Section 10. No law impairing the obligation of contracts shall be passed.

WHEN DOES A LAW IMPAIR THE OBLIGATION OF CONTRACTS: 1. If it changes the terms and conditions of a legal contract either as to the time or mode of performance 2. If it imposes new conditions or dispenses with those expressed

NOTE: A mere change in PROCEDURAL REMEDIES which does not change the substance of the contract, and which still leaves an efficacious remedy for enforcement does NOT impair the obligation of contracts. A valid exercise of police power is superior to obligation of contracts. The freedom to contract is not absolute; all contracts and all rights are subject to the police power of the State and not only may regulations which affect them be established by the State, but all such regulations must be subject to change from time to time, as the general wellbeing of the community may require, or the circumstances may change, or as experience may demonstrate the necessity. The purpose of the impairment clause is to safeguard the integrity of valid contractual agreements against unwarranted interference by the State. As a rule, they should be respected by the legislature and not tampered with by subsequent laws that will change the intention of the parties or modify their rights and obligations. The will of the obligor and the obligee must be observed; the obligation of their contract must not be impaired. However, the protection of the impairment clause is not absolute. There are instances when contracts valid at the time of their conclusion may become invalid, or some of their provisions may be rendered inoperative or illegal, by virtue of supervening legislation. Limitations:

3. If it authorizes for its satisfaction something different from that provided in its terms. Civil Code, Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Nature of protection Purpose: Safeguard the integrity of valid contractual agreements against unwarranted interference by the State. General Rule: Contracts should be respected by the legislature and not tampered with by subsequent laws that will change the intention of the parties or modify their rights and obligations. The will of the parties to the contract must prevail. Contracts affected valid. Affects legal, executed and executory contracts, which must be

1. Police powerprevails over contracts; 2. Eminent domainmay impair obligation of contracts; and

Limitations A contract valid at the time of its execution may be legally modified or even completely invalidated by a subsequent law. Strict construction. Charters, franchises and licenses granted by the Government are strictly construed against the grantees. If a law is a proper exercise of the police power, it will prevail over the contract. This is because public welfare is superior to private rights (PNB v. Remigio, G.R. 78508, March 21, 1995). Into each contract are read the provisions of existing law and, always, a reservation of the police power as long as the agreement deals with a matter affecting the public welfare. Eminent domain and taxation may also validly limit the impairment clause. Effect of emergency legislation on contracts In a national emergency, such as a protracted economic depression, the police power may be exercised to the extent of impairing some of the rights of parties arising from contracts. However, such emergency laws are to remain in effect only during the continuance of the emergency. Currency legislation and contracts The legislative department has complete authority to determine the currency of the state and to prescribe what articles shall be used and accepted as legal tender in the payment of lawful obligations. Private parties are bound to observe this governmental authority over the nation's currency in the execution of their contracts. Impairment In order to come within the meaning of the constitutional provision, the obligation of contract must be impaired by some legislative act (statute, ordinance, etc.). The act need not be by a legislative office; but it should be legislative in nature. Furthermore, the impairment must be substantial (Philippine Rural Electric Cooperatives Assoc. v. DILG Secretary, G.R. 143076, June 10, 2003). A mere administrative order, not legislative in nature, may not be considered a cause of impairment within the scope of the constitutional guarantee. The guarantee is also not violated by court decisions. The act of impairment is anything which diminishes the value of the contract. The legislature may, however, change the remedy or may prescribe new modes of procedure. The change does not impair the obligation of contracts so long as another remedy, just as efficacious, is provided for the adequate enforcement of the rights under the contract. (Manila Trading Co v. Reyes, 1935)

3. Taxationcannot impair obligation of contracts. What may a law be said to have impaired the obligation of contracts? A law which changes the terms of legal contract between parties, either in time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satisfaction something different from that provided in its terms, is a law which impairs the obligation of a contract and is null & void. (Clements v Nolting) Impairmentanything that diminishes the efficacy of a contract There is impairment when there is change in the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satisfaction something different from that provided in its terms. (Clemons vs. Nolting, No. 17959, January 24, 1922) Hon. Heherson Alvarez vs. PICOP Resources, Inc., G.R. No. 162243, November 29, 2006, in unequivocal terms, the SC have consistently held that such licenses concerning the harvesting of timber in the countrys forests cannot be considered contracts that would bind the Government regardless of changes in policy and the demands of public interest and welfare. Since timber licenses are not contracts, the non-impairment clause cannot be invoked. The law relating to the obligation of contracts does not prohibit every change in existing laws. To fall within the prohibition the change must impair the obligation of the existing contract, and the impairment must be substantial. A law which changes the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satisfaction something different from that provided in its terms, is law which impairs the obligation of a contract and is therefore null and void. (Clemons v. Nolting) Any law which enlarges, abridges, or in any manner changes the intention of the parties, necessarily impairs the contract itself. (U.S. v. Diaz Conde)

Government of the Philippine Islands v. Frank: The terms of a statute had been made a part of the contract between Frank and the Government. The Court said that a subsequent amendment of the statute could not have the effect of amending the terms of the contract. To come under the prohibition, the law must effect a change on the rights of the parties with reference to each other and not with reference to non-parties. Moreover, what the prohibition envisions are enactments passed by a governmental law-making body. An additional tax imposed upon goods already contracted to be sold does not impair the contract between the buyer and seller.

A change in the Catholic Churchs canon law which affects the contractual relation between parties with reference to internal affairs of the church is not covered by the prohibition.

During the period of transition, a statute was passed providing that money judgments rendered in court should be stated in terms of the new Philippine currency in an amount equivalent to the value of the old. The law, when applied to contractual debts, was challenged as an impairment of the obligation of contracts. In Gaspar v. Molina, the Court upheld the statute since it did not require the debtor to pay more nor the creditor to receive less than they were required to pay or receive under the former law.

