G.R. No.
L-22814 August 28, 1968
PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES,
INC., plaintiff-appellant,
vs.
CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL
BOARD,
THE CITY MAYOR and THE CITY TREASURER, all of
the CITY OF BUTUAN, defendants-appellees.
Direct appeal to this Court, from a decision of the Court of
First Instance of Agusan, dismissing plaintiff's complaint, with
costs.
Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a
domestic corporation with offices and principal place of
business in Quezon City. The defendants are the City of
Butuan, its City Mayor, the members of its municipal board
and its City Treasurer. Plaintiff seeks to recover the sums
paid by it to the City of Butuan hereinafter referred to as
the City and collected by the latter, pursuant to its Municipal
Ordinance No. 110, as amended by Municipal Ordinance No.
122, both series of 1960, which plaintiff assails as null and
void, and to prevent the enforcement thereof. Both parties
submitted the case for decision in the lower court upon a
stipulation to the effect:
1. That plaintiff's warehouse in the City of Butuan serves as a
storage for its products the "Pepsi-Cola" soft drinks for sale to
customers in the City of Butuan and all the municipalities in
the Province of Agusan. These "Pepsi-Cola Cola" soft drinks
are bottled in Cebu City and shipped to the Butuan City
warehouse of plaintiff for distribution and sale in the City of
Butuan and all municipalities of Agusan. .
2. That on August 16, 1960, the City of Butuan enacted
Ordinance No. 110 which was subsequently amended by
Ordinance No. 122 and effective November 28, 1960. A copy
of Ordinance No. 110, Series of 1960 and Ordinance No. 122
are incorporated herein as Exhibits "A" and "B", respectively.
3. That Ordinance No. 110 as amended, imposes a tax on any
person, association, etc., of P0.10 per case of 24 bottles of
Pepsi-Cola and the plaintiff paid under protest the amount of
P4,926.63 from August 16 to December 31, 1960 and the
amount of P9,250.40 from January 1 to July 30, 1961.
4. That the plaintiff filed the foregoing complaint for the
recovery of the total amount of P14,177.03 paid under protest
and those that if may later on pay until the termination of this
case on the ground that Ordinance No. 110 as amended of the
City of Butuan is illegal, that the tax imposed is excessive and
that it is unconstitutional.
5. That pursuant to Ordinance No. 110 as amended, the City
Treasurer of Butuan City, has prepared a form to be
accomplished by the plaintiff for the computation of the tax. A
copy of the form is enclosed herewith as Exhibit "C".
6. That the Profit and Loss Statement of the plaintiff for the
period from January 1, 1961 to July 30, 1961 of its warehouse
in Butuan City is incorporated herein as Exhibits "D" to "D-1"
to "D-5". In this Profit and Loss Statement, the defendants
claim that the plaintiff is not entitled to a depreciation of
P3,052.63 but only P1,202.55 in which case the profit of
plaintiff will be increased from P1,254.44 to P3,104.52. The
plaintiff differs only on the claim of depreciation which the
company claims to be P3,052.62. This is in accordance with
the findings of the representative of the undersigned City
Attorney who verified the records of the plaintiff.
7. That beginning November 21, 1960, the price of Pepsi-Cola
per case of 24 bottles was increased to P1.92 which price is
uniform throughout the Philippines. Said increase was made
due to the increase in the production cost of its manufacture.
8. That the parties reserve the right to submit arguments on the
constitutionality and illegality of Ordinance No. 110, as
amended of the City of Butuan in their respective memoranda.
xxx xxx x x x1wph1.t
Section 1 of said Ordinance No. 110, as amended, states what
products are "liquors", within the purview thereof. Section 2
provides for the payment by "any agent and/or consignee" of
any dealer "engaged in selling liquors, imported or local, in
the City," of taxes at specified rates. Section 3 prescribes a tax
of P0.10 per case of 24 bottles of the soft drinks and
carbonated beverages therein named, and "all other soft drinks
or carbonated drinks." Section 3-A, defines the meaning of the
term "consignee or agent" for purposes of the ordinance.
Section 4 provides that said taxes "shall be paid at the end of
every calendar month." Pursuant to Section 5, the taxes "shall
be based and computed from the cargo manifest or bill of
lading or any other record showing the number of cases of soft
drinks, liquors or all other soft drinks or carbonated drinks
received within the month." Sections 6, 7 and 8 specify the
surcharge to be added for failure to pay the taxes within the
period prescribed and the penalties imposable for "deliberate
and willful refusal to pay the tax mentioned in Sections 2 and
3" or for failure "to furnish the office of the City Treasurer a
copy of the bill of lading or cargo manifest or record of soft
drinks, liquors or carbonated drinks for sale in the City."
Section 9 makes the ordinance applicable to soft drinks,
liquors or carbonated drinks "received outside" but "sold
within" the City. Section 10 of the ordinance provides that the
revenue derived therefrom "shall be alloted as follows: 40%
for Roads and Bridges Fund; 40% for the General Fund and
20% for the School Fund."
Plaintiff maintains that the disputed ordinance is null and void
because: (1) it partakes of the nature of an import tax; (2) it
amounts to double taxation; (3) it is excessive, oppressive and
confiscatory; (4) it is highly unjust and discriminatory; and (5)
section 2 of Republic Act No. 2264, upon the authority of
which it was enacted, is an unconstitutional delegation of
legislative powers.
The second and last objections are manifestly devoid of merit.
Indeed independently of whether or not the tax in question,
when considered in relation to the sales tax prescribed by Acts
of Congress, amounts to double taxation, on which we need
not and do not express any opinion - double taxation, in
general, is not forbidden by our fundamental law. We have not
adopted, as part thereof, the injunction against double taxation
found in the Constitution of the United States and of some
States of the Union.1 Then, again, the general principle
against delegation of legislative powers, in consequence of the
theory of separation of powers2 is subject to one well-
established exception, namely: legislative powers may be
delegated to local governments to which said theory does
not apply3 in respect of matters of local concern.
The third objection is, likewise, untenable. The tax of "P0.10
per case of 24 bottles," of soft drinks or carbonated drinks
in the production and sale of which plaintiff is engaged or
less than P0.0042 per bottle, is manifestly too small to be
excessive, oppressive, or confiscatory.
The first and the fourth objections merit, however, serious
consideration. In this connection, it is noteworthy that the tax
prescribed in section 3 of Ordinance No. 110, as originally
approved, was imposed upon dealers "engaged in selling" soft
drinks or carbonated drinks. Thus, it would seem that the
intent was then to levy a tax upon the sale of said
merchandise. As amended by Ordinance No. 122, the tax is,
however, imposed only upon "any agent and/or consignee of
any person, association, partnership, company or corporation
engaged in selling ... soft drinks or carbonated drinks." And,
pursuant to section 3-A, which was inserted by said Ordinance
No. 122:

