consti cases sec 10

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SECTION 10NO LAW IMPAIRING OBLIGATION OF CONTRACTS

ORTIGAS & CO. V. FEATI BANK 94 SCRA 533 (L-24670)

An appeal interposed on June 23, 1965 by plaintiff-appellant, Ortigas & Co., Limited Partnership,from the decision of the Court of First Instance of Rizal, Branch VI, at Pasig, Hon. Andres Reyespresiding, which dismissed its complaint in Civil Case No. 7706, entitled, "Ortigas & Company,Limited Partnership, plaintiff, v. Feati Bank and Trust Company, defendant," for lack of merit.

The following facts a reproduction of the lower court's findings, which, in turn, are based on astipulation of facts entered into by the parties are not disputed. Plaintiff (formerly known as "Ortigas,Madrigal y Cia") is a limited partnership and defendant Feati Bank and Trust Co., is a corporationduly organized and existing in accordance with the laws of the Philippines. Plaintiff is engaged in realestate business, developing and selling lots to the public, particularly the Highway Hills Subdivisionalong Epifanio de los Santos Avenue, Mandaluyong, Rizal. 1

On March 4, 1952, plaintiff, as vendor, and Augusto Padilla y Angeles and Natividad Angeles, asvendees, entered into separate agreements of sale on installments over two parcels of land, known

as Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision, situated at Mandaluyong, Rizal. OnJuly 19, 1962, the said vendees transferred their rights and interests over the aforesaid lots in favorof one Emma Chavez. Upon completion of payment of the purchase price, the plaintiff executed thecorresponding deeds of sale in favor of Emma Chavez. Both the agreements (of sale on installment)and the deeds of sale contained the stipulations or restrictions that:

1. The parcel of land subject of this deed of sale shall be used the Buyer exclusivelyfor residential purposes, and she shall not be entitled to take or remove soil, stonesor gravel from it or any other lots belonging to the Seller.

2. All buildings and other improvements (except the fence) which may be constructedat any time in said lot must be, (a) of strong materials and properly painted, (b)

provided with modern sanitary installations connected either to the public sewer or toan approved septic tank, and (c) shall not be at a distance of less than two (2) metersfrom its boundary lines. 2

The above restrictions were later annotated in TCT Nos. 101509 and 101511 of the Register ofDeeds of Rizal, covering the said lots and issued in the name of Emma Chavez. 3

Eventually, defendant-appellee acquired Lots Nos. 5 and 6, with TCT Nos. 101613 and 106092issued in its name, respectively and the building restrictions were also annotatedtherein. 4Defendant-appellee bought Lot No. 5 directly from Emma Chavez, "free from all liens andencumbrances as stated in Annex 'D', 5while Lot No. 6 was acquired from Republic Flour Mills through a"Deed of Exchange," Annex "E". 6TCT No. 101719 in the name of Republic Flour Mills likewise containedthe same restrictions, although defendant-appellee claims that Republic Flour Mills purchased the said

Lot No. 6 "in good faith. free from all liens and encumbrances," as stated in the Deed of Sale, Annex"F" 7between it and Emma Chavez.

Plaintiff-appellant claims that the restrictions annotated on TCT Nos. 101509, 101511, 101719,101613, and 106092 were imposed as part of its general building scheme designed for thebeautification and development of the Highway Hills Subdivision which forms part of the big landedestate of plaintiff-appellant where commercial and industrial sites are also designated orestablished. 8


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Defendant-appellee, upon the other hand, maintains that the area along the western part of Epifaniode los Santos Avenue (EDSA) from Shaw Boulevard to Pasig River, has been declared acommercial and industrial zone, per Resolution No. 27, dated February 4, 1960 of the MunicipalCouncil of Mandaluyong, Rizal. 9It alleges that plaintiff-appellant 'completely sold and transferred tothird persons all lots in said subdivision facing Epifanio de los Santos Avenue" 10and the subject lotsthereunder were acquired by it "only on July 23, 1962 or more than two (2) years after the area ... had

been declared a commercial and industrial zone ...

11

On or about May 5, 1963, defendant-appellee began laying the foundation and commenced theconstruction of a building on Lots Nos. 5 and 6, to be devoted to banking purposes, but whichdefendant-appellee claims could also be devoted to, and used exclusively for, residential purposes.The following day, plaintiff-appellant demanded in writing that defendant-appellee stop theconstruction of the commerical building on the said lots. The latter refused to comply with thedemand, contending that the building was being constructed in accordance with the zoningregulations, defendant-appellee having filed building and planning permit applications with theMunicipality of Mandaluyong, and it had accordingly obtained building and planning permits toproceed with the construction.12

On the basis of the foregoing facts, Civil Case No. 7706, supra, was submitted in the lower court fordecision. The complaint sought, among other things, the issuance of "a writ of preliminary injunction... restraining and enjoining defendant, its agents, assigns, and those acting on its or their behalffrom continuing or completing the construction of a commercial bank building in the premises ...involved, with the view to commanding the defendant to observe and comply with the buildingrestrictions annotated in the defendant's transfer certificate of title."

In deciding the said case, the trial court considered, as the fundamental issue, whether or not theresolution of the Municipal Council of Mandaluyong declaring Lots Nos. 5 and 6, among others, aspart of the commercial and industrial zone of the municipality, prevailed over the building restrictionsimposed by plaintiff-appellant on the lots in question. 13The records do not show that a writ ofpreliminary injunction was issued.

The trial court upheld the defendant-appellee and dismissed the complaint, holding that the subjectrestrictions were subordinate to Municipal Resolution No. 27, supra. It predicated its conclusion onthe exercise of police power of the said municipality, and stressed that private interest should "bowdown to general interest and welfare. " In short, it upheld the classification by the Municipal Councilof the area along Epifanio de los Santos Avenue as a commercial and industrial zone, and held thatthe same rendered "ineffective and unenforceable" the restrictions in question as against defendant-appellee.14The trial court decision further emphasized that it "assumes said resolution to be valid,considering that there is no issue raised by either of the parties as to whether the same is null and void. 15

On March 2, 1965, plaintiff-appellant filed a motion for reconsideration of the above decision, 16whichmotion was opposed by defendant-appellee on March 17, 1965. 17It averred, among others, in the motionfor reconsideration that defendant- appellee "was duty bound to comply with the conditions of the contractof sale in its favor, which conditions were duly annotated in the Transfer Certificates of Title issued in her

(Emma Chavez) favor." It also invited the trial court's attention to its claim that the Municipal Council had(no) power to nullify the contractual obligations assumed by the defendant corporation." 18

The trial court denied the motion for reconsideration in its order of March 26, 1965. 19

On April 2, 1965 plaintiff-appellant filed its notice of appeal from the decision dismissing thecomplaint and from the order of March 26, 1965 denying the motion for reconsideration, its record onappeal, and a cash appeal bond." 20On April 14, the appeal was given due course 21and the records ofthe case were elevated directly to this Court, since only questions of law are raised. 22


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Plaintiff-appellant alleges in its brief that the trial court erred

I. When it sustained the view that Resolution No. 27, series of 1960 of the MunicipalCouncil of Mandaluyong, Rizal declaring Lots Nos. 5 and 6, among others, as part ofthe commercial and industrial zone, is valid because it did so in the exercise of itspolice power; and

II. When it failed to consider whether or not the Municipal Council had the power tonullify the contractual obligations assumed by defendant-appellee and when it did notmake a finding that the building was erected along the property line, when it shouldhave been erected two meters away from said property line. 23

The defendant-appellee submitted its counter-assignment of errors. In this connection, We alreadyhad occasion to hold in Relativo v. Castro 24that "(I)t is not incumbent on the appellee, who occupies apurely defensive position, and is seeking no affirmative relief, to make assignments of error, "

The only issues to be resolved, therefore, are: (1) whether Resolution No. 27 s-1960 is a validexercise of police power; and (2) whether the said Resolution can nullify or supersede the

contractual obligations assumed by defendant-appellee.

