Sunday, June 10, 2012

Inherent powers of the state


INHERENT POWERS OF THE STATE

 POLICE POWER

§  Requisites
1-    LAWFUL SUBJECT: The interests of the public generally, as distinguished from those of a particular class, require the exercise of the police power
2-    LAWFUL MEANS: The means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals

§  MMDA v. Bel-Air Village Association, Inc., 328 SCRA 836, March 27, 2000, 1st Div. [Puno]

Police power is an inherent attribute of sovereignty.  It has been defined as the power vested by the Constitution in the legislature to make, ordain, and establish all manner of wholesome and reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the Constitution, as they shall judge to be for the good and welfare of the commonwealth, and for the subjects of the same

It bears stressing that police power is lodged primarily in the National Legislature.  It cannot be exercised by any group or body of individuals not possessing legislative powerThe National Legislature, however, may delegate this power to the President and administrative boards as well as the lawmaking bodies of municipal corporations or local government units.  Once delegated, the agents can exercise only such legislative powers as are conferred on them by the national lawmaking body.

§  Acebedo Optical Company, Inc. v. CA, 329 SCRA 314, March 31, 2000, En Banc [Purisima]

The scope of police power has been held to be so comprehensive as to encompass almost all matters affecting the health, safety, peace, order, morals, comfort and convenience of the community.  Police power is essentially regulatory in nature and the power to issue licenses or grant business permits, if exercised for a regulatory and not revenue-raising purpose, is within the ambit of this power.

§  Philtread Workers Union [PTWU] v. Confesor, 269 SCRA 393, March 12, 1997

Article 263(g) of the Labor Code (vesting upon the Secretary of Labor the discretion to determine what industries are indispensable to the national interest and thereafter, assume jurisdiction over disputes in said industries) does not interfere with the workers’ right to strike but merely regulates it, when in the exercise of such right, national interests will be affected.  The rights granted by the Constitution are not absolute.  They are still subject to control and limitation to ensure that they are not exercised arbitrarily.  The interests of both the employers and the employees are intended to be protected and not one of them is given undue preference.

The Labor Code vests upon the Secretary of Labor the discretion to determine what industries are indispensable to national interest.  Thus, upon the determination of the Secretary of Labor that such industry is indispensable to the national interest, it will assume jurisdiction over the labor dispute of said industry.  The assumption of jurisdiction is in the nature of police power measure.  This is done for the promotion of the common good considering that a prolonged strike or lockout can be inimical to the national economy. 

POWER OF EMINENT DOMAIN


-          Who May Exercise?

§  Heirs of Alberto Suguitan v. City of Mandaluyong, 328 SCRA 137, March 14, 2000, 3rd Div. [Gonzaga-Reyes]

The exercise of the right of eminent domain, whether directly by the State, or by its authorized agents, is necessarily in derogation of private rights, and the rule in that case is that the authority must be strictly construed.  No species of property is held by individuals with greater tenacity, and none is guarded by the Constitution and the laws more sedulously, than the right to the freehold of inhabitants.  When the legislature interferes with that right, and, for greater public purposes, appropriates the land of ah individual without his consent, the plain meaning of the law should not be enlarged by doubt[ful] interpretation.

-          Exercise of Eminent Domain by LGUs

§  Municipality of Paranaque v. V.M. Realty Corp., 292 SCRA 678, July 20, 1998 [Panganiban]

The power of eminent domain is lodged in the legislative branch of government, which may delegate the exercise thereof to LGUs, other public entities and public utilities. An LGU may therefore exercise the power to expropriate private property only when authorized by Congress and subject to the latter's control and restraints imposed "through the law conferring the power or in other legislations." In this case, Section 19 of RA 7160, which delegates to LGUs the power of eminent domain, also lays down the parameters for its exercise.

Thus, the following essential requisites must concur before an LGU can exercise the power of eminent domain:
1.   An ordinance is enacted by the local legislative council authorizing the local chief executive, in behalf of the LGU, to exercise the power of eminent domain or pursue expropriation proceedings over a particular private property.  
2.   The power of eminent domain is exercised for public use, purpose or welfare, or for the benefit of the poor and the landless.
3.   There is payment of just compensation, as required under Section 9, Article III of the Constitution, and other pertinent laws.
4.   A valid and definite offer has been previously made to the owner of the property sought to be expropriated, but said offer was not accepted.

In the case at bar, the local chief executive sought to exercise the power of eminent domain pursuant to a resolution of the municipal council. Thus, there was no compliance with the first requisite that the mayor be authorized through an ordinance.

A municipal ordinance is different from a resolution. An ordinance is a law, but a resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific matter.  An ordinance possesses a general and permanent character, but a resolution is temporary in nature. Additionally, the two are enacted differently — a third reading is necessary for an ordinance, but not for a resolution, unless decided otherwise by a majority of all the Sanggunian members.