... Definition of the Term Consignee or Agent. For

purposes of this Ordinance, a consignee of agent shall mean
any person, association, partnership, company or corporation
who acts in the place of another by authority from him or one
entrusted with the business of another or to whom is
consigned or shipped no less than 1,000 cases of hard liquors
or soft drinks every month for resale, either retail or
wholesale.

As a consequence, merchants engaged in the sale of soft drink

or carbonated drinks, are not subject to the tax, unless they are
agents and/or consignees of another dealer, who, in the very
nature of things, must be one engaged in business outside the
City. Besides, the tax would not be applicable to such agent
and/or consignee, if less than 1,000 cases of soft drinks are
consigned or shipped to him every month. When we consider,
also, that the tax "shall be based and computed from the cargo
manifest or bill of lading ... showing the number of cases"
not sold but "received" by the taxpayer, the intention to
limit the application of the ordinance to soft drinks and
carbonated drinks brought into the City from outside thereof
becomes apparent. Viewed from this angle, the tax partakes of
the nature of an import duty, which is beyond defendant's
authority to impose by express provision of law.4

Even however, if the burden in question were regarded as a

tax on the sale of said beverages, it would still be invalid, as
discriminatory, and hence, violative of the uniformity required
by the Constitution and the law therefor, since only sales by
"agents or consignees" of outside dealers would be subject to
the tax. Sales by local dealers, not acting for or on behalf of
other merchants, regardless of the volume of their sales, and
even if the same exceeded those made by said agents or
consignees of producers or merchants established outside the
City of Butuan, would be exempt from the disputed tax.

It is true that the uniformity essential to the valid exercise of

the power of taxation does not require identity or equality
under all circumstances, or negate the authority to classify the
objects of taxation.5 The classification made in the exercise of
this authority, to be valid, must, however, be reasonable6 and
this requirement is not deemed satisfied unless: (1) it is based
upon substantial distinctions which make real differences; (2)
these are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to present
conditions, but, also, to future conditions substantially
identical to those of the present; and (4) the classification
applies equally all those who belong to the same class.7

These conditions are not fully met by the ordinance in

question.8 Indeed, if its purpose were merely to levy a burden
upon the sale of soft drinks or carbonated beverages, there is
no reason why sales thereof by sealers other than agents or
consignees of producers or merchants established outside the
City of Butuan should be exempt from the tax.

WHEREFORE, the decision appealed from is hereby reversed,

and another one shall be entered annulling Ordinance No. 110,
as amended by Ordinance No. 122, and sentencing the City of
Butuan to refund to plaintiff herein the amounts collected from
and paid under protest by the latter, with interest thereon at the
legal rate from the date of the promulgation of this decision, in
addition to the costs, and defendants herein are, accordingly,
restrained and prohibited permanently from enforcing said
Ordinance, as amended. It is so ordered.
Pepsi Cola Bottiling Co. vs City of Butuan (1968)

Facts: Ordinance 110 was enacted by the City of Butuan

imposing a tax of P0.10 per case of 24 bottles of softdrinks or
carbonated drinks. The tax was imposed upon dealers engeged
in selling softdrinks or carbonated drinks. When Ordinance
110, the tax was imposed upon an agent or consignee of any
person, association, partnership, company or corporation
engaged in selling softdrinks or carbonated drinks, with agent
or consignee being particularly defined on the inserted
provision Section 3-A. In effect, merchants engaged in the sale
of softdrinks, etc. are not subject to the tax unless they are
agents or consignees of another dealer who must be one
engaged in business outside the City. Pepsi-Cola Bottling Co.
filed suit to recover sums paid by it to the city pursuant to the
Ordinance, which it claims to be null and void.

Issue: Whether the Ordinance is discriminatory.

