EN BANC

[G.R. No. 117577. December 1, 1995.]

ALEJANDRO

B.

TY

AND

MVR

PICTURE

TUBE

INC., petitioners, vs. THE HON. AURELIO C. TRAMPE, in his

capacity as Judge of the Regional Trial Court of Pasig, Metro
Manila. THE HON. SECRETARY OF FINANCE, THE MUNICIPAL
ASSESSOR OF PASIG AND THE MUNICIPAL TREASURER OF
PASIG, respondents.
Medel, Macam, Del Rosario, Collado & Polines for petitioners.
Chuchi D.S. Tan for respondents Pasig Municipal Treasurer and Municipal
Assessors.
The Solicitor General for respondents.
SYLLABUS
1. STATUTORY

CONSTRUCTION;

REPEALS

BY

IMPLICATION

NOT

FAVORED; P.D. 921, NOT REPEALED BY RA 7160 (LOCAL GOVERNMENT

CODE). Although RA. 7160 (Local Government Code of 1991) has a repealing
provision (Section 534), if the intention of the legislature was to abrogate P.D.
921, it would have included it in such repealing clause. Hence, any repeal or
modification of P.D. 921 can only be possible under par. (f) of Section 534 which
partakes of the nature of a general repealing provision. It is a basic rule of
statutory construction that repeals by implication are not favored. An implied
repeal will not be allowed unless it is convincingly and unambiguously
demonstrated that the two laws are so clearly repugnant and patently inconsistent
that they cannot co-exist. This is based on the rationale that the will of the
legislature cannot be overturned by the judicial function of construction and

interpretation. Their function is to try to harmonize, as much as possible, seeming

conflicts in the laws and resolve doubts in favor of their validity and coexistence. PRESIDENTIAL DECREE NO. 921 was promulgated on 12 April
1976, with the aim of, inter alia, evolving "a progressive revenue raising program
that will not unduly burden the tax payers . . ." in Metropolitan Manila. Hence, it
provided for the "administration of local financial services in Metropolitan Manila"
only, and for this purpose, divided the area into four Local Treasury and
Assessment Districts, regulated the duties and functions of the treasurers and
assessors in the cities and municipalities in said area and spelled out the process
of assessing, imposing and distributing the proceeds of real estate taxes therein.
Upon the other hand, Republic Act No. 7160, otherwise, "known and cited as the
'Local Government Code of 1991'" took effect on 01 January 1992. It declared
"genuine and meaningful local autonomy" as a policy of the state. Such policy
was meant to decentralize government "powers, authority, responsibilities and
resources" from the national government to the local government units "to enable
them to attain their fullest development as self-reliant communities and make
them more effective partners in the attainment of national goals." In the
formulation and implementation of policies and measures on local autonomy,
"(l)ocal government units may group themselves, consolidate or coordinate their
efforts, services, and resources for purposes commonly beneficial to them." From
the above, it is clear that the two laws are not co-extensive and mutually inclusive
in their scope and purpose. While R.A. 7160 covers almost all governmental
functions delegated to local government units all over the country, P.D.
921 embraces only the Metropolitan Manila area and is limited to the
administration of financial services therein, especially the assessment and
collection of real estate (and some other local) taxes. Coming down to specifics,
Sec. 9 of P.D. 921 requires that the schedule of values of real properties in the
Metropolitan Manila area shall be prepared jointly by the city assessors in the
districts created therein; while Sec. 212 of R.A. 7160 states that the schedule
shall be prepared "by the provincial, city and municipal assessors of the
municipalities within the Metropolitan Manila Area for the different classes of real
property situated in their respective local government units for enactment by

ordinance of the sanggunian concerned. . . ." It is obvious that harmony in these

provisions is not only possible, but in fact desirable, necessary and consistent
with the legislative intent and policy.

cdrep

2. ADMINISTRATIVE LAW; RULE ON EXHAUSTION OF ADMINISTRATIVE

REMEDIES; EXCEPTION IS WHERE CONTROVERSY INVOLVED IS ONLY
QUESTION OF LAW. Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there is a well-settled
exception in cases where the controversy does not involve questions of fact but
only of law. In the present case, the parties already agreed "that the issues in the
petition are legal" and thus, no evidence was presented. In laying down the
powers of the Local Board of Assessment Appeals, R.A. 7160 provides in Sec.
229 (b) that "(t)he proceedings of the Board shall be conducted solely for the
purpose of ascertaining the facts . . . ." It follows that appeals to this Board may
be fruitful only where questions of fact are involved. Again, the protest
contemplated under Sec. 252 of R.A. 7160 is needed where there is a question
as to the reasonableness of the amount assessed. Hence, if a taxpayer disputes
the reasonableness of an increase in a real estate tax assessment, he is required
to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will
not act on his protest. In the case at bench however, the petitioners are
questioning the very authority and power of the assessor, acting solely and
independently, to impose the assessment and of the treasurer to collect the tax.
These are not questions merely of amounts of the increase in the tax but attacks
on the very validity of any increase.
3. STATUTORY CONSTRUCTION; QUESTION OF CONSTITUTIONALITY;
RULE. The constitutionality of a law, regulation, ordinance or act will not be
resolved by courts if the controversy can be, as in this case it has been, settled
on other grounds. In the recent case of Macasiano vs. National Housing
Authority, this Court declared: "It is a rule firmly entrenched in our jurisprudence
that the constitutionality of an act of the legislature will not be determined by the
courts unless that question is properly raised and presented in appropriate cases
and is necessary to a determination of the case, i.e., the issue of constitutionality

must be the very lis mota presented. To reiterate, the essential requisites for a
successful judicial inquiry into the constitutionality of a law are: (a) the existence
of an actual case or controversy involving a conflict of legal rights susceptible of
judicial determination, (b) the constitutional question must be raised by a proper
party, (c) the constitutional question must be raised at the earliest opportunity,
and (d); the resolution of the constitutional question must be necessary to the
decision of the case. "In view of the foregoing ruling, the question may be asked:
what happens to real estate tax payments already made prior to its promulgation
and finality? Under the law, 'the taxpayer may file a written claim for refund or
credit for taxes and interests . . . ."

THCSAE

DECISION

PANGANIBAN, J :
p

ARE THE INCREASED REAL ESTATE TAXES imposed by and being collected
in the Municipality (now City) of Pasig. effective from the year 1994, valid and
legal? This is the question brought before this Court for resolution.
The Parties
Petitioner Alejandro B. Ty is a resident of and registered owner of lands and
buildings in the Municipality (now City) of Pasig, while petitioner MVR Picture
Tube Inc. is a corporation duly organized and existing under Philippine laws and
is likewise a registered owner of lands and buildings in said Municipality. 1
Respondent Aurelio C. Trampe is being sued in his capacity as presiding judge of
Branch 163, Regional Trial Court of the National Capital Judicial Region. sitting in
Pasig, whose Decision dated 14 July 1994 and Order dated 30 September 1994
in Special Civil Action No. 629 (entitled "Alejandro B. Ty and MVR Picture Tube.
Inc. vs. The Hon. Secretary of Finance, et al.") are sought to be set aside.
Respondent Secretary of Finance is impleaded as the government officer who
approved the Schedule of Market Values used as basis for the new tax

assessments being enforced by respondents Municipal Assessor and Municipal

Treasurer of Pasig and the legality of which is being questioned in this petition.

The Antecedent Facts

On 06 January 1994, respondent Assessor sent a notice of assessment
respecting certain real properties of petitioners located in Pasig. Metro Manila in
a letter dated 18 March 1994, petitioners through counsel "request(ed) the
Municipal Assessor to reconsider the subject assessments." 3
Not satisfied, petitioners on 29 March 1994 filed with the Regional Trial Court of
the National Capital Judicial Region, Branch 163, presided over by respondent
Judge, a Petition for Prohibition with prayer for a restraining order and/or writ of
preliminary injunction to declare null and void the new tax assessments and to
enjoin the collection of real estate taxes based on said assessments. In a
Decision 4 dated 14 July 1994, respondent Judge denied the petition "for lack of
merit" in the following disposition:
"WHEREFORE, foregoing premises considered, petitioners' prayer to
declare unconstitutional the schedule of market values as prepared by
the Municipal Assessor of Pasig, Metro Manila, and to enjoin
permanently the Municipal Treasurer of Pasig, Metro Manila. from
collecting the real property taxes based thereof (sic) is hereby DENIED
for lack of merit. Cost (sic) de oficio."

Subsequently, petitioners' Motion for Reconsideration was also denied by

respondent Judge in an Order 5 dated 30 September 1994.
Rebuffed by said Decision and Order, petitioners filed this present Petition for
Review directly before this Court, raising pure questions of law and assigning the
following errors:
"The Court a quo gravely erred in holding that PRESIDENTIAL DECREE
NO. 921 was expressly repealed by R.A. 7160 and that said presidential
decree including its Implementing Rules (P.D. 464) went down to the

statutes' graveyard together with the other decision(s) of the Supreme

Court affecting the same.

"The Court a quo while holding that the new tax assessments have
tremendously increased ranging from 418.8% to 570%, gravely erred in
blaming petitioners for their failure to exhaust administrative remedies
provided for by law.
"The Court a quo blatantly erred in not declaring the confiscatory and
oppressive nature of the assessments as illegal, void ab initio and
unconstitutional constituting a deprivation of property without due
process of law." 6

In a resolution dated 21 November 1994, this Court, without giving due course to
the petition, required respondents to comment thereon. Respondents Municipal
Treasurer and Municipal Assessor, through counsel, filed their Comment on 19
December 1994, and respondent Secretary of Finance, through the Solicitor
General, submitted his on 11 May 1995. Petitioners filed their Reply to the
Comment of respondent Assessor and Treasurer 06 January 1995, and their
Reply to that of the respondent Secretary on 18 May 1995. After careful
deliberation on the above pleadings, the Court resolved to give due course to the
petition, and, inasmuch as the issues are relatively simple, the Court dispensed
with requiring the parties to submit further memoranda and instead decided to
consider the respondents' respective comments as their answers and
memoranda. Thus the case is now considered submitted for resolution.
The Issues
The issues brought by the parties for decision by this Court are:
1. Whether Republic Act No. 7160, otherwise known as The Local
Government Code of 1991, repealed the provisions of PRESIDENTIAL
DECREE NO. 921;

2. Whether petitioners are required to exhaust administrative remedies

prior to seeking judicial relief; and
3. Whether the new tax assessments are oppressive and confiscatory,
and therefore unconstitutional.

In disposing of the above issues against petitioners, the court a quo ruled that the
schedule

of

market

values

and

the

assessments

based

thereon

prepared solely by respondent assessor are valid and legal, they having been
prepared in accordance with the provisions of The Local Government Code of
1991 (R.A. 7160). It held also that said Code had effectively repealed the
previous law on the matter, P.D. 921, which required, in the preparation of said
schedule, joint action by all the city and municipal assessors in the Metropolitan
Manila area. The lower court also faulted petitioners with failure to exhaust
administrative remedies provided under Sections 226 and 252 of R.A. 7160.
Finally, it found the questioned assessments consistent with the tremendously
increased . . . price of real estate anywhere in the country." 7
Stated the court:
'This Court is inclined to agree with the view of defendants that R.A.
7160 in its repealing clause provide (sic) that Presidential Decree Nos. . .
. 464 . . . are hereby repealed and rendered of no force and effect.
Hence said presidential decrees including their implementing rules went
down to the statutes' graveyard together with the decisions of the
Supreme Court on cases effecting (sic) the same.
"This Court is also in accord with respondents (sic) view that petitioners
failed to avail of either Section 226 of R.A. 7160, that is by appealing the
assessment of their properties to the Board of Assessment Appeal within
sixty (60) days from the date of receipt of the written Notice of
Assessment, and if it is true that petitioner (sic) as alleged in their
pleadings was not afforded the opportunity to appeal to the board of
assessment appeal, then they could have availed of the provisions of
Section 252, of the same R.A. 7160 by paying the real estate tax under

protest. Because of petitioners (sic) failure to avail of either Sections 226

or 252 of R.A. 7160, they failed to exhaust administratives (sic) remedies
provided for by law before bringing the case to Court. (Buayan Cattle
Co., Inc. vs. Quintillan 128 SCRA 276) Therefore the filing of this case
before this Court is premature, the same not falling under the exception
because the issue involved is not a question of law but of fact. (Valmonte
vs. Belmonte. Jr., 170 SCRA 256)
"Petitioners also alleged that the New Tax Assessments are not only
oppressive and confiscatory but also destructive in view of the
tremendous increase in its valuation, from P855,360.00 to P4,121,
280.00 a marked increase of 418.8% of one of its properties, while the
other, from P857,600.00 to P4,374,410.00, an increased (sic) of 510%.
This Court agree (sic) with petitioners (sic) observation, but the reality
(sic) the price of real property anywhere in the country tremendously
increased. This is shown in the Real Estate Monitor of Econotic
Incorporated (copy attached with the memorandum of respondents). For
example real properties in Pasig in 1991 located at the Ortigas
Commercial Complex command (sic) a price of P42,000.00 per square
meter which price is supported by a case filed before this Court (civil
case no. 64506, Jesus Fajardo, et al. vs. Ortigas and Co.) for Recovery
(sic) of agents (sic) commission. The property subject of the sale which
was also located at the Ortigas Commercial Complex at Pasig, Metro
Manila was sold to a Taiwanese at P42,000.00 per square meter. It is
therefore not surprising that the assessment of real properties in Pasig
increased tremendously. Had petitioners first exhausted administrative
remedies they would have realized the fact that prices of real estate has
(sic) tremendously increased and would have known the reason/reasons
why." 8

In its Order dated 30 September 1994 denying the Motion for Reconsideration,
the court a quo ruled:

'This Court despite petitioners' exhaustive and thorough research and

discussion of the point in issue, is still inclined to sustain the view
that P.D. 921 was impliedly repealed by R.A. 7160. P.D. 921 to the mind
of this Court is an implementing law of P.D. 464, Sections 3, 6, 9, 12 and
13 of said P.D. provide how certain provisions of PD. 464 shall be
implemented. Since P.D. 464 was expressly repealed by R.A. 7160, P.D.
921 must necessarily be considered repealed, otherwise, what should
Sections 3, 6, 9, 12 and 13 of P.D. 921 implement? And, had the law
makers intended to have said P.D. 921 remain valid and enforceable they
would have provided so in R.A. 7160. Since there is none, P.D. 921 must
be considered repealed."

Re: The First Issue Repeal of P.D. 921 ?

To resolve the first issue, it is necessary to revisit the following provisions of law:
1. Section 15 of P.D. No. 464, promulgated on 20 May 1974, otherwise known as
the Real Property Tax Code:
"SECTION 15. Preparation of Schedule of Values. Before any general
revision of property assessments is made, asprovided in this Code, there
shall be prepared for the province or city a Schedule of Market Value for
the different classes of real property therein situated in such form and
detail as shall be prescribed by the Secretary of Finance.
"Said schedule, together with an abstract of the data (on) which it is
based, shall be submitted to the Secretary of Finance for review not later
than the thirty-first day of December immediately preceding the calendar
year the general revision of assessments shall be undertaken. The
Secretary of Finance shall have ninety days from the date of receipt
within which to review said schedule to determine whether it conforms
with the provisions of this Code."

2. Subsequently, on 12 April 1976, P.D. 921 was promulgated, which in Section 9

thereof, states:

"SECTION 9. Preparation of Schedule of Values for Real Property within

the Metropolitan Area. The Schedule of Values that will serve as the
basis for the appraisal and assessment for taxation purposes of real
properties located within the Metropolitan Area shall be prepared jointly
by the City Assessors of the Districts created under Section one hereof,
with the City Assessor of Manila acting as Chairman, in accordance with
the pertinent provisions of Presidential Decree No. 464, as amended,
otherwise known as the Real Property Tax Code, and the implementing
rules and regulations thereof issued by the Secretary of Finance."

3. Section One of P.D. 921, referred to above, provides:

"SECTION 1. Division of Metropolitan Manila into Local Treasury and
Assessment Districts. For purposes of effective fiscal management,
Metropolitan Manila is hereby divided into the following Local Treasury
and Assessment Districts:
First District Manila
Second District Quezon City, Pasig, Marikina,
Mandaluyong and San Juan
Third District Caloocan City, Malabon, Navotas
and Valenzuela
Fourth District Pasay City, Makati, Paranaque,
Muntinlupa, Las Pinas, Pateros and
Taguig
"Manila, Quezon City, Caloocan City and Pasay City shall be the
respective Centers of the aforesaid Treasury and Assessment Districts."

4. On 01 January 1992, Republic Act No. 7160, otherwise known as The Local
Government Code of 1991, took effect, Section 212 of said law is quoted as
follows:

"SECTION 212. Preparation of Schedule of Fair Market Values.

Before any general revision of property assessment is made pursuant to
the provisions of this Title, there shall be prepared a schedule of fair
market values by the provincial. city and the municipal assessors of the
municipalities within the Metropolitan Manila Area for the different
classes of real property situated in their respective local government
units for enactment by ordinance of the sanggunian concerned. The
schedule of fair market values shall be published in a newspaper of
general circulation in the province, city or municipality concerned, or in
the absence thereof, shall be posted in the provincial capitol
city or municipal hall and in two other conspicuous public place
therein."

LexLib

5. The repealing clause of R.A. 7160 found in Section 534 thereof is hereby
reproduced as follows:
"SECTION 534. Repealing Clause.
(a) . . .
(b) . . .
(c) . . .; and Presidential Decree Nos. 381, 436, 464, 477, 626, 632,752,
and 1136 are hereby repealed and rendered of no force and effect.

xxx xxx xxx

(f) All general and special laws, acts, city charter, decrees, executive
orders, proclamations and administrative regulations, or part or parts
thereof which are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly." (Emphasis supplied)

It is obvious from the above provisions of R.A. 7160, specifically Sec. 534,
that P.D. 921 was NOT EXPRESSLY repealed by said statute. Thus, the question
is: Was P.D. 921 IMPLIEDLY repealed by R.A. 7160?

Petitioners contend that, contrary to the aforequoted Decision of the lower court.
"whether the assessment is made before or after the effectivity of R.A. 7160, the
observance of, and compliance with, the explicit requirement of P.D. 921 is strict
and mandatory either" because P.D. 921 was not impliedly repealed by R.A.
7160 and is therefore still the applicable statute, or because the Supreme Court,
in three related cases 10 promulgated on 16 December 1993 after the Local
Government Code of 1991 already took effect ruled that a schedule of market
values

and

the

corresponding

as

assessments

based

thereon

"prepared solely by the city assessor . . . failed to comply with the explicit
requirement (of collegial and joint action by all the assessors in the Metropolitan
Manila area under P.D. 921) . . . and are on that account illegal and void."
On the other hand, respondents aver that Section 9 of P.D. 921 and Section 212
of R.A. 7160 are clearly and unequivocally incompatible because they dwell on
the same subject matter, namely, the preparation of a schedule of values for real
property within the Metropolitan Manila Area. Under P.D. 921, the schedule shall
be prepared jointly by the city assessors of the District, while, under R.A. 7160,
such schedule shall be prepared "by the provincial, city and municipal assessors
of the municipalities within the Metropolitan Manila area . . . ". Furthermore, they
claim that "Section 9 (of P.D. 921) merely supplement(ed) Section 15 of P.D.
464 in so far as the preparation of the schedule of values in Metro Manila (is
concerned)." Thus, "with the express repeal of P.D. 464 . . . P.D. 921 . . . can not
therefore exist independently on its own." They also argue that although the
aforecited Supreme Court decision was promulgated after R.A. 7160 took effect,
"the assessment of the Municipal Assessors in those three (3) cited cases were
assessed in 1990 prior to the effectivity of the Code." Hence, the doctrine in said
cases cannot be applied to those prepared in 1994 under R.A. 7160.
We rule for petitioners.
R.A. 7160 has a repealing provision (Section 534) and, if the intention of the
legislature was to abrogate P.D. 921, it would have included it in such repealing
clause, as it did in expressly rendering of no force and effect several other

presidential decrees. Hence, any repeal or modification of P.D. 921 can only be
possible under par. (f) of said Section 534, as follows:
"(f) All general and special laws, acts, city charter, decrees, executive
orders, proclamations and administrative regulations, part or parts
thereof which are inconsistent with any of the provisions of the Code are
hereby repealed or modified accordingly."

The foregoing partakes of the nature of a general repealing provision. It is a basic

rule of statutory construction that repeals by implication are not favored. An
implied repeal will not be allowed unless it is convincingly and unambiguously
demonstrated that the two laws are so clearly repugnant and patently inconsistent
that they cannot co-exist. This is based on the rationale that the will of the
legislature cannot be overturned by the judicial function of construction and
interpretation. Courts cannot take the place of Congress in repealing statutes.
Their function is to try to harmonize, as much as possible, seeming conflicts in
the laws and resolve doubts in favor of their validity and co-existence.
In Villegas v. Subido 11 the issue raised before the Court was whether the
Decentralization Act had the effect of repealing what was specifically ordained in
the Charter of the City of Manila. Under the Charter, it was provided in its Section
22 that "The President of the Philippines with the consent of the Commission on
Appointments shall appoint . . . the City Treasurer and his Assistant." Under the
Decentralization Act, it was provided that "All other employees, except teachers
paid out of provincial, city or municipal general funds and other local funds
shall . . . be appointed by the provincial governor, city or municipal mayor upon
recommendation of the head of office concerned."
The Court, in holding that there was no implied repeal in this case, 12 said:
. . . It has been the constant holding of this Court that repeals by
implication are not favored and will not be so declared unless it be
manifest that the legislature so intended. Such a doctrine goes as far
back as United States v. Reyes, a 1908 decision (10 Phil. 423. Cf. U.S. v.
Academia, 10 Phil. 431 [1908]). It is necessary then before such a repeal

is deemed to exist that it be shown that the statutes or statutory

provisions deal with the same subject matter and that the latter be
inconsistent with the former. (Cf. Calderon V. Provincia del Santisimo
Rosano, 28 Phil. 164 [1914]). There must be a showing of repugnancy
clear and convincing in character. The language used in the latter statute
must be such as to render it irreconcilable with what has been formerly
enacted. An inconsistency that falls short of that standard does not
suffice. What is needed is a manifest indication of the legislative purpose
to repeal. [Citing numerous cases]
"More specifically, a subsequent statute, general in character as to its
terms and application, is not to be construed as repealing a special or
specific enactment. unless the legislative purpose to do so is manifest.
This is so even if the provisions of the latter are sufficiently
comprehensive to include what was set forth in the special act. This
principle has likewise been consistently applied in decisions of this Court
from Manila Railroad Co. v. Rafferty (40 Phil. 224), decided as far back
as 1919. A citation from an opinion of Justice Tuason is illuminating.
Thus: From another angle the presumption against repeal is stronger. A
special law is not regarded as having been amended or repealed by a
general law unless the intent to repeal or alter is manifest. Generalia
specialibus non derogant. And this is true although the terms of the
general act are broad enough to include the matter in the special statute.
. . . At any rate, in the event harmony between provisions of this type in
the same law or in two laws is impossible, the specific provision controls
unless the statute, considered in its entirety, indicates a contrary
intention upon the part of the legislature. . . . A general law is one which
embraces a class of subjects or places and does not omit any subject or
place naturally belonging to such class, while a special act is one which
relates to particular persons or things of a class.' (Citing Valera v.
Tuason, 80 Phil. 823, 827-828 [1948])"

In the relatively recent case of Mecano vs. Commission on Audit, 13 the Court en
banc had occasion to reiterate and to reinforce the rule against implied repeals,
as follows:
"Repeal by implication proceeds on the premise that where a statute of
later date clearly reveals an intention on the part of the legislature to
abrogate a prior act on the subject, that intention must be given effect.
Hence, before there can be a repeal, there must be a clear showing on
the part of the law maker that the intent in enacting the new law was to
abrogate the old one. The intention to repeal must be clear and manifest;
otherwise, at least, as a general rule, the later act is to be construed as a
continuation of, and not a substitute for, the first act and will continue so
far as the two acts are the same from the time of the first enactment.
"There are two categories of repeal by implication. The first is where
provisions in the two acts on the same subject matter are in an
irreconcilable conflict, the later act to the extent of the conflict constitutes
an implied repeal of the earlier one. The second is if the later act covers
the whole subject of the earlier one and is clearly intended as a
substitute, it will operate to repeal the earlier law.
"Implied repeal by irreconcilable inconsistency take place when the two
statutes cover the same subject matter; they are so clearly inconsistent
and incompatible with each other that they cannot be reconciled or
harmonized; and both cannot be given effect, that is that one law cannot
be enforced without nullifying the other."

In the same vein, but in different words, this Court ruled in Gordon vs. Veridiano:
14
"Courts of justice, when confronted with apparently conflicting statutes,
should endeavor to reconcile the same instead of declaring outright the
invalidity of one as against the other. Such alacrity should be avoided.
The wise policy is for the judge to harmonize them if this is possible,
bearing in mind that they are equally the handiwork of the same

legislature, and so give effect to both while at the same time also
according due respect to a coordinate department of the government. It
is this policy the Court will apply in arriving at the interpretation of the
laws above-cited and the conclusions that should follow therefrom."

In the instant case, and using the Courts' standard for implied repeal
in Mecano, we compared the two laws.
PRESIDENTIAL DECREE NO. 921 was promulgated on 12 April 1976, with the
aim of, inter alia, evolving "a progressive revenue raising program that will not
unduly burden the tax payers. . ."

15

in Metropolitan Manila. Hence, it provided for

the "administration of local financial services in Metropolitan Manila" only, and for
this purpose, divided the area into four Local Treasury and Assessment Districts,
regulated the duties and functions of the treasurers and assessors in the cities
and municipalities in said area and spelled out the process of assessing,
imposing and distributing the proceeds of real estate taxes therein.

Upon the other hand, Republic Act No. 7160, otherwise "known and cited as the
'Local Government Code of 1991'" 16 took effect on 01 January 1992.

17

It

declared "genuine and meaningful local autonomy" as a policy of the state. Such
policy was meant to decentralize government" powers, authority, responsibilities
and resources" from the national government to the local government units "to
enable them to attain their fullest development as self-reliant communities and
make them more effective partners in the attainment of national goals."

18

In the

formulation and implementation of policies and measures on local autonomy,

"(l)ocal government units may group themselves, consolidate or coordinate their
efforts, services, and resources for purposes commonly beneficial to them." 19
From the above, it is clear that the two laws are not co-extensive and mutually
inclusive in their scope and purpose. While R.A. 7160 covers almost all
governmental functions delegated to local government units all over the
country, P.D. 921 embraces only the Metropolitan Manila area and is limited to

the administration of financial services therein, especially the assessment and

collection of real estate (and some other local) taxes.
Coming down to specifics, Sec. 9 of P.D. 921 requires that the schedule of values
of real properties in the Metropolitan Manila area shall be prepared jointly by the
city assessors in the districts created therein; while Sec. 212 of R.A. 7160 states
that the schedule shall be prepared "by the provincial, city and municipal
assessors of the municipalities within the Metropolitan Manila Area for the
different classes of real property situated in their respective local government
units for enactment by ordinance of the sanggunian concerned. . . ."
It is obvious that harmony in these provisions is not only possible, but in fact
desirable, necessary and consistent with the legislative intent and policy. By
reading together and harmonizing these two provisions, we arrive at the following
steps in the preparation of the said schedule, as follows:
1. The assessor in each municipality or city in the Metropolitan Manila
area shall prepare his/her proposed schedule of values, in accordance
with Sec. 212, R.A. 7160.
2. Then, the Local Treasury and Assessment District shall meet, per
Sec. 9, P.D. 921. In the instant case, that district shall be composed of
the assessors in Quezon City, Pasig, Marikina, Mandaluyong and San
Juan, pursuant to Sec. 1 of said P.D. In this meeting, the different
assessors shall compare their individual assessments, discuss and
thereafter jointly agree and produce a schedule of values for their district,
taking into account the preamble of said P.D. that they should evolve "a
progressive revenue raising program that will not unduly burden the
taxpayers".
3. The schedule jointly agreed upon by the assessors shall then be
published in a newspaper of general circulation and submitted to the
sanggunian concerned for enactment by ordinance, per Sec. 212, R.A.
7160.

By this harmonization, both the preamble of P.D. 921 decreeing that the real
estate taxes shall "not unduly burden the taxpayer" and the "operative principle of
decentralization"

provided

under

Sec.

3, R.A.

7160 encouraging

local

government units to "consolidate or coordinate their efforts, services and

resources" shall be fulfilled. Indeed, the essence of joint local action for common
good so cherished in the Local Government Code finds concrete expression in
this harmonization.

LLphil

How about respondents' claim that. with the express repeal of P.D. 464, P.D.
921 being merely a "supplement" of said P.D. cannot "exist independently
on its own"? Quite the contrary is true. By harmonizing P.D. 921 with R.A. 7160,
we have just demonstrated that it can exist outside of P.D. 464, as a support,
supplement and extension of R.A. 7160, which for this purpose, has
replaced P.D. 464.
Since it is now clear that P.D. 921 is still good law, it is equally clear that this
Court's ruling in the Mathay/Javier/Puyat-Reyes cases (supra) is still the
prevailing and applicable doctrine. And, applying the said ruling in the present
case, it is likewise clear that the schedule of values prepared solely by the
respondent municipal assessor is illegal and void.
Re: The Second Issue Exhaustion of Administrative Remedies
We now come to the second issue. The provisions of Sections 226 and 252
of R.A. 7160, being material to this issue, are set forth below:
"SECTION 226. Local Board of Assessment Appeals. Any owner or
person having legal interest in the property who is not satisfied with the
action of the provincial, city or municipal assessor in the assessment of
his property may, within sixty (60) days from the date of receipt of the
written notice of assessment, appeal to the Board of Assessment
Appeals of the province or city by filing a petition under oath in the form
prescribed for the purpose, together with copies of the tax declarations
and such affidavits or documents submitted in support of the appeal.

"SECTION 252. Payment under Protest. (a) No protest shall be

entertained unless the taxpayer first pays the tax. There shall be
annotated on the tax receipts the words "paid under protest". The protest
in writing must be filed within thirty (30) days from payment of the tax to
the provincial, city treasurer or municipal treasurer, in the case of a
municipality within Metropolitan Manila Area, who shall decide the
protest within sixty (60) days from receipt.
(b) The tax or a portion thereof paid under protest shall be held in trust
by the treasurer concerned.
(c) In the event that the protest is finally decided in favor of the taxpayer,
the amount or portion of the tax protested shall be refunded to the
protestant, or applied as tax credit against his existing or future tax
liability.
(d) In the event that the protest is denied or upon the lapse of the sixtyday period pre-scribed in subparagraph (a), the taxpayer may avail of the
remedies as provided for in Chapter 3, Title Two, Book II of this Code."

Respondents argue that this case is premature because petitioners neither

appealed the questioned assessments on their properties to the Board of
Assessment Appeal, pursuant to Sec. 226 nor paid the taxes under protest, per
Sec. 252.
We do not agree. Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there is a well-settled
exception in cases where the controversy does not involve questions of fact but
only of law. 20In the present case, the parties, even during the proceedings in the
lower court on 11 April 1994, already agreed "that the issues in the petition are
legal" 21 , and thus, no evidence was presented in said court.
In laying down the powers of the Local Board of Assessment Appeals, R.A.
7160 provides in Sec. 229 (b) that "(t)he proceedings of the Board shall be
conducted solely for the purpose of ascertaining the facts . . .". It follows that
appeals to this Board may be fruitful only where questions of fact are involved.

Again, the protest contemplated under Sec. 252 of R.A. 7160 is needed where
there is a question as to the reasonableness of the amount assessed. Hence, if a
taxpayer disputes the reasonableness of an increase in a real estate tax
assessment, he is required to "first pay the tax" under protest. Otherwise, the city
or municipal treasurer will not act on his protest. In the case at bench however,
the petitioners are questioning the very authority and power of the assessor,
acting solely and independently, to impose the assessment and of the treasurer
to collect the tax. These are not questions merely of amounts of the increase in
the tax but attacks on the very validity of anyincrease.
Finally, it will be noted that in the consolidated cases of Mathay/Javier/PuyatReyes cited earlier, the Supreme Court referred the petitions (which similarly
questioned the schedules of market values prepared solely by the respective
assessors in the local government units concerned) to the Board of Assessment
Appeal, not for the latter to exercise its appellate jurisdiction, but rather to act only
as a fact-finding commission. Said the Court

22

thru Chief Justice Andres R.

Narvasa:
"On November 5, 1991, the Court issued a Resolution clarifying its
earlier one of May 16, 1991. It pointed out that the authority of the
Central Board of Assessment Appeals 'to take cognizance of the factual
issues raised in these two cases by virtue of the referral by this Court in
the exercise of its extraordinary or certiorari jurisdiction should not be
confused with its appellate jurisdiction over appealed assessment cases
under Section 36 of P.D. 464 otherwise known as the Real Property Tax
Code. The Board is not acting in its appellate jurisdiction in the instant
cases, but rather, it is acting as a Court-appointed fact-finding
commission to assist the Court in resolving the factual issues raised in
G.R. Nos. 97618 and 97760.'"

In other words. the Court gave due course to the petitions therein in spite of the
fact that the petitioners had not a priori,exhausted administrative remedies by
filing an appeal before said Board. Because there were factual issues raised in
the Mathay, et al. cases, the Supreme Court constituted the Central Board of

Assessment Appeals as a fact finding body to assist the Court in resolving said
factual issues. But in the instant proceedings, there are no such factual issues.
Therefore, there is no reason to require petitioners to exhaust the administrative
remedies provided in R.A. 7160. nor to mandate a referral by this Court to said
Board.
Re: The Third Issue Constitutionality of the Assessments
Having already definitively disposed of the case through the resolution of the
foregoing two issues, we find no more need to pass upon the third. It is axiomatic
that the constitutionality of a law, regulation, ordinance or act will not be resolved
by courts if the controversy can be, as in this case it has been, settled on other
grounds. In the recent case of Macasiano vs. National Housing Authority, 23 this
Court declared:

"It is a rule firmly entrenched in our jurisprudence that the

constitutionality of an act of the legislature will not be determined by the
courts unless that question is properly raised and presented in
appropriate cases and is necessary to a determination of the case, i.e.,
the issue of constitutionality must be the very lis mota presented. To
reiterate, the essential requisites for a successful judicial inquiry into the
constitutionality of a law are: (a) the existence of an actual case or
controversy involving a conflict of legal rights susceptible of judicial
determination, (b) the constitutional question must be raised by a proper
party, (c) the constitutional question must be raised at the earliest
opportunity, and (d) theresolution of the constitutional question must be
necessary to the decision of the case." (Emphasis supplied)

The aforequoted decision in Macasiano merely reiterated the ruling in Laurel

vs. Garcia, 24 where this Court held:
"The Court does not ordinarily pass upon constitutional questions unless
these questions are properly raised in appropriate cases and their
resolution is necessary for the determination of the case (People V. Vera.

65 Phil. 56 [1937]).The Court will not pass upon a constitutional question

although properly presented by the record if the case can be disposed of
on some other found such as the application of a statute or general
law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909],
Railroad

Commission

v.

Pullman

Co.,

312

U.S.

496

[1941])." 25 (Emphasis supplied)

In view of the foregoing ruling, the question may be asked: what happens to real
estate tax payments already made prior to it's promulgation and finality? Under
the law, 26 "the taxpayer may file a written claim for refund or credit for taxes and
interests . . .."
Finally, this Tribunal would be remiss in its duty as guardian of the judicial branch
if we let pass unnoticed the ease by which the respondent Judge consigned "to
the statutes' graveyard" a legislative enactment "together with the (three)
decisions of the Supreme Court" promulgated jointly and unanimously en banc.
An elementary regard for the sacredness of laws and the stability of judicial
doctrines laid down by superior authority should have constrained him to be more
circumspect in rendering his decision and to spell out carefully and precisely the
reasons for his decision to invalidate such acts, instead of imperiously decreeing
an implied repeal. He knows or should have known the legal precedents against
implied repeals. Respondent Judge, in his decision, did not even make an
attempt to try to reconcile or harmonize the laws involved. Instead, he just
unceremoniously swept them and this Court's decisions into the dustbin of
"judicial history." In his future acts and decisions, he is admonished to be more
judicious in setting aside established laws, doctrines and precedents.
WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE
the questioned Decision and Order of respondent Judge, DECLARING as null
and void the questioned Schedule of Market Values for properties in Pasig City
prepared by respondent Assessor, as well as the corresponding assessments
and real estate tax increases based thereon; and ENJOINING the respondent
Treasurer from collecting the real estate tax increases made on the basis of said
Schedule and assessments. No

|||

(Ty v. Trampe, G.R. No. 117577, December 01, 1995)

EN BANC
[G.R. No. L-31156. February 27, 1976.]
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,
INC., plaintiff-appellant, vs. MUNICIPALITY
OF
TANAUAN,
LEYTE, THE MUNICIPAL MAYOR, ET AL., defendants-appellees.
Sabido, Sabido & Associates for plaintiff-appellant.
Assistant Solicitor General Conrado
M. Reyes for defendants-appellees.

T . Limcaoco and Solicitor

Enrique

SYNOPSIS
Pepsi-Cola Bottling Company of the Philippines, Inc., filed a complaint with
preliminary injunction before the Court of First Instance of Leyte to declare
Section 2 of R.A. No. 2264, (known as the Local Autonomy Act) unconstitutional
as an undue delegation of the taxing authority and declare null and void
Municipal Ordinance No. 23, which levies and collects from soft drinks producers
and manufactures a tax of 1/16 of a centavo for every bottle of soft drinks corked,
and Municipal Ordinance No. 27 which levies and collects on soft drinks
produced or manufactured within the territorial jurisdiction a tax of one centavo on
each gallon of volume capacity. The trial court dismissed the complaint and
upheld the constitutionality of Sec. 2 of R.A. No. 2264 and declared Municipal
Ordinances Nos. 27 valid and constitutional. Appealed to the Court of Appeals,
the case was certified to the Supreme Court as involving pure question of law.
The Supreme Court upheld the validity of the delegation to Municipal Corporation
or authority to tax and likewise the validity of Municipal Ordinance No. 27, which
repealed Municipal Ordinance No. 23.

SYLLABUS
1. TAXATION; NATURE; NON-DELEGATION OF POWER, EXCEPTION. The
power of taxation is an essential and inherent attribute of sovereignty, belonging
as a matter of right to every independent government, without being expressly
conferred by the people. It is a power that is purely legislative and which the
central legislative body cannot delegate either to the executive or judicial
department of government without infringing upon the theory of separation of
powers. The exception, however, lies in the case of municipal corporations, to
which, said theory does not apply. Legislative powers may be delegated to local
governments in respect of matters of local concern. This is sanctioned by
immemorial. By necessary implication, the legislative power to create political
corporations for purpose of local self-government carries with it the power to
confer on such local government agencies the power to tax.
2. ID.; ID.; ID.; SCOPE OF LOCAL GOVERNMENT'S POWER TO TAX. The
taxing authority conferred on local governments under Section 2, Republic Act
No. 2264, is broad enough as to extend to almost "everything, excepting those
which are mentioned therein." As long as the tax levied under the authority of a
city or municipal ordinance is not within the exceptions and limitations in the law,
the same comes within the ambit of the general rule, pursuant to the rules
of expresio unius est exclusio alterius, and exceptio firmat regulum in casibus non
excepti. Municipalities are empowered to impose not only municipal license taxes
upon persons engaged in any business or occupation but also to levy for public
purposes, just and uniform taxes.
3. ID.; ID.; ID.; LIMITATION. Municipalities and municipal districts are
prohibited to impose "any percentage tax on sales or other in any form based
thereon nor impose taxes on articles subject to specific tax, except gasoline,
under the provisions of the National Internal Revenue Code." For purposes of this
particular limitation, a municipal ordinance which prescribes a set of radio
between the amount of the tax and the volume of sales of the taxpayer imposes a
sales tax and is null and void for being outside the power of the municipality to
enact.