1. The contention that the trial court erred in sustaining the validity of Resolution No. 27 as anexercise of police power is without merit. In the first place, the validity of the said resolution wasnever questioned before it. The rule is that the question of law or of fact which may be included inthe appellant's assignment of errors must be those which have been raised in the court below, andare within the issues framed by the parties. 25The object of requiring the parties to present all questionsand issues to the lower court before they can be presented to the appellate court is to enable the lowercourt to pass thereon, so that the appellate court upon appeal may determine whether or not such rulingwas erroneous. The requirement is in furtherance of justice in that the other party may not be taken bysurprise. 26The rule against the practice of blowing "hot and cold" by assuming one position in the trialcourt and another on appeal will, in the words of Elliot, prevent deception. 27For it is well-settled thatissues or defenses not raised 28or properly litigated 29or pleaded 30in the Court below cannot be raised

or entertained on appeal.

In this particular case, the validity of the resolution was admitted at least impliedly, in the stipulationof facts below. when plaintiff-appellant did not dispute the same. The only controversy then as statedby the trial court was whether or not the resolution of the Municipal Council of Mandaluyong ... whichdeclared lots Nos. 4 and 5 among others, as a part of the commercial and industrial zone of themunicipality, prevails over the restrictions constituting as encumbrances on the lots inquestion. 31Having admitted the validity of the subject resolution below, even if impliedly, plaintiff-appellant cannot now change its position on appeal.

But, assuming arguendo that it is not yet too late in the day for plaintiff-appellant to raise the issue ofthe invalidity of the municipal resolution in question, We are of the opinion that its posture is

unsustainable. Section 3 of R.A. No. 2264, otherwise known as the Local AutonomyAct," 32empowers a Municipal Council "to adopt zoning and subdivision ordinances or regulations"; 33forthe municipality. Clearly, the law does not restrict the exercise of the power through an ordinance.Therefore, granting that Resolution No. 27 is not an ordinance, it certainly is a regulatory measure withinthe intendment or ambit of the word "regulation" under the provision. As a matter of fact the same sectiondeclares that the power exists "(A)ny provision of law to the contrary notwithstanding ... "

An examination of Section 12 of the same law 34which prescribes the rules for its interpretation likewisereveals that the implied power of a municipality should be "liberally construed in its favor" and that "(A)nyfair and reasonable doubt as to the existence of the power should be interpreted in favor of the local


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government and it shall be presumed to exist." The same section further mandates that the generalwelfare clause be liberally interpreted in case of doubt, so as to give more power to local governments inpromoting the economic conditions, social welfare and material progress of the people in the community.The only exceptions under Section 12 are existing vested rights arising out of a contract between "aprovince, city or municipality on one hand and a third party on the other," in which case the original termsand provisions of the contract should govern. The exceptions, clearly, do not apply in the case at bar.

2. With regard to the contention that said resolution cannot nullify the contractual obligationsassumed by the defendant-appellee referring to the restrictions incorporated in the deeds of saleand later in the corresponding Transfer Certificates of Title issued to defendant-appellee it shouldbe stressed, that while non-impairment of contracts is constitutionally guaranteed, the rule is notabsolute, since it has to be reconciled with the legitimate exercise of police power, i.e., "the power toprescribe regulations to promote the health, morals, peace, education, good order or safety andgeneral welfare of the people. 35Invariably described as "the most essential, insistent, and illimitable ofpowers" 36and "in a sense, the greatest and most powerful attribute of government, 37the exercise of thepower may be judicially inquired into and corrected only if it is capricious, 'whimsical, unjust orunreasonable, there having been a denial of due process or a violation of any other applicableconstitutional guarantee. 38As this Court held through Justice Jose P. Bengzon in Philippine LongDistance Company vs. City of Davao, et al. 39police power "is elastic and must be responsive to various

social conditions; it is not, confined within narrow circumscriptions of precedents resting on pastconditions; it must follow the legal progress of a democratic way of life." We were even more emphaticin Vda. de Genuino vs. The Court of Agrarian Relations, et al., 40when We declared: "We do not see whypublic welfare when clashing with the individual right to property should not be made to prevail throughthe state's exercise of its police power.

Resolution No. 27, s-1960 declaring the western part of highway 54, now E. de los Santos Avenue(EDSA, for short) from Shaw Boulevard to the Pasig River as an industrial and commercial zone,was obviously passed by the Municipal Council of Mandaluyong, Rizal in the exercise of policepower to safeguard or promote the health, safety, peace, good order and general welfare of thepeople in the locality, Judicial notice may be taken of the conditions prevailing in the area, especiallywhere lots Nos. 5 and 6 are located. The lots themselves not only front the highway; industrial andcommercial complexes have flourished about the place. EDSA, a main traffic artery which runs

through several cities and municipalities in the Metro Manila area, supports an endless stream oftraffic and the resulting activity, noise and pollution are hardly conducive to the health, safety orwelfare of the residents in its route. Having been expressly granted the power to adopt zoning andsubdivision ordinances or regulations, the municipality of Mandaluyong, through its Municipal'council, was reasonably, if not perfectly, justified under the circumstances, in passing the subjectresolution.

The scope of police power keeps expanding as civilization advances, stressed this Court, speakingthru Justice Laurel in the leading case of Calalang v. Williams et al.,41Thus-

As was said in the case of Dobbins v. Los Angeles (195 US 223, 238 49 L. ed.169),'the right to exercise the police power is a continuing one, and a business

lawful today may in the future, because of changed situation, the growth ofpopulation or other causes, become a menace to the public health and welfare, andbe required to yield to the public good.' And in People v. Pomar (46 Phil. 440), it wasobserved that 'advancing civilization is bringing within the scope of police power ofthe state today things which were not thought of as being with in such poweryesterday. The development of civilization), the rapidly increasing population, thegrowth of public opinion, with an increasing desire on the part of the masses and ofthe government to look after and care for the interests of the individuals of the state,


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have brought within the police power many questions for regulation which formerlywere not so considered. 42(Emphasis, supplied.)

Thus, the state, in order to promote the general welfare, may interfere with personal liberty, withproperty, and with business and occupations. Persons may be subjected to all kinds of restraints andburdens, in order to secure the general comfort health and prosperity of the state 43and to this

fundamental aim of our Government, the rights of the individual are subordinated.44

The need for reconciling the non-impairment clause of the Constitution and the valid exercise ofpolice power may also be gleaned from Helvering v. Davis 45wherein Mr. Justice Cardozo, speakingfor the Court, resolved the conflict "between one welfare and another, between particular and general,thus

Nor is the concept of the general welfare static. Needs that were narrow or parochiala century ago may be interwoven in our day with the well-being of the nation What iscritical or urgent changes with the times. 46

The motives behind the passage of the questioned resolution being reasonable, and it being a "

legitimate response to a felt public need,"

47not whimsical or oppressive, the non-impairment ofcontracts clause of the Constitution will not bar the municipality's proper exercise of the power. Now Chief

Justice Fernando puts it aptly when he declared: "Police power legislation then is not likely to succumb tothe challenge that thereby contractual rights are rendered nugatory." 48

Furthermore, We restated in Philippine American Life Ins. Co. v. Auditor General49that laws andreservation of essential attributes of sovereign power are read into contracts agreed upon by the parties.Thus

Not only are existing laws read into contracts in order to fix obligations as betweenthe parties, but the reservation of essential attributes of sovereign power is also readinto contracts as a postulate of the legal order. The policy of protecting contractsagainst impairments presupposes the maintenance of a government by virtue of

which contractual relations are worthwhile

a government which retains adequateauthority to secure the peace and good order of society.

Again, We held in Liberation Steamship Co., Inc. v. Court of Industrial Relations, 50through JusticeJ.B.L. Reyes, that ... the law forms part of, and is read into, every contract, unless clearly excludedtherefrom in those cases where such exclusion is allowed." The decision in Maritime Company of thePhilippines v. Reparations Commission, 51written for the Court by Justice Fernando, now Chief Justice,restates the rule.

One last observation. Appellant has placed unqualified reliance on American jurisprudence andauthorities 52to bolster its theory that the municipal resolution in question cannot nullify or supersede theagreement of the parties embodied in the sales contract, as that, it claims, would impair the obligation ofcontracts in violation of the Constitution. Such reliance is misplaced.