tax was, under the law then prevailing, paid by the manufacturer, and the liability for said tax naturally fell in the present case upon the plaintiff. By Act No. 2432, enacted December 23, 1914, the Philippine Legislature increased the specific tax on cigarettes from P1 to P1.20 per thousand cigarettes, and by amendatory Act No. 2445, effective from January 1, 1915, it was declared that, as regards contracts already made for future delivery, the burden of the increased tax should, unless the parties should have otherwise agreed, be borne by the person to whom the article taxed should be furnished. After this provision become effective, the plaintiff continued, as before, to pay the internal-revenue taxes and in order to reimburse itself to the extent of the outlay incident to the increase in the tax added the amount of P10 per box to the price of the cigarettes. The monthly statements thereafter submitted to the purchaser by the plaintiff showed this increase; and as payments were from time to time made by Nubla, they were credited by the plaintiff upon account, with the result that, upon the showing of the plaintiff's books and assuming that Nubla had been properly charged with the increased tax, all cigarettes delivered prior to August 1, 1916, had been fully paid for. During the months of August and September, however, fifty-six cases of cigarettes were taken by Nubla, for which no payment has been made; and for the recovery of the amount alleged to be due for these cigarettes this action was instituted by the plaintiff in the Court of First Instance of the city of Manila. Judgment having been there rendered in favor of the plaintiff, both defendants have appealed. The dispute is upon the point of liability for the increased tax imposed by Act No. 2432, and the amount which the plaintiff is entitled to recover from the defendant Nubla Co-Siong, assuming that said defendant is liable for the tax at all, is P10,192 the amount for which judgment was rendered against him by the trial court. As to the defendant Rafael Machuca Go-Tauco, the trial court held that, being a surety, his liability was limited to the payment of the price stipulated in the original contract, or P172 per box, and that he was not liable for the additional amount of P10 per box representing the increase in the tax. Judgment was, therefore, rendered against this defendant, jointly and severally with his codefendant, for the sum of P9,632 only. As regards the liability of the purchaser, Nubla Co-Siong, the case is determined adversely to his contention by the decision of this court in Mitsui Bussan Kaisaha vs. Manila Electric Railroad and Light Company (p. 624, post); and upon this branch of the present case we are content to refer to the opinion therein as embracing a sufficient statement of the grounds of the decision. As against the surety, Rafael Machuca Go-Tuaco, the case presents one or two additional features which require discussion. As already noted, the trial court held that the liability of the surety did not extend to the reimbursement of the plaintiff for the amount paid out by its satisfaction of the increased internal-revenue tax on the fifty six cases of cigarettes bought in August and September 1916. This defendant was, therefore, absolved from liability for the sum of P560, which the plaintiff had paid upon said cigarettes. As the plaintiff did not appeal from this judgment, the propriety of the action of the trial court upon this point is not now in question. It is, however, here contended for the surety that the court erred in holding him liable for any part of the debtedness which is the basis of this action. This contention is based upon two distinct arguments. The first is that, supposing Act No. 2445 to be valid, it increases from P172 to P182 per box the price which Manuel Nubla Co-Siong was obligated to pay for the cigarettes, which alteration in the contract has the effect of releasing the surety. The second is that the payments made by Nubla to the plaintiff in the entire period during which cigarettes were supplied under the contract inquisition, i.e., form July 15, 1913, to September 6, 1916, were sufficient fully to satisfy the price of P172 chargeable for the cigarettes under the contract, and that the obligation of the surety is therefore discharged. In other words this defendant insists that the application of the payments from time to time made by the principal debtor should be revised and that said payments should be reapplied exclusively to the stipulated price of the cigarettes, without reference to the additional P10 per case paid after January 1, 1915, in satisfaction of the increased internal-revenue tax. These proportions will be considered in turn. It is undoubtedly true that the law looks upon the contract of surety ship with a jealous eye, and the rule is settled that the obligation of the surety cannot be extended by implication beyond its specified limits. Article 1827 of the Civil Code so declares (Uy Aloc vs. Cho Jan Ling 27 Phil., Rep., 427); and with this doctrine the common law is accordant. As was said by Justice Story in Miller vs. Stewart (9 Wheat. 680; 6 L. ed. 189): Nothing can be clearer, both upon principle and authority, than the doctrine that the liability of a surety is not to be extended, by implication, beyond the terms of his contract. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no farther. It is, furthermore, a well-recognized rule of jurisprudence, applied in the case just cited, that if any material alteration or change in the obligation of the

Clemons v. Nolting: An attempt by the government to satisfy an obligation to pay in U.S. dollars by the payment of Philippine pesos at the rate of P2 = $1 when the commercial value of the U.S. dollar was much more, was deemed an impairment of the contractual obligation. The non-impairment clause is a limit on the exercise of legislative power and not of judicial or quasi-judicial power. Police power is superior over the sanctity of contracts. Statutes enacted for the regulation of public utilities, being a proper exercise by the state of police power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already established and in operation. (Pangasinan Transportation Co. v. Public Service Commission) In Abe v. Foster Wheeler Corporation, in upholding a statute granting to workers rights which they did not have under existing contracts, the Court said that the constitutional guaranty of non-impairment is limited by the exercise of police power of the State, in the interest of public health, safety, morals and general welfare. The contract clause did not preclude remedial legislation in the interest of the general welfare.

Primero v. Court of Agrarian Relations: The security of tenure guaranteed to an agricultural tenant by a statute was challenged as impairing existing tenancy relations. The Court ruled that the law was unquestionably a remedial legislation promulgated pursuant to the social justice precepts of the Constitution and in the exercise of the police power of the State to promote the common weal. New regulations on loans making redemption of property sold on foreclosure more strict were not allowed to apply retroactively. (Co v. Philippine National Bank) Limitations on the use of land imposed by contract yield to a reasonable exercise of police power and, hence, zoning regulations are superior to contractual restrictions on the use of property. (Ortigas & Co. v. FEATI Bank) Contracts also yield to the requirements of freedom of worship.

A license or permit is not a contract between the sovereignty and the licensee or permittee, and is not a property in the constitutional sense, as to which the constitutional prescription against the impairment of contracts may extend. (Gonzalo Sy Trading v. Central Bank) LA INSULAR, plaintiff-appellee, vs. RAFAEL MACHUCA GO-TAUCO and MANUEL NUBLA CO-SIONG The plaintiff in this action, La Insular. is a commercial partnership engaged in the manufacture of cigars and cigarettes in the city of Manila. On July 15, 1913, a contract was entered into between its general agent and the two defendants, Manuel Nubla Co-Siong and Rafael Machuca Go-Tauco, whereby the plaintiff became obliged to supply cigarettes daily to Manuel Nubla CoSiong in a quantity of not less than two nor more than five boxes of two thousand packages each The price was fixed at P172 per box, payment to be made within the first five days of the month next following the successive deliveries. Manuel Nubla Co-Siong obligated himself as principal to pay for the cigarettes within said five says, while Rafael Machuca Go-Tuaco bound himself as surety, jointly and severally with Nubla, in the sum of P25,000, to satisfy an indebtedness contracted for cigarettes thus supplied. Pursuant to the provisions of this agreement cigarettes were supplied by the plaintiff to Nubla Co-Siong during the year 1913 to 1916, amounting in value to nearly P350,000. For the cigarettes so supplied payment was from time to time made by the defendant Nubla Co-Siong upon bills presented by the plaintiff. It appears that when the contract above-mentioned was executed cigarettes were subject to a specific tax of the peso for each thousand cigarettes. This

principal obligator is effected by the immediate parties to the contract, without the asset of the surety, the latter is discharged. Cases could be cited to this proposition without number, one of the most common illustrations being found in the situation where the creditor, or obligee, without the assent of the surety, by a valid and binding agreement gives further time to the principal debtor for payment or performance. As is well known, the surety is thereby discharged. (32 Cyc., 191.) A statement is not infrequently found in the cases to the effect that it makes no difference whether the change in the obligation of the contract may be favorable to the surety; it is enough to release the surety that the contract was changed without his assent. Speaking generally, this last observation may be accepted, but authorities are to be found which raise a doubt as to the universality of such rule. Thus, in Preston vs. Huntington (67 Mich., 139), it was held that a surety who had obligated himself to answer for the rent reserved in a lease at the rate of $75 per month was not discharged from the obligation by the circumstances that, by a valid agreement between the landlord and his tenant (the principal obligor), the amount of the rent was reduced $25 per month, though of course the liability of the surety was held to be reduced to the same extent. The court considered the reduction of rent as being in the nature of a release pro tanto only It is to be noted that in order to effect a release of the surety, the change in the contract must, as a general rule, be made by the principal parties to the contract. Indeed, no valid or effective change in the contract can, generally speaking, be made by any other person than the actual parties thereto. A recognized exception more apparent than real is found in cases where sureties on official bonds have been held to be released as a result of changes effected by the Legislature in the duration of the official term or in the duties of the officer whose fidelity is intended to be secured by the bond. A line of decisions, of which Roman vs. Peters (2 Rob. [La.], 479; 38 Am. Dec., 222), is an illustration, holds that the surety is discharged by such change in the law. It appeared in the case cited, that, subsequent to the execution of the official bond of a sheriff, an Act of the Legislature was passed curtailing the duties and emoluments of the office. Said the court: The law is particularly watchful over the rights of sureties; and will not countenance any transactions between the parties, that shall lessen the ability of the principal to comply with his contract, or that shall alter the rights of the parties, or enlarge the demand to the prejudice of the sureties. To permit parties to alter and modify their contracts as they please, and to hold the sureties answerable for the performance of such parts as were not altered, would be transferring their responsibility, without their consent, from one contract to another. The contract, by the modification and alternation, becomes a new and different contract, and one for which the sureties never become responsible. xxx xxx xxx

