Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-7995

May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien

residents, corporations and partnerships adversely affected. by
Republic Act No. 1180, petitioner,
vs.
JAIME HERNANDEZ, Secretary of Finance, and MARCELINO
SARMIENTO, City Treasurer of Manila,respondents.
Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and Associates
for petitioner.
Office of the Solicitor General Ambrosio Padilla and Solicitor Pacifico P. de
Castro for respondent Secretary of Finance.
City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S. Serrano for
respondent City Treasurer.
Dionisio Reyes as Amicus Curiae.
Marcial G. Mendiola as Amicus Curiae.
Emiliano R. Navarro as Amicus Curiae.
LABRADOR, J.:
I. The case and issue, in general
This Court has before it the delicate task of passing upon the validity and
constitutionality of a legislative enactment, fundamental and far-reaching in
significance. The enactment poses questions of due process, police power
and equal protection of the laws. It also poses an important issue of fact, that
is whether the conditions which the disputed law purports to remedy really or
actually exist. Admittedly springing from a deep, militant, and positive
nationalistic impulse, the law purports to protect citizen and country from the
alien retailer. Through it, and within the field of economy it regulates,
Congress attempts to translate national aspirations for economic
independence and national security, rooted in the drive and urge for national
survival and welfare, into a concrete and tangible measures designed to free
the national retailer from the competing dominance of the alien, so that the

country and the nation may be free from a supposed economic dependence
and bondage. Do the facts and circumstances justify the enactment?
II. Pertinent provisions of Republic Act No. 1180
Republic Act No. 1180 is entitled "An Act to Regulate the Retail Business." In
effect it nationalizes the retail trade business. The main provisions of the Act
are: (1) a prohibition against persons, not citizens of the Philippines, and
against associations, partnerships, or corporations the capital of which are
not wholly owned by citizens of the Philippines, from engaging directly or
indirectly in the retail trade; (2) an exception from the above prohibition in
favor of aliens actually engaged in said business on May 15, 1954, who are
allowed to continue to engaged therein, unless their licenses are forfeited in
accordance with the law, until their death or voluntary retirement in case of
natural persons, and for ten years after the approval of the Act or until the
expiration of term in case of juridical persons; (3) an exception therefrom in
favor of citizens and juridical entities of the United States; (4) a provision for
the forfeiture of licenses (to engage in the retail business) for violation of the
laws on nationalization, control weights and measures and labor and other
laws relating to trade, commerce and industry; (5) a prohibition against the
establishment or opening by aliens actually engaged in the retail business of
additional stores or branches of retail business, (6) a provision requiring
aliens actually engaged in the retail business to present for registration with
the proper authorities a verified statement concerning their businesses,
giving, among other matters, the nature of the business, their assets and
liabilities and their offices and principal offices of judicial entities; and (7) a
provision allowing the heirs of aliens now engaged in the retail business who
die, to continue such business for a period of six months for purposes of
liquidation.
III. Grounds upon which petition is based-Answer thereto
Petitioner, for and in his own behalf and on behalf of other alien residents
corporations and partnerships adversely affected by the provisions of
Republic Act. No. 1180, brought this action to obtain a judicial declaration
that said Act is unconstitutional, and to enjoin the Secretary of Finance and
all other persons acting under him, particularly city and municipal treasurers,
from enforcing its provisions. Petitioner attacks the constitutionality of the
Act, contending that: (1) it denies to alien residents the equal protection of
the laws and deprives of their liberty and property without due process of

law ; (2) the subject of the Act is not expressed or comprehended in the title
thereof; (3) the Act violates international and treaty obligations of the
Republic of the Philippines; (4) the provisions of the Act against the
transmission by aliens of their retail business thru hereditary succession, and
those requiring 100% Filipino capitalization for a corporation or entity to
entitle it to engage in the retail business, violate the spirit of Sections 1 and
5, Article XIII and Section 8 of Article XIV of the Constitution.
In answer, the Solicitor-General and the Fiscal of the City of Manila contend
that: (1) the Act was passed in the valid exercise of the police power of the
State, which exercise is authorized in the Constitution in the interest of
national economic survival; (2) the Act has only one subject embraced in the
title; (3) no treaty or international obligations are infringed; (4) as regards
hereditary succession, only the form is affected but the value of the property
is not impaired, and the institution of inheritance is only of statutory origin.
IV. Preliminary consideration of legal principles involved
a. The police power.
There is no question that the Act was approved in the exercise of the police
power, but petitioner claims that its exercise in this instance is attended by a
violation of the constitutional requirements of due process and equal
protection of the laws. But before proceeding to the consideration and
resolution of the ultimate issue involved, it would be well to bear in mind
certain basic and fundamental, albeit preliminary, considerations in the
determination of the ever recurrent conflict between police power and the
guarantees of due process and equal protection of the laws. What is the
scope of police power, and how are the due process and equal protection
clauses related to it? What is the province and power of the legislature, and
what is the function and duty of the courts? These consideration must be
clearly and correctly understood that their application to the facts of the case
may be brought forth with clarity and the issue accordingly resolved.
It has been said the police power is so far - reaching in scope, that it has
become almost impossible to limit its sweep. As it derives its existence from
the very existence of the State itself, it does not need to be expressed or
defined in its scope; it is said to be co-extensive with self-protection and
survival, and as such it is the most positive and active of all governmental
processes, the most essential, insistent and illimitable. Especially is it so
under a modern democratic framework where the demands of society and of