4. ID.; ID.; ID.; DELEGATION OF POWER TO TAX UNDER NEW

CONSTITUTION. Under the New Constitution, local governments are granted
autonomous authority to create their own sources of revenue and to levy taxes.
Section 5, Article XI Provides: "Each local government unit shall have the power
to create its sources of revenue and to levy taxes, subject to such limitations as
may be provided by law." Withal, it cannot be said that Section 2 of Republic Act
No. 2264 emanated from beyond the sphere of the legislative power to enact and
vest in local governments the power of local taxation.
5. ID.; ID.; ID.; VALIDITY THEREOF. The plenary nature of the delegated
power of local governments under Section 2, ofR.A. No. 2264 would not suffice to
invalidate the law as confiscatory and oppressive. In delegating the authority, the
State is not limited to the measure of that which is exercised by itself. When it is
said that the taxing power may be delegated to municipalities and the like, it is
meant that there may be delegated such measure of power to impose and collect
taxes the legislature may deem expedient. Thus, municipalities may be permitted
to tax subjects which for reasons of public policy the State has not deemed wise
to tax for more general purposes.
6. ID.; REQUISITES FOR LAWFUL EXERCISE OF TAXING POWER.
Constitutional injunction against deprivation of property without due process of
law may not be passed over under the guise of the taxing power, except when the
taking of the property is in the lawful exercise of the taxing power, as when, (1)
the tax is for a public purpose; (2) the rule on uniformity of taxation observed; (3)
either the person or property taxed is within the jurisdiction of the government
levying the tax; and (4) in the assessment and collection of certain kinds of taxes,
notice and opportunity for hearing are provided.
7. ID.; ID.; INSTANCES WHERE DUE PROCESS IS VIOLATED. Due process
is usually violated where the tax imposed is for a private as distinguished from
the public purposes; a tax a imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods are used in assessing
and collecting taxes. But, a tax does not violate the due process clause, as
applied to a particular taxpayer, although the purpose of the tax will result in an
injury rather than a benefit to such taxpayer. Due process does not require that
the property subject to the tax or the amount of tax to be raised should be

determined by judicial inquiry, and a notice and hearing as to the amount of tax
and the manner in which it shall be apportioned are generally not necessary to
due process of law.
8. ID.; DOUBLE TAXATION; GENERALLY NOT FORBIDDEN. The delegated
authority under Section 2 of the Local Autonomy Act cannot be declared
unconstitutional on the theory of double taxation. It must be observed that the
delegating authority specifies the limitations and enumerates the taxes over local
taxation may not be exercised. The reason is that the State has exclusively
reversed the same for its own prerogative. Moreover, double taxation, in general,
is not forbidden by the fundamental law, since the injunction against double
taxation found in the Constitution of the United States and some states of the
Union has not been adopted as part thereof.
9. ID.; ID.; ID.; EXCEPTION. Double taxation becomes obnoxious only where
the taxpayer is taxed twice for the benefit of the same governmental entity or by
the same jurisdiction for the same purpose, but not in a case where one tax is
imposed by the State and the other by the city or municipality.
10. ID.; ID.; ID.; INSTANT CASE. Where, as in the case at bar, the municipality
of Tanauan enacted Ordinance No. 27 imposing a tax of one centavo on each
gallon of volume capacity while in the previous Ordinance No. 23, it was 1/16 of a
centavo for every bottle corked, it is clear that the intention of the municipal
council was to substitute Ordinance No. 27 to that of Ordinance No. 23, repealing
the latter.
11. ID.; TAX LEVIED ON PRODUCE, NOT PERCENTAGE TAX. The
imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity" on all soft drinks produced or manufactured under
Ordinance No. 27 does not partake of a nature of a percentage tax on sales, or
other taxes in any form based thereon. The tax is levied on the produce (whether
sold or not) and not on the sales. The volume capacity of the taxpayer's
production of soft drinks is considered solely for purposes of determining the tax
rate on the products, but there is no set ratio between the volume of sales and
the amount of tax.
12. ID.; ID.; ID.; MUNICIPALITY ALLOWED TO INCREASE TAX AS LONG AS
AMOUNT IS REASONABLE. The tax of one centavo (P0.01) on each gallon

(128 fluid ounces, U.S.) of volume capacity of all soft drinks, produced or
manufactured or an equivalent of 1-1/2 centavos per case, cannot be considered
unjust and unfair. An increase in the tax alone would not support the claim that
the tax is oppressive, unjust and confiscatory. Municipal corporations are allowed
much discretion in determining the rates of impossible taxes. This is in line with
the constitutional policy of according the widest possible autonomy to local
government in matters of taxation, an aspect that is given expression in the Local
Tax Code (PD No. 231, July 1, 1973).
13. ID.; SPECIFIC TAXES; ARTICLES SUBJECT TO SPECIFIC TAX. Specific
taxes are those imposed on specified articles, such as distilled spirits, wines,
fermented liquors, products of tobacco other than cigars and cigarettes, matches,
firecrackers, manufactured oils and other fuels, coal bunker fuel oil
cinematographic films, playing cards, saccharine, opium and other habit forming
drugs.
FERNANDO, J., concurring:
1. CONSTITUTIONAL
LAW;
TAXATION;
POWER
OF
MUNICIPAL
CORPORATION TO TAX UNDER THE NEW CONSTITUTION. The present
Constitution is quite explicit as to the power of taxation vested in local and
municipal corporations. It is therein specifically provided: "Each local government
unit shall have the power to create its own sources to revenue and to levy taxes,
subject to such limitations as may be provided by law."
2. ID.; ID.; LIMITATION ON POWER TO TAX UNDER THE 1935 Constitution.
The only limitation on the authority to tax under the 1935 Constitution was that
while the President of the Philippines was vested with the power of control over
all executive departments, bureaus, or offices, he could only "exercise general
supervision over all local governments as may be provided by law." As far as
legislative power over local government was concerned, no restriction whatsoever
was placed in the Congress of the Philippines. It would appear therefore that the
extent of the taxing power was solely for the legislative body to decide.
3. ID.; ID.; MUNICIPAL CORPORATION'S POWER TO TAX MUST BE CLEARLY
SHOWN. Although the scope of municipal taxing power had been enlarged by

subsequent legislations, the Court, in Golden Ribbon Lumber Co. vs. City of
Butuan, L-18534, December 24, 1964, reaffirmed the traditional concept, thus:
"The rule is well-settled that municipal corporations, unlike sovereign states, are
clothed with no power of taxation; that its charter or a statute must clearly show
an intent to confer that power of the municipal corporation cannot assume and
exercise it, and that any such power granted must be construed strictly, any doubt
or ambiguity arising from the terms of the grant to be resolved against the
municipality."
4. ID.; ID.; DOUBLE TAXATION. The objection to the taxation as double may
be laid down on one side. The 14th Amendment (the due process clause) no
more forbids double taxation than it does doubling the amount of a tax, short of
confiscation or proceedings unconstitutional on other grounds.
DECISION
MARTIN, J :
p

This is an appeal from the decision of the Court of First Instance of Leyte in its
Civil Case No. 3294, which was certified to Us by the Court of Appeals on
October 6, 1969, as involving only pure questions of law, challenging the power
of taxation delegated to municipalities under the Local Autonomy Act (Republic
Act No. 2264, as amended, June 19, 1959).
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the
Philippines, Inc., commenced a complaint with preliminary injunction before the
Court of First Instance of Leyte for that Court to declare Section 2 of Republic Act
No. 2264, 1 otherwise known as the Local Autonomy Act, unconstitutional as an
undue delegation of taxing authority as well as to declare Ordinances Nos. 23
and 27, series of 1962, of the Municipality of Tanauan, Leyte, null and void.
aisa dc

On July 23, 1963, the parties entered into a Stipulation of Facts, the material
portions of which state that, first, both Ordinances Nos. 23 and 27 embrace or
cover the same subject matter and the production tax rates imposed therein are
practically the same, and second that on January 17, 1963, the acting Municipal

Treasurer of Tanauan, Leyte, as per his letter addressed to the Manager of the
Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by
the latter of the provisions of said Ordinance No. 27, series of 1962.
LLpr

Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on

September 25, 1962, levies and collects "from soft drinks producers and
manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft
drink corked." 2 For the purpose of computing the taxes due, the person, firm,
company or corporation producing soft drinks shall submit to the Municipal
Treasurer a monthly report of the total number of bottles produced and corked
during the month. 3
On the other hand, Municipal Ordinance No. 27, which was approved on October
28, 1962, levies and collects "on soft drinks produced or manufactured within the
territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each
gallon (128 fluid ounces, U.S.) of volume capacity." 4 For the purpose of
computing the taxes due, the person, firm, company, partnership, corporation or
plant producing soft drinks shall submit to the Municipal Treasurer a monthly
report of the total number of gallons produced or manufactured during the
month. 5
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as
"municipal production tax."
On October 7, 1963, the Court of First Instance of Leyte rendered judgment
"dismissing the complaint and upholding the constitutionality of [Section
2, Republic Act No. 2264]; declaring Ordinances Nos. 23 and 27 valid, legal and
constitutional; ordering the plaintiff to pay the taxes due under the oft-said
Ordinances; and to pay the costs."
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the
Court of Appeals, which, in turn, elevated the case to Us pursuant to Section 31
of the Judiciary Act of 1948, as amended.
There are three capital questions raised in this appeal:
1. Is Section 2, Republic Act No. 2264 an undue delegation of power,
confiscatory and oppressive?

2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose

percentage or specific taxes?
3. Are Ordinances Nos. 23 and 27 unjust and unfair?

1. The power of taxation is an essential and inherent attribute of sovereignty,

belonging as a matter of right to every independent government, without being
expressly conferred by the people. 6 It is a power that is purely legislative and
which the central legislative body cannot delegate either to the executive or
judicial department of the government without infringing upon the theory of
separation of powers. The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply. Legislative powers may be
delegated to local governments in respect of matters of local concern. 7 This is
sanctioned by immemorial practice. 8 By necessary implication, the legislative
power to create political corporations for purposes of local self-government
carries with it the power to confer on such local governmental agencies the power
to tax. 9 Under the New Constitution, local governments are granted the
autonomous authority to create their own sources of revenue and to levy taxes.
Section 5, Article XI provides: "Each local government unit shall have the power
to create its sources of revenue and to levy taxes, subject to such limitations as
may be provided by law." Withal, it cannot be said that Section 2 of Republic Act
No. 2264 emanated from beyond the sphere of the legislative power to enact and
vest in local governments the power of local taxation.
The plenary nature of the taxing power thus delegated, contrary to plaintiffappellant's pretense, would not suffice to invalidate the said law as confiscatory
and oppressive. In delegating the authority, the State is not limited to the exact
measure of that which is exercised by itself. When it is said that the taxing power
may be delegated to municipalities and the like, it is meant that there may be
delegated such measure of power to impose and collect taxes as the legislature
may deem expedient. Thus, municipalities may be permitted to tax subjects
which for reasons of public policy the State has not deemed wise to tax for more
general purposes. 10 This is not to say though that the constitutional injunction
against deprivation of property without due process of law may be passed over
under the guise of the taxing power, except when the taking of the property is in
the lawful exercise of the taxing power, as when (1) the tax is for a public

purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or
property taxed is within the jurisdiction of the government levying the tax; and (4)
in the assessment and collection of certain kinds of taxes notice and opportunity
for hearing are provided. 11 Due process is usually violated where the tax
imposed is for a private as distinguished from a public purpose; a tax is imposed
on property outside the State, i.e., extra-territorial taxation; and arbitrary or
oppressive methods are used in assessing and collecting taxes. But, a tax does
not violate the due process clause, as applied to a particular taxpayer, although
the purpose of the tax will result in an injury rather than a benefit to such
taxpayer. Due process does not require that the property subject to the tax or the
amount of tax to be raised should be determined by judicial inquiry, and a notice
and hearing as to the amount of the tax and the manner in which it shall be
apportioned are generally not necessary to due process of law. 12
There is no validity to the assertion that the delegated authority can be declared
unconstitutional on the theory of double taxation. It must be observed that the
delegating authority specifies the limitations and enumerates the taxes over
which local taxation may not be exercised. 13 The reason is that the State has
exclusively reserved the same for its own prerogative. Moreover, double taxation,
in general, is not forbidden by our fundamental law, since We have not adopted
as part thereof the injunction against double taxation found in the Constitution of
the United States and some states of the Union. 14 Double taxation becomes
obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity 15 or by the same jurisdiction for the same purpose, 16 but not
in a case where one tax is imposed by the State and the other by the city or
municipality. 17
2. The plaintiff-appellant submits that Ordinance Nos. 23 and 27 constitute
double taxation, because these two ordinances cover the same subject matter
and impose practically the same tax rate. The thesis proceeds from its
assumption that both ordinances are valid and legally enforceable. This is not so.
As earlier quoted, Ordinance No. 23, which was approved on September 25,
1962, levies or collects from soft drinks producers or manufacturers a tax of onesixteen (1/16) of a centavo for every bottle corked, irrespective of the volume
contents of the bottle used. When it was discovered that the producer or
manufacturer could increase the volume contents of the bottle and still pay the

same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved
on October 28, 1962, imposing a tax of one centavo (P0.01) on each gallon (128
fluid ounces, U.S.) of volume capacity. The difference between the two
ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance
No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is
one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity.
The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27
is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23,
and operates as a repeal of the latter, even without words to that
effect. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only
seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts
confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought to
compel compliance by the plaintiff-appellant of the provisions of said Ordinance
No. 27, series of 1962. The aforementioned admission shows that only
Ordinance No. 27, series of 1962 is being enforced by defendants-appellees.
Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief
"that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No.
23 as the provisions of the latter are inconsistent with the provisions of the
former."
That brings Us to the question of whether the remaining Ordinance No. 27
imposes a percentage or a specific tax. Undoubtedly, the taxing authority
conferred on local governments under Section 2, Republic Act No. 2264, is broad
enough as to extend to almost "everything, excepting those which are mentioned
therein." As long as the tax levied under the authority of a city or municipal
ordinance is not within the exceptions and limitations in the law, the same comes
within the ambit of the general rule, pursuant to the rules of expresio unius est
exclusio alterius, and exceptio firmat regulum in casibus non excepti. 19 The
limitation applies, particularly, to the prohibition against municipalities and
municipal districts to impose "any percentage tax on sales or other taxes in any
form based thereon nor impose taxes on articles subject to specific tax, except
gasoline, under the provisions of the National Internal Revenue Code." For
purposes of this particular limitation, a municipal ordinance which prescribes a
set ratio between the amount of the tax and the volume of sales of the taxpayer

imposes a sales tax and is null and void for being outside the power of the
municipality to enact. 20 But, the imposition of "a tax of one centavo (P0.01) on
each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks
produced or manufactured under Ordinance No. 27 does not partake of the
nature of a percentage tax on sales, or other taxes in any form based thereon.
The tax is levied on the produce (whether sold or not) and not on the sales. The
volume capacity of the taxpayers production of soft drinks is considered solely for
purposes of determining the tax rate on the products, but there is no set ratio
between the volume of sales and the amount of the tax. 21
Nor can the tax levied be treated as a specific tax. Specific taxes are those
imposed on specified articles, such as distilled spirits, wines, fermented liquors,
products of tobacco other than cigars and cigarettes, matches, firecrackers,
manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil,
cinematographic films, playing cards, saccharine, opium and other habit-forming
drugs. 22 Soft drink is not one of those specified.
cdphil

3. The tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity on all soft drinks, produced or manufactured, or an equivalent of
1-1/2 centavos per case, 23 cannot be considered unjust and unfair. 24 An increase
in the tax alone would not support the claim that the tax is oppressive, unjust and
confiscatory. Municipal corporations are allowed much discretion in determining
the rates of imposable taxes. 25 This is in line with the constitutional policy of
according the widest possible autonomy to local governments in matters of local
taxation, an aspect that is given expression in the Local Tax Code (PD No. 231,
July 1, 1973). 26 Unless the amount is so excessive as to be prohibitive, courts
will go slow in writing off an ordinance as unreasonable. 27 Reluctance should not
deter compliance with an ordinance such as Ordinance No. 27 if the purpose of
the law to further strengthen local autonomy were to be realized. 28
Finally, the municipal license tax of P1,000.00 per corking machine with five but
not more than ten crowners or P2,000.00 with ten but not more than twenty
crowners imposed on manufacturers, producers, importers and dealers of soft
drinks and/or mineral waters under Ordinance No. 54, series of 1964, as
amended by Ordinance No. 41, series of 1968, of defendant
Municipality, 29 appears not to affect the resolution of the validity of Ordinance No.

27. Municipalities are empowered to impose, not only municipal license taxes
upon persons engaged in any business or occupation but also to levy for public
purposes, just and uniform taxes. The ordinance in question (Ordinance No. 27)
comes within the second power of a municipality.
ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264,
otherwise known as the Local Autonomy Act, as amended, is hereby upheld and
Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of 1962,
repealing Municipal Ordinance No. 23, same series, is hereby declared of valid
and legal effect. Costs against petitioner-appellant.
cdta

SO ORDERED.
|||

(Pepsi-Cola Bottling Co. of the Philippines, Inc. v. Municipality of Tanauan, G.R.

No. L-31156, February 27, 1976)

FIRST DIVISION
[G.R. No. 156252. June 27, 2006.]
COCA-COLA

BOTTLERS

PHILIPPINES,

INC., petitioner, vs.

CITY OF MANILA, LIBERTY M. TOLEDO City Treasurer and

JOSEPH SANTIAGO Chief, Licensing Division, respondents.

DECISION

CHICO-NAZARIO, J :
p

Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules
of Civil Procedure, assailing the Order 1 of the Regional Trial Court (RTC) of
Manila, Branch 21, dated 8 May 2002, dismissing petitioner's Petition for
Injunction, and the Order 2 dated 5 December 2002, denying petitioner's Motion
for Reconsideration.

Petitioner Coca-Cola Bottlers Philippines, Inc. is a corporation engaged in the

business of manufacturing and selling beverages and maintains a sales office
located in the City of Manila.
On 25 February 2000, the City Mayor of Manila approved Tax Ordinance No.
7988, otherwise known as "Revised Revenue Code of the City of Manila"
repealing Tax Ordinance No. 7794 entitled, "Revenue Code of the City of Manila."
Tax Ordinance No. 7988 amended certain sections of Tax Ordinance No. 7794 by
increasing the tax rates applicable to certain establishments operating within the
territorial jurisdiction of the City of Manila, including herein petitioner.
Aggrieved by said tax ordinance, petitioner filed a Petition 3 before the
Department of Justice (DOJ), against the City of Manila and its Sangguniang
Panlungsod,

invoking Section 187 4 of The Local Government Code of

1991 (Republic Act No. 7160). Said Petition questions the constitutionality or
legality of Section 21 of Tax Ordinance No. 7988. According to petitioner:

STIEHc

Section 21 of the Old Revenue Code of the City of Manila (Ordinance

No. 7794, as amended) was reproduced verbatim as Section 21 under
the new Ordinance except for the last paragraph thereof which reads:
"PROVIDED, that all registered businesses in the City of Manila that are
already paying the aforementioned tax shall be exempted from payment
thereof", which was deleted; that said deletion would, in effect, impose
additional business tax on businesses, including herein petitioner, that
are already subject to business tax under the other sections, specifically
Sec. 14, of the New Revenue Code of the City of Manila, which
imposition, petitioner claims, "is beyond or exceeds the limitation on the
taxing power of the City of Manila under Sec. 143 (h) of the LGC of
1991; and that deletion is a palpable and manifest violation ofThe Local
Government Code of 1991, and the clear mandate of Article X, Sec. 5 of
the 1987 Constitution, hence Section 21 is "illegal and unconstitutional."

On 17 August 2000, then DOJ Secretary Artemio G. Tuquero issued a Resolution

declaring Tax Ordinance No. 7988 null and void and without legal effect, the
pertinent portions of which read:
After a judicious scrutiny of the records of this case, in the light of the
pertinent provisions of The Local Government Code of 1991, this
Department finds for the petitioner.
The Local Government Code of 1991 provides:
"Section 188. Publication of Tax Ordinances and Revenue
Measures. Within ten (10) days after their approval, certified
true copies of all provincial, city and municipal tax ordinances or
revenue measures shall be published in full for three (3)
consecutive days in a newspaper of local circulation; Provided,
however, that in provinces, cities, and municipalities where there
are no newspapers or local circulations the same may be posted
in at least two (2) conspicuous and publicly accessible
places." (R.A. No. 7160) (stress supplied)
Upon the other hand, the Rules and Regulations Implementing the Local
Government Code of 1991, insofar as pertinent, mandates:
"Art. 277. Publication of Tax Ordinances and Revenue Measures.
(a) within ten (10) days after their approval, certified true copies
of all provincial, city and municipal tax ordinances or revenue
measures shall be published in full for three (3) consecutive days
in a newspaper of local circulation provided that in provinces,
cities and municipalities where there are no newspapers of local
circulation, the same may be posted in at least two (2)
conspicuous and publicly accessible places.
If the tax ordinances or revenue measure contains penal
provisions as authorized under Art. 279 of this Rule, the gist of
such tax ordinance or revenue measure shall be published in a
newspaper of general circulation within the province, posting of

such ordinance or measure shall be made in accessible and

conspicuous public places in all municipalities and cities of the
province to which the sanggunian enacting the ordinance or
revenue measure belongs.
xxx xxx xxx."
(emphasis ours)
It is clear from the above-quoted provisions of R.A. No. 7160 and its
implementing

rules

that

the

requirement

of

publication

is MANDATORY and leaves no choice. The use of the word "shall" in

both provisions is imperative, operating to impose a duty that may be
enforced (Soco v. Militante, 123 SCRA 160, 167; Modern Coach Corp. v.
Faver 173 SE 2d 497, 499).
Its essence is simply to inform the people and the entities who may likely
be affected, of the existence of the tax measure. It bears emphasis, that,
strict observance of the said procedural requirement is the only
safeguard against any unjust and unreasonable exercise of the taxing
powers by ensuring that the taxpayers are notified through publication of
the existence of the measure, and are therefore able to voice out their
views or objections to the said measure. For, after all, taxes are
obligatory exactions or enforced contributions corollary to taking of
property.
xxx xxx xxx
In the case at bar, respondents, by its failure to file their comments and
present documentary evidence to show that the mandatory requirement
of law on publication, among other things, has been met, may be
deemed to have waived its right to controvert or dispute the documentary
evidence submitted by petitioner which indubitably show that subject tax
ordinance was published only once, i.e., on the May 22, 2000 issue of
the Philippine Post. Clearly, therefore, herein respondents failed to

satisfy the requirement that said ordinance shall be published for three
(3) consecutive days as required by law.
xxx xxx xxx
In view of the foregoing, we find it unnecessary to pass upon the other
issues raised by the petitioner.
WHEREFORE, premises considered, Tax Ordinance No. 7988 of the
City of Manila is hereby declared NULL and VOID and WITHOUT
LEGAL EFFECT for having been enacted in contravention of the
provisions of The Local Government Code of 1991 and its implementing
rules and regulations. 5

The City of Manila failed to file a Motion for Reconsideration nor lodge an appeal
of said Resolution, thus, said Resolution of the DOJ Secretary declaring Tax
Ordinance No. 7988 null and void has lapsed into finality.

SDHCac

On 16 November 2000, Atty. Leonardo A. Aurelio wrote the Bureau of Local

Government Finance (BLGF) requesting in behalf of his client, Singer Sewing
Machine Company, an opinion on whether the Office of the City Treasurer of
Manila has the right to enforce Tax Ordinance No. 7988 despite the Resolution,
dated 17 August 2000, of the DOJ Secretary. Acting on said letter, the BLGF
Executive Director issued an Indorsement on 20 November 2000 ordering the
City Treasurer of Manila to "cease and desist" from enforcing Tax Ordinance No.
7988. According to the BLGF:
In the attached Resolution dated August 17, 2000 of the Department of
Justice, it is stated that ". . . Ordinance No. 7988 of the City of Manila is
hereby declared NULL AND VOID AND WITHOUT LEGAL EFFECT for
having been enacted in contravention of the provisions of The Local
Government Code of 1991 and its implementing rules and regulations."
xxx xxx xxx
In view thereof, that Office is hereby instructed to cease and desist from
implementing the aforementioned Manila Tax Ordinance No. 7988,

inviting attention to Section 190 of the Local Government Code (LGC) of

1991, quoted hereunder:
"Section 190. Attempt to Enforce Void or Suspended Tax
Ordinances and Revenue Measures. The enforcement of any
tax ordinance or revenue measures after due notice of the
disapproval or suspension thereof shall be sufficient ground to
administrative disciplinary action against the local officials and
employees responsible therefore."
Be guided accordingly. 6

Despite the Resolution of the DOJ declaring Tax Ordinance No. 7988 null and
void and the directive of the BLGF that respondents cease and desist from
enforcing said tax ordinance, respondents continued to assess petitioner
business tax for the year 2001 based on the tax rates prescribed under Tax
Ordinance No. 7988. Thus, petitioner filed a Complaint with the RTC of Manila,
Branch 21, on 17 January 2001, praying that respondents be enjoined from
implementing the aforementioned tax ordinance.
On 28 November 2001, the RTC of Manila, Branch 21, rendered a Decision in
favor of petitioner, the decretal portion of which states:
The defendants did not follow the procedure in the enactment of Tax
Ordinance No. 7988. The Court agrees with plaintiff's contention that the
ordinance should first be published for three (3) consecutive days in a
newspaper of local circulation aside from the posting of the same in at
least four (4) conspicuous public places.
xxx xxx xxx
WHEREFORE, premises considered, judgment is hereby rendered
declaring the injunction permanent. Defendants are enjoined from
implementing Tax Ordinance No. 7988. The bond posted by the plaintiff
is hereby CANCELLED. 7

During the pendency of the said case, the City Mayor of Manila approved on 22
February 2001 Tax Ordinance No. 8011 entitled, "An Ordinance Amending
Certain Sections of Ordinance No. 7988." Said tax ordinance was again
challenged by petitioner before the DOJ through a Petition questioning the
legality of the aforementioned tax ordinance on the grounds that (1) said tax
ordinance amends a tax ordinance previously declared null and void and without
legal effect by the DOJ; and (2) said tax ordinance was likewise not published
upon its approval in accordance with Section 188 of The Local Government Code
of 1991.

EcAHDT

On 5 July 2001, then DOJ Secretary Hernando Perez issued a Resolution

declaring Tax Ordinance No. 8011 null and void and legally not existing.
According to the DOJ Secretary:
After a careful examination/evaluation of the records of this case and
applying the pertinent provisions of The Local Government Code of
1991, this Department finds the instant petition of Coca-Cola Bottlers,
Philippines, Inc. meritorious.
It bears stress, at the outset, that the subject ordinance was passed and
approved by the respondents principally to amend Ordinance No. 7988
which was earlier nullified by this Department in its Resolution Dated
August 17, 2000, also at the instance of the herein petitioner. . . .
xxx xxx xxx
. . . [T]he only logical conclusion, therefore, is that Ordinance No. 8011,
subject herein, is also null and void, it being a mere amendatory
ordinance of Ordinance No. 7988 which, as earlier stated, had been
nullified by this Department. An invalid or unconstitutional law or
ordinance does not, in legal contemplation, exist (Manila Motors Co.,
Inc. vs. Flores, 99 Phil. 738). Where a statute which has been amended
is invalid, nothing, in effect, has been amended. As held in People vs.
Lim, 108 Phil. 1091:

"If an order or law sought to be amended is invalid, then it does

not legally exist. There would be no occasion or need to amend
it; . . ." (at p. 1097)
Instead of amending Ordinance No. 7988, herein respondent should
have enacted another tax measure which strictly complies with the
requirements of law, both procedural and substantive. The passage of
the assailed ordinance did not have the effect of curing the defects of
Ordinance No. 7988 which, any way, does not legally exist.
xxx xxx xxx
WHEREFORE, premises considered, Tax Ordinance No. 8011 is hereby
declared NULL and VOID and LEGALLY NOT EXISTING. 8

Respondent's Motion for Reconsideration of the Resolution of the DOJ was

subsequently denied in a Resolution, 9 dated 12 March 2002.
The City of Manila appealed the DOJ Resolution, dated 12 March 2002, denying
its Motion for Reconsideration of the Resolution nullifying Tax Ordinance No.
8011 before the RTC of Manila, Branch 17, but the same was dismissed for lack
of jurisdiction in an Order, dated 2 December 2002. According to the trial court:
From whatever angle the recourse of herein petitioners was viewed,
either from the standpoint of Section 1, Rule 43, or Section 1 and the last
sentence of the second paragraph of Section 4, Rule 65 of the 1997
Rules of Civil Procedure, the conclusion was inevitable that petitioners'
remedial measure from dispositions of the Secretary of Justice should
have been ventilated before the next judicial plane. . . .
Accordingly, by reason of the foregoing premises, Civil Case No. 02103372 for "Certiorari" is DISMISSED.

Consequently, respondents appealed the foregoing Order, dated 2 December

2002, via a Petition for Review on Certiorari to the Supreme Court docketed as
G.R. No. 157490. However, said appeal was dismissed in our Resolution, dated
23 June 2003, the dispositive of which reads:

DHEACI

Pursuant to Rule 45 and other related provisions of the 1997 Rules of

Civil Procedure as amended governing appeals bycertiorari to the
Supreme Court, only petitions which are accompanied by or which
comply strictly with the requirements specified therein shall be
entertained. On the basis thereof, the Court resolves to DENY the
instant petition for review oncertiorari of the orders of the Regional Trial
Court, Manila, Branch 17 dated December 2, 2002 and March 7, 2003
for the late filing as the petition was filed beyond the reglementary period
of fifteen (15) days fixed in Sec. 2, Rule 45 in relation to Sec. 5(a), Rule
56.
The omnibus motion of petitioners for reconsideration of the resolution of
April 23, 2003 which denied the motion for an extension of time to file a
petition is DENIED for lack of merit.

Respondents' Motion for Reconsideration was subsequently denied in a

Resolution, dated 11 August 2003, in which the Court resolved as follows:
Acting on the motion of petitioners for reconsideration of the resolution of
June 23, 2003 which denied the petition for review on certiorari and
considering that there is no compelling reason to warrant a modification
of this Court's resolution, the Court resolves to DENY reconsideration
with FINALITY.

Meanwhile, on the basis of the enactment of Tax Ordinance No. 8011, the City of
Manila filed a Motion for Reconsideration with the RTC of Manila, Branch 21, of
its Decision, dated 28 November 2001, which the court a quo granted in the
herein assailed Order dated 8 May 2002, the full text of which reads:
Considering that Ordinance No. 7988 (Amended Revenue Code of the
City of Manila) has already been amended by Ordinance No. 8011
entitled "An Ordinance Amending Certain Sections of Ordinance No.
7988" approved by the City Mayor of Manila on February 22, 2001, let
the above-entitled case be as it is hereby DISMISSED. Without
pronouncement as to costs." 10

Petitioner's Motion for Reconsideration of the abovequoted Order was denied by

the trial court in the second challenged Order, dated 5 December 2002; hence
the instant Petition.

cTIESD

The case at bar revolves around the sole pivotal issue of whether or not Tax
Ordinance No. 7988 is null and void and of no legal effect. However,
respondents, in their Comment and Memorandum, raise the procedural issue of
whether or not the instant Petition has complied with the requirements of the
1997 Rules on Civil Procedure; thus, the Court resolves to first pass upon this
issue before tackling the substantial matters involved in this case.
Respondents insist that the instant Petition raises questions of fact that are
proscribed under Rule 45 of the 1997 Rules of Civil Procedure which states that
Petitions for Certiorari before the Supreme Court shall raise only questions of law.
We do not agree. There is a question of fact when doubt or controversy arises as
to the truth or falsity of the alleged facts, when there is no dispute as to fact, the
question of whether or not the conclusion drawn therefrom is correct is a question
of law. 11A thorough reading of the Petition will reveal that petitioner does not
present an issue in which we are called to rule on the truth or falsity of any fact
alleged in the case. Furthermore, the resolution of whether or not the court a
quo erred in dismissing petitioner's case in light of the enactment of Tax
Ordinance No. 8011, allegedly amending Tax Ordinance No. 7988, does not
necessitate an incursion into the facts attending the case.
Contrarily, it is respondents who actually raise questions of fact before us. While
accusing petitioner of raising questions of fact, respondents, in the same breath,
proceeded to allege that the RTC of Manila, Branch 21, in its Decision, dated 28
November 2001, failed to take into account the evidence presented by
respondents allegedly proving that Tax Ordinance No. 7988 was published for
four times in a newspaper of general circulation in accordance with the
requirements of law. A determination of whether or not the trial court erred in
concluding that Tax Ordinance No. 7988 was indeed published for four times in a
newspaper of general circulation would clearly involve a calibration of the
probative value of the evidence presented by respondents to prove such

allegation. Therefore, said issue is a question of fact which this Court, not being a
trier of facts, will decline to pass upon.
Respondents also point out that the Petition was not properly verified and
certified because Nelson Empalmado, the Vice President for Tax and Financial
Services of Coca-Cola Bottlers Philippines, Inc. who verified the subject Petition
was not duly authorized to file said Petition. Respondents assert that nowhere in
the attached Secretary's Certificate can it be found the authority of Nelson
Empalmado to institute the instant Petition. Thus, there being a lack of proper
verification, respondents contend that the Petition must be treated as a mere
scrap of paper, which has no legal effect as declared in Section 4, Rule 7 of the
1997 Rules of Civil Procedure.
An inspection of the Secretary's Certificate attached to the petition will show that
Nelson Empalmado is not among those designated as representative to
prosecute claims in behalf of Coca-Cola Bottlers Philippines, Inc. However, it
would seem that the authority of Mr. Empalmado to file the instant Petition
emanated from a Special Power of Attorney signed by Ramon V. Lapez, Jr.,
Associate Legal Counsel/Assistant Corporate Secretary of Coca-Cola Bottlers
Philippines, Inc. and one of those named in the Secretary's Certificate as
authorized to file a Petition in behalf of the corporation. A careful perusal of said
Secretary's Certificate will further reveal that the persons authorized therein to
represent petitioner corporation in any suit are also empowered to designate and
appoint any individual as attorney-in-fact of the corporation for the prosecution of
any suit. Accordingly, by virtue of the Special Power of Attorney executed by
Ramon V. Lapez, Jr. authorizing Nelson Emplamado to file a Petition before the
Supreme Court, the instant Petition has been properly verified, in accordance
with the 1997 Rules of Civil Procedure.

DACTSH

Having disposed of the procedural issues raised by respondents, We now come

to the pivotal issue in this petition.
It is undisputed from the facts of the case that Tax Ordinance No. 7988 has
already been declared by the DOJ Secretary, in its Order, dated 17 August 2000,

as null and void and without legal effect due to respondents' failure to satisfy the
requirement that said ordinance be published for three consecutive days as
required by law. Neither is there quibbling on the fact that the said Order of the
DOJ was never appealed by the City of Manila, thus, it had attained finality after
the lapse of the period to appeal.

SICaDA

Furthermore, the RTC of Manila, Branch 21, in its Decision dated 28 November
2001, reiterated the findings of the DOJ Secretary that respondents failed to
follow the procedure in the enactment of tax measures as mandated by Section
188 ofThe Local Government Code of 1991, in that they failed to publish Tax
Ordinance No. 7988 for three consecutive days in a newspaper of local
circulation. From the foregoing, it is evident that Tax Ordinance No. 7988 is null
and void as said ordinance was published only for one day in the 22 May 2000
issue of the Philippine Post in contravention of the unmistakable directive of The
Local Government Code of 1991.
Despite the nullity of Tax Ordinance No. 7988, the court a quo, in the assailed
Order, dated 8 May 2002, went on to dismiss petitioner's case on the force of the
enactment of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988.
Significantly, said amending ordinance was likewise declared null and void by the
DOJ Secretary in a Resolution, dated 5 July 2001, elucidating that "[I]nstead of
amending Ordinance No. 7988, [herein] respondent should have enacted another
tax measure which strictly complies with the requirements of law, both procedural
and substantive. The passage of the assailed ordinance did not have the
effect of curing the defects of Ordinance No. 7988 which, any way, does not
legally exist." Said Resolution of the DOJ Secretary had, as well, attained finality
by virtue of the dismissal with finality by this Court of respondents' Petition for
Review on Certiorari in G.R. No. 157490 assailing the dismissal by the RTC of
Manila, Branch 17, of its appeal due to lack of jurisdiction in its Order, dated 11
August 2003.

Based on the foregoing, this Court must reverse the Order of the RTC of Manila,
Branch 21, dismissing petitioner's case as there is no basis in law for such
dismissal. The amending law, having been declared as null and void, in legal
contemplation, therefore, does not exist. Furthermore, even if Tax Ordinance No.
8011 was not declared null and void, the trial court should not have dismissed the
case on the reason that said tax ordinance had already amended Tax Ordinance
No. 7988. As held by this Court in the case of People v. Lim, 12 if an order or law
sought to be amended is invalid, then it does not legally exist, there should be no
occasion or need to amend it. 13
WHEREFORE, premises considered, the instant Petition is hereby GRANTED.
The Orders of the RTC of Manila, Branch 21, dated 8 May 2002 and 5 December
2002, respectively, are hereby REVERSED and SET ASIDE.

HCDAac

SO ORDERED.
|||

(Coca-Cola Bottlers Phil., Inc. v. City of Manila, G.R. No. 156252, June 27,

2006)

THIRD DIVISION
[G.R. No. 181845. August 4, 2009.]
THE CITY OF MANILA, LIBERTY M. TOLEDO, in her capacity
as THE TREASURER OF MANILA and JOSEPH SANTIAGO, in
his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY
OF

MANILA, petitioners, vs.

COCA-COLA

PHILIPPINES, INC., respondent.

DECISION

BOTTLERS

CHICO-NAZARIO, J :
p

This case is a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Civil Procedure seeking to review and reverse the Decision 1 dated 18
January 2008 and Resolution 2 dated 18 February 2008 of the Court of Tax
Appeals en banc(CTA en banc) in C.T.A. EB No. 307. In its assailed Decision, the
CTA en banc dismissed the Petition for Review of herein petitioners City of
Manila, Liberty M. Toledo (Toledo), and Joseph Santiago (Santiago); and
affirmed the Resolutions dated 24 May 2007, 3 8 June 2007, 4 and 26 July
2007, 5 of the CTA First Division in C.T.A. AC No. 31, which, in turn, dismissed
the Petition for Review of petitioners in said case for being filed out of time. In its
questioned Resolution, the CTA en banc denied the Motion for Reconsideration
of petitioners.
Petitioner City of Manila is a public corporation empowered to collect and assess
business taxes, revenue fees, and permit fees, through its officers, petitioners
Toledo and Santiago, in their capacities as City Treasurer and Chief of the
Licensing Division, respectively. On the other hand, respondent Coca-Cola
Bottlers Philippines, Inc. is a corporation engaged in the business of
manufacturing and selling beverages, and which maintains a sales office in the
City of Manila.
The case stemmed from the following facts:
Prior to 25 February 2000, respondent had been paying the City of Manila local
business tax only under Section 14 of Tax Ordinance No. 7794, 6 being expressly
exempted from the business tax under Section 21 of the same tax ordinance.
Pertinent provisions of Tax Ordinance No. 7794 provide:
Section 14.Tax on Manufacturers, Assemblers and Other Processors.
There is hereby imposed a graduated tax on manufacturers, assemblers,
repackers, processors, brewers, distillers, rectifiers, and compounders of
liquors, distilled spirits, and wines or manufacturers of any article of
commerce of whatever kind or nature, in accordance with any of the
following schedule:

xxx xxx xxx

over

P6,500,000.00

up

toP36,000.00

plus

50%

of

P25,000,000.00in excess of P6,500,000.00

xxx xxx xxx
Section 21.Tax on Businesses Subject to the Excise, Value-Added or
Percentage Taxes under the NIRC. On any of the following
businesses and articles of commerce subject to excise, value-added or
percentage taxes under the National Internal Revenue Code hereinafter
referred to as NIRC, as amended, a tax of FIFTY PERCENT (50%) of
ONE PERCENT (1%) per annum on the gross sales or receipts of the
preceding calendar year is hereby imposed:
(A)On persons who sell goods and services in the course of trade or
business; and those who import goods whether for business or
otherwise; as provided for in Sections 100 to 103 of the NIRC as
administered and determined by the Bureau of Internal Revenue
pursuant to the pertinent provisions of the said Code.

aDHCcE

xxx xxx xxx

(D)Excisable goods subject to VAT
(1)Distilled spirits
(2)Wines
xxx xxx xxx
(8)Coal and coke
(9)Fermented liquor, brewers' wholesale price, excluding the ad
valorem tax
xxx xxx xxx

1%

PROVIDED, that all registered businesses in the City of Manila that are
already paying the aforementioned tax shall be exempted from payment
thereof.

Petitioner City of Manila subsequently approved on 25 February 2000, Tax

Ordinance No. 7988, 7 amending certain sections of Tax Ordinance No. 7794,
particularly: (1) Section 14, by increasing the tax rates applicable to certain
establishments operating within the territorial jurisdiction of the City of Manila;
and (2) Section 21, by deleting the proviso found therein, which stated "that all
registered businesses in the City of Manila that are already paying the
aforementioned tax shall be exempted from payment thereof". Petitioner City of
Manila approved only after a year, on 22 February 2001, another tax ordinance,
Tax Ordinance No. 8011, amending Tax Ordinance No. 7988.
Tax Ordinances No. 7988 and No. 8011 were later declared by the Court null and
void in Coca-Cola Bottlers Philippines, Inc. v. City of Manila 8 (Coca-Cola case)
for the following reasons: (1) Tax Ordinance No. 7988 was enacted in
contravention of the provisions of the Local Government Code (LGC) of 1991 and
its implementing rules and regulations; and (2) Tax Ordinance No. 8011 could not
cure the defects of Tax Ordinance No. 7988, which did not legally exist.
However, before the Court could declare Tax Ordinance No. 7988 and Tax
Ordinance No. 8011 null and void, petitioner City of Manila assessed respondent
on the basis of Section 21 of Tax Ordinance No. 7794, as amended by the
aforementioned tax ordinances, for deficiency local business taxes, penalties,
and interest, in the total amount of P18,583,932.04, for the third and fourth
quarters of the year 2000. Respondent filed a protest with petitioner Toledo on
the ground that the said assessment amounted to double taxation, as respondent
was taxed twice, i.e., under Sections 14 and 21 of Tax Ordinance No. 7794, as
amended by Tax Ordinances No. 7988 and No. 8011. Petitioner Toledo did not
respond to the protest of respondent.