In the first place, the views set forth in American decisions and authorities are notper secontrollingin the Philippines, the laws of which must necessarily be construed in accordance with the intentionof its own lawmakers and such intent may be deduced from the language of each law and thecontext of other local legislation related thereto. 53and Burgess, et al v. Magarian, et al., 55two Of thecases cited by plaintiff-appellant, lend support to the conclusion reached by the trial court, i.e. that themunicipal resolution supersedes/supervenes over the contractual undertaking between the parties. Dolanv. Brown, states that "Equity will not, as a rule, enforce a restriction upon the use of property byinjunction where the property has so changed in character and environment as to make it unfit or


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unprofitable for use should the restriction be enforced, but will, in such a case, leave the complainant towhatever remedy he may have at law. 56(Emphasis supplied.) Hence, the remedy of injunction in Dolanvs. Brown was denied on the specific holding that "A grantor may lawfully insert in his deed conditions orrestrictions which are not against public policy and do not materially impair the beneficial enjoyment of theestate. 57Applying the principle just stated to the present controversy, We can say that since it is nowunprofitable, nay a hazard to the health and comfort, to use Lots Nos. 5 and 6 for strictly residentialpurposes, defendants- appellees should be permitted, on the strength of the resolution promulgatedunder the police power of the municipality, to use the same for commercial purposes. In Burgess v.Magarian et al. it was, held that "restrictive covenants running with the land are binding on all subsequentpurchasers ... " However, Section 23 of the zoning ordinance involved therein containedaprovisoexpressly declaring that the ordinance was not intended "to interfere with or abrogate or annulany easements, covenants or other agreement between parties." 58In the case at bar, no such proviso isfound in the subject resolution.

It is, therefore, clear that even if the subject building restrictions were assumed by the defendant-appellee as vendee of Lots Nos. 5 and 6, in the corresponding deeds of sale, and later, in TransferCertificates of Title Nos. 101613 and 106092, the contractual obligations so assumed cannot prevailover Resolution No. 27, of the Municipality of Mandaluyong, which has validly exercised its policepower through the said resolution. Accordingly, the building restrictions, which declare Lots Nos. 5

and 6 as residential, cannot be enforced.

IN VIEW OF THE FOREGOING, the decision appealed from, dismissing the complaint, is herebyAFFIRMED. "without pronouncement as to costs.

SO ORDERED.

CITY OF SAN PABLO LAGUNA V. BIENBENIDO REYES GR NO 127708 (1999)

This is a petition under Rule 45 of the Rules of Court to review on a pure question of law the

decision of the Regional Trial Court (RTC) of San Pablo City, Branch 29 in Civil Case No. SP-4359(96), entitled "Manila Electric Company vs. City of San Pablo, Laguna, City Treasurer of SanPablo Laguna, and the Sangguniang Panglunsod of San Pablo City, Laguna." The RTC declared theimposition of a franchise tax under Section 2.09 Article D of Ordinance No. 56 otherwise known asthe Revenue Code of the City of San Pablo as ineffective and void insofar as the respondentMERALCO is concerned for being violative of Act No. 3648, Republic Act No. 2340 and PD 551. TheRTC also granted MERALCO'S claim for refund of franchise taxes paid under protest.

The following antecedent facts are undisputed:

Act No. 3648 granted the Escudero Electric Service Company a legislative franchise to maintain andoperate an electric light and power system in the City of San Pablo and nearby municipalities.

Section 10 of Act No. 3648 provides:

. . . In consideration of the franchise and rights hereby granted, the grantee shall payunto the municipal treasury of each municipality in which it is supplying electriccurrent to the public under this franchise, a tax equal to two percentum of the grossearnings from electric current sold or supplied under this franchise in each saidmunicipality. Said tax shall be due and payable quarterly and shall be in lieu of anyand all taxes of any kind nature or description levied, established or collected by anyauthority whatsoever, municipal, provincial or insular, now or in the future, on its


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poles, 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 franchise, rights. privileges, receipts, revenues and profits from whichtaxes the grantee is hereby expressly exempted.

Escudero's franchise was transferred to the plaintiff (herein respondent) MERALCO under RepublicAct No. 2340.

Presidential Decree No. 551 was enacted on September 11, 1974. Section 1 thereof provides thefollowing:

Sec. 1. Any provision of law or local ordinance to the contrary notwithstanding, thefranchise tax payable by all grantees of franchise to generate, distribute and sellelectric current for light, heat and power shall be two percent (2%) of their grossreceipts received from the sale of electric current and from transactions incident tothe generation, distribution and sale of electric current.

Such franchise tax shall be payable to the Commissioner of Internal Revenue of hisduly authorized representative on or before the twentieth day of the month followingthe end of each calendar quarter or month as may be provided in the respectivefranchise or pertinent municipal regulation and shall, any provision of the Local TaxCode or any other law to the contrary notwithstanding, be in lieu of all taxes andassessments of whatever nature imposed by any national or local authority onearnings, receipts, income and privilege of generation, distribution and sale ofelectric current.

Republic Act No. 7160, otherwise known as the "Local Government Code of 1991" (hereinafterreferred to as LGC) took effect on January 1, 1992. The said Code authorizes the province/city toimpose a tax on business enjoying a franchise at a rate not exceeding fifty percent (50%) of onepercent (1%) of the gross annual receipts for the preceding calendar year realized within its

jurisdiction.

On October 5, 1992, the Sangguniang Panglunsod of San Pablo City enacted Ordinance No. 56,otherwise known as the Revenue Code of the City of San Pablo. The said Ordinance took effect onOctober 30, 1992. 1

Sec. 2.09, Article D of said Ordinance provides:

Sec. 2.09. Franchise Tax There is hereby imposed a tax on business enjoying afranchise, at a rate of fifty percent (50%) of one percent (1%) of the cross annualreceipts, which shall include both cash sales and sales on account realized duringthe preceding calendar year within the city.

Pursuant to the above-quoted Section 2.09, the petitioner City Treasurer sent to private respondenta letter demanding payment of the aforesaid franchise tax. From 1994 to 1996, private respondentpaid "under protest" a total amount of P1,857,711.67. 2

The private respondent subsequently filed this action before the Regional Trial Court to declareOrdinance No. 56 null and void insofar as it imposes the franchise tax upon private respondentMERALCO 3and to claim for a refund of the taxes paid.


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The Court ruled in favor of MERALCO and upheld its argument that the LGC did not expressly orimpliedly repeal the tax exemption/incentive enjoyed by it under its charter The dispositive portion ofthe decision reads:

WHEREFORE, the imposition of a franchise tax under Sec. 2.09, Article D ofOrdinance No. 56 otherwise known as the Revenue Code of the City of San Pablo, is

declared ineffective and null and void insofar as the plaintiff MERALCO is concernedfor being of Republic Act. No. 2340, PD 551, and Republic Act No. 7160 anddefendants are ordered to refund to the plaintiff the amount of ONE MILLION EIGHTHUNDRED FIFTY SEVEN THOUSAND SEVEN HUNDRED ELEVEN & 67/100(P1,857,711.67) and such other amounts as may have been paid by the plaintiffunder said Revenue Ordinance No. 56 after the filling of the complaint. 4

SO ORDERED.

Its motion for records for reconsideration having been denied by the trial court. 5the petitioners filedthe instant petition with this Court raising pure question of law based on the following grounds:

I. RESPONDENT JUDGE GRAVELY ERRED IN HOLDING THATACT NO. 3648, REPUBLIC ACT NO 2340 AND PRESIDENTIALDECREE NO. 551, AS AMENDED, INSOFAR AS THEY GRANTTAX INCENTIVES, PRIVILEGES AND IMMUNITIES TO PRIVATERESPONDENT, HAVE NOT BEEN REPEALED BY REPUBLIC ACTNO. 7160.

II. RESPONDENT JUDGE GRAVELY ERRED IN RULING THATSECTION 193 OF REPUBLIC ACT NO. 7160 HAS NOTWITHDRAWN THE TAX INCENTIVES, PRIVILEGES ANDIMMUNITIES BEING ENJOYED BY THE PRIVATE RESPONDENTUNDER ACT NO. 3648 REPUBLIC ACT NO. 2340 ANDPRESIDENTIAL DECREE NO. 551 AS AMENDED.