nations have multiplied to almost unimaginable proportions; the field and

scope of police power has become almost boundless, just as the fields of
public interest and public welfare have become almost all-embracing and
have transcended human foresight. Otherwise stated, as we cannot foresee
the needs and demands of public interest and welfare in this constantly
changing and progressive world, so we cannot delimit beforehand the extent
or scope of police power by which and through which the State seeks to
attain or achieve interest or welfare. So it is that Constitutions do not define
the scope or extent of the police power of the State; what they do is to set
forth the limitations thereof. The most important of these are the due process
clause and the equal protection clause.
b. Limitations on police power.
The basic limitations of due process and equal protection are found in the
following provisions of our Constitution:
SECTION 1.(1) No person shall be deprived of life, liberty or property
without due process of law, nor any person be denied the equal
protection of the laws. (Article III, Phil. Constitution)
These constitutional guarantees which embody the essence of individual
liberty and freedom in democracies, are not limited to citizens alone but are
admittedly universal in their application, without regard to any differences of
race, of color, or of nationality. (Yick Wo vs. Hopkins, 30, L. ed. 220, 226.)
c. The, equal protection clause.
The equal protection of the law clause is against undue favor and individual
or class privilege, as well as hostile discrimination or the oppression of
inequality. It is not intended to prohibit legislation, which is limited either in
the object to which it is directed or by territory within which is to operate. It
does not demand absolute equality among residents; it merely requires that
all persons shall be treated alike, under like circumstances and
conditions both as to privileges conferred and liabilities enforced. The equal
protection clause is not infringed by legislation which applies only to those
persons falling within a specified class, if it applies alike to all persons within
such class, and reasonable grounds exists for making a distinction between
those who fall within such class and those who do not. (2 Cooley,
Constitutional Limitations, 824-825.)

d. The due process clause.

The due process clause has to do with the reasonableness of legislation
enacted in pursuance of the police power. Is there public interest, a public
purpose; is public welfare involved? Is the Act reasonably necessary for the
accomplishment of the legislature's purpose; is it not unreasonable, arbitrary
or oppressive? Is there sufficient foundation or reason in connection with the
matter involved; or has there not been a capricious use of the legislative
power? Can the aims conceived be achieved by the means used, or is it not
merely an unjustified interference with private interest? These are the
questions that we ask when the due process test is applied.
The conflict, therefore, between police power and the guarantees of due
process and equal protection of the laws is more apparent than real. Properly
related, the power and the guarantees are supposed to coexist. The
balancing is the essence or, shall it be said, the indispensable means for the
attainment of legitimate aspirations of any democratic society. There can be
no absolute power, whoever exercise it, for that would be tyranny. Yet there
can neither be absolute liberty, for that would mean license and anarchy. So
the State can deprive persons of life, liberty and property, provided there is
due process of law; and persons may be classified into classes and groups,
provided everyone is given the equal protection of the law. The test or
standard, as always, is reason. The police power legislation must be firmly
grounded on public interest and welfare, and a reasonable relation must exist
between purposes and means. And if distinction and classification has been
made, there must be a reasonable basis for said distinction.
e. Legislative discretion not subject to judicial review.
Now, in this matter of equitable balancing, what is the proper place and role
of the courts? It must not be overlooked, in the first place, that the
legislature, which is the constitutional repository of police power and
exercises the prerogative of determining the policy of the State, is by force of
circumstances primarily the judge of necessity, adequacy or reasonableness
and wisdom, of any law promulgated in the exercise of the police power, or
of the measures adopted to implement the public policy or to achieve public
interest. On the other hand, courts, although zealous guardians of individual
liberty and right, have nevertheless evinced a reluctance to interfere with
the exercise of the legislative prerogative. They have done so early where
there has been a clear, patent or palpable arbitrary and unreasonable abuse