asserted that any change produced in the contract by the agency of a third person, causing an increased responsibility of the surety, will not discharge the latter, if the creditor has merely been inactive or passive. But we cannot regard the state as a stranger to this contract. It is not necessary here to express an opinion upon the point whether the case referred to was or was not correctly decided. We observe, however, that the closing words of the passage quoted shows that the court placed the decision on the ground that the State which entity, it should be noted, is named as the obligee in an official bond was a party to the contract; and when the Legislature, as one of the arms of the State, intervened to change the obligation, such change was in fact effected by the State itself. In the case at bar the Government of the Philippine Islands was in no sense a party to the contract of July 15, 1913, between the plaintiff and the defendants; and it is readily seen that when the Legislature of these Islands increased the internal revenue tax upon cigarettes, this was an act done by a stranger to the contract, and not by any person in privity therewith. The consequence is that, properly speaking, the legislative fiat, placing the burden of the tax on the purchaser, did not in any wise affect the obligation of the contract as between the parties. It was merely an external factor which, supervening upon the situation created by the contract , made it impossible for the purchaser to realize the benefit which would have accrued to him if the seller had been required to pay the tax. Nearly all changes in taxation affect existing contracts in some way or other, but this does not necessarily change such contracts in a legal sense. The question of the constitutional validity of Acts Nos. 2432 and 2445 is not under discussion in this decision; for as will be seen by reference to Mitsui Bussan Kaisaha vs. Manila Electric Railroad and Light Company, already referred to, that question was effectually settled by the Act of Congress legalizing Acts No. 2432 and 2445. But it is insisted that the Legislative Acts las mentioned so altered the obligation of the contract in question as to release the surety, and in this connection we think it well to refer to some of the American cases in which the constitutionality of such Acts as these has been discussed, for it is evident that if the imposition of the increased tax on cigarettes in the case before us could not have had the effect, in the absence of any action by Congress, of impairing the contract in the constitutional sense, it must also follow that the contract was not changed in the sense necessary to release the surety. Upon this point we quote, as pertinent, the following language used by the Supreme Court of the United States: Authorities from numerous sources are cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of the Constitution, even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the Constitutional, nor can it be said that it impairs the obligation of any existing contract in its true legal sense. (The North Missouri R.R. Co. vs. MaGuire, 87 U.S., 46; 22 L. ed., 294.) It is has been held by the same high Tribunal that the imposition of a license tax on the resident agent of a foreign manufacturing company does not impair the obligation of the contract between the agent and his principal, although its immediate consequence is to make that contract less profitable to the agent. (Kehrer vs. Stewart, 197 U.S., 60: 49 L. ed., 663.) In Clemente National Bank vs. State of Vermont (231 U.S., 120; 58 L. ed., 148), it was held that the obligations of existing contracts between a national bank and its depositors were not constitutionally impaired by a tax imposed by the legislature of the State of Vermont upon interest bearing deposits which the bank was authorized to pay and charge to the depositors. In this case it was held, at page 140: It cannot be doubted that the property being taxable, the state could provide, in order to secure the collection of a valid tax upon such credits, for garnishment or trustee process against the bank, or in effect constitute the bank its agent to collect the tax from the individual depositors. The point was made in this case that the statute levying the tax interfered with existing contracts between the bank and its depositors, impairing their obligation. The court overruled this contention and held that the statute merely imposed a tax upon the property of the depositors in the exercise of a power subject to which the contracts of deposits were made. It is thus seen that all contracts are made subject to the taxing powers of the state and territorial governments. In Tanner vs. Little (240 U.S., 369; 60 L. ed., 691), it was held that a state license tax on merchants using stamps, tickets, or coupons, redeemable in cash or merchandise, does not unconstitutionally impair the contract

These principles are not denied by the opposite party, but their application to official bonds given to the state by public officers is contested; and it is asserted that any change produced in the contract by the agency of a third person, causing an increased responsibility of the surety, will not discharge the latter, if the creditor has merely been inactive or passive. But we cannot regard the state as a stranger to this contract. It is not necessary here to express an opinion upon the point whether the case referred to was or was not correctly speaking, be made by any other person than the actual parties thereto. A recognized exception more apparent than real is found in cases where sureties on official bonds have been held to be released as a result of changes effected by the Legislature in the duration of the official term or in the duties of the officer whose fidelity is intended to be secured by the bond. A line of decisions, of which Roman vs. Peters (2 Rob [La.], 479; 38 Am. Dec., 222), is an illustration, holds that the surety is discharged by such change in the law. It appeared in the case just cited, that, subsequent to the execution of the official bond of a sheriff, an Act of the Legislature was passed curtailing the duties and emoluments of the office. Said the court: The law is particularly watchful over the rights of sureties; and will not countenance any transactions between the parties, that shall lessen the ability of the principal to comply with his contract, or that shall alter the rights of the parties, or enlarge the demand to the prejudice of the sureties. To permit parties to their and modify their contracts as they please, and to hold the sureties answerable for the performance of such parts as were not altered, would be transferring their responsibility, without their consent, form one contract to another. The contract, by the modification and alternation, becomes a new and different contract, and one for which the sureties never became responsible. These principles are not denied by the opposite party, but their application to official bonds given to the state by public officers is contested; and it is

obligations of such merchants with their customers or with third parties with whom they had contracted for the use of such stamps or coupons before the Act levying the tax was passed. In Grand Trunk Western Railway Co. vs. Railroad Commission of Indiana (221 U.S., 400; 55 L. ed., 786), it was held that a contract between two intersecting railway companies imposing upon the junior road the duty of constructing and property maintaining the physical crossing of the two roads, and providing and maintaining semaphores, watchmen, etc., is not constitutionally impaired by an order of the state railroad commission prescribing other and additional duties such as the installation and use of an interlocking plant and apportioning between the two companies the expense of executing the order. In Chicago, Burlington & Quincy Railroad co. vs. State of Nebraska (170 U.S., 57; 42 L. ed., 948), it was held that a contract between a city and a railroad company to participate in the construction of a viaduct in view of their mutual duty to the public is not violated by a statute and ordinance compelling the railroad company to repair it. The court further held in this case that the maintenance of safe viaducts over railroad tracts at important street crossings cannot be taken out of the police power of the legislature by a contract between a city and a railroad company. These authorities, we think, clearly show that the Acts of the Legislature by which the increased tax on cigarettes was imposed neither impaired, in a constitutional sense, the obligation of the contract which is the basis of this action nor changed that obligation in such sense as to occasion the discharge of the surety. The point raised in behalf of the surety with respect to the application of the payments must in our opinion be likewise resolved adversely to him. The surety is clearly bound by the application of the payments made by the creditor wit the assent of the principal debtor, and we entertain no doubt that when Manuel Nubla Co-Siong from time to time paid the bills submitted by the plaintiff, and which, after January 1, 1915, showed an increased of P10 per case in the price of the cigarettes, he very well knew that this additional amount was due to the inclusion of the new tax paid by the plaintiff. We are not impressed by the suggestion contained in the appellant's brief to the effect that as the bill appear to have been rendered only for cigarettes supplied, and not for cigarettes plus the amount paid upon account of internal-revenue tax, the payments must therefore be applied exclusively to the price of the cigarettes. The fundamental rights of the parties, which are sufficiently put in issue in the complaint and answer, are not in our opinion affected by the form in which the accounts were rendered nor by the circumstances that the plaintiff's cause of action, as stated in his complaint, purports to be based merely upon a claim for cigarettes sold. Our conclusion is that there is no error in the judgment appealed from, the same is accordingly affirmed, with costs against the appellants. So ordered. **Does the law impair the obligation of the contract? No. the law does not change the relation between the parties. What it does, is to establish an obligation of the seller to one not a party to the contract, i.e, the government.