III. RESPONDENT JUDGE GRAVELY ERRED IN HOLDING THATTHE FRANCHISE TAX IN QUESTION CONSTITUTES ANIMPAIRMENT OF THE CONTRACT BETWEEN THEGOVERNMENT AND PRIVATE RESPONDENT.

Petitioners' position is that RA 7160 (LGC) expressly repealed Act No. 3648, Republic Act No. 2340and Presidential Decree 551 and that pursuant to the provisions of Sections 137 and 193 of theLGC, the province or city now has the power to impose a franchise tax on a business enjoying afranchise. Petitioners rely on the ruling in the case of Mactan Cebu International Airport Authorityvs.Marcos6where the Supreme Court held that the exemption from real property tax granted to MactanCebu International Airport Authority under its charter has been withdrawn upon the effectivity of the LGC.

In addition, the petitioners cite in their Memorandum dated December 8, 1993 an administrativeinterpretation made by the Bureau of Local Government Finance of the Department of Finance in its3rd indorsement dated February 15, 1994 to the effect that the earlier ruling of the Department ofFinance that holders of franchise which contain the phrase "in lieu of all taxes" proviso are exemptfrom the payment of any kind of tax is no longer applicable upon the effectivity of the LGC in view ofthe withdrawal of tax exemption privileges as provided in Sections 193 and 234 thereof.

We resolve to reverse the court a quo.


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The pivotal issue is whether the City of San Pablo may impose a local franchise tax pursuant to theLGC upon the Manila Electric Company which pays a tax equal to two percent of its gross receipts inlieu ofall taxes and assessments of whatever nature imposed by any national or local authority onsavings or income.

It is necessary to reproduce the pertinent provisions of the LGC.

Sec. 137 Franchise TaxNotwithstanding any exemption granted by any law orother special law, the province may impose a tax on business enjoying a franchise,at a rate not exceeding fifty percent 50% of one percent 1% of the gross annualreceipts for the preceding calendar year based on the incoming receipts, or realized,within its territorial jurisdiction. . . .

Sec. 151 Scope of Taxing PowersExcept as otherwise provided in this Code,the city, may levy the taxes, fees, and charges which the province or municipalitymay impose: Provided, however, That the taxes, fees and charges levied andcollected by highly urbanized and independent component cities shall accrue to themand distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed forthe province or municipality by not more than fifty percent (50%) except the rates ofprofessional and amusement taxes.

Sec. 193 Withdrawal of Tax Exemption PrivilegesUnless otherwise provided inthis Code, tax exemptions or incentives granted to, or presently enjoyed by allpersons, whether natural or juridical, including government-owned or controlledcorporations, except local water districts, cooperatives duly registered under R.A.6938, non- stock and non-profit hospitals and educational institutions, are herebywithdrawn upon the effectivity of this Code.

Sec. 534 (f) Repealing Clause All general and special law, acts, city charters,decrees, executive orders, proclamation and administrative regulations, or part orparts thereof which are inconsistent with any of the provisions of this code are herebyrepealed or modified accordingly.

Sec. 534 (f), the repealing clause of the LGC, provides that all general and special laws, act, citycharters, decrees, executive orders, proclamations and administrative regulations or parts thereofwhich are inconsistent with any of the provisions of the Code are hereby repealed or modifiedaccordingly.

This clause partakes of the nature of a general repealing clause. 7It is certainly not an expressrepealing clause because it fails to designate the specific act or acts identified by number or title, that areintended to be repealed. 8

Was there an implied repeal by Republic Act No. 7160 of the MERALCO franchise insofar as thelatter imposes a 2% tax "in lieu of all taxes and assessments of whatever nature"?

We rule affirmatively.

We are mindful of the established rule that repeals by implication are not favored as laws arepresumed to be passed with deliberation and full knowledge of all laws existing on the subject. Ageneral law cannot be construed to have repealed a special law by mere implication unless the


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intent to repeal or alter is manifest 9and it must be convincingly demonstrated that the two laws are soclearly repugnant and patently inconsistent that they cannot co-exist. 10

It is our view that petitions correctly rely on the provisions of Sections 137 and 193 of the LGC tosupport their position that MERALCO`s tax exemption has been withdrawn. The explicit language ofSection 137 which authorizes the province to impose franchise tax "notwithstanding any exemption

granted by any law or other special law" is all-encompassing and clear. The franchise tax isimposable despite any exemption enjoyed under special laws.

Sec. 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unlessotherwise provided in this Code, tax exemptions or incentives granted to or presently enjoyed by allpersons whether natural or juridical, including government-owned or controlled corporations except1) local water districts, 2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profithospitals and educational institutions, are withdrawn upon the effectivity of this code, the obviousimport is to limit the exemptions to the three enumerated entities. It is a basic precept of statutoryconstruction that the express mention of one person, thing, act, or consequence excludes all othersas expressed in the familiar maxim expressio untus est exclusio alterius. 11In the absence of anyprovision of the Code to the contrary, and we find no other provision in point, any existing tax exemptionor incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn.

Reading together Sections 137 and 193 of the LGC, we conclude that under the LGC the localgovernment unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annualreceipts for the preceding calendar year based on the incoming receipts realized within its territorial

jurisdiction. The legislative purpose to withdraw tax privileges enjoy under existing law or charter isclearly manifested by the language used in Sections 137 end 193 categorically withdrawing suchexemption subject only to the exceptions enumerated. Since it would be not only tedious andimpractical to attempt to enumerate all the existing statutes providing for special tax exemptions orprivileges, the LGC provided for an express, albeit general, withdrawal of such exemptions orprivileges. 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 theInternal Revenue Code, as the charter is in the nature of a private contract and the exemption is partof the inducement for the acceptance of the franchise, and that the imposition of another franchisetax by the local authority would constitute an impairment of contract between the government andthe corporation. 12But these "magic words" contained in the phrase "shall be in lieu of all taxes'' 13haveto give way to the peremptory language of the LGC specifically providing for the withdrawal of suchexemption privileges.

Accordingly in Mactan Cebu International Airport Authority vs.Marcos. 14this Court held that Section 193 of the LGC prescribes the general rule, viz., the tax exemptionor incentives, granted to or presently enjoyed by natural or juridical persons are withdrawn upon theeffectivity of the LGC except with respect to those entities expressly enumerated. In the same vein, Wemust hold that the express withdrawal upon effectivity of the LGC of all exemptions except only as

provided therein, can no longer be invoked by Meralco to disclaim liability for the local tax.

Private respondents further argue that the "in lieu of" provision contained in PD 551, Act. No. 3648and RA 2340 does not partake of the nature of an exemption, but is a "commutative tax". Thiscontention was raised but was not upheld in Cagayan Electric Power and LightCo. Inc. vs. Commissioner of Internal Revenue15wherein the Supreme Court stated:


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. . . Congress could impair petitioner's legislative franchise by making it liable forincome tax from which heretofore it was exempted by virtue of the exemptionprovided for in section 3 of its franchise . . .

. . . Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting toincome tax all corporate tax payers not expressly exempted therein and in section 27

of the Code, had the effect of withdrawing petitioner's exemption from income tax . . .

