FUNDAMENTAL POWERS OF THE STATE

 

CHAPTER 4

THE FUNDAMENTAL POWERS OF THE STATE

·         Inherent and do not need to be expressly conferred by constitutional provision

·         Supposed to co-exist with the State

Fundamental Powers of the State

1.       Police Power

-          Power of the State to regulate liberty and property for the promotion of the general welfare

2.       Power of Eminent Domain

-          Enables the State to forcibly acquire private property, upon payment of just compensation, for some intended public use

3.       Power of Taxation

-          The State is able to demand from the members of society their proportionate share of contribution in the maintenance of the government

SIMILARITIES:

1.       They are inherent in the State and may be exercised by it without need of express constitutional grant.

2.       They are not only necessary but indispensable. The State cannot continue to be effective unless it is able to exercise them.

3.       They are methods by which the State interferes with private rights.

4.       They all presuppose an equivalent compensation for the private rights interfered with.

5.       They are exercised primarily by the legislature.

DIFFERENCES

1.        The police power regulates both liberty and property. The power of eminent domain and the power of taxation affect only property rights.

2.       The police power and the power of taxation may be exercised only by the government. The power of eminent domain may be exercised by some private entities.

3.       The property taken in the exercise of the police power is destroyed because it is noxious or intended for a noxious purpose. The property taken under the power of eminent domain and power of taxation is intended for a public use or purpose and is therefore wholesome.

4.       The compensation of the person subjected to the police power is the intangible altruistic feeling that he has contributed to the general welfare. The compensation involved in the other powers is more concrete, to wit, a full and fair equivalent of the property expropriated or protection and public improvements for the taxes paid.

LIMITATIONS

·         May not be exercised arbitrarily, to the prejudice of the Bill of Rights

·         To be construed in favor of private rights and against attempts on the part of the State to interfere with them

·         The exercise of the fundamental powers is subject at all times to the limitations and requirements of the Constitution and may in proper cases be annulled by the courts.

 

CHAPTER 5

THE POLICE POWER

 

DEFINITION AND SCOPE

-          The power of promoting the public welfare by restraining and regulating the use of liberty and property (Professor Freund)

-          Regulates not only property but, more importantly, the liberty of private persons, and virtually all the people

-          May be regarded as infinitely more important than eminent domain and taxation

 

CHARACTERISTICS

-          It is considered the most pervasive, least limitable, and the most demanding of the 3 powers

-          The most essential, insistent and the least limitable of powers, extending as it does “to all the great public needs”

-          It may be exercised as long as the activity or the property sought to be regulated has some relevance to the public welfare

-          May not be bargained away through the medium of a contract or even a treaty

-          Dynamic, not static, and must move with the moving society it is supposed to regulate

-          Once exercised, it is not deemed exhausted and may be exercised again and again, as often as it is necessary for the protection or the promotion of the public welfare

-          May sometimes use the taxing power as an implement for the attainment of a legitimate police objective

-          Like taxation, the power of eminent domain could also be used as an implement of the police power

-          Primarily lodged in the national legislature

-          May also be exercised by the President and administrative boards as well as the lawmaking bodies on all municipal levels by virtue of a valid delegation of legislative power

-          No mandamus is available to coerce the exercise of the police power

 

Quasi-legislative power

-          The authority delegated by the law-making body to the administrative body to adopt rules and regulations intended to carry out the provisions of the law and implement legislative policy

 

Tests to determine the validity of a police measure

(1)    The interests of the public generally, as distinguished from those of particular class, require the exercise of the police power

(2)    The means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals

 

Requisites:

(1)    Lawful Subject

-          Simply means that the subject of the measure is within the scope of the police power, that is, that the activity or property sought to be regulated affects the public welfare

-          As long as the object is the public welfare and the subject of regulation may be properly related thereto, there is compliance with the first test requiring the primacy of the welfare of the many over the interests of the few

-          The government nat enact legislation that nay interfere with personal liberty, property, lawful businesses and occupations to promote the general welfare; however, the interference must be reasonable and not arbitrary.