he authorized a certain Andrew So to use his name and image for 96 North, a clothing company. Petitioner also signed Endorsement Agreements with Konka International Plastics Manufacturing Corporation and another corporation involved in the amusement and video games business, G-Box. These last two agreements were entered into on October 14, 2003 and November 10, 2003, respectively. Pursuant to these agreements, three billboards were set up along the Balintawak Interchange of the North Expressway. One billboard showed petitioner promoting the plastic products of Konka International Plastics Manufacturing Corporation, and the other two showed petitioner endorsing the clothes of 96 North. One more billboard was set up along Roxas Boulevard showing petitioner promoting the game and amusement parlors of G-Box. On December 30, 2003, however, petitioner filed his certificate of candidacy for the position of Senator under Alyansa ng Pag-asa, a tripartite alliance of three political parties: PROMDI, REPORMA, and Aksyon Demokratiko. On January 6, 2004, respondent COMELEC issued Resolution No. 6520, which contained Section 32, the provision assailed herein. On January 21, 2004, petitioner was directed to comply with the said provision by the COMELECs Law Department. He replied, on January 29, 2004, by requesting the COMELEC that he be informed as to how he may have violated the assailed provision. He sent another letter dated February 23, 2004, this time asking the COMELEC that he be exempted from the application of Section 32, considering that the billboards adverted to are mere product endorsements and cannot be construed as paraphernalia for premature campaigning under the rules. The COMELEC answered petitioners request by issuing another letter, dated February 27, 2004, wherein it ordered him to remove or cause the removal of the billboards, or to cover them from public view pending the approval of his request. Feeling aggrieved, petitioner Chavez asks this Court that the COMELEC be enjoined from enforcing the assailed provision. He urges this Court to declare the assailed provision unconstitutional as the same is allegedly (1) a gross violation of the non-impairment clause; (2) an invalid exercise of police power; (3) in the nature of an ex-post facto law; (4) contrary to the Fair Elections Act; and (5) invalid due to overbreadth. Is Section 32 of COMELEC Resolution No. 6520 an invalid exercise of police power? Petitioner argues that the billboards, while they exhibit his name and image, do not at all announce his candidacy for any public office nor solicit support for such candidacy from the electorate. They are, he claims, mere product endorsements and not election propaganda. Prohibiting, therefore, their exhibition to the public is not within the scope of the powers of the COMELEC, he concludes. This Court takes a contrary view. Police power, as an inherent attribute of sovereignty, is the power to prescribe regulations to promote the health, morals, peace, education, good order, or safety, and the general welfare of the people.[1] To determine the validity of a police measure, two questions must be asked: (1) Does the interest of the public in general, as distinguished from those of a particular class, require the exercise of police power? and (2) Are the means employed reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals? A close examination of the assailed provision reveals that its primary objectives are to prohibit premature campaigning and to level the playing field for candidates of public office, to equalize the situation between popular or rich candidates, on one hand, and lesser-known or poorer candidates, on the other, by preventing the former from enjoying undue advantage in exposure and publicity on account of their resources and popularity. The latter is a valid reason for the exercise of police power as held in National Press Club v. COMELEC,[2] wherein the petitioners questioned the constitutionality of Section 11(b) of Republic Act No. 6646, which prohibited the sale or donation of print space and air time for campaigning or other political purposes, except to the COMELEC. The obvious intention of this provision is to equalize, as far as practicable, the situations of rich and poor candidates by preventing the former from enjoying the undue advantage offered by huge campaign war chests. This Court ruled therein that this objective is of special importance and urgency in a country which, like ours, is characterized by extreme disparity in income distribution between the economic elite and the rest of society, and by the prevalence of poverty, with so many of our population falling below the poverty line. Moreover, petitioner cannot claim that the subject billboards are purely product endorsements and do not announce nor solicit any support for his candidacy. Under the Omnibus Election Code, election campaign or partisan political activity is defined as an act designed to promote the election or defeat of a particular candidate or candidates to a public office. Activities included under this definition are: (1) Forming organizations, associations, clubs, committees, or other groups of persons for the purpose of soliciting votes and/or undertaking any campaign for or against a candidate

FRANCISCO I. CHAVEZ, petitioner, vs. COMMISSION ON ELECTIONS, represented by its Chairman, BENJAMIN S. ABALOS, ESMERALDA AMORA-LADRA, in her capacity as Acting Director IV, National Capital Judicial Region, Commission on Elections, and the SOLICITOR GENERAL, respondents. In this petition for prohibition with prayer for the issuance of a writ of preliminary injunction, Francisco I. Chavez stands as a taxpayer and a citizen asking this Court to enjoin the Commission on Elections (COMELEC) from enforcing Section 32 of its Resolution No. 6520, dated January 6, 2004. The assailed provision is, as follows: Section 32. All propaganda materials such as posters, streamers, stickers or paintings on walls and other materials showing the picture, image, or name of a person, and all advertisements on print, in radio or on television showing the image or mentioning the name of a person, who subsequent to the placement or display thereof becomes a candidate for public office shall be immediately removed by said candidate and radio station, print media or television station within 3 days after the effectivity of these implementing rules; otherwise, he and said radio station, print media or television station shall be presumed to have conducted premature campaigning in violation of Section 80 of the Omnibus Election Code. Petitioner Chavez, on various dates, entered into formal agreements with certain establishments to endorse their products. On August 18, 2003,

(2) Holding political caucuses, conferences, meetings, rallies, parades, or other similar assemblies, for the purpose of soliciting votes and/or undertaking any campaign or propaganda for or against a candidate; (3) Making speeches, announcements or commentaries, or holding interviews for or against the election of any candidate for public office; (4) Publishing or distributing campaign literature or materials designed to support or oppose the election of any candidate; or (5) Directly or indirectly soliciting votes, pledges or support for or against a candidate.[3] (underscoring ours) It is true that when petitioner entered into the contracts or agreements to endorse certain products, he acted as a private individual and had all the right to lend his name and image to these products. However, when he filed his certificate of candidacy for Senator, the billboards featuring his name and image assumed partisan political character because the same indirectly promoted his candidacy. Therefore, the COMELEC was acting well within its scope of powers when it required petitioner to discontinue the display of the subject billboards. If the subject billboards were to be allowed, candidates for public office whose name and image are used to advertise commercial products would have more opportunity to make themselves known to the electorate, to the disadvantage of other candidates who do not have the same chance of lending their faces and names to endorse popular commercial products as image models. Similarly, an individual intending to run for public office within the next few months, could pay private corporations to use him as their image model with the intention of familiarizing the public with his name and image even before the start of the campaign period. This, without a doubt, would be a circumvention of the rule against premature campaigning: Sec. 80. Election campaign or partisan political activity outside campaign period. It shall be unlawful for any person, whether or not a voter or candidate, or for any party, or association of persons, to engage in an election campaign or partisan political activity except during the campaign period. x x x [4] Article IX (C) (4) of the Constitution provides: Sec. 4. The Commission may, during the election period, supervise or regulate the enjoyment or utilization of all franchises or permits for the operation of transportation and other public utilities, media of communication or information, all grants, special privileges, or concessions granted by the Government or any subdivision, agency, or instrumentality thereof, including any government-owned or controlled corporation or its subsidiary. Such supervision or regulation shall aim to ensure equal opportunity, time, and space, and the right to reply, including reasonable, equal rates therefor, for public information campaigns and forums among candidates in connection with the objective of holding free, orderly, honest, peaceful, and credible elections. Under the abovementioned Constitutional provision, the COMELEC is expressly authorized to supervise or regulate the enjoyment or utilization of all media communication or information to ensure equal opportunity, time, and space. All these are aimed at the holding of free, orderly, honest, peaceful, and credible elections. Neither is Section 32 of Resolution No. 6520 a gross violation of the non-impairment clause. The non-impairment clause of the Constitution must yield to the loftier purposes targeted by the Government.[5] Equal opportunity to proffer oneself for public office, without regard to the level of financial resources one may have at his disposal, is indeed of vital interest to the public. The State has the duty to enact and implement rules to safeguard this interest. Time and again, this Court has said that contracts affecting public interest contain an implied reservation of the police power as a postulate of the existing legal order. This power can be activated at anytime to change the provisions of the contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not militate against the impairment clause, which is subject to and limited by the paramount police power.[6] Furthermore, this Court notes that the very contracts entered into by petitioner provide that the endorsers photograph and image shall be utilized in whatever form, mode and manner in keeping with norms of decency, reasonableness, morals and law;[7] and in whatever form, mode and manner not contrary to law and norms of decency,[8] and in whatever form, mode and manner in keeping with norms of decency, reasonableness, morals and law.[9] Petitioner also claims that Section 32 of Resolution No. 6520 is in the nature of an ex post facto law. He urges this Court to believe that the assailed provision makes an individual criminally liable for an election offense for not removing such advertisement, even if at the time the said