Private respondent's invocation of the non-impairment clause of the Constitution is accordinglyunavailing. The LGC was enacted in pursuance of the constitutional policy to ensure autonomy tolocal governments16and to enable them to attain fullest development as self-reliant communities. 17Thusin Mactan Cebu International Airport Authority vs. Marcos,supra, this Court pointed out, in upholding thewithdrawal of the real estate tax exemption previously enjoyed by the Mactan Cebu International AirportAuthority, as follows:

Note that as reproduced in Section 234 (a) the phrase ''and any government-ownedor controlled corporation so exempt by its charter" was excluded. The justification forthis restricted exemption in Section 234(a) seems obvious: to limit further taxexemption privileges, especially in light of the general provision on withdrawal of taxexemption privileges in Section 193 and the special provision on withdrawal ofexemption from payment of real property taxes in the last paragraph of Section 234.These policy considerations are consistent with the State policy to ensure autonomyto local governments and the objective of the LGC that they enjoy genuine andmeaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of nationalgoals. The power to tax is the most effective instrument to raise needed revenues tofinance and support myriad activities of local government units for the delivery ofbasic services essential to the promotion of the general welfare and theenhancement of peace, progress, and prosperity of the people. It may also berelevant to recall that the original reasons for the withdrawal of tax exemptionprivileges granted to government-owned or controlled corporations and all other units

of government were that such privilege resulted in serious tax base erosion anddistortions in the tax treatment of similarly situated enterprises, and there was a needfor these entities to share in the requirements of development, fiscal or otherwise, bypaying the taxes and other charges due from them. 18

The Court therein concluded that:

nothing can prevent Congress from decreeing that even instrumentalities or agenciesof the Government performing governmental functions may be subject to tax. Whereit is done precisely to fulfill a constitutional mandate and national policy, no one candoubt its wisdom. 19

The power to tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised bylocal legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant todirect authority conferred by Section 5, Article X of the Constitution. 20Thus Article X, Section 5 of theConstitution reads:

Sec. 5 Each Local Government unit shall have the power to create its ownsources of revenue and to levy taxes, fees and charges subject to such guidelinesand limitations as the Congress may provide, consistent with the basic policy of local


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autonomy. Such taxes, fees and charges shall accrue exclusively to the LocalGovernments.

The important legal effect of Section 5 is that henceforth, in interpreting statutory provisionon municipal fiscal powers, doubts will have to resolved in favor of municipal corporations. 21

There is further basis for tire conclusion that the non-impairment of contract clause cannot beinvoked to uphold Meralco's exemption from the local tax. Escudero Electric Co. was originally giventhe legislative franchise under Act. 3648 to operate an electric light and power system in the City ofSan Pablo and nearby municipalities. The term of the franchise under Act. No. 3648 is a period offifty years from the Act's approval in 1929. The said law provided that the franchise is granted uponthe condition that it shall be subject to amendment, or repeal by the Congress of the UnitedStates. 22Under the 1935. 23the 1973 24and the 1987 25Constitutions, no franchise or right shall begranted except under the condition that it shall be subject to amendment, alteration or repeal by theNational Assembly when the public interest so requires. With or without the reservation clause, franchisesare subject to alterations through a reasonable exercise of the police power; they are also subject toalteration by the power to tax, which like police power cannot be contracted away. 26

Finally, while the matter is not of controlling significance, the Court notes that whereas the originalEscudero franchise exempted the franchise holder from all taxes levied or collected "now or in thefuture" 27this phrase is noticeably omitted in the counterpart provision of P.D. 551; that said omission isintended not to foreclose future taxes may reasonably be deduced by statutory construction.

WHEREFORE, the instant petition is GRANTED. The decision of the Regional Trial Court of SanPablo City, appealed from is hereby reversed and set aside and the complaint of MERALCO ishereby DISMISSED.

No pronouncement as to costs.

SO ORDERED.

BANAY V. COMELEC 595 SCRA 477 (2009)

THE CASE

BEFORE THE COURT IS A PETITION FOR PROHIBITION[1]WITH A

PRAYER FOR THE ISSUANCE OF A TEMPORARY RESTRAINING ORDER

OR A WRIT OF PRELIMINARY INJUNCTION[2]FILED BY PETITIONER

BARANGAY ASSOCIATION FOR NATIONAL ADVANCEMENT AND

TRANSPARENCY (BANAT) PARTY LIST (PETITIONER) ASSAILING THECONSTITUTIONALITY OF REPUBLIC ACT NO. 9369 (RA 9369)[3]AND

ENJOINING RESPONDENT COMMISSION ON ELECTIONS (COMELEC)

FROM IMPLEMENTING THE STATUTE.
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RA 9369 is a consolidation of Senate Bill No. 2231 and House Bill No. 5352

passed by the Senate on 7 December 2006 and the House of Representatives on 19

December 2006. On 23 January 2007, less than four months before the 14 May

2007 local elections, the President signed RA 9369. Two newspapers of general

circulation, Malaya and Business Mirror, published RA 9369 on 26 January2007. RA 9369 thus took effect on 10 February 2007.

On 7 May 2007, petitioner, a duly accredited multi-sectoral organization,

filed this petition for prohibition alleging that RA 9369 violated Section 26(1),

Article VI of the Constitution.[4] Petitioner also assails the constitutionality of

Sections 34, 37, 38, and 43 of RA 9369. According to petitioner, these provisionsare of questionable application and doubtful validity for failing to comply with the

provisions of the Constitution.

The COMELEC and the Office of the Solicitor General (OSG) filed their

respective Comments. At the outset, both maintain that RA 9369 enjoys thepresumption of constitutionality, save for the prayer of the COMELEC to declare

Section 43 as unconstitutional.

The Assailed Provisions of RA 9369

Petitioner assails the following provisions of RA 9369:

1. Section 34 which provides:

SEC. 34. Sec. 26 of Republic Act No. 7166 is hereby amended

to read as follows:SEC. 26.Official Watchers. - Every registered political party or

coalition of political parties, and every candidate shall each be entitled to

one watcher in every polling place and canvassing

center:ProvidedThat, candidates for the Sangguniang Panlalawigan,Sangguniang Panlunsod, or Sangguniang Bayan belonging to the same

slate or ticket shall collectively be entitled to only one watcher.

The dominant majority party and dominant minority party,

which the Commission shall determine in accordance with law, shall
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each be entitled to one official watcher who shall be paid a fixed

per diemof four hundred pesos (400.00).

There shall also recognized six principal watchers, representing the six

accredited major political parties excluding the dominant majority and minority

parties, who shall be designated by the Commission upon nomination of the saidparties. These political parties shall be determined by the Commission upon notice

and hearing on the basis of the following circumstances:

(a) The established record of the said parties, coalition of groups

that now composed them, taking into account, among other things, their

showing in past election;

(b) The number of incumbent elective officials belonging to them

ninety (90) days before the date of election;

c) Their identifiable political organizations and strengths as

evidenced by their organized/chapters;(d) The ability to fill a complete slate of candidates from the municipal level

to the position of President; and

(e) Other analogous circumstances that may determine their

relative organizations and strengths.

2. Section 37 which provides:

SEC. 37. Section 30 of Republic Act No. 7166 is herebyamended to read as follows:

SEC. 30.Congress as the National Board of Canvassers for theElection of President and Vice President: The Commission en banc as

the National Board of Canvassers for the election of senators:

Determination of Authenticity and Due Execution of Certificates of

Canvass. Congress and the Commission en bancshall determine the

authenticity and due execution of the certificate of canvass for president

and vice president and senators, respectively, as accomplished and


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transmitted to it by the local boards of canvassers, on a showing that: (1)

each certificate of canvass was executed, signed and thumbmarked by

the chairman and members of the board of canvassers and transmitted or

caused to be transmitted to Congress by them; (2) each certificate of

canvass contains the names of all of the candidates for president and vice

president or senator, as the case may be, and their corresponding votes inwords and their corresponding votes in words and in figures; (3) there

exits no discrepancy in other authentic copies of the certificates of

canvass or any of its supporting documents such as statement of votes by

city/municipality/by precinct or discrepancy in the votes of any candidate

in words and figures in the certificate; and (4) there exist no discrepancy

in the votes of any candidate in words and figures in the certificates of

canvass against the aggregate number of votes appearing in the election

returns of precincts covered by the certificate of canvass:Provided, That

certified print copies of election returns or certificates of canvass may be

used for the purpose of verifying the existence of the discrepancy.

WHEN THE CERTIFICATE OF CANVASS, DULY

CERTIFIED BY THE BOARD OF CANVASSERS OF EACH

PROVINCE, CITY OF DISTRICT, APPEARS TO BE INCOMPLETE,

THE SENATE PRESIDENT OR THE CHAIRMAN OF THE

COMMISSION, AS THE CASE MAY BE, SHALL REQUIRE THE

BOARD OF CANVASSERS CONCERNED TO TRANSMIT BY

PERSONAL DELIVERY, THE ELECTION RETURNS FORM

POLLING PLACES THAT WERE NOT INCLUDED IN THECERTIFICATE OF CANVASS AND SUPPORTING STATEMENTS.