Held: The Ordinance, as amended, is discriminatory since

only sales by agents or consignees of outside dealers would
be subject to the tax. Sales by local dealers, not acting for or
on behalf of other merchants, regardless of the volume of their
sales , and even if the same exceeded those made by said
agents or consignees of producers or merchants established
outside the city, would be exempt from the tax. The
classification made in the exercise of the authority to tax, to be
valid must be reasonable, which would be satisfied if the
classification is based upon substantial distinctions which
makes real differences; these are germane to the purpose of
legislation or ordinance; the classification applies not only to
present conditions but also to future conditions substantially
identical to those of the present; and the classification applies
equally to all those who belong to the same class. These
conditions are not fully met by the ordinance in question.
G.R. No. 91649 May 14, 1991
ATTORNEYS HUMBERTO BASCO, EDILBERTO
BALCE, SOCRATES MARANAN AND LORENZO
SANCHEZ, petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING
CORPORATION (PAGCOR), respondent.
H.B. Basco & Associates for petitioners.
Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR.
PARAS, J.:
A TV ad proudly announces:
"The new PAGCOR responding through responsible
gaming."
But the petitioners think otherwise, that is why, they filed the
instant petition seeking to annul the Philippine Amusement
and Gaming Corporation (PAGCOR) Charter PD 1869,
because it is allegedly contrary to morals, public policy and
order, and because
A. It constitutes a waiver of a right prejudicial to a third
person with a right recognized by law. It waived the Manila
City government's right to impose taxes and license fees,
which is recognized by law;
B. For the same reason stated in the immediately
preceding paragraph, the law has intruded into the local
government's right to impose local taxes and license fees.
This, in contravention of the constitutionally enshrined
principle of local autonomy;
C. It violates the equal protection clause of the
constitution in that it legalizes PAGCOR conducted
gambling, while most other forms of gambling are outlawed,
together with prostitution, drug trafficking and other vices;
D. It violates the avowed trend of the Cory government
away from monopolistic and crony economy, and toward free
enterprise and privatization. (p. 2, Amended Petition; p. 7,
Rollo)
In their Second Amended Petition, petitioners also claim that
PD 1869 is contrary to the declared national policy of the
"new restored democracy" and the people's will as expressed
in the 1987 Constitution. The decree is said to have a
"gambling objective" and therefore is contrary to Sections 11,
12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2)
of Article XIV, of the present Constitution (p. 3, Second
Amended Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and
practicing lawyers (petitioner Basco being also the Chairman
of the Committee on Laws of the City Council of Manila), can
question and seek the annulment of PD 1869 on the alleged
grounds mentioned above.
The Philippine Amusements and Gaming Corporation
(PAGCOR) was created by virtue of P.D. 1067-A dated
January 1, 1977 and was granted a franchise under P.D. 1067-
B also dated January 1, 1977 "to establish, operate and
maintain gambling casinos on land or water within the
territorial jurisdiction of the Philippines." Its operation was
originally conducted in the well known floating casino
"Philippine Tourist." The operation was considered a success
for it proved to be a potential source of revenue to fund
infrastructure and socio-economic projects, thus, P.D. 1399
was passed on June 2, 1978 for PAGCOR to fully attain this
objective.
Subsequently, on July 11, 1983, PAGCOR was created under
P.D. 1869 to enable the Government to regulate and centralize
all games of chance authorized by existing franchise or
permitted by law, under the following declared policy
Sec. 1. Declaration of Policy. It is hereby declared to be
the policy of the State to centralize and integrate all games of
chance not heretofore authorized by existing franchises or
permitted by law in order to attain the following objectives:
(a) To centralize and integrate the right and authority to
operate and conduct games of chance into one corporate entity
to be controlled, administered and supervised by the
Government.
(b) To establish and operate clubs and casinos, for
amusement and recreation, including sports gaming pools,
(basketball, football, lotteries, etc.) and such other forms of
amusement and recreation including games of chance, which
may be allowed by law within the territorial jurisdiction of the
Philippines and which will: (1) generate sources of additional
revenue to fund infrastructure and socio-civic projects, such as
flood control programs, beautification, sewerage and sewage
projects, Tulungan ng Bayan Centers, Nutritional Programs,
Population Control and such other essential public services;
(2) create recreation and integrated facilities which will
expand and improve the country's existing tourist attractions;
and (3) minimize, if not totally eradicate, all the evils,
malpractices and corruptions that are normally prevalent on
the conduct and operation of gambling clubs and casinos
without direct government involvement. (Section 1, P.D.
1869)
To attain these objectives PAGCOR is given territorial
jurisdiction all over the Philippines. Under its Charter's
repealing clause, all laws, decrees, executive orders, rules and
regulations, inconsistent therewith, are accordingly repealed,
amended or modified.
It is reported that PAGCOR is the third largest source of
government revenue, next to the Bureau of Internal Revenue
and the Bureau of Customs. In 1989 alone, PAGCOR earned
P3.43 Billion, and directly remitted to the National
Government a total of P2.5 Billion in form of franchise tax,
government's income share, the President's Social Fund and
Host Cities' share. In addition, PAGCOR sponsored other
socio-cultural and charitable projects on its own or in
cooperation with various governmental agencies, and other
private associations and organizations. In its 3 1/2 years of
operation under the present administration, PAGCOR remitted
to the government a total of P6.2 Billion. As of December 31,
1989, PAGCOR was employing 4,494 employees in its nine
(9) casinos nationwide, directly supporting the livelihood of
Four Thousand Four Hundred Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No.
1869. They allege that the same is "null and void" for being
"contrary to morals, public policy and public order,"
monopolistic and tends toward "crony economy", and is
violative of the equal protection clause and local autonomy as
well as for running counter to the state policies enunciated in
Sections 11 (Personal Dignity and Human Rights), 12
(Family) and 13 (Role of Youth) of Article II, Section 1
(Social Justice) of Article XIII and Section 2 (Educational
Values) of Article XIV of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and
thorough scrutiny and the most deliberate consideration by the
Court, involving as it does the exercise of what has been
described as "the highest and most delicate function which
belongs to the judicial department of the government." (State
v. Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act
of a co-equal and coordinate branch of the government We
need not be reminded of the time-honored principle, deeply
ingrained in our jurisprudence, that a statute is presumed to be
valid. Every presumption must be indulged in favor of its
constitutionality. This is not to say that We approach Our task
with diffidence or timidity. Where it is clear that the
legislature or the executive for that matter, has over-stepped
the limits of its authority under the constitution, We should not
hesitate to wield the axe and let it fall heavily, as fall it must,
on the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59
SCRA 54, the Court thru Mr. Justice Zaldivar underscored the
common good. It is not capable of an exact definition but has
. . . thoroughly established principle which must be followed
in all cases where questions of constitutionality as obtain in
the instant cases are involved. All presumptions are indulged
in favor of constitutionality; one who attacks a statute alleging
unconstitutionality must prove its invalidity beyond a
reasonable doubt; that a law may work hardship does not
render it unconstitutional; that if any reasonable basis may be
conceived which supports the statute, it will be upheld and the
challenger must negate all possible basis; that the courts are
not concerned with the wisdom, justice, policy or expediency
of a statute and that a liberal interpretation of the constitution
in favor of the constitutionality of legislation should be
adopted. (Danner v. Hass, 194 N.W. 2nd 534, 539; Spurbeck
v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g.
Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta v.
Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs
of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983] cited in
Citizens Alliance for Consumer Protection v. Energy
Regulatory Board, 162 SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents
are questioning the legal personality of petitioners to file the
instant petition.
Considering however the importance to the public of the case
at bar, and in keeping with the Court's duty, under the 1987
Constitution, to determine whether or not the other branches
of government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the
