1-12 cases tax first case assignments.docx

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 175356 December 3, 2013

MANILA MEMORIAL PAR, INC. AND LA !UNERARIA PA"#SUCAT,INC.,Petitioners,

vs.SECRETAR$ O! T%E DEPARTMENT O! SOCIAL &EL!ARE AND

DE'ELOPMENT ()* T%E SECRETAR$ O! T%E DEPARTMENT O!!INANCE,Respondents.

D E C I S I N

DEL CASTILLO,J.:

!hen a part" challe#es the constitutionalit" of a la$, the burden of proofrests upon hi%.

Before us is a Petition for Prohibition &under Rule '( of the Rules of Court)led b" +e--o)er M()-/( Memor-(/ P(r, I)c. ()* L( !)er(r-(P(#Sc(, I)c., do%estic corporations en#a#ed in the business ofprovidin# funeral and burial services, a#ainst public re+o)*e)Secre(r-e o 4e De+(rme) o Soc-(/ &e/(re ()* Dee/o+me)DS&D ()* 4e De+(rme) o !-)()ce DO!.

Petitioners ((-/the constitutionalit" of Section * of Re+b/-c Ac RANo. 7832,+as a%ended b" RA &(-,*and the i%ple%entin# rules and

re#ulations issued b" the DS!D and D insofar as 4ee (//o9b-)e e(b/-4me) o c/(-m 4e 20: *-co) ;-e) oe)-or c--e) ( ( (< *e*c-o).

actual Antecedents

n April &+, /&, RA 7832 9( +(e* -)o /(9, ;r()-); e)-orc--e) 4e o//o9-); +r--/e;e=

SEC0IN *. Privile#es for the Senior Citi1ens. 2 0he senior citi1ens shall beentitled to the follo$in#3

a4 the ;r() o 9e)> +erce) 20: *-co) rom (//e(b/-4me) re/(-e o -/-(-o) o r()+or(-o) er-ce,4oe/ ()* -m-/(r /o*;-); e(b/-4me)?@, re(r() ()*recre(-o) ce)er ()* +rc4(e o me*-c-)e ()>94ere -) 4eco)r>= Pro-*e*, T4( +r-(e e(b/-4me) m(> c/(-m 4eco ( (< cre*-

b4 a %ini%u% of t$ent" percent 5&674 discount on ad%ission feeschar#ed b" theaters, cine%a houses and concert halls, circuses, carnivalsand other si%ilar places of culture, leisure, and a%use%ent8

c4 e9e%ption fro% the pa"%ent of individual inco%e ta9es3 Provided, 0hattheir annual ta9able inco%e does not e9ceed the propert" level asdeter%ined b" the National Econo%ic and Develop%ent Authorit" 5NEDA4for that "ear8

d4 e9e%ption fro% trainin# fees for socioecono%ic pro#ra%s underta:enb" the SCA as part of its $or:8

e4 free %edical and dental services in #overn%ent establish%ent;sE SENIR CI0IEN shall be eli#ible for the deductiblesales discount.

5&4 0he #ross sellin# price and the sales discount MS0 BE SEPARA0EGOINDICA0ED IN 0>E ICIAG RECEIP0 R SAGES INFICE issued b" theestablish%ent for the sale of #oods or services to the senior citi1en.

5+4 nl" the actual a%ount of the discount #ranted or a sales discount note9ceedin# &67 of the #ross sellin# price can be deducted fro% the #rossinco%e, net of value added ta9, if applicable, for inco%e ta9 purposes,and fro% #ross sales or #ross receipts of the business enterpriseconcerned, for FA0 or other percenta#e ta9 purposes.

5*4 0he discount can onl" be allo$ed as deduction fro% #ross inco%e forthe sa%e ta9able "ear that the discount is #ranted.

5(4 0he business establish%ent #ivin# sales discounts to uali)ed seniorciti1ens is reuired to :eep separate and accurate record;s< of sales,$hich shall include the na%e of the senior citi1en, 0IN, SCA ID, #rosssalesreceipts, sales discount #ranted, ;date< of ;transaction< and invoicenu%ber for ever" sale transaction to senior citi1en.

5'4 nl" the follo$in# business establish%ents $hich #ranted salesdiscount to senior citi1ens on their sale of #oods andor services %a"clai% the said discount #ranted as deduction fro% #ross inco%e, na%el"3

9 9 9 9

5i4 uneral parlors and si%ilar establish%ents 2 0he bene)ciar" or an"person $ho shall shoulder the funeral and burial e9penses of thedeceased senior citi1en shall clai% the discount, such as cas:et,e%bal%%ent, cre%ation cost and other related services for the seniorciti1en upon pa"%ent and presentation of ;his< death certi)cate.

0he DS!D li:e$ise issued its o$n Rules and Re#ulations I%ple%entin# RA&(-, to $it3

RGE FI DISCN0S AS 0A DEDC0IN ES0ABGIS>MEN0S

Article . 0a9 Deduction of Establish%ents. 2 0he establish%ent %a" clai%the discounts #ranted under Rule F, Section * 2 Discounts forEstablish%ents, Section , Medical and Dental Services in Private acilitiesand Sections /6 and // 2 Air, Sea and Gand 0ransportation as ta9deduction based on the net cost of the #oods sold or services rendered.

Provided, 0hat the cost of the discount shall be allo$ed as deduction fro%#ross inco%e for the sa%e ta9able "ear that the discount is#ranted8 Provided, further,0hat the total a%ount of the clai%ed ta9deduction net of value added ta9 if applicable, shall be included in their

#ross sales receipts for ta9 purposes and shall be sub=ect to properdocu%entation and to the provisions of the National Internal RevenueCode, as a%ended8 Provided, )nall", that the i%ple%entation of the ta9deduction shall be sub=ect to the Revenue Re#ulations to be issued b" theBureau of Internal Revenue 5BIR4 and approved b" the Depart%ent ofinance 5D4.

eelin# a##rieved b" the ta9 deduction sche%e, petitioners )led thepresent recourse, pra"in# that Section * of RA -*+&, as a%ended b" RA&(-, and the i%ple%entin# rules and re#ulations issued b" the DS!Dand the D be declared unconstitutional insofar as these allo$ businessestablish%ents to clai% the &67 discount #iven to senior citi1ens as a ta9deduction8 that the DS!D and the D be prohibited fro% enforcin# the

sa%e8 and that the ta9 credit treat%ent of the &67 discount under thefor%er Section * 5a4 of RA -*+& be reinstated.

Issues

Petitioners raise the follo$in# issues3

A.

!>E0>ER 0>E PE0I0IN PRESEN0S AN AC0AG CASE R CN0RFERSO.

B.+


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!>E0>ER SEC0IN * REPBGIC AC0 N. &(- AND I0SIMPGEMEN0IN? RGES AND RE?GA0INS, INSAR AS 0>EO PRFIDE

0>A0 0>E 0!EN0O PERCEN0 5&674 DISCN0 0 SENIR CI0IENS MAOBE CGAIMED AS A 0A DEDC0IN BO 0>E PRIFA0E ES0ABGIS>MEN0S,ARE INFAGID AND NCNS0I00INAG.

PetitionersL Ar#u%ents

Petitioners e%phasi1e that the" are not uestionin# the &67 discount#ranted to senior citi1ens but are onl" assailin# the constitutionalit" of theta9 deduction sche%e prescribed under RA &(- and the i%ple%entin#rules and re#ulations issued b" the DS!D and the D./6

Petitioners posit that the ta9 deduction sche%e contravenes Article III,Section of the Constitution, $hich provides that3 H;p


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0he Petition %ust therefore sho$ that Hthe #overn%ental act bein#challen#ed has a direct adverse eect on the individual challen#in# it.H+*

In this case, the ta9 deduction sche%e challen#ed b" petitioners has adirect adverse eect on the%. 0hus, it cannot be denied that there e9istsan actual case or controvers".

The validity of the 20% senior citizen discount and tax deduction

scheme under RA 925! as an exercise of "olice "o#er of the$tate! has already een settled in &arlos $u"erdru' &or"oration.

Petitioners posit that the resolution of this case lies in the deter%inationof $hether the le#all" %andated &67 senior citi1en discount is ane9ercise of police po$er or e%inent do%ain. If it is police po$er, no =ustco%pensation is $arranted. But if it is e%inent do%ain, the ta9 deductionsche%e is unconstitutional because it is not a peso for pesorei%burse%ent of the &67 discount #iven to senior citi1ens. 0hus, itconstitutes ta:in# of private propert" $ithout pa"%ent of =ustco%pensation. At the outset, $e note that this uestion has been settledin Carlos Superdru# Corporation.+(