advertisement was exhibited, the same was clearly legal. Hence, it makes a person, whose name or image is featured in any such advertisement, liable for premature campaigning under the Omnibus Election Code.[10] A close scrutiny of this rationale, however, demonstrates its lack of persuasiveness. Section 32, although not penal in nature, defines an offense and prescribes a penalty for said offense. Laws of this nature must operate prospectively, except when they are favorable to the accused. It should be noted, however, that the offense defined in the assailed provision is not the putting up of propaganda materials such as posters, streamers, stickers or paintings on walls and other materials showing the picture, image or name of a person, and all advertisements on print, in radio or on television showing the image or mentioning the name of a person, who subsequent to the placement or display thereof becomes a candidate for public office. Nor does it prohibit or consider an offense the entering of contracts for such propaganda materials by an individual who subsequently becomes a candidate for public office. One definitely does not commit an offense by entering into a contract with private parties to use his name and image to endorse certain products prior to his becoming a candidate for public office. The offense, as expressly prescribed in the assailed provision, is the non-removal of the described propaganda materials three (3) days after the effectivity of COMELEC Resolution No. 6520. If the candidate for public office fails to remove such propaganda materials after the given period, he shall be liable under Section 80 of the Omnibus Election Code for premature campaigning. Indeed, nowhere is it indicated in the assailed provision that it shall operate retroactively. There is, therefore, no ex post facto law in this case. WHEREFORE, the petition is DISMISSED

ORTIGAS VS. FEATI BANK [94 SCRA 533; NO.L-24670; 14 DEC 1979]

Facts: Plaintiff is engaged in real estate business, developing and selling lots to the public, particularly the Highway Hills Subdivision along EDSA. On March 4, 1952, plaintiff, as vendor, and Augusto Padilla and Natividad Angeles, as vendees, entered into separateagreements of sale on installments over two parcels of land of the Subdivision. On July 19, 1962, the said vendees transferred their rights and interests over the aforesaid lots in favor of one Emma Chavez. Upon completion of payment of the purchase price, the plaintiff executed the corresponding deeds of sale in favor of Emma Chavez. Both the agreements (of sale on installment) and the deeds of sale contained the stipulations or restrictions that: 1. The parcel of land shall be used exclusively for residential purposes, and she shall not be entitled to take or remove soil, stones or gravel from it or any other lots belonging to the Seller. 2. All buildings and other improvements (except the fence) which may be constructed at any time in said lot must be, (a) of strong materials and properly painted, (b) provided with modern sanitary installations connected either to the public sewer or to an approved septic tank, and (c) shall not be at a distance of less than two (2) meters from its boundary lines. Eventually said lots were bought by defendant. Lot 5 directly from Chavez and Lot 6 from Republic Flour Mills by deed of exchange, with same restrictions. Plaintiff claims that restriction is for the beautification of the subdivision. Defendant claimed of the commercialization of western part of EDSA. Defendant began constructing a commercial bank building. Plaintiff demand to stop it, which forced him to file a case, which was later dismissed, upholding police power. Motion for recon was denied, hence the appeal.

Issue: Whether

or

Not

non-impairment

clause

violated.

Held: No. Resolution is a valid exercise of police power. EDSA, a main traffic artery which runs through several cities and municipalities in the Metro Manila area, supports an endless stream of traffic and the resulting activity, noise and pollution are hardly conducive to the health, safety or welfare of the residents in its route. Health, safety, peace, good order and general welfare of the people in the locality are justifications for this. It should be stressed, that while non-impairment of contracts is constitutionally guaranteed, the rule is not absolute, since it has to be reconciled with the legitimate exercise of police power. **The municipal resolution, although not strictly an ordinance, is a zoning regulation which is a police power measure which the municipality has the power to pass under the Local Autonomy Act. As a reasonable exercise of police power, it is superior to the obligation of contracts. It is a police measure and prevails over a restriction contained in the title to property.

ENEDINA PRESLEY, petitioner, vs. BEL-AIR VILLAGE ASSOCIATION, INC., and THE HON. COURT OF APPEALS, respondents. A complaint for specific performance and damages with preliminary injunction was filed by plaintiff-appellee, Bel-Air Village Association, Inc. (BAVA for short) against Teofilo Almendras and Rollo Almendras (now both deceased and substituted by defendant-appellant Enedina Presley) for violation of the Deed Restrictions of Bel-Air Subdivision that the subject house and lot shall be used only for residential and not for commercial purposes and for non-payment of association dues to plaintiff BAVA amounting to P3,803.55. The Almendrases were at the time of the filing of the action the registered owners of a house and lot located at 102 Jupiter Street, Bel-Air Village, Makati, Metro Manila. As such registered owners, they were members of plaintiff BAVA pursuant to the Deed Restrictions annotated in their title (TCT No. 73616) over the property in question and defendant Presley, as lessee of the property, is the owner and operator of 'Hot Pan de Sal Store' located in the same address. At the time the Almendrases bought their property in question from Makati Development Corporation, the Deed Restrictions (Exh. "C") was already annotated in their title (Exh. "B") providing (among others) 'that the lot must be used only for residential purpose' When BAVA came to know of the existence of the 'Pan de sal' store, it sent a letter to the defendants asking them to desist from operating the store (Exh. "D"). Under the existing Deed Restrictions aforesaid, the entire Bel-Air Subdivision is classified as a purely residential area, particularly Jupiter Road which is owned by and registered in the name of BAVA. It has likewise been established that the Almendrases had not paid the BAVA membership dues and assessments which amounted to P3,802.55 as of November 3, 1980. Teofilo Almendras contended that there was no written contract between him and appellee BAVA. Only a consensual contract existed between the parties whereby Almendras regularly pays his dues and assessments to BAVA for such services as security, garbage collection and maintenance and repair of Jupiter Street. However, when the services were withdrawn by appellee BAVA, there was no more reason for the latter to demand payment of such dues and assessments. (Rollo, pp. 30-31) After due hearing on the merits, the trial court rendered the decision in favor of BAVA which was affirmed by the respondent Court of Appeals. On January 20, 1989, the Court of Appeals denied the Motion for Reconsideration. Issue: WON, there is a violation of the non-impairment clause? The Court in the Sangalang case, however, held: ... In the Sangalang case, we absolve the Ayala Corporation primarily owing to our finding that is not liable for the opening of Jupiter Street to the general public. Insofar as these petitions are concerned, we likewise exculpate the private respondents, not only because of the fact that Jupiter Street is not covered by the restrictive easements based on the 'deed restrictions' but chiefly because the National Government itself, through the Metro Manila Commission (MMC), had reclassified Jupiter Street into a 'high density commercial (C-3) zone,' (See rollo, G.R. No. 71169, Id., 117) pursuant to its Ordinance No. 81-01 Hence, the petitioners have no cause of action on the strength alone of the said deed restrictions. (p. 667; Emphasis supplied) In the instant petition, BAVA assails the Court's decision in the Sangalang case, more specifically the Court's interpretation of Ordinance No. 81-01 passed by the Metro Manila Commission (MMC) on March 14, 1981. It avers that due to the multitude of issues raised and the numerous pleadings filed by the different contending parties, the Court was misled and unfortunately erred in concluding that Jupiter Street was reclassified as a "high density commercial (C-3) zone" when in fact, it is still considered as a "(R-1) residential zone." If indeed private respondent's observations were accurate, the Court will certainly not hesitate to correct the situation and the case at bar would be the proper occasion to do so. We have carefully examined the pleadings but have found no reason to reconsider the Sangalang doctrine. In assailing the Court's decision, the private respondent has come out with mere assertions and allegations. It failed to present any proofs or convincing