SAID ELECTION RETURNS SHALL BE SUBMITTED BY

PERSONAL DELIVERY WITHIN TWO (2) DAYS FROM RECEIPT

OF NOTICE.

WHEN IT APPEARS THAT ANY CERTIFICATE OF

CANVASS OR SUPPORTING STATEMENT OF VOTES BY

CITY/MUNICIPALITY OR BY PRECINCT BEARS ERASURES OR

ALTERATION WHICH MAY CAST DOUBT AS TO THE

VERACITY OF THE NUMBER OF VOTES STATED HEREIN ANDMAY AFFECT THE RESULT OF THE ELECTION, UPON

REQUESTED OF THE PRESIDENTIAL, VICE PRESIDENTIAL OR

SENATORIAL CANDIDATE CONCERNED OR HIS PARTY,

CONGRESS OR THE COMMISSIONEN BANC, AS THE CASE

MAY BE SHALL, FOR THE SOLE PURPOSE OF VERIFYING THE

ACTUAL NUMBER OF VOTES CAST FOR PRESIDENT, VICE


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PRESIDENT OR SENATOR, COUNT THE VOTES AS THEY

APPEAR IN THE COPIES OF THE ELECTION RETURNS

SUBMITTED TO IT.

IN CASE OF ANY DISCREPANCY, INCOMPLETENESS,

ERASURE OR ALTERATION AS MENTIONED ABOVE, THE

PROCEDURE ON PRE-PROCLAMATION CONTROVERSIES

SHALL BE ADOPTED AND APPLIED AS PROVIDED IN SECTION

17,18,19 AND 20.

ANY PERSON WHO PRESENT IN EVIDENCE A

SIMULATED COPY OF AN ELECTION RETURN, CERTIFICATEOF CANVASS OR STATEMENT OF VOTES, OR A PRINTED

COPY OF AN ELECTION RETURN, CERTIFICATE OFCANVASS OR STATEMENT OF VOTES BEARING A

SIMULATED CERTIFICATION OR A SIMULATED IMAGE,

SHALL BE GUILTY OF AN ELECTION OFFENSE SHALL BEPENALIZED IN ACCORDANCE WITH BATAS PAMBANSA

BLG. 881.

3. SECTION 38 WHICH PROVIDES:

SEC. 38. SECTION 15 OF REPUBLIC ACT NO. 7166 IS

HEREBY AMENDED TO READ AS FOLLOWS:

SEC. 15.PRE-PROCLAMATION CASES IN ELECTIONS FOR

PRESIDENT, VICE PRESIDENT, SENATOR, AND MEMBER OFTHE HOUSE OF REPRESENTATIVES. - FOR PURPOSES OF THE

ELECTIONS FOR PRESIDENT, VICE PRESIDENT, SENATOR,

AND MEMBER OF THE HOUSE OF REPRESENTATIVES, NOPRE-PROCLAMATION CASES SHALL BE ALLOWED ONMATTERS RELATING TO THE PREPARATION,

TRANSMISSION, RECEIPT, CUSTODY AND APPRECIATION

OF ELECTION RETURNS OR THE CERTIFICATES OF

CANVASS, AS THE CASE MAY BE, EXCEPT AS PROVIDEDFOR IN SECTION 30 HEREOF. HOWEVER, THIS DOES NOT


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PRECLUDE THE AUTHORITY OF THE APPROPRIATE

CANVASSING BODYMOTU PROPRIOOR UPON WRITTENCOMPLAINT OF AN INTERESTED PERSON TO CORRECT

MANIFEST ERRORS IN THE CERTIFICATE OF CANVASS OR

ELECTION RETURNS BEFORE IT.

QUESTIONS AFFECTING THE COMPOSITION ORPROCEEDINGS OF THE BOARD OF CANVASSERS MAY BE

INITIATED IN THE BOARD OR DIRECTLY WITH THE

COMMISSION IN ACCORDANCE WITH SECTION 19 HEREOF.

ANY OBJECTION ON THE ELECTION RETURNS BEFORE THE CITY

OR MUNICIPAL BOARD OF CANVASSERS, OR ON THE MUNICIPAL

CERTIFICATES OF CANVASS BEFORE THE PROVINCIAL BOARD OF

CANVASSERS OR DISTRICT BOARD OF CANVASSERS IN METRO MANILAAREA, SHALL BE SPECIFICALLY NOTICED IN THE MINUTES OF THE

RESPECTIVE PROCEEDINGS.

4. SECTION 43 WHICH PROVIDES:

SEC. 43. SECTION 265 OF BATAS PAMBANSA BLG. 881 IS

HEREBY AMENDED TO READ AS FOLLOWS:

SEC. 265.PROSECUTION. THE COMMISSION SHALL,

THROUGH ITS DULY AUTHORIZED LEGAL OFFICERS, HAVE

THE POWER, CONCURRENT WITH THE OTHER PROSECUTING

ARMS OF THE GOVERNMENT, TO CONDUCT PRELIMINARYINVESTIGATION OF ALL ELECTION OFFENSES PUNISHABLE

UNDER THIS CODE, AND TO PROSECUTE THE SAME.


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THE ISSUES

PETITIONER RAISES THE FOLLOWING ISSUES:

1. WHETHER RA 9369 VIOLATES SECTION 26(1), ARTICLE VI OFTHE CONSTITUTION;

WHETHER SECTIONS 37 AND 38 VIOLATE SECTION 17, ARTICLE

VI[5]AND PARAGRAPH 7, SECTION 4, ARTICLE VII[6]OF THECONSTITUTION;

Whether Section 43 violates Section 2(6), Article IX-C of the Constitution;[7]and

WHETHER SECTION 34 VIOLATES SECTION 10, ARTICLE III OF THE

CONSTITUTION.[8]

THE COURTS RULING

THE PETITION HAS NO MERIT.

IS SETTLED THAT EVERY STATUTE IS PRESUMED TO BE

CONSTITUTIONAL.[9] THE PRESUMPTION IS THAT THE

LEGISLATURE INTENDED TO ENACT A VALID, SENSIBLE AND JUST

LAW.

THOSE WHO PETITION THE COURT TO DECLARE A LAWUNCONSTITUTIONAL MUST SHOW THAT THERE IS A CLEAR AND

UNEQUIVOCAL BREACH OF THE CONSTITUTION, NOT MERELY A

DOUBTFUL, SPECULATIVE OR ARGUMENTATIVE ONE;

OTHERWISE, THE PETITION MUST FAIL.[10]

In this case, petitioner failed to justify why RA 9369 and the assailed

provisions should be declared unconstitutional.

RA 9369 does not viol ate Section 26(1), Ar ticle VI of the Consti tut ion

Petitioner alleges that the title of RA 9369 is misleading because it speaks of

poll automation but contains substantial provisions dealing with the manual

canvassing of election returns. Petitioner also alleges that Sections 34, 37, 38, and

43 are neither embraced in the title nor germane to the subject matter of RA 9369.
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Both the COMELEC and the OSG maintain that the title of RA 9369 is broad

enough to encompass topics which deal not only with the automation process butwith everything related to its purpose encouraging a transparent, credible, fair, and

accurate elections.

The constitutional requirement that every bill passed by the Congress shallembrace only one subject which shall be expressed in the title thereof has always

been given a practical rather than a technical construction.[11] The requirement is

satisfied if the title is comprehensive enough to include subjects related to the

general purpose which the statute seeks to achieve.[12] The title of a law does not

have to be an index of its contents and will suffice if the matters embodied in the

text are relevant to each other and may be inferred from the title .[13] Moreover, a

title which declares a statute to be an act to amend a specified code is sufficient

and the precise nature of the amendatory act need not be further stated.[14]

RA 9369 is an amendatory act entitled An Act Amending Republic Act No.