In that case, $e ruled3

Petitioners assert that Section *5a4 of the la$ is unconstitutional becauseit constitutes deprivation of private propert". Co%pellin# dru#storeo$ners and establish%ents to #rant the discount $ill result in a loss ofpro)t and capital because /4 dru#stores i%pose a %ar:@up of onl" (7 to/67 on branded %edicines8 and &4 the la$ failed to provide a sche%e$hereb" dru#stores $ill be =ustl" co%pensated for the discount.E9a%inin# petitionersL ar#u%ents, it is apparent that $hat petitioners areulti%atel" uestionin# is the validit" of the ta9 deduction sche%e as arei%burse%ent %echanis% for the t$ent" percent 5&674 discount thatthe" e9tend to senior citi1ens. Based on the afore@stated D pinion, theta9 deduction sche%e does not full" rei%burse petitioners for the

discount privile#e accorded to senior citi1ens. 0his is because thediscount is treated as a deduction, a ta9@deductible e9pense that issubtracted fro% the #ross inco%e and results in a lo$er ta9able inco%e.Stated other$ise, it is an a%ount that is allo$ed b" la$ to reduce theinco%e prior to the application of the ta9 rate to co%pute the a%ount ofta9 $hich is due. Bein# a ta9 deduction, the discount does not reduceta9es o$ed on a peso for peso basis but %erel" oers a fractionalreduction in ta9es o$ed. 0heoreticall", the treat%ent of the discount as adeduction reduces the net inco%e of the private establish%entsconcerned. 0he discounts #iven $ould have entered the coers andfor%ed part of the #ross sales of the private establish%ents, $ere it notfor R.A. No. &(-. 0he per%anent reduction in their total revenues is aforced subsid" correspondin# to the ta:in# of private propert" for public

use or bene)t. 0his constitutes co%pensable ta:in# for $hich petitioners

$ould ordinaril" beco%e entitled to a =ust co%pensation. Qustco%pensation is de)ned as the full and fair euivalent of the propert"ta:en fro% its o$ner b" the e9propriator. 0he %easure is not the ta:erLs#ain but the o$nerLs loss. 0he $ord =ust is used to intensif" the %eanin#of the $ord co%pensation, and to conve" the idea that the euivalent tobe rendered for the propert" to be ta:en shall be real, substantial, full anda%ple. A ta9 deduction does not oer full rei%burse%ent of the seniorciti1en discount. As such, it $ould not %eet the de)nition of =ustco%pensation. >avin# said that, this raises the uestion of $hether the

State, in pro%otin# the health and $elfare of a special #roup of citi1ens,can i%pose upon private establish%ents the burden of partl" subsidi1in#a #overn%ent pro#ra%. 0he Court believes so. 0he Senior Citi1ens Act$as enacted pri%aril" to %a9i%i1e the contribution of senior citi1ens tonation@buildin#, and to #rant bene)ts and privile#es to the% for theiri%prove%ent and $ell@bein# as the State considers the% an inte#ral partof our societ". 0he priorit" #iven to senior citi1ens )nds its basis in theConstitution as set forth in the la$ itself. 0hus, the Act provides3 SEC. &.Republic Act No. -*+& is hereb" a%ended to read as follo$s3

SEC0IN /. Declaration of Policies and b=ectives. J Pursuant to ArticleF, Section * of the Constitution, it is the dut" of the fa%il" to ta:e careof its elderl" %e%bers $hile the State %a" desi#n pro#ra%s of social

securit" for the%. In addition to this, Section /6 in the Declaration ofPrinciples and State Policies provides3 H0he State shall provide social

=ustice in all phases of national develop%ent.H urther, Article III, Section//, provides3 H0he State shall adopt an inte#rated and co%prehensiveapproach to health develop%ent $hich shall endeavor to %a:e essential#oods, health and other social services available to all the people ataordable cost. 0here shall be priorit" for the needs of theunderprivile#ed sic:, elderl", disabled, $o%en and children.H Consonant$ith these constitutional principles the follo$in# are the declared policiesof this Act3

5f4 0o reco#ni1e the i%portant role of the private sector in thei%prove%ent of the $elfare of senior citi1ens and to activel" see: theirpartnership.

0o i%ple%ent the above polic", the la$ #rants a t$ent" percent discountto senior citi1ens for %edical and dental services, and dia#nostic andlaborator" fees8 ad%ission fees char#ed b" theaters, concert halls,circuses, carnivals, and other si%ilar places of culture, leisure anda%use%ent8 fares for do%estic land, air and sea travel8 utili1ation ofservices in hotels and si%ilar lod#in# establish%ents, restaurants andrecreation centers8 and purchases of %edicines for the e9clusive use oren=o"%ent of senior citi1ens. As a for% of rei%burse%ent, the la$

provides that business establish%ents e9tendin# the t$ent" percent(
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discount to senior citi1ens %a" clai% the discount as a ta9 deduction. 0hela$ is a le#iti%ate e9ercise of police po$er $hich, si%ilar to the po$er ofe%inent do%ain, has #eneral $elfare for its ob=ect. Police po$er is notcapable of an e9act de)nition, but has been purposel" veiled in #eneralter%s to underscore its co%prehensiveness to %eet all e9i#encies andprovide enou#h roo% for an eKcient and e9ible response to conditionsand circu%stances, thus assurin# the #reatest bene)ts. Accordin#l", it hasbeen described as Hthe %ost essential, insistent and the least li%itable ofpo$ers, e9tendin# as it does to all the #reat public needs.H It is H;t


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ur#e us to re@e9a%ine our rulin# in Carlos Superdru# Corporation +$hichalle#edl" reversed the rulin# in Central Gu1on Dru# Corporation.+

0he" also point out that Carlos Superdru# Corporation*6reco#ni1ed thatthe ta9 deduction sche%e under the assailed la$ does not provide forsuKcient =ust co%pensation. !e a#ree $ith petitionersL observation thatthere are state%ents in Central Gu1on Dru# Corporation */describin# the&67 discount as an e9ercise of the po$er of e%inent do%ain, vi1.3

;0avin# said that, this raises the uestion of $hether theState, in pro%otin# the health and $elfare of a special #roup of citi1ens,

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can i%pose upon private establish%ents the burden of partl" subsidi1in#a #overn%ent pro#ra%. 0he Court believes so.**

0his, not$ithstandin#, $e $ent on to rule in Carlos Superdru#Corporation*(that the &67 discount and ta9 deduction sche%e is a valide9ercise of the police po$er of the State. 0he present case, thus, aordsan opportunit" for us to clarif" the above@uoted state%ents in CentralGu1on Dru# Corporation*'and Carlos Superdru# Corporation.*-

irst, $e note that the above@uoted disuisition on e%inent do%ain inCentral Gu1on Dru# Corporation*is obiter dictaand, thus, not bindin#precedent. As stated earlier, in Central Gu1on Dru# Corporation,*$e ruledthat the BIR acted ultra vires$hen it eectivel" treated the &67 discountas a ta9 deduction, under Sections &.i and * of RR No. &@*, despite theclear $ordin# of the previous la$ that the sa%e should be treated as a ta9credit. !e $ere, therefore, not confronted in that case $ith the issue as to$hether the &67 discount is an e9ercise of police po$er or e%inentdo%ain. Second, althou#h $e adverted to Central Gu1on Dru#Corporation(6in our rulin# in Carlos Superdru# Corporation,(/this referredonl" to preli%inar" %atters. A fair readin# of Carlos Superdru#Corporation(&$ould sho$ that $e cate#oricall" ruled therein that the &67discount is a valid e9ercise of police po$er. 0hus, even if the current la$,throu#h its ta9 deduction sche%e 5$hich abandoned the ta9 creditsche%e under the previous la$4, does not provide for a peso for pesorei%burse%ent of the &67 discount #iven b" private establish%ents, noconstitutional in)r%it" obtains because, bein# a valid e9ercise of policepo$er, pa"%ent of =ust co%pensation is not $arranted. !e have carefull"revie$ed the basis of our rulin# in Carlos Superdru# Corporation(+and $e)nd no co#ent reason to overturn, %odif" or abandon it. !e also note thatpetitionersL ar#u%ents are a %ere reiteration of those raised and resolvedin Carlos Superdru# Corporation.(*0hus, $e sustain Carlos Superdru#Corporation.((

Nonetheless, $e dee% it proper, in $hat follo$s, to a%plif" oure9planation in Carlos Superdru# Corporation('as to $h" the &67 discountis a valid e9ercise of police po$er and $h" it %a" not, under the speci)ccircu%stances of this case, be considered as an e9ercise of the po$er ofe%inent do%ain contrar" to the obiter in Central Gu1on Dru#Corporation.(-

Police po$er versus e%inent do%ain.

Police po$er is the inherent po$er of the State to re#ulate or to restrainthe use of libert" and propert" for public $elfare.(

0he onl" li%itation is that the restriction i%posed should be reasonable,not oppressive.(

In other $ords, to be a valid e9ercise of police po$er, it %ust have ala$ful sub=ect or ob=ective and a la$ful %ethod of acco%plishin# the#oal.'6

nder the police po$er of the State, Hpropert" ri#hts of individuals %a"be sub=ected to restraints and burdens in order to ful)ll the ob=ectives ofthe #overn%ent.H'/

0he State H%a" interfere $ith personal libert", propert", la$ful businessesand occupations to pro%ote the #eneral $elfare ;as lon# as< theinterference ;is< reasonable and not arbitrar".H'&

E%inent do%ain, on the other hand, is the inherent po$er of the State tota:e or appropriate private propert" for public use.'+

0he Constitution, ho$ever, reuires that private propert" shall not beta:en $ithout due process of la$ and the pa"%ent of =ust co%pensation.'*

0raditional distinctions e9ist bet$een police po$er and e%inent do%ain.In the e9ercise of police po$er, a propert" ri#ht is i%paired b"re#ulation,'(or the use of propert" is %erel" prohibited, re#ulated orrestricted''to pro%ote public $elfare. In such cases, there is noco%pensable ta:in#, hence, pa"%ent of =ust co%pensation is notreuired. E9a%ples of these re#ulations are propert" conde%ned forbein# no9ious or intended for no9ious purposes 5e.#., a buildin# on thever#e of collapse to be de%olished for public safet", or obscene %aterialsto be destro"ed in the interest of public %orals4'-as $ell as 1onin#ordinances prohibitin# the use of propert" for purposes in=urious to thehealth, %orals or safet" of the co%%unit" 5e.#., dividin# a cit"Ls territor"into residential and industrial areas4.'