of the legislative prerogative. Moreover, courts are not supposed to override

legitimate policy, and courts never inquire into the wisdom of the law.
V. Economic problems sought to be remedied
With the above considerations in mind, we will now proceed to delve directly
into the issue involved. If the disputed legislation were merely a regulation,
as its title indicates, there would be no question that it falls within the
legitimate scope of legislative power. But it goes further and prohibits a
group of residents, the aliens, from engaging therein. The problem becomes
more complex because its subject is a common, trade or occupation, as old
as society itself, which from the immemorial has always been open to
residents, irrespective of race, color or citizenship.
a. Importance of retail trade in the economy of the nation.
In a primitive economy where families produce all that they consume and
consume all that they produce, the dealer, of course, is unknown. But as
group life develops and families begin to live in communities producing more
than what they consume and needing an infinite number of things they do
not produce, the dealer comes into existence. As villages develop into big
communities and specialization in production begins, the dealer's importance
is enhanced. Under modern conditions and standards of living, in which
man's needs have multiplied and diversified to unlimited extents and
proportions, the retailer comes as essential as the producer, because thru
him the infinite variety of articles, goods and needed for daily life are placed
within the easy reach of consumers. Retail dealers perform the functions of
capillaries in the human body, thru which all the needed food and supplies
are ministered to members of the communities comprising the nation.
There cannot be any question about the importance of the retailer in the life
of the community. He ministers to the resident's daily needs, food in all its
increasing forms, and the various little gadgets and things needed for home
and daily life. He provides his customers around his store with the rice or
corn, the fish, the salt, the vinegar, the spices needed for the daily cooking.
He has cloths to sell, even the needle and the thread to sew them or darn
the clothes that wear out. The retailer, therefore, from the lowly peddler, the
owner of a small sari-sari store, to the operator of a department store or, a
supermarket is so much a part of day-to-day existence.
b. The alien retailer's trait.

The alien retailer must have started plying his trades in this country in the
bigger centers of population (Time there was when he was unknown in
provincial towns and villages). Slowly but gradually be invaded towns and
villages; now he predominates in the cities and big centers of population. He
even pioneers, in far away nooks where the beginnings of community life
appear, ministering to the daily needs of the residents and purchasing their
agricultural produce for sale in the towns. It is an undeniable fact that in
many communities the alien has replaced the native retailer. He has shown
in this trade, industry without limit, and the patience and forbearance of a
slave.
Derogatory epithets are hurled at him, but he laughs these off without
murmur; insults of ill-bred and insolent neighbors and customers are made in
his face, but he heeds them not, and he forgets and forgives. The community
takes note of him, as he appears to be harmless and extremely useful.
c. Alleged alien control and dominance.
There is a general feeling on the part of the public, which appears to be true
to fact, about the controlling and dominant position that the alien retailer
holds in the nation's economy. Food and other essentials, clothing, almost all
articles of daily life reach the residents mostly through him. In big cities and
centers of population he has acquired not only predominance, but apparent
control over distribution of almost all kinds of goods, such as lumber,
hardware, textiles, groceries, drugs, sugar, flour, garlic, and scores of other
goods and articles. And were it not for some national corporations like the
Naric, the Namarco, the Facomas and the Acefa, his control over principal
foods and products would easily become full and complete.
Petitioner denies that there is alien predominance and control in the retail
trade. In one breath it is said that the fear is unfounded and the threat is
imagined; in another, it is charged that the law is merely the result of
radicalism and pure and unabashed nationalism. Alienage, it is said, is not an
element of control; also so many unmanageable factors in the retail business
make control virtually impossible. The first argument which brings up an
issue of fact merits serious consideration. The others are matters of opinion
within the exclusive competence of the legislature and beyond our
prerogative to pass upon and decide.
The best evidence are the statistics on the retail trade, which put down the
figures in black and white. Between the constitutional convention year

(1935), when the fear of alien domination and control of the retail trade
already filled the minds of our leaders with fears and misgivings, and the
year of the enactment of the nationalization of the retail trade act (1954),
official statistics unmistakably point out to the ever-increasing dominance
and control by the alien of the retail trade, as witness the following tables:

INCHONG VS. HERNANDEZ

101 PHIL 155
Facts:
The Congress of the Philippines enacted the act which nationalizes theretail
trade business, Republic Act No. 1180 entitled An Act to Regulate theRetail
Business, prohibiting aliens in general to engage in retail trade in
ourcountry.Petitioner, for and in his own behalf and on behalf of other alien
residents,corporations and partnerships adversely affected by the provisions
of RA No.1180, brought this action to obtain a judicial declaration that said
Act isunconstitutional.
Issue:
Whether Congress in enacting R.A. No. 1180 violated the UN Charter, theUN
Declaration of Human Rights and the Philippine-Chinese Treaty of Amity.
Held:
The UN Charter imposes no strict or legal obligations regarding the
rightsand freedom of their subjects, and the Declaration of Human Rights
containsnothing more than a mere recommendation, or a common standard
of achievement for all peoples and all nations. The Treaty of Amity between
the Republic of the Philippines and the Republic of China guarantees equality
of treatment to the Chinese nationals upon the sameterms as the nationals
of any other country. But the nationals of China are notdiscriminated against
because nationals of all other countries, except those of the United States,
who are granted special rights by the Constitution, are allprohibited from
engaging in the retail trade.But even supposing that the law infringes upon
the said treaty, the treaty isalways subject to qualification or amendment by
a subsequent law, and the samemay never curtail or restrict the scope of the
police power of the State.