Consequently, respondent filed with the Regional Trial Court (RTC) of Manila,
Branch 47, an action for the cancellation of the assessment against respondent
for business taxes, which was docketed as Civil Case No. 03-107088.
On 14 July 2006, the RTC rendered a Decision 9 dismissing Civil Case No. 03107088. The RTC ruled that the business taxes imposed upon the respondent
under Sections 14 and 21 of Tax Ordinance No. 7988, as amended, were not of
the same kind or character; therefore, there was no double taxation. The RTC,
though, in an Order 10 dated 16 November 2006, granted the Motion for
Reconsideration of respondent, decreed the cancellation and withdrawal of the
assessment

against

the

latter,

and

barred

petitioners

from

further

imposing/assessing local business taxes against respondent under Section 21 of

Tax Ordinance No. 7794, as amended by Tax Ordinance No. 7988 and Tax
Ordinance No. 8011. The 16 November 2006 Decision of the RTC was in
conformity with the ruling of this Court in the Coca-Cola case, in which Tax
Ordinance No. 7988 and Tax Ordinance No. 8011 were declared null and void.
The Motion for Reconsideration of petitioners was denied by the RTC in an
Order 11 dated 4 April 2007. Petitioners received a copy of the 4 April 2007 Order
of the RTC, denying their Motion for Reconsideration of the 16 November 2006
Order of the same court, on 20 April 2007.
On 4 May 2007, petitioners filed with the CTA a Motion for Extension of Time to
File Petition for Review, praying for a 15-day extension or until 20 May 2007
within which to file their Petition. The Motion for Extension of petitioners was
docketed as C.T.A. AC No. 31, raffled to the CTA First Division.
Again, on 18 May 2007, petitioners filed, through registered mail, a Second
Motion for Extension of Time to File a Petition for Review, praying for another 10day extension, or until 30 May 2007, within which to file their Petition.

cHEATI

On 24 May 2007, however, the CTA First Division already issued a Resolution
dismissing C.T.A. AC No. 31 for failure of petitioners to timely file their Petition for
Review on 20 May 2007.

Unaware of the 24 May 2007 Resolution of the CTA First Division, petitioners filed
their Petition for Review therewith on 30 May 2007 via registered mail. On 8 June
2007, the CTA First Division issued another Resolution, reiterating the dismissal
of the Petition for Review of petitioners.
Petitioners moved for the reconsideration of the foregoing Resolutions dated 24
May 2007 and 8 June 2007, but their motion was denied by the CTA First
Division in a Resolution dated 26 July 2007. The CTA First Division reasoned that
the Petition for Review of petitioners was not only filed out of time it also failed
to comply with the provisions of Section 4, Rule 5; and Sections 2 and 3, Rule 6,
of the Revised Rules of the CTA.
Petitioners

thereafter

filed

Petition

for

Review

before

the

CTA en

banc, docketed as C.T.A. EB No. 307, arguing that the CTA First Division erred in
dismissing their Petition for Review in C.T.A. AC No. 31 for being filed out of time,
without considering the merits of their Petition.
The CTA en banc rendered its Decision on 18 January 2008, dismissing the
Petition for Review of petitioners and affirming the Resolutions dated 24 May
2007, 8 June 2007, and 26 July 2007 of the CTA First Division. The CTA en
banc similarly denied the Motion for Reconsideration of petitioners in a
Resolution dated 18 February 2008.
Hence, the present Petition, where petitioners raise the following issues:
I.WHETHER OR NOT PETITIONERS SUBSTANTIALLY COMPLIED
WITH THE REGLEMENTARY PERIOD TO TIMELY APPEAL THE
CASE FOR REVIEW BEFORE THE [CTA DIVISION].
II.WHETHER OR NOT THE RULING OF THIS COURT IN THE
EARLIER

[COCA-COLA

CASE]

IS

DOCTRINAL

AND

CONTROLLING IN THE INSTANT CASE.

III.WHETHER OR NOT PETITIONER CITY OF MANILA CAN STILL
ASSESS TAXES UNDER [SECTIONS] 14 AND 21 OF [TAX
ORDINANCE NO. 7794, AS AMENDED].

IV.WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21 OF

THE

[TAX

ORDINANCE

NO.

7794,

AS

AMENDED]

CONSTITUTES DOUBLE TAXATION.

Petitioners assert that Section 1, Rule 7

12

of the Revised Rules of the CTA refers

to certain provisions of the Rules of Court, such as Rule 42 of the latter, and
makes them applicable to the tax court. Petitioners then cannot be faulted in
relying on the provisions of Section 1, Rule 42

13

of the Rules of Court as regards

the period for filing a Petition for Review with the CTA in division. Section 1, Rule
42 of the Rules of Court provides for a 15-day period, reckoned from receipt of
the adverse decision of the trial court, within which to file a Petition for Review
with the Court of Appeals. The same rule allows an additional 15-day period
within which to file such a Petition; and, only for the most compelling reasons,
another extension period not to exceed 15 days. Petitioners received on 20 April
2007 a copy of the 4 April 2007 Order of the RTC, denying their Motion for
Reconsideration of the 16 November 2006 Order of the same court. On 4 May
2007, believing that they only had 15 days to file a Petition for Review with the
CTA in division, petitioners moved for a 15-day extension, or until 20 May 2007,
within which to file said Petition. Prior to the lapse of their first extension period,
or on 18 May 2007, petitioners again moved for a 10-day extension, or until 30
May 2007, within which to file their Petition for Review. Thus, when petitioners
filed their Petition for Review with the CTA First Division on 30 May 2007, the
same was filed well within the reglementary period for doing so.

Petitioners argue in the alternative that even assuming that Section 3 (a), Rule
8 14 of the Revised Rules of the CTA governs the period for filing a Petition for
Review with the CTA in division, still, their Petition for Review was filed within the
reglementary period. Petitioners call attention to the fact that prior to the lapse of
the 30-day period for filing a Petition for Review under Section 3 (a), Rule 8 of the
Revised Rules of the CTA, they had already moved for a 10-day extension, or
until 30 May 2007, within which to file their Petition. Petitioners claim that there
was sufficient justification in equity for the grant of the 10-day extension they

requested, as the primordial consideration should be the substantive, and not the
procedural, aspect of the case. Moreover, Section 3 (a), Rule 8 of the Revised
Rules of the CTA, is silent as to whether the 30-day period for filing a Petition for
Review with the CTA in division may be extended or not.
Petitioners also contend that the Coca-Cola case is not determinative of the
issues in the present case because the issue of nullity of Tax Ordinance No.
7988 and Tax Ordinance No. 8011 is not the lis mota herein. The Coca-Cola case
is not doctrinal and cannot be considered as the law of the case.

HDaACI

Petitioners further insist that notwithstanding the declaration of nullity of Tax

Ordinance No. 7988 and Tax Ordinance No. 8011, Tax Ordinance No. 7794
remains a valid piece of local legislation. The nullity of Tax Ordinance No. 7988
and Tax Ordinance No. 8011 does not effectively bar petitioners from imposing
local business taxes upon respondent under Sections 14 and 21 of Tax
Ordinance No. 7794, as they were read prior to their being amended by the
foregoing null and void tax ordinances.
Petitioners finally maintain that imposing upon respondent local business taxes
under both Sections 14 and 21 of Tax Ordinance No. 7794 does not constitute
direct double taxation. Section 143 of the LGC gives municipal, as well as city
governments, the power to impose business taxes, to wit:
SECTION 143.Tax on Business. The municipality may impose taxes
on the following businesses:
(a)On manufacturers, assemblers, repackers, processors, brewers,
distillers, rectifiers, and compounders of liquors, distilled spirits, and
wines or manufacturers of any article of commerce of whatever kind or
nature, in accordance with the following schedule:
xxx xxx xxx
(b)On wholesalers, distributors, or dealers in any article of commerce of
whatever kind or nature in accordance with the following schedule:
xxx xxx xxx

(c)On exporters, and on manufacturers, millers, producers, wholesalers,

distributors, dealers or retailers of essential commodities enumerated
hereunder at a rate not exceeding one-half (1/2) of the rates prescribed
under subsections (a), (b) and (d) of this Section:
xxx xxx xxx
Provided, however, That barangays shall have the exclusive power to
levy taxes, as provided under Section 152 hereof, on gross sales or
receipts of the preceding calendar year of Fifty thousand pesos
(P50,000.00) or less, in the case of cities, and Thirty thousand pesos
(P30,000) or less, in the case of municipalities.
(e)On contractors and other independent contractors, in accordance with
the following schedule:
xxx xxx xxx
(f)On banks and other financial institutions, at a rate not exceeding fifty
percent (50%) of one percent (1%) on the gross receipts of the
preceding calendar year derived from interest, commissions and
discounts from lending activities, income from financial leasing,
dividends, rentals on property and profit from exchange or sale of
property, insurance premium.
(g)On peddlers engaged in the sale of any merchandise or article of
commerce, at a rate not exceeding Fifty pesos (P50.00) per peddler
annually.
(h)On any business, not otherwise specified in the preceding
paragraphs, which the sanggunian concerned may deem proper to
tax: Provided, That on any business subject to the excise, value-added
or percentage tax under the National Internal Revenue Code, as
amended, the rate of tax shall not exceed two percent (2%) of gross
sales or receipts of the preceding calendar year.

Section 14 of Tax Ordinance No. 7794 imposes local business tax on

manufacturers, etc. of liquors, distilled spirits, wines, and any other article of
commerce, pursuant to Section 143 (a) of the LGC. On the other hand, the local
business tax under Section 21 of Tax Ordinance No. 7794 is imposed upon
persons selling goods and services in the course of trade or business, and those
importing goods for business or otherwise, who, pursuant to Section 143 (h) of
the LGC, are subject to excise tax, value-added tax (VAT), or percentage tax
under the National Internal Revenue Code (NIRC). Thus, there can be no double
taxation when respondent is being taxed under both Sections 14 and 21 of Tax
Ordinance No. 7794, for under the first, it is being taxed as a manufacturer; while
under the second, it is being taxed as a person selling goods in the course of
trade or business subject to excise, VAT, or percentage tax.
The Court first addresses the issue raised by petitioners concerning the period
within which to file with the CTA a Petition for Review from an adverse decision or
ruling of the RTC.
The period to appeal the decision or ruling of the RTC to the CTA via a Petition
for Review is specifically governed by Section 11 of Republic Act No.
9282, 15 and Section 3 (a), Rule 8 of the Revised Rules of the CTA.
Section 11 of Republic Act No. 9282 provides:

cTIESa

SEC. 11.Who May Appeal; Mode of Appeal; Effect of Appeal. Any

party adversely affected by a decision, ruling or inaction of the
Commissioner of Internal Revenue, the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and Industry or the
Secretary of Agriculture or the Central Board of Assessment Appeals or
the Regional Trial Courts may file an Appeal with the CTA within thirty
(30) days after the receipt of such decision or ruling or after the
expiration of the period fixed by law for action as referred to in Section
7(a)(2) herein.
Appeal shall be made by filing a petition for review under a procedure
analogous to that provided for under Rule 42 of the 1997 Rules of

Civil Procedure with the CTA within thirty (30) days from the receipt of
the decision or ruling or in the case of inaction as herein provided, from
the expiration of the period fixed by law to act thereon. . . . . (Emphasis
supplied.)

Section 3 (a), Rule 8 of the Revised Rules of the CTA states:

SEC. 3.Who may appeal; period to file petition. (a) A party adversely
affected by a decision, ruling or the inaction of the Commissioner of
Internal Revenue on disputed assessments or claims for refund of
internal revenue taxes, or by a decision or ruling of the Commissioner of
Customs, the Secretary of Finance, the Secretary of Trade and Industry,
the Secretary of Agriculture, or a Regional Trial Court in the exercise of
its original jurisdiction may appeal to the Court bypetition for
review filed within thirty days after receipt of a copy of such decision or
ruling, or expiration of the period fixed by law for the Commissioner of
Internal Revenue to act on the disputed assessments. . . . . (Emphasis
supplied.)

It is crystal clear from the afore-quoted provisions that to appeal an adverse

decision or ruling of the RTC to the CTA, the taxpayer must file a Petition for
Review with the CTA within 30 days from receipt of said adverse decision or
ruling of the RTC.
It is also true that the same provisions are silent as to whether such 30-day
period can be extended or not. However, Section 11 of Republic Act No.
9282 does state that the Petition for Review shall be filed with the CTA following
the procedure analogous to Rule 42 of the Revised Rules of Civil
Procedure. Section 1, Rule 42 16 of the Revised Rules of Civil Procedure
provides that the Petition for Review of an adverse judgment or final order of the
RTC must be filed with the Court of Appeals within: (1) the original 15-day period
from receipt of the judgment or final order to be appealed; (2) an extended period
of 15 days from the lapse of the original period; and (3) only for the most

compelling reasons, another extended period not to exceed 15 days from the
lapse of the first extended period.
Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure,
the 30-day original period for filing a Petition for Review with the CTA under
Section 11 of Republic Act No. 9282, as implemented by Section 3 (a), Rule 8 of
the Revised Rules of the CTA, may be extended for a period of 15 days. No
further extension shall be allowed thereafter, except only for the most compelling
reasons, in which case the extended period shall not exceed 15 days.
Even the CTA en banc, in its Decision dated 18 January 2008, recognizes that
the 30-day period within which to file the Petition for Review with the CTA may,
indeed, be extended, thus:
Being suppletory to R.A. 9282, the 1997 Rules of Civil Procedure allow
an additional period of fifteen (15) days for the movant to file a Petition
for Review, upon Motion, and payment of the full amount of the docket
fees. A further extension of fifteen (15) days may be granted on
compelling reasons in accordance with the provision of Section 1, Rule
42 of the 1997 Rules of Civil Procedure . . . .

17

In this case, the CTA First Division did indeed err in finding that petitioners failed
to file their Petition for Review in C.T.A. AC No. 31 within the reglementary
period.
From 20 April 2007, the date petitioners received a copy of the 4 April 2007
Order of the RTC, denying their Motion for Reconsideration of the 16 November
2006 Order, petitioners had 30 days, or until 20 May 2007, within which to file
their Petition for Review with the CTA. Hence, the Motion for Extension filed by
petitioners on 4 May 2007 grounded on their belief that the reglementary
period for filing their Petition for Review with the CTA was to expire on 5 May
2007, thus, compelling them to seek an extension of 15 days, or until 20 May
2007, to file said Petition was unnecessary and superfluous. Even without said
Motion for Extension, petitioners could file their Petition for Review until 20 May
2007, as it was still within the 30-day reglementary period provided for under

Section 11 of Republic Act No. 9282; and implemented by Section 3 (a), Rule 8
of the Revised Rules of the CTA.

The Motion for Extension filed by the petitioners on 18 May 2007, prior to the
lapse of the 30-day reglementary period on 20 May 2007, in which they prayed
for another extended period of 10 days, or until 30 May 2007, to file their Petition
for Review was, in reality, only the first Motion for Extension of petitioners. The
CTA First Division should have granted the same, as it was sanctioned by the
rules of procedure. In fact, petitioners were only praying for a 10-day extension,
five days less than the 15-day extended period allowed by the rules. Thus, when
petitioners filed via registered mail their Petition for Review in C.T.A. AC No. 31
on 30 May 2007, they were able to comply with the reglementary period for filing
such a petition.

cHAaCE

Nevertheless, there were other reasons for which the CTA First Division
dismissed

the

Petition

for

Review

of

petitioners

in

C.T.A.

AC

No.

31; i.e., petitioners failed to conform to Section 4 of Rule 5, and Section 2 of Rule
6 of the Revised Rules of the CTA. The Court sustains the CTA First Division in
this regard.
Section 4, Rule 5 of the Revised Rules of the CTA requires that:
SEC. 4.Number of copies. The parties shall file eleven signed copies
of every paper for cases before the Court en banc and six signed
copies for cases before a Division of the Court in addition to the
signed original copy, except as otherwise directed by the Court.
Papers to be filed in more than one case shall include one additional
copy for each additional case. (Emphasis supplied.)

Section 2, Rule 6 of the Revised Rules of the CTA further necessitates that:
SEC. 2.Petition for review; contents. The petition for review shall
contain allegations showing the jurisdiction of the Court, a concise
statement of the complete facts and a summary statement of the issues

involved in the case, as well as the reasons relied upon for the review of
the challenged decision. The petition shall be verified and must contain a
certification against forum shopping as provided in Section 3, Rule 46 of
the Rules of Court. A clearly legible duplicate original or certified
true copy of the decision appealed from shall be attached to the
petition. (Emphasis supplied.)

The aforesaid provisions should be read in conjunction with Section 1, Rule 7 of

the Revised Rules of the CTA, which provides:
SECTION 1.Applicability of the Rules of Court on procedure in the Court
of Appeals, exception. The procedure in the Court en banc or in
Divisions in original or in appealed cases shall be the same as those in
petitions for review and appeals before the Court of Appeals pursuant to
the applicable provisions of Rules 42, 43, 44, and 46 of the Rules of
Court, except as otherwise provided for in these Rules. (Emphasis
supplied.)

As found by the CTA First Division and affirmed by the CTA en banc, the Petition
for Review filed by petitioners via registered mail on 30 May 2007 consisted only
of one copy and all the attachments thereto, including the Decision dated 14 July
2006; and that the assailed Orders dated 16 November 2006 and 4 April 2007 of
the RTC in Civil Case No. 03-107088 were mere machine copies. Evidently,
petitioners did not comply at all with the requirements set forth under Section 4,
Rule 5; or with Section 2, Rule 6 of the Revised Rules of the CTA. Although the
Revised Rules of the CTA do not provide for the consequence of such noncompliance, Section 3, Rule 42 of the Rules of Court may be applied suppletorily,
as allowed by Section 1, Rule 7 of the Revised Rules of the CTA. Section 3, Rule
42 of the Rules of Court reads:
SEC. 3.Effect of failure to comply with requirements. The failure of the
petitioner to comply with any of the foregoing requirements regarding the
payment of the docket and other lawful fees, the deposit for costs, proof
of service of the petition, and the contents of and the documents which

should

accompany

the

petition

shall

be

sufficient

ground

for

the dismissal thereof. (Emphasis supplied.)

True, petitioners subsequently submitted certified copies of the Decision dated 14

July 2006 and assailed Orders dated 16 November 2006 and 4 April 2007 of the
RTC in Civil Case No. 03-107088, but a closer examination of the stamp on said
documents reveals that they were prepared and certified only on 14 August 2007,
about two months and a half after the filing of the Petition for Review by
petitioners.
Petitioners never offered an explanation for their non-compliance with Section 4
of Rule 5, and Section 2 of Rule 6 of the Revised Rules of the CTA. Hence,
although the Court had, in previous instances, relaxed the application of rules of
procedure, it cannot do so in this case for lack of any justification.
Even assuming arguendo that the Petition for Review of petitioners in C.T.A. AC
No. 31 should have been given due course by the CTA First Division, it is still
dismissible for lack of merit.
Contrary to the assertions of petitioners, the Coca-Cola case is indeed applicable
to the instant case. The pivotal issue raised therein was whether Tax Ordinance
No. 7988 and Tax Ordinance No. 8011 were null and void, which this Court
resolved in the affirmative. Tax Ordinance No. 7988 was declared by the
Secretary of the Department of Justice (DOJ) as null and void and without legal
effect due to the failure of herein petitioner City of Manila to satisfy the
requirement under the law that said ordinance be published for three consecutive
days. Petitioner City of Manila never appealed said declaration of the DOJ
Secretary; thus, it attained finality after the lapse of the period for appeal of the
same. The passage of Tax Ordinance No. 8011, amending Tax Ordinance No.
7988, did not cure the defects of the latter, which, in any way, did not legally
exist.

EcSCAD

By virtue of the Coca-Cola case, Tax Ordinance No. 7988 and Tax Ordinance No.
8011 are null and void and without any legal effect. Therefore, respondent cannot

be taxed and assessed under the amendatory laws Tax Ordinance No. 7988
and Tax Ordinance No. 8011.
Petitioners insist that even with the declaration of nullity of Tax Ordinance No.
7988 and Tax Ordinance No. 8011, respondent could still be made liable for local
business taxes under both Sections 14 and 21 of Tax Ordinance No. 7944 as
they were originally read, without the amendment by the null and void tax
ordinances.
Emphasis must be given to the fact that prior to the passage of Tax Ordinance
No. 7988 and Tax Ordinance No. 8011 by petitioner City of Manila, petitioners
subjected and assessed respondent only for the local business tax under Section
14 of Tax Ordinance No. 7794, but never under Section 21 of the same. This was
due to the clear and unambiguous proviso in Section 21 of Tax Ordinance No.
7794, which stated that "all registered business in the City of Manila that are
already paying the aforementioned tax shall be exempted from payment thereof".
The "aforementioned tax" referred to in said provisorefers to local business tax.
Stated differently, Section 21 of Tax Ordinance No. 7794 exempts from the
payment of the local business tax imposed by said section, businesses that are
already paying such tax under other sections of the same tax ordinance. The
said proviso, however, was deleted from Section 21 of Tax Ordinance No. 7794
by Tax Ordinances No. 7988 and No. 8011. Following this deletion, petitioners
began assessing respondent for the local business tax under Section 21 of Tax
Ordinance No. 7794, as amended.
The Court easily infers from the foregoing circumstances that petitioners
themselves believed that prior to Tax Ordinance No. 7988 and Tax Ordinance No.
8011, respondent was exempt from the local business tax under Section 21 of
Tax Ordinance No. 7794. Hence, petitioners had to wait for the deletion of the
exempting proviso in Section 21 of Tax Ordinance No. 7794 by Tax Ordinance
No. 7988 and Tax Ordinance No. 8011 before they assessed respondent for the
local business tax under said section. Yet, with the pronouncement by this Court
in the Coca-Cola case that Tax Ordinance No. 7988 and Tax Ordinance No. 8011
were null and void and without legal effect, then Section 21 of Tax Ordinance No.

7794, as it has been previously worded, with its exempting proviso, is back in
effect. Accordingly, respondent should not have been subjected to the local
business tax under Section 21 of Tax Ordinance No. 7794 for the third and fourth
quarters of 2000, given its exemption therefrom since it was already paying the
local business tax under Section 14 of the same ordinance.
Petitioners obstinately ignore the exempting proviso in Section 21 of Tax
Ordinance No. 7794, to their own detriment. Said exempting proviso was
precisely included in said section so as to avoid double taxation.
Double taxation means taxing the same property twice when it should be taxed
only once; that is, "taxing the same person twice by the same jurisdiction for the
same thing". It is obnoxious when the taxpayer is taxed twice, when it should be
but once. Otherwise described as "direct duplicate taxation", the two taxes must
be imposed on the same subject matter, for the same purpose, by the same
taxing authority, within the same jurisdiction, during the same taxing
period; and the taxes must be of the same kind or character. 18
Using the aforementioned test, the Court finds that there is indeed double
taxation if respondent is subjected to the taxes under both Sections 14 and 21 of
Tax Ordinance No. 7794, since these are being imposed: (1) on the same subject
matter the privilege of doing business in the City of Manila; (2) for the same
purpose to make persons conducting business within the City of Manila
contribute to city revenues; (3) by the same taxing authority petitioner City of
Manila; (4) within the same taxing jurisdiction within the territorial jurisdiction of
the City of Manila; (5) for the same taxing periods per calendar year; and (6) of
the same kind or character a local business tax imposed on gross sales or
receipts of the business.

The distinction petitioners attempt to make between the taxes under Sections 14
and 21 of Tax Ordinance No. 7794 is specious. The Court revisits Section 143 of
the LGC, the very source of the power of municipalities and cities to impose a
local business tax, and to which any local business tax imposed by petitioner City

of Manila must conform. It is apparent from a perusal thereof that when a

municipality or city has already imposed a business tax on manufacturers, etc. of
liquors, distilled spirits, wines, and any other article of commerce, pursuant to
Section 143 (a) of the LGC, said municipality or city may no longer subject the
same manufacturers, etc. to a business tax under Section 143 (h) of the same
Code. Section 143 (h) may be imposed only on businesses that are subject to
excise tax, VAT, or percentage tax under the NIRC, and that are "not otherwise
specified in preceding paragraphs". In the same way, businesses such as
respondent's, already subject to a local business tax under Section 14 of Tax
Ordinance No. 7794 [which is based on Section 143 (a) of the LGC], can no
longer be made liable for local business tax under Section 21 of the same Tax
Ordinance [which is based on Section 143 (h) of the LGC].
WHEREFORE, premises

considered,

the

instant

TSCIEa

Petition

for

Review

on Certiorari is hereby DENIED. No costs.

SO ORDERED.
|||

(City of Manila v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 181845, August

04, 2009)

SECOND DIVISION
[G.R. No. L-30745. January 18, 1978.]
PHILIPPINE MATCH CO., LTD., plaintiff-appellant, vs. THE CITY
OF

CEBU

and

JESUS

E.

ZABATE,

Acting

City

Treasurer, defendants-appellees.
Pelaez, Pelaez & Pelaez for appellant.
Nazario Pacquiao, Metudio P. Belarmino & Ceferino Jomuad for appellees.
SYNOPSIS

Appellant assailed the legality of the sales tax which the city treasurer of Cebu
collected on out-of-town deliveries of matches, to wit: (1) sales of matches
booked and paid for in Cebu City but shipped directly to customers outside of the
city; (2) transfers of matches to salesman assigned to different agencies outside
of the city; and (3) shipments of matches to provincial customers pursuant to
salesmen's instructions. Appellant paid under protest the sales tax on those three
categories of out-of-town deliveries.
The trial court sustained the tax imposed on the first transaction, and invalidated
the tax in the other two. It characterized the tax on the other two transactions as a
"storage tax", not a sales tax, since the sales were consummated outside of the
city, and hence, beyond the city's taxing power. The city did not appeal from the
decision. But the appellant appealed from that portion of the decision sustaining
the tax on sales of matches to customers outside of the city, which sales were
bocked and paid for in Cebu City and also from the dismissal of its claim for
damages against the city treasurer.
In affirming the appealed decisions, the Supreme Court held that the municipal
board of Cebu City is empowered "to provide for the levy and collection of taxes
for general and special purposes in accordance with law." The prohibition against
the imposition of percentage taxes refers to municipalities and municipal districts
but not to chartered cities. The fact that the matches were delivered to customers
outside the of the city did not place the sales beyond the city's taxing power. The
sales formed part of the merchandising business being carried on by the
appellant in the city. As the city treasurer acted within the scope of his authority
and n consonance with his bona fide interpretation of the tax ordinance, though
not sustained completely by the court, his action did not render him liable for
damages.
SYLLABUS
1. TAXATION; TAXING POWER OF CITIES AND MUNICIPALITIES, DEFEND
BY LOCAL AUTONOMY ACT. The taxing power validly delegated to cities and

municipalities is defined in the local Autonomy Act, Republic Act No. 2264 which
took effect on June 19, 1959.
2. ID.; CONSTITUTIONAL PROVISIONS. Article XI of the Constitution
provides that "each local government unit shall have the power to create its own
sources of revenue and to levy taxes, subject to such limitations as may be
provided by law". This was implemented by Presidential Decree No. 231, the
Local Tax Code, which took effect on July 1, 1973.
3. ID.; SCOPE OF TAXING POWER OF LOCAL GOVERNMENT. The taxing
power of cities, municipalities and municipal districts may be used (1) upon any
person engaged in any occupation or business, or exercising any privilege
therein; (2) for services rendered by those political subdivisions or rendered in
connection with any business, profession or occupation being conducted therein,
and (3) to levy, for public purposes just and uniform taxes. licenses or fees.
4. ID.; MUNICIPAL BOARDS OF CEBU CITY; EMPOWERED TO PROVIDE FOR
THE LEVY AND COLLECTION OF TAXES. The municipal board of Cebu City
is empowered "to provide for the levy and collection of taxes for general and
special purposes in accordance with law."
5. ID.; MUNICIPAL CORPORATIONS; TAX ON SALES OF GOODS IN THE
CITY. Under a city ordinance which imposes tax on sales of goods in the city,
the city can validly tax sales of matches to customers outside of the city as long
as the orders were booked and paid for, and the matches were delivered to the
carrier, in the city. The matches can be regarded as sold in the city, as
contemplated in the ordinance, because delivery to the carrier is delivery to the
buyer. As the sales were finalized in the city and the matches sold were stored in
the city, the fact that the matches were delivered to customers, whose places of
business were outside of the city, would not place those sales beyond the city's
taxing power. Those sales formed part of the merchandising business being
carried on by the taxpayer in the city. In essence, they are the same as sales of
matches fully consummated in the city.

6. DAMAGES, AWARD OF; ARTICLE 27, NEW CIVIL CODE, CONSTRUED.

Article 27 presupposes that the refusal or omission of a public official is attributed
to malice or inexcusable negligence.
7. PUBLIC OFFICERS; LIABILITY, GENERAL RULE. As a rule, a public
officer, whether judicial, quasi-judicial or executive, is not personally liable to one
injured in consequence of an act performed within the scope of his official
authority, and in the line of his official duty. Where an officer is invested with
discretion and is empowered to exercise his judgment in matters brought before
him, he is sometimes called a quasi-judicial officer, and when so acting he is
usually given immunity from liability to persons who may be injured as the result
of an erroneous or mistaken decision, however erroneous his judgment may be,
provided the acts complained of are done within the scope of the officer's
authority, and without willfulness, malice of corruption.
8. ID.; CITY TREASURER WHO ACTED WITHIN THE SCOPE OF AUTHORITY,
NOT LIABLE. Where the city treasurer honestly believed that he was justified
under section 9 of the tax ordinance in collecting the sales tax on out-of-town
deliveries, considering that the company's branch office was located in the city
and that all out-of-town purchase orders for matches were filled up by the branch
office and the sales were duly reported to it and the city treasurer acted within the
scope of his authority and in consonance with his bona fide interpretation of the
tax ordinance, the fact that his action was not completely sustained by the courts
would not render him liable for damages.
9. ID.; ERRONEOUS INTERPRETATION OF ORDINANCE, NOT GROUND FOR
DAMAGES. An erroneous interpretation of an ordinance does not constitute
nor does it amount to bad faith that would entitle and aggrieved party to an award
for damages.

DECISION

AQUINO, J :
p

This case is about the legality of the tax collected by the City of Cebu on sales of
matches stored by the Philippine Match Co., Ltd. in Cebu City but delivered to
customers outside of the city.
Ordinance No. 279 of Cebu City (approved by the mayor on March 10, 1960 and
also approved by the provincial board) is "an ordinance imposing a quarterly tax
on gross sales or receipts of merchants, dealers, importers and manufacturers or
any commodity doing business" in Cebu City. It imposes a sales tax of one
percent (1%) on the gross sales, receipt or value of commodities sold, bartered,
exchanged or manufactured in the city in excess of P2,000 a quarter.

cdrep

Section 9 of the ordinance provides that, for purpose of the tax, "all delivers of
goods or commodities stored in the City of Cebu, or if not stored are sold" in that
city, "shall be considered as sales" in the city and shall be taxable.
Thus, it would seem that under the tax ordinance sales of matches consummated
outside of the city are taxable as long as the matches sold are taken from the
company's stock stored in Cebu City.
The Philippine Match Co., Ltd., whose principal office is in Manila, is engaged in
the manufacture of matches. Its factory is located at Punta, Sta. Ana, Manila. It
ships cases or cartons of matches from Manila to its branch office in Cebu City
for storage, sale and distribution within the territories and districts under its Cebu
branch or the whole Visayas-Mindanao region. Cebu City itself is just one of the
eleven districts under the company's Cebu City branch office.
The company does not question the tax on the sales of matches consummated in
Cebu City, meaning matches sold and delivered within the city.
It assails the legality of the tax which the city treasurer collected on out-of-town
deliveries of matches, to wit: (1) sales of matches booked and paid for in Cebu
City but shipped directly to customers outside of the city; (2) transfers of matches
to salesmen assigned to different agencies outside of the city and (3) shipments
of matches to provincial customers pursuant to salesmen's instructions.

The company paid under protest to the city treasurer the sum of P12,844.61 as
one percent sales tax on those three classes of out-of-town deliveries of matches
for the second quarter of 1961 to the second quarter of 1963.
In paying the tax the company accomplished the verified forms furnished by the
city treasurer's office. It submitted a statement indicating the four kinds of
transactions enumerated above, the total sales, and a summary of the deliveries
to the different agencies, as well as the invoice numbers, names of customers,
the value of the sales, the transfers of matches to salesmen outside of Cebu City,
and the computation of taxes.
Sales of matches booked and paid for in Cebu City but shipped directly to
customers outside of the city refer to orders for matches made in the city by the
company's customers, by means of personal or phone calls, for which sales
invoices are issued, and then the matches are shipped from the bodega in the
city, where the matches had been stored, to the place of business or residences
of the customers outside of the city, duly covered by bills of lading. The matches
are used and consumed outside of the city.

LLphil

Transfers of matches to salesmen assigned to different agencies outside of the

city embrace shipments of matches from the branch office in the city to the
salesmen (provided with panel cars) assigned within the province of Cebu and in
the different districts in the Visayas and Mindanao under the jurisdiction or
supervision of the Cebu City branch office. The shipments are covered by bills of
lading. No sales invoices whatsoever are issued. The matches received by the
salesmen constitute their direct cash accountability to the company. The
salesmen sell the matches within their respective territories. They issue cash
sales invoices and remit the proceeds of the sales to the company's Cebu branch
office. The value of the unsold matches constitutes their stock liability. The
matches are used and consumed outside of the city.

Shipments of matches to provincial customers pursuant to salesmen's

instructions embrace orders, by letter or telegram, sent to the branch office by the

company's salesman assigned outside of the city. The matches are shipped from
the company's bodega in the city to the customers residing outside of the city.
The salesmen issue the sales invoices. The proceeds of the sale, for which the
salesman are accountable, are remitted to the branch office. As in the first and
second kinds of transactions above-mentioned, the matches are consumed and
used outside the city.

cdphil

The company in its letter of April 15, 1961 to the city treasurer sought the refund
of the sales tax paid for out-of-town deliveries of matches. It invoked Shell
Company of the Philippines, Ltd. vs. Municipality of Sipocot, Camarines Sur, 105
Phil. 1263. In that the case sales of oil and petroleum products effected outside
the territorial limits of Sipocot were held not to be subject to the tax imposed by
an ordinance of that municipality.
The city treasurer denied the request. His stand is that under section 9 of the
ordinance all out-of-town deliveries of matches stored in the city are subject to
the sales tax imposed by the ordinance.
On August 12, 1963 the company filed the complaint herein, praying that the
ordinance be declared void insofar as it taxed the deliveries of matches outside of
Cebu City, that the city be ordered to refund to the company the said sum of
P12,844.61 as excess sales tax paid, and that the city treasurer be ordered to
pay damages.
After hearing, the trial court sustained the tax on the sales of matches booked
and paid for in Cebu City although the matches were shipped directly to
customers outside of the city. The lower court held that the said sales were
consummated in Cebu City because delivery to the carrier in the city is deemed
to be a delivery to the customers outside of the city.
But the trial court invalidated the tax on transfers of matches to salesmen
assigned to different agencies outside of the city and on shipments of matches to
provincial customers pursuant to the instructions of the salesmen. It ordered the
defendants to refund to the plaintiff the sum of P8,923.55 as taxes paid on the

said out-of-town deliveries with legal rate of interest from the respective dates of
payment.
The trial court characterized the tax on the other two transactions as a "storage
tax" and not a sales tax. It assumed that the sales were consummated outside of
the city and, hence, beyond the city's taxing power.
The city did not appeal from that decision. The company appealed from that
portion of the decision upholding the tax on sales of matches to customers
outside of the city but which sales were booked and paid for in Cebu City, and
also from the dismissal of its claim for damages against the city treasurer.
The issue is whether the City of Cebu can tax sales of matches which were
perfected and paid for in Cebu City but the matches were delivered to customers
outside of the City.
We hold that the appeal is devoid of merit because the city can validly tax the
sales of matches to customers outside of the city as long as the orders were
booked and paid for in the company's branch office in the city. Those matches
can be regarded as sold in the city, as contemplated in the ordinance, because
the matches were delivered to the carrier in Cebu City. Generally, delivery to the
carrier is delivery to the buyer (Art. 1523, Civil Code; Behn, Meyer & Co. vs.
Yangco, 38 Phil. 602).
A different interpretation would defeat the tax ordinance in question or encourage
tax evasion through the simple expedient of arranging for the delivery of the
matches at the out-skirts of the city through the purchases were effected and
paid for in the company's branch office in the city.
The municipal board of Cebu City is empowered "to provide for the levy and
collection of taxes for general and special purposes in accordance with law" (Sec.
17[a], Commonwealth Act No. 58; See. 31[1], Rep. Act No. 3857, Revised
Charter of Cebu City).

LLphil

The taxing power validly delegated to cities and municipalities is defined in the
Local Autonomy Act, Republic Act No. 2264(Pepsi-Cola Bottling Co. of the

Philippines, Inc. vs. Municipality of Tanauan, Leyte, L-31156, February 27, 1976,
69 SCRA 460), which took effect on June 19, 1959 and which provides:
"SEC.

2. Taxation.

Any

provision

of

law

to

the

contrary

notwithstanding, all chartered cities, municipalities and municipal districts

shall have authority to impose municipal license taxes or fees upon
persons engaged in any occupation or business, or exercising privileges
in chartered cities, municipalities or municipal districts by requiring them
to secure licenses at rates fixed by the municipal board or city council of
the city, the municipal council of the municipality, or the municipal district
council of the municipal district; to collect fees and charges for services
rendered by the city, municipality or municipal district; to regulate and
impose reasonable fees for services rendered in connection with any
business, profession or occupation being conducted within the city,
municipality or municipal district and otherwise to levy for public
purposes, just and uniform taxes, licenses or fees;
"Provided, That municipalities and municipal districts shall, in no case,
impose any percentage tax on sales or other taxes in any form based
thereon nor impose taxes on articles subject to specific tax, except
gasoline, under the provisions of the National International Revenue
Code;
"Provided, however, That no city, municipality or municipal district may
levy or impose any of the following: (here follows an enumeration of
internal revenue taxes)
xxx xxx xxx" **

Note that the prohibition against the imposition of percentage taxes (formerly
provided for in section 1 of Commonwealth Act No. 472) refers to municipalities
and municipal districts but not to chartered cities. (See sec. 5[1], Local Tax
Code, P.D. No. 231. Marinduque Iron Mines Agents, Inc. vs. Municipal Council of
Hinabangan, Samar, 120 Phil. 413; Ormoc Sugar Co., Inc. vs. Treasurer of
Ormoc City, L-23794, February 17, 1968, 22 SCRA 603).

Note further that the taxing power of cities, municipalities and municipal districts
may be used (1) "upon any person engaged in any occupation or business, or
exercising any privilege" therein; (2) for services rendered by those political
subdivisions or rendered in connection with any business, profession or
occupation being conducted therein, and (3) to levy, for public purposes, just and
uniform taxes, licenses or fees (C. N. Hodges vs. Municipal Board of the City of
Iloilo, 117 Phil. 164, 167. See sec. 31[25], Revised Charter of Cebu City).
Applying that jurisdictional test to the instant case, it is at once obvious that sales
of matches to customers outside of Cebu City, which sales were booked and paid
for in the company's branch office in the city, are subject to the city's taxing
power. The instant case is easily distinguishable from the Shell Company case
where the price of the oil sold was paid outside of the municipality of Sipocot, the
entity imposing the tax.
On the other hand, the ruling in Municipality of Jose Panganiban, Province of
Camarines Norte vs. Shell Company of the Philippines, Ltd., L-18349, July 30,
1966, 17 SCRA 778 that the place of delivery determines the taxable situs of the
property to be taxed cannot properly be invoked in this case. REPUBLIC ACT
NO. 1435, the law which enabled the Municipality of Jose Panganiban to levy the
sales tax involved in that case, specifies that the tax may be levied upon oils
"distributed within the limits of the city or municipality", meaning the place where
the oils were delivered. That feature of the Jose Panganiban case distinguishes it
from this case.
The sales in the instant case were finalized in the city and the matches sold were
stored in the city. The fact that the matches were delivered to customers, whose
places of business were outside of the city, would not place those sales beyond
the city's taxing power. Those sales formed part of the merchandising business
being carried on by the company in the city. In essence, they are the same as
sales of matches fully consummated in the city.
Furthermore, because the seller's place of business is in Cebu City, it cannot be
sensibly argued that such sales should be considered as transactions subject to

the taxing power of the political subdivisions where the customers resided and
accepted delivery of the matches sold.
The company in its second assignment of error contends that the trial court erred
in not ordering defendant acting city treasurer to pay exemplary damages of
P20,000 and attorney's fees.