arguments to substantiate its claim that Jupiter Street is still classified as a residential zone. (See Filinvest v. Court of Appeals, 182 SCRA 664 [1990]) No new zoning re-classification, ordinance, certification to the effect or jurisprudence for that matter was brought to the attention of this Court which would necessarily compel us to take a second look at the Sangalang Case. The Court can not reverse a precedent and rule favorably for the private respondent on the strength of mere inferences. The respondent court in the case at bar was not at all entirely wrong in upholding the Deed of Restrictions annotated in the title of the petitioners. It held that the provisions of the Deed of Restrictions are in the nature of contractual obligations freely entered into by the parties. Undoubtedly, they are valid and can be enforced against the petitioner. However, these contractual stipulations on the use of the land even if said conditions are annotated on the torrens title can be impaired if necessary to reconcile with the legitimate exercise of police power. (Ortigas & Co. Limited Partnership v. Feati Bank and Trust Co., 94 SCRA 533 [1979]). We reiterate the Court's pronouncements in the Sangalang case which are quite clear: It is not that we are saying that restrictive easements, especially the easements herein in question, are invalid or ineffective. As far as the Bel-Air subdivision itself is concerned, certainly, they are valid and enforceable. But they are, like all contracts, subject to the overriding demands, needs, and interests of the greater number as the State may determine in the legitimate exercise of police power. Our jurisdiction guarantees sanctity of contract and is said to be the 'law between the contracting parties,' (Civil Code, supra, art. 1159) but while it is so, it cannot contravene 'law, morals, good customs, public order, or public policy.' (supra, art. 1306). Above all, it cannot be raised as a deterrent to police power, designed precisely to promote health, safety, peace, and enhance the common good, at the expense of contractual rights, whenever necessary. . . (p. 667) Jupiter Street has been highly commercialized since the passage of Ordinance No. 81-01. The records indicate that commercial buildings, offices, restaurants, and stores have already sprouted in this area. We, therefore, see no reason why the petitioner should be singled out and prohibited from putting up her hot pan de sal store. Thus, in accordance with the ruling in the Sangalang case, the respondent court's decision has to be reversed. With respect to the demand for payment of association dues in the sum of P3,803.55, the records reveal that this issue is now moot and academic after petitioner Presley purchased the property subject of lease from the Almendrases and settled all association dues. Likewise, the demand for payment of attorney's fees is now without legal or factual basis. WHEREFORE, the petition is hereby GRANTED. (same w/ Ortigas)

DEL ROSARIO VS BENGZON

Facts: On 15 March 1989, the full text of Republic Act 6675 was published in two newspapers of general circulation in the Philippines. The law took effect on 30 March 1989, 15 days after its publication, as provided in Section 15 thereof. Section 7, Phase 3 of Administrative Order 62 was amended by Administrative Order 76 dated 28 August 1989 by postponing to 1 January 1990 the effectivity of the sanctions and penalties for violations of the law, provided in Sections 6 and 12 of the Generics Act and Sections 4 and 7 of the Administrative Order. Officers of the Philippine Medical Association, the national organization of medical doctors in the Philippines, on behalf of their professional brethren who are of kindred persuasion, filed a class suit requesting the Court to declare some provisions (specifically penal) of the Generics Act of 1988 and the implementing Administrative Order 62 issued pursuant thereto as unconstitutional, hence, null and void. The petition was captioned as an action for declaratory relief, over which the Court does not exercise jurisdiction. Nevertheless, in view of the public interest involved, the Court decided to treat it as a petition for prohibition instead. Issue: WON, the prohibition against the use by doctors of no substitution and/or words of similar import in their prescription in the Generics Act is a lawful regulation. Held: Yes. There is no constitutional infirmity in the Generics Act; rather, it implements the constitutional mandate for the State to protect and promote the right to health of the people and to make essential goods, health and other social services available to all the people at affordable cost (Section 15, Art. II and Section 11, Art. XIII, 1987 Constitution). The prohibition against the use by doctors of no substitution and/or words of

similar import in their prescription, is a valid regulation to prevent the circumvention of the law. It secures to the patient the right to choose between the brand name and its generic equivalent since his doctor is allowed to write both the generic and the brand name in his prescription form. If a doctor is allowed to prescribe a brand-name drug with no substitution, the patients option to buy a lower-priced, but equally effective, generic equivalent would thereby be curtailed. The law aims to benefit the impoverished (and often sickly) majority of the population in a still developing country like ours, not the affluent and generally healthy minority

four hundred thousand piculs: Provided, That the provisions of this section shall not apply to sugar centrals with an actual production of less than one hundred fifty thousand piculs; Sixty-two and one-half per centum for the planter, and thirty-seven and onehalf per centum for the central in any milling district the maximum actual production of which exceeds four hundred thousand piculs but does not exceed six hundred thousand piculs; Sixty-five per centum for the planter, and thirty-five per centum for the central in any milling district the maximum actual production of which exceeds six hundred thousand piculs but does not exceed nine hundred thousand piculs; Sixty-seven and one-half per centum for the planter, and thirty-two and onehalf per centum for the central in any milling district the maximum actual production of which exceeds nine hundred thousand piculs but does not exceed one million two hundred thousand piculs; Seventy per centum for the planter, and thirty per centum for the central in any milling district the maximum actual production of which exceeds one million two hundred thousand piculs. By actual production is meant the total production of the mill for the crop year immediately preceding. SEC. 9. In addition to the benefits granted by the Minimum Wage Law, the proceeds of any increase in the participation granted the planters under this Act and above their present share shall be divided between the planter and his laborers in the plantation in the following proportion: Sixty per centum of the increased participation for the laborers and forty per centum for the planters. The distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor. The benefits granted to laborers in sugar plantations under this Act and in the Minimum Wage Law shall not in any way be diminished by such labor contracts known as "by the piece," "by the volume," "by the area," or by any other system of "pakyaw," the Secretary of Labor being hereby authorized to issue the necessary orders for the enforcement of this provision." Furthermore, plaintiffs asked thereunder as well as by separate motion, that the aforementioned court authorize them to sue as pauper litigants, under Sec. 22, Rule 3 of the Rules of Court:

SECTION 11: FREE ACCESS TO THE COURTS AND QUASI-JUDICIAL BODIES AND ADEQUATE LEGAL ASSISTANCE SHALL NOT BE DENIED TO ANY PERSON BY REASON OF POVERTY. Inspired by social justice policy and covered by the equal protection clause, this rule has been implemented by several provisions of the Rules of Court in favor of the pauper litigant. The IBP provides deserving indigents with free legal aid, including representation in court, and similar services available from the DOJ to litigants who cannot afford retained counsel, like the accused in a criminal case who can ask for the assistance of counsel de officio. There are also private legal assistance organizations now functioning for the benefit of penurious clients who otherwise might be unable to resort to the courts of justice because only of their misfortune of being poor. This provision makes them the equal of the rich before the law.

This provision is the basis for Sec. 22, Rule 3 of the Rules of Court allowing litigation in forma pauperis. Those protected include low paid employees, domestic servants and labourers. They need not be persons so poor that they must be supported at public expense. It suffices that the plaintiff is indigent.

** There is no merit in the petitioners theory that the Generics Act impairs the obligation of contract between a physician and his patient, for no contract ever results from a consultation between patient & physician. A doctor may take in or refuse a patient, just as the patient may take or refuse the doctors advice or prescription.