It has, thus, been observed that, in the e9ercise of police po$er 5asdistin#uished fro% e%inent do%ain4, althou#h the re#ulation aects theri#ht of o$nership, none of the bundle of ri#hts $hich constituteo$nership is appropriated for use b" or for the bene)t of the public.'

n the other hand, in the e9ercise of the po$er of e%inent do%ain,propert" interests are appropriated and applied to so%e public purpose$hich necessitates the pa"%ent of =ust co%pensation therefor. Nor%all",the title to and possession of the propert" are transferred to thee9propriatin# authorit". E9a%ples include the acuisition of lands for theconstruction of public hi#h$a"s as $ell as a#ricultural lands acuired b"the #overn%ent under the a#rarian refor% la$ for redistribution touali)ed far%er bene)ciaries. >o$ever, it is a settled rule that theacuisition of title or total destruction of the propert" is not essential forHta:in#H under the po$er of e%inent do%ain to be present.-6
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E9a%ples of these include establish%ent of ease%ents such as $here theland o$ner is perpetuall" deprived of his proprietar" ri#hts because of theha1ards posed b" electric trans%ission lines constructed above hispropert"-/or the co%pelled interconnection of the telephone s"ste%bet$een the #overn%ent and a private co%pan".-&

In these cases, althou#h the private propert" o$ner is not divested ofo$nership or possession, pa"%ent of =ust co%pensation is $arrantedbecause of the burden placed on the propert" for the use or bene)t of the

public.

The 20% senior citizen discount is an exercise of "olice "o#er.

It %a" not al$a"s be eas" to deter%ine $hether a challen#ed#overn%ental act is an e9ercise of police po$er or e%inent do%ain. 0hever" nature of police po$er as elastic and responsive to various socialconditions-+as $ell as the evolvin# %eanin# and scope of public use -*and

=ust co%pensation-(in e%inent do%ain evinces that these are not staticconcepts. Because of the e9i#encies of rapidl" chan#in# ti%es, Con#ress%a" be co%pelled to adopt or e9peri%ent $ith dierent %easures topro%ote the #eneral $elfare $hich %a" not fall suarel" $ithin the

traditionall" reco#ni1ed cate#ories of police po$er and e%inent do%ain.0he =udicious approach, therefore, is to loo: at the nature and eects ofthe challen#ed #overn%ental act and decide, on the basis thereof,$hether the act is the e9ercise of police po$er or e%inent do%ain. 0hus,$e no$ loo: at the nature and eects of the &67 discount to deter%ine ifit constitutes an e9ercise of police po$er or e%inent do%ain. 0he &67discount is intended to i%prove the $elfare of senior citi1ens $ho, at theira#e, are less li:el" to be #ainfull" e%plo"ed, %ore prone to illnesses andother disabilities, and, thus, in need of subsid" in purchasin# basicco%%odities. It %a" not be a%iss to %ention also that the discountserves to honor senior citi1ens $ho presu%abl" spent the productive"ears of their lives on contributin# to the develop%ent and pro#ress ofthe nation. 0his distinct cultural ilipino practice of honorin# the elderl" isan inte#ral part of this la$. As to its nature and eects, the &67 discountis a re#ulation aectin# the abilit" of private establish%ents to price theirproducts and services relative to a special class of individuals, seniorciti1ens, for $hich the Constitution aords preferential concern.-'

In turn, this aects the a%ount of pro)ts or inco%e#ross sales that aprivate establish%ent can derive fro% senior citi1ens. In other $ords, thesub=ect re#ulation aects the pricin#, and, hence, the pro)tabilit" of aprivate establish%ent. >o$ever, it does not purport to appropriate orburden speci)c properties, used in the operation or conduct of thebusiness of private establish%ents, for the use or bene)t of the public, orsenior citi1ens for that %atter, but %erel" re#ulates the pricin# of #oodsand services relative to, and the a%ount of pro)ts or inco%e#ross sales

that such private establish%ents %a" derive fro%, senior citi1ens. 0he

sub=ect re#ulation %a" be said to be si%ilar to, but $ith substantialdistinctions fro%, price control or rate of return on invest%ent controlla$s $hich are traditionall" re#arded as police po$er %easures.--

0hese la$s #enerall" re#ulate public utilities or industriesenterprisesi%bued $ith public interest in order to protect consu%ers fro% e9orbitantor unreasonable pricin# as $ell as te%per corporate #reed b" controllin#the rate of return on invest%ent of these corporations considerin# thatthe" have a %onopol" over the #oods or services that the" provide to the

#eneral public. 0he sub=ect re#ulation diers therefro% in that 5/4 thediscount does not prevent the establish%ents fro% ad=ustin# the level ofprices of their #oods and services, and 5&4 the discount does not appl" toall custo%ers of a #iven establish%ent but onl" to the class of seniorciti1ens. Nonetheless, to the de#ree %aterial to the resolution of this case,the &67 discount %a" be properl" vie$ed as belon#in# to the cate#or" ofprice re#ulator" %easures $hich aect the pro)tabilit" of establish%entssub=ected thereto. n its face, therefore, the sub=ect re#ulation is a policepo$er %easure. 0he obiter in Central Gu1on Dru# Corporation,-ho$ever,describes the &67 discount as an e9ercise of the po$er of e%inentdo%ain and the ta9 credit, under the previous la$, euivalent to thea%ount of discount #iven as the =ust co%pensation therefor. 0he reason isthat 5/4 the discount $ould have for%ed part of the #ross sales of the

establish%ent $ere it not for the la$ prescribin# the &67 discount, and5&4 the per%anent reduction in total revenues is a forced subsid"correspondin# to the ta:in# of private propert" for public use or bene)t.

0he a$ in this reasonin# is in its pre%ise. It presupposes that the sub=ectre#ulation, $hich i%pacts the pricin# and, hence, the pro)tabilit" of aprivate establish%ent, auto%aticall" a%ounts to a deprivation of propert"$ithout due process of la$. If this $ere so, then all price and rate of returnon invest%ent control la$s $ould have to be invalidated because the"i%pact, at so%e level, the re#ulated establish%entLs pro)ts orinco%e#ross sales, "et there is no provision for pa"%ent of =ustco%pensation. It $ould also %ean that overn%ent cannot set price or rateof return on invest%ent li%its, $hich reduce the pro)ts or inco%e#rosssales of private establish%ents, if no =ust co%pensation is paid even if the

%easure is not con)scator". 0he obiter is, thus, at odds $ith the settledoctrine that the State can e%plo" police po$er %easures to re#ulate thepricin# of #oods and services, and, hence, the pro)tabilit" of businessestablish%ents in order to pursue le#iti%ate State ob=ectives for theco%%on #ood, provided that the re#ulation does not #o too far as toa%ount to Hta:in#.H-

In Cit" of Manila v. Ga#uio, Qr., 6$e reco#ni1ed thatJ 9 9 9 a ta:in# alsocould be found if #overn%ent re#ulation of the use of propert" $ent Htoofar.H !hen re#ulation reaches a certain %a#nitude, in %ost if not in allcases there %ust be an e9ercise of e%inent do%ain and co%pensation tosupport the act. !hile propert" %a" be re#ulated to a certain e9tent, ifre#ulation #oes too far it $ill be reco#ni1ed as a ta:in#. No for%ula or rule

can be devised to ans$er the uestions of $hat is too far and $hen
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re#ulation beco%es a ta:in#. In Mahon, Qustice >ol%es reco#ni1ed that it$as Ha uestion of de#ree and therefore cannot be disposed of b" #eneralpropositions.H n %an" other occasions as $ell, the .S. Supre%e Courthas said that the issue of $hen re#ulation constitutes a ta:in# is a %atterof considerin# the facts in each case. 0he Court as:s $hether =ustice andfairness reuire that the econo%ic loss caused b" public action %ust beco%pensated b" the #overn%ent and thus borne b" the public as a $hole,or $hether the loss should re%ain concentrated on those fe$ personssub=ect to the public action./

0he i%pact or eect of a re#ulation, such as the one under consideration,%ust, thus, be deter%ined on a case@to@case basis. !hether that linebet$een per%issible re#ulation under police po$er and Hta:in#H undere%inent do%ain has been crossed %ust, under the speci)c circu%stancesof this case, be sub=ect to proof and the one assailin# the constitutionalit"of the re#ulation carries the heav" burden of provin# that the %easure isunreasonable, oppressive or con)scator". 0he ti%e@honored rule is thatthe burden of provin# the unconstitutionalit" of a la$ rests upon the oneassailin# it and Hthe burden beco%es heavier $hen police po$er is atissue.H&

0he &67 senior citi1en discount has not been sho$n to be unreasonable,oppressive or con)scator".