LexLib

The claim for damages is predicated on articles 19, 20, 21, 27 and 2229 of the
Civil Code. It is argued that the city treasurer refused and neglected without just
cause to perform his duty and to act with justice and good faith. The company
faults the city treasurer for not following the opinion of the city fiscal, as legal
adviser of the city, that all out-of-town deliveries of matches are not subject to
sales tax because such transaction were effected outside of the city's territorial
limits.
In reply, it is argued for defendant city treasurer that in enforcing the tax
ordinance in question he was simply complying with his duty as collector of taxes
(Sec. 50, Revised Charter of Cebu City). Moreover, he had no choice but to
enforce the ordinance because according to section 357 of the Revised Manual
of Instructions to Treasurer's, "a tax ordinance will be enforced in accordance
with its provisions" until declared illegal or void by a competent court, or
otherwise revoked by the council or board from which it originated.
Furthermore, the Secretary of Finance had reminded the city treasurer that a tax
ordinance approved by the provincial board is operative and must be enforced
without prejudice to the right of any affected taxpayer to assail its legality in the
judicial forum. The fiscal's opinion on the legality of an ordinance is merely
advisory and has no binding effect.

Article 27 of the Civil Code provides that "any person suffering material or moral
loss because a public servant or employee refuses or neglects, without just
cause, to perform his official duty may file an action for damages and other relief
against the latter, without prejudice to any disciplinary administrative action that
may be taken."

Article 27 presupposes that the refusal or omission of a public official is

attributable to malice or inexcusable negligence. In this case, it cannot be said
that the city treasurer acted wilfully or was grossly negligent in not refunding to
the plaintiff the taxes which it paid under protest on out-of-town sales of matches.
The record clearly reveals that the city treasurer honestly believed that he was
justified under section 9 of the tax ordinance in collecting the sales tax on out-oftown deliveries, considering that the company's branch office was located in
Cebu City and that all out-of-town purchase orders for matches were filled up by
the branch office and the sales were duly reported to it.
The city treasurer acted within the scope of his authority and in consonance with
his bona fide interpretation of the tax ordinance. The fact that his action was not
completely sustained by the courts would not render him liable for damages. We
have upheld his act of taxing sales of matches booked and paid for in the city.

prLL

"As a rule, a public officer, whether judicial, quasi-judicial, or executive, is not

personally liable to one injured in consequence of an act performed within the
scope of his official authority, and in the line of his official duty." "Where an officer
is invested with discretion and is empowered to exercise his judgment in matters
brought before him, he is sometimes called a quasi-judicial officer, and when so
acting he is usually given immunity from liability to persons who may be injured
as the result or an erroneous or mistaken decision, however erroneous his
judgment may be, provided the acts complained of are done within the scope of
the officer's authority, and without willfulness, malice or corruption." (63 Am Jur
2nd 798, 799 cited in Philippine Racing Club, Inc. vs. Bonifacio, 109 Phil. 233,
240-241).
It has been held that an erroneous interpretation of an ordinance does not
constitute nor does it amount to bad faith that would entitle an aggrieved party to
an award for damages (Cabungcal vs. Cordova, 120 Phil. 567, 572-3). That
salutary rule may be applied in this case.
Exemplary damages may be claimed in addition to moral, temperate, liquidated
or compensatory damages (Art. 2229, Civil Code). Attorney's fees are being

claimed herein as actual damages. We find that it would not be just and equitable
to award attorney's fees in this case against the City of Cebu and its treasurer
(See Art. 2208, Civil Code).
WHEREFORE, the trial court's judgment is affirmed. No costs.
SO ORDERED.
|||

(Philippine Match Co., Ltd. v. City of Cebu, G.R. No. L-30745, January 18, 1978)

THIRD DIVISION
[G.R. No. 149110. April 9, 2003.]
NATIONAL POWER CORPORATION, petitioner, vs. CITY OF
CABANATUAN, respondent.
The Solicitor General for petitioner.
Edgardo G. Villarin and Trese D. Wenceslao for respondent.
SYNOPSIS
Petitioner

is a

government

owned

and

controlled

corporation

created

under Commonwealth Act No. 120, as amended. For many years, petitioner sold
electric power to the residents of Cabanatuan City. Pursuant to a 1992 ordinance,
the respondent assessed the petitioner a franchise tax. In refusing to pay the tax
assessment, petitioner argued that the respondent had no authority to impose tax
on government entities like itself and that it was a tax exempt entity by express
provisions of law. Hence, respondent filed a collection suit demanding payment of
the assessed tax due alleging that petitioner's exemption from local taxes has
been repealed. The trial court dismissed the case and ruled that the tax
exemption privileges granted to petitioner still subsists. On appeal, the Court of
Appeals reversed the trial court's order. Petitioner's motion for reconsideration

was denied by the appellate court. Hence, this petition for review filed before the
Supreme Court.
The Supreme Court denied this petition and affirmed the decision of the Court of
Appeals. According to the Court, one of the most significant provisions of the
Local Government Code (LGC) is the removal of the blanket exclusion of
instrumentalities and agencies of the national government from the coverage of
local taxation. Although as a general rule, Local Government Units (LGU) cannot
impose taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, this rule now admits an exception, i.e., when
specific provisions of the LGC authorize the LGU to impose taxes, fees or
charges on the aforementioned entities. In the case at bar, Section 151 in relation
to Section 137 of the LGC clearly authorized the respondent city government to
impose on the petitioner the franchise tax in question.
SYLLABUS
1. TAXATION;

TAXES

AS

THE

LIFEBLOOD

OF

THE

GOVERNMENT;

CONSTRUED. Taxes are the lifeblood of the government, for without taxes,
the government can neither exist nor endure. A principal attribute of sovereignty,
the exercise of taxing power derives its source from the very existence of the
state whose social contract with its citizens obliges it to promote public interest
and common good. The theory behind the exercise of the power to tax emanates
from necessity; without taxes, government cannot fulfill its mandate of promoting
the general welfare and well-being of the people.
2. ID.; POWER TO TAX; LOCAL GOVERNMENT UNITS; ENJOY DIRECT
AUTHORITY TO LEVY TAXES, FEES AND OTHER CHARGES PURSUANT TO
ARTICLE X, SECTION 5 OF THE CONSTITUTION; RATIONALE. In recent
years, the increasing social challenges of the times expanded the scope of state
activity, and taxation has become a tool to realize social justice and the equitable
distribution of wealth, economic progress and the protection of local industries as
well as public welfare and similar objectives. Taxation assumes even greater

significance with the ratification of the 1987 Constitution. Thenceforth, the power
to tax is no longer vested exclusively on Congress; local legislative bodies are
now given direct authority to levy taxes, fees and other charges pursuant to
Article X, Section 5 of the 1987 Constitution, viz: "Section 5. Each Local
Government unit shall have the power to create its own sources of revenue, to
levy taxes, fees and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy. Such
taxes, fees and charges shall accrue exclusively to the Local Governments." This
paradigm shift results from the realization that genuine development can be
achieved only by strengthening local autonomy and promoting decentralization of
governance. For a long time, the country's highly centralized government
structure has bred a culture of dependence among local government leaders
upon the national leadership. It has also "dampened the spirit of initiative,
innovation and imaginative resilience in matters of local development on the part
of local government leaders." The only way to shatter this culture of dependence
is to give the LGUs a wider role in the delivery of basic services, and confer them
sufficient powers to generate their own sources for the purpose. To achieve this
goal, Section 3 of Article X of the 1987 Constitution mandates Congress to enact
a local government code that will, consistent with the basic policy of local
autonomy, set the guidelines and limitations to this grant of taxing powers.
3. ID.; ID.; ID.; CANNOT IMPOSE TAXES, FEES OR CHARGES OF ANY KIND
ON

THE

NATIONAL

GOVERNMENT,

ITS

AGENCIES

AND

INSTRUMENTALITIES AS A RULE; EXCEPTION. Considered as the most

revolutionary piece of legislation on local autonomy, the LGC effectively deals
with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to
include taxes which were prohibited by previous laws such as the imposition of
taxes on forest products, forest concessionaires, mineral products, mining
operations, and the like. The LGC likewise provides enough flexibility to impose
tax rates in accordance with their needs and capabilities. It does not prescribe
graduated fixed rates but merely specifies the minimum and maximum tax rates
and leaves the determination of the actual rates to the respective sanggunian.
One of the most significant provisions of the LGC is the removal of the blanket

exclusion of instrumentalities and agencies of the national government from the

coverage of local taxation. Although as a general rule, LGUs cannot impose
taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e., when specific provisions
of the LGCauthorize the LGUs to impose taxes, fees or charges on the
aforementioned entities, viz: "Section 133. Common Limitations on the Taxing
Powers of the Local Government Units Unless otherwise provided herein, the
exercise

of

the

taxing

powers

of

provinces,

cities,

municipalities,

and barangays shall not extend to the levy of the following: . . . (o) Taxes, fees, or
charges of any kind on the National Government, its agencies and
instrumentalities, and local government units."
4. MERCANTILE LAW; FRANCHISE; DEFINED AND CONSTRUED. In its
general signification, a franchise is a privilege conferred by government authority,
which does not belong to citizens of the country generally as a matter of common
right. In its specific sense, a franchise may refer to a general or primary
franchise, or to a special or secondary franchise. The former relates to the right
to exist as a corporation, by virtue of duly approved articles of incorporation, or a
charter pursuant to a special law creating the corporation. The right under a
primary or general franchise is vested in the individuals who compose the
corporation and not in the corporation itself. On the other hand, the latter refers to
the right or privileges conferred upon an existing corporation such as the right to
use the streets of a municipality to lay pipes of tracks, erect poles or string wires.
The rights under a secondary or special franchise are vested in the corporation
and may ordinarily be conveyed or mortgaged under a general power granted to
a corporation to dispose of its property, except such special or secondary
franchises as are charged with a public use.
5. TAXATION;

FRANCHISE

TAX

ISDHcT

IMPOSED

UNDER

THE

LOCAL

GOVERNMENT CODE; REQUISITES. In Section 131 (m) of theLGC,

Congress unmistakably defined a franchise in the sense of a secondary or
special franchise. This is to avoid any confusion when the word franchise is used
in the context of taxation. As commonly used, a franchise tax is "a tax on the

privilege of transacting business in the state and exercising corporate franchises

granted by the state." It is not levied on the corporation simply for existing as a
corporation, upon its property or its income, but on its exercise of the rights or
privileges granted to it by the government. Hence, a corporation need not pay
franchise tax from the time it ceased to do business and exercise its franchise. It
is within this context that the phrase "tax on businesses enjoying a franchise" in
Section 137 of theLGC should be interpreted and understood. Verily, to determine
whether the petitioner is covered by the franchise tax in question, the following
requisites should concur: (1) that petitioner has a "franchise" in the sense of a
secondary or special franchise; and (2) that it is exercising its rights or privileges
under this franchise within the territory of the respondent city government. To
stress, a franchise tax is imposed based not on the ownership but on the exercise
by the corporation of a privilege to do business. The taxable entity is the
corporation which exercises the franchise, and not the individual stockholders.
6. ID.; TAX EXEMPTION; CONSTRUED STRONGLY AGAINST THE CLAIMANT;
APPLICATION IN CASE AT BAR. As a rule, tax exemptions are construed
strongly against the claimant. Exemptions must be shown to exist clearly and
categorically, and supported by clear legal provisions. In the case at bar, the
petitioner's sole refuge is Section 13 of Rep. Act No. 6395exempting from, among
others, "all income taxes, franchise taxes and realty taxes to be paid to the
National Government, its provinces, cities, municipalities and other government
agencies and instrumentalities." However, Section 193 of the LGCwithdrew,
subject to limited exceptions, the sweeping tax privileges previously enjoyed by
private and public corporations. Contrary to the contention of petitioner, Section
193 of the LGC is an express, albeit general, repeal of all statutes granting tax
exemptions from local taxes. It reads: "Sec. 193. Withdrawal of Tax Exemption
Privileges. Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local
water districts, cooperatives duly registered under R.A. No. 6938, non-stock and
non-profit hospitals and educational institutions, are hereby withdrawn upon the
effectivity of this Code." It is a basic precept of statutory construction that the

express mention of one person, thing, act, or consequence excludes all others as
expressed in the familiar maxim expressio unius est exclusio alterius. Not being a
local water district, a cooperative registered under R.A. No. 6938, or a non-stock
and non-profit hospital or educational institution, petitioner clearly does not
belong to the exception. It is therefore incumbent upon the petitioner to point to
some provisions of the LGC that expressly grant it exemption from local taxes.

7. POLITICAL

LAW;

GOVERNMENT

OWNED

AND

CONTROLLED

CORPORATION; CONSTRUED. Section 2 of Pres. Decree No. 2029

classifies government-owned or controlled corporations (GOCCs) into those
performing

governmental

functions

and

those

performing

proprietary

functions, viz: "A government-owned or controlled corporation is a stock or a nonstock corporation, whether performing governmental or proprietary functions,
which is directly chartered by special law or if organized under the general
corporation law is owned or controlled by the government directly, or indirectly
through a parent corporation or subsidiary corporation, to the extent of at least a
majority of its outstanding voting capital stock . . . ." Governmental functions are
those pertaining to the administration of government, and as such, are treated as
absolute obligation on the part of the state to perform while proprietary functions
are those that are undertaken only by way of advancing the general interest of
society, and are merely optional on the government. Included in the class of
GOCCs performing proprietary functions are "business-like" entities such as the
National Steel Corporation (NSC), the National Development Corporation (NDC),
the Social Security System (SSS), the Government Service Insurance System
(GSIS), and the National Water Sewerage Authority (NAWASA), among others.

DECISION

PUNO, J :
p

This is a petition for review 1 of the Decision 2 and the Resolution 3 of the Court of
Appeals dated March 12, 2001 and July 10, 2001, respectively, finding petitioner
National Power Corporation (NPC) liable to pay franchise tax to respondent City
of Cabanatuan.
Petitioner

is

CEDScA

government-owned

and

controlled

corporation

created

under Commonwealth Act No. 120, as amended. 4 It is tasked to undertake the

"development of hydroelectric generations of power and the production of
electricity from nuclear, geothermal and other sources, as well as, the
transmission of electric power on a nationwide basis." 5 Concomitant to its
mandated duty, petitioner has, among others, the power to construct, operate and
maintain power plants, auxiliary plants, power stations and substations for the
purpose of developing hydraulic power and supplying such power to the
inhabitants. 6
For many years now, petitioner sells electric power to the residents of
Cabanatuan City, posting a gross income of P107,814,187.96 in 1992. 7 Pursuant
to Section 37 of Ordinance No. 165-92, 8 the respondent assessed the petitioner
a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter's
gross receipts for the preceding year. 9
Petitioner, whose capital stock was subscribed and paid wholly by the Philippine
Government, 10 refused to pay the tax assessment. It argued that the respondent
has no authority to impose tax on government entities. Petitioner also contended
that as a non-profit organization, it is exempted from the payment of all forms of
taxes, charges, duties or fees 11 in accordance with Sec. 13 of Rep. Act No.
6395, as amended, viz:
Sec. 13. Non-profit Character of the Corporation; Exemption from all
Taxes, Duties, Fees, Imposts and Other Charges by Government and
Governmental Instrumentalities. The Corporation shall be non-profit
and shall devote all its return from its capital investment, as well as
excess revenues from its operation, for expansion. To enable the
Corporation to pay its indebtedness and obligations and in furtherance

and effective implementation of the policy enunciated in Section one of

this Act, the Corporation is hereby exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges, costs
and service fees in any court or administrative proceedings in which it
may be a party, restrictions and duties to the Republic of the Philippines,
its provinces, cities, municipalities and other government agencies and
instrumentalities;
(b) From all income taxes, franchise taxes and realty taxes to be paid to
the National Government, its provinces, cities, municipalities and other
government agencies and instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax,
and wharfage fees on import of foreign goods required for its operations
and projects; and
(d) From all taxes, duties, fees, imposts, and all other charges imposed
by the Republic of the Philippines, its provinces, cities, municipalities and
other government agencies and instrumentalities, on all petroleum
products used by the Corporation in the generation, transmission,
utilization, and sale of electric power."

12

The respondent filed a collection suit in the Regional Trial Court of Cabanatuan
City, demanding that petitioner pay the assessed tax due, plus a surcharge
equivalent to 25% of the amount of tax, and 2% monthly interest.

13

Respondent

alleged that petitioner's exemption from local taxes has been repealed by Section
193 of Rep. Act No. 7160, 14 which reads as follows:
"Sec. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including
government owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code."

On January 25, 1996, the trial court issued an Order

15

dismissing the case. It

ruled that the tax exemption privileges granted to petitioner subsist despite the
passage of Rep. Act No. 7160 for the following reasons: (1) Rep. Act No. 6395 is
a particular law and it may not be repealed by Rep. Act No. 7160 which is a
general law; (2) Section 193 of Rep. Act No. 7160 is in the nature of an implied
repeal which is not favored; and (3) local governments have no power to tax
instrumentalities of the national government. Pertinent portion of the Order reads:
"The question of whether a particular law has been repealed or not by a
subsequent law is a matter of legislative intent. The lawmakers may
expressly repeal a law by incorporating therein repealing provisions
which expressly and specifically cite(s) the particular law or laws, and
portions thereof, that are intended to be repealed. A declaration in a
statute, usually in its repealing clause, that a particular and specific law,
identified by its number or title is repealed is an express repeal; all others
are implied repeal. Sec. 193 of R.A. No. 7160 is an implied repealing
clause because it fails to identify the act or acts that are intended to be
repealed. It is a well-settled rule of statutory construction that repeals of
statutes by implication are not favored. The presumption is against
inconsistency and repugnancy for the legislative is presumed to know
the existing laws on the subject and not to have enacted inconsistent or
conflicting statutes. It is also a well-settled rule that, generally, general
law does not repeal a special law unless it clearly appears that the
legislative has intended by the latter general act to modify or repeal the
earlier special law. Thus, despite the passage of R.A. No. 7160 from
which the questioned Ordinance No. 165-92 was based, the tax
exemption privileges of defendant NPC remain.
Another point going against plaintiff in this case is the ruling of the
Supreme Court in the case of Basco vs. Philippine Amusement and
Gaming Corporation, 197 SCRA 52, where it was held that:
'Local governments have no power to tax instrumentalities of the
National Government. PAGCOR is a government owned or

controlled corporation with an original charter, PD 1869. All of its

shares of stocks are owned by the National Government. . . .
Being an instrumentality of the government, PAGCOR should be
and actually is exempt from local taxes. Otherwise, its operation
might be burdened, impeded or subjected to control by mere local
government.'
Like PAGCOR, NPC, being a government owned and controlled
corporation with an original charter and its shares of stocks owned by
the National Government, is beyond the taxing power of the Local
Government. Corollary to this, it should be noted here that in the NPC
Charter's declaration of Policy, Congress declared that: '. . . (2) the total
electrification of the Philippines through the development of power from
all services to meet the needs of industrial development and dispersal
and needs of rural electrification are primary objectives of the nations
which

shall

be

pursuedcoordinately

and

supported

by

all

instrumentalities and agencies of the government, including its financial

institutions.' (emphasis supplied). To allow plaintiff to subject defendant
to its tax-ordinance would be to impede the avowed goal of this
government instrumentality.
Unlike the State, a city or municipality has no inherent power of taxation.
Its taxing power is limited to that which is provided for in its charter or
other statute. Any grant of taxing power is to be construed strictly, with
doubts resolved against its existence.
From the existing law and the rulings of the Supreme Court itself, it is
very clear that the plaintiff could not impose the subject tax on the
defendant." 16

On appeal, the Court of Appeals reversed the trial court's Order

17

on the ground

that Section 193, in relation to Sections 137 and 151 of the LGC, expressly
withdrew the exemptions granted to the petitioner.

18

It ordered the petitioner to

pay the respondent city government the following: (a) the sum of P808,606.41

representing the franchise tax due based on gross receipts for the year 1992, (b)
the tax due every year thereafter based in the gross receipts earned by NPC, (c)
in all cases, to pay a surcharge of 25% of the tax due and unpaid, and (d) the
sum of P10,000.00 as litigation expense. 19
On April 4, 2001, the petitioner filed a Motion for Reconsideration on the Court of
Appeal's Decision. This was denied by the appellate court, viz:

"The Court finds no merit in NPC's motion for reconsideration. Its

arguments reiterated therein that the taxing power of the province under
Art. 137 (sic) of the Local Government Code refers merely to private
persons or corporations in which category it (NPC) does not belong, and
that the LGC (RA 7160) which is a general law may not impliedly repeal
the NPC Charter which is a special law finds the answer in Section
193 of the LGC to the effect that 'tax exemptions or incentives granted to,
or presently enjoyed by all persons, whether natural or juridical, including
government-owned or controlled corporations except local water
districts . . . are hereby withdrawn.' The repeal is direct and unequivocal,
not implied.
IN VIEW WHEREOF, the motion for reconsideration is hereby DENIED.
SO ORDERED." 20

In this petition for review, petitioner raises the following issues:

"A. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
NPC, A PUBLIC NON-PROFIT CORPORATION, IS LIABLE TO
PAY A FRANCHISE TAX AS IT FAILED TO CONSIDER THAT
SECTION 137 OF THE LOCAL GOVERNMENT CODE IN
RELATION TO SECTION 131 APPLIES ONLY TO PRIVATE
PERSONS OR CORPORATIONS ENJOYING A FRANCHISE.
B. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
NPC'S EXEMPTION FROM ALL FORMS OF TAXES HAS BEEN

REPEALED

BY

THE

PROVISION

OF

THE

LOCAL

GOVERNMENT CODE AS THE ENACTMENT OF A LATER

LEGISLATION, WHICH IS A GENERAL LAW, CANNOT BE
CONSTRUED TO HAVE REPEALED A SPECIAL LAW.
C. THE

COURT

OF

APPEALS

GRAVELY

ERRED

IN

NOT

CONSIDERING THAT AN EXERCISE OF POLICE POWER

THROUGH TAX EXEMPTION SHOULD PREVAIL OVER THE
LOCAL GOVERNMENT CODE." 21

It is beyond dispute that the respondent city government has the authority to
issue Ordinance No. 165-92 and impose an annual tax on "businesses enjoying
a franchise," pursuant to Section 151 in relation to Section 137 of the LGC, viz:
"Sec. 137. Franchise Tax. Notwithstanding any exemption granted by
any law or other special law, the province may impose a tax on
businesses enjoying a franchise, at a rate not exceeding fifty percent
(50%) of one percent (1%) of the gross annual receipts for the preceding
calendar year based on the incoming receipt, or realized, within its
territorial jurisdiction.
In the case of a newly started business, the tax shall not exceed onetwentieth (1/20) of one percent (1%) of the capital investment. In the
succeeding calendar year, regardless of when the business started to
operate, the tax shall be based on the gross receipts for the preceding
calendar year, or any fraction thereof, as provided herein." (emphasis
supplied)
xxx xxx xxx
Sec. 151. Scope of Taxing Powers. Except as otherwise provided in
this Code, the city, may levy the taxes, fees, and charges which the
province or municipality may impose: Provided, however, That the taxes,
fees and charges levied and collected by highly urbanized and
independent component cities shall accrue to them and distributed in
accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent
(50%) except the rates of professional and amusement taxes."

Petitioner, however, submits that it is not liable to pay an annual franchise tax to
the respondent city government. It contends that Sections 137 and 151 of
the LGC in relation to Section 131, limit the taxing power of the respondent city
government to private entities that are engaged in trade or occupation for profit. 22
Section 131 (m) of the LGC defines a "franchise" as "a right or privilege, affected
with public interest which is conferred uponprivate persons or corporations, under
such terms and conditions as the government and its political subdivisions may
impose in the interest of the public welfare, security and safety." From the
phraseology of this provision, the petitioner claims that the word "private"
modifies the terms "persons" and "corporations." Hence, when the LGC uses the
term "franchise," petitioner submits that it should refer specifically to franchises
granted to private natural persons and to private corporations. 23 Ergo, its charter
should not be considered a "franchise" for the purpose of imposing the franchise
tax in question.
On the other hand, Section 131 (d) of the LGC defines "business" as "trade or
commercial activity regularly engaged in as means of livelihood or with a view to
profit." Petitioner claims that it is not engaged in an activity for profit, in as much
as its charter specifically provides that it is a "non-profit organization." In any
case, petitioner argues that the accumulation of profit is merely incidental to its
operation; all these profits are required by law to be channeled for expansion and
improvement of its facilities and services. 24
Petitioner

also

alleges

that

it

is

an

instrumentality

of

the

National

Government, 25 and as such, may not be taxed by the respondent city

government. It cites the doctrine in Basco vs. Philippine Amusement and Gaming
Corporation 26 where this Court held that local governments have no power to tax
instrumentalities of the National Government, viz:

"Local governments have no power to tax instrumentalities of the

National Government.
PAGCOR has a dual role, to operate and regulate gambling casinos. The
latter role is governmental, which places it in the category of an agency
or instrumentality of the Government. Being an instrumentality of the
Government, PAGCOR should be and actually is exempt from local
taxes. Otherwise, its operation might be burdened, impeded or subjected
to control by a mere local government.
'The states have no power by taxation or otherwise, to retard,
impede, burden or in any manner control the operation of
constitutional laws enacted by Congress to carry into execution
the powers vested in the federal government. (MC Culloch v.
Maryland, 4 Wheat 316, 4 L Ed. 579)'
This doctrine emanates from the 'supremacy' of the National
Government over local governments.
'Justice Holmes, speaking for the Supreme Court, made reference
to the entire absence of power on the part of the States to touch,
in that way (taxation) at least, the instrumentalities of the United
States (Johnson v. Maryland, 254 US 51) and it can be agreed
that no state or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from consummating
its federal responsibilities, or even seriously burden it from
accomplishment

of

them.'

(Antieau, Modern

Constitutional

Law, Vol. 2, p. 140, italics supplied)

Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable
activities or enterprise using the power to tax as 'a tool regulation' (U.S.
v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the 'power to
destroy' (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an

instrumentality or creation of the very entity which has the inherent

power to wield it." 27

Petitioner contends that Section 193 of Rep. Act No. 7160, withdrawing the tax
privileges of government-owned or controlled corporations, is in the nature of an
implied repeal. A special law, its charter cannot be amended or modified impliedly
by the local government code which is a general law. Consequently, petitioner
claims that its exemption from all taxes, fees or charges under its charter subsists
despite the passage of the LGC, viz:
"It is a well-settled rule of statutory construction that repeals of statutes
by implication are not favored and as much as possible, effect must be
given to all enactments of the legislature. Moreover, it has to be
conceded that the charter of the NPC constitutes a special law. Republic
Act No. 7160, is a general law. It is a basic rule in statutory construction
that the enactment of a later legislation which is a general law cannot be
construed to have repealed a special law. Where there is a conflict
between a general law and a special statute, the special statute should
prevail since it evinces the legislative intent more clearly than the general
statute. 28

Finally, petitioner submits that the charter of the NPC, being a valid exercise of
police power, should prevail over the LGC. It alleges that the power of the local
government to impose franchise tax is subordinate to petitioner's exemption from
taxation; "police power being the most pervasive, the least limitable and most
demanding of all powers, including the power of taxation." 29
The petition is without merit.
Taxes are the lifeblood of the government,

30

for without taxes, the government

can neither exist nor endure. A principal attribute of sovereignty,

31

the exercise of

taxing power derives its source from the very existence of the state whose social
contract with its citizens obliges it to promote public interest and common good.
The theory behind the exercise of the power to tax emanates from

necessity; 32 without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people.
In recent years, the increasing social challenges of the times expanded the scope
of state activity, and taxation has become a tool to realize social justice and the
equitable distribution of wealth, economic progress and the protection of local
industries as well as public welfare and similar objectives.

33

Taxation assumes

even greater significance with the ratification of the 1987 Constitution.

Thenceforth, the power to tax is no longer vested exclusively on Congress; local
legislative bodies are now given direct authority to levy taxes, fees and other
charges 34 pursuant to Article X, Section 5 of the 1987 Constitution, viz:
"Section 5. Each Local Government unit shall have the power to create
its own sources of revenue, to levy taxes, fees and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees and charges
shall accrue exclusively to the Local Governments."

This paradigm shift results from the realization that genuine development can be
achieved only by strengthening local autonomy and promoting decentralization of
governance. For a long time, the country's highly centralized government
structure has bred a culture of dependence among local government leaders
upon the national leadership. It has also "dampened the spirit of initiative,
innovation and imaginative resilience in matters of local development on the part
of local government leaders." 35 The only way to shatter this culture of
dependence is to give the LGUs a wider role in the delivery of basic services, and
confer them sufficient powers to generate their own sources for the purpose. To
achieve this goal, Section 3 of Article X of the 1987 Constitution mandates
Congress to enact a local government code that will, consistent with the basic
policy of local autonomy, set the guidelines and limitations to this grant of taxing
powers, viz:

"Section 3. The Congress shall enact a local government code which

shall provide for a more responsive and accountable local government
structure instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities, and
resources, and provide for the qualifications, election, appointment and
removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and operation
of the local units."

To recall, prior to the enactment of the Rep. Act No. 7160, 36 also known as
the Local Government Code of 1991 (LGC), various measures have been
enacted to promote local autonomy. These include the Barrio Charter of
1959, 37 the Local Autonomy Act of 1959, 38 the Decentralization Act of
1967 39 and the Local Government Code of 1983. 40 Despite these initiatives,
however, the shackles of dependence on the national government remained.
Local government units were faced with the same problems that hamper their
capabilities to participate effectively in the national development efforts, among
which are: (a) inadequate tax base, (b) lack of fiscal control over external sources
of income, (c) limited authority to prioritize and approve development projects, (d)
heavy dependence on external sources of income, and (e) limited supervisory
control over personnel of national line agencies. 41
Considered

as

the

most

revolutionary

piece

of

legislation

on

local

autonomy, 42 the LGC effectively deals with the fiscal constraints faced by LGUs.
It widens the tax base of LGUs to include taxes which were prohibited by
previous laws such as the imposition of taxes on forest products, forest
concessionaires,

mineral

products,

mining

operations,

and

the

like.

The LGClikewise provides enough flexibility to impose tax rates in accordance

with their needs and capabilities. It does not prescribe graduated fixed rates but
merely specifies the minimum and maximum tax rates and leaves the
determination of the actual rates to the respective sanggunian. 43

One of the most significant provisions of the LGC is the removal of the blanket
exclusion of instrumentalities and agencies of the national government from the
coverage of local taxation. Although as a general rule, LGUs cannot impose
taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e., when specific provisions
of the LGC authorize the LGUs to impose taxes, fees or charges on the
aforementioned entities, viz:
"Section 133. Common Limitations on the Taxing Powers of the Local
Government Units. Unless otherwise provided herein, the exercise of
the

taxing

powers

of

provinces,

cities,

municipalities,

and barangays shall not extend to the levy of the following:

xxx xxx xxx
(o) Taxes, fees, or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units." (emphasis
supplied)

In view of the afore-quoted provision of the LGC, the doctrine in Basco vs.
Philippine Amusement and Gaming Corporation

44relied

upon by the petitioner to

support its claim no longer applies. To emphasize, the Basco case was decided
prior to the effectivity of the LGC, when no law empowering the local government
units to tax instrumentalities of the National Government was in effect. However,
as this Court ruled in the case of Mactan Cebu International Airport Authority
(MCIAA) vs. Marcos, 45 nothing prevents Congress from decreeing that even
instrumentalities or agencies of the government performing governmental
functions may be subject to tax. 46 In enacting the LGC, Congress exercised its
prerogative to tax instrumentalities and agencies of government as it sees fit.
Thus, after reviewing the specific provisions of the LGC, this Court held that
MCIAA, although an instrumentality of the national government, was subject to
real property tax, viz:
"Thus, reading together Sections 133, 232, and 234 of the LGC, we
conclude that as a general rule, as laid down in Section 133, the taxing

power of local governments cannot extend to the levy of inter alia, 'taxes,
fees and charges of any kind on the national government, its agencies
and instrumentalities, and local government units'; however, pursuant to
Section 232, provinces, cities and municipalities in the Metropolitan
Manila Area may impose the real property tax except on,inter alia, 'real
property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted for
consideration or otherwise, to a taxable person as provided in the item
(a) of the first paragraph of Section 12.'"

47

In the case at bar, Section 151 in relation to Section 137 of the LGC clearly
authorizes the respondent city government to impose on the petitioner the
franchise tax in question.

STIEHc

In its general signification, a franchise is a privilege conferred by government

authority, which does not belong to citizens of the country generally as a matter
of common right. 48 In its specific sense, a franchise may refer to a general or
primary franchise, or to a special or secondary franchise. The former relates to
the right to exist as a corporation, by virtue of duly approved articles of
incorporation,

or

charter

pursuant

to

special

law

creating

the

corporation. 49 The right under a primary or general franchise is vested in the

individuals who compose the corporation and not in the corporation itself.

50

On

the other hand, the latter refers to the right or privileges conferred upon an
existing corporation such as the right to use the streets of a municipality to lay
pipes of tracks, erect poles or string wires. 51 The rights under a secondary or
special franchise are vested in the corporation and may ordinarily be conveyed or
mortgaged under a general power granted to a corporation to dispose of its
property, except such special or secondary franchises as are charged with a
public use. 52
In Section 131 (m) of the LGC, Congress unmistakably defined a franchise in the
sense of a secondary or special franchise. This is to avoid any confusion when
the word franchise is used in the context of taxation. As commonly used,
a franchise taxis "a tax on the privilege of transacting business in the state and

exercising corporate franchises granted by the state."

53

It is not levied on the

corporation simply for existing as a corporation, upon its property

54

or its

income, 55 but on its exercise of the rights or privileges granted to it by the

government. Hence, a corporation need not pay franchise tax from the time it
ceased to do business and exercise its franchise.

56

It is within this context that

the phrase "tax on businesses enjoying a franchise" in Section 137 of

the LGC should be interpreted and understood. Verily, to determine whether the
petitioner is covered by the franchise tax in question, the following requisites
should concur: (1) that petitioner has a "franchise" in the sense of a secondary or
special franchise; and (2) that it is exercising its rights or privileges under this
franchise within the territory of the respondent city government.
Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended
by Rep. Act No. 7395, constitutes petitioner's primary and secondary franchises.
It serves as the petitioner's charter, defining its composition, capitalization, the
appointment and the specific duties of its corporate officers, and its corporate life
span. 57 As its secondary franchise,Commonwealth Act No. 120, as amended,
vests the petitioner the following powers which are not available to ordinary
corporations, viz:
"xxx xxx xxx
(e) To conduct investigations and surveys for the development of water
power in any part of the Philippines;
(f) To take water from any public stream, river, creek, lake, spring or
waterfall in the Philippines, for the purposes specified in this Act;
to intercept and divert the flow of waters from lands of riparian
owners and from persons owning or interested in waters which
are or may be necessary for said purposes, upon payment of just
compensation therefor; to alter, straighten, obstruct or increase
the flow of water in streams or water channels intersecting or
connecting therewith or contiguous to its works or any part
thereof. Provided, That just compensation shall be paid to any

person or persons whose property is, directly or indirectly,

adversely affected or damaged thereby;
(g) To construct, operate and maintain power plants, auxiliary plants,
dams, reservoirs, pipes, mains, transmission lines, power stations
and substations, and other works for the purpose of developing
hydraulic power from any river, creek, lake, spring and waterfall in
the Philippines and supplying such power to the inhabitants
thereof, to acquire, construct, install, maintain, operate, and
improve gas, oil, or steam engines, and/or other prime movers,
generators and machinery in plants and/or auxiliary plants for the
production of electric power; to establish, develop, operate,
maintain and administer power and lighting systems for the
transmission and utilization of its power generation; to sell electric
power in bulk to (1) industrial enterprises, (2) city, municipal or
provincial systems and other government institutions, (3) electric
cooperatives,

(4)

franchise

holders,

and

(5)

real

estate

subdivisions . . .;

(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage,

encumber and otherwise dispose of property incident to, or
necessary, convenient or proper to carry out the purposes for
which the Corporation was created: Provided, That in case a right
of way is necessary for its transmission lines, easement of right of
way shall only be sought: Provided, however, That in case the
property itself shall be acquired by purchase, the cost thereof
shall be the fair market value at the time of the taking of such
property;
(i) To construct works across, or otherwise, any stream, watercourse,
canal, ditch, flume, street, avenue, highway or railway of private

and public ownership, as the location of said works may require . .

.;
(j) To exercise the right of eminent domain for the purpose of this Act in
the manner provided by law for instituting condemnation
proceedings

by

the

national,

provincial

and

municipal

governments;
xxx xxx xxx
(m) To cooperate with, and to coordinate its operations with those of the
National Electrification Administration and public service entities;
(n) To exercise complete jurisdiction and control over watersheds
surrounding the reservoirs of plants and/or projects constructed or
proposed

to

be

constructed

by

the

Corporation.

Upon

determination by the Corporation of the areas required for

watersheds for a specific project, the Bureau of Forestry, the
Reforestation Administration and the Bureau of Lands shall, upon
written advice by the Corporation, forthwith surrender jurisdiction
to the Corporation of all areas embraced within the watersheds,
subject to existing private rights, the needs of waterworks
systems, and the requirements of domestic water supply;
(o) In the prosecution and maintenance of its projects, the Corporation
shall adopt measures to prevent environmental pollution and
promote the conservation, development and maximum utilization
of natural resources . . ."

58

With these powers, petitioner eventually had the monopoly in the generation and
distribution of electricity. This monopoly was strengthened with the issuance of
Pres. Decree No. 40, 59 nationalizing the electric power industry. Although Exec.
Order No. 215 60 thereafter allowed private sector participation in the generation
of electricity, the transmission of electricity remains the monopoly of the
petitioner.

Petitioner also fulfills the second requisite. It is operating within the respondent
city government's territorial jurisdiction pursuant to the powers granted to it
by Commonwealth Act No. 120, as amended. From its operations in the City of
Cabanatuan, petitioner realized a gross income of P107,814,187.96 in 1992.
Fulfilling both requisites, petitioner is, and ought to be, subject of the franchise tax
in question.
Petitioner, however, insists that it is excluded from the coverage of the franchise
tax simply because its stocks are wholly owned by the National Government, and
its charter characterized it as a "non-profit" organization.
These contentions must necessarily fail.
To stress, a franchise tax is imposed based not on the ownership but on the
exercise by the corporation of a privilege to do business. The taxable entity is the
corporation which exercises the franchise, and not the individual stockholders. By
virtue of its charter, petitioner was created as a separate and distinct entity from
the National Government. It can sue and be sued under its own name,

61

and can

exercise all the powers of a corporation under the Corporation Code. 62

To be sure, the ownership by the National Government of its entire capital stock
does not necessarily imply that petitioner is not engaged in business. Section 2 of
Pres. Decree No. 2029 63 classifies government-owned or controlled corporations
(GOCCs) into those performing governmental functions and those performing
proprietary functions, viz:
"A government-owned or controlled corporation is a stock or a non-stock
corporation, whether performing governmental or proprietary functions,
which is directly chartered by special law or if organized under the
general corporation law is owned or controlled by the government
directly, or indirectly through a parent corporation or subsidiary
corporation, to the extent of at least a majority of its outstanding voting
capital stock . . .." (emphases supplied)

Governmental functions are those pertaining to the administration of government,

and as such, are treated as absolute obligation on the part of the state to perform

while proprietary functions are those that are undertaken only by way of
advancing the general interest of society, and are merely optional on the
government. 64 Included in the class of GOCCs performing proprietary functions
are "business-like" entities such as the National Steel Corporation (NSC), the
National Development Corporation (NDC), the Social Security System (SSS), the
Government Service Insurance System (GSIS), and the National Water
Sewerage Authority (NAWASA), 65 among others.

caHCSD

Petitioner was created to "undertake the development of hydroelectric generation

of power and the production of electricity from nuclear, geothermal and other
sources, as well as the transmission of electric power on a nationwide
basis." 66 Pursuant to this mandate, petitioner generates power and sells
electricity in bulk. Certainly, these activities do not partake of the sovereign
functions of the government. They are purely private and commercial
undertakings, albeit imbued with public interest. The public interest involved in its
activities, however, does not distract from the true nature of the petitioner as a
commercial enterprise, in the same league with similar public utilities like
telephone and telegraph companies, railroad companies, water supply and
irrigation companies, gas, coal or light companies, power plants, ice plant among
others; all of which are declared by this Court as ministrant or proprietary
functions of government aimed at advancing the general interest of society. 67
A closer reading of its charter reveals that even the legislature treats the
character of the petitioner's enterprise as a "business," although it limits
petitioner's profits to twelve percent (12%), viz: 68
"(n) When essential to the proper administration of its corporate affairs or
necessary for the proper transaction of itsbusiness or to carry out
the purposes for which it was organized, to contract indebtedness
and issue bonds subject to approval of the President upon
recommendation of the Secretary of Finance;
(o) To exercise such powers and do such things as may be reasonably
necessary to carry out the business and purposes for which it was

organized, or which, from time to time, may be declared by the

Board to be necessary, useful, incidental or auxiliary to
accomplish the said purpose . . . ."(emphasis supplied)

It is worthy to note that all other private franchise holders receiving at least sixty
percent (60%) of its electricity requirement from the petitioner are likewise
imposed the cap of twelve percent (12%) on profits.