8436, Entitled An Act Authorizing the Commission on Elections to Use an

Automated Election System in the May 11, 1998 National or Local Elections and

in Subsequent National and Local Electoral Exercises, to Encourage Transparency,

Credibility, Fairness and Accuracy of Elections, Amending for the Purpose Batas

Pambansa Blg. 881, as Amended, Republic Act No. 7166 and Other Related

Election Laws, Providing Funds Therefor and For Other Purposes. Clearly, the

subject matter of RA 9369 covers the amendments to RA 8436, Batas Pambansa

Blg. 881 (BP 881),[15]Republic Act No. 7166 (RA 7166),[16]and other related

election laws to achieve its purpose of promoting transparency, credibility,

fairness, and accuracy in the elections. The provisions of RA 9369 assailed by

petitioner deal with amendments to specific provisions of RA 7166 and BP 881,

specifically: (1) Sections 34, 37 and 38 amend Sections 26, 30 and 15 of RA 7166,

respectively; and (2) Section 43 of RA 9369 amends Section 265 of BP

881. Therefore, the assailed provisions are germane to the subject matter of RA

9369 which is to amend RA 7166 and BP 881, among others.

Sections 37 and 38 do not viol ate Section 17, Article VI and Paragraph 7,

Section 4, Ar ticle VI I of the Constitution
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PETITIONER ARGUES THAT SECTIONS 37 AND 38 VIOLATE THE

CONSTITUTION BY IMPAIRING THE POWERS OF THE PRESIDENTIAL

ELECTORAL TRIBUNAL (PET) AND THE SENATE ELECTORAL

TRIBUNAL (SET). ACCORDING TO PETITIONER, UNDER THE AMENDED

PROVISIONS, CONGRESS AS THE NATIONAL BOARD OF CANVASSERSFOR THE ELECTION OF PRESIDENT AND VICE PRESIDENT

(CONGRESS), AND THE COMELEC EN BANCAS THE NATIONAL

BOARD OF CANVASSERS (COMELECEN BANC), FOR THE ELECTION OF

SENATORS MAY NOW ENTERTAIN PRE-PROCLAMATION CASES IN

THE ELECTION OF THE PRESIDENT, VICE PRESIDENT, AND

SENATORS. PETITIONER CONCLUDES THAT IN ENTERTAINING PRE-

PROCLAMATION CASES, CONGRESS AND THE COMELECEN

BANC UNDERMINE THE INDEPENDENCE AND ENCROACH UPON THEJURISDICTION OF THE PET AND THE SET.

The COMELEC maintains that the amendments introduced by Section 37

pertain only to the adoption and application of the procedures on pre-proclamation

controversies in case of any discrepancy, incompleteness, erasure or alteration in

the certificates of canvass. The COMELEC adds that Section 37 does not provide

that Congress and the COMELEC en banc may now entertain pre-proclamation

cases for national elective posts.

OSG argues that the Constitution does not prohibit pre-proclamation casesinvolving national elective posts. According to the OSG,

ONLY SECTION 15 OF RA 7166[17]EXPRESSLY DISALLOWS PRE-

PROCLAMATION CASES INVOLVING NATIONAL ELECTIVE POSTS

BUT THIS PROVISION WAS SUBSEQUENTLY AMENDED BY

SECTION 38 OF RA 9369.

InPimentel III v. COMELEC,[18]we already discussed the implications of

the amendments introduced by Sections 37 and 38 to Sections 15 and 30 [19]of RA

7166, respectively and we declared:

Indeed, this Court recognizes that by virtue of the amendments

introduced by Republic Act No. 9369 to Sections 15 and 30 of Republic
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Act No. 7166, pre-proclamation cases involving the authenticity and due

execution of certificates of canvass are now allowed in elections for

President, Vice-President, and Senators. The intention of Congress to

treat a case falling under Section 30 of Republic Act No. 7166, as

amended by Republic Act No. 9369, as a pre-proclamation case is

apparent in the fourth paragraph of the said provision which adopts andapplies to such a case the same procedure provided under Sections 17,

18, 19 and 20 of Republic Act No. 7166 on pre-proclamation

controversies.

In sum, in [the] elections for President, Vice-President, Senators

and Members of the House of Representatives, the general rule is still

that pre-proclamation cases on matters relating to the preparation,

transmission, receipt, custody and appreciation of election returns or

certificates of canvass are still prohibited. As with other general rules,

there are recognized exceptions to the prohibition, namely: (1) correction

of manifest errors; (2) questions affecting the composition or proceeding

of the board of canvassers; and (3) determination of the authenticity and

due execution of certificates of canvass as provided in Section 30 of

Republic Act No. 7166, as amended by Republic Act No. 9369.[20]

I n the present case, Congress and the COMELEC en banc do not

encroach upon the jur isdiction of the PET and the SET. There is no conf li ct ofjur isdiction since the powers of Congress and the COMELEC en banc, on one

hand, and the PET and the SET, on the other, are exercised on different

occasions and for dif ferent purposes. The PET is the sole judge of all contests

relating to the election, returns and qualif ications of the President or Vice

President. The SET is the sole judge of all contests relating to the election,

returns, and quali fi cations of members of the Senate. The ju r isdiction of the

PET and the SET can only be invoked once the winning presidential, vice

presidenti al or senator ial candidates have been proclaimed. On the other hand,

under Section 37, Congress and the COMELEC en banc shal l determine only

the authenti city and due executi on of the certi f icates of canvass. Congress and

the COMELEC en banc shall exercise this power before the proclamation of the

winning presidenti al, vice presidenti al, and senator ial candidates.
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Section 43 does not violate Section 2(6), Ar ticle IX-C of the Constitution

Both petitioner and the COMELEC argue that the Constitution vests in the

COMELEC the exclusive power to investigate and prosecute cases of violations

of election laws. Petitioner and the COMELEC allege that Section 43 is

unconstitutional because it gives the other prosecuting arms of the government

concurrent power with the COMELEC to investigate and prosecute election

offenses.[21]

We do not agree with petitioner and the COMELEC that the Constitution

gave the COMELEC the exclusive power to investigate and prosecute cases of

violations of election laws.

Section 2(6), Article IX-C of the Constitution vests in the COMELEC the

power to investigate and,where appropriate, prosecute cases of violations of

election laws, including acts or omissions constituting election frauds, offenses,

and malpractices.This was an important innovation introduced by the

Constitution because this provision was not in the 1935[22]or1973[23]Constitutions.[24] The phrase [w]here appropriate leaves to the legislature

the power to determine the kind of election offenses that the COMELEC shall

prosecute exclusively or concurrently with other prosecuting arms of the

government.

The grant of the exclusive power to the COMELEC can be found in

Section 265 of BP 881, which provides:

Sec. 265.Prosecution. - The Commission shall, through its dulyauthorized legal officers, have the exclusive power to conduct

preliminary investigation of all election offenses punishable under this

Code, and to prosecute the same. The Commission may avail of the

assistance of other prosecuting arms of the government: Provided,

however, That in the event that the Commission fails to act on any

complaint within four months from his filing, the complainant may file
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the complaint with the office of the fiscal or with the Ministry of Justice

for proper investigation and prosecution, if warranted. (Emphasis

supplied)

This was also an innovation introduced by BP 881. The history of election laws

shows that prior to BP 881, no such exclusive power was ever bestowed on the

COMELEC.[25]

We also note that while Section 265 of BP 881 vests in the COMELEC the

exclusive power to conduct preliminary investigations and prosecute election

offenses, it likewise authorizes the COMELEC to avail itself of the assistance of

other prosecuting arms of the government. In the 1993 COMELEC Rules ofProcedure, the authority of the COMELEC was subsequently qualified and

explained.[26] The 1993 COMELEC Rules of Procedure provides:

Rule 34 - Prosecution of Election Offenses

Sec. 1. Authority of the Commission to Prosecute

ElectionOffenses. - The Commission shall have the exclusive

power to conduct preliminary investigation of all election offenses

punishable under the election laws and to prosecute the same,

except as may otherwise be provided by law. (Emphasis supplied)

It is clear that the grant of the exclusive power to investigate and

prosecute election offenses to the COMELEC was not by virtue of the Constitution

but by BP 881, a legislative enactment. If the intention of the framers of the

Constitution were to give the COMELEC the exclusive power to investigate and

prosecute election offenses, the framers would have expressly so stated in the

Constitution. They did not.