In Alala"an v. National Po$er Corporation,+petitioners, $ho $erefranchise holders of electric plants, challen#ed the validit" of a la$li%itin# their allo$able net pro)ts to no %ore than /&7 per annu% oftheir invest%ents plus t$o@%onth operatin# e9penses. In re=ectin# theirplea, $e ruled that, in an earlier case, it $as found that /&7 is areasonable rate of return and that petitioners failed to prove that theaforesaid rate is con)scator" in vie$ of the presu%ption ofconstitutionalit".*

!e adopted a si%ilar line of reasonin# in Carlos Superdru#

Corporation(

$hen $e ruled that petitioners therein failed to prove thatthe &67 discount is arbitrar", oppressive or con)scator". !e noted thatno evidence, such as a )nancial report, to establish the i%pact of the &67discount on the overall pro)tabilit" of petitioners $as presented in orderto sho$ that the" $ould be operatin# at a loss due to the sub=ectre#ulation or that the continued i%ple%entation of the la$ $ould beunconscionabl" detri%ental to the business operations of petitioners. Inthe case at bar, petitioners proceeded $ith a h"pothetical co%putation ofthe alle#ed loss that the" $ill suer si%ilar to $hat the petitioners inCarlos Superdru# Corporation'did. Petitioners $ent directl" to this Court$ithout )rst establishin# the factual bases of their clai%s. >ence, thepresent recourse %ust, li:e$ise, fail. Because all la$s en=o" thepresu%ption of constitutionalit", courts $ill uphold a la$Ls validit" if an"

set of facts %a" be conceived to sustain it.

-

n its face, $e )nd that there are at least t$o conceivable bases tosustain the sub=ect re#ulationLs validit" absent clear and convincin# proofthat it is unreasonable, oppressive or con)scator". Con#ress %a" havele#iti%atel" concluded that business establish%ents have the capacit" toabsorb a decrease in pro)ts or inco%e#ross sales due to the &67discount $ithout substantiall" aectin# the reasonable rate of return ontheir invest%ents considerin# 5/4 not all custo%ers of a businessestablish%ent are senior citi1ens and 5&4 the level of its pro)t %ar#ins on#oods and services oered to the #eneral public. Concurrentl", Con#ress

%a" have, li:e$ise, le#iti%atel" concluded that the establish%ents, $hich$ill be reuired to e9tend the &67 discount, have the capacit" to revisetheir pricin# strate#" so that $hatever reduction in pro)ts orinco%e#ross sales that the" %a" sustain because of sales to seniorciti1ens, can be recouped throu#h hi#her %ar:@ups or fro% other productsnot sub=ect of discounts. As a result, the discounts resultin# fro% sales tosenior citi1ens $ill not be con)scator" or undul" oppressive. In su%, $esustain our rulin# in Carlos Superdru# Corporationthat the &67 seniorciti1en discount and ta9 deduction sche%e are valid e9ercises of policepo$er of the State absent a clear sho$in# that it is arbitrar", oppressiveor con)scator".

Conclusion

In closin#, $e note that petitioners h"pothesi1e, consistent $ith ourprevious ratiocinations, that the discount $ill force establish%ents to raisetheir prices in order to co%pensate for its i%pact on overall pro)ts orinco%e#ross sales. 0he #eneral public, or those not belon#in# to thesenior citi1en class, are, thus, %ade to eectivel" shoulder the subsid" forsenior citi1ens. 0his, in petitionersL vie$, is unfair.

As alread" %entioned, Con#ress %a" be reasonabl" assu%ed to haveforeseen this eventualit". But, %ore i%portantl", this #oes into the$isdo%, eKcac" and e9pedienc" of the sub=ect la$ $hich is not proper for

=udicial revie$. In a $a", this la$ pursues its social euit" ob=ective in anon@traditional %anner unli:e past and e9istin# direct subsid" pro#ra%sof the #overn%ent for the poor and %ar#inali1ed sectors of our societ".Feril", Con#ress %ust be #iven suKcient lee$a" in for%ulatin# $elfarele#islations #iven the enor%ous challen#es that the #overn%ent facesrelative to, a%on# others, resource adeuac" and ad%inistrativecapabilit" in i%ple%entin# social refor% %easures $hich ai% to protectand uphold the interests of those %ost vulnerable in our societ". In theprocess, the individual, $ho en=o"s the ri#hts, bene)ts and privile#es oflivin# in a de%ocratic polit", %ust bear his share in supportin# %easuresintended for the co%%on #ood. 0his is onl" fair. In )ne, $ithout thereuisite sho$in# of a clear and uneuivocal breach of the Constitution,the validit" of the assailed la$ %ust be sustained.

Refutation of the Dissent/6
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0he %ain points of Qustice CarpioLs Dissent %a" be su%%ari1ed asfollo$s3 5/4 the discussion on e%inent do%ain in Central Gu1on Dru#Corporationis not obiter dicta8 5&4 allo$able ta:in#, in police po$er, isli%ited to propert" that is destro"ed or placed outside the co%%erce of%an for public $elfare8 5+4 the a%ount of %andator" discount is privatepropert" $ithin the a%bit of Article III, Section 6of the Constitution8 and5*4 the per%anent reduction in a private establish%entLs total revenue,arisin# fro% the %andator" discount, is a ta:in# of private propert" forpublic use or bene)t, hence, an e9ercise of the po$er of e%inent do%ain

reuirin# the pa"%ent of =ust co%pensation. I !e %aintain that thediscussion on e%inent do%ain in Central Gu1on Dru# Corporation/isobiter dicta. As previousl" discussed, in Central Gu1on Dru#Corporation,&the BIR, pursuant to Sections &.i and * of RR No. &@*,treated the senior citi1en discount in the previous la$, RA -*+&, as a ta9deduction instead of a ta9 credit despite the clear provision in that la$$hich stated 2

SEC0IN *. Privile#es for the Senior Citi1ens. 2 0he senior citi1ens shall beentitled to the follo$in#3

a4 0he #rant of t$ent" percent 5&674 discount fro% all establish%entsrelative to utili1ation of transportation services, hotels and si%ilar lod#in#establish%ent, restaurants and recreation centers and purchase of%edicines an"$here in the countr"3 Provided, 0hat private establish%ents%a" clai% the cost as ta9 credit8 5E%phasis supplied4

0hus, the Court ruled that the sub=ect revenue re#ulation violated the la$,vi13

0he &6 percent discount reuired b" the la$ to be #iven to senior citi1ensis a ta9 credit, not %erel" a ta9 deduction fro% the #ross inco%e or #rosssale of the establish%ent concerned. A ta9 credit is used b" a privateestablish%ent onl" after the ta9 has been co%puted8 a ta9 deduction,before the ta9 is co%puted. RA -*+& unconditionall" #rants a ta9 credit to

all covered entities. 0hus, the provisions of the revenue re#ulation that$ithdra$ or %odif" such #rant are void. Basic is the rule thatad%inistrative re#ulations cannot a%end or revo:e the la$.+

As can be readil" seen, the discussion on e%inent do%ain $as notnecessar" in order to arrive at this conclusion. All that $as needed $as topoint out that the revenue re#ulation contravened the la$ $hich it sou#htto i%ple%ent. And, precisel", this $as done in Central Gu1on Dru#Corporation*b" co%parin# the $ordin# of the previous la$ vis@ @vis therevenue re#ulation8 e%plo"in# the rules of statutor" construction8 andappl"in# the settled principle that a re#ulation cannot a%end the la$ itsee:s to i%ple%ent. A close readin# of Central Gu1on Dru#Corporation($ould sho$ that the Court $ent on to state that the ta9

credit Hcan be dee%edH as =ust co%pensation onl" to e9plain $h" the

previous la$ provides for a ta9 credit instead of a ta9 deduction. 0heCourt sur%ised that the ta9 credit $as a for% of =ust co%pensation #ivento the establish%ents covered b" the &67 discount. >o$ever, the reason$h" the previous la$ provided for a ta9 credit and not a ta9 deduction$as not necessar" to resolve the issue as to $hether the revenuere#ulation contravenes the la$. >ence, the discussion on e%inent do%ainis obiter dicta.

A court, in resolvin# cases before it, %a" loo: into the possible purposes

or reasons that i%pelled the enact%ent of a particular statute or le#alprovision. >o$ever, state%ents %ade relative thereto are not al$a"snecessar" in resolvin# the actual controversies presented before it. 0his$as the case in Central Gu1on Dru# Corporation'resultin# in thatunfortunate state%ent that the ta9 credit Hcan be dee%edH as =ustco%pensation. 0his, in turn, led to the erroneous conclusion, b" deductivereasonin#, that the &67 discount is an e9ercise of the po$er of e%inentdo%ain. 0he Dissent essentiall" adopts this theor" and reasonin# $hich,as $ill be sho$n belo$, is contrar" to settled principles in police po$erand e%inent do%ain anal"sis. II 0he Dissent discusses at len#th thedoctrine on Hta:in#H in police po$er $hich occurs $hen private propert" isdestro"ed or placed outside the co%%erce of %an. Indeed, there is a$hole class of police po$er %easures $hich =ustif" the destruction of

private propert" in order to preserve public health, %orals, safet" or$elfare. As earlier %entioned, these $ould include a buildin# on the ver#eof collapse or con)scated obscene %aterials as $ell as those %entionedb" the Dissent $ith re#ard to propert" used in violatin# a cri%inal statuteor one $hich constitutes a nuisance. In such cases, no co%pensation isreuired. >o$ever, it is euall" true that there is another class of policepo$er %easures $hich do not involve the destruction of private propert"but %erel" re#ulate its use. 0he %ini%u% $a#e la$, 1onin# ordinances,price control la$s, la$s re#ulatin# the operation of %otels and hotels,la$s li%itin# the $or:in# hours to ei#ht, and the li:e $ould fall under thiscate#or". 0he e9a%ples cited b" the Dissent, li:e$ise, fall under thiscate#or"3 Article /(- of the Gabor Code, Sections / and / of the SocialSecurit" Ga$, and Section - of the Pa#@IBI? und Ga$. 0hese la$s %erel"

re#ulate or, to use the ter% of the Dissent, burden the conduct of theaairs of business establish%ents. In such cases, pa"%ent of =ustco%pensation is not reuired because the" fall $ithin the sphere ofper%issible police po$er %easures. 0he senior citi1en discount la$ fallsunder this latter cate#or". III 0he Dissent proceeds fro% the theor" thatthe per%anent reduction of pro)ts or inco%e#ross sales, due to the &67discount, is a Hta:in#H of private propert" for public purpose $ithoutpa"%ent of =ust co%pensation. At the outset, it %ust be e%phasi1ed thatpetitioners never presented an" evidence to establish that the" $ereforced to suer enor%ous losses or operate at a loss due to the eects ofthe assailed la$. 0he" ca%e directl" to this Court and provided ah"pothetical co%putation of the loss the" $ould alle#edl" suer due tothe operation of the assailed la$. 0he central pre%ise of the DissentLsar#u%ent that the &67 discount results in a per%anent reduction in

//
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pro)ts or inco%e#ross sales, or forces a business establish%ent tooperate at a loss is, thus, $holl" unsupported b" co%petent evidence. 0obe sure, the Court can invalidate a la$ $hich, on its face, is arbitrar",oppressive or con)scator".-

But this is not the case here.