-          Requisites for Proper Exercise

1-    Taking of private property
2-    Public use/purpose
3-    Payment of just compensation
4-    Valid offer to buy and refusal of offer

Requisites for valid exercise by LGU
1-    An ordinance must be enacted by the Sanggunian authorizing the local chief executive to expropriate on behalf of the LGU.
2-    The taking of the private property must be for a public use/purpose, welfare or for the benefit of the poor and landless
3-    Payment of just compensation
4-    There must first be a valid and definite offer to the owner of the property and said offer was refused.

-          “TAKING” in the Constitutional Sense
May include trespass without actual eviction of the owner, material impairment of the value of the property or prevention of the ordinary uses fro which the property was intended. [notes]

Requisites for a valid taking:
1.     Exproprietor must enter a private property
2.     Entry must be for more than a momentary period
3.     Entry must be under warrant or color of authority
4.     Property must be devoted to public use or otherwise informally appropriated or injuriously affected
5.     Utilization of the property must be in such a way as to oust the owner and deprive him of beneficial enjoyment 

-          “Taking” under Eminent Domain distinguished from “Taking” under the Police Power 

§  PPI v. COMELEC, [G.R. No. 119694.  May 22, 1995.]

To compel print media companies to donate "Comelec space" of the dimensions specified in Section 2 of Resolution No. 2722, amounts to "taking" of private personal property for public use or purposes…xxx

The extent of the taking or deprivation is not insubstantial; this is not a case of a de minimis temporary limitation or restraint upon the use of private property. The monetary value of the compulsory "donation," measured by the advertising rates ordinarily charged by newspaper publishers whether in cities or in non-urban areas, may be very substantial indeed. The taking of private property for public use is, of course, authorized by the Constitution, but not without payment of "just compensation" (Article III, Section 9). And apparently the necessity of paying compensation for "Comelec space" is precisely what is sought to be avoided by respondent Commission, whether Section 2 of Resolution No. 2772 is read as petitioner PPI reads it, as an assertion of authority to require newspaper publishers to "donate" free print space for Comelec purposes, or as an exhortation, or perhaps an appeal, to publishers to donate free print space, as Section 1 of Resolution No. 2772-A attempts to suggest. The threshold requisites for a lawful taking of private property for public use need to be examined here: one is the necessity for the taking; another is the legal authority to effect the taking. The element of necessity for the taking has not been shown by respondent Comelec…xxx

Similarly, it has not been suggested, let alone demonstrated, that Comelec has been granted the power of eminent domain either by the Constitution or by the legislative authority. A reasonable relationship between that power and the enforcement and administration of election laws by Comelec must be shown; it is not casually to be assumed. . . . Section 2 does not constitute a valid exercise of the power of eminent domain.

§  TELEBAP, Inc. v. COMELEC, 289 SCRA 337, April 21, 1998 [Mendoza]

In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images.  They are merely given the temporary privilege of using them.  Since a franchise is a mere privilege, the exercise of the privilege may reasonably be burdened with the performance by the grantee of some form of public service.

Consequently, “a license permits broadcasting, but the licensee has no constitutional right to be the one who holds the license or to monopolize a radio frequency to the exclusion of his fellow citizens.  There is nothing in the First Amendment which prevents the government from requiring a licensee to share his frequency with others and to conduct himself as a proxy or fiduciary with obligations to present those views and voices which are representative of his community and which would otherwise, by necessity, be barred from the airwaves.”  As radio and television broadcast stations do not own the airwaves, no private property is taken by the requirement that they provide airtime to the Comelec. 

-          Meaning of “Public Use”

Traditional Concept:  The number of actual beneficiaries determines public purpose.   If the benefits redound in favor of individuals, then the purpose is not public.

“Concept of vicarious benefit”:  Abandons the traditional concept.  The purpose is public as long as the society in general is indirectly benefited, i.e. conversion of a slum area into a model housing community.  There is a vicarious advantage to the society.

§  Filstream International Incorporated v. CA, 284 SCRA 716, Jan. 23, 1998 [Francisco]

The City of Manila, acting through its legislative branch, has the express power to acquire private lands in the city and subdivide these lands into home lots for sale to bona fide tenants or occupants thereof, and to laborers and low-salaried employees of the city.

That only a few could actually benefit from the expropriation of the property does not diminish its public character.  It is simply not possible to provide all at once land and shelter for all who need them. 

Through the years, the public use requirement in eminent domain has evolved into a flexible concept, influenced by changing conditionsPublic use now includes the broader notion of indirect public benefit or advantage, including in particular, urban land reform and housing.