69

The main difference is that

the petitioner is mandated to devote "all its returns from its capital investment, as
well as excess revenues from its operation, for expansion"

70

while other

franchise holders have the option to distribute their profits to its stockholders by
declaring dividends. We do not see why this fact can be a source of difference in
tax treatment. In both instances, the taxable entity is the corporation, which
exercises the franchise, and not the individual stockholders.
We also do not find merit in the petitioner's contention that its tax exemptions
under its charter subsist despite the passage of the LGC.
As a rule, tax exemptions are construed strongly against the claimant.
Exemptions must be shown to exist clearly and categorically, and supported by
clear legal provisions. 71 In the case at bar, the petitioner's sole refuge is Section
13 of Rep. Act No. 6395 exempting from, among others, "all income taxes,
franchise taxes and realty taxes to be paid to the National Government, its
provinces,

cities,

municipalities

and

other

government

agencies

and

instrumentalities." However, Section 193 of the LGC withdrew, subject to limited

exceptions, the sweeping tax privileges previously enjoyed by private and public
corporations. Contrary to the contention of petitioner, Section 193 of the LGC is
an express, albeit general, repeal of all statutes granting tax exemptions from
local taxes. 72 It reads:
"Sec. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including
government-owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock

and non-profit hospitals and educational institutions, are hereby

withdrawn upon the effectivity of this Code." (emphasis supplied)

It is a basic precept of statutory construction that the express mention of one

person, thing, act, or consequence excludes all others as expressed in the
familiar maxim expressio unius est exclusio alterius. 73 Not being a local water
district, a cooperative registered under R.A. No. 6938, or a non-stock and nonprofit hospital or educational institution, petitioner clearly does not belong to the
exception. It is therefore incumbent upon the petitioner to point to some
provisions of the LGCthat expressly grant it exemption from local taxes.
But this would be an exercise in futility. Section 137 of the LGC clearly states that
the LGUs can impose franchise tax"notwithstanding any exemption granted by
any law or other special law." This particular provision of the LGC does not admit
any

exception.

In City

Government

of

San

Pablo,

Laguna

v.

Reyes, 74 MERALCO's exemption from the payment of franchise taxes was

brought as an issue before this Court. The same issue was involved in the
subsequent case of Manila Electric Company v. Province of Laguna. 75 Ruling in
favor of the local government in both instances, we ruled that the franchise tax in
question is imposable despite any exemption enjoyed by MERALCO under
special laws, viz:

"It is our view that petitioners correctly rely on provisions of Sections 137
and 193 of the LGC to support their position that MERALCO's tax
exemption has been withdrawn. The explicit language of Section 137
which authorizes the province to impose franchise tax 'notwithstanding
any exemption granted by any law or other special law' is allencompassing and clear. The franchise tax is imposable despite any
exemption enjoyed under special laws.
Section 193 buttresses the withdrawal of extant tax exemption
privileges. By stating that unless otherwise provided in this Code, tax
exemptions or incentives granted to or presently enjoyed by all persons,

whether natural or juridical, including government-owned or controlled

corporations except (1) local water districts, (2) cooperatives duly
registered under R.A. 6938, (3) non-stock and non-profit hospitals and
educational institutions, are withdrawn upon the effectivity of this code,
the obvious import is to limit the exemptions to the three enumerated
entities. It is a basic precept of statutory construction that the express
mention of one person, thing, act, or consequence excludes all others as
expressed in the familiar maxim expressio unius est exclusio alterius. In
the absence of any provision of the Code to the contrary, and we find no
other provision in point, any existing tax exemption or incentive enjoyed
by MERALCO under existing law was clearly intended to be withdrawn.
Reading together Sections 137 and 193 of the LGC, we conclude that
under the LGC the local government unit may now impose a local tax at
a rate not exceeding 50% of 1% of the gross annual receipts for the
preceding calendar based on the incoming receipts realized within its
territorial jurisdiction. The legislative purpose to withdraw tax privileges
enjoyed under existing law or charter is clearly manifested by the
language used on (sic) Sections 137 and 193 categorically withdrawing
such exemption subject only to the exceptions enumerated. Since it
would be not only tedious and impractical to attempt to enumerate all the
existing statutes providing for special tax exemptions or privileges,
the LGCprovided for an express, albeit general, withdrawal of such
exemptions or privileges. No more unequivocal language could have
been used." 76 (emphasis supplied).

It is worth mentioning that Section 192 of the LGC empowers the LGUs, through
ordinances duly approved, to grant tax exemptions, initiatives or reliefs.

77

But in

enacting Section 37 of Ordinance No. 165-92 which imposes an annual franchise

tax "notwithstanding any exemption granted by law or other special law," the
respondent city government clearly did not intend to exempt the petitioner from
the coverage thereof.

Doubtless, the power to tax is the most effective instrument to raise needed
revenues to finance and support myriad activities of the local government units
for the delivery of basic services essential to the promotion of the general welfare
and the enhancement of peace, progress, and prosperity of the people. As this
Court observed in the Mactan case, "the original reasons for the withdrawal of tax
exemption privileges granted to government-owned or controlled corporations
and all other units of government were that such privilege resulted in serious tax
base erosion and distortions in the tax treatment of similarly situated
enterprises." 78 With the added burden of devolution, it is even more imperative
for government entities to share in the requirements of development, fiscal or
otherwise, by paying taxes or other charges due from them.
IN VIEW WHEREOF, the instant petition is DENIED and the assailed Decision
and Resolution of the Court of Appeals dated March 12, 2001 and July 10, 2001,
respectively, are hereby AFFIRMED.
SO ORDERED.
|||

(National Power Corporation v. City of Cabanatuan, G.R. No. 149110, April 09,

2003)

THIRD DIVISION
[G.R. No. 152492. October 16, 2003.]
PALMA

DEVELOPMENT

MUNICIPALITY

OF

SUR, respondent.
Edlaw Office for petitioner.
Mamadra Tampipi for respondent.

CORPORATION, petitioner, vs.

MALANGAS,

ZAMBOANGA

DEL

SYNOPSIS
Here in issue was the validity of Section 5G.01 of Municipal Revenue Code No.
09, Series of 1993, imposing service fee for the use of respondent municipality's
roads leading to the wharf and to any point along the shorelines within the
jurisdiction of the municipality, and for police surveillance on all goods and
equipments harbored or sheltered in the premises of the wharf and others within
the jurisdiction of the municipality. The Court ruled: the same was null and void
for being violative of The Local Government Code of 1991 or RA No. 7160.
Section 133(e) thereof prohibits the imposition, in the guise of wharfage, of fees as well as all other taxes or charges in any form whatsoever - on goods or
merchandise that pass through the territorial jurisdiction of the local government
units.

ESacHC

SYLLABUS
1. POLITICAL LAW; ADMINISTRATIVE LAW; Local Government Code of
1991 (RA 7160); IMPOSITION OF TAXES, FEES OR CHARGES UPON GOODS
OR MERCHANDISE THAT PASS THROUGH TERRITORIAL JURISDICTION OF
LOCAL GOVERNMENT UNITS, PROHIBITED. By express language of
Sections 153 and 155 of RA No. 7160, local government units, through their
Sanggunian, may prescribe the terms and conditions for the imposition of toll fees
or charges for the use of any public road, pier or wharf funded and constructed
by them. A service fee imposed on vehicles using municipal roads leading to the
wharf is thus valid. However, Section 133(e) of RA No. 7160 prohibits the
imposition, in the guise of wharfage, of fees as well as all other taxes or
charges in any form whatsoever on goods or merchandise. It is therefore
irrelevant if the fees imposed are actually for police surveillance on the goods,
because any other form of imposition on goods passing through the territorial
jurisdiction of the municipality is clearly prohibited by Section 133(e).

ScAaHE

2. ID.; ID.; ID.; WHARFAGE, DEFINED. Under Section 131(y) of RA No. 7160,
wharfage is defined as "a fee assessed against the cargo of a vessel engaged in

foreign or domestic trade based on quantity, weight, or measure received and/or

discharged by vessel." It is apparent that a wharfage does not lose its basic
character by being labeled as a service fee "for police surveillance on all
goods."

ACIESH

3. ID.; ID.; ID.; BENEFITS FROM THE USE OF MUNICIPAL ROADS AND
WHARF, NOT UNJUST ENRICHMENT WHERE THE SAME RESULTED FROM
THE INFRASTRUCTURE THAT THE MUNICIPALITY WAS MANDATED BY LAW
TO PROVIDE. Unpersuasive is the contention of respondent that petitioner
would unjustly be enriched at the former's expense. Though the rules thereon
apply equally well to the government, for unjust enrichment to be deemed
present, two conditions must generally concur: (a) a person is unjustly benefited,
and (b) such benefit is derived at another's expense or damage. In the instant
case, the benefits from the use of the municipal roads and the wharf were not
unjustly derived by petitioner. Those benefits resulted from the infrastructure that
the municipality was mandated by law to provide. There is no unjust enrichment
where the one receiving the benefit has a legal right or entitlement thereto, or
when there is no causal relation between one's enrichment and the other's
impoverishment.

HIAEcT

4. REMEDIAL LAW; APPEAL; REMAND OF CASE TO THE LOWER COURT

FOR RECEPTION OF ADDITIONAL EVIDENCE; NOT PROPER WHERE CASE
ALREADY SETTLED. We rule against the remand of the case to the trial court
for additional evidence. Not only is it frowned upon by the Rules of Court; it is
also unnecessary on the basis of the facts established by the admissions of the
parties. Besides, the fact sought to be established with the reception of additional
evidence is irrelevant to the due settlement of the case. Section 133(e) of RA No.
7160 expressly prohibits the imposition of all other taxes, fees or charges in any
form whatsoever upon the merchandise or goods that pass through the territorial
jurisdiction of local government units. It is therefore immaterial to the instant case
whether the service fee on the goods is for police surveillance or not, since the
subject provision of the revenue ordinance is invalid. Reception of further

evidence to establish this fact would not legalize the imposition of such fee in any
way.

HcDATC

5. ID.; EVIDENCE; WHAT NEED NOT BE PROVED; JUDICIAL ADMISSIONS.

The allegations of both parties are formal judicial admissions that are
conclusive upon the parties making them. They require no further proof in
accordance with Section 4 of Rule 129 of the Rules of Court. Thus, judicial
admissions made by parties in the pleadings, in the course of the trial, or in other
proceedings in the same case are conclusive. No further evidence is required to
prove them. Moreover, they cannot be contradicted unless it is shown that they
have been made through palpable mistake, or that they have not been made at
all.

DECISION

PANGANIBAN, J :
p

In accordance with The Local Government Code of 1991, a municipal ordinance

imposing fees on goods that pass through the issuing municipality's territory is
null and void.
The Case
The Petition for Review 1 before us assails the August 31, 2001 Decision 2 and
the February 6, 2002 Resolution 3 of the Court of Appeals (CA) in CA-GR CV No.
56477. The dispositive portion of the challenged Decision reads as follows:
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the assailed
Decision is VACATED and SET ASIDE, and this case is ordered
REMANDED to the court a quo for the reception of evidence of the
parties on the matter or point delineated in the final sentence abovestated." 4

The assailed Resolution denied petitioner's Motion for Reconsideration.

The Facts
The facts are undisputed. Petitioner Palma Development Corporation is engaged
in milling and selling rice and corn to wholesalers in Zamboanga City. It uses the
municipal port of Malangas, Zamboanga del Sur as transshipment point for its
goods. The port, as well as the surrounding roads leading to it, belong to and are
maintained by the Municipality of Malangas, Zamboanga del Sur.
On January 16, 1994, the municipality passed Municipal Revenue Code No. 09,
Series of 1993, which was subsequently approved by the Sangguniang
Panlalawigan of Zamboanga del Sur in Resolution No. 1330 dated August 4,
1994. Section 5G.01 of the ordinance reads:
"Section 5G.01. Imposition of fees. There shall be collected service
fee for its use of the municipal road[s] or streets leading to the wharf and
to any point along the shorelines within the jurisdiction of the municipality
and for police surveillance on all goods and all equipment harbored or
sheltered in the premises of the wharf and other within the jurisdiction of
this municipality in the following schedule:
a) Vehicles and Equipment: rate of fee
1. Automatic per unit P10.00
2. Ford Fiera P10.00
3. Trucks P10.00
xxx xxx xxx
b) Other Goods, Construction Material products:
1. Bamboo craft P20.00
2. Bangus/Kilo 0.30
xxx xxx xxx
41. Rice and corn grits/sack 0.50" 5

Accordingly, the service fees imposed by Section 5G.01 of the ordinance was
paid by petitioner under protest. It contended that under Republic Act No. 7160,
otherwise known as The Local Government

Code of 1991, municipal

governments did not have the authority to tax goods and vehicles that passed
through their jurisdictions. Thereafter, before the Regional Trial Court (RTC) of
Pagadian City, petitioner filed against the Municipality of Malangas on November
20, 1995, an action for declaratory relief assailing the validity of Section 5G.01 of
the municipal ordinance.
On the premise that the case involved the validity of a municipal ordinance, the
RTC directed respondent to secure the opinion of the Office of the Solicitor
General. The trial court likewise ordered that the opinions of the Departments of
Finance and of justice be sought. As these opinions were still unavailable as of
October 17, 1996, petitioner's counsel filed, without objection from respondent, a
Manifestation seeking the submission of the case for the RTC's decision on a
pure question of law.
In due time, the trial court rendered its November 13, 1996 Decision declaring the
entire Municipal Revenue Code No. 09 asultra vires and, hence, null and void.
Ruling of the Court of Appeals
The CA held that local government units already had revenue-raising powers as
provided for under Sections 153 and 155 ofRA No. 7160. It ruled as well that
within the purview of these provisions and therefore valid is Section 5G.01,
which provides for a "service fee for the use of the municipal road or streets
leading to the wharf and to any point along the shorelines within the jurisdiction of
the municipality" and "for police surveillance on all goods and all equipment
harbored or sheltered in the premises of the wharf and other within the
jurisdiction of this municipality."
However, since both parties had submitted the case to the trial court for decision
on a pure question of law without a full-blown trial on the merits, the CA could not
determine whether the facts of the case were within the ambit of the aforecited
sections of RA No. 7160. The appellate court ruled that petitioner still had to

adduce evidence to substantiate its allegations that the assailed ordinance had
imposed fees on the movement of goods within the Municipality of Malangas in
the guise of a toll fee for the use of municipal roads and a service fee for police
surveillance. Thus, the CA held that the absence of such evidence necessitated
the remand of the case to the trial court.
Hence, this Petition. 6
Issues
Petitioner raises the following issues for our consideration:

"1. Whether or not the Court of Appeals erred when it ordered that the
extant case be remanded to the lower court for reception of
evidence.
"2. Whether or not the Court of Appeals erred when it ruled that a full
blown trial on the merits is necessary and that plaintiff-appellee,
now petitioner, `has to adduce evidence to substantiate its thesis
that the assailed municipal ordinance, in fact, imposes fees on the
movement of goods within the jurisdiction of the defendant and
that this imposition is merely in the guise of a toll fee for the use of
municipal roads and service fee for police surveillance.'
"3. Whether or not the Court of Appeals erred when it did not rule that
the questioned municipal ordinance is contrary to the provisions
of R.A. No. 7160 or the Local Government Code of the
Philippines." 7

In brief, the issues boil down to the following: 1) whether Section 5G.01 of
Municipal Revenue Code No. 09 is valid; and 2) whether the remand of the case
to the trial court is necessary.
The Court's Ruling
The Petition is meritorious.

First Issue:
Validity of the Imposed Fees
Petitioner argues that while respondent has the power to tax or impose fees
on vehicles using its roads, it cannot tax thegoods that are transported by the
vehicles. The provision of the ordinance imposing a service fee for police
surveillance on goods is allegedly contrary to Section 133(e) of RA No. 7160,
which reads:
"Section 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
xxx xxx xxx
e) Taxes, fees and charges and other impositions upon goods carried
into and out of, or passing through, the territorial jurisdictions of local
government units in the guise of charges for wharfage, tolls for bridges
or otherwise, or other taxes, fees or charges in any form whatsoever
upon such goods or merchandise;"

On the other hand, respondent maintains that the subject fees are intended for
services rendered, the use of municipal roads and police surveillance. The fees
are supposedly not covered by the prohibited impositions under Section 133(e)
of RA No. 7160. 8 It further contends that it was empowered by the express
mandate of Sections 153 and 155 of RA No. 7160 to enact Section 5G.01 of the
ordinance. The pertinent provisions of this statute read as follows:
"Section 153. Service Fees and Charges. Local government units
may impose and collect such reasonable fees and charges for services
rendered.

xxx xxx xxx

"Section 155. Toll Fees or Charges. The sanggunian concerned may
prescribe the terms and conditions and fix the rates for the imposition of

toll fees or charges for the use of any public road, pier or wharf,
waterway, bridge, ferry or telecommunication system funded and
constructed by the local government unit concerned: Provided, That no
such toll fees or charges shall be collected from officers and enlisted
men of the Armed Forces of the Philippines and members of the
Philippine National Police on mission, post office personnel delivering
mail, physically-handicapped, and disabled citizens who are sixty-five
(65) years or older.
"When public safety and welfare so requires, the sanggunian concerned
may discontinue the collection of the tolls, and thereafter the said facility
shall be free and open for public use."

Respondent claims that there is no proof that the P0.50 fee for every sack of rice
or corn is a fraudulent legislation enacted to subvert the limitation imposed by
Section 133(e) of RA No. 7160. Moreover, it argues that allowing petitioner to use
its roads without paying the P0.50 fee for every sack of rice or corn would
contravene the principle of unjust enrichment.
By express language of Sections 153 and 155 of RA No. 7160, local government
units, through their Sanggunian, may prescribe the terms and conditions for the
imposition of toll fees or charges for the use of any public road, pier or wharf
funded and constructed by them. A service fee imposed on vehicles using
municipal roads leading to the wharf is thus valid. However, Section 133(e) of RA
No. 7160 prohibits the imposition, in the guise of wharfage, of fees as well as
all other taxes or charges in any form whatsoever on goods or merchandise. It
is therefore irrelevant if the fees imposed are actually for police surveillance on
the goods, because any other form of imposition on goods passing through the
territorial jurisdiction of the municipality is clearly prohibited by Section 133(e).
Under Section 131(y) of RA No. 7160, wharfage is defined as "a fee assessed
against the cargo of a vessel engaged in foreign or domestic trade based on
quantity, weight, or measure received and/or discharged by vessel." It is apparent

that a wharfage does not lose its basic character by being labeled as a service
fee "for police surveillance on all goods."
Unpersuasive is the contention of respondent that petitioner would unjustly be
enriched at the former's expense. Though the rules thereon apply equally well to
the government, 9 for unjust enrichment to be deemed present, two conditions
must generally concur: (a) a person is unjustly benefited, and (b) such benefit is
derived at another's expense or damage. 10
In the instant case, the benefits from the use of the municipal roads and the
wharf were not unjustly derived by petitioner.Those benefits resulted from the
infrastructure that the municipality was mandated by law to provide.

11

There is no

unjust enrichment where the one receiving the benefit has a legal right or
entitlement thereto, or when there is no causal relation between one's enrichment
and the other's impoverishment. 12
Second Issue:
Remand of the Case
Petitioner asserts that the remand of the case to the trial court for further
reception of evidence is unnecessary, because the facts are undisputed by both
parties. It has already been clearly established, without need for further evidence,
that petitioner transports rice and corn on board trucks that pass through the
municipal roads leading to the wharf. Under protest, it paid the service fees, a
fact that respondent has readily admitted without qualification.
Respondent, on the other hand, is silent on the issue of the remand of the case
to the trial court. The former merely defends the validity of the ordinance, arguing
neither for nor against the remand.
We rule against the remand. Not only is it frowned upon by the Rules of
Court; 13 it is also unnecessary on the basis of the facts established by the
admissions of the parties. Besides, the fact sought to be established with the
reception of additional evidence is irrelevant to the due settlement of the case.
The pertinent portion of the assailed CA Decision reads:

"To be stressed is the fact that local government units now have the
following common revenue raising powers under the Local Government
Code:
'Section 153. Service Fees and Charges. Local government
units may impose and collect such reasonable fees and
charges for services rendered.
xxx xxx xxx
'Section

155. Toll

Fees

or

Charges.

The

Sanggunian

concerned may prescribe the terms and conditions and fix the
rates for the imposition of toll fees or charges for the use of any
public

road,

pier

or

wharf,

waterway,

bridge,

ferry

or

telecommunication system funded and constructed by the local

government unit concerned:Provided, That no such toll fees or
charges shall be collected from officers and enlisted men of the
Armed Forces of the Philippines and members of the Philippine
National Police on mission, post office personnel delivering mail,
physically-handicapped, and disabled citizens who are sixty-five
(65) years or older.
`When public safety and welfare so requires, the Sanggunian
concerned may discontinue the collection of the tolls, and
thereafter the said facility shall be free and open for public use. . .
'
"As we see it, the disputed municipal ordinance, which provides for
a service fee for the use of the municipal road or streets leading to the
wharf and to any point along the shorelines within the jurisdiction of the
municipality and for police surveillance on all goods and all equipment
harbored or sheltered in the premises of the wharf and other within the
jurisdiction of this municipality, seems to fall within the compass of the
above cited provisions of R.A. No. 7160. As elsewhere indicated, the
parties in this case, nonetheless, chose to submit the issue to the Trial

Court on a `pure question of law,' without a full-blown trial on the merits:

consequently, we are not prepared to say, at this juncture, that the facts
of the case inevitably call for the application, and/or that these make out
a clear-cut case within the ambit and purview, of the aforecited section.
The plaintiff, thus, has to adduce evidence to substantiate its thesis that
the assailed municipal ordinance, in fact, imposes fees on the movement
of goods within the jurisdiction of the defendant, and that this imposition
is merely in the guise of a toll fee for the use of municipal roads and
service fee for police surveillance. Competent evidence upon this score
must, thus, be presented." 14

We note that Section 5G.01 imposes two types of service fees: 1) one for
the use of the municipal roads and 2) another forpolice surveillance on all goods
and equipment sheltered in the premises of the wharf. The amount of service
fees, however, is based on the type of vehicle that passes through the road and
the type of goods being transported.
While both parties admit that the service fees imposed are for the use of the
municipal roads, petitioner maintains that the service fee for police surveillance
on goods harbored on the wharf is in the guise of a wharfage,

15

a prohibited

imposition under Section 133(e) of RA No. 7160.

Thus, the CA held that the case should be remanded to the trial court in order to
resolve this factual dispute. The appellate court noted that under Section 155
of RA No. 7160, municipalities apparently now have the power to impose fees for
the use of municipal roads.
Nevertheless, a remand is still unnecessary even if the service fee charged
against the goods are for police surveillance, because Section 133(e) of RA No.
7160 expressly prohibits the imposition of all other taxes, fees or charges in any
form whatsoever upon the merchandise or goods that pass through the territorial
jurisdiction of local government units. It is therefore immaterial to the instant case
whether the service fee on the goods is for police surveillance or not, since the

subject provision of the revenue ordinance is invalid. Reception of further

evidence to establish this fact would not legalize the imposition of such fee in any
way.
Furthermore, neither party disputes any of the other material facts of the case.
From their respective Briefs before the CA and their Memoranda before this
Court, they do not dispute the fact that petitioner, from its principal place of
business, transports rice and corn on board trucks bound for respondent's wharf.
The trucks traverse the municipal roads en route to the wharf, where the sacks of
rice and corn are manually loaded into marine vessels bound for Zamboanga
City. Likewise undisputed is the fact that respondent imposed and collected fees
under the ordinance from petitioner. The former admits that it has been collecting,
in addition to the fees on vehicles, P0.50 for every sack of rice or corn that the
latter has been shipping through the wharf. 16
The foregoing allegations are formal judicial admissions that are conclusive upon
the parties making them. They require no further proof in accordance
with Section 4 of Rule 129 of the Rules of Court, which reads:
"SEC. 4. Judicial admissions. An admission, verbal or written, made
by a party in the course of the proceedings in the same case, does not
require proof. The admission may be contradicted only by showing that it
was made through palpable mistake or that no such admission was
made."

Judicial admissions made by parties in the pleadings, in the course of the trial, or
in other proceedings in the same case are conclusive. No further evidence is
required to prove them. Moreover, they cannot be contradicted unless it is shown
that they have been made through palpable mistake, or that they have not been
made at all. 17
WHEREFORE, the Petition is GRANTED. The assailed Decision and Resolution
of the Court of Appeals are hereby SET ASIDE. The imposition of a service fee
for police surveillance on all goods harbored or sheltered in the premises of the
municipal port of Malangas under Sec. 5G.01 of the Malangas Municipal

Revenue Code No. 09, series of 1993, is declared NULL AND VOID for being
violative of Republic Act No. 7160.
SO ORDERED.
|||

(Palma Development Corp. v. Municipality of Malangas, G.R. No. 152492,

October 16, 2003)

THIRD DIVISION
[G.R. No. 155491. July 21, 2009.]
SMART COMMUNICATIONS, INC., petitioner, vs. THE CITY OF
DAVAO, represented herein by its Mayor Hon. RODRIGO
DUTERTE, and the SANGGUNIANG PANLUNSOD OF DAVAO
CITY, respondents.

RESOLUTION

NACHURA, J :
p

Before

the

Court

is

Motion

for

Reconsideration 1 filed

by

Smart

Communications, Inc. (Smart) of the Decision 2 of the Court dated September 16,
2008, denying its appeal of the Decision and Order of the Regional Trial Court
(RTC) of Davao City, dated July 19, 2002 and September 26, 2002, respectively.
Briefly, the factual antecedents are as follows:
On February 18, 2002, Smart filed a special civil action for declaratory relief

for

the ascertainment of its rights and obligations under the Tax Code of the City of
Davao, which imposes a franchise tax on businesses enjoying a franchise within

the territorial jurisdiction of Davao. Smart avers that its telecenter in Davao City is
exempt from payment of franchise tax to the City.
On July 19, 2002, the RTC rendered a Decision denying the petition. Smart filed
a motion for reconsideration, which was denied by the trial court in an Order
dated September 26, 2002. Smart filed an appeal before this Court, but the same
was denied in a decision dated September 16, 2008. Hence, the instant motion
for reconsideration raising the following grounds: (1) the "in lieu of all taxes"
clause in Smart's franchise, Republic Act No. 7294 (RA 7294), covers local taxes;
the rule of strict construction against tax exemptions is not applicable; (2) the "in
lieu of all taxes" clause is not rendered ineffective by the Expanded VAT Law; (3)
Section 23 of Republic Act No. 7925 4 (RA 7925) includes a tax exemption; and
(4) the imposition of a local franchise tax on Smart would violate the
constitutional prohibition against impairment of the obligation of contracts.
Section 9 of RA 7294 and Section 23 of RA 7925 are once again put in issue.
Section 9 of Smart's legislative franchise contains the contentious "in lieu of all
taxes" clause. The Section reads:

IcSHTA

Section 9.Tax provisions. The grantee, its successors or assigns shall

be liable to pay the same taxes on their real estate buildings and
personal property, exclusive of this franchise, as other persons or
corporations which are now or hereafter may be required by law to
pay. In addition thereto, the grantee, its successors or assigns shall
pay a franchise tax equivalent to three percent (3%) of all gross
receipts of the business transacted under this franchise by the
grantee, its successors or assigns and the said percentage shall
be in

lieu

of

all

taxes on

this

franchise

or

earnings

thereof: Provided, That the grantee, its successors or assigns shall

continue to be liable for income taxes payable under Title II of the
National Internal Revenue Code pursuant to Section 2 of Executive
Order No. 72 unless the latter enactment is amended or repealed, in
which case the amendment or repeal shall be applicable thereto.

xxx xxx xxx 5

Section 23 of RA 7925, otherwise known as the most favored treatment

clause or equality clause, contains the word "exemption", viz.:
SEC. 23.Equality of Treatment in the Telecommunications Industry.
Any advantage, favor, privilege, exemption, or immunity granted under
existing franchises, or may hereafter be granted, shall ipso facto become
part of previously granted telecommunications franchises and shall be
accorded immediately and unconditionally to the grantees of such
franchises: Provided, however, That the foregoing shall neither apply to
nor affect provisions of telecommunications franchises concerning
territory covered by the franchise, the life span of the franchise, or the
type of the service authorized by the franchise.

A review of the recent decisions of the Court on the matter of exemptions from
local franchise tax and the interpretation of the word "exemption" found in Section
23 of RA 7925 is imperative in order to resolve this issue once and for all.
In Digital

Telecommunications

Philippines,

Inc.

(Digitel)

v.

Province

of

Pangasinan, 7 Digitel used as an argument the "in lieu of all taxes"

clauses/provisos found in the legislative franchises of Globe, 8 Smart and
Bell, 9 vis--vis Section 23 of RA 7925, in order to claim exemption from the
payment of local franchise tax. Digitel claimed, just like the petitioner in this case,
that it was exempt from the payment of any other taxes except the national
franchise and income taxes. Digitel alleged that Smart was exempted from the
payment of local franchise tax.
However, it failed to substantiate its allegation, and, thus, the Court denied
Digitel's claim for exemption from provincial franchise tax. Cited was the ruling of
the Court in PLDT v. City of Davao, 10 wherein the Court, speaking through Mr.
Justice Vicente V. Mendoza, held that in approving Section 23 of RA No. 7925,
Congress did not intend it to operate as a blanket tax exemption to all
telecommunications entities. Section 23 cannot be considered as having
amended PLDT's franchise so as to entitle it to exemption from the imposition of

local franchise taxes. The Court further held that tax exemptions are highly
disfavored and that a tax exemption must be expressed in the statute in clear
language that leaves no doubt of the intention of the legislature to grant such
exemption. And, even in the instances when it is granted, the exemption must be
interpreted in strictissimi juris against the taxpayer and liberally in favor of the
taxing authority.

HASDcC

The Court also clarified the meaning of the word "exemption" in Section 23 of RA
7925: that the word "exemption" as used in the statute refers or pertains merely
to an exemption from regulatory or reporting requirements of the Department of
Transportation and Communication or the National Transmission Corporation *
and not to an exemption from the grantee's tax liability.
In Philippine Long Distance Telephone Company (PLDT) v. Province of
Laguna, 11 PLDT was a holder of a legislative franchise under Act No. 3436, as
amended. On August 24, 1991, the terms and conditions of its franchise were
consolidated underREPUBLIC ACT NO. 7082, Section 12 of which embodies the
so-called "in-lieu-of-all taxes" clause. Under the said Section, PLDT shall pay a
franchise tax equivalent to three percent (3%) of all its gross receipts, which
franchise tax shall be "in lieu of all taxes". The issue that the Court had to resolve
was whether PLDT was liable to pay franchise tax to the Province of Laguna in
view of the "in lieu of all taxes" clause in its franchise and Section 23 of RA 7925.
Applying the rule of strict construction of laws granting tax exemptions and the
rule that doubts are resolved in favor of municipal corporations in interpreting
statutory provisions on municipal taxing powers, the Court held that Section 23
of RA 7925 could not be considered as having amended petitioner's franchise so
as to entitle it to exemption from the imposition of local franchise taxes.
In ruling against the claim of PLDT, the Court cited the previous decisions
in PLDT v. City of Davao 12 and PLDT v. City of Bacolod, 13 in denying the claim
for exemption from the payment of local franchise tax.
In sum, the aforecited jurisprudence suggests that aside from the national
franchise tax, the franchisee is still liable to pay the local franchise tax, unless it is

expressly and unequivocally exempted from the payment thereof under its
legislative franchise. The "in lieu of all taxes" clause in a legislative franchise
should categorically state that the exemption applies to both local and national
taxes; otherwise, the exemption claimed should be strictly construed against the
taxpayer and liberally in favor of the taxing authority.
Republic Act No. 7716, otherwise known as the "Expanded VAT Law", did not
remove or abolish the payment of local franchise tax. It merely replaced the
national franchise tax that was previously paid by telecommunications franchise
holders and in its stead imposed a ten percent (10%) VAT in accordance with
Section 108 of the Tax Code. VAT replaced the national franchise tax, but it did
not prohibit nor abolish the imposition of local franchise tax by cities or
municipaties. *
The power to tax by local government units emanates from Section 5, Article X of
the Constitution which empowers them to create their own sources of revenues
and to levy taxes, fees and charges subject to such guidelines and limitations as
the Congress may provide. The imposition of local franchise tax is not
inconsistent with the advent of the VAT, which rendersfunctus officio the franchise
tax paid to the national government. VAT inures to the benefit of the national
government, while a local franchise tax is a revenue of the local government
unit.

TEDHaA

WHEREFORE, the motion for reconsideration is DENIED, and this denial is final.
SO ORDERED.
|||

(Smart Communications, Inc. v. City of Davao, G.R. No. 155491, July 21, 2009)

FIRST DIVISION
[G.R. No. 154092. July 14, 2005.]

MOBIL

PHILIPPINES,

INC., petitioner, vs.

THE

CITY

TREASURER OF MAKATI and the CHIEF OF THE LICENSE

DIVISION OF THE CITY OF MAKATI, respondents.

DECISION

QUISUMBING, J :
p

This petition for review on certiorari seeks the reversal of the Decision 1 dated
November 22, 2001 of the Regional Trial Court of Pasig City, Branch 268, in Civil
Case No. 67599, subsequently affirmed in an Order 2 dated May 15, 2002.
Petitioner is a domestic corporation engaged in the manufacturing, importing,
exporting and wholesaling of petroleum products, while respondents are the local
government officials of the City of Makati charged with the implementation of the
Revenue Code of the City of Makati, as well as the collection and assessment of
business taxes, license fees and permit fees within said city. 3
Prior to September 1998, petitioner's principal office was at the National
Development Company Building, in 116 Tordesillas St., Salcedo Village, Makati
City. On August 20, 1998, petitioner filed an application with the City Treasurer of
Makati for the retirement of its business within the City of Makati as it moved its
principal place of business to Pasig City. 4
In its application, petitioner declared its gross sales/receipts as follows:
Gross Sales Receipts for Calendar Year 1997 P453,799,493.29
Gross Sales Receipts for Calendar Year 1998 267,952,766.67 5
January to August

Upon evaluation of petitioner's application, then OIC of the License Division, Ms.
Jesusa E. Cuneta, issued to petitioner, a billing slip 6 assessing the following
taxes against petitioner:

For the 4th Quarter of 1998 (based on 1997 gross sales)

As Manufacturer P14,439.54
As Wholesaler 550,778.58
Garbage Fee 1,250.00
Sub-Total P566,468.12
For the Gross Sales made in 1998
As Manufacture P40,008.33
As Wholesaler 1,291,630.51
Sub-Total 1,331,638.84

TOTAL ASSESSED BUSINESS TAXES P1,898,106.96 7

On September 11, 1998, petitioner paid the assessed amount of P1,898,106.96

under protest. The City Treasurer issued therefor Official Receipt No.
9065025C 8 and approved the petitioner's application for retirement of business
from Makati to Pasig City.
On July 21, 1999, petitioner filed a claim for P1,331,638.84 refund. 9 On August
11, 1999, petitioner received a letter

10

denying the claim for refund on the ground

that petitioner was merely transferring and not retiring its business, and that the
gross sales realized while petitioner still maintained office in Makati from January
1 to August 31, 1998 should be taxed in the City of Makati. 11
Petitioner subsequently filed a petition with the Regional Trial Court of Pasig City,
Branch 268, seeking the refund of business taxes erroneously collected by the
City of Makati.
In its Decision, the trial court ruled as follows:
In summary, the pertinent law provides that a person or entity doing
business in the Municipality shall be subject to business tax. The tax

shall be fixed by the quarter. The initial tax for the quarter in which a
business starts to operate shall be two and one-half percent (2 1/2%) of
one percent (1%) of its capital investment. Thereafter, the tax shall be
computed based on the gross sales or receipts of the preceding quarter.
In the succeeding calendar year, regardless of when the business
started to operate, the tax shall be based on the gross sales or receipts
for the preceding calendar year. That tax shall accrue on the first day of
January of each year and payment shall be made within the first 20 days
of January or of each subsequent quarter as the case may be.

TaIHEA

Considering therefore that the business tax accrues only on the first day
of January as provided in Sec. 3A.07 and becomes payable within the
first 20 days thereof or of each subsequent quarter, the payments made
by Mobil in the year 1998 are therefore payments for the business tax for
1997 which accrued in January of 1998 and became payable within the
first 20 days of January or of each subsequent quarter. Thus, upon
retirement in August 1998, the taxes for said year which should accrue in
January 1999 [become] immediately payable before the application for
retirement can be approved (Ibid, (g), Sec. 3A.08). The assessment of
the Chief of the License Division of Makati is therefore with legal basis
and does not constitute double taxation.
WHEREFORE, premises considered, the instant petition for refund is
hereby DENIED and the case is dismissed for lack of merit.
SO ORDERED. 12

Petitioner filed a Motion for Reconsideration

13

which was denied in an Order

dated May 15, 2002, hence this appeal.

Before us, petitioner alleges now that,
THE TRIAL COURT ERRED IN HOLDING THAT PETITIONER'S
BUSINESS TAX PAYMENTS MADE IN 1998 ARE ACTUALLY
PAYMENTS FOR BUSINESS TAXES IN 1997. THIS CONCLUSION IS

CONTROVERTED BY MAKATI CITY'S REVENUE CODE, AND, IN

FACT, CONSTITUTES DOUBLE TAXATION. 14

Simply stated, the issue is: Are the business taxes paid by petitioner in 1998,
business taxes for 1997 or 1998?
According to petitioner, the 1997 gross sales/revenue is merely the basis for the
amount of business taxes due for the privilege of carrying on a business in the
year when the tax was paid.
For their part, respondents argue that since local taxes, which include business
taxes, are paid either within the first twenty days of January of each year or of
each subsequent quarter, as the case may be, what the taxpayer actually pays
during the recorded calendar year is actually its business tax for the preceding
year.
Prefatorily, it is necessary to distinguish between a business tax vis--vis an
income tax.
Business taxes imposed in the exercise of police power for regulatory purposes
are paid for the privilege of carrying on a business in the year the tax was paid. It
is paid at the beginning of the year as a fee to allow the business to operate for
the rest of the year. It is deemed a prerequisite to the conduct of business.
Income tax, on the other hand, is a tax on all yearly profits arising from property,
professions, trades or offices, or as a tax on a person's income, emoluments,
profits and the like. It is tax on income, whether net or gross realized in one
taxable year. 15It is due on or before the 15th day of the 4th month following the
close of the taxpayer's taxable year and is generally regarded as an excise tax,
levied upon the right of a person or entity to receive income or profits.
The trial court erred when it said that the payments made by petitioner in 1998
are payments for business tax incurred in 1997 which only accrued in January
1998. Likewise, it erred when it ruled that petitioner was still liable for business
taxes based on its gross income/revenue for January to August 1998.
Section 3A.04 of the Makati City Revenue Code states:

Sec. 3A.04. Computation of tax for newly-started business. In the

case of newly-started business under Sec. 3A.02, (a), (b), (c), (d), (e),
(f), (g), (h), (i), (j), (k), (l), and (m) above, the tax shall be fixed by the
quarter. The initial tax of the quarter in which the business starts to
operate shall be two and one half percent (2 1/2 %) of one percent (1%)
of the capital investment.
In the succeeding quarter or quarters, in cases where the business
opens before the last quarter of the year, the tax shall be based on the
gross sales or receipt for the preceding quarter at one-half (1/2) of the
rates fixed therefor by the pertinent schedule in Section 3A.02, (a), (b),
(c), (d), (e), (f), (g), (h), (i), (j), (k), (l), and (m).

EHASaD

In the succeeding calendar year, regardless of when the business

started to operate, the tax shall be based on the gross sales or receipts
for the preceding calendar year, or any fraction thereof as provided in the
same pertinent schedules. 16

Under the Makati Revenue Code, it appears that the business tax, like income
tax, is computed based on the previous year's figures. This is the reason for the
confusion. A newly-started business is already liable for business taxes (i.e.
license fees) at the start of the quarter when it commences operations. In
computing the amount of tax due for the first quarter of operations, the business'
capital investment is used as the basis. For the subsequent quarters of the first
year, the tax is based on the gross sales/receipts for the previous quarter. In the
following year(s), the business is then taxed based on the gross sales or receipts
of the previous year. The business taxes paid in the year 1998 is for the privilege
of engaging in business for the same year, and not for having engaged in
business for 1997.
Upon its transfer, petitioner was apparently subjected to Sec. 3A.11 par. (g) which
states:
xxx xxx xxx
(g) Retirement of business.

xxx xxx xxx

For purposes thereof, termination shall mean that business operation are
stopped completely.
xxx xxx xxx
(2) If it is found that the retirement or termination of the business is
legitimate, [a]nd the tax due therefrom be less than the tax due for the
current year based on the gross sales or receipts, the difference in the
amount of the tax shall be paid before the business is considered
officially retired or terminated. 17

Based on this foregoing provision, on the year an establishment retires or

terminates its business within the municipality, it would be required to pay the
difference in the amount if the tax collected, based on the previous year's gross
sales or receipts, is less than the actual tax due based on the current year's
gross sales or receipts.
For the year 1998, petitioner paid a total of P2,262,122.48 to the City Treasurer of
Makati 18 as business taxes for the year 1998. The amount of tax as computed
based on petitioner's gross sales for 1998 is only P1,331,638.84. Since the
amount paid is more than the amount computed based on petitioner's actual
gross sales for 1998, petitioner upon its retirement is not liable for additional
taxes to the City of Makati. Thus, we find that the respondent erroneously treated
the assessment and collection of business tax as if it were income tax, by
rendering an additional assessment of P1,331,638.84 for the revenue generated
for the year 1998.