In the case at bar, evidence is indispensable before a deter%ination of a

constitutional violation can be %ade because of the follo$in# reasons.irst, the assailed la$, b" i%posin# the senior citi1en discount, does notta:e an" of the properties used b" a business establish%ent li:e, sa", theland on $hich a %anufacturin# plant is constructed or the euip%entbein# used to produce #oods or services. Second, rather than ta:in#speci)c properties of a business establish%ent, the senior citi1en discountla$ %erel" re#ulates the prices of the #oods or services bein# sold tosenior citi1ens b" %andatin# a &67 discount. 0hus, if a product is soldat P/6.66 to the #eneral public, then it shall be sold at P.66 5 i.e., P/6.66less &674 to senior citi1ens. Note that the la$ does not i%pose at $hatspeci)c price the product shall be sold, onl" that a &67 discount shall be#iven to senior citi1ens based on the price set b" the businessestablish%ent. A business establish%ent is, thus, free to ad=ust the pricesof the #oods or services it provides to the #eneral public. Accordin#l", itcan increase the price of the above product to P&6.66 but is reuired tosell it at P/'.66 5i.e. , P&6.66 less &674 to senior citi1ens. 0hird, becausethe la$ i%pacts the prices of the #oods or services of a particularestablish%ent relative to its sales to senior citi1ens, its pro)ts orinco%e#ross sales are aected. 0he e9tent of the i%pact $ould,ho$ever, depend on the pro)t %ar#in of the business establish%ent on aparticular #ood or service. If a product costs P(.66 to produce and is soldat P/6.66, then the pro)tis P(.66or a pro)t %ar#in/66of (67./6/

nder the assailed la$, the aforesaid product $ould have to be soldat P.66 to senior citi1ens "et the business $ould still earn P+.66/6&or a+67/6+pro)t %ar#in. n the other hand, if the product costs P.66 toproduce and is reuired to be sold at P.66 to senior citi1ens, then thebusiness $ould e9perience a loss of P/.66./6*

But note that since not all custo%ers of a business establish%ent aresenior citi1ens, the business establish%ent %a" continue to earn P/.66fro% non@senior citi1ens $hich, in turn, can oset an" loss arisin# fro%sales to senior citi1ens.

ourth, $hen the la$ i%poses the &67 discount in favor of senior citi1ens,it does not prevent the business establish%ent fro% revisin# its pricin#strate#".

B" revisin# its pricin# strate#", a business establish%ent can recoup an"reduction of pro)ts or inco%e#ross sales $hich $ould other$ise arisefro% the #ivin# of the &67 discount. 0o illustrate, suppose A has t$ocusto%ers3 , a senior citi1en, and O, a non@senior citi1en. Prior to the la$,A sells his products at P/6.66 a piece to and O resultin# in inco%e#rosssales of P&6.66 5P/6.66 U P/6.664. !ith the passa#e of the la$, A %ustno$ sell his product to at P.66 5i.e., P/6.66 less &674 so that hisinco%e#ross sales $ould be P/.66 5P.66 U P/6.664 or lo$er b" P&.66.

0o prevent this fro% happenin#, A decides to increase the price of his

products to P//.// per piece. 0hus, he sells his product to at P.5i.e. , P//.// less &674 and to O at P//.//. As a result, his inco%e#rosssales $ould still be P&6.66/6(5P. U P//.//4. 0he capacit", then, ofbusiness establish%ents to revise their pricin# strate#" %a:es it possiblefor the% not to suer an" reduction in pro)ts or inco%e#ross sales, or, inthe alternative, %iti#ate the reduction of their pro)ts or inco%e#rosssales even after the passa#e of the la$. In other $ords, businessestablish%ents have the capacit" to ad=ust their prices so that the" %a"re%ain pro)table even under the operation of the assailed la$.

0he Dissent, ho$ever, states that 2 0he e9planation b" the %a=orit" thatprivate establish%ents can al$a"s increase their prices to recover the%andator" discount $ill onl" encoura#e private establish%ents to ad=ust

their prices up$ards to the pre=udice of custo%ers $ho do not en=o" the&67 discount. It $as li:e$ise su##ested that if a co%pan" increases itsprices, despite the application of the &67 discount, the establish%entbeco%es %ore pro)table than it $as before the i%ple%entation of R.A.-*+&. Such an econo%ic =usti)cation is self@defeatin#, for %ore consu%ers$ill suer fro% the price increase than $ill bene)t fro% the &67 discount.Even then, such abilit" to increase prices cannot le#all" validate aviolation of the e%inent do%ain clause./6'

But, if it is possible that the business establish%ent, b" ad=ustin# itsprices, $ill suer no reduction in its pro)ts or inco%e#ross sales 5or suerso%e reduction but continue to operate pro)tabl"4 despite #ivin# thediscount, $hat $ould be the basis to stri:e do$n the la$V If it is possible

that the business establish%ent, b" ad=ustin# its prices, $ill not be undul"burdened, ho$ can there be a )ndin# that the assailed la$ is anunconstitutional e9ercise of police po$er or e%inent do%ainV 0hat there%a" be a burden placed on business establish%ents or the consu%in#public as a result of the operation of the assailed la$ is not, b" itself, a#round to declare it unconstitutional for this #oes into the $isdo% ande9pedienc" of the la$.

0he cost of %ost, if not all, re#ulator" %easures of the #overn%ent onbusiness establish%ents is ulti%atel" passed on to the consu%ers butthat, b" itself, does not =ustif" the $holesale nulli)cation of these%easures. It is a basic postulate of our de%ocratic s"ste% of #overn%ent

/&
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that the Constitution is a social contract $hereb" the people havesurrendered their soverei#n po$ers to the State for the co%%on #ood./6-

All persons %a" be burdened b" re#ulator" %easures intended for theco%%on #ood or to serve so%e i%portant #overn%ental interest, such asprotectin# or i%provin# the $elfare of a special class of people for $hichthe Constitution aords preferential concern. Indubitabl", the oneassailin# the la$ has the heav" burden of provin# that the re#ulation isunreasonable, oppressive or con)scator", or has #one Htoo farH as to

a%ount to a Hta:in#.H Oet, here, the Dissent $ould have this Court nullif"the la$ $ithout an" proof of such nature.

urther, this Court is not the proper foru% to debate the econo%ictheories or realities that i%pelled Con#ress to shift fro% the ta9 credit tothe ta9 deduction sche%e. It is not $ithin our po$er or co%petence to

=ud#e $hich sche%e is %ore or less burdenso%e to businessestablish%ents or the consu%in# public and, thereafter, to choose $hichsche%e the State should use or pursue. 0he shift fro% the ta9 credit tota9 deduction sche%e is a polic" deter%ination b" Con#ress and theCourt $ill respect it for as lon# as there is no sho$in#, as here, that thesub=ect re#ulation has trans#ressed constitutional li%itations.navoidabl", the lac: of evidence constrains the Dissent to rel" onspeculative and h"pothetical ar#u%entation $hen it states that the &67discount is a si#ni)cant a%ount and not a %ini%al loss 5$hicherroneousl" assu%es that the discount auto%aticall" results in a loss$hen it is possible that the pro)t %ar#in is #reater than &67 andor thepricin# strate#" can be revised to prevent or %iti#ate an" reduction inpro)ts or inco%e#ross sales as illustrated above4,/6and not all privateestablish%ents %a:e a &67 pro)t %ar#in 5$hich conversel" i%plies thatthere are those $ho %a:e %ore and, thus, $ould not be #reatl" aectedb" this re#ulation4./6