(2)    Lawful Means

-          Even if the purpose be within the scope of the police power, the law will still be annulled if the subject is sought to be regulated in violation of the second requirement

-          The end does not justify the means

-          The power to regulate does not include the power to prohibit nor does it include the power to confiscate, with the exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the purpose of protecting peace and order and of promoting the general welfare

Test

1.)    Rational relationship test

-          Laws or ordinances are upheld if they rationally further a legitimate governmental interest

-          Usually for review of economic legislation

-          Requisites:

(1)    Interest of the public in general

(2)    The means employed are reasonably necessary for the accomplishment of the purpose

2.)    Strict scrutiny test

-          The focus is on the presence of compelling, rather than substantial, governmental interest and on the absence of less restrictive means for achieving that interest

-          Usually applied for laws dealing with freedom of the mind or restricting the political process

3.)    Heightened or immediate scrutiny

-          For evaluating classifications based on gender and legitimacy

4.)    Overbreadth doctrine

-          A proper governmental purpose, constitutionally subject to state regulation, may not be achieved by means that unnecessarily sweep its subject broadly, thereby invading the area of protected freedoms

-          Applied when a statute needlessly restrains even constitutionally guaranteed rights

5.)    Void-for-vagueness doctrine

-          Applicable when a penal statute encroaches upon the freedom of speech

 

Prohibition against third party doctrine

-          One is prohibited from assailing the constitutionality of the statute based solely on the violation of the rights of third persons before the court

-          XPN: where it involves free speech on grounds of overbreadth or vagueness of the statute

 

Facial challenge

-          First amendment challenge

-          One that is launched to assail the validity of statutes concerning not only protected speech but also all other rights in the first amendment

 

 

 

 

CHAPTER 6

EMINENT DOMAIN

 

DEFINITION AND SCOPE

-          Also called the power of expropriation

-          Described as the highest and most exact idea of property remaining in the government that may be acquired for some public purpose through a method in the nature of a compulsory sale to the State

-          Being inherent, the power of eminent domain does not need to be specifically conferred on the government by the Constitution

-          LIMITATION:

ART. III, SEC. 9, 1987 CONSTITUTION  Private property shall not be taken for public use without just compensation.

-          Strictly interpreted against the expropriator and liberally in favor of the property owner

WHO MAY EXERCISE

·         The power of eminent domain is lodged primarily in the national legislature, but its exercise may be validly delegated  to other governmental entities and, in fact, even to private corporations

·         Under existing laws, the following may exercise the power of expropriation:

(1)    The Congress

(2)    The President of the Philippines

(3)    The various local legislative bodies

(4)    Certain public corporations

(5)    Quasi-public corporations

·         Essential requisites for the exercise by a local government unit of the power of expropriation:

o   Enactment of an ordinance and not a resolution

o   It must be for public use, purpose or welfare, or for the benefit of the poor and the landless

o   Its exercise must be preceded by a valid and definite offer made to the owner, who rejects the same

·         Before a LGU may enter into the possession of the property sought to be expropriated, it must:

1.       file a complaint for expropriation sufficient in form and substance in the proper court

2.       deposit with the said court at least 15% of the property’s fair market value based on its current tax declaration

DESTRUCTION FROM NECESSITY

-          may be validly undertaken even by private individuals

-          The right of eminent domain is a public right; it arises from the laws of society and is vested 9in the state or its grantee, acting under the right and power of the state, or benefit of the state, or those acting under it. The right of necessity arises under the laws of society or society itself. It is the right of self-defense, of self-preservation, whether applied to persons or to property. It is a private right vested in every individual, and with which the right of the state or state necessity has nothing to do. (American Print Works v. Lawrence)

-          Cannot require the conversion of the property take to public use, nor is there any need for the payment of just compensation

NECESSITY OF EXERCISE

·         Essentially political when decided by the national legislature and are usually not subject to judicial review

·         But where these questions are decided by a delegate only of the national legislature, the judiciary has assumed the power to inquire into whether the authority conferred upon such delegate has been correctly or properly exercised by it.

 

·         2 stages of expropriation:

1.       Determination of the validity of the expropriation

2.       Determination of just compensation

·         The determination of the necessity of an expropriation can only be resolved during the first stage of an expropriation proceeding

·         Once the State decides to exercise its power of eminent domain, the power of judicial review becomes limited in scope, and the courts will be left to determine the amount of just compensation to be paid to the affected land owners

·         A court’s determination of just compensation may be set aside if tainted with grave abuse of discretion

PRIVATE PROPERTY

·         Anything that can come under the dominion of man is subject to expropriation. This will include real and personal, tangible and intangible properties

·         XPN:

o   Money

-          Expropriation of money would be a futile act because of the requirement of just compensation, usually also in money

o   Choses in action

-          a personal right not reduced into possession but recoverable by a suit at law, a right to receive, demand or recover a debt, demand or damages on a cause of action ex contractu or for a tort or for a tort or omission of duty

-          essentially conjectural both as to its validity and its value

·         Property already devoted to public use is still subject to expropriation, provided this is done directly by the national legislature or under a specific grant of authority to the delegate.