discretion given to them, the Court has brushed aside
technicalities of procedure and has taken cognizance of this
petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng
Pilipinas Inc. v. Tan, 163 SCRA 371)
With particular regard to the requirement of proper party as
applied in the cases before us, We hold that the same is
satisfied by the petitioners and intervenors because each of
them has sustained or is in danger of sustaining an immediate
injury as a result of the acts or measures complained of. And
even if, strictly speaking they are not covered by the
definition, it is still within the wide discretion of the Court to
waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions
raised.
In the first Emergency Powers Cases, ordinary citizens and
taxpayers were allowed to question the constitutionality of
several executive orders issued by President Quirino although
they were involving only an indirect and general interest
shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the
transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing
aside, if we must technicalities of procedure." We have since
then applied the exception in many other cases. (Association
of Small Landowners in the Philippines, Inc. v. Sec. of
Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss
the substantive issues raised.
Gambling in all its forms, unless allowed by law, is generally
prohibited. But the prohibition of gambling does not mean that
the Government cannot regulate it in the exercise of its police
power.
The concept of police power is well-established in this
jurisdiction. It has been defined as the "state authority to enact
legislation that may interfere with personal liberty or property
in order to promote the general welfare." (Edu v. Ericta, 35
SCRA 481, 487) As defined, it consists of (1) an imposition or
restraint upon liberty or property, (2) in order to foster the
been, purposely, veiled in general terms to underscore its all-
comprehensive embrace. (Philippine Association of Service
Exporters, Inc. v. Drilon, 163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times,
even to anticipate the future where it could be done, provides
enough room for an efficient and flexible response to
conditions and circumstances thus assuming the greatest
benefits. (Edu v. Ericta, supra)
It finds no specific Constitutional grant for the plain reason
that it does not owe its origin to the charter. Along with the
taxing power and eminent domain, it is inborn in the very fact
of statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital
functions of governance. Marshall, to whom the expression
has been credited, refers to it succinctly as the plenary power
of the state "to govern its citizens". (Tribe, American
Constitutional Law, 323, 1978). The police power of the State
is a power co-extensive with self-protection and is most aptly
termed the "law of overwhelming necessity." (Rubi v.
Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most
essential, insistent, and illimitable of powers." (Smith Bell &
Co. v. National, 40 Phil. 136) It is a dynamic force that
enables the state to meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the
government to "regulate and centralize thru an appropriate
institution all games of chance authorized by existing
franchise or permitted by law" (1st whereas clause, PD 1869).
As was subsequently proved, regulating and centralizing
gambling operations in one corporate entity the PAGCOR,
was beneficial not just to the Government but to society in
general. It is a reliable source of much needed revenue for the
cash strapped Government. It provided funds for social impact
projects and subjected gambling to "close scrutiny, regulation,
supervision and control of the Government" (4th Whereas
Clause, PD 1869). With the creation of PAGCOR and the
direct intervention of the Government, the evil practices and
corruptions that go with gambling will be minimized if not
totally eradicated. Public welfare, then, lies at the bottom of
the enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the
right of the City of Manila to impose taxes and legal fees; that
the exemption clause in P.D. 1869 is violative of the principle
of local autonomy. They must be referring to Section 13 par.
(2) of P.D. 1869 which exempts PAGCOR, as the franchise
holder from paying any "tax of any kind or form, income or
otherwise, as well as fees, charges or levies of whatever
nature, whether National or Local."
(2) Income and other taxes. a) Franchise Holder: No
tax of any kind or form, income or otherwise as well as fees,
charges or levies of whatever nature, whether National or
Local, shall be assessed and collected under this franchise
from the Corporation; nor shall any form or tax or charge
attach in any way to the earnings of the Corporation, except a
franchise tax of five (5%) percent of the gross revenues or
earnings derived by the Corporation from its operations under
this franchise. Such tax shall be due and payable quarterly to
the National Government and shall be in lieu of all kinds of
taxes, levies, fees or assessments of any kind, nature or
description, levied, established or collected by any municipal,
provincial or national government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the
following reasons:
(a) The City of Manila, being a mere Municipal
corporation has no inherent right to impose taxes (Icard v. City
of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil.
337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus,
"the Charter or statute must plainly show an intent to confer
that power or the municipality cannot assume it" (Medina v.
City of Baguio, 12 SCRA 62). Its "power to tax" therefore
must always yield to a legislative act which is superior having
been passed upon by the state itself which has the "inherent
power to tax" (Bernas, the Revised [1973] Philippine
Constitution, Vol. 1, 1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to
control by Congress. It should be stressed that "municipal
corporations are mere creatures of Congress" (Unson v.
Lacson, G.R. No. 7909, January 18, 1957) which has the
power to "create and abolish municipal corporations" due to
its "general legislative powers" (Asuncion v. Yriantes, 28 Phil.
67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore,
has the power of control over Local governments (Hebron v.
Reyes, G.R. No. 9124, July 2, 1950). And if Congress can
grant the City of Manila the power to tax certain matters, it
can also provide for exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on
gambling, has long been revoked. As early as 1975, the power
of local governments to regulate gambling thru the grant of
"franchise, licenses or permits" was withdrawn by P.D. No.
771 and was vested exclusively on the National Government,
thus:
Sec. 1. Any provision of law to the contrary notwithstanding,
the authority of chartered cities and other local governments to
issue license, permit or other form of franchise to operate,
maintain and establish horse and dog race tracks, jai-alai and
other forms of gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate,
maintain and establish, horse and dog race tracks, jai-alai and
other forms of gambling shall be issued by the national
government upon proper application and verification of the
qualification of the applicant . . .
Therefore, only the National Government has the power to
issue "licenses or permits" for the operation of gambling.
Necessarily, the power to demand or collect license fees which
is a consequence of the issuance of "licenses or permits" is no
longer vested in the City of Manila.
(d) Local governments have no power to tax
instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original
charter, PD 1869. All of its shares of stocks are owned by the
National Government. In addition to its corporate powers
(Sec. 3, Title II, PD 1869) it also exercises regulatory powers
thus:
Sec. 9. Regulatory Power. The Corporation shall maintain
a Registry of the affiliated entities, and shall exercise all the
powers, authority and the responsibilities vested in the
Securities and Exchange Commission over such affiliating
entities mentioned under the preceding section, including, but
not limited to amendments of Articles of Incorporation and
By-Laws, changes in corporate term, structure, capitalization
and other matters concerning the operation of the affiliated
entities, the provisions of the Corporation Code of the
Philippines to the contrary notwithstanding, except only with
respect to original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling
casinos. The latter role is governmental, which places it in the
category of an agency or instrumentality of the Government.
Being an instrumentality of the Government, PAGCOR should
be and actually is exempt from local taxes. Otherwise, its
operation might be burdened, impeded or subjected to control
by a mere Local government.
The states have no power by taxation or otherwise, to retard,
impede, burden or in any manner control the operation of
constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government. (MC
Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National
Government over local governments.
Justice Holmes, speaking for the Supreme Court, made
reference to the entire absence of power on the part of the
States to touch, in that way (taxation) at least, the
instrumentalities of the United States (Johnson v. Maryland,
254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a
way as to prevent it from consummating its federal
responsibilities, or even to seriously burden it in the
accomplishment of them. (Antieau, Modern Constitutional
Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National
policies thru extermination of what local authorities may
perceive to be undesirable activities or enterprise using the
power to tax as "a tool for regulation" (U.S. v. Sanchez, 340
US 42).
The power to tax which was called by Justice Marshall as the
"power to destroy" (Mc Culloch v. Maryland, supra) cannot be
allowed to defeat an instrumentality or creation of the very
entity which has the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy
Clause of the Constitution will be violated by P.D. 1869. This
is a pointless argument. Article X of the 1987 Constitution (on
Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to
create its own source of revenue and to levy taxes, fees, and
other charges subject to such guidelines and limitation as the
congress may provide, consistent with the basic policy on
local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local government. (emphasis supplied)
The power of local government to "impose taxes and fees" is
always subject to "limitations" which Congress may provide
by law. Since PD 1869 remains an "operative" law until
"amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
Constitution), its "exemption clause" remains as an exception
to the exercise of the power of local governments to impose
taxes and fees. It cannot therefore be violative but rather is
consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987
Constitution simply means "decentralization" (III Records of
the 1987 Constitutional Commission, pp. 435-436, as cited in
Bernas, The Constitution of the Republic of the Philippines,
Vol. II, First Ed., 1988, p. 374). It does not make local
governments sovereign within the state or an "imperium in
imperio."
Local Government has been described as a political
subdivision of a nation or state which is constituted by law and
has substantial control of local affairs. In a unitary system of
government, such as the government under the Philippine
Constitution, local governments can only be an intra sovereign
subdivision of one sovereign nation, it cannot be an imperium
in imperio. Local government in such a system can only mean
a measure of decentralization of the function of government.
(emphasis supplied)
As to what state powers should be "decentralized" and what
may be delegated to local government units remains a matter
of policy, which concerns wisdom. It is therefore a political
question. (Citizens Alliance for Consumer Protection v.
Energy Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or
otherwise dealing with gambling is a State concern and hence,
it is the sole prerogative of the State to retain it or delegate it
to local governments.
As gambling is usually an offense against the State, legislative
grant or express charter power is generally necessary to
empower the local corporation to deal with the subject. . . . In
the absence of express grant of power to enact, ordinance
provisions on this subject which are inconsistent with the state
laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex-
Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah
You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA
480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis
supplied)
Petitioners next contend that P.D. 1869 violates the equal
protection clause of the Constitution, because "it legalized
PAGCOR conducted gambling, while most gambling are
outlawed together with prostitution, drug trafficking and other
vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention.
The petitioners' posture ignores the well-accepted meaning of
the clause "equal protection of the laws." The clause does not
preclude classification of individuals who may be accorded
different treatment under the law as long as the classification
is not unreasonable or arbitrary (Itchong v. Hernandez, 101
Phil. 1155). A law does not have to operate in equal force on
all persons or things to be conformable to Article III, Section 1
of the Constitution (DECS v. San Diego, G.R. No. 89572,
December 21, 1989).
The "equal protection clause" does not prohibit the Legislature
from establishing classes of individuals or objects upon which
different rules shall operate (Laurel v. Misa, 43 O.G. 2847).
The Constitution does not require situations which are
different in fact or opinion to be treated in law as though they
were the same (Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by
PAGCOR is violative of the equal protection is not clearly
explained in the petition. The mere fact that some gambling
activities like cockfighting (P.D 449) horse racing (R.A. 306
as amended by RA 983), sweepstakes, lotteries and races (RA
1169 as amended by B.P. 42) are legalized under certain
conditions, while others are prohibited, does not render the
applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is
not to be overthrown because there are other instances to
which it might have been applied. (Gomez v. Palomar, 25
SCRA 827)
The equal protection clause of the 14th Amendment does not
mean that all occupations called by the same name must be
treated the same way; the state may do what it can to prevent
which is deemed as evil and stop short of those cases in which
harm to the few concerned is not less than the harm to the
public that would insure if the rule laid down were made
mathematically exact. (Dominican Hotel v. Arizona, 249 US
2651).
Anent petitioners' claim that PD 1869 is contrary to the
"avowed trend of the Cory Government away from
monopolies and crony economy and toward free enterprise
and privatization" suffice it to state that this is not a ground for
this Court to nullify P.D. 1869. If, indeed, PD 1869 runs
counter to the government's policies then it is for the
Executive Department to recommend to Congress its repeal or
amendment.
The judiciary does not settle policy issues. The Court can only
declare what the law is and not what the law should
be.1wphi1 Under our system of government, policy issues
are within the domain of the political branches of government
and of the people themselves as the repository of all state
power. (Valmonte v. Belmonte, Jr., 170 SCRA 256).
On the issue of "monopoly," however, the Constitution
provides that:
Sec. 19. The State shall regulate or prohibit monopolies when
public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed. (Art. XII,
National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies
are not necessarily prohibited by the Constitution. The state
must still decide whether public interest demands that
monopolies be regulated or prohibited. Again, this is a matter
of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11
(Personality Dignity) 12 (Family) and 13 (Role of Youth) of
Article II; Section 13 (Social Justice) of Article XIII and
Section 2 (Educational Values) of Article XIV of the 1987
Constitution, suffice it to state also that these are merely
statements of principles and, policies. As such, they are
basically not self-executing, meaning a law should be passed
by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to
be self-executing principles ready for enforcement through the
courts. They were rather directives addressed to the executive
and the legislature. If the executive and the legislature failed to
heed the directives of the articles the available remedy was not
judicial or political. The electorate could express their
displeasure with the failure of the executive and the legislature
through the language of the ballot. (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality
(Yu Cong Eng v. Trinidad, 47 Phil. 387; Salas v. Jarencio, 48
SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v.
Comelec, 179 SCRA 287). Therefore, for PD 1869 to be
nullified, it must be shown that there is a clear and
unequivocal breach of the Constitution, not merely a doubtful
and equivocal one. In other words, the grounds for nullity
must be clear and beyond reasonable doubt. (Peralta v.
Comelec, supra) Those who petition this Court to declare a
law, or parts thereof, unconstitutional must clearly establish
the basis for such a declaration. Otherwise, their petition must
fail. Based on the grounds raised by petitioners to challenge
the constitutionality of P.D. 1869, the Court finds that
petitioners have failed to overcome the presumption. The
dismissal of this petition is therefore, inevitable. But as to
whether P.D. 1869 remains a wise legislation considering the
issues of "morality, monopoly, trend to free enterprise,
privatization as well as the state principles on social justice,
role of youth and educational values" being raised, is up for
Congress to determine.
As this Court held in Citizens' Alliance for Consumer
Protection v. Energy Regulatory Board, 162 SCRA 521
Presidential Decree No. 1956, as amended by Executive Order
No. 137 has, in any case, in its favor the presumption of
validity and constitutionality which petitioners Valmonte and
the KMU have not overturned. Petitioners have not undertaken
to identify the provisions in the Constitution which they claim
to have been violated by that statute. This Court, however, is
not compelled to speculate and to imagine how the assailed
legislation may possibly offend some provision of the
Constitution. The Court notes, further, in this respect that
petitioners have in the main put in question the wisdom,
justice and expediency of the establishment of the OPSF,
issues which are not properly addressed to this Court and
which this Court may not constitutionally pass upon. Those
issues should be addressed rather to the political departments
of government: the President and the Congress.