In )ne, because of the possible scenarios discussed above, $e cannotassu%e that the &67 discount results in a per%anent reduction in pro)tsor inco%e#ross sales, %uch less that business establish%ents are forcedto operate at a loss under the assailed la$. And, even if $e #ratuitousl"assu%e that the &67 discount results in so%e de#ree of reduction inpro)ts or inco%e#ross sales, $e cannot assu%e that such reduction isarbitrar", oppressive or con)scator". 0o repeat, there is no actual proof tobac: up this clai%, and it could be that the loss suered b" a businessestablish%ent $as occasioned throu#h its fault or ne#li#ence in notadaptin# to the eects of the assailed la$. 0he la$ unifor%l" applies to allbusiness establish%ents covered thereunder. 0here is, therefore, noun=ust discri%ination as the aforesaid business establish%ents are faced$ith the sa%e constraints. 0he necessit" of proof is all the %ore pertinentin this case because, as si%ilarl" observed b" Qustice Felasco in hisConcurrin# pinion, the la$ has been in operation for over nine "earsno$. >o$ever, the #ri% picture painted b" petitioners on the

unconscionable losses to be indiscri%inatel" suered b" businessestablish%ents, $hich should have led to the closure of nu%erousbusiness establish%ents, has not co%e to pass. Feril", $e cannotinvalidate the assailed la$ based on assu%ptions and con=ectures.!ithout adeuate proof, the presu%ption of constitutionalit" %ust prevail.IF At this =uncture, $e note that the Dissent %odi)ed its ori#inalar#u%ents b" includin# a ne$ para#raph, to $it3

Section , Article III of the /- Constitution spea:s of private propert"

$ithout an" distinction. It does not state that there should be pro)t beforethe ta:in# of propert" is sub=ect to =ust co%pensation. 0he privatepropert" referred to for purposes of ta:in# could be inherited, donated,purchased, %ort#a#ed, or as in this case, part of the #ross sales of privateestablish%ents. 0he" are all private propert" and an" ta:in# should beattended b" correspondin# pa"%ent of =ust co%pensation. 0he &67discount #ranted to senior citi1ens belon# to private establish%ents,$hether these establish%ents %a:e a pro)t or suer a loss. In fact, the&67 discount applies to non@pro)t establish%ents li:e countr", social, or#olf clubs $hich are open to the public and not onl" for e9clusive%e%bership. 0he issue of pro)t or loss to the establish%ents isi%%aterial.//6

0$o thin#s %a" be said of this ar#u%ent. irst, it contradicts the rest ofthe ar#u%ents of the Dissent. After it states that the issue of pro)t or lossis i%%aterial, the Dissent proceeds to ar#ue that the &67 discount is nota %ini%al loss///and that the &67 discount forces businessestablish%ents to operate at a loss.//&

Even the obiter in Central Gu1on Dru# Corporation,//+$hich the Dissentessentiall" adopts and relies on, is pre%ised on the per%anent reductionof total revenues and the loss that business establish%ents $ill be forcedto suer in ar#uin# that the &67 discount constitutes a Hta:in#H under thepo$er of e%inent do%ain. 0hus, $hen the Dissent no$ ar#ues that theissue of pro)t or loss is i%%aterial, it contradicts itself because it laterar#ues, in order to =ustif" that there is a Hta:in#H under the po$er ofe%inent do%ain in this case, that the &67 discount forces businessestablish%ents to suer a si#ni)cant loss or to operate at a loss. Second,this ar#u%ent suers fro% the sa%e a$ as the DissentTs ori#inalar#u%ents. It is an erroneous characteri1ation of the &67 discount.Accordin# to the Dissent, the &67 discount is part of the #ross sales and,hence, private propert" belon#in# to business establish%ents. >o$ever,as previousl" discussed, the &67 discount is not private propert" actuall"o$ned andor used b" the business establish%ent. It should bedistin#uished fro% properties li:e lands or buildin#s actuall" used in theoperation of a business establish%ent $hich, if appropriated for publicuse, $ould a%ount to a Hta:in#H under the po$er of e%inent do%ain.Instead, the &67 discount is a re#ulator" %easure $hich i%pacts thepricin# and, hence, the pro)tabilit" of business establish%ents. At the

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ti%e the discount is i%posed, no particular propert" of the businessestablish%ent can be said to be Hta:en.H 0hat is, the State does notacuire or ta:e an"thin# fro% the business establish%ent in the $a" thatit ta:es a piece of private land to build a public road. !hile the &67discount %a" for% part of the potential pro)ts or inco%e#ross sales//*ofthe business establish%ent, as si%ilarl" characteri1ed b" Qustice Bersa%inin his Concurrin# pinion, potential pro)ts or inco%e#ross sales are notprivate propert", speci)call" cash or %one", alread" belon#in# to thebusiness establish%ent. 0he" are a %ere e9pectanc" because the" are

potential fruits of the successful conduct of the business. Prior to the saleof #oods or services, a business establish%ent %a" be sub=ect to Statere#ulations, such as the &67 senior citi1en discount, $hich %a" i%pactthe level or a%ount of pro)ts or inco%e#ross sales that can be #eneratedb" such establish%ent. or this reason, the validit" of the discount is to bedeter%ined based on its overall eects on the operations of the businessestablish%ent.

A#ain, as previousl" discussed, the &67 discount does not auto%aticall"result in a &67 reduction in pro)ts, or, to ali#n it $ith the ter% used b"the Dissent, the &67 discount does not %ean that a &67 reduction in#ross sales necessaril" results. Because 5/4 the pro)t %ar#in of a productis not necessaril" less than &67, 5&4 not all custo%ers of a business

establish%ent are senior citi1ens, and 5+4 the establish%ent %a" reviseits pricin# strate#", such reduction in pro)ts or inco%e#ross sales %a" beprevented or, in the alternative, %iti#ated so that the businessestablish%ent continues to operate pro)tabl". 0hus, even if $e#ratuitousl" assu%e that so%e de#ree of reduction in pro)ts orinco%e#ross sales occurs because of the &67 discount, it does not follo$that the re#ulation is unreasonable, oppressive or con)scator" becausethe business establish%ent %a" %a:e the necessar" ad=ust%ents tocontinue to operate pro)tabl". No evidence $as presented b" petitionersto sho$ other$ise. In fact, no evidence $as presented b" petitioners atall. Qustice Geonen, in his Concurrin# and Dissentin# pinion,characteri1es Hpro)tsH 5or inco%e#ross sales4 as an inchoate ri#ht.Another $a" to vie$ it, as stated b" Qustice Felasco in his Concurrin#

pinion, is that the business establish%ent %erel" has a ri#ht to pro)ts.0he Constitution adverts to it as the ri#ht of an enterprise to a reasonablereturn on invest%ent.//(

ndeniabl", this ri#ht, li:e an" other ri#ht, %a" be re#ulated under thepolice po$er of the State to achieve i%portant #overn%ental ob=ectivesli:e protectin# the interests and i%provin# the $elfare of senior citi1ens. Itshould be noted thou#h that potential pro)ts or inco%e#ross sales arerelevant in police po$er and e%inent do%ain anal"ses because the" %a",in appropriate cases, serve as an indicia $hen a re#ulation has #one HtoofarH as to a%ount to a Hta:in#H under the po$er of e%inent do%ain. !henthe deprivation or reduction of pro)ts or inco%e#ross sales is sho$n tobe unreasonable, oppressive or con)scator", then the challen#ed

#overn%ental re#ulation %a" be nulli)ed for bein# a Hta:in#H under the

po$er of e%inent do%ain. In such a case, it is not pro)ts or inco%e#rosssales $hich are actuall" ta:en and appropriated for public use. Rather,$hen the re#ulation causes an establish%ent to incur losses in anunreasonable, oppressive or con)scator" %anner, $hat is actuall" ta:enis capital and the ri#ht of the business establish%ent to a reasonablereturn on invest%ent. If the business losses are not halted because of thecontinued operation of the re#ulation, this eventuall" leads to thedestruction of the business and the total loss of the capital investedtherein. But, a#ain, petitioners in this case failed to prove that the sub=ect

re#ulation is unreasonable, oppressive or con)scator".

F.

0he Dissent further ar#ues that $e erroneousl" used price and rate ofreturn on invest%ent control la$s to =ustif" the senior citi1en discount la$.Accordin# to the Dissent, onl" pro)ts fro% industries i%bued $ith publicinterest %a" be re#ulated because this is a condition of their franchises.Pro)ts of establish%ents $ithout franchises cannot be re#ulatedper%anentl" because there is no la$ re#ulatin# their pro)ts. 0he Dissentconcludes that the per%anent reduction of total revenues or #ross salesof business establish%ents $ithout franchises is a ta:in# of privatepropert" under the po$er of e%inent do%ain. In %a:in# this ar#u%ent, it

is unfortunate that the Dissent uotes onl" a portion of the ponencia 20he sub=ect re#ulation %a" be said to be si%ilar to, but $ith substantialdistinctions fro%, price control or rate of return on invest%ent controlla$s $hich are traditionall" re#arded as police po$er %easures. 0hesela$s #enerall" re#ulate public utilities or industriesenterprises i%bued$ith public interest in order to protect consu%ers fro% e9orbitant orunreasonable pricin# as $ell as te%per corporate #reed b" controllin# therate of return on invest%ent of these corporations considerin# that the"have a %onopol" over the #oods or services that the" provide to the#eneral public. 0he sub=ect re#ulation diers therefro% in that 5/4 thediscount does not prevent the establish%ents fro% ad=ustin# the level ofprices of their #oods and services, and 5&4 the discount does not appl" toall custo%ers of a #iven establish%ent but onl" to the class of senior

citi1ens. 9 9 9//'

0he above para#raph, in full, states 2

0he sub=ect re#ulation %a" be said to be si%ilar to, but $ith substantialdistinctions fro%, price control or rate of return on invest%ent controlla$s $hich are traditionall" re#arded as police po$er %easures. 0hesela$s #enerall" re#ulate public utilities or industriesenterprises i%bued$ith public interest in order to protect consu%ers fro% e9orbitant orunreasonable pricin# as $ell as te%per corporate #reed b" controllin# therate of return on invest%ent of these corporations considerin# that the"have a %onopol" over the #oods or services that the" provide to the#eneral public. 0he sub=ect re#ulation diers therefro% in that 5/4 the

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discount does not prevent the establish%ents fro% ad=ustin# the level ofprices of their #oods and services, and 5&4 the discount does not appl" toall custo%ers of a #iven establish%ent but onl" to the class of seniorciti1ens.