WHEREFORE, the assailed Decision is hereby REVERSED and respondents

City Treasurer and Chief of the License Division of Makati City are ordered to
REFUND to petitioner business taxes paid in the amount of P1,331,638.84.
Costs against respondents.
SO ORDERED.

|||

(MOBIL PHILIPPINES, INC. vs. CITY TREASURER OF MAKATI, ET AL., G.R.

No. 154092, July 14, 2005)

SECOND DIVISION
[G.R. No. 154993. October 25, 2005.]
LUZ R. YAMANE, in her capacity as the CITY TREASURER OF
MAKATI CITY, petitioner, vs. BA LEPANTO CONDOMINIUM
CORPORATION, respondent.

DECISION

TINGA, J :
p

Petitioner City Treasurer of Makati, Luz Yamane (City Treasurer), presents for
resolution of this Court two novel questions: one procedural, the other
substantive, yet both of obvious significance. The first pertains to the proper
mode of judicial review undertaken from decisions of the regional trial courts
resolving the denial of tax protests made by local government treasurers,
pursuant to the Local Government Code. The second is whether a local
government unit can, under the Local Government Code, impel a condominium
corporation to pay business taxes. 1
While we agree with the City Treasurer's position on the first issue, there
ultimately is sufficient justification for the Court to overlook what is essentially a
procedural error. We uphold respondents on the second issue. Indeed, there are
disturbing aspects in both procedure and substance that attend the attempts by
the City of Makati to flex its taxing muscle. Considering that the tax imposition
now in question has utterly no basis in law, judicial relief is imperative. There are

fewer indisputable causes for the exercise of judicial review over the exercise of
the taxing power than when the tax is based on whim, and not on law.
The facts, as culled from the record, follow.
Respondent BA-Lepanto Condominium Corporation (the "Corporation") is a duly
organized condominium corporation constituted in accordance with the
Condominium Act, 2 which owns and holds title to the common and limited
common areas of the BA-Lepanto Condominium (the "Condominium"), situated in
Paseo de Roxas, Makati City. Its membership comprises the various unit owners
of the Condominium. The Corporation is authorized, under Article V of its
Amended By-Laws, to collect regular assessments from its members for
operating expenses, capital expenditures on the common areas, and other
special assessments as provided for in the Master Deed with Declaration of
Restrictions of the Condominium.
On 15 December 1998, the Corporation received a Notice of Assessment dated
14 December 1998 signed by the City Treasurer. The Notice of Assessment
stated that the Corporation is "liable to pay the correct city business taxes, fees
and charges," computed as totaling P1,601,013.77 for the years 1995 to
1997. 3 The Notice of Assessment was silent as to the statutory basis of the
business taxes assessed.

ACDIcS

Through counsel, the Corporation responded with a written tax protest dated 12
February 1999, addressed to the City Treasurer. It was evident in the protest that
the Corporation was perplexed on the statutory basis of the tax assessment.
With due respect, we submit that the Assessment has no basis as the
Corporation is not liable for business taxes and surcharges and interest
thereon, under the Makati [Revenue] Code or even under the [Local
Government] Code.
The Makati [Revenue] Code and the [Local Government] Code do not
contain any provisions on which the Assessment could be based. One
might argue that Sec. 3A.02(m) of the Makati [Revenue] Code imposes
business tax on owners or operators of any business not specified in the

said code. We submit, however, that this is not applicable to the

Corporation as the Corporation is not an owner or operator of any
business in the contemplation of the Makati [Revenue] Code and even
the [Local Government] Code. 4

Proceeding from the premise that its tax liability arose from Section 3A.02(m) of
the Makati Revenue Code, the Corporation proceeded to argue that under both
the Makati Code and the Local Government Code, "business" is defined as "trade
or commercial activity regularly engaged in as a means of livelihood or with a
view to profit." It was submitted that the Corporation, as a condominium
corporation, was organized not for profit, but to hold title over the common areas
of the Condominium, to manage the Condominium for the unit owners, and to
hold title to the parcels of land on which the Condominium was located. Neither
was the Corporation authorized, under its articles of incorporation or by-laws to
engage in profit-making activities. The assessments it did collect from the unit
owners were for capital expenditures and operating expenses. 5
The protest was rejected by the City Treasurer in a letter dated 4 March 1999.
She insisted that the collection of dues from the unit owners was effected
primarily "to sustain and maintain the expenses of the common areas, with the
end in view [sic] of getting full appreciative living values [sic] for the individual
condominium occupants and to command better marketable [sic] prices for those
occupants" who would in the future sell their respective units. 6 Thus, she
concluded since the "chances of getting higher prices for well-managed common
areas of any condominium are better and more effective that condominiums with
poor [sic] managed common areas," the corporation activity "is a profit venture
making [sic]". 7
From the denial of the protest, the Corporation filed an Appeal with the Regional
Trial Court (RTC) of Makati. 8 On 1 March 2000, the Makati RTC Branch 57
rendered a Decision 9 dismissing the appeal for lack of merit. Accepting the
premise laid by the City Treasurer, the RTC acknowledged, in sadly risible
language:

Herein appellant, to defray the improvements and beautification of the

common areas, collect [sic] assessments from its members. Its end view
is to get appreciate living rules for the unit owners [sic], to give an
impression to outsides [sic] of the quality of service the condominium
offers, so as to allow present owners to command better prices in the
event of sale. 10

With this, the RTC concluded that the activities of the Corporation fell squarely
under the definition of "business" under Section 13(b) of the Local
Government Code, and thus subject to local business taxation. 11
From this Decision of the RTC, the Corporation filed a Petition for Review under
Rule 42 of the Rules of Civil Procedure with the Court of Appeals. Initially, the
petition was dismissed outright 12 on the ground that only decisions of the RTC
brought on appeal from a first level court could be elevated for review under the
mode of review prescribed under Rule 42. 13 However, the Corporation pointed
out in its Motion for Reconsideration that under Section 195 of the Local
Government Code, the remedy of the taxpayer on the denial of the protest filed
with the local treasurer is to appeal the denial with the court of competent
jurisdiction. 14 Persuaded by this contention, the Court of Appeals reinstated the
petition. 15
On 7 June 2002, the Court of Appeals Special Sixteenth Division rendered
the Decision 16 now assailed before this Court. The appellate court reversed the
RTC and declared that the Corporation was not liable to pay business taxes to
the City of Makati.17 In doing so, the Court of Appeals delved into jurisprudential
definitions of profit, 18 and concluded that the Corporation was not engaged in
profit. For one, it was held that the very statutory concept of a condominium
corporation showed that it was not a juridical entity intended to make profit, as its
sole purpose was to hold title to the common areas in the condominium and to
maintain the condominium. 19
The Court of Appeals likewise cited provisions from the Corporation's Amended
Articles of Incorporation and Amended By-Laws that, to its estimation,
established that the Corporation was not engaged in business and the

assessment collected from unit owners limited to those necessary to defray the
expenses in the maintenance of the common areas and management the
condominium. 20
Upon denial of her Motion for Reconsideration, 21 the City Treasurer elevated the
present Petition for Review under Rule 45. It is argued that the Corporation is
engaged in business, for the dues collected from the different unit owners is
utilized towards the beautification and maintenance of the Condominium,
resulting in "full appreciative living values" for the condominium units which would
command better market prices should they be sold in the future. The City
Treasurer likewise avers that the rationale for business taxes is not on the income
received or profit earned by the business, but the privilege to engage in business.
The fact that the Corporation is empowered "to acquire, own, hold, enjoy, lease,
operate and maintain, and to convey sell, transfer or otherwise dispose of real or
personal property" allegedly qualifies "as incident to the fact of [the Corporation's]
act of engaging in business. 22
The City Treasurer also claims that the Corporation had filed the wrong mode of
appeal before the Court of Appeals when the latter filed its Petition for Review
under Rule 42. It is reasoned that the decision of the Makati RTC was rendered in
the exercise of original jurisdiction, it being the first court which took cognizance
of the case. Accordingly, with the Corporation having pursued an erroneous
mode of appeal, the RTC Decision is deemed to have become final and
executory.
First, we dispose of the procedural issue, which essentially boils down to whether
the RTC, in deciding an appeal taken from a denial of a protest by a local
treasurer under Section 195 of the Local Government Code, exercises "original
jurisdiction" or "appellate jurisdiction." The question assumes a measure of
importance to this petition, for the adoption of the position of the City Treasurer
that the mode of review of the decision taken by the RTC is governed by Rule 41
of the Rules of Civil Procedure means that the decision of the RTC would have
long become final and executory by reason of the failure of the Corporation to file
a notice of appeal. 23

There are discernible conflicting views on the issue. The first, as expressed by
the Court of Appeals, holds that the RTC, in reviewing denials of protests by local
treasurers, exercises appellate jurisdiction. This position is anchored on the
language of Section 195 of the Local Government Code which states that the
remedy of the taxpayer whose protest is denied by the local treasurer is "to
appeal with the court of competent jurisdiction."

24

Apparently though, the Local

Government Code does not elaborate on how such "appeal" should be

undertaken.

HAIaEc

The other view, as maintained by the City Treasurer, is that the jurisdiction
exercised by the RTC is original in character. This is the first time that the position
has been presented to the court for adjudication. Still, this argument does find
jurisprudential mooring in our ruling in Garcia v. De Jesus, 25 where the Court
proffered the following distinction between original jurisdiction and appellate
jurisdiction: "Original jurisdiction is the power of the Court to take judicial
cognizance of a case instituted for judicial action for the first time under
conditions provided by law. Appellate jurisdiction is the authority of a Court higher
in rank to re-examine the final order or judgment of a lower Court which tried the
case now elevated for judicial review." 26
The quoted definitions were taken from the commentaries of the esteemed
Justice Florenz Regalado. With the definitions as beacon, the review taken by the
RTC over the denial of the protest by the local treasurer would fall within that
court's original jurisdiction. In short, the review is the initial judicial cognizance of
the matter. Moreover, labeling the said review as an exercise of appellate
jurisdiction is inappropriate, since the denial of the protest is not the judgment or
order of a lower court, but of a local government official.
The stringent concept of original jurisdiction may seemingly be neutered by Rule
43 of the 1997 Rules of Civil Procedure, Section 1 of which lists a slew of
administrative agencies and quasi-judicial tribunals or their officers whose
decisions may be reviewed by the Court of Appeals in the exercise of its

appellate jurisdiction. However, the basic law of jurisdiction, Batas Pambansa Blg.
129 (B.P. 129), 27 ineluctably confers appellate jurisdiction on the Court of
Appeals over final rulings of quasi-judicial agencies, instrumentalities, boards or
commission, by explicitly using the phrase "appellate jurisdiction."

28

The power to

create or characterize jurisdiction of courts belongs to the legislature. While the

traditional notion of appellate jurisdiction connotes judicial review over lower court
decisions, it has to yield to statutory redefinitions that clearly expand its breadth
to encompass even review of decisions of officers in the executive branches of
government.
Yet significantly, the Local Government Code, or any other statute for that matter,
does not expressly confer appellate jurisdiction on the part of regional trial courts
from the denial of a tax protest by a local treasurer. On the other hand, Section
22 of B.P. 129 expressly delineates the appellate jurisdiction of the Regional Trial
Courts, confining as it does said appellate jurisdiction to cases decided by
Metropolitan, Municipal, and Municipal Circuit Trial Courts. Unlike in the case of
the Court of Appeals, B.P. 129 does not confer appellate jurisdiction on Regional
Trial Courts over rulings made by non-judicial entities.
From these premises, it is evident that the stance of the City Treasurer is correct
as a matter of law, and that the proper remedy of the Corporation from the RTC
judgment is an ordinary appeal under Rule 41 to the Court of Appeals. However,
we make this pronouncement subject to two important qualifications. First, in this
particular case there are nonetheless significant reasons for the Court to overlook
the procedural error and ultimately uphold the adjudication of the jurisdiction
exercised by the Court of Appeals in this case. Second, the doctrinal weight of
the pronouncement is confined to cases and controversies that emerged prior to
the enactment of Republic Act No. 9282, the law which expanded the jurisdiction
of the Court of Tax Appeals (CTA).
Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the CTA
exercises exclusive appellate jurisdiction to review on appeal decisions, orders or
resolutions of the Regional Trial Courts in local tax cases original decided or
resolved by them in the exercise of their originally or appellate jurisdiction.

Moreover, the provision also states that the review is triggered "by filing a petition
for review under a procedure analogous to that provided for under Rule 42 of the
1997 Rules of Civil Procedure." 29
Republic Act No. 9282, however, would not apply to this case simply because it
arose prior to the effectivity of that law. To declare otherwise would be to institute
a jurisdictional rule derived not from express statutory grant, but from implication.
The jurisdiction of a court to take cognizance of a case should be clearly
conferred and should not be deemed to exist on mere implications,

30

and this

settled rule would be needlessly emasculated should we declare that the

Corporation's position is correct in law.
Be that as it may, characteristic of all procedural rules is adherence to the precept
that they should not be enforced blindly, especially if mechanical application
would defeat the higher ends that animates our civil procedure the just,
speedy and inexpensive disposition of every action and proceeding.

31

Indeed,

we have repeatedly upheld and utilized ourselves the discretion of courts to

nonetheless take cognizance of petitions raised on an erroneous mode of appeal
and instead treat these petitions in the manner as they should have appropriately
been filed. 32 The Court of Appeals could very well have treated the Corporation's
petition for review as an ordinary appeal.

cADSCT

Moreover, we recognize that the Corporation's error in elevating the RTC decision
for review via Rule 42 actually worked to the benefit of the City Treasurer. There
is wider latitude on the part of the Court of Appeals to refuse cognizance over a
petition for review under Rule 42 than it would have over an ordinary appeal
under Rule 41. Under Section 13, Rule 41, the stated grounds for the dismissal of
an ordinary appeal prior to the transmission of the case records are when the
appeal was taken out of time or when the docket fees were not paid.

33

On the

other hand, Section 6, Rule 42 provides that in order that the Court of Appeals
may allow due course to the petition for review, it must first make a prima
facie finding that the lower court has committed an error that would warrant the
reversal or modification of the decision under review.

34

There is no similar

requirement of a prima facie determination of error in the case of ordinary appeal,

which is perfected upon the filing of the notice of appeal in due time. 35
Evidently, by employing the Rule 42 mode of review, the Corporation faced a
greater risk of having its petition rejected by the Court of Appeals as compared to
having filed an ordinary appeal under Rule 41. This was not an error that worked
to the prejudice of the City Treasurer.
We now proceed to the substantive issue, on whether the City of Makati may
collect business taxes on condominium corporations.
We begin with an overview of the power of a local government unit to impose
business taxes.
The power of local government units to impose taxes within its territorial
jurisdiction derives from the Constitution itself, which recognizes the power of
these units "to create its own sources of revenue and to levy taxes, fees, and
charges subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy."

36

These guidelines and

limitations as provided by Congress are in main contained in The Local

Government Code of 1991 (the "Code"), which provides for comprehensive
instances when and how local government units may impose taxes. The
significant limitations are enumerated primarily in Section 133 of the Code, which
include among others, a prohibition on the imposition of income taxes except
when levied on banks and other financial institutions.

37

None of the other general

limitations under Section 133 find application to the case at bar.

IaHCAD

The most well-known mode of local government taxation is perhaps the real
property tax, which is governed by Title II, Book II of the Code, and which bears
no application in this case. A different set of provisions, found under Title I of
Book II, governs other taxes imposable by local government units, including
business taxes. Under Section 151 of the Code, cities such as Makati are
authorized to levy the same taxes fees and charges as provinces and
municipalities. It is in Article II, Title II, Book II of the Code, governing municipal

taxes, where the provisions on business taxation relevant to this petition may be
found. 38
Section 143 of the Code specifically enumerates several types of business on
which municipalities and cities may impose taxes. These include manufacturers,
wholesalers, distributors, dealers of any article of commerce of whatever nature;
those engaged in the export or commerce of essential commodities; contractors
and other independent contractors; banks and financial institutions; and peddlers
engaged in the sale of any merchandise or article of commerce. Moreover, the
localsanggunian is also authorized to impose taxes on any other businesses not
otherwise specified under Section 143 which thesanggunian concerned may
deem proper to tax.
The coverage of business taxation particular to the City of Makati is provided by
the Makati Revenue Code ("Revenue Code"), enacted through Municipal
Ordinance No. 92-072. The Revenue Code remains in effect as of this writing.
Article A, Chapter III of the Revenue Code governs business taxes in Makati, and
it is quite specific as to the particular businesses which are covered by business
taxes. To give a sample of the specified businesses under the Revenue Code
which are not enumerated under the Local Government Code, we cite Section
3A.02(f) of the Code, which levies a gross receipt tax:

(f) On contractors and other independent contractors defined in Sec.

3A.01(q) of Chapter III of this Code, and on owners or operators of
business establishments rendering or offering services such as:
advertising agencies; animal hospitals; assaying laboratories; belt and
buckle shops; blacksmith shops; bookbinders; booking officers for film
exchange; booking offices for transportation on commission basis;
breeding of game cocks and other sporting animals belonging to others;
business management services; collecting agencies; escort services;
feasibility studies; consultancy services; garages; garbage disposal
contractors; gold and silversmith shops; inspection services for incoming

and outgoing cargoes; interior decorating services; janitorial services;

job placement or recruitment agencies; landscaping contractors; lathe
machine shops; management consultants not subject to professional tax;
medical and dental laboratories; mercantile agencies; messsengerial
services; operators of shoe shine stands; painting shops; perma press
establishments; rent-a-plant services; polo players; school for and/or
horse-back riding academy; real estate appraisers; real estate
brokerages;

photostatic,

white/blue

printing,

Xerox,

typing,

and

mimeographing services; rental of bicycles and/or tricycles, furniture,

shoes, watches, household appliances, boats, typewriters, etc.; roasting
of pigs, fowls, etc.; shipping agencies; shipyard for repairing ships for
others; shops for shearing animals; silkscreen or T-shirt printing shops;
stables; travel agencies; vaciador shops; veterinary clinics; video rentals
and/or coverage services; dancing schools/speed reading/EDP; nursery,
vocational and other schools not regulated by the Department of
Education, Culture and Sports, (DECS), day care centers; etc.

39

Other provisions of the Revenue Code likewise subject hotel and restaurant
owners and operators 40 , real estate dealers, and lessors of real estate

41

to

business taxes.
Should the comprehensive listing not prove encompassing enough, there is also
a catch-all provision similar to that under the Local Government Code. This is
found in Section 3A.02(m) of the Revenue Code, which provides:
(m) On owners or operators of any business not specified above shall
pay the tax at the rate of two percent (2%) for 1993, two and one-half
percent (2 1/2%) for 1994 and 1995, and three percent (3%) for 1996
and the years thereafter of the gross receipts during the preceding
year. 42

The initial inquiry is what provision of the Makati Revenue Code does the City
Treasurer rely on to make the Corporation liable for business taxes. Even at this
point, there already stands a problem with the City Treasurer's cause of action.

Our careful examination of the record reveals a highly disconcerting fact. At no

point has the City Treasurer been candid enough to inform the Corporation, the
RTC, the Court of Appeals, or this Court for that matter, as to what exactly is the
precise statutory basis under the Makati Revenue Code for the levying of the
business tax on petitioner. We have examined all of the pleadings submitted by
the City Treasurer in all the antecedent judicial proceedings, as well as in this
present petition, and also the communications by the City Treasurer to the
Corporation which form part of the record. Nowhere therein is there any citation
made by the City Treasurer of any provision of the Revenue Code which would
serve as the legal authority for the collection of business taxes from
condominiums in Makati.

HSDaTC

Ostensibly, the notice of assessment, which stands as the first instance the
taxpayer is officially made aware of the pending tax liability, should be sufficiently
informative to apprise the taxpayer the legal basis of the tax. Section 195 of the
Local Government Code does not go as far as to expressly require that the notice
of assessment specifically cite the provision of the ordinance involved but it does
require that it state the nature of the tax, fee or charge, the amount of deficiency,
surcharges, interests and penalties. In this case, the notice of assessment sent to
the Corporation did state that the assessment was for business taxes, as well as
the amount of the assessment. There may have been prima facie compliance
with the requirement under Section 195. However in this case, the Revenue Code
provides multiple provisions on business taxes, and at varying rates. Hence, we
could appreciate the Corporation's confusion, as expressed in its protest, as to
the exact legal basis for the tax. 43 Reference to the local tax ordinance is vital, for
the power of local government units to impose local taxes is exercised through
the appropriate ordinance enacted by the sanggunian, and not by the Local
Government Code alone. 44 What determines tax liability is the tax ordinance, the
Local Government Code being the enabling law for the local legislative body.
Moreover, a careful examination of the Revenue Code shows that while Section
3A.02(m) seems designed as a catch-all provision, Section 3A.02(f), which
provides for a different tax rate from that of the former provision, may be

construed to be of similar import. While Section 3A.02(f) is quite exhaustive in

enumerating the class of businesses taxed under the provision, the listing, while it
does not include condominium-related enterprises, ends with the abbreviation
"etc.", or "et cetera".
We do note our discomfort with the unlimited breadth and the dangerous
uncertainty which are the twin hallmarks of the words "et cetera." Certainly, we
cannot be disposed to uphold any tax imposition that derives its authority from
enigmatic and uncertain words such as "et cetera." Yet we cannot even say with
definiteness whether the tax imposed on the Corporation in this case is based on
"et cetera," or on Section 3A.02(m), or on any other provision of the Revenue
Code. Assuming that the assessment made on the Corporation is on a provision
other than Section 3A.02(m), the main legal issue takes on a different
complexion. For example, if it is based on "et cetera" under Section 3A.02(f), we
would have to examine whether the Corporation faces analogous comparison
with the other businesses listed under that provision.
Certainly, the City Treasurer has not been helpful in that regard, as she has been
silent all through out as to the exact basis for the tax imposition which she wishes
that this Court uphold. Indeed, there is only one thing that prevents this Court
from ruling that there has been a due process violation on account of the City
Treasurer's failure to disclose on paper the statutory basis of the tax that the
Corporation itself does not allege injury arising from such failure on the part of
the City Treasurer.
We do not know why the Corporation chose not to put this issue into litigation,
though we can ultimately presume that no injury was sustained because the City
Treasurer failed to cite the specific statutory basis of the tax. What is essential
though is that the local treasurer be required to explain to the taxpayer with
sufficient particularity the basis of the tax, so as to leave no doubt in the mind of
the taxpayer as to the specific tax involved.
In this case, the Corporation seems confident enough in litigating despite the
failure of the City Treasurer to admit on what exact provision of the Revenue

Code the tax liability ensued. This is perhaps because the Corporation has
anchored its central argument on the position that the Local Government Code
itself does not sanction the imposition of business taxes against it. This position
was sustained by the Court of Appeals, and now merits our analysis.
As stated earlier, local tax on businesses is authorized under Section 143 of the
Local Government Code. The word "business" itself is defined under Section
131(d) of the Code as "trade or commercial activity regularly engaged in as a
means of livelihood or with a view to profit." 45 This definition of "business" takes
on importance, since Section 143 allows local government units to impose local
taxes on businesses other than those specified under the provision. Moreover,
even those business activities specifically named in Section 143 are themselves
susceptible to broad interpretation. For example, Section 143(b) authorizes the
imposition of business taxes on wholesalers, distributors, or dealers in any article
of commerce of whatever kind or nature.

IAcDET

It is thus imperative that in order that the Corporation may be subjected to

business taxes, its activities must fall within the definition of business as provided
in the Local Government Code. And to hold that they do is to ignore the very
statutory nature of a condominium corporation.
The creation of the condominium corporation is sanctioned by Republic Act No.
4726, otherwise known as the Condominium Act. Under the law, a condominium
is an interest in real property consisting of a separate interest in a unit in a
residential, industrial or commercial building and an undivided interest in
common, directly or indirectly, in the land on which it is located and in other
common areas of the building. 46 To enable the orderly administration over these
common areas which are jointly owned by the various unit owners, the
Condominium Act permits the creation of a condominium corporation, which is
specially formed for the purpose of holding title to the common area, in which the
holders of separate interests shall automatically be members or shareholders, to
the exclusion of others, in proportion to the appurtenant interest of their
respective units. 47 The necessity of a condominium corporation has not gained
widespread acceptance 48 , and even is merely permissible under the

Condominium Act. 49 Nonetheless, the condominium corporation has been

resorted to by many condominium projects, such as the Corporation in this case.
In line with the authority of the condominium corporation to manage the
condominium project, it may be authorized, in the deed of restrictions, "to make
reasonable assessments to meet authorized expenditures, each condominium
unit to be assessed separately for its share of such expenses in proportion
(unless otherwise provided) to its owner's fractional interest in any common
areas." 50 It is the collection of these assessments from unit owners that form the
basis of the City Treasurer's claim that the Corporation is doing business.

The Condominium Act imposes several limitations on the condominium

corporation that prove crucial to the disposition of this case. Under Section 10 of
the law, the corporate purposes of a condominium corporation are limited to the
holding of the common areas, either in ownership or any other interest in real
property recognized by law; to the management of the project; and to such other
purposes as may be necessary, incidental or convenient to the accomplishment
of such purpose. 51Further, the same provision prohibits the articles of
incorporation or by-laws of the condominium corporation from containing any
provisions which are contrary to the provisions of the Condominium Act, the
enabling or master deed, or the declaration of restrictions of the condominium
project. 52
We can elicit from the Condominium Act that a condominium corporation is
precluded by statute from engaging in corporate activities other than the holding
of the common areas, the administration of the condominium project, and other
acts necessary, incidental or convenient to the accomplishment of such
purposes. Neither the maintenance of livelihood, nor the procurement of profit,
fall within the scope of permissible corporate purposes of a condominium
corporation under the Condominium Act.
The Court has examined the particular Articles of Incorporation and By-Laws of
the Corporation, and these documents unmistakably hew to the limitations

contained in the Condominium Act. Per the Articles of Incorporation, the

Corporation's corporate purposes are limited to: (a) owning and holding title to
the common and limited common areas in the Condominium Project; (b) adopting
such necessary measures for the protection and safeguard of the unit owners
and their property, including the power to contract for security services and for
insurance coverage on the entire project; (c) making and adopting needful rules
and regulations concerning the use, enjoyment and occupancy of the units and
common areas, including the power to fix penalties and assessments for violation
of such rules; (d) to provide for the maintenance, repair, sanitation, and
cleanliness of the common and limited common areas; (e) to provide and contract
for public utilities and other services to the common areas; (f) to contract for the
services of persons or firms to assist in the management and operation of the
Condominium Project; (g) to discharge any lien or encumbrances upon the
Condominium Project; (h) to enforce the terms contained in the Master Deed with
Declaration of Restrictions of the Project; (i) to levy and collect those
assessments as provided in the Master Deed, in order to defray the costs,
expenses and losses of the condominium; (j) to acquire, own, hold, enjoy, lease
operate and maintain, and to convey, sell transfer, mortgage or otherwise dispose
of real or personal property in connection with the purposes and activities of the
corporation; and (k) to exercise and perform such other powers reasonably
necessary, incidental or convenient to accomplish the foregoing purposes. 53
Obviously, none of these stated corporate purposes are geared towards
maintaining a livelihood or the obtention of profit. Even though the Corporation is
empowered to levy assessments or dues from the unit owners, these amounts
collected are not intended for the incurrence of profit by the Corporation or its
members, but to shoulder the multitude of necessary expenses that arise from
the maintenance of the Condominium Project. Just as much is confirmed by
Section 1, Article V of the Amended By-Laws, which enumerate the particular
expenses to be defrayed by the regular assessments collected from the unit
owners. These would include the salaries of the employees of the Corporation,
and the cost of maintenance and ordinary repairs of the common areas. 54

The City Treasurer nonetheless contends that the collection of these

assessments and dues are "with the end view of getting full appreciative living
values" for the condominium units, and as a result, profit is obtained once these
units are sold at higher prices. The Court cites with approval the two
counterpoints raised by the Court of Appeals in rejecting this contention. First, if
any profit is obtained by the sale of the units, it accrues not to the corporation but
to the unit owner. Second, if the unit owner does obtain profit from the sale of the
corporation, the owner is already required to pay capital gains tax on the
appreciated value of the condominium unit. 55
Moreover, the logic on this point of the City Treasurer is baffling. By this rationale,
every Makati City car owner may be considered as being engaged in business,
since the repairs or improvements on the car may be deemed oriented towards
appreciating the value of the car upon resale. There is an evident distinction
between persons who spend on repairs and improvements on their personal and
real property for the purpose of increasing its resale value, and those who defray
such expenses for the purpose of preserving the property. The vast majority of
persons fall under the second category, and it would be highly specious to
subject these persons to local business taxes. The profit motive in such cases is
hardly the driving factor behind such improvements, if it were contemplated at all.
Any profit that would be derived under such circumstances would merely be
incidental, if not accidental.
Besides, we shudder at the thought of upholding tax liability on the basis of the
standard of "full appreciative living values", a phrase that defies statutory
explication, commonsensical meaning, the English language, or even definition
from Google. The exercise of the power of taxation constitutes a deprivation of
property under the due process clause, 56 and the taxpayer's right to due process
is violated when arbitrary or oppressive methods are used in assessing and
collecting taxes. 57 The fact that the Corporation did not fall within the enumerated
classes of taxable businesses under either the Local Government Code or the
Makati Revenue Code already forewarns that a clear demonstration is essential
on the part of the City Treasurer on why the Corporation should be taxed anyway.

"Full appreciative living values" is nothing but blather in search of meaning, and
to impose a tax hinged on that standard is both arbitrary and oppressive.
The City Treasurer also contends that the fact that the Corporation is engaged in
business is evinced by the Articles of Incorporation, which specifically empowers
the Corporation "to acquire, own, hold, enjoy, lease, operate and maintain, and to
convey, sell, transfer mortgage or otherwise dispose of real or personal
property." 58 What the City Treasurer fails to add is that every corporation
organized under the Corporation Code 59 is so specifically empowered. Section
36(7) of theCorporation Code states that every corporation incorporated under
the Code has the power and capacity "to purchase, receive, take or grant, hold,
convey, sell, lease, pledge, mortgage and otherwise deal with such real and
personal property . . . as the transaction of the lawful business of the corporation
may reasonably and necessarily require . . ."

60

Without this power, corporations,

as juridical persons, would be deprived of the capacity to engage in most

meaningful legal relations.
Again, whatever capacity the Corporation may have pursuant to its power to
exercise acts of ownership over personal and real property is limited by its stated
corporate purposes, which are by themselves further limited by the Condominium
Act. A condominium corporation, while enjoying such powers of ownership, is
prohibited by law from transacting its properties for the purpose of gainful
profit.

HSDIaC

Accordingly, and with a significant degree of comfort, we hold that condominium

corporations are generally exempt from local business taxation under the Local
Government Code, irrespective of any local ordinance that seeks to declare
otherwise.
Still, we can note a possible exception to the rule. It is not unthinkable that the
unit owners of a condominium would band together to engage in activities for
profit under the shelter of the condominium corporation.

61

Such activity would be

prohibited under the Condominium Act, but if the fact is established, we see no
reason why the condominium corporation may be made liable by the local

government unit for business taxes. Even though such activities would be
considered as ultra vires, since they are engaged in beyond the legal capacity of
the condominium corporation 62 , the principle of estoppel would preclude the
corporation or its officers and members from invoking the void nature of its
undertakings for profit as a means of acquitting itself of tax liability.
Still, the City Treasurer has not posited the claim that the Corporation is engaged
in business activities beyond the statutory purposes of a condominium
corporation. The assessment appears to be based solely on the Corporation's
collection of assessments from unit owners, such assessments being utilized to
defray the necessary expenses for the Condominium Project and the common
areas. There is no contemplation of business, no orientation towards profit in this
case. Hence, the assailed tax assessment has no basis under the Local
Government Code or the Makati Revenue Code, and the insistence of the city in
its collection of the void tax constitutes an attempt at deprivation of property
without due process of law.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
|||

(Yamane v. BA Lepanto Condominium Corp., G.R. No. 154993, October 25,

2005)

THIRD DIVISION
[G.R. No. 176667. November 22, 2007.]
ERICSSON TELECOMMUNICATIONS, INC., petitioner, vs. CITY
OF PASIG, represented by its City Mayor, Hon. Vicente P.
Eusebio, et al., * respondent.

DECISION

AUSTRIA-MARTINEZ, J :
p

Ericsson Telecommunications, Inc. (petitioner), a corporation with principal office

in Pasig City, is engaged in the design, engineering, and marketing of
telecommunication facilities/system. In an Assessment Notice dated October 25,
2000 issued by the City Treasurer of Pasig City, petitioner was assessed a
business tax deficiency for the years 1998 and 1999 amounting to P9,466,885.00
and P4,993,682.00, respectively, based on its gross revenues as reported in its
audited financial statements for the years 1997 and 1998. Petitioner filed a
Protest dated December 21, 2000, claiming that the computation of the local
business tax should be based on gross receipts and not on gross revenue.
The City of Pasig (respondent) issued another Notice of Assessment to petitioner
on November 19, 2001, this time based on business tax deficiencies for the years
2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93, respectively,
based on its gross revenues for the years 1999 and 2000. Again, petitioner filed a
Protest on January 21, 2002, reiterating its position that the local business tax
should be based on gross receipts and not gross revenue.
Respondent denied petitioner's protest and gave the latter 30 days within which
to appeal the denial. This prompted petitioner to file a petition for review 1 with the
Regional Trial Court (RTC) of Pasig, Branch 168, praying for the annulment and
cancellation

of

petitioner's

deficiency

local

business

taxes

totaling

P17,262,205.66.
Respondent and its City Treasurer filed a motion to dismiss on the grounds that
the court had no jurisdiction over the subject matter and that petitioner had no
legal capacity to sue. The RTC denied the motion in an Order dated December 3,
2002 due to respondents' failure to include a notice of hearing. Thereafter, the
RTC declared respondents in default and allowed petitioner to present
evidence ex-parte.

In a Decision 2 dated March 8, 2004, the RTC canceled and set aside the
assessments made by respondent and its City Treasurer. The dispositive portion
of the RTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and ordering defendants to CANCEL and SET
ASIDE Assessment Notice dated October 25, 2000 and Notice of
Assessment dated November 19, 2001.

ITcCSA

SO ORDERED. 3

On appeal, the Court of Appeals (CA) rendered its Decision 4 dated November
20, 2006, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby ordered SET
ASIDE and a new one entered DISMISSING the plaintiff/appellee's
complaint WITHOUT PREJUDICE.
SO ORDERED. 5

The CA sustained respondent's claim that the petition filed with the RTC should
have been dismissed due to petitioner's failure to show that Atty. Maria Theresa
B. Ramos (Atty. Ramos), petitioner's Manager for Tax and Legal Affairs and the
person who signed the Verification and Certification of Non-Forum Shopping,
was duly authorized by the Board of Directors.
Its motion for reconsideration having been denied in a Resolution 6 dated
February 9, 2007, petitioner now comes before the Court via a Petition for
Review on Certiorari under Rule 45 of the Rules of Court, on the following
grounds:
(1) THE COURT OF APPEALS ERRED IN DISMISSING THE CASE
FOR LACK OF SHOWING THAT THE SIGNATORY OF THE
VERIFICATION/CERTIFICATION

IS

NOT

SPECIFICALLY

AUTHORIZED FOR AND IN BEHALF OF PETITIONER.

(2) THE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO
RESPONDENT'S APPEAL, CONSIDERING THAT IT HAS NO

JURISDICTION OVER THE SAME, THE MATTERS TO BE

RESOLVED

BEING

PURE

QUESTIONS

OF

LAW,

JURISDICTION OVER WHICH IS VESTED ONLY WITH THIS

HONORABLE COURT.
(3) ASSUMING THE COURT OF APPEALS HAS JURISDICTION OVER
RESPONDENT'S APPEAL, SAID COURT ERRED IN NOT
DECIDING ON THE MERITS OF THE CASE FOR THE SPEEDY
DISPOSITION

THEREOF,

CONSIDERING

THAT

THE

DEFICIENCY LOCAL BUSINESS TAX ASSESSMENTS ISSUED

BY RESPONDENT ARE CLEARLY INVALID AND CONTRARY
TO THE PROVISIONS OF THE PASIG REVENUE CODE AND
THE LOCAL GOVERNMENT CODE. 7

After receipt by the Court of respondent's complaint and petitioner's reply, the
petition is given due course and considered ready for decision without the need
of memoranda from the parties.
The Court grants the petition.
First, the complaint filed by petitioner with the RTC was erroneously dismissed by
the CA for failure of petitioner to show that its Manager for Tax and Legal Affairs,
Atty. Ramos, was authorized by the Board of Directors to sign the Verification and
Certification of Non-Forum Shopping in behalf of the petitioner corporation.

cEATSI

Time and again, the Court, under special circumstances and for compelling
reasons, sanctioned substantial compliance with the rule on the submission of
verification and certification against non-forum shopping. 8
In General Milling Corporation v. National Labor Relations Commission, 9 the
Court deemed as substantial compliance the belated attempt of the petitioner to
attach to the motion for reconsideration the board resolution/secretary's
certificate, stating that there was no attempt on the part of the petitioner to ignore
the prescribed procedural requirements.

In Shipside Incorporated v. Court of Appeals, 10 the authority of the petitioner's

resident manager to sign the certification against forum shopping was submitted
to the CA only after the latter dismissed the petition. The Court considered the
merits of the case and the fact that the petitioner subsequently submitted a
secretary's certificate, as special circumstances or compelling reasons that justify
tempering the requirements in regard to the certificate of non-forum shopping. 11
There were also cases where there was complete non-compliance with the rule
on certification against forum shopping and yet the Court proceeded to decide
the case on the merits in order to serve the ends of substantial justice. 12
In the present case, petitioner submitted a Secretary's Certificate signed on May
6, 2002, whereby Atty. Ramos was authorized to file a protest at the local
government level and to "sign, execute and deliver any and all papers,
documents and pleadings relative to the said protest and to do and perform all
such acts and things as may be necessary to effect the foregoing." 13
Applying the foregoing jurisprudence, the subsequent submission of the
Secretary's Certificate and the substantial merits of the petition, which will be
shown forthwith, justify a relaxation of the rule.
Second, the CA should have dismissed the appeal of respondent as it has no
jurisdiction over the case since the appeal involves a pure question of law. The
CA seriously erred in ruling that the appeal involves a mixed question of law and
fact necessitating an examination and evaluation of the audited financial
statements and other documents in order to determine petitioner's tax base.
There is a question of law when the doubt or difference is on what the law is on a
certain state of facts. On the other hand, there is a question of fact when the
doubt or difference is on the truth or falsity of the facts alleged. 14 For a question
to be one of law, the same must not involve an examination of the probative value
of the evidence presented by the litigants or any of them. The resolution of the
issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact. Thus, the test of whether a question

is one of law or of fact is not the appellation given to such question by the party
raising the same; rather, it is whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which case, it is a
question of law; otherwise it is a question of fact. 15
There is no dispute as to the veracity of the facts involved in the present case.
While there is an issue as to the correct amount of local business tax to be paid
by petitioner, its determination will not involve a look into petitioner's audited
financial statements or documents, as these are not disputed; rather, petitioner's
correct tax liability will be ascertained through an interpretation of the pertinent
tax laws, i.e., whether the local business tax, as imposed by the Pasig City
Revenue Code (Ordinance No. 25-92) and the Local Government Code of 1991,
should be based on gross receipts, and not on gross revenue which respondent
relied on in computing petitioner's local business tax deficiency. This, clearly, is a
question of law, and beyond the jurisdiction of the CA.

EDCTIa

Section 2 (c), Rule 41 of the Rules of Court provides that in all cases where
questions of law are raised or involved, the appeal shall be to this Court by
petition for review on certiorari under Rule 45.
Thus, as correctly pointed out by petitioner, the appeal before the CA should have
been dismissed, pursuant to Section 5 (f), Rule 56 of the Rules of Court, which
provides:
Sec. 5. Grounds for dismissal of appeal. The appeal may be
dismissed motu proprio or on motion of the respondent on the following
grounds:
xxx xxx xxx
(f) Error in the choice or mode of appeal.
xxx xxx xxx

Third, the dismissal of the appeal, in effect, would have sustained the RTC
Decision ordering respondent to cancel the Assessment Notices issued by
respondent, and therefore, would have rendered moot and academic the issue of

whether the local business tax on contractors should be based on gross

receipts or gross revenues.
However, the higher interest of substantial justice dictates that this Court should
resolve the same, to evade further repetition of erroneous interpretation of the
law, 16 for the guidance of the bench and bar.