§  Estate of Salud Jimenez v. PEZA, 349 SCRA 240, Jan. 16, 2001, 2nd Div. [De Leon] (Public Use Requirement; Payment of Just Compensation)

In the exercise of eminent domain, only as much land can be taken as is necessary for the legitimate purpose of the condemnation. The term "necessary", in this connection, does not mean absolutely indispensable but requires only a reasonable necessity of the taking for the stated purpose, growth and future needs of the enterprise. The respondent cannot attain a self-sustaining and viable ECOZONE if inevitable needs in the expansion in the surrounding areas are hampered by the mere refusal of the private landowners to part with their properties. The purpose of creating an ECOZONE and other facilities is better served if respondent directly owns the areas subject of the expansion program.

The Legislature may directly determine the necessity for appropriating private property for a particular improvement for public use, and it may select the exact location of the improvement. In such a case, it is well-settled that the utility of the proposed improvement, the existence of the public necessity for its construction, the expediency of constructing it, the suitableness of the location selected, are all questions exclusively for the legislature to determine, and the courts have no power to interfere or to substitute their own views for those of the representatives of the people.

In the absence of some constitutional or statutory provision to the contrary, the necessity and expediency of exercising the right of eminent domain are questions essentially political and not judicial in their character.

The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just" inasmuch as the property owner is made to suffer the consequences of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss. 46 Payment of just compensation should follow as a matter of right immediately after the order of expropriation is issued. Any delay in payment must be counted from said order. However, the delay to constitute a violation of due process must be unreasonable and inexcusable; it must be deliberately done by a party in order to defeat the ends of justice.

-          Payment of Just Compensation

Just compensation is described as a full and fair equivalent of the property taken from the private owner by the exproprietor.  This is intended to indemnify the owner fully for the losss he has sustained as a result of the expropriation.

      Just compensation          =          actual or basic value of the property
+ consequential damages
-  consequential benefits (which should not exceed the
                                                               consequential damages)

      The basic or market value of the property is the price that may be agreed upon by parties willing but not compelled to enter into a contract of sale.

§  Acquisition of Easement of Right-of-Way

The exercise of the power of eminent domain does not always result in the taking or appropriation of title to the expropriated property; it may only result in the imposition of a burden upon the owner of the condemned property, without loss or title or possession.  In this case, while it is true that the plaintiff is only after a right-of-way easement, it nevertheless perpetually deprives defendants of their proprietary rights as manifested y the imposition by the plaintiff upon the defendants that below said transmission lines, no plant higher than 3 meters is allowed. (NPC v. Gutierrez, 193 SCRA 1)

-          How expropriation may be initiated?  Two Stages in Expropriation of Land


§  Republic v. Salem Investment Corporation, G.R. No. 137569, June 23, 2000, 2nd Div. [Mendoza]

The first is concerned with the determination of the authority of the plaintiff to   exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit.  It ends with an order, if not dismissal of the action, "of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose declared in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint"…xxx.

The second phase of the eminent domain action is concerned with the determination by the court of "the just compensation for the property sought to be taken."  This is done by the court with the assistance of not more than three (3) commissioners…xxx

It is only upon the completion of these two stages that expropriation is said to have been completed.  Moreover, it is only upon payment of just compensation that title over the property passes to the government.  Therefore, until the action for expropriation has been completed and terminated, ownership over the property being expropriated remains with the registered owner.  Consequently, the latter can exercise all rights pertaining to an owner, including the right to dispose of his property, subject to the power of the State ultimately to acquire it through expropriation. 

-          Is prior unsuccessful negotiation a condition precedent for the exercise of eminent domain?

§  SMI Development Corporation v. Republic, 323 SCRA 862, Jan. 28, 2000, 3rd Div. [Panganiban]

Current effective law on delegated authority to exercise the power of eminent domain is found in Section 12, Book III of the Revised Administrative Code, which provides:

“SEC. 12.  Power of Eminent Domain – The President shall determine when it is necessary or advantageous to exercise the power of eminent domain in behalf of the National Government, and direct the Solicitor General, whenever he deems the action advisable, to institute expropriation proceedings in the proper court.”

The foregoing provision does not require prior unsuccessful negotiation as a condition precedent for the exercise of eminent domain.  In Iron and Steel Authority v. Court of Appeals, the President chose to prescribe this condition as an additional requirement instead.  In the instant case, however, no such voluntary restriction was imposed. 

-          When Ownership transferred to Expropriator


§  Republic v. Salem Investment Corporation, G.R. No. 137569, June 23, 2000, 2nd Div. [Mendoza]

The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation.  Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. 

-          When may the Expropriator enter the Property?

Upon receipt of the landowner of the corresponding payment or, in case of rejection or no response from the landowner, upon the deposit with an accessible bank designated by DAR of the compensation in cash or in Land Bank Bonds in accordance with this Act, the DAR shall take immediate possession of the land …xxx (Land Bank v. CA & DAR v. CA)
-          When used as Implement of Police Power

Power of Eminent Domain is utilized as an implement of Police Power to promote the welfare of the people.