Nonetheless, to the de#ree %aterial to the resolution of this case, the&67 discount %a" be properl" vie$ed as belon#in# to the cate#or" ofprice re#ulator" %easures $hich aects the pro)tabilit" of establish%entssub=ected thereto. 5E%phasis supplied4

0he point of this para#raph is to si%pl" sho$ that the State has, in thepast, re#ulated prices and pro)ts of business establish%ents. In other$ords, this t"pe of re#ulator" %easures is traditionall" reco#ni1ed aspolice po$er %easures so that the senior citi1en discount %a" beconsidered as a police po$er %easure as $ell. !hat is %ore, thesubstantial distinctions bet$een price and rate of return on invest%entcontrol la$s vis--visthe senior citi1en discount la$ provide #reaterreason to uphold the validit" of the senior citi1en discount la$. Aspreviousl" discussed, the abilit" to ad=ust prices allo$s the establish%entsub=ect to the senior citi1en discount to prevent or %iti#ate an" reductionof pro)ts or inco%e#ross sales arisin# fro% the #ivin# of the discount. Incontrast, establish%ents sub=ect to price and rate of return on invest%ent

control la$s cannot ad=ust prices accordin#l". Certainl", there is nointention to sa" that price and rate of return on invest%ent control la$sare the =usti)cation for the senior citi1en discount la$. Not at all. 0he

=usti)cation for the senior citi1en discount la$ is the plenar" po$ers ofCon#ress. 0he le#islative po$er to re#ulate business establish%ents isbroad and covers a $ide arra" of areas and sub=ects. It is $ell $ithinCon#ressL le#islative po$ers to re#ulate the pro)ts or inco%e#ross salesof industries and enterprises, even those $ithout franchises. or $hat arefranchises but %ere le#islative enact%entsV 0here is nothin# in theConstitution that prohibits Con#ress fro% re#ulatin# the pro)ts orinco%e#ross sales of industries and enterprises $ithout franchises. nthe contrar", the social =ustice provisions of the Constitution en=oin theState to re#ulate the Hacuisition, o$nership, use, and dispositionH of

propert" and its incre%ents.//-

0his %a" cover the re#ulation of pro)ts or inco%e#ross sales of allbusinesses, $ithout uali)cation, to attain the ob=ective of diusin#$ealth in order to protect and enhance the ri#ht of all the people tohu%an di#nit".//

0hus, under the social =ustice polic" of the Constitution, businessestablish%ents %a" be co%pelled to contribute to upliftin# the pli#ht ofvulnerable or %ar#inali1ed #roups in our societ" provided that there#ulation is not arbitrar", oppressive or con)scator", or is not in breachof so%e speci)c constitutional li%itation. !hen the Dissent, therefore,states that the Hpro)ts of private establish%ents $hich are non@

franchisees cannot be re#ulated per%anentl", and there is no such la$re#ulatin# their pro)ts per%anentl",H//it is assu%in# $hat it ou#ht toprove. irst, there are la$s $hich, in eect, per%anentl" re#ulate pro)tsor inco%e#ross sales of establish%ents $ithout franchises, and RA &(-is one such la$. And, second, Con#ress can re#ulate such pro)ts orinco%e#ross sales because, as previousl" noted, there is nothin# in theConstitution to prevent it fro% doin# so. >ere, a#ain, it %ust bee%phasi1ed that petitioners failed to present an" proof to sho$ that theeects of the assailed la$ on their operations has been unreasonable,

oppressive or con)scator". 0he per%anent re#ulation of pro)ts orinco%e#ross sales of business establish%ents, even those $ithoutfranchises, is not as unco%%on as the Dissent depicts it to be. orinstance, the %ini%u% $a#e la$ allo$s the State to set the %ini%u%$a#e of e%plo"ees in a #iven re#ion or #eo#raphical area. Because of theadded labor costs arisin# fro% the %ini%u% $a#e, a per%anent reductionof pro)ts or inco%e#ross sales $ould result, assu%in# that the e%plo"erdoes not increase the prices of his #oods or services. 0o illustrate,suppose it costs a co%pan" P(.66 to produce a product and it sells thesa%e at P/6.66 $ith a (67 pro)t %ar#in. Gater, the State increases the%ini%u% $a#e. As a result, the co%pan" incurs #reater labor costs sothat it no$ costs P-.66 to produce the sa%e product. 0he pro)t perproduct of the co%pan" $ould be reduced to P+.66 $ith a pro)t %ar#in of

+67. 0he net eect $ould be the sa%e as in the earlier e9a%ple of#rantin# a &67 senior citi1en discount. As can be seen, the %ini%u%$a#e la$ could, li:e$ise, lead to a per%anent reduction of pro)ts. Doesthis %ean that the %ini%u% $a#e la$ should, li:e$ise, be declaredunconstitutional on the %ere plea that it results in a per%anent reductionof pro)tsV 0a:in# it a step further, suppose the co%pan" decides toincrease the price of its product in order to oset the eects of theincrease in labor cost8 does this %ean that the %ini%u% $a#e la$,follo$in# the reasonin# of the Dissent, is unconstitutional because theconsu%in# public is eectivel" %ade to subsidi1e the $a#e of a #roup oflaborers, i.e., %ini%u% $a#e earnersV 0he sa%e reasonin# can beadopted relative to the e9a%ples cited b" the Dissent $hich, accordin# toit, are valid police po$er re#ulations. Article /(- of the Gabor Code,Sections / and / of the Social Securit" Ga$, and Section - of the Pa#@IBI? und Ga$ $ould eectivel" increase the labor cost of a businessestablish%ent. 0his $ould, in turn, be inte#rated as part of the cost of its#oods or services. A#ain, if the establish%ent does not increase its prices,the net eect $ould be a per%anent reduction in its pro)ts orinco%e#ross sales. ollo$in# the reasonin# of the Dissent that Han" for%of per%anent ta:in# of private propert" 5includin# pro)ts or inco%e#rosssales4/&6is an e9ercise of e%inent do%ain that reuires the State to pa"

=ust co%pensation,H/&/then these statutor" provisions $ould, li:e$ise,have to be declared unconstitutional. It does not %atter that thesebene)ts are dee%ed part of the e%plo"eesL le#islated $a#es because thenet eect is the sa%e, that is, it leads to hi#her labor costs and aper%anent reduction in the pro)ts or inco%e#ross sales of the businessestablish%ents./&&

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0he point then is this 2 %ost, if not all, re#ulator" %easures i%posed b"the State on business establish%ents i%pact, at so%e level, the latterLsprices andor pro)ts or inco%e#ross sales./&+

If the Court $ere to sustain the DissentLs theor", then a $holesalenulli)cation of such %easures $ould inevitabl" result. 0he police po$er ofthe State and the social =ustice provisions of the Constitution $ould, thus,be rendered nu#ator". 0here is nothin# sacrosanct about pro)ts orinco%e#ross sales. 0his, $e %ade clear in Carlos Superdru#

Corporation3/&*

Police po$er as an attribute to pro%ote the co%%on #ood $ould bediluted considerabl" if on the %ere plea of petitioners that the" $ill suerloss of earnin#s and capital, the uestioned provision is invalidated.Moreover, in the absence of evidence de%onstratin# the alle#edcon)scator" eect of the provision in uestion, there is no basis for itsnulli)cation in vie$ of the presu%ption of validit" $hich ever" la$ has inits favor.

9 9 9 9

0he Court is not oblivious of the retail side of the phar%aceutical industr"and the co%petitive pricin# co%ponent of the business. !hile theConstitution protects propert" ri#hts petitioners %ust the realities ofbusiness and the State, in the e9ercise of police po$er, can intervene inthe operations of a business $hich %a" result in an i%pair%ent ofpropert" ri#hts in the process.

Moreover, the ri#ht to propert" has a social di%ension. !hile Article III ofthe Constitution provides the percept for the protection of propert",various la$s and =urisprudence, particularl" on a#rarian refor% and there#ulation of contracts and public utilities, continousl" serve as are%inder for the pro%otion of public #ood.

ndeniabl", the success of the senior citi1ens pro#ra% rests lar#el" onthe support i%parted b" petitioners and the other private establish%entsconcerned. 0his bein# the case, the %eans e%plo"ed in invo:in# theactive participation of the private sector, in order to achieve the purposeor ob=ective of the la$, is reasonabl" and directl" related. !ithoutsuKcient proof that Section *5a4 of R.A. No. &(- is arbitrar", and that thecontinued i%ple%entation of the sa%e $ould be unconscionabl"detri%ental to petitioners, the Court $ill refrain for% uashin# ale#islative act./&(

In conclusion, $e %aintain that the correct rule in deter%inin# $hetherthe sub=ect re#ulator" %easure has a%ounted to a Hta:in#H under thepo$er of e%inent do%ain is the one laid do$n in Alalayan v. National

Power Corporation/&'and follo$ed in Carlos SuperdurgCorporation/&-consistent $ith lon# standin# principles in police po$er ande%inent do%ain anal"sis. 0hus, the deprivation or reduction of pro)ts orinco%e. ?ross sales %ust be clearl" sho$n to be unreasonable,oppressive or con)scator". nder the speci)c circu%stances of this case,such deter%ination can onl" be %ade upon the presentation of co%petentproof $hich petitioners failed to do. A la$, $hich has been in operation for%an" "ears and pro%otes the $elfare of a #roup accorded specialconcern b" the Constitution, cannot and should not be su%%aril"

invalidated on a %ere alle#ation that it reduces the pro)ts orinco%e#ross sales of business establish%ents.