·         Property subject of expropriation must be by its nature or condition wholesome, as it is intended to be devoted to a public use

TAKING

-          As commonly understood, taking imports a physical dispossession of the owner and is thus deprived of all beneficial use and enjoyment of his property. In law however, taking may include trespass without actual eviction of the property or prevention of the ordinary uses for which the property was intended

-          Not every taking is compensable, as it may be justified under police power aimed at improving the general welfare. Whatever damages are sustained by the property owners are regarded as merely incidental to a proper exertion of such power. The losses sustained are in the nature of damnun absque injuria. The only recompense available to the owner is the altruistic feeling that they have somehow, by their sacrifice, contributed to the well-being of the people in general. This rule is valid as long as the prejudice suffered by the individual property owner is shared in common with the rest of the community

-          Compensable taking includes destruction, restriction, diminution, or interruption of the rights of ownership or of the common and necessary use and enjoyment of the property in a lawful manner, lessening or destroying its value. It is neither necessary that the owner be wholly deprived of the use of his property, nor material whether the property is removed from the possession of the owner, or in any respect changes hands.

-          Requisites of taking in eminent domain:

1.       The expropriator must enter a private property

2.       The entry must be for more than a momentary period.

3.       The entry must be under warrant or color of legal authority

4.       The property must be devoted to public use or otherwise informally appropriated or injuriously affected

5.       The utilization of the property for public use must be in such a way as to oust the owner and deprive him of beneficial enjoyment of the property

-           Mere notice of the intention to expropriate a particular property does not bind its owner and inhibit him from disposing of it or otherwise dealing with it; neither will the mere passage of an ordinance authorizing expropriation. The expropriator can enter the said property only after expropriation proceedings are actually commenced and the deposit required by law is duly made.

-          The owner does not need to file the usual claim for recovery of just compensation with the COA if the government takes over his property and devotes it to public use without benefit of expropriation. He may immediately file a complaint with the proper court for payment of his property as the arbitrary action of the government shall be deemed a waiver of its immunity from suit.

PUBLIC USE

-          Any use directly available to the general public as a matter of right and note merely of forbearance or accommodation

-          Where the expropriated property is converted into a res communes, and, as such, is subject to direct enjoyment by any and all members of the public indiscriminately

-          There will also be a public use involved even if the expropriated property is not actually acquired by the government but is merely devoted to public services administered by privately-owned public utilities

-          It does not matter whether the direct use of the expropriated property by the public for free or for fee. The important thing is that any member of the general public, as such, can demand the right to use the converted property for his direct and personal convenience.

-          Cover uses which, while not directly available to the public, redound to their indirect advantage or benefit

JUST COMPENSATION

-          a full and fair equivalent of the property taken from the private owner by the expropriator

-          intended to indemnify the owner fully for the loss he has sustained as a result of the expropriation

-          the measure of this compensation is not the taker’s gain but the owner’s loss

-          the compensation, to be just, must be fair not only to the owner but also to the expropriator

-          where the entire property is not expropriated, there should be added to the basic value of the owner’s consequential damages after deducting therefrom the consequential benefits arising from the expropriation. If the consequential benefits exceed the consequential damages, these items should be disregarded altogether as the basic value of the property should be paid in every case.

-          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

-          Just compensation simply means the property’s fair market value at the time of the filing of the complaint, or that sum of money which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree on as price to be given and received therefor.

-          This market value is not limited to the assessed value of the property or to the schedule of market values determined by the provincial or city appraisal committee. While market value may be one of the bases of determining just compensation, the same cannot be arbitrarily arrived at without considering the factors to be appreciated in arriving at the FMV of the property.

-          Consequential damages consist of injuries directly caused on the residue of the private property taken by reason of the expropriation. Consequential benefits, like consequential damages, must be direct and particular and nor merely shared with the rest of the properties in the area.

-          No actual taking of the building is necessary to grant consequential damages. Consequential damages are awarded if as a result of the expropriation, the remaining property of the owner suffers from impairment or decrease in value. (RP v. BPI)

-          Just compensation for the crops and improvements is inseparable from the valuation of the raw lands as the former are part and parcel of the latter.