AHaDSI

As earlier stated, the substantive issue in this case is whether the local business
tax on contractors should be based on gross receipts or gross revenue.
Respondent assessed deficiency local business taxes on petitioner based on the
latter's gross revenue as reported in its financial statements, arguing that gross
receipts is synonymous with gross earnings/revenue, which, in turn, includes
uncollected earnings. Petitioner, however, contends that only the portion of the
revenues which were actually and constructively received should be considered
in determining its tax base.
Respondent is authorized to levy business taxes under Section 143 in relation to
Section 151 of the Local Government Code.
Insofar as petitioner is concerned, the applicable provision is subsection (e),
Section 143 of the same Code covering contractors and other independent
contractors, to wit:
SEC. 143. Tax on Business. The municipality may impose taxes on
the following businesses:
xxx xxx xxx
(e) On contractors and other independent contractors, in accordance
with the following schedule:
With gross

receipts for

preceding

calendar

the amount of:

xxx xxx xxx

the Amount
year

in Per

of

Tax
Annum

(Emphasis supplied)

The above provision specifically refers to gross receipts which is defined under
Section 131 of the Local Government Code, as follows:
xxx xxx xxx
(n) "Gross Sales or Receipts" include the total amount of money or its
equivalent representing the contract price, compensation or service fee,
including the amount charged or materials supplied with the services and
the deposits or advance payments actually or constructively received
during the taxable quarter for the services performed or to be performed
for another person excluding discounts if determinable at the time of
sales, sales return, excise tax, and value-added tax (VAT);
xxx xxx xxx

The law is clear. Gross receipts include money or its equivalent actually or
constructively received in consideration of services rendered or articles sold,
exchanged or leased, whether actual or constructive.
In Commissioner of Internal Revenue v. Bank of Commerce, 17 the Court
interpreted gross receipts as including those which were actually or constructively
received, viz.:
Actual receipt of interest income is not limited to physical receipt.
Actual receipt may either be physical receipt or constructive
receipt. When the depository bank withholds the final tax to pay the tax
liability of the lending bank, there is prior to the withholding a
constructive receipt by the lending bank of the amount withheld. From
the amount constructively received by the lending bank, the depository
bank deducts the final withholding tax and remits it to the government for
the account of the lending bank. Thus, the interest income actually
received by the lending bank, both physically and constructively, is the
net interest plus the amount withheld as final tax.

AEHCDa

The

concept

of

withholding

tax

on

income obviously

and

necessarily implies that the amount of the tax withheld comes from the
income earned by the taxpayer. Since the amount of the tax withheld
constitutes income earned by the taxpayer, then that amount manifestly
forms part of the taxpayer's gross receipts. Because the amount withheld
belongs to the taxpayer, he can transfer its ownership to the government
in payment of his tax liability. The amount withheld indubitably comes
from income of the taxpayer, and thus forms part of his gross receipts.
(Emphasis supplied)

Further elaboration was made by the Court in Commissioner of Internal Revenue

v. Bank of the Philippine Islands, 18 in this wise:
Receipt of income may be actual or constructive. We have held that the
withholding process results in the taxpayer's constructive receipt of the
income withheld, to wit:
By analogy, we apply to the receipt of income the rules
on actual and constructive possession

provided

in

Articles 531 and 532 of our Civil Code.

Under Article 531:
"Possession is acquired by the material occupation of a
thing or the exercise of a right, or by the fact that it is
subject to the action of our will, or by the proper acts and
legal formalities established for acquiring such right."
Article 532 states:
"Possession may be acquired by the same person who is
to enjoy it, by his legal representative, by his agent, or by
any person without any power whatever; but in the last
case, the possession shall not be considered as acquired
until the person in whose name the act of possession was
executed has ratified the same, without prejudice to the

juridical consequences of negotiorum gestio in a proper

case."
The last means of acquiring possession under Article 531
refers to juridical acts the acquisition of possession by
sufficient title to which the law gives the force of acts of
possession. Respondent argues that only items of
income actually received should be included in its gross
receipts. It claims that since the amount had already been
withheld at source, it did not have actual receipt thereof.
We clarify. Article 531 of the Civil Code clearly provides
that the acquisition of the right of possession is through the
proper acts and legal formalities established therefor. The
withholding process is one such act. There may not
be actual receipt of the income withheld; however, as
provided for in Article 532, possession by any person
without any power whatsoever shall be considered as
acquired when ratified by the person in whose name the
act of possession is executed.
In our withholding tax system, possession is acquired by
the payor as the withholding agent of the government,
because the taxpayer ratifies the very act of possession for
the government. There is thusconstructive receipt. The
processes of bookkeeping and accounting for interest on
deposits and yield on deposit substitutes that are subjected
to FWT are indeed for legal purposes tantamount to
delivery, receipt or remittance. 19

Revenue Regulations No. 16-2005 dated September 1, 2005

examples of "constructive receipt", to wit:

STaIHc

SEC. 4. 108-4. Definition of Gross Receipts. . . .

20

defined and gave

"Constructive receipt" occurs when the money consideration or its

equivalent is placed at the control of the person who rendered the
service without restrictions by the payor. The following are examples of
constructive receipts:
(1) deposit in banks which are made available to the seller of services
without restrictions;
(2) issuance by the debtor of a notice to offset any debt or obligation and
acceptance thereof by the seller as payment for services rendered; and
(3) transfer of the amounts retained by the payor to the account of the
contractor.

There is, therefore, constructive receipt, when the consideration for the articles
sold, exchanged or leased, or the services rendered has already been placed
under the control of the person who sold the goods or rendered the services
without any restriction by the payor.
In

contrast, gross

revenue covers

money

or

its

equivalent

actually

or

constructively received, including the value of services rendered or articles

sold, exchanged or leased, the payment of which is yet to be received. This
is in consonance with the International Financial Reporting Standards,

21

which

defines revenue as the gross inflow of economic benefits (cash,receivables, and

other assets) arising from the ordinary operating activities of an enterprise (such
as sales of goods, sales of services, interest, royalties, and dividends),

22

which is

measured at the fair value of the consideration received or receivable.23

As aptly stated by the RTC:
"[R]evenue from services rendered is recognized when services have
been performed and are billable." It is "recorded at the amount received
or expected to be received." (Section E [17] of the Statements of
Financial Accounting Standards No. 1).

24

In petitioner's case, its audited financial statements reflect income or revenue

which accrued to it during the taxable period although not yet actually or

constructively received or paid. This is because petitioner uses the accrual

method of accounting, where income is reportable when all the events have
occurred that fix the taxpayer's right to receive the income, and the amount can
be determined with reasonable accuracy; the right to receive income, and not the
actual receipt, determines when to include the amount in gross income. 25
The imposition of local business tax based on petitioner's gross revenue will
inevitably result in the constitutionally proscribed double taxation taxing of the
same person twice by the same jurisdiction for the same thing

26

inasmuch as

petitioner's revenue or income for a taxable year will definitely include its gross
receipts already reported during the previous year and for which local business
tax has already been paid.
Thus, respondent committed a palpable error when it assessed petitioner's local
business tax based on its gross revenue as reported in its audited financial
statements, as Section 143 of the Local Government Code and Section 22 (e) of
the Pasig Revenue Code clearly provide that the tax should be computed based
on gross receipts.

DIETcH

WHEREFORE, the petition is GRANTED. The Decision dated November 20,

2006 and Resolution dated February 9, 2007 issued by the Court of Appeals are
SET ASIDE, and the Decision dated March 8, 2004 rendered by the Regional
Trial Court of Pasig, Branch 168 is REINSTATED.
SO ORDERED.
|||

(Ericsson Telecommunications, Inc. v. City of Pasig, G.R. No. 176667,

November 22, 2007)

EN BANC
[G.R. No. L-40296. November 21, 1984.]

ALLIED

THREAD

CO.,

INC.,

and

KER

&

COMPANY,

LTD., petitioners, vs. HON. CITY MAYOR OF MANILA, HON.

CITY TREASURER OF MANILA, HON. LORENZO RELOVA, in
his

capacity

as

Presiding

Judge,

Branch

II,

CFI

of

Manila, respondents.
Antonio A. Nieva for petitioners.
Santiago F. Alidio, S.M. Artiaga, Jr. and Jose A. Perella for respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; TAXATION; LOCAL TAX CODE AS AMENDED BY
PRESIDENTIAL

DECREE

NO.

426;

VALIDITY

OF

ORDINANCE;

SUBSEQUENT AMENDMENTS THERETO DO NOT INVALIDATE NOR MOVE

THE EFFECTIVITY DATE OF A LOCAL TAX ORDINANCE; CASE AT BAR.
Ordinance No. 7516 was enacted by the Municipal Board of Manila on June 12.
1974 and approved by the City Mayor on June 15. 1974. Fifteen (15) days
thereafter, or on July 1, 1974. the said ordinance became effective pursuant to
Sec. 42 of the Local Tax Code. It is clear therefore that Ordinance No. 7516 has
fully conformed with P.D. No. 426 and Local Tax Regulation No. 1-74 which
require that "a local tax ordinance intended to take effect on July 1, 1974 should
be enacted by the Local Chief Executive not later than June 15, 1974." The
subsequent amendments to the basic ordinance did not in any way invalidate it
nor move the date of its effectivity. To hold otherwise would limit the power of the
defunct Municipal Board of Manila to amend an existing ordinance as exigencies
require.
2. ID.; ID.; ID.; MODES OF APPRISING PUBLIC OF NEW LOCAL TAX
ORDINANCE; CASE AT BAR. We are persuaded that there was substantial
compliance of the law on publication. Section 43 of the Local Tax Code provides
two modes of apprising the public of a new ordinance, either, (a) by means of
publication in a newspaper of general circulation or, (b) by means of posting of

copies thereof in the local legislative hall or premises and two other conspicuous
places within the territorial jurisdiction of the local government. Respondents,
having complied with the second mode of notice. We are of the opinion that there
is no legal infirmity to the validity of Ordinance No. 7516 as amended.
3. ID.; ID.; ID.; EXCISE TAX; TAXABILITY UNDER QUESTIONED ORDINANCE
DEPENDS UPON THE PLACE WHERE SALE TRANSACTION IS PERFECTED.
Finally, petitioner Allied Thread Co., Inc. claims exclusion from Ordinance No.
7516 as amended on the ground that it does not maintain an office or branch
office in the City of Manila, where the subject Ordinance only applies. This
contention is devoid of merit. Allied Thread Co., Inc. admits that it does business
in the City of Manila through a broker or agent, Ker & Company, Ltd. Doing
business in the City of Manila is all that is required to fall within the coverage of
the Ordinance. It should be noted that Ordinance No. 7516 as amended imposes
a business tax on manufacturers, importers or producers doing business in the
City of Manila. The tax imposition here is upon the performance of an act,
enjoyment of a privilege, or the engaging in an occupation, and hence is in the
nature of an excise tax. The power to levy an excise upon the performance of an
act or the engaging in an occupation does not depend upon the domicile of the
person subject to the excise, nor upon the physical location of the property and in
connection with the act or occupation taxed, but depends upon the place in which
the act is performed or occupation engaged in. Thus, the gauge for taxability
under the said Ordinance No. 7516 as amended does not depend on the location
of the office, but attaches upon the place where the respective sale transaction(s)
is perfected and consummated. (See Koppel (Phil.) vs. Yatco, 77 Phil. 496
[1946]) Since Allied Thread Co., Inc. sells its products in the City of Manila
through its broker, Ker & Company, Ltd., it cannot escape the tax liability imposed
by Ordinance No. 7516 as amended.

DECISION

ABAD SANTOS, J :
p

This is a Petition for Review challenging the decision of the then Court of First
Instance of Manila presided by then Judge, now Justice Lorenzo Relova, which
upheld the validity of Manila Ordinance No. 7516, as amended by Ordinance
Nos. 7544, 7545 and 7556, and adjudging petitioner Allied Thread Co., Inc.
taxable thereunder considering that its products are sold in Manila.
On June 12, 1974, the Municipal Board of the City of Manila enacted Ordinance
No. 7516 imposing on manufacturers, importers or producers, doing business in
the City of Manila, business taxes based on gross sales on a graduated basis.
The Mayor approved the said Ordinance on June 15, 1974. In due time, the same
ordinance underwent a series of amendments, to wit: on June 19, 1974, by
Ordinance No. 7544 approved by the Mayor on the same date; Ordinance No.
7545 enacted by the Municipal Board on June 20, 1974 and approved by the
Mayor on June 27, 1974; and Ordinance No. 7556, enacted by the Municipal
Board on July 20, 1974 and approved by the Mayor on July 29, 1974.

LLjur

Ordinance No. 7516 as amended, reads as follows:

"Sec. 1. Business Tax. There is hereby imposed on the following
business in the City of Manila an annual tax collectible quarterly except
on those for which fixed taxes are already provided for as follows:
A. On manufacturers, importers, or producers of any article of commerce
of whatever kind or nature, including brewers, distilled spirits and/or
wines in accordance with the following schedule:
xxx xxx xxx
"PROVIDED HOWEVER, that for purposes of collection of this tax,
manufacturers and producers maintaining or operating branch or sales
offices elsewhere shall record the sale in the branch or sales office
making the sale and the tax thereon shall accrue to the City of Manila if
the branch of sales office is in Manila. In cases where there is no such
branch or sales office in the city, the sale shall be duly recorded in the

principal office along with the sales made in the principal office. Sixty
percent of all sales recorded in the principal office shall be taxable by the
City of Manila if the principal office is in Manila, while the remaining forty
percent shall be deemed as sales made in the factory and shall be
taxable by the local government where the factory is located.
"In cases where a manufacturer or producer has factories in Manila and
in different localities, the forty per cent sales allocation mentioned in the
preceding paragraph shall be appropriated among the City of Manila and
the localities where the factories are situated in proportion to their
respective volumes of production during the period for which the tax is
due."

The records show that petitioner Allied Thread Co., Inc. is engaged in the
business of manufacturing sewing thread and yarn under duly registered marks
and labels. It operates its factory and maintains an office in Pasig, Rizal. In order
to sell its products in Manila and in other parts of the Philippines, petitioner Allied
Thread Co., Inc. engaged the services of a sales broker, Ker & Company, Ltd.
(co-petitioner herein), the latter deriving commissions from every sale made for
its principal.

cdasia

Having been affected by the aforementioned Ordinance, being manufacturers

and sales brokers, on July 22, 1974, Allied Thread Co., Inc. and Ker & Co., Ltd.
filed with the defunct Court of First Instance of Manila, a petition for Declaratory
Relief, contending that Ordinance No. 7516, as amended, is not valid nor
enforceable as the same is contrary to Section 54 of Presidential Decree No.
426, as clarified by Local Tax Regulation No. 1-74 dated April 8, 1974 of the
Department of Finance, reading as follows:
"J. GENERAL PROVISIONS
1. All existing tax ordinance of provinces, cities, municipalities and
barrios shall be deemed ipso facto nullified on June 30, 1974.

2. The local boards or councils should enact their respective tax

ordinances pursuant to the provisions of the Local Tax Code, as
amended by P.D. 426, to take effect not earlier than July 1, 1974.
3. Pursuant to the provisions of Section 42 of the Code, as amended by
Section 18 of the said Decree, a local tax ordinance shall go into effect
on the 15th day after approved by the local chief executives in
accordance with Section 41 of the Code.
4. In view hereof, and considering the provisions of Section 54 of the
Code, regarding the accrual of taxes a local tax ordinance intended to
take effect on July 1, 1974 should be enacted by the Local Chief
Executive not later than June 15, 1974." (Emphasis supplied)

Otherwise stated, petitioners assert that due to the series of amendments to

Ordinance No. 7516, the same Ordinance fell short of the deadline set by Sec. 54
of P.D. No. 426 that "for an ordinance intended to take effect on July 1, 1974, it
must be enacted on or before June 15, 1974." Necessarily, so it is asserted, the
said Ordinance No. 7516 as amended, is not valid nor enforceable.
Petitioners further contend that the questioned Ordinance did not comply with the
necessary publication requirement in a newspaper of general circulation as
mandated by Sec. 43 of the Local Tax Code. Petitioner Allied Thread Co., Inc.
also claims that it should not be subjected to the said Ordinance No. 7516 as
amended, because it does not operate or maintain a branch office in Manila and
that its principal office and factory are located in Pasig, Rizal.
We agree with the decision of the then Court of First Instance of Manila,
upholding the validity of Ordinance No. 7516 as amended, and finding petitioner
Allied Thread Co., Inc. the proper subject thereto.
There is no dispute that Ordinance No. 7516 was enacted by the Municipal Board
of Manila on June 12, 1974 and approved by the City Mayor on June 15, 1974.
Fifteen (15) days thereafter, or on July 1, 1974, the said ordinance became
effective pursuant to Sec. 42 of the Local Tax Code. It is clear therefore that
Ordinance No. 7516 has fully conformed with P.D. No. 426 and Local Tax

Regulation No. 1-74 which require that "a local tax ordinance intended to take
effect on July 1, 1974 should be enacted by the Local Chief Executive not later
than June 15, 1974". The subsequent amendments to the basic ordinance did
not in any way invalidate it nor move the date of its effectivity. To hold otherwise
would limit the power of the defunct Municipal Board of Manila to amend an
existing ordinance as exigencies require.

Petitioners complain that they were not fully apprised of the enactment of
Ordinance No. 7516 for the same was not duly published in a newspaper of
general circulation. Respondents argue however, that copies of Ordinance No.
7516 and its amendments were posted in public buildings, government offices,
and public places in lieu of publication in newspaper of general circulation.
We are persuaded that there was substantial compliance of the law on
publication. Section 43 of the Local Tax Code provides two modes of apprising
the public of a new ordinance, either, (a) by means of publication in a newspaper
of general circulation or, (b) by means of posting of copies thereof in the local
legislative hall or premises and two other conspicuous places within the territorial
jurisdiction of the local government. Respondents, having complied with the
second mode of notice, We are of the opinion that there is no legal infirmity to the
validity of Ordinance No. 7516 as amended.
Finally, petitioner Allied Thread Co., Inc. claims exclusion from Ordinance No.
7515 as amended on the ground that it does not maintain an office or branch
office in the City of Manila, where the subject Ordinance only applies. This
contention is devoid of merit. Allied Thread Co., Inc. admits that it does business
in the City of Manila through a broker or agent, Ker & Company, Ltd. Doing
business in the City of Manila is all that is required to fall within the coverage of
the Ordinance.
It should be noted that Ordinance No. 7516 as amended imposes a business tax
on manufacturers, importers or producers doing business in the City of Manila.
The tax imposition here is upon the performance of an act, enjoyment of a

privilege, or the engaging in an occupation, and hence is in the nature of an

excise tax.

LLjur

The power to levy an excise upon the performance of an act or the engaging in
an occupation does not depend upon the domicile of the person subject to the
excise, nor upon the physical location of the property and in connection with the
act or occupation taxed, but depends upon the place in which the act is
performed or occupation engaged in.
Thus, the gauge for taxability under the said Ordinance No. 7516 as amended
does not depend on the location of the office, but attaches upon the place where
the respective sale transaction(s) is perfected and consummated. (See Koppel
(Phil) vs. Yatco, 77 Phil. 496 [1946].) Since Allied Thread Co., Inc. sells its
products in the City of Manila through its broker, Ker & Company, Ltd., it cannot
escape the tax liability imposed by Ordinance No. 7516 as amended.
WHEREFORE, the petition is hereby dismissed for lack of merit, Costs against
the petitioners.
SO ORDERED.
|||

(Allied Thread Co., Inc. v. City Mayor of Manila, G.R. No. L-40296, November

21, 1984)

THIRD DIVISION
[G.R. No. 126232. November 27, 1998.]
THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN,
FLORENCE CHAVES, and MANUEL DJ SIAYNGCO in their
capacity

as

TREASURER,

PROVINCIAL
PROVINCIAL

GOVERNOR,

PROVINCIAL

LEGAL

ADVISER,

respectively, petitioners, vs. THE HONORABLE COURT OF

APPEALS (FORMER SPECIAL 12TH DIVISION), REPUBLIC

CEMENT CORPORATION, respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL BY CERTIORARI UNDER
RULE 45; CONSIDERED PROPERLY FILED IN CASE AT BAR; EXISTENCE
AND AVAILABILITY OF THE RIGHT OF APPEAL ARE ANTITHETICAL TO
AVAILMENT OF PETITION FORCERTIORARI UNDER RULE 65. Petitioners'
argument is misleading. While it is true that the remedy against a final order is an
appeal, and not a petition for certiorari, the petition referred to is a petition
for certiorari under Rule 65. As stated in Martinez, the party aggrieved does not
have the option to substitute the special civil action of certiorari under Rule 65 for
the remedy of appeal. The existence and availability of the right of appeal are
antithetical to the availment of the special civil action ofcertiorari. Republic
Cement did not, however, file a petition for certiorari under Rule 65, but an appeal
by certiorari under Rule 45. Even law students know that certiorari under Rule 45
is a mode of appeal, an appeal from the Regional Trial Court being taken in either
of two ways (a) by writ of error (involving questions of fact and law) and (b)
by certiorari (limited only to issues of law), with an appeal by certiorari being
brought to the Supreme Court, there being no provision of law for taking appeals
by certiorari to the Court of Appeals. It is thus clearly apparent that Republic
Cement correctly contested the trial court's order of dismissal by filing an appeal
by certiorari under Rule 45.

cdasia

2. ID.; ID.; ID.; SUPREME COURT HAS THE OPTION TO REFER PETITION TO
THE COURT OF APPEALS WHEN FACTUAL ISSUES ARE ERRONEOUSLY
RAISED. Petitioners fault the Court for referring Republic Cement's petition to
the Court of Appeals, claiming that the same should have been dismissed
pursuant to Circular 2-90. Petitioners conveniently overlook the other provisions
of Circular 2-90, specifically 4b) thereof, which provides: b) Raising factual issues
in appeal by certiorari. Although submission of issues of fact in an appeal

by certiorari taken to the Supreme Court from the regional trial court is ordinarily
proscribed, the Supreme Court nonetheless retains the option, in the exercise of
its sound discretion and considering the attendant circumstances, either itself to
take cognizance of and decide such issues or to refer them to the Court of
Appeals for determination. As can be clearly adduced from the foregoing, when
an appeal by certiorari under Rule 45 erroneously raises factual issues, the Court
has the option to refer the petition to the Court of Appeals. The exercise by the
Court of this option may not now be questioned by petitioners.
3. ID.; ID.; ID.; TRIAL COURT'S ORDER IN CASE AT BAR NEVER BECAME
FINAL AND EXECUTORY WHEN PETITION WAS FILED BY PRIVATE
RESPONDENT. As the trial court's order was properly appealed by Republic
Cement, the trial court's May 13, 1994 order never became final and executory,
rendering petitioner's third assignment of error moot and academic.
4. ID.; COURTS; JURISDICTION; PARTY WHO INVOKES THE JURISDICTION
OF THE COURT IS ESTOPPED FROM ASSAILING THE SAME AFTER
FAILING TO OBTAIN AFFIRMATIVE RELIEF. Petitioners are barred by the
doctrine of estoppel from contesting the authority of the Court of Appeals to
decide the instant case, as this Court has consistently held that "(a) party cannot
invoke the jurisdiction of a court to secure affirmative relief against his opponent
and after obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction." The Supreme Court frowns upon the undesirable practice of a party
submitting his case for decision and then accepting the judgment, only if
favorable, and attacking it for lack of jurisdiction when adverse.
5. LEGAL ETHICS; ATTORNEYS; NO SPECIAL AUTHORITY REQUIRED TO
BIND CLIENT ON MATTERS OF ORDINARY JUDICIAL PROCEDURE. It is a
well-settled rule that all proceedings in court to enforce a remedy, to bring a
claim, demand, cause of action or subject matter of a suit to hearing, trial,
determination, judgment and execution are within the exclusive control of the
attorney. With respect to such matters of ordinary judicial procedure, the attorney
needs no special authority to bind his client. Such questions as what action or
pleading to file, where and when to file it, what are its formal requirements, what

should be the theory of the case, what defenses to raise, how may the claim or
defense be proved, when to rest the case, as well as those affecting the
competency of a witness, the sufficiency, relevancy, materiality or immateriality of
certain evidence and the burden of proof are within the authority of the attorney
to decide. Whatever decision an attorney makes on any of these procedural
questions, even if it adversely affects a client's case, will generally bind a
client.

TIDcEH

6. POLITICAL
AGREEMENT

LAW;

PUBLIC

AND MODUS

CORPORATIONS;

LOCAL

VIVENDI LIMITING

THE

GOVERNMENT;
ISSUES

FOR

RESOLUTION OF THE COURT SIGNED BY COUNSEL OF THE PROVINCE IS

BINDING EVEN IF THE SANGGUNIAN HAD NOT AUTHORIZED THE SAME.
While it is true that the Provincial Governor can enter into contract and obligate
the province only upon authority of the sangguniang panlalawigan, the same is
inapplicable to the case at bar. The agreement and modus vivendi may have
been signed by petitioner Roberto Pagdanganan, as Governor of the Province of
Bulacan, without authorization from the sangguniang panlalawigan, but it was
also signed by Manuel Siayngco, the Provincial Legal Officer, in his capacity as
such, and as counsel of petitioners. The agreement and modus vivendi signed by
petitioners' counsel is binding upon petitioners, even if the Sanggunian had not
authorized the same, limitation of issues being a procedural question falling
within the exclusive authority of the attorney to decide.
7. TAXATION; LOCAL TAXATION; PROVINCE NOT AUTHORIZED TO LEVY
EXCISE TAX ON ARTICLES ALREADY TAXED BY THE NIRC. The Court of
Appeals erred in ruling that a province can impose only the taxes specifically
mentioned under the Local Government Code. As correctly pointed out by
petitioners, Section 186 allows a province to levy taxes other than those
specifically enumerated under the Code, subject to the conditions specified
therein. This finding, nevertheless, affords cold comfort to petitioners as they are
still prohibited from imposing taxes on stones, sand, gravel, earth and other
quarry resources extracted from private lands. The tax imposed by the Province
of Bulacan is an excise tax, being a tax upon the performance, carrying on, or

exercise of an activity. The Local Government Code provides: Section

133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following: .
. . (h) Excise taxes on articles enumerated under the National Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products; . . . A
province may not, levy excise taxes on articles already taxed by the National
Internal Revenue Code.
8. ID.; ID.; PROVINCE NOT AUTHORIZED TO IMPOSE TAX ON STONES,
SAND, GRAVEL, EARTH AND OTHER QUARRY RESOURCES EXTRACTED
FROM PRIVATE LAND; ASSESSMENT OF TAX IN CASE AT BAR,
CONSIDERED ULTRA VIRES. Section 151 of the National Internal Revenue
Code levies a tax on all quarry resources, regardless of origin, whether extracted
from public or private land. Thus, a province may not ordinarily impose taxes on
stones, sand, gravel, earth and other quarry resources, as the same are already
taxed under the National Internal Revenue Code. The province can, however,
impose a tax on stones, sand, gravel, earth and other quarry resources extracted
from public land because it is expressly empowered to do so under the Local
Government Code. As to stones, sand, gravel, earth and other quarry resources
extracted from private land, however, it may not do so, because of the limitation
provided by Section 133 of the Code in relation to Section 151 of the National
Internal Revenue Code. Given the above disquisition, petitioners cannot claim
that the appellate court unjustly deprived them of the power to create their
sources of revenue, their assessment of taxes against Republic Cement
being ultra vires traversing as it does the limitations set by the Local Government
Code.
9. ID.; ID.; PROVINCIAL ORDINANCE NO. 3 OF BULACAN PROVINCE;
COURT QUESTIONING THE ASSESSMENT OF TAX ON THE BASIS OF SAID
ORDINANCE, NOT A COLLATERAL ATTACK ON THE ORDINANCE ITSELF.
Contrary to petitioners' claim, the legality of the ordinance was never questioned
by the Court of Appeals. Rather, what the appellate court questioned was

petitioners' assessment of taxes on Republic Cement on the basis of Provincial

Ordinance No. 3, not the ordinance itself.
10. ID.; ID.; ID.; REGALIAN DOCTRINE MAY NOT BE INVOKED BY THE
PROVINCE TO EXTEND COVERAGE THEREOF; TAX STATUTES MUST BE
CONSTRUED STRICTISSIMI JURIS AGAINST THE GOVERNMENT. Section
21 of Provincial Ordinance No. 3 is practically only a reproduction of Section 138
of the Local Government Code. A cursory reading of both would show that both
refer to ordinary sand, stones, gravel, earth and other quarry resources extracted
from public lands. Even if we disregard the limitation set by Section 133 of the
Local Government Code, petitioners may not impose taxes on stones, sand,
gravel, earth and other quarry resources extracted from private lands on the
basis of Section 21 of Provincial Ordinance No. 3 as the latter clearly applies only
to quarry resources extracted from public lands. Petitioners may not invoke the
Regalian doctrine to extend the coverage of their ordinance to quarry resources
extracted from private lands, for taxes, being burdens, are not to be presumed
beyond what the applicable statute expressly and clearly declares, tax statutes
being construedstrictissimi juris against the government.

SDAaTC

DECISION

ROMERO, J :
p

Before us is a petition for certiorari seeking the reversal of the decision of the
Court of Appeals dated September 27, 1995 declaring petitioner without authority
to levy taxes on stones, sand, gravel, earth and other quarry resources extracted
from private lands, as well as the August 26, 1996 resolution of the appellate
court denying its motion for reconsideration.
The facts are as follows:

cdll

On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed Provincial

Ordinance No. 3, known as "An Ordinance Enacting the Revenue Code of the
Bulacan Province," which was to take effect on July 1, 1992. Section 21 of the
ordinance provides as follows:
Section 21. Imposition of Tax. There is hereby levied and collected a
tax of 10% of the fair market value in the locality per cubic meter of
ordinary stones, sand, gravel, earth and other quarry resources, such,
but not limited to marble, granite, volcanic cinders, basalt, tuff and rock
phosphate, extracted from public lands or from beds of seas, lakes,
rivers, streams, creeks and other public waters within its territorial
jurisdiction. (Emphasis ours)

Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated November

11, 1993, assessed private respondent Republic Cement Corporation (hereafter
Republic Cement) P2,524,692.13 for extracting limestone, shale and silica from
several parcels of private land in the province during the third quarter of 1992
until the second quarter of 1993. Believing that the province, on the basis of
above-said ordinance, had no authority to impose taxes on quarry resources
extracted from private lands, Republic Cement formally contested the same on
December 23, 1993. The same was, however, denied by the Provincial Treasurer
on January 17, 1994. Republic Cement, consequently filed a petition for
declaratory relief with the Regional Trial Court of Bulacan on February 14, 1994.
The province filed a motion to dismiss Republic Cement's petition, which was
granted by the trial court on May 13, 1993, which ruled that declaratory relief was
improper, allegedly because a breach of the ordinance had been committed by
Republic Cement.
On July 11, 1994, Republic Cement filed a petition for certiorari with the Supreme
Court seeking to reverse the trial court's dismissal of their petition. The Court, in
a resolution dated July 27, 1994, referred the same to the Court of Appeals,
where it was docketed as CA G.R. SP No. 34915. The appellate court required
petitioners to file a comment, which they did on September 7, 1994.

In the interim, the Province of Bulacan issued a warrant of levy against Republic
Cement, allegedly because of its unpaid tax liabilities. Negotiations between
Republic Cement and petitioners resulted in an agreement and modus vivendi on
December 12, 1994, whereby Republic Cement agreed to pay under protest
P1,262,346.00, 50% of the tax assessed by petitioner, in exchange for the lifting
of the warrant of levy. Furthermore, Republic Cement and petitioners agreed to
limit the issue for resolution by the Court of Appeals to the question as to whether
or not the provincial government could impose and/or assess taxes on quarry
resources extracted by Republic Cement from private lands pursuant to Section
21 of Provincial Ordinance No. 3. This agreement and modus vivendi were
embodied in a joint manifestation and motion signed by Governor Roberto
Pagdanganan, on behalf of the Province of Bulacan, by Provincial Treasurer
Florence Chavez, and by Provincial Legal Officer Manuel Siayngco, as
petitioners' counsel and filed with the Court of Appeals on December 13, 1994. In
a resolution dated December 29, 1994, the appellate court approved the same
and limited the issue to be resolved to the question of whether or not the
provincial government could impose taxes on stones, sand, gravel, earth and
other quarry resources extracted from private lands.
After due trial, the Court of Appeals, on September 27, 1995, rendered the
following judgment:
WHEREFORE, judgment is hereby rendered declaring the Province of
Bulacan under its Provincial Ordinance No. 3 entitled "An Ordinance
Enacting The Revenue Code of Bulacan Province" to be without legal
authority to impose and assess taxes on quarry resources extracted by
RCC from private lands, hence the interpretation of Respondent
Treasurer of Chapter II, Article D, Section 21 of the Ordinance, and the
assessment made by the Province of Bulacan against RCC is null and
void.

Petitioners' motion for reconsideration, as well as their supplemental motion for

reconsideration, was denied by the appellate court on August 26, 1996, hence
this appeal.

Petitioners claim that the Court of Appeals erred in:

1. NOT HAVING OUTRIGHTLY DISMISSED THE SUBJECT
PETITION ON THE GROUND THAT THE SAME IS NOT
THE

APPROPRIATE

REMEDY

FROM

THE

TRIAL

COURT'S GRANT OF THE PRIVATE RESPONDENTS'

(HEREIN PETITIONER) MOTION TO DISMISS;
2. NOT DISMISSING THE SUBJECT PETITION FOR BEING
VIOLATIVE

OF

CIRCULAR

2-90

ISSUED

BY

THE

SUPREME COURT;
3. NOT DISMISSING THE PETITION FOR REVIEW ON THE
GROUND THAT THE TRIAL COURT'S ORDER OF MAY 13,
1994 HAD LONG BECOME FINAL AND EXECUTORY;
4. GOING BEYOND THE PARAMETERS OF ITS APPELLATE
JURISDICTION IN RENDERING THE SEPTEMBER 27,
1995 DECISION;
5. HOLDING

THAT

PRIVATE

RESPONDENT

(HEREIN

PETITIONER) ARE ESTOPPED FROM RAISING THE

PROCEDURAL

ISSUE

IN

THE

MOTION

FOR

RECONSIDERATION;
6. THE INTERPRETATION OF SECTION 134 OF THE LOCAL
GOVERNMENT CODE AS STATED IN THE SECOND TO
THE LAST PARAGRAPH OF PAGE 5 OF ITS SEPTEMBER
27, 1995 DECISION;
7. SUSTAINING THE ALLEGATIONS OF HEREIN RESPONDENT
WHICH UNJUSTLY DEPRIVED PETITIONER THE POWER
TO CREATE ITS OWN SOURCES OF REVENUE;
8. DECLARING THAT THE ASSESSMENT MADE BY THE
PROVINCE OF BULACAN AGAINST RCC AS NULL AND

VOID WHICH IN EFFECT IS A COLLATERAL ATTACK ON

PROVINCIAL ORDINANCE NO. 3; AND
9. FAILING TO CONSIDER THE REGALIAN DOCTRINE IN
FAVOR OF THE LOCAL GOVERNMENT.
The issues raised by petitioners are devoid of merit. The number and diversity of
errors raised by appellants impel us, however, to discuss the points
raised seriatim.
In their first assignment of error, petitioners contend that instead of filing a petition
for certiorari with the Supreme Court, Republic Cement should have appealed
from the order of the trial court dismissing their petition. Citing Martinez
vs. CA, 1they allege that a motion to dismiss is a final order, the remedy against
which is not a petition for certiorari, but an appeal, regardless of the questions
sought to be raised on appeal, whether of fact or of law, whether involving
jurisdiction or grave abuse of discretion of the trial court.
Petitioners' argument is misleading. While it is true that the remedy against a final
order is an appeal, and not a petition forcertiorari, the petition referred to is a
petition for certiorari under Rule 65. As stated in Martinez, the party aggrieved
does not have the option to substitute the special civil action of certiorari under
Rule 65 for the remedy of appeal. The existence and availability of the right of
appeal are antithetical to the availment of the special civil action of certiorari.
Republic Cement did not, however, file a petition for certiorari under Rule 65, but
an

appeal

by certiorari under

Rule

45.

Even

law

students

know

that certiorari under Rule 45 is a mode of appeal, an appeal from the Regional
Trial Court being taken in either of two ways (a) by writ of error (involving
questions of fact and law) and (b) by certiorari (limited only to issues of law), with
an appeal by certiorari being brought to the Supreme Court, there being no
provision of law for taking appeals bycertiorari to the Court of Appeals. 2 It is thus
clearly apparent that Republic Cement correctly contested the trial court's order
of dismissal by filing an appeal by certiorari under Rule 45. In fact, petitioners, in
their

second

assignment

of

error,

admit

that

petition

for

review

on certiorari under Rule 45 is available to a party aggrieved by an order granting

a motion to dismiss. 3They claim, however, that Republic Cement could not avail
of the same allegedly because the latter raised issues of fact, which is prohibited,
Rule 45 providing that "(t)he petition shall raise only questions of law which must
be distinctly set forth." 4In this respect, petitioners claim that Republic Cement's
petition should have been dismissed by the appellate court, Circular 2-90
providing:
4. Erroneous Appeals. An appeal taken to either the Supreme Court
or the Court of Appeals by the wrong or inappropriate mode shall be
dismissed.

cdrep

xxx xxx xxx

d) No transfer of appeals erroneously taken. No transfers of appeals
erroneously taken to the Supreme Court or to the Court of Appeals to
whichever of these Tribunals has appropriate appellate jurisdiction will be
allowed; continued ignorance or wilful disregard of the law on appeals
will not be tolerated.

Petitioners even fault the Court for referring Republic Cement's petition to the
Court of Appeals, claiming that the same should have been dismissed pursuant
to Circular 2-90. Petitioners conveniently overlook the other provisions of Circular
2-90, specifically 4b) thereof, which provides:
b) Raising factual issues in appeal by certiorari. Although submission
of issues of fact in an appeal by certiorari taken to the Supreme Court
from the regional trial court is ordinarily proscribed, the Supreme Court
nonetheless retains option, in exercise of its sound discretion and
considering the attendant circumstances, either itself to take cognizance
of and decide such issues or to refer them to the Court of Appeals for
determination.

As

can

be

clearly

adduced

from

the

foregoing,

when

an

appeal

by certiorari under Rule 45 erroneously raises factual issues, the Court has the

option to refer the petition to the Court of Appeals. The exercise by the Court of
this option may not now be questioned by petitioners.