SECTION 11: FREE ACCESS TO THE COURTS AND QUASI-JUDICIAL BODIES AND ADEQUATE LEGAL ASSISTANCE SHALL NOT BE DENIED TO ANY PERSON BY REASON OF POVERTY. **those protected include low paid employees, domestic servants and laborers The new Constitution has expanded the right so that in addition to giving free access to courts it now guarantees free access also to quasi-judicial bodies and to adequate legal assistance FELIPE ACAR, ET AL vs. HON. INOCENCIO ROSAL, A ll over the world, Constitutions share one purpose: to protect and enhance the people's interest, as a nation collectively and as persons individually. The Philippine Constitution is no exception. Interpretation of its provisions, therefore, should be done with a view to realizing this fundamental objective. Among the provisions in our Constitution is one both, timely and far-reaching, as it affects the people at large and relates to social justice problems of the day. It is Subsec. 21, Sec. I of Art. III: "Free access to the courts shall not be denied to any person by reason of poverty." It is the one involved in this case. A suit was filed in the Court of First Instance of Negros Oriental on February 21, 1963 by ten persons for their own behalf and that of 9,000 other farm laborers working off and on in sugar cane plantations at the Bais milling district, Negros Oriental, against Compaia General de Tabacos de Filipinas, Central Azucarera de Bais, Compaia Celulosa de Filipinas, Ramon Barata, Aurelio Montinola, Sr., and Miguel Franco. Plaintiffs sought to recover their alleged participations or shares amounting to the aggregate sum of P14,031,836.74, in the sugar, molasses, bagasse and other derivatives based on the provisions of Republic Act 809 (The Sugar Act of 1952), particularly Sections 1 and 9 thereof: SECTION 1. In the absence of written milling agreements between the majority of planters and the millers of sugarcane in any milling district in the Philippines, the unrefined sugar produced in that district from the milling by any sugar central of the sugar-cane of any sugar-cane planter or plantation owner, as well as all by-products and derivatives thereof, shall be divided between them as follows: Sixty per centum for the planter, and forty per centum for the central in any milling district the maximum actual production of which is not more than

SEC. 22. Pauper litigant. Any court may authorize a litigant to prosecute his action or defense as a pauper upon a proper showing that he has no means to that effect by affidavits, certificate of the corresponding provincial, city or municipal treasurer, or otherwise. Such authority once given shall include an exemption from payment of legal fees and from filing appeal bond, printed record and printed brief. The legal fees shall be a lien to any judgment rendered in the case favorably to the pauper, unless the court otherwise provides. invoking Sec. 1, subsec. (21) of Art. III of the Constitution of the Philippines. They alleged that they had no means to pay the docket fee of P14,500.00, being laborers dependent solely on their daily wages for livehood and possessed of no properties. And in support of the foregoing, the ten named plaintiffs submitted certificates of the municipal treasurers of their places of residence stating that they have no real property declared in their names in said municipalities. Acting on the petition to litigate in forma pauperis, the Court of First Instance issued an order on May 27, 1963, denying the same upon the ground that the plaintiffs have regular employment and sources of income and, thus, can not be classified as poor or paupers. Plaintiffs sought reconsideration of said order but reconsideration was denied in an order dated June 11, 1963. Assailing said two CFI orders and asserting their alleged right not to be denied free access to the courts by reason of poverty, plaintiffs in said case filed herein, on August 1, 1963, the present special civil action or certiorari and mandamus. Petition to litigate as pauper in the instant case before Us was also filed. And on August 16, 1963, We allowed petitioners herein to litigate in this Court as paupers and required respondent to answer. Respondent's answer was filed on November 2, 1963. After hearing on February 10, 1964 this case was submitted for decision. The sole issue herein is whether petitioners were deprived, by the orders in question, of free access to the courts by reason of poverty. In denying petitioners' motion to litigate as paupers, respondent Judge adopted the definition at "pauper" in Black's Law Dictionary (at p. 1284) as "a person so poor that he must be supported at public expense". And, as afore-stated, he ruled that petitioners are not that poor. Such interpretation, to our mind, does not fit with the purpose of the rules on suits in forma pauperis and the provision of the Constitution, in the Bill of Rights, that: "Free access to the courts shall not be denied to any person by

reason of poverty." As applied to statutes or provisions on the right to sue in forma pauperis, the term has a broader meaning. It has thus been recognized that: "An applicant for leave to sue in forma pauperis need not be a pauper; the fact that he is able-bodied and may earn the necessary money is no answer to his statement that he has not sufficient means to prosecute the action or to secure the costs" (14 Am. Jur. 31). It suffices that plaintiff is indigent (Ibid.), the not a public charge. And the difference between "paupers" and "indigent" persons is that the latter are "persons who have no property or source of income sufficient for their support aside from their own labor, though self-supporting when able to work and in employment" (Black's Law Dictionary, p. 913, "Indigent", citing People vs. Schoharie County, 121 NY 345, 24 NE 830). It is therefore in this sense of being indigent that "pauper" is taken when referring to suits in forma pauperis. Black's Law Dictionary in fact defines pauper, thus: "A person so poor that he must be supported at public expense; also a suitor who, on account of poverty, is allowed to sue or defend without being chargeable with costs" (p. 1284, emphasis supplied) WGvU0eCxN. It is further argued that the docket fee of P14,500 would very well be shouldered by petitioners since there are around 9,000 of them. It must be remembered, however that the action in question was filed by way of a class suit. And the Rules of Court allowing such procedure state under Sec. 12, Rule 3: SEC. 12. Class suit. When the subject matter of the controversy is one of common or general interest to many persons, and the parties are so numerous that it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all. But in such case the court shall make sure that the parties actually before it are sufficiently numerous and representative so that all interest concerned are fully protected. Any party in interest shall have a right to intervene in protection of his individual interest. So that in the suit before respondent Judge the ten named petitioners herein are the ones suing, albeit for the benefit of all the others. It follows that the payment of docket fee would be directly charged upon them, not upon the unnamed "9,000 other laborers." And even if the 9,000 other laborers should later bear the payment of said docket fee of P14,500, the same would be spread among them at about P1.60 each. Said cost of pressing their respective average demand of P1.60 each is, to Our mind, a substantial imposition on a seasonal farm laborer earning barely subsistent wages. And as pointed out, this is only the initial fee; subsequent fees and charges would have to be paid. The philosophy underlying the constitutional mandate of free access to the courts notwithstanding poverty, therefore, calls for exemption of herein petitioners from payment of the aforesaid legal fees in their assertion and claim of substantial rights under the Sugar Act of 1952. Returning to the purpose of all Constitutions, as mentioned earlier, We find this course the most sensible, logical and practical construction demanded by the free access clause of the Constitution. For a contrary interpretation could not make said provision the living reality that it is designed to be. As regards the fact that the supporting certifications of indigence refer only to the ten named plaintiffs, suffice it to reiterate that this involves a class suit, where it is not practicable to bring all the other 9,000 laborers before the court. This Court finds the supporting evidence of indigence adequate, showing in petitioners' favor, as plaintiffs in the suit before respondent Judge, the right not to be denied free access to the courts by reason of poverty. Since they were excluded from the use and enjoyment of said right, mandamus lies to enforce it. Appeal was unavailing, since they were not even accorded the status of litigants, for non-payment of docket fee; and perfecting an appeal would have presented the same question of exemption from legal fees, appeal bond and similar requisites GHG3h. Wherefore, petitioners are declared entitled to litigate as paupers in their class suit before respondent Judge and the latter is hereby ordered to grant their petition to litigate in forma pauperis.