Parenthetically, We wish to state that gambling is generally

immoral, and this is precisely so when the gambling resorted
to is excessive. This excessiveness necessarily depends not
only on the financial resources of the gambler and his family
but also on his mental, social, and spiritual outlook on life.
However, the mere fact that some persons may have lost their
material fortunes, mental control, physical health, or even their
lives does not necessarily mean that the same are directly
attributable to gambling. Gambling may have been the
antecedent, but certainly not necessarily the cause. For the
same consequences could have been preceded by an overdose
of food, drink, exercise, work, and even sex.

WHEREFORE, the petition is DISMISSED for lack of merit.

Humberto Basco vs Philippine Amusements and Gaming
Corporation
In 1977, the Philippine Amusements and Gaming Corporation
(PAGCOR) was created by Presidential Decree 1067-A. PD
1067-B meanwhile granted PAGCOR the power to establish,
operate and maintain gambling casinos on land or water within
the territorial jurisdiction of the Philippines. PAGCORs
operation was a success hence in 1978, PD 1399 was passed
which expanded PAGCORs power. In 1983, PAGCORs
charter was updated through PD 1869. PAGCORs charter
provides that PAGCOR shall regulate and centralize all games
of chance authorized by existing franchise or permitted by
law. Section 1 of PD 1869 provides:
Section 1. Declaration of Policy. It is hereby declared to
be the policy of the State to centralize and integrate all games
of chance not heretofore authorized by existing franchises or
permitted by law.
Atty. Humberto Basco and several other lawyers assailed the
validity of the law creating PAGCOR. They claim that PD
1869 is unconstitutional because a) it violates the equal
protection clause and b) it violates the local autonomy clause
of the constitution.
Basco et al argued that PD 1869 violates the equal protection
clause because it legalizes PAGCOR-conducted gambling,
while most other forms of gambling are outlawed, together
with prostitution, drug trafficking and other vices.
Anent the issue of local autonomy, Basco et al contend that
P.D. 1869 forced cities like Manila to waive its right to impose
taxes and legal fees as far as PAGCOR is concerned; that
Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as
the franchise holder from paying any tax of any kind or form,
income or otherwise, as well as fees, charges or levies of
whatever nature, whether National or Local is violative of the
local autonomy principle.
charges subject to such guidelines and limitation as the
congress may provide, consistent with the basic policy on
local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local government.
A close reading of the above provision does not violate local
autonomy (particularly on taxing powers) as it was clearly
stated that the taxing power of LGUs are subject to such
guidelines and limitation as Congress may provide.
Further, the City of Manila, being a mere Municipal
corporation has no inherent right to impose taxes. The Charter
of the City of Manila is subject to control by Congress. It
should be stressed that municipal corporations are mere
creatures of Congress which has the power to create and
abolish municipal corporations due to its general legislative
powers. Congress, therefore, has the power of control over
Local governments. And if Congress can grant the City of
Manila the power to tax certain matters, it can also provide for
exemptions or even take back the power.
Further still, local governments have no power to tax
instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original
charter, PD 1869. All of its shares of stocks are owned by the
National Government. Otherwise, its operation might be
burdened, impeded or subjected to control by a mere Local
government.
This doctrine emanates from the supremacy of the National
Government over local governments.

ISSUE:

1. Whether or not PD 1869 violates the equal protection

clause.

2. Whether or not PD 1869 violates the local autonomy clause.

HELD:

1. No. Just how PD 1869 in legalizing gambling conducted by

PAGCOR is violative of the equal protection is not clearly
explained in Bascos petition. The mere fact that some
gambling activities like cockfighting (PD 449) horse racing
(RA 306 as amended by RA 983), sweepstakes, lotteries and
races (RA 1169 as amended by BP 42) are legalized under
certain conditions, while others are prohibited, does not render
the applicable laws, PD. 1869 for one, unconstitutional.