As the trial court's order was properly appealed by Republic Cement, the trial
court's May 13, 1994 order never became final and executory, rendering
petitioner's third assignment of error moot and academic.
Petitioners' fourth and fifth assignment of errors are likewise without merit.
Petitioners assert that the Court of Appeals could only rule on the propriety of the
trial court's dismissal of Republic Cement's petition for declaratory relief,
allegedly because that was the sole relief sought by the latter in its petition
for certiorari. Petitioners claim that the appellate court overstepped its jurisdiction
when it declared null and void the assessment made by the Province of Bulacan
against Republic Cement.
Petitioners gloss over the fact that, during the proceedings before the Court of
Appeals, they entered into an agreement andmodus vivendi whereby they limited
the issue for resolution to the question as to whether or not the provincial
government could impose and/or assess taxes on stones, sand, gravel, earth and
other quarry resources extracted by Republic Cement from private lands. This
agreement and modus vivendi were approved by the appellate court on
December 29, 1994. All throughout the proceedings, petitioners never questioned
the authority of the Court of Appeals to decide this issue, an issue which it
brought itself within the purview of the appellate court. Only when an adverse
decision was rendered by the Court of Appeals did petitioners question the
jurisdiction of the former.
Petitioners are barred by the doctrine of estoppel from contesting the authority of
the Court of Appeals to decide the instant case, as this Court has consistently
held that "(a) party cannot invoke the jurisdiction of a court to secure affirmative
relief against his opponent and after obtaining or failing to obtain such relief,
repudiate or question that same jurisdiction." 5 The Supreme Court frowns upon
the undesirable practice of a party submitting his case for decision and then

accepting the judgment, only if favorable, and attacking it for lack of jurisdiction
when adverse. 6
In a desperate attempt to ward off defeat, petitioners now repudiate the abovementioned agreement and modus vivendi, claiming that the same was not
binding on the Province of Bulacan, not having been authorized by
the Sangguniang Panlalawigan of Bulacan. While it is true that the Provincial
Governor can enter into contract and obligate the province only upon authority of
the sangguniang panlalawigan, 7 the same is inapplicable to the case at bar. The
agreement and modus vivendi may have been signed by petitioner Roberto
Pagdanganan, as Governor of the Province of Bulacan, without authorization
from the sangguniang panlalawigan, but it was also signed by Manuel Siayngco,
the Provincial Legal Officer, in his capacity as such, and as counsel of petitioners.
It is a well-settled rule that all proceedings in court to enforce a remedy, to bring a
claim, demand, cause of action or subject matter of a suit to hearing, trial,
determination, judgment and execution are within the exclusive control of the
attorney. 8With respect to such matters of ordinary judicial procedure, the
attorney needs no special authority to bind his client. 9 Such questions as what
action or pleading to file, where and when to file it, what are its formal
requirements, what should be the theory of the case, what defenses to raise, how
may the claim or defense be proved, when to rest the case, as well as those
affecting the competency of a witness, the sufficiency, relevancy, materiality or
immateriality of certain evidence and the burden of proof are within the authority
of the attorney to decide. 10 Whatever decision an attorney makes on any of these
procedural questions, even if it adversely affects a client's case, will generally
bind a client. The agreement and modus vivendisigned by petitioners' counsel is
binding upon petitioners, even if the Sanggunian had not authorized the same,
limitation of issues being a procedural question falling within the exclusive
authority of the attorney to decide.
In any case, the remaining issues raised by petitioner are likewise devoid of
merit, a province having no authority to impose taxes on stones, sand, gravel,

earth and other quarry resources extracted from private lands. The pertinent
provisions of the Local Government Code are as follows:
Sec. 134. Scope of Taxing Powers. Except as otherwise provided in
this Code, the province may levy only the taxes, fees, and charges as
provided in this Article.
Sec. 138. Tax on Sand, Gravel and Other Quarry Resources. The
province may levy and collect not more than ten percent (10%) of fair
market value in the locality per cubic meter of ordinary stones, sand,
gravel, earth, and other quarry resources, as defined under the National
Internal Revenue Code, as amended, extracted from public lands or from
the beds of seas, lakes, rivers, streams, creeks, and other public waters
within its territorial jurisdiction.
xxx xxx xxx (Emphasis supplied)

The appellate court, on the basis of Section 134, ruled that a province was
empowered to impose taxes only on sand, gravel, and other quarry resources
extracted from public lands, its authority to tax being limited by said provision only
to those taxes, fees and charges provided in Article One, Chapter 2, Title One of
Book II of the Local Government Code. 11 On the other hand, petitioners claim
that Sections 129 12 and 186 13 of the Local Government Code authorizes the
province to impose taxes other than those specifically enumerated under the
Local Government Code.
The Court of Appeals erred in ruling that a province can impose only the taxes
specifically mentioned under the Local Government Code. As correctly pointed
out by petitioners, Section 186 allows a province to levy taxes other than those
specifically enumerated under the Code, subject to the conditions specified
therein.
This finding, nevertheless, affords cold comfort to petitioners as they are still
prohibited from imposing taxes on stones, sand, gravel, earth and other quarry
resources extracted from private lands. The tax imposed by the Province of

Bulacan is an excise tax, being a tax upon the performance, carrying on, or
exercise of an activity. 14 The Local Government Code provides:
Section 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
xxx xxx xxx
(h) Excise taxes on articles enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or charges on petroleum
products;
xxx xxx xxx

A province may not, therefore, levy excise taxes on articles already taxed by the
National Internal Revenue Code. Unfortunately for petitioners, the National
Internal Revenue Code provides:
Section 151. Mineral Products.
(A) Rates of Tax. There shall be levied, assessed and collected on
minerals, mineral products and quarry resources, excise tax as follows:
xxx xxx xxx
(2) On all nonmetallic minerals and quarry resources, a tax of two
percent (2%) based on the actual market value of the gross output
thereof at the time of removal, in case of those locally extracted or
produced; or the values used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax and valueadded tax, in the case of importation.
xxx xxx xxx
(B) [Definition of Terms]. For purposes of this Section, the term
xxx xxx xxx

(4) Quarry resources shall mean any common stone or other common
mineral substances as the Director of the Bureau of Mines and GeoSciences may declare to be quarry resources such as, but not restricted
to, marl, marble, granite, volcanic cinders, basalt, tuff and rock
phosphate; Provided, That they contain no metal or metals or other
valuable minerals in economically workable quantities.

cdll

It is clearly apparent from the above provision that the National Internal Revenue
Code levies a tax on all quarry resources, regardless of origin, whether extracted
from public or private land. Thus, a province may not ordinarily impose taxes on
stones, sand, gravel, earth and other quarry resources, as the same are already
taxed under the National Internal Revenue Code. The province can, however,
impose a tax on stones, sand, gravel, earth and other quarry resources extracted
from public land because it is expressly empowered to do so under the Local
Government Code. As to stones, sand, gravel, earth and other quarry resources
extracted from private land, however, it may not do so, because of the limitation
provided by Section 133 of the Code in relation to Section 151 of the National
Internal Revenue Code.
Given the above disquisition, petitioners cannot claim that the appellate court
unjustly deprived them of the power to create their sources of revenue, their
assessment of taxes against Republic Cement being ultra vires, traversing as it
does the limitations set by the Local Government Code.
Petitioners likewise aver that the appellate court's declaration of nullity of its
assessment against Republic Cement is a collateral attack on Provincial
Ordinance No. 3, which is prohibited by public policy.

15

Contrary to petitioners'

claim, the legality of the ordinance was never questioned by the Court of
Appeals. Rather, what the appellate court questioned was petitioners'
assessment of taxes on Republic Cement on the basis of Provincial Ordinance
No. 3, not the ordinance itself.
Furthermore, Section 21 of Provincial Ordinance No. 3 is practically only a
reproduction of Section 138 of the Local Government Code. A cursory reading of

both would show that both refer to ordinary sand, stone, gravel, earth and other
quarry resources extracted from public lands. Even if we disregard the limitation
set by Section 133 of the Local Government Code, petitioners may not impose
taxes on stones, sand, gravel, earth and other quarry resources extracted from
private lands on the basis of Section 21 of Provincial Ordinance No. 3 as the
latter clearly applies only to quarry resources extracted from public lands.
Petitioners may not invoke the Regalian doctrine to extend the coverage of their
ordinance to quarry resources extracted from private lands, for taxes, being
burdens, are not to be presumed beyond what the applicable statute expressly
and clearly declares, tax statutes being construed strictissimi juris against the
government. 16

WHEREFORE, premises considered, the instant petition is DISMISSED for lack

of merit and the decision of the Court of Appeals is hereby AFFIRMED in toto.
Costs against petitioner.
SO ORDERED.
|||

(Province of Bulacan v. Court of Appeals, G.R. No. 126232, November 27,

1998)

FIRST DIVISION
[G.R. No. 166134. June 29, 2010.]
ANGELES CITY, petitioner, vs. ANGELES CITY ELECTRIC
CORPORATION and REGIONAL TRIAL COURT BRANCH 57,
ANGELES CITY, respondents.

DECISION

DEL CASTILLO, J :
p

The prohibition on the issuance of a writ of injunction to enjoin the collection of

taxes applies only to national internal revenue taxes, and not to local taxes.
This Petition 1 for Certiorari under Rule 65 of the Rules of Court seeks to set
aside the Writ of Preliminary Injunction issued by the Regional Trial Court (RTC)
of Angeles City, Branch 57, in Civil Case No. 11401, enjoining Angeles City and
its City Treasurer from levying, seizing, disposing and selling at public auction the
properties owned by Angeles Electric Corporation (AEC).
Factual Antecedents
On June 18, 1964, AEC was granted a legislative franchise under Republic Act
No. (RA) 4079 2 to construct, maintain and operate an electric light, heat, and
power system for the purpose of generating and distributing electric light, heat
and power for sale in Angeles City, Pampanga. Pursuant to Section 3-A
thereof, 3 AEC's payment of franchise tax for gross earnings from electric current
sold was in lieu of all taxes, fees and assessments.
On September 11, 1974, Presidential Decree No. (PD) 551 reduced the franchise
tax of electric franchise holders. Section 1 ofPD 551 provided that:
SECTION 1. Any provision of law or local ordinance to the contrary
notwithstanding, the franchise tax payable by all grantees of franchises
to generate, distribute and sell electric current for light, heat and power
shall be two percent (2%) of their gross receipts received from the sale
of electric current and from transactions incident to the generation,
distribution and sale of electric current.

cIADTC

Such franchise tax shall be payable to the Commissioner of Internal

Revenue or his duly authorized representative on or before the twentieth
day of the month following the end of each calendar quarter or month as
may be provided in the respective franchise or pertinent municipal
regulation and shall, any provision of the Local Tax Code or any other
law to the contrary notwithstanding, be in lieu of all taxes and

assessments of whatever nature imposed by any national or local

authority on earnings, receipts, income and privilege of generation,
distribution and sale of electric current.

On January 1, 1992, RA 7160 or the Local Government Code (LGC) of 1991 was
passed into law, conferring upon provinces and cities the power, among others, to
impose tax on businesses enjoying franchise. 4 In accordance with the LGC,
theSangguniang Panlungsod of Angeles City enacted on December 23, 1993 Tax
Ordinance No. 33, S-93, otherwise known as the Revised Revenue Code of
Angeles City (RRCAC).
On February 7, 1994, a petition seeking the reduction of the tax rates and a
review of the provisions of the RRCAC was filed with the Sangguniang
Panlungsod by Metro Angeles Chamber of Commerce and Industry Inc. (MACCI)
of which AEC is a member. There being no action taken by the Sangguniang
Panlungsod on the matter, MACCI elevated the petition 5 to the Department of
Finance, which referred the same to the Bureau of Local Government Finance
(BLGF). In the petition, MACCI alleged that the RRCAC is oppressive, excessive,
unjust and confiscatory; that it was published only once, simultaneously on
January 22, 1994; and that no public hearings were conducted prior to its
enactment. Acting on the petition, the BLGF issued a First Indorsement 6 to the
City Treasurer of Angeles City, instructing the latter to make representations with
the Sangguniang Panlungsod for the appropriate amendment of the RRCAC in
order to ensure compliance with the provisions of the LGC, and to make a report
on the action taken within five days.
Thereafter, starting July 1995, AEC has been paying the local franchise tax to the
Office of the City Treasurer on a quarterly basis, in addition to the national
franchise tax it pays every quarter to the Bureau of Internal Revenue (BIR).
Proceedings before the City Treasurer
On January 22, 2004, the City Treasurer issued a Notice of Assessment 7 to AEC
for payment of business tax, license fee and other charges for the period 1993 to

2004 in the total amount of P94,861,194.10. Within the period prescribed by law,
AEC protested the assessment claiming that:
(a) pursuant to RA 4079, it is exempt from paying local business
tax;
(b) since it is already paying franchise tax on business, the
payment of business tax would result in double taxation;
(c) the period to assess had prescribed because under the LGC,
taxes and fees can only be assessed and collected within
five (5) years from the date they become due; and

aAHDIc

(d) the assessment and collection of taxes under the RRCAC

cannot be made retroactive to 1993 or prior to its effectivity. 8
On February 17, 2004, the City Treasurer denied the protest for lack of merit and
requested AEC to settle its tax liabilities. 9
Proceedings before the RTC
Aggrieved, AEC appealed the denial of its protest to the RTC of Angeles
City via a Petition for Declaratory Relief, 10 docketed as Civil Case No. 11401.
On April 5, 2004, the City Treasurer levied on the real properties of AEC.

11

Notice of Auction Sale 12 was published and posted announcing that a public
auction of the levied properties of AEC would be held on May 7, 2004.
This prompted AEC to file with the RTC, where the petition for declaratory relief
was pending, an Urgent Motion for Issuance of Temporary Restraining Order
and/or Writ of Preliminary Injunction 13 to enjoin Angeles City and its City
Treasurer from levying, annotating the levy, seizing, confiscating, garnishing,
selling and disposing at public auction the properties of AEC.
Meanwhile, in response to the petition for declaratory relief filed by AEC, Angeles
City and its City Treasurer filed an Answer with Counterclaim
filed a Reply. 15

14

to which AEC

After due notice and hearing, the RTC issued a Temporary Restraining Order
(TRO) 16 on May 4, 2004, followed by an Order

17dated

May 24, 2004 granting

the issuance of a Writ of Preliminary Injunction, conditioned upon the filing of a

bond in the amount of P10,000,000.00. Upon AEC's posting of the required bond,
the RTC issued a Writ of Preliminary Injunction on May 28, 2004,

18

which was

amended on May 31, 2004 due to some clerical errors. 19

On August 5, 2004, Angeles City and its City Treasurer filed a "Motion for
Dissolution of Preliminary Injunction and Motion for Reconsideration of the Order
dated May 24, 2004," 20 which was opposed by AEC. 21
Finding no compelling reason to disturb and reconsider its previous findings, the
RTC denied the joint motion on October 14, 2004. 22
Issue
Being a special civil action for certiorari, the issue in the instant case is limited to
the determination of whether the RTC gravely abused its discretion in issuing the
writ of preliminary injunction enjoining Angeles City and its City Treasurer from
levying, selling, and disposing the properties of AEC. All other matters pertaining
to the validity of the tax assessment and AEC's tax exemption must therefore be
left for the determination of the RTC where the main case is pending decision.

IEDHAT

Petitioner's Arguments
Petitioner's main argument is that the collection of taxes cannot be enjoined by
the RTC, citing Valley Trading Co., Inc. v. Court of First Instance of Isabela,
Branch II, 23 wherein the lower court's denial of a motion for the issuance of a writ
of preliminary injunction to enjoin the collection of a local tax was upheld.
Petitioner further reasons that since the levy and auction of the properties of a
delinquent taxpayer are proper and lawful acts specifically allowed by the LGC,
these cannot be the subject of an injunctive writ. Petitioner likewise insists that
AEC must first pay the tax before it can protest the assessment. Finally, petitioner
contends that the tax exemption claimed by AEC has no legal basis because RA
4079 has been expressly repealed by the LGC.
Private respondent's Arguments

Private respondent AEC on the other hand asserts that there was no grave abuse
of discretion on the part of the RTC in issuing the writ of preliminary injunction
because it was issued after due notice and hearing, and was necessary to
prevent the petition from becoming moot. In addition, AEC claims that the
issuance of the writ of injunction was proper since the tax assessment issued by
the City Treasurer is not yet final, having been seasonably appealed pursuant to
Section 195 24 of the LGC. AEC likewise points out that following the case
of Pantoja v. David, 25 proceedings to invalidate a warrant of distraint and levy to
restrain the collection of taxes do not violate the prohibition against injunction to
restrain the collection of taxes because the proceedings are directed at the right
of the City Treasurer to collect the tax by distraint or levy. As to its tax liability,
AEC maintains that it is exempt from paying local business tax. In any case, AEC
counters that the issue of whether it is liable to pay the assessed local business
tax is a factual issue that should be determined by the RTC and not by the
Supreme Court via a petition for certiorari under Rule 65 of the Rules of Court.
Our Ruling
We find the petition bereft of merit.
The LGC does not specifically prohibit an injunction enjoining the collection of
taxes
A principle deeply embedded in our jurisprudence is that taxes being the lifeblood
of the government should be collected promptly,

26

without unnecessary

hindrance 27 or delay. 28 In line with this principle, the National Internal Revenue
Code of 1997 (NIRC) expressly provides that no court shall have the authority to
grant an injunction to restrain the collection of any national internal revenue tax,
fee or charge imposed by the code. 29 An exception to this rule obtains only when
in the opinion of the Court of Tax Appeals (CTA) the collection thereof may
jeopardize the interest of the government and/or the taxpayer. 30
The situation, however, is different in the case of the collection of local taxes as
there is no express provision in the LGC prohibiting courts from issuing an
injunction to restrain local governments from collecting taxes. Thus, in the case

of Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II, cited by
the petitioner, we ruled that:

EHCaDS

Unlike the National Internal Revenue Code, the Local Tax Code

31

does

not contain any specific provision prohibiting courts from enjoining the
collection of local taxes. Such statutory lapse or intent, however it may
be viewed, may have allowed preliminary injunction where local taxes
are involved but cannot negate the procedural rules and requirements
under Rule 58. 32

In light of the foregoing, petitioner's reliance on the above-cited case to support

its view that the collection of taxes cannot be enjoined is misplaced. The lower
court's denial of the motion for the issuance of a writ of preliminary injunction to
enjoin the collection of the local tax was upheld in that case, not because courts
are prohibited from granting such injunction, but because the circumstances
required for the issuance of writ of injunction were not present.
Nevertheless, it must be emphasized that although there is no express prohibition
in the LGC, injunctions enjoining the collection of local taxes are frowned upon.
Courts therefore should exercise extreme caution in issuing such injunctions.
No grave abuse of discretion was committed by the RTC
Section 3, Rule 58, of the Rules of Court lays down the requirements for the
issuance of a writ of preliminary injunction, viz.:
(a) That the applicant is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance
of the acts complained of, or in the performance of an act or acts, either
for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or
acts complained of during the litigation would probably work injustice to
the applicant; or
(c) That a party, court, or agency or a person is doing, threatening, or
attempting to do, or is procuring or suffering to be done, some act or acts

probably in violation of the rights of the applicant respecting the subject

of the action or proceeding, and tending to render the judgment
ineffectual.

Two requisites must exist to warrant the issuance of a writ of preliminary

injunction, namely: (1) the existence of a clear and unmistakable right that must
be protected; and (2) an urgent and paramount necessity for the writ to prevent
serious damage. 33

cICHTD

In issuing the injunction, the RTC ratiocinated that:

It is very evident on record that petitioner

34

resorted and filed an urgent

motion for issuance of a temporary restraining order and preliminary

injunction to stop the scheduled auction sale only when a warrant of levy
was issued and published in the newspaper setting the auction sale of
petitioner's property by the City Treasurer, merely few weeks after the
petition for declaratory relief has been filed, because if the respondent
will not be restrained, it will render this petition moot and academic. To
the mind of the Court, since there is no other plain, speedy and
adequate remedy available to the petitioner in the ordinary course of law
except this application for a temporary restraining order and/or writ of
preliminary injunction to stop the auction sale and/or to enjoin and/or
restrain respondents from levying, annotating the levy, seizing,
confiscating, garnishing, selling and disposing at public auction the
properties of petitioner, or otherwise exercising other administrative
remedies against the petitioner and its properties, this alone justifies the
move of the petitioner in seeking the injunctive reliefs sought for.
Petitioner in its petition is questioning the assessment or the ruling of the
City Treasurer on the business tax and fees, and not the local ordinance
concerned. This being the case, the Court opines that notice is not
required to the Solicitor General since what is involved is just a violation
of a private right involving the right of ownership and possession of
petitioner's properties. Petitioner, therefore, need not comply with

Section 4, Rule 63 requiring such notice to the Office of the Solicitor

General.
The Court is fully aware of the Supreme Court pronouncement that
injunction is not proper to restrain the collection of taxes. The issue here
as of the moment is the restraining of the respondent from pursuing its
auction sale of the petitioner's properties. The right of ownership and
possession of the petitioner over the properties subject of the auction
sale is at stake.
Respondents assert that not one of the witnesses presented by the
petitioner have proven what kind of right has been violated by the
respondent, but merely mentioned of an injury which is only a scenario
based on speculation because of petitioner's claim that electric power
may be disrupted.
Engr. Abordo's testimony reveals and even his Affidavit Exhibit "S"
showed that if the auction sale will push thru, petitioner will not only lose
control and operation of its facility, but its employees will also be denied
access to equipments vital to petitioner's operations, and since only the
petitioner has the capability to operate Petersville sub station, there will
be a massive power failure or blackout which will adversely affect
business and economy, if not lives and properties in Angeles City and
surrounding communities.

AECIaD

Petitioner, thru its witnesses, in the hearing of the temporary restraining

order, presented sufficient and convincing evidence proving irreparable
damages and injury which were already elaborated in the temporary
restraining order although the same may be realized only if the auction
sale will proceed. And unless prevented, restrained, and enjoined, grave
and irreparable damage will be suffered not only by the petitioner but all
its electric consumers in Angeles, Clark, Dau and Bacolor, Pampanga.
The purpose of injunction is to prevent injury and damage from being
incurred, otherwise, it will render any judgment in this case ineffectual.

"As an extraordinary remedy, injunction is calculated to preserve or

maintain the status quo of things and is generally availed of to prevent
actual or threatened acts, until the merits of the case can be heard".
(Cagayan de Oro City Landless Res. Assn. Inc. vs. CA, 254 SCRA 220)
It appearing that the two essential requisites of an injunction have been
satisfied, as there exists a right on the part of the petitioner to be
protected, its right[s] of ownership and possession of the properties
subject of the auction sale, and that the acts (conducting an auction
sale) against which the injunction is to be directed, are violative of the
said rights of the petitioner, the Court has no other recourse but to grant
the prayer for the issuance of a writ of preliminary injunction considering
that if the respondent will not be restrained from doing the acts
complained of, it will preempt the Court from properly adjudicating on the
merits the various issues between the parties, and will render moot and
academic the proceedings before this court.

35

As a rule, the issuance of a preliminary injunction rests entirely within the

discretion of the court taking cognizance of the case and will not be interfered
with, except where there is grave abuse of discretion committed by the
court. 36 For grave abuse of discretion to prosper as a ground for certiorari, it
must be demonstrated that the lower court or tribunal has exercised its power in
an arbitrary and despotic manner, by reason of passion or personal hostility, and
it must be patent and gross as would amount to an evasion or to a unilateral
refusal to perform the duty enjoined or to act in contemplation of law. 37 In other
words, mere abuse of discretion is not enough. 38
Guided by the foregoing, we find no grave abuse of discretion on the part of the
RTC in issuing the writ of injunction. Petitioner, who has the burden to prove
grave abuse of discretion, 39 failed to show that the RTC acted arbitrarily and
capriciously in granting the injunction. Neither was petitioner able to prove that
the injunction was issued without any factual or legal justification. In assailing the
injunction, petitioner primarily relied on the prohibition on the issuance of a writ of
injunction to restrain the collection of taxes. But as we have already said, there is

no such prohibition in the case of local taxes. Records also show that before
issuing the injunction, the RTC conducted a hearing where both parties were
given the opportunity to present their arguments. During the hearing, AEC was
able to show that it had a clear and unmistakable legal right over the properties to
be levied and that it would sustain serious damage if these properties, which are
vital to its operations, would be sold at public auction. As we see it then, the writ
of injunction was properly issued.

cEaSHC

A final note. While we are mindful that the damage to a taxpayer's property rights
generally takes a back seat to the paramount need of the State for funds to
sustain governmental functions, 40 this rule finds no application in the instant case
where the disputed tax assessment is not yet due and demandable. Considering
that AEC was able to appeal the denial of its protest within the period prescribed
under Section 195 of the LGC, the collection of business taxes
this time is, to our mind, hasty, if not premature.

42

41

through levy at

The issues of tax exemption,

double taxation, prescription and the alleged retroactive application of the

RRCAC, raised in the protest of AEC now pending with the RTC, must first be
resolved before the properties of AEC can be levied. In the meantime, AEC's
rights of ownership and possession must be respected.
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
|||

(Angeles City v. Angeles Electric Corporation, G.R. No. 166134, June 29, 2010)

THIRD DIVISION
[G.R. No. 183137. April 10, 2013.]
PELIZLOY REALTY CORPORATION, represented herein by its
President, GREGORY K. LOY, petitioner, vs. THE PROVINCE OF
BENGUET, respondent.

DECISION

LEONEN, J :
p

The principal issue in this case is the scope of authority of a province to impose
an amusement tax.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
praying that the December 10, 2007 decision of the Regional Trial Court, Branch
62, La Trinidad, Benguet in Civil Case No. 06-CV-2232 be reversed and set aside
and a new one issued in which: (1) respondent Province of Benguet is declared
as having no authority to levy amusement taxes on admission fees for resorts,
swimming pools, bath houses, hot springs, tourist spots, and other places for
recreation; (2) Section 59, Article X of the Benguet Provincial Revenue Code of
2005 is declared null and void; and (3) the respondent Province of Benguet is
permanently enjoined from enforcing Section 59, Article X of the Benguet
Provincial Revenue Code of 2005.
Petitioner Pelizloy Realty Corporation ("Pelizloy") owns Palm Grove Resort, which
is designed for recreation and which has facilities like swimming pools, a spa and
function halls. It is located at Asin, Angalisan, Municipality of Tuba, Province of
Benguet.
On December 8, 2005, the Provincial Board of the Province of Benguet approved
Provincial Tax Ordinance No. 05-107, otherwise known as the Benguet Revenue
Code of 2005 ("Tax Ordinance"). Section 59, Article X of the Tax Ordinance
levied a ten percent (10%) amusement tax on gross receipts from admissions to
"resorts, swimming pools, bath houses, hot springs and tourist spots."
Specifically, it provides the following:

IcTCHD

Article Ten: Amusement Tax on Admission

Section 59.Imposition of Tax. There is hereby levied a tax to be
collected from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, cockpits, dancing halls, dancing

schools, night or day clubs, and other places of amusement at the rate of
thirty percent (30%) of the gross receipts from admission fees; and
A tax of ten percent (10%) of gross receipts from admission fees for
boxing, resorts, swimming pools, bath houses, hot springs, and
tourist spots is likewise levied. [Emphasis and underscoring supplied]

Section 162 of the Tax Ordinance provided that the Tax Ordinance shall take
effect on January 1, 2006.
It was Pelizloy's position that the Tax Ordinance's imposition of a 10%
amusement tax on gross receipts from admission fees for resorts, swimming
pools, bath houses, hot springs, and tourist spots is an ultra vires act on the part
of the Province of Benguet. Thus, it filed an appeal/petition before the Secretary
of Justice on January 27, 2006.
The appeal/petition was filed within the thirty (30)-day period from the effectivity
of a tax ordinance allowed by Section 187 ofRepublic Act No. 7160, otherwise
known as the Local Government Code (LGC). 1 The appeal/petition was docketed
as MSO-OSJ Case No. 03-2006.
Under Section 187 of the LGC, the Secretary of Justice has sixty (60) days from
receipt of the appeal to render a decision. After the lapse of which, the aggrieved
party may file appropriate proceedings with a court of competent jurisdiction.
Treating the Secretary of Justice's failure to decide on its appeal/petition within
the sixty (60) days provided by Section 187 of the LGC as an implied denial of
such appeal/petition, Pelizloy filed a Petition for Declaratory Relief and Injunction
before the Regional Trial Court, Branch 62, La Trinidad, Benguet. The petition
was docketed as Civil Case No. 06-CV-2232.
Pelizloy argued that Section 59, Article X of the Tax Ordinance imposed a
percentage tax in violation of the limitation on the taxing powers of local
government units (LGUs) under Section 133 (i) of the LGC. Thus, it was null and
void ab initio. Section 133 (i) of the LGC provides:

SEIacA

Section 133.Common Limitations on the Taxing Powers of Local

Government Units. Unless otherwise provided herein, the exercise of
the

taxing

powers

of

provinces,

cities,

municipalities,

and barangays shall not extend to the levy of the following:

xxx xxx xxx
(i)Percentage or value-added tax (VAT) on sales, barters
or exchanges or similar transactions on goods or services
except as otherwise provided herein.

The Province of Benguet assailed the Petition for Declaratory Relief and
Injunction as an improper remedy. It alleged that once a tax liability has attached,
the only remedy of a taxpayer is to pay the tax and to sue for recovery after
exhausting administrative remedies. 2
On substantive grounds, the Province of Benguet argued that the phrase 'other
places of amusement' in Section 140 (a) of theLGC 3 encompasses resorts,
swimming pools, bath houses, hot springs, and tourist spots since "Article 220
(b) (sic)" of the LGCdefines "amusement" as "pleasurable diversion and
entertainment . . . synonymous to relaxation, avocation, pastime, or
fun."4 However, the Province of Benguet erroneously cited Section 220 (b) of
the LGC. Section 220 of the LGC refers to valuation of real property for real
estate tax purposes. Section 131 (b) of the LGC, the provision which actually
defines "amusement", states:
Section 131.Definition of Terms. When used in this Title, the term:
xxx xxx xxx
(b)"Amusement"

is

pleasurable

diversion

and

entertainment. It is synonymous to relaxation, avocation,

pastime, or fun.

On December 10, 2007, the RTC rendered the assailed Decision dismissing the
Petition for Declaratory Relief and Injunction for lack of merit.

Procedurally, the RTC ruled that Declaratory Relief was a proper remedy. On the
validity of Section 59, Article X of the Tax Ordinance, the RTC noted that, while
Section 59, Article X imposes a percentage tax, Section 133 (i) of the LGC itself
allowed for exceptions. It noted that what the LGC prohibits is not the imposition
by LGUs of percentage taxes in general but the "imposition and levy of
percentage tax on sales, barters, etc., on goods and services only." 5 It further
gave credence to the Province of Benguet's assertion that resorts, swimming
pools, bath houses, hot springs, and tourist spots are encompassed by the
phrase 'other places of amusement' in Section 140 of the LGC.

AcSIDE

On May 21, 2008, the RTC denied Pelizloy's Motion for Reconsideration.
Aggrieved, Pelizloy filed the present petition on June 10, 2008 on pure questions
of law. It assailed the legality of Section 59, Article X of the Tax Ordinance as
being a (supposedly) prohibited percentage tax per Section 133 (i) of the LGC.
In its Comment, the Province of Benguet, erroneously citing Section 40 of
the LGC, argued that Section 59, Article X of the Tax Ordinance does not levy a
percentage tax "because the imposition is not based on the total gross receipts of
services of the petitioner but solely and actually limited on thegross receipts of
the admission fees collected." 6 In addition, it argued that provinces can validly
impose amusement taxes on resorts, swimming pools, bath houses, hot springs,
and tourist spots, these being 'amusement places'.
For resolution in this petition are the following issues:
1.Whether or not Section 59, Article X of Provincial Tax Ordinance
No. 05-107, otherwise known as the Benguet Revenue Code
of 2005, levies a percentage tax.
2.Whether or not provinces are authorized to impose amusement
taxes on admission fees to resorts, swimming pools, bath
houses, hot springs, and tourist spots for being "amusement
places" under the Local Government Code.

The power to tax "is an attribute of sovereignty," 7 and as such, inheres in the
State. Such, however, is not true for provinces, cities, municipalities
and barangays as they are not the sovereign; 8 rather, they are mere "territorial
and political subdivisions of the Republic of the Philippines". 9
The rule governing the taxing power of provinces, cities, municipalities
and barangays is summarized in Icard v. City Council of Baguio: 10
It is settled that a municipal corporation unlike a sovereign state is
clothed with no inherent power of taxation. The charter or statute must
plainly show an intent to confer that power or the municipality, cannot
assume it. And the power when granted is to be construed in strictissimi
juris. Any doubt or ambiguity arising out of the term used in granting that
power

must

be

resolved

against

the

municipality.

Inferences,

implications, deductions all these have no place in the

interpretation

of

the

taxing

corporation. 11 [Underscoring supplied]

power

of

municipal

EDATSI

Therefore, the power of a province to tax is limited to the extent that such power
is delegated to it either by the Constitution or by statute. Section 5, Article X of
the 1987 Constitution is clear on this point:
Section 5.Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments. [Underscoring
supplied]

Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer
vested exclusively on Congress; local legislative bodies are now given direct
authority to levy taxes, fees and other charges."

12

Nevertheless, such authority is

"subject to such guidelines and limitations as the Congress may provide". 13

In conformity with Section 3, Article X of the 1987 Constitution, 14 Congress

enacted Republic Act No. 7160, otherwise known as The Local Government
Code of 1991. Book II of the LGC governs local taxation and fiscal matters.
Relevant provisions of Book II of the LGC establish the parameters of the taxing
powers of LGUS found below.
First, Section 130 provides for the following fundamental principles governing the
taxing powers of LGUs:
1.Taxation shall be uniform in each LGU.
2.Taxes, fees, charges and other impositions shall:
a.be equitable and based as far as practicable on the
taxpayer's ability to pay;
b.be levied and collected only for public purposes;
c.not be unjust, excessive, oppressive, or confiscatory;
d.not be contrary to law, public policy, national economic
policy, or in the restraint of trade.
3.The collection of local taxes, fees, charges and other impositions
shall in no case be let to any private person.

IHCESD

4.The revenue collected pursuant to the provisions of the LGC shall

inure solely to the benefit of, and be subject to the
disposition by, the LGU levying the tax, fee, charge or other
imposition unless otherwise specifically provided by the LGC.
5.Each LGU shall, as far as practicable, evolve a progressive
system of taxation.
Second, Section 133 provides for the common limitations on the taxing powers of
LGUs. Specifically, Section 133 (i) prohibits the levy by LGUs of percentage or
value-added tax (VAT) on sales, barters or exchanges or similar transactions on
goods or services except as otherwise provided by the LGC.

As it is Pelizloy's contention that Section 59, Article X of the Tax Ordinance levies
a prohibited percentage tax, it is crucial to understand first the concept of a
percentage tax.
In Commissioner of Internal Revenue v. Citytrust Investment Phils., Inc., 15 the
Supreme Court defined percentage tax as a "tax measured by a certain
percentage of the gross selling price or gross value in money of goods sold,
bartered or imported; or of the gross receipts or earnings derived by any person
engaged in the sale of services." Also, Republic Act No. 8424, otherwise known
as the National Internal Revenue Code (NIRC), in Section 125, Title V,

16

lists

amusement taxes as among the (other) percentage taxes which are levied
regardless of whether or not a taxpayer is already liable to pay value-added tax
(VAT).

IcTEaC

Amusement taxes are fixed at a certain percentage of the gross receipts incurred
by certain specified establishments.
Thus, applying the definition in CIR v. Citytrust and drawing from the treatment of
amusement taxes by the NIRC, amusement taxes are percentage taxes as
correctly argued by Pelizloy.
However, provinces are not barred from levying amusement taxes even if
amusement taxes are a form of percentage taxes. Section 133 (i) of
the LGC prohibits the levy of percentage taxes "except as otherwise provided" by
the LGC.
Section 140 of the LGC provides:
SECTION 140.Amusement Tax. (a) The province may levy an
amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia,
and other places of amusement at a rate of not more than thirty percent
(30%) of the gross receipts from admission fees.
(b)In the case of theaters of cinemas, the tax shall first be deducted and
withheld by their proprietors, lessees, or operators and paid to the

provincial treasurer before the gross receipts are divided between said
proprietors,

lessees,

or

operators

and

the

distributors

of

the

cinematographic films.
(c)The holding of operas, concerts, dramas, recitals, painting and art
exhibitions, flower shows, musical programs, literary and oratorical
presentations, except pop, rock, or similar concerts shall be exempt from
the payment of the tax herein imposed.
(d)The Sangguniang Panlalawigan may prescribe the time, manner,
terms and conditions for the payment of tax. In case of fraud or failure to
pay the tax, the Sangguniang Panlalawigan may impose such
surcharges, interests and penalties.
(e)The proceeds from the amusement tax shall be shared equally by the
province and the municipality where such amusement places are
located. [Underscoring supplied]

ASaTCE

Evidently, Section 140 of the LGC carves a clear exception to the general rule in
Section 133 (i). Section 140 expressly allows for the imposition by provinces of
amusement taxes on "the proprietors, lessees, or operators of theaters, cinemas,
concert halls, circuses, boxing stadia, and other places of amusement."
However, resorts, swimming pools, bath houses, hot springs, and tourist spots
are not among those places expressly mentioned by Section 140 of the LGC as
being subject to amusement taxes. Thus, the determination of whether
amusement taxes may be levied on admissions to resorts, swimming pools, bath
houses, hot springs, and tourist spots hinges on whether the phrase 'other places
of amusement' encompasses resorts, swimming pools, bath houses, hot springs,
and tourist spots.
Under the principle of ejusdem generis, "where a general word or phrase follows
an enumeration of particular and specific words of the same class or where the
latter follow the former, the general word or phrase is to be construed to include,
or to be restricted to persons, things or cases akin to, resembling, or of the same
kind or class as those specifically mentioned." 17

The purpose and rationale of the principle was explained by the Court in National
Power Corporation v. Angas 18 as follows:
The purpose of the rule on ejusdem generis is to give effect to both the
particular and general words, by treating the particular words as
indicating the class and the general words as including all that is
embraced in said class, although not specifically named by the particular
words. This is justified on the ground that if the lawmaking body intended
the general terms to be used in their unrestricted sense, it would have
not made an enumeration of particular subjects but would have used
only general terms. [2 Sutherland, Statutory Construction, 3rd ed., pp.
395-400]. 19

In Philippine Basketball Association v. Court of Appeals, 20 the Supreme Court

had an opportunity to interpret a starkly similar provision or the counterpart
provision of Section 140 of the LGC in the Local Tax Code then in effect.
Petitioner Philippine Basketball Association (PBA) contended that it was subject
to the imposition by LGUs of amusement taxes (as opposed to amusement taxes
imposed by the national government). In support of its contentions, it cited
Section 13 of Presidential Decree No. 231, otherwise known as the Local Tax
Code of 1973, (which is analogous to Section 140 of the LGC) providing the
following:

STaCIA

Section 13.Amusement tax on admission. The province shall

impose a tax on admission to be collected from the proprietors,
lessees, or operators of theaters, cinematographs, concert halls,
circuses and other places of amusement . . . .

Applying the principle of ejusdem generis, the Supreme Court rejected PBA's
assertions and noted that:
[I]n determining the meaning of the phrase 'other places of
amusement', one must refer to the prior enumeration of theaters,
cinematographs, concert halls and circuses with artistic expression as
their common characteristic. Professional basketball games do not fall

under the same category as theaters, cinematographs, concert halls

and circuses as the latter basically belong to artistic forms of
entertainment

while

the

former

caters

to

sports

and

gaming. 21[Underscoring supplied]

However, even as the phrase 'other places of amusement' was already clarified
in Philippine Basketball Association, Section 140 of the LGC adds to the
enumeration of 'places of amusement' which may properly be subject to
amusement tax. Section 140 specifically mentions 'boxing stadia' in addition to
"theaters, cinematographs, concert halls [and] circuses" which were already
mentioned in PD No. 231. Also, 'artistic expression' as a characteristic does not
pertain to 'boxing stadia'.
In the present case, the Court need not embark on a laborious effort at statutory
construction. Section 131 (c) of the LGCalready provides a clear definition of
'amusement places':
Section 131.Definition of Terms. When used in this Title, the term:
xxx xxx xxx
(c)"Amusement
concert

Places"

halls,

include

circuses

and

theaters,
other

cinemas,

places

of

amusement where one seeks admission to entertain

oneself

by

seeing

or

viewing

the

show

or

performances [Underscoring supplied].

Indeed, theaters, cinemas, concert halls, circuses, and boxing stadia are bound
by a common typifying characteristic in that they are all venues primarily for the
staging of spectacles or the holding of public shows, exhibitions, performances,
and other events meant to be viewed by an audience. Accordingly, 'other places
of amusement' must be interpreted in light of the typifying characteristic of being
venues "where one seeks admission to entertain oneself by seeing or viewing the
show or performances" or being venues primarily used to stage spectacles or
hold public shows, exhibitions, performances, and other events meant to be
viewed by an audience.

HIaSDc

As defined in The New Oxford American Dictionary,

22

'show' means "a spectacle

or display of something, typically an impressive one"; 23 while 'performance'

means "an act of staging or presenting a play, a concert, or other form of
entertainment." 24 As such, the ordinary definitions of the words 'show' and
'performance' denote not only visual engagement (i.e., the seeing or viewing of
things) but also active doing (e.g., displaying, staging or presenting) such that
actions are manifested to, and (correspondingly) perceived by an audience.
Considering these, it is clear that resorts, swimming pools, bath houses, hot
springs and tourist spots cannot be considered venues primarily "where one
seeks admission to entertain oneself by seeing or viewing the show or
performances". While it is true that they may be venues where people are visually
engaged, they are not primarily venues for their proprietors or operators to
actively display, stage or present shows and/or performances.
Thus, resorts, swimming pools, bath houses, hot springs and tourist spots do not
belong to the same category or class as theaters, cinemas, concert halls,
circuses, and boxing stadia. It follows that they cannot be considered as among
the 'other places of amusement' contemplated by Section 140 of the LGC and
which may properly be subject to amusement taxes.
At this juncture, it is helpful to recall this Court's pronouncements in Icard:
[T]he power [to tax] when granted [to a province] is to be construed
in strictissimi juris. Any doubt or ambiguity arising out of the term used
in granting that power must be resolved against the [province].
Inferences, implications, deductions all these have no place in
the interpretation of the taxing power of a [province].

25

In this case, the definition of 'amusement places' in Section 131 (c) of the LGC is
a clear basis for determining what constitutes the 'other places of amusement'
which may properly be subject to amusement tax impositions by provinces. There
is no reason for going beyond such basis. To do otherwise would be to
countenance an arbitrary interpretation/application of a tax law and to inflict an
injustice on unassuming taxpayers.

cCaEDA

The previous pronouncements notwithstanding, it will be noted that it is only the

second paragraph of Section 59, Article X of the Tax Ordinance which imposes
amusement taxes on "resorts, swimming pools, bath houses, hot springs, and
tourist spots". The first paragraph of Section 59, Article X of the Tax Ordinance
refers to "theaters, cinemas, concert halls, circuses, cockpits, dancing halls,
dancing schools, night or day clubs, and other places of amusement". In any
case, the issues raised by Pelizloy are pertinent only with respect to the second
paragraph of Section 59, Article X of the Tax Ordinance. Thus, there is no reason
to invalidate the first paragraph of Section 59, Article X of the Tax Ordinance. Any
declaration as to the Province of Benguet's lack of authority to levy amusement
taxes must be limited to admission fees to resorts, swimming pools, bath houses,
hot springs and tourist spots.
Moreover, the second paragraph of Section 59, Article X of the Tax Ordinance is
not limited to resorts, swimming pools, bath houses, hot springs, and tourist spots
but also covers admission fees for boxing. As Section 140 of the LGC allows for
the imposition of amusement taxes on gross receipts from admission fees to
boxing stadia, Section 59, Article X of the Tax Ordinance must be sustained with
respect to admission fees from boxing stadia.
WHEREFORE, the petition for review on certiorari is GRANTED. The second
paragraph of Section 59, Article X of the Benguet Provincial Revenue Code of
2005, in so far as it imposes amusement taxes on admission fees to resorts,
swimming pools, bath houses, hot springs and tourist spots, is declared null and
void. Respondent Province of Benguet is permanently enjoined from enforcing
the second paragraph of Section 59, Article X of the Benguet Provincial Revenue
Code of 2005 with respect to resorts, swimming pools, bath houses, hot springs
and tourist spots.
SO ORDERED.
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(Pelizloy Realty Corp. v. Province of Benguet, G.R. No. 183137, April 10, 2013)