!>ERERE, the Petition is hereb" DISMISSED for lac: of %erit.

S RDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L#81631 December 17, 1B76

%ON. RAMON D. AGATSING, ( M(>or o 4e C-> o M()-/(ROMAN G. GARGANTIEL, ( Secre(r> o 4e M(>or T%E MARET

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ADMINISTRATOR ()* T%E MUNICIPAL OARD O!MANILA, petitioners,

vs.%ON. PEDRO A. RAMIRE", -) 4- c(+(c-> ( Pre-*-); *;e o 4e

Cor o !-r I)()ce o M()-/(, r()c4 ()* 4e!EDERATION O! MANILA MARET 'ENDORS, INC., respondents.

Santiago F. Alidio and Restituto R. illanueva for petitioners.

Antonio !. Abad, "r. for private respondent.

Federico A. #lay for petitioner for intervention.

MARTIN,J.:

0he chief uestion to be decided in this case is $hat la$ shall #overn thepublication of a ta9 ordinance enacted b" the Municipal Board of Manila,the Revised Cit" Charter 5R.A. *6, as a%ended4, $hich reuires

publication of the ordinance before its enact%ent and after its approval,or the Gocal 0a9 Code 5P.D. No. &+/4, $hich onl" de%ands publication afterapproval.

n Qune /&, /-*, the Municipal Board of Manila enacted rdinance No.-(&&, HAN RDINANCE RE?GA0IN? 0>E PERA0IN PBGIC MARE0SAND PRESCRIBIN? EES R 0>E REN0AGS S0AGGS AND PRFIDIN?PENAG0IES R FIGA0IN 0>ERE AND R 0>ER PRPSES.H 0hepetitioner Cit" Ma"or, Ra%on D. Ba#atsin#, approved the ordinance on

Qune /(, /-*.

n ebruar" /-, /-(, respondent ederation of Manila Mar:et Fendors,Inc. co%%enced Civil Case '-- before the Court of irst Instance of

Manila presided over b" respondent Qud#e, see:in# the declaration ofnullit" of rdinance No. -(&& for the reason that 5a4 the publicationreuire%ent under the Revised Charter of the Cit" of Manila has not beenco%plied $ith8 5b4 the Mar:et Co%%ittee $as not #iven an" participationin the enact%ent of the ordinance, as envisioned b" Republic Act '6+85c4 Section + 5e4 of the Anti@?raft and Corrupt Practices Act has beenviolated8 and 5d4 the ordinance $ould violate Presidential Decree No. - ofSepte%ber +6, /-& prescribin# the collection of fees and char#es onlivestoc: and ani%al products.

Resolvin# the acco%pan"in# pra"er for the issuance of a $rit ofpreli%inar" in=unction, respondent Qud#e issued an order on March //,/-(, den"in# the plea for failure of the respondent ederation of Manila

Mar:et Fendors, Inc. to e9haust the ad%inistrative re%edies outlined inthe Gocal 0a9 Code.

After due hearin# on the %erits, respondent Qud#e rendered its decisionon Au#ust &, /-(, declarin# the nullit" of rdinance No. -(&& of theCit" of Manila on the pri%ar" #round of non@co%pliance $ith thereuire%ent of publication under the Revised Cit" Charter. Respondent

Qud#e ruled3

0here is, therefore, no uestion that the ordinance inuestion $as not published at all in t$o dail" ne$spapersof #eneral circulation in the Cit" of Manila before itsenact%ent. Neither $as it published in the sa%e %annerafter approval, althou#h it $as posted in the le#islativehall and in all cit" public %ar:ets and cit" public libraries.

0here bein# no co%pliance $ith the %andator"reuire%ent of publication before and after approval, theordinance in uestion is invalid and, therefore, null andvoid.

Petitioners %oved for reconsideration of the adverse decision, stressin#

that 5a4 onl" a post@publication is reuired b" the Gocal 0a9 Code8 and 5b4private respondent failed to e9haust all ad%inistrative re%edies beforeinstitutin# an action in court.

n Septe%ber &', /-(, respondent Qud#e denied the %otion.

orth$ith, petitioners brou#ht the %atter to s throu#h the presentpetition for revie$ on certiorari.

!e )nd the petition i%pressed $ith %erits.

/. 0he ne$usof the present controvers" is the apparent conict bet$een

the Revised Charter of the Cit" of Manila and the Gocal 0a9 Code on the%anner of publishin# a ta9 ordinance enacted b" the Municipal Board ofManila. or, $hile Section /- of the Revised Charter provides3

%ach proposed ordinanceshall be published in t$o dail"ne$spapers of #eneral circulation in the cit", and shall notbe discussed or enacted b" the Board until after the thirdda" follo$in# such publication. W W W %ach approvedordinanceW W W shall be published in t$o dail" ne$spapersof #eneral circulation in the cit", $ithin ten da"s after itsapproval8 and shall ta:e eect and be in force on andafter the t$entieth da" follo$in# its publication, if no dateis )9ed in the ordinance.

/-


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Section *+ of the Gocal 0a9 Code directs3

!ithin ten da"s after their approval, certi)ed true copiesof all provincial, cit", %unicipal and barrioordinanceslevying or i&posing ta$es, fees or other charges shall bepublished for three consecutive da"s in a ne$spaper orpublication $idel" circulated $ithin the =urisdiction of thelocal #overn%ent, or posted in the local le#islative hall orpre%ises and in t$o other conspicuous places $ithin the

territorial =urisdiction of the local #overn%ent. In eithercase, copies of all provincial, cit", %unicipal and barrioordinances shall be furnished the treasurers of therespective co%ponent and %other units of a local#overn%ent for disse%ination.

In other $ords, $hile the Revised Charter of the Cit" of Manila reuirespublication beforethe enact%ent of the ordinance and afterthe approvalthereof in t$o dail" ne$spapers of #eneral circulation in the cit", the Gocal

0a9 Code onl" prescribes for publication after the approval of Hordinanceslevying or i&posing ta$es, fees or other chargesH either in a ne$spaper orpublication $idel" circulated $ithin the =urisdiction of the local#overn%ent or b" postin# the ordinance in the local le#islative hall or

pre%ises and in t$o other conspicuous places $ithin the territorial=urisdiction of the local #overn%ent. PetitionersT co%pliance $ith the Gocal0a9 Code rather than $ith the Revised Charter of the Cit" spa$ned thisliti#ation.

0here is no uestion that the Revised Charter of the Cit" of Manila isa special actsince it relates onl" to the Cit" of Manila, $hereas the Gocal

0a9 Code is a #eneral la$ because it applies universall" to all local#overn%ents. Blac:stone de)nes #eneral la$ as a universal rule aectin#the entire co%%unit" and special la$ as one relatin# to particular personsor thin#s of a class. 1And the rule co%%onl" said is that a prior specialla$ is not ordinaril" repealed b" a subseuent #eneral la$. 0he fact thatone is special and the other #eneral creates a presu%ption that thespecial is to be considered as re%ainin# an e9ception of the #eneral, oneas a #eneral la$ of the land, the other as the la$ of a particularcase. 2>o$ever, the rule readil" "ields to a situation $here the specialstatute refers to a sub=ect in #eneral, $hich the #eneral statute treatsinparticular. 0he e9actl" is the circu%stance obtainin# in the case at bar.Section /- of the Revised Charter of the Cit" of Manila spea:s ofHordinanceH in #eneral, i.e., irrespective of the nature and scopethereof, whereas, Section *+ of the Gocal 0a9 Code relates to Hordinanceslev"in# or i%posin# ta9es, fees or other char#esH in particular. In re#ard,therefore, to ordinances in #eneral, the Revised Charter of the Cit" ofManila is doubtless do%inant, but, that do%inant force loses its continuit"$hen it approaches the real% of Hordinances lev"in# or i%posin# ta9es,fees or other char#esH in particular. 0here, the Gocal 0a9 Code controls.

>ere, as al$a"s, a #eneral provision %ust #ive $a" to a particularprovision. 3Special provision #overns. 80his is especiall" true $here thela$ containin# the particular provision $as enacted later than the onecontainin# the #eneral provision. 0he Cit" Charter of Manila $aspro%ul#ated on Qune /, /* as a#ainst the Gocal 0a9 Code $hich $asdecreed on Qune /, /-+. 0he la$@%a:in# po$er cannot be said to haveintended the establish%ent of conictin# and hostile s"ste%s upon thesa%e sub=ect, or to leave in force provisions of a prior la$ b" $hich thene$ $ill of the le#islatin# po$er %a" be th$arted and overthro$n. Such a

result $ould render le#islation a useless and Idle cere%on", and sub=ectthe la$ to the reproach of uncertaint" and unintelli#ibilit". 5

0he case of City of 'anila v. (eotico 6 is opposite. In that case, 0eoticosued the Cit" of Manila for da%a#es arisin# fro% the in=uries he suered$hen he fell inside an uncovered and unli#hted catchbasin or %anhole onP. Bur#os Ave

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