Bascos posture ignores the well-accepted meaning of the

clause equal protection of the laws. The clause does not
preclude classification of individuals who may be accorded
different treatment under the law as long as the classification
is not unreasonable or arbitrary. A law does not have to
operate in equal force on all persons or things to be
conformable to Article III, Sec 1 of the Constitution. The
equal protection clause does not prohibit the Legislature
from establishing classes of individuals or objects upon which
different rules shall operate. The Constitution does not require
situations which are different in fact or opinion to be treated in
law as though they were the same.

2. No. Section 5, Article 10 of the 1987 Constitution provides:

Each local government unit shall have the power to create its
own source of revenue and to levy taxes, fees, and other
G.R. No. 147192 June 27, 2006
GOVERNMENT SERVICE INSURANCE SYSTEM,
Petitioner,
vs.
THE CITY ASSESSOR OF ILOILO CITY, THE REGISTER
OF DEEDS OF ILOILO CITY and ROSALINA
FRANCISCO, represented by her attorney-in-fact,
SALVADOR PAJA I,* Respondents.
DECISION
CORONA, J.:
Assailed in this present petition for review under Rule 45 of
the Rules of Court are the decision1 and resolution2 of the
Court of Appeals (CA) dismissing a petition for annulment of
judgment3 filed by petitioner, the Government Service
Insurance System (GSIS), in Cadastral Case No. 84 and
another unnumbered cadastral case decided by the Regional
Trial Court (RTC), Branches 36 and 31, of Iloilo City,
respectively.
In the two cadastral cases, private respondent Rosalina
Francisco petitioned for the issuance of new transfer
certificates of title (TCTs) in her name over two parcels of
land, to wit:
TCT No. 41681
A parcel of land known as Lot No. 6, Block 2, of the
Subdivision Plan (LRC) Psd-184005 being a portion of Lot
2214-B, Jaro Cadastre, LRC (GLRO) Record No. 8 situated in
the District of Jaro, Iloilo City, Island of Panay, registered in
the name of GSIS c/o Baldomero Dagdag, of legal age,
Filipino citizen and resident of Jaro, Iloilo City, Philippines on
June 28, 1991.
TCT No. 48580
A parcel of land known as Lot No. 22, Block 2, of the
Subdivision Record No. 8 situated in the District of Jaro, Iloilo
City, Island of Panay, registered in the name of GSIS c/o
Rodolfo Ceres, of legal age, Filipino Citizen and a resident of
Iloilo City, Philippines, with an area of Two Hundred Ninety
Four (294) square meters, more or less.
Private respondent Francisco purchased the subject properties
in the auction sales held for the satisfaction of delinquent real
property taxes. After the lapse of the one-year redemption
period and the failure of the registered owner or any interested
person to redeem the properties, the Iloilo City Treasurer
issued the corresponding final bill of sale to private
respondent. The sales were later on duly annotated on the
certificates of title on file with the Register of Deeds.
However, the final bill of sale could not be registered because
the owners duplicate certificate of title was unavailable at that
time.
To effect registration in her name, private respondent
instituted separate petitions for the entry of title in her name
over the two lots with the RTCs of Iloilo City. Both petitions
were unopposed.
Finding merit in her petitions, the RTCs, in separate orders
issued on separate dates, directed the issuance of new
duplicate TCTs. The dispositive portion of the April 29, 1993
order of RTC Branch 36 in Cadastral Case No. 84 read:
WHEREFORE, premises considered, the Register of Deeds of
the City of Iloilo is hereby ordered to issue new owners
duplicate copy of Transfer Certificate of Title No. T-41681 in
the name of GSIS c/o Baldomero Dagdag, upon payment of
the required legal fees. Accordingly, the lost copy of the
subject title is hereby declared as NULL and VOID.4
On the other hand, RTC Branch 31 also issued an order, dated
November 8, 1994, in the other (unnumbered) cadastral case,
the dispositive portion of which read:
WHEREFORE, as prayed for, the Register of Deeds, City of
Iloilo is hereby directed to issue a new owners duplicate
certificate of Title No. T-48580 in the name of the G.S.I.S.
C/O RODOLFO CERES, the registered owner, basing the
same on the Original Certificate of Title found intact and
existing in the Office of the Register of Deeds and the latter to
cancel Transfer Certificate of Title No. T-48580 together with
the encumbrances therein and to issue a new Transfer
Certificate of Title in the name of ROSALINA FRANCISCO
of legal age, single, Filipino Citizen and resident of Brgy.
Tacas, Jaro, Iloilo City, Philippines. The owners duplicate
certificate of title No. T-48580 which was not surrendered is
hereby declared null and void.5
No appeal was made from both orders of the courts a quo,
hence, they became final and executory.
In a petition to annul the judgment of the trial court, petitioner,
as the alleged previous owner of the parcels of land sold at
public auction, assailed the orders of the RTCs of Iloilo City
before the CA. It claimed that the assessment of real property
taxes on it (GSIS) was void since, under its charter (RA 8291),
it was exempt from all forms of taxes (including real property
taxes on the properties held by it) that were due to the local
governments where such properties were located.
Furthermore, it claimed that the proceedings in the assessment
and levy of said taxes, as well as the sale of the properties at
public auction, were held without notice to it, hence, its right
to due process was violated.
The appellate court gave no credence to the arguments of
petitioner and dismissed its petition. According to the CA, the
exemption of GSIS under its charter was not applicable
pursuant to Section 234(a) of RA 7160, otherwise known as
The Local Government Code of 1991 (LGC). Under that law,
the tax-exempt status of GSIS cannot be invoked where the
actual use or beneficial ownership of the properties under its
title has been conveyed to another person.6 The CA added that
there was also no basis for GSISs claim that it was denied due
process.7
Petitioner filed a motion for reconsideration but this was
denied by the CA, hence, it brought this case to us via a
petition for review on certiorari under Rule 45 of the Rules of
Court.
In this petition, petitioner essentially faults the CA for ruling
that its properties were not exempt from all forms of taxes
under its charter (RA 8291) and that the proceedings on the
assessment and levy of its properties were legal.
In support of its position, petitioner points to Section 39 of RA
8291 which reads:
Section 39. Exemption from Tax, Legal Process and Lien. It
is hereby declared that the actuarial solvency of the funds of
the GSIS shall be preserved and maintained at all times and
that the contribution rates are necessary to sustain the benefits