-          The determination of just compensation is clearly a judicial function. Any determination which may be made by any administrative body on the value of expropriated land would be at best preliminary and should not be considered as conclusive upon the landowner or any other interested party.

-          The property taken should be assessed as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings. Where entry precedes the filing of the complaint for expropriation, the assessment should be made as of the time of the entry. Where the institution of action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint.

-          Criteria for determining just compensation:

o   Value of the land and its character at the time it was taken by the government

o   Actual use and not potential use of the property expropriated at the time of its taking

-          Just compensation is to be determined on the basis of the value of the land expropriated at the time of the taking, not at the time of the rendition of judgment. The time of taking is the time when the landowner was deprived of the use and benefit of his property.

-          The owner is entitled to payment of interest from the time of the taking until just compensation is actually paid to him. Interest must be claimed, however, or are deemed waived.

-          REASON: to ensure prompt payment of the value of the land and to limit the opportunity loss of the owner that can drag from days to decades

-          The constitutional limitation of just compensation is considered to be the sum equivalent to the market value of the property, broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and competition or the fair value of the property as between one who receives, and one who desires to sell, it fixed at the time of the actual taking of the government. Thus, if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited.

-          Prompt payment of just compensation is not satisfied by mere deposit with any accessible bank of the provisional compensation determined by it or by the DAR, and its subsequent release to the landowner after compliance with the legal requirements set by RA 6657. (Land Bank of the Philippines v. Heirs of Puyat)

-          Landowners would not be entitled to interest on the final compensation if the expropriator deposits the compensation for their lands after their rejection of its initial valuation. (LBP v. Escandor)

-          Interest of 12% per annum on the just compensation is due the landowner in case of delay in payment, which will, in effect, make the obligation on the part of the government one of forbearance. On the other hand, interest in the form damages cannot be imposed where there is prompt and valid payment of just compensation. Interest on just compensation is assessed only in case of delay in the payment thereof, a fact which must be adequately proved. (LBP v. Chico)

-          Neither laches no prescription may bar a claim for just compensation for property taken for public use.

-          Taxes paid from the time of the taking until the transfer of title, during which one did not enjoy any beneficial use of the property, are reimbursable by the expropriator.

-          If the landowner agrees voluntarily to the taking of his property by the government for public use, he waives his right to the institution of a formal expropriation proceeding covering such property. His failure to question for a long period the failure of the government to institute expropriation proceedings constitutes a waiver of his right to regain possession of his property. His remedy would be an action for payment of just compensation and may not sue for ejectment. (Republic v. Mendoza)

-          Title to the property shall not be transferred until after actual payment of just compensation is made to the owner.

 

CHAPTER 7

TAXATION

NATURE

·         Taxes are the enforced proportional contributions from persons and property, levied by the State by virtue of its sovereignty, for the support of government and for all public needs. Taxation is the method by which these contributions are exacted.

·         The importance of taxation derives from the unavoidable obligation of the government to protect the people and extend to them benefits in the form of public projects and services. In exchange for these, the people are subjected to the reciprocal duty of sharing the expenses to be incurred therefor through the payment by them of taxes.

·         The obligation to pay taxes is not based on contract. It is a duty imposed upon the individual by the mere fact of his membership in the body politic and his enjoyment of the benefits available from such membership.

·         Nonpayment of taxes may be the subject of criminal prosecution and punishment since an accused cannot invoke the prohibition against imprisonment for debt as taxes are not considered debts.

·         Neither may estoppel be invoked against the matters on taxation

·         Taxes are the nation’s lifeblood through which government agencies continue to operate and with which the Sate discharges its functions for the welfare of its constituents. (Secretary of Finance v. Oro)

·         Taxes are distinguished from licenses in the sense that the former are levied to raise revenues whereas the latter are imposed for regulatory purposes only.

·         The term tax frequently applies to all kinds of exactions of monies which become public funds. It is often used to include levies for revenue as well as levies for regulatory purposes.

·         If the generating or revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the impositions a tax.

SCOPE

·         So pervasive is the power of taxation that it reaches even the citizen abroad and his income earned from sources outside his State.

·         In other case, all income earned in the taxing State, whether by citizens or aliens, and all immovable and tangible personal property owned by persons domiciled therein, are subject to its taxing power.