July 1994 the trial court issued an order overruling the objection. On 8 August 1994 the court denied the motion for reconsideration.[5] This prompted petitioner to go to the Court of Appeals by way of a petition for certiorari alleging that the trial court acted with grave abuse of discretion amounting to lack of jurisdiction when it issued the assailed orders.[6]

On 23 August 1994 petitioner filed before the Court of Appeals a Motion to Litigate as Pauper attaching thereto supporting affidavits executed by petitioner himself and by two (2) ostensibly disinterested persons attesting to petitioner's eligibility to avail himself of this privilege.[7] The appellate court subsequently issued its resolution dated 21 March 1997 denying the motion and directing petitioner to remit the docketing fees in the total amount of P420.00 within five (5) days from notice.[8] On 7 April 1997 petitioner filed a Motion for Reconsideration of the order denying his motion to litigate as a pauper, but this was similarly denied in the resolution of 8 October 1997.[9] Petitioner then filed a Manifestation on 28 October 1997 wherein he stated through counsel that he was transmitting the docket fees required of his client "under protest" and that the money remitted was advanced by his counsel, Atty. Jesus G. Chavez himself.[10] The transmittal of the amount was evidenced by two (2) postal money orders attached to the Motion to Litigate as Pauper.[11]

In the assailed Resolution of 10 November 1997 the Court of Appeals dismissed the petition, citing petitioners failure to pay the required docket fee.[12] Petitioner moved for reconsideration citing his compliance with the docket fee requirement as alleged in his Manifestation adverted to above.[13] However, the Court of Appeals in the second assailed Resolution of 21 January 1998 denied this latest motion on the ground that, per verification by the Judicial Records Division, the amount remitted by petitioner as docket fee was short of 150.00.[14] Msesm

The only issue expressly raised by petitioner is whether a motion to litigate as pauper can be entertained by an appellate court. When petitioner filed on 23 August 1994 his original motion to appeal as pauper before the appellate court the applicable rule was the second paragraph of Sec. 16, rule 41, of the 1964 Revised Rules of Court, which provides-

Sec. 16. Appeal by pauper Where a party desiring to appeal shall establish to the satisfaction of the trial court that he is a pauper and unable to pay the expenses of prosecuting the appeal, and that the case is of such importance, by reason of the amount involved, or the nature of the question raised, that it ought to be reviewed by the appellate court, the trial judge may enter an order entitling the party to appeal as pauper. The clerk shall transmit to the appellate court the entire record of the case, including the evidence taken on trial and the record on appeal, and the case shall be heard in the appellate court upon the original record so transmitted without printing the same. Esmso

A petition to be allowed to appeal as pauper shall not be entertained by the appellate court.

TEOFILO MARTINEZ, petitioner, vs. PEOPLE OF THE PHILIPPINES This is a petition for certiorari under Rule 65, erroneously filed as a petition for review on certiorari under Rule 45. But this procedural infirmity notwithstanding, we have decided to give it due course to resolve the question whether the Court of Appeals gravely abused its discretion in denying petitioner's motion to appeal as a pauper litigant.[1]

Even prior to the adoption of the 1964 Revised Rules of Court, the Court had uniformly frowned upon appellate courts entertaining petitions to litigate as pauper, holding that the question of whether a party-litigant is so poor as to qualify him to litigate as pauper is a question of fact which is best determined by the trial court. The trial court is the court which may properly decide or pass upon the question of fact which may require presentation of evidence whether the appellant is an indigent and may appeal as such, and whether the case is of such importance that, by reason not only of the amount involved but of the nature of the question raised in the court below, it ought to be reviewed by the appellate court.[15]

The antecedents: Petitioner was accused of homicide in Crim. Case No. 5753 before the Regional Trial Court of Butuan City.[2] During the hearing on 23 June 1994 petitioner represented by Atty. Jesus G. Chavez of the Public Attorney's Office of Butuan City objected to petitioner's motion to be allowed to litigate as pauper and moved instead to strike out the entire testimony of the first witness for the prosecution on the ground that it was inadmissible for being violative of the testimonial privilege afforded to children in cases involving their parents. The Presiding Judge[3] deferred his ruling on the objection and allowed the testimony to be continued.[4] On 21

When the 1997 Rules of Civil Procedure came into effect on 1 July 1997 the provision abovequoted was not reenacted. Section 21 of Rule 3, as now worded, outlines the procedure for, as well as the effects of, the grant of a motion to litigate as pauper -

Sec. 21. Indigent party. - A party may be authorized to litigate his action, claim or defense as an indigent if the court, upon an ex parte application and hearing, is satisfied that the party is one who has no money or property sufficient and available for food, shelter and basic necessities for himself and his family.

Such authority shall include an exemption from payment of docket and other lawful fees, and of transcripts of stenographic notes which the court may order to be furnished him. The amount of the docket and other lawful fees which the indigent was exempted from paying shall be a lien on any judgment rendered in the case favorable to the indigent, unless the court otherwise provides. Esmmis

country dedicated to affording equal justice to all and special privileges to none in the administration of its criminal law. There can be no equal justice where the kind of trial a man gets depends on the amount of money he has.[18]

Any adverse party may contest the grant of such authority at any time before judgment is rendered by the trial court. If the court should determine after hearing that the party declared as an indigent is in fact a person with sufficient income or property, the proper docket and other lawful fees shall be assessed and collected by the clerk of court. If payment is not made within the time fixed by the court, execution shall issue or the payment thereof, without prejudice to such other sanctions as the court may impose.

A perusal of the records shows that petitioner has complied with all the evidentiary requirements for prosecuting a motion to appear in court as a pauper. He has executed an affidavit attesting to the fact that he and his immediate family do not earn a gross income of more than P3,000.00 a month, and that their only real property, a hut, cannot be worth more than P10,000.00.[19] He has also submitted a joint affidavit executed by Florencia L. Ongtico and Helen Maur, both residents of Butuan City, who generally attested to the same allegations contained in petitioner's own affidavit.[20] Based on this evidence, the Court finds that petitioner is qualified to litigate as an indigent. Chief

On the other hand, Sec. 18 of Rule 141 prescribes the evidentiary requirements for the exemption of pauper litigants from payment of legal fees -

WHEREFORE, the questioned Resolution of the Court of Appeals dated 10 November 1997 dismissing the petition for certiorari of petitioner Teofilo Martinez and its Resolution dated 21 January 1998 denying reconsideration are SET ASIDE for having been issued with grave abuse of discretion. Accordingly, this case is REMANDED for appropriate action to the Court of Appeals which is further ordered to allow petitioner to litigate as pauper and to return to him the amount of P420.00 representing the docket fees he paid. **Statues regulating the procedure of the courts will be construed as applicable to actions pending & undetermined at the time of their passage. In that sense & to that extent, procedural laws are retroactive. This interpretation of the present rules is more in keeping with or Bill of Rights, which decrees that, FREE ACCESS TO THE COURTS AND QUASI-JUDICIAL BODIES AND ADEQUATE LEGAL ASSISTANCE SHALL NOT BE DENIED TO ANY PERSON BY REASON OF POVERTY.

Sec. 18. Pauper-litigants exempt from payment of legal fees. - Pauperlitigants (a) whose gross income and that of their immediate family do not exceed four thousand (P4,000.00) pesos a month if residing in Metro Manila, and three thousand (P3,000.00) pesos a month if residing outside Metro Manila, and (b) who do not own real property with an assessed value of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of legal fees. Esmsc

The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper-litigant, unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he and his immediate family do not earn the gross income abovementioned, nor do they own any real property with the assessed value aforementioned, supported by an affidavit of a disinterested person attesting to the truth of the litigant's affidavit.

Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to strike out the pleading of that party, without prejudice to whatever criminal liability may have been incurred. Esm

It cannot be inferred from any of the aforementioned provisions that the restrictive policy enunciated by Sec. 16, Rule 41, of the 1964 Revised Rules of Court was carried over to the 1997 Rules of Civil Procedure. Nowhere can we find a provision to the effect that "(a) petition to be allowed to appeal as pauper shall not be entertained by the appellate court."

We resolve to apply the present rules on petitioner retrospectively. Statutes regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of their passage. In that sense and to that extent procedural laws are retroactive.[16] We therefore hold that a motion to litigate as an indigent can be made even before the appellate courts, either for the prosecution of appeals, in petitions for review or in special civil actions. Jksm

We believe that this interpretation of the present rules is more in keeping with our Bill of Rights, which decrees that, "(f)ree access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty."[17] Our espousal of the democratization of appellate remedies is shared by the United States Supreme Court, speaking through Mr. Justice Hugo L. Black -

There is no meaningful distinction between a rule which would deny the poor the right to defend themselves in a trial court and one which effectively denies the poor an adequate appellate review accorded to all who have money enough to pay the costs in advance x x x x Such a denial is a misfit in a