under this Act shall be kept low as possible in order not to
burden the member of the GSIS and their employers. Taxes
imposed on the GSIS tend to impair the actuarial solvency of
its funds and increase the contribution rate necessary to sustain
the benefits of this Act. Accordingly, notwithstanding any
laws to the contrary, the GSIS, its assets, revenues, including
all accruals thereto, and benefits paid shall be exempt from all
taxes, assessment fees, charges or duties of all kinds. These
exemptions shall continue unless expressly and specifically
revoked and any assessment against the GSIS as of the
approval of this Act are hereby considered paid.
Consequently, all laws, ordinances, regulations, issuances,
opinions, or jurisprudence contrary to or in derogation of this
provision are hereby deemed repealed, superseded and
rendered ineffective and without legal force and effect.
xxx xxx xxx
The funds and/or properties referred to herein as well as the
benefits, sums or monies corresponding to the benefits under
this Act shall be exempt from attachment, garnishment,
execution, levy or other processes issued by the courts, quasi-
judicial agencies or administrative bodies including the
Commission on Audit (COA) disallowances and from all
financial obligations of the members, including his pecuniary
accountability arising from or caused or occasioned by his
exercise or performance of his official functions or duties, or
incurred relative to or in connection with his position or
otherwise, is in favor of GSIS.8 (italics supplied)
We find no reversible error in the decision and resolution of
the CA.
Even if the charter of the GSIS generally exempts it from tax
liabilities, the prescription is not so encompassing as to make
the tax exemption applicable to the properties in dispute here.
In the early case of City of Baguio v. Busuego,9 we held that
the tax-exempt status of the GSIS could not prevent the
accrual of the real estate tax liability on properties transferred
by it to a private buyer through a contract to sell. In the
present case, GSIS had already conveyed the properties to
private persons thus making them subject to assessment and
payment of real property taxes.10 The alienation of the
properties sold by GSIS was the proximate cause and
necessary consequence of the delinquent taxes due.
The doctrine laid down in City of Baguio is reflected in
Section 234 (a) of the LGC,11 which states:
Section 234. Exemptions from Real Property Tax. The
following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or
any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a
taxable person. (emphasis supplied)
Petitioner, however, claims that RA 8291, which took effect in
1997, abrogated Section 234 (a) of the LGC of 1991.
We disagree.
The abrogation or repeal of a law cannot be assumed; the
intention to revoke must be clear and manifest.12 RA 8291
made no express repeal or abrogation of the provisions of RA
7160, particularly Section 234 (a) thereof.
Repeal by implication in this case is not at all convincing
either. To bring about an implied repeal, the two laws must be
absolutely incompatible. They must be clearly repugnant in a
way that the later law (RA 8291) cannot exist without
nullifying the prior law (RA 7160).13
Indeed, there is nothing in RA 8291 which abrogates,
expressly or impliedly, that particular provision of the LGC.
The two statutes are not inconsistent on that specific point, let
alone so irreconcilable as to compel us to uphold one and
strike down the other.
The rule is that every statute must be interpreted and brought
into accord with other laws in a way that will form a uniform
system of jurisprudence.14 The legislature is presumed to
have known existing laws on the subject and not to have
enacted conflicting laws.15 Thus, the legislature cannot be
presumed to have intended Section 234 (a) to run counter to
Section 39 of RA 8291.
This conclusion is buttressed by the Courts 2003 decision in
National Power Corporation v. City of Cabanatuan16 where
we declared that the tax provisions of the LGC were the most
significant provisions therein insofar as they removed the
blanket exclusion of instrumentalities and agencies of the
national government (like petitioner) from the coverage of
local taxation. In that case, petitioner National Power
Corporation (NPC) claimed that it was an instrumentality of
the government exempt under its charter from paying
franchise tax. The Court overruled NPC and upheld the right
of respondent city government to impose the franchise tax on
its privilege to transact business in its area.
Again, in the 2004 case of Rubia v. Government Service
Insurance System,17 the Court declared that any interpretation
that gave Section 39 an expansive construction to exempt all
GSIS assets and properties from legal processes was
unwarranted. These processes included the levy and
garnishment of its assets for taxes or claims enforced against
it. The Court there ruled that the exemption under Section 39
of the GSIS Charter should be read consistently with its
avowed purpose the maintenance of its actuarial solvency to
finance the retirement, disability and life insurance benefits of
its members. The Court meant that the tax-exempt properties
and assets of GSIS referred to those that remained at its
disposal and use, either for investment or for income-
generating purposes. Properties whose actual and beneficial
use had been transferred to private taxable persons, for
consideration or otherwise, were excluded and were thus
taxable.
In Mactan Cebu International Airport Authority v. Marcos,18
the Court ruled that the exemption of a government-owned or
controlled corporation from taxes and other charges was not
absolute and could be withdrawn, as in fact certain provisions
of the LGC, including Section 234 (a), were deemed to have
expressly withdrawn the tax-exempt privilege of petitioner as
a government-owned corporation.
Lastly, even if we were to construe that RA 8291 abrogated
Section 234(a) of the LGC, still it cannot be made to apply
retroactively without impairing the vested rights of private
respondent. The appellate court thus correctly stated:
xxx it has been the courts consistent ruling that a repealing
statute must not interfere with vested rights or impair the
obligation of contracts; that if any other construction is
possible, the act should not be construed so as to affect rights
which have vested under the old law. Private respondent[s],
we reiterate, have become the private owner[s] of the
properties in question in the regular course of proceedings
established by law, and after the decisions granting such rights
have become final and executory. The enactment of the new
GSIS Charter cannot be applied in a retroactive manner as to
divest the private respondent[s] of [their] ownership.19
(citations omitted)
WHEREFORE, the petition is hereby DENIED.