InPeople v. Basilla,[27]we acknowledged that without the assistance of provincial

and city fiscals and their assistants and staff members, and of the state prosecutors
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of the Department of Justice, the prompt and fair investigation and prosecution of

election offenses committed before or in the course of nationwide elections wouldsimply not be possible.[28] In COMELEC v. Espaol,[29]we also stated that

enfeebled by lack of funds and the magnitude of its workload, the COMELEC did

not have a sufficient number of legal officers to conduct such investigation and toprosecute such cases.[30] The prompt investigation, prosecution, and disposition of

election offenses constitute an indispensable part of the task of securing free,orderly, honest, peaceful, and credible elections.[31]Thus, given the plenary power

of the legislature to amend or repeal laws, if Congress passes a law amendingSection 265 of BP 881, such law does not violate the Constitution.

Section 34 does not violate Section 10, Ar ticle I I I of the Constitution

assails the constitutionality of the provision which fixes the per diem of poll

watchers of the dominant majority and dominant minority parties at Pon electionday . Petitioner argues that this violates the freedom of the parties to contract

and their right to fix the terms and conditions of the contract they see as fair,

equitable and just. Petitioner adds that this is a purely private contract using

private funds which cannot be regulated by law .

The OSG argues that petitioner erroneously invoked the non-impairment

clause because this only applies to previously perfected contracts. In this case,

there is no perfected contact and, therefore, no obligation will be impaired.

Both the COMELEC and the OSG argue that the law is a proper exercise ofpolice power and it will prevail over a contract. According to the COMELEC, poll

watching is not just an ordinary contract but is an agreement with the solemn duty

to ensure the sanctity of votes. The role of poll watchers is vested with public

interest which can be regulated by Congress in the exercise of its policepower. The OSG further argues that the assurance that the poll watchers will

receive fair and equitable compensation promotes the general welfare. The OSG

also states that this was a reasonable regulation considering that the dominantmajority and minority parties will secure a copy of the election returns and aregiven the right to assign poll watchers inside the polling precincts.

There is no violation of the non-impairment clause. First, the non-

impairment clause is limited in application to laws that derogate from prior acts or

contracts by enlarging, abridging or in any manner changing the intention of the
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parties.[32] There is impairment if a subsequent law changes the terms of a contract

between the parties, imposes new conditions, dispenses with those agreed upon or

withdraws remedies for the enforcement of the rights of the parties.[33]

As observed by the OSG, there is no existing contract yet and, therefore, no

enforceable right or demandable obligation will be impaired. RA 9369 wasenacted more than three months prior to the 14 May 2007 elections. Hence, when

the dominant majority and minority parties hired their respective poll watchers for

the 14 May 2007 elections, they were deemed to have incorporated in theircontracts all the provisions of RA 9369.

Second, it is settled that police power is superior to the non-impairment

clause.[34] The constitutional guaranty of non-impairment of contracts is limited bythe exercise of the police power of the State, in the interest of public health, safety,

morals, and general welfare of the community.

Section 8 of COMELEC Resolution No. 1405[35]specifies the rights and

duties of poll watchers:

THE WATCHERS SHALL HAVE THE RIGHT TO STAY IN

THE SPACE RESERVED FOR THEM INSIDE THE POLLING

PLACE. THEY SHALL HAVE THE RIGHT TO WITNESS AND

INFORM THEMSELVES OF THE PROCEEDINGS OF THE BOARD;

TO TAKE NOTES OF WHAT THEY MAY SEE OR HEAR, TO TAKE

PHOTOGRAPHS OF THE PROCEEDINGS AND INCIDENTS, IFANY, DURING THE COUNTING OF VOTES, AS WELL AS THE

ELECTION RETURNS, TALLY BOARD AND BALLOT BOXES; TO

FILE A PROTEST AGAINST ANY IRREGULARITY OR

VIOLATION OF LAW WHICH THEY BELIEVE MAY HAVE BEEN

COMMITTED BY THE BOARD OR BY ANY OF ITS MEMBERS

OR BY ANY PERSON; TO OBTAIN FROM THE BOARD A

CERTIFICATE AS TO THE FILING OF SUCH PROTEST AND/OR

OF THE RESOLUTION THEREON; TO READ THE BALLOTS

AFTER THEY SHALL HAVE BEEN READ BY THE CHAIRMAN,

AS WELL AS THE ELECTION RETURNS AFTER THEY SHALLHAVE BEEN COMPLETED AND SIGNED BY THE MEMBERS OF

THE BOARD WITHOUT TOUCHING THEM, BUT THEY SHALL

NOT SPEAK TO ANY MEMBER OF THE BOARD, OR TO ANY

VOTER, OR AMONG THEMSELVES, IN SUCH A MANNER AS

WOULD DISTURB THE PROCEEDINGS OF THE BOARD; AND TO

BE FURNISHED, UPON REQUEST, WITH A CERTIFICATE OF
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VOTES FOR THE CANDIDATES, DULY SIGNED AND

THUMBMARKED BY THE CHAIRMAN AND ALL THE

MEMBERS OF THE BOARD OF ELECTION INSPECTORS.

Additionally, the poll watchers of the dominant majority and minority parties in aprecinct shall, if available, affix their signatures and thumbmarks on the election

returns for that precinct.[36] The dominant majority and minority parties shall also

be given a copy of the certificates of canvass[37]and election returns[38]through their

respective poll watchers. Clearly, poll watchers play an important role in the

elections.

MOREOVER, WHILE THE CONTRACTING PARTIES MAY ESTABLISHSUCH STIPULATIONS, CLAUSES, TERMS, AND CONDITIONS AS THEY

MAY DEEM CONVENIENT, SUCH STIPULATIONS SHOULD NOT BECONTRARY TO LAW, MORALS, GOOD CUSTOMS, PUBLIC ORDER, OR

PUBLIC POLICY.[39]

INBELTRAN V. SECRETARY OF HEALTH,[40]WE SAID:

FURTHERMORE, THE FREEDOM TO CONTRACT IS

NOT ABSOLUTE; ALL CONTRACTS AND ALL RIGHTS ARE

SUBJECT TO THE POLICE POWER OF THE STATE AND NOT

ONLY MAY REGULATIONS WHICH AFFECT THEM BE

ESTABLISHED BY THE STATE, BUT ALL SUCH REGULATIONSMUST BE SUBJECT TO CHANGE FROM TIME TO TIME, AS THE

GENERAL WELL-BEING OF THE COMMUNITY MAY REQUIRE,

OR AS THE CIRCUMSTANCES MAY CHANGE, OR AS

EXPERIENCE MAY DEMONSTRATE THE

NECESSITY.[41](EMPHASIS SUPPLIED)

THEREFORE, ASSUMING THERE WERE EXISTING CONTRACTS,

SECTION 34 WOULD STILL BE CONSTITUTIONAL BECAUSE THE LAWWAS ENACTED IN THE EXERCISE OF THE POLICE POWER OF THE

STATE TO PROMOTE THE GENERAL WELFARE OF THE PEOPLE. WE

AGREE WITH THE COMELEC THAT THE ROLE OF POLL WATCHERS IS

INVESTED WITH PUBLIC INTEREST. IN FACT, EVEN PETITIONER

CONCEDES THAT POLL WATCHERS NOT ONLY GUARD THE VOTES OF
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THEIR RESPECTIVE CANDIDATES OR POLITICAL PARTIES BUT ALSO

ENSURE THAT ALL THE VOTES ARE PROPERLY

COUNTED. ULTIMATELY, POLL WATCHERS AID IN FAIR AND

HONEST ELECTIONS. POLL WATCHERS HELP ENSURE THAT THE

ELECTIONS ARE TRANSPARENT, CREDIBLE, FAIR, ANDACCURATE. THE REGULATION OF THE PER DIEM OF THE POLL

WATCHERS OF THE DOMINANT MAJORITY AND MINORITY PARTIES

PROMOTES THE GENERAL WELFARE OF THE COMMUNITY AND IS A

VALID EXERCISE OF POLICE POWER.

WHEREFORE, weDISMISSthe petition for lack of merit.

SO ORDERED.

consti cases sec 10

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