It is the Constitution itself which mandated the pursuit of Agrarian Reform Program to address once and for all the plight of the landless and the poor which for centuries has been the source of discontent and unrest. (ASLP v. Sec. DAR)

POWER OF TAXATION


-          Does the power to tax include the power to destroy?

The power to tax includes the power to destroy if it is used as an implement of the police power (regulatory) of the State. However, it does not include the power to destroy if it is used solely for the purpose of raising revenue. (ROXAS vs. CTA)

NOTES:
  • > If the purpose of taxation is regulatory in character, taxation is used to implement the police power of the state.

  • > If the power of taxation is used to destroy things, businesses, or enterprises and the purpose is to raise revenue, the court will come in because there will be violation of the inherent and constitutional limitations and it will be declared invalid.

-          Taxes distinguished from Licenses

§  Acebedo Optical Company, Inc. v. CA, 329 SCRA 314, March 31, 2000, En Banc [Purisima]

The scope of police power has been held to be so comprehensive as to encompass almost all matters affecting the health, safety, peace, order, morals, comfort and convenience of the community. Police power is essentially regulatory in nature and the power to issue licenses or grant business permits, if exercised for a regulatory and not revenue-raising purpose, is within the ambit of this power.

The power to grant or issue licenses or business permits must always be exercised in accordance with law, with utmost observance of the rights of all concerned to due process and equal protection of the law.

Distinction must be made between the grant of a license or permit to do business and the issuance of a license to engage in the practice of a particular profession. The first is usually granted by the local authorities and the second is issued by the Board or Commission tasked to regulate the particular profession. A business permit authorizes the person, natural or otherwise, to engage in business or some form of commercial activity. A professional license, on the other hand, is the grant of authority to a natural person to engage in the practice or exercise of his or her profession.

§  The Life-Blood Doctrine

Taxes are the life-blood of the Government and their prompt and certain availability are an imperious need. (CIR v. Pineda, 21 SCRA 105)

      The existence of the government is a necessity; the main source of the government is taxes.  These are the life-blood of the government.  The government will not be able to survive and continue to perform its functions without taxes. (CIR v. Algue, Inc., 158 SCRA 8)

-          Can taxes be subject to off-setting or compensation?

§  Philex Mining Corporation v. CIR, 294 SCRA 687, Aug. 28, 1998 [Romero]

Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other.  There is a material distinction between a tax and debt.  Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacityIt must be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of bargain.  Hence, a tax does not depend upon the consent of the taxpayer.  If any taxpayer can defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit, this would adversely affect the government revenue system.  A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection of a tax is contingent on the result of the lawsuit it filed against the government. 

-          Tax Exemptions

§  Sec. 28[3], Art. VI, 1987 Constitution

SECTION 28.   (3)       Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation.

§  Sec. 4[3], Art. XIV, 1987 Constitution

SECTION 4. (3)  All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law.

          Proprietary educational institutions, including those cooperatively owned, may likewise be entitled to such exemptions subject to the limitations provided by law including restrictions on dividends and provisions for reinvestment.

§  CIR v. CA, 298 SCRA 83, Oct. 14, 1998 [Panganiban]

Laws allowing tax exemption are construed strictissimi juris.  Hence, for the YMCA to be granted the exemption it claims under the abovecited provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes.  However, the Court notes that not a scintilla of evidence was submitted by private respondent to prove that it met the said requisites.


-          Who may grant tax exemptions?

§  Chavez v. PCGG, 299 SCRA 744, Dec. 9, 1998 [Panganiban]

The power to tax and to grant exemptions is vested in the Congress and, to a certain extent, in the local legislative bodies.  Section 28(4), Article VI of the Constitution, specifically provides: “No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of the Congress.”  The PCGG has absolutely no power to grant tax exemptions, even under the cover of its authority to compromise ill-gotten wealth cases.

-          Tax Treaties; International Juridical Double Taxation

§  CIR v. S.C. Johnson and Son, Inc., 309 SCRA 87, June 25, 1999, 3rd Div. [Gonzaga-Reyes]

The RP-US Tax Treaty is just one of a number of bilateral treaties which the Philippines has entered into for the avoidance of double taxation.  The purpose of these international agreements is to reconcile the national fiscal legislations of the contracting parties in order to help the taxpayer avoid simultaneous taxation in two different jurisdictions.  More precisely, the tax conventions are drafted with a view towards the elimination of international juridical double taxation

International juridical double taxation is defined as the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods.

The apparent rationale for doing away with double taxation is to encourage the free flow of goods and services and the movement of capital, technology and persons between countries, conditions deemed vital in creating robust and dynamic economies.  Foreign investments will only thrive in a fairly predictable and reasonable international investment climate and the protection against double taxation is crucial in creating such a climate.

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