·         The power to tax may include the power to destroy if it is used validly as an implement of police power in discouraging and in effect ultimately prohibiting certain things or enterprises inimical to the public welfare.

·         But where the power to tax is used solely for the purpose of raising revenues, the modern view is that it cannot be allowed to confiscate or destroy. If this is sought to be done, the tax may be successfully attached as an inordinate and unconstitutional exercise of the discretion that is usually vested exclusively in the legislature in ascertaining the amount of the tax.

EXERCISE

·         Inherent in the state

·         Primarily vested in the national legislature , it may now also be exercised by the local legislative bodies, no longer by virtue of a valid delegation  but pursuant to a direct authority conferred by Article X, Section 5 of the Constitution.

ART. X, SEC. 5, 1987 CONSTITUTION Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.

·         GR: there must be a statutory grant for a local government unit to impose lawfully a tax, that unit not having the inherent power of taxation

XPN: no applicable where what is involved is an exercise of, principally, the regulatory power of the LGU and where that regulatory power is expressly accompanied by the taxing power.

·         Subject to the discretion of the legislature, however it may be reversed when it violates the due process and equal protection clauses or the particular restrictions on the power of taxation as prescribed in Art. VI, Sec. 28 of the Constitution.

DUE PROCESS AND TAXATION

·         Like all government powers, taxation is subject to the requirements of due process.

·         Taxes will not be allowed if they are confiscatory, except where they are intended precisely for destruction as an instrument of the police power.

·         GR: Due process does not require previous notice and hearing before a law prescribing fixed or specific taxes on certain articles may be enacted.

XPN: Where the tax to be collected is to be based on the value of the taxable property, the taxpayer is entitled to be notified of the assessment proceedings and to be heard therein on the correct valuation to be given the property.

EQUAL PROTECTION AND TAXATION

ART. VI, SEC. 28(1), 1987 CONSTITUTION The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.

                  Uniformity

-          Persons or things belonging to the same class shall be taxed at the same rate

                  Equality

-          Tax shall be strictly proportional to the relative value of the property

Requisites of valid classification:

1.       The standards that are used therefor are substantial and not arbitrary

2.       The categorization is germane to achieve the legislative purpose

3.       The law applies, all things being equal, to both present and future conditions

4.       The classification applies equally well to all those belonging to the same class

Equitable

-          Connotes that taxes should be apportioned among the people according to their capacity to pay

DOUBLE TAXATION

-          When additional taxes are laid on the same subject by the same taxing jurisdiction during the same taxing period and for the same purpose

-          There is no provision in the Constitution specifically prohibiting double taxation

-          Despite the lack of a specific prohibition, however, double taxation will not be allowed if it results in a violation of the equal protection clause

PUBLIC PURPOSE

·         To sustain a tax, it  is necessary to show that the proceeds are devoted to a public purpose

·         Revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons

·         The mere fact that the tax will be directly enjoyed by a private individual does not make it invalid so long as some link to the public welfare is established

 

TAX EXEMPTIONS

·         Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is, in fact, covered by the exemption so claimed.

·         Tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist clearly and categorically, and support by clear legal provision.

·         Where the tax exemption is granted gratuitously, it may be validly revoked at will, with or without cause. But if the exemption is granted for valuable consideration, it is deemed to partake of the nature of a contract and the obligation thereof is protected against impairment.

·         2 kinds of tax exemption

1.       Constitutional exemption

ART. VI, SEC. 28(3), 1987 CONSTITUTION Charitable institutions, churches, and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes shall be exempt from taxation.

 

o   Exemption is granted to religious and charitable institutions because they give considerable assistance to the State in the improvement of the morality of the people and the care of the indigent and the handicapped

o   Intended to make it easier for these institutions to pursue laudable objectives without the impediment of taxes that they otherwise would have to shoulder

o   Requires that the lands, buildings or improvements be directly, actually and exclusive devoted to religious, charitable, or educational purposes to be entitled to exemption

o   The exemption referred only to property taxes imposed on lands, buildings and improvements used for such purposes

ART. XIV, SEC. 4(3), 1987 CONSTITUTION (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.

2.       Statutory exemptions

-    Granted in the discretion of the legislature

ART. VI, SEC. 28(4), 1987 CONSTITUTION No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress.

REASON: Tax exemptions should not be lightly extended since they will represent a loss of revenue to the government.