G.R. No.

L-49529 March 31, 1989

VALLEY TRADING CO., INC., petitioner,
vs.
COURT OF FIRST INSTANCE OF ISABELA, BRANCH II; DR. CARLOS UY (in his capacity as
Mayor of Cauayan, Isabela); MOISES BALMACEDA (in his capacity as Municipal Treasurer of
Cauayan, Isabela); and SANGGUNIANG BAYAN of Cauayan, Isabela, respondents.
Jesus M. Aguas for petitioner.
The Solicitor General for respondents.

REGALADO, J.:
Challenged in this petition for certiorari are the orders of the then Court of First Instance of
Isabela, 1 dated October 13, 1978 and November 17, 1978, denying petitioner's prayer for a writ of preliminary injunction in Special Civil
Action Br. II-61. 2

The records show that petitioner Valley Trading Co., Inc. filed a complaint in the court a quo seeking
a declaration of the supposed nullity of Section 2B.02, Sub-paragraph 1, Letter (A), Paragraph 2 of
Ordinance No. T-1, Revenue Code of Cauayan, Isabela, which imposed a graduated tax on retailers,
independent wholesalers and distributors; and for the refund of P23,202.12, plus interest of 14 % per
annum thereon, which petitioner had paid pursuant to said ordinance. Petitioner likewise prayed for
the issuance of a writ of preliminary prohibitory injunction to enjoin the collection of said
tax. 3 Defendants in said case were Dr. Carlos A. Uy and Moises Balmaceda, who were sued in their capacity as Mayor and Municipal
Treasurer of Cauayan, Isabela, respectively, together with the Sangguniang Bayan of the same town.

Petitioner takes the position that said ordinance imposes a "graduated fixed tax based on Sales" that
"in effect imposes a sales tax in contravention of Sec. 5, Charter I, par. (L) of P.D. 231 amended by
P.D. 426 otherwise known as the Local Tax Code " 4 which prohibits a municipality from imposing a percentage tax on
sales.

Respondents, on the other hand, claim in their answer that the tax is an annual fixed business tax,
not a percentage tax on sales, imposable by a municipality under Section 19(A-1) of the Local Tax
Code. They cited the ruling of the Acting Secretary of Finance, in his letter of April 14, 1977,
upholding the validity of said tax on the ground that the same is an annual graduated fixed tax
imposed on the privilege to engage in business, and not a percentage tax on sales which consists of
a fixed percentage of the proceeds realized out of every sale transaction of taxable items sold by the
taxpayer. 5
After a reply to the answer had been filed, the trial court set the case for a pre-trial
conference. 6 However, on October 13, 1978, the court issued an order terminating the pre-trial and reset the hearing on the merits for
failure of the parties to arrive at an amicable settlement. In the same order, the trial court also denied the prayer for a writ of preliminary
injunction on the ground that "the collection of taxes cannot be enjoined". 7

Petitioner moved for the reconsideration of the order, contending that a hearing is mandatory before
action may be taken on the motion for the issuance of a writ of preliminary injunction, 8 but the court below
denied said motion and reiterated its previous order. 9

At the center of this controversy is the submission of the petitioner that a hearing on the merits is
necessary before a motion for a writ of preliminary injunction may be denied. Petitioner supports its
contention by invoking Section 7, Rule 58 of the Rules of Court which provides that "(a)fter hearing
on the merits the court may grant or refuse, continue, modify or dissolve the injunction as justice
may require." Petitioner maintains that Section 6 of Rule 58 relied upon by respondents refers to the
objections that might be interposed to the issuance of the writ or the justification for the dissolution of
an injunction previously issued ex parte, but that nowhere is it mentioned that a hearing is not
necessary.
The weakness of petitioner's position is easily discernible. While it correctly pointed out that Section
6 of Rule 58 provides for the grounds for objection to an injunction, petitioner ignores the
circumstances under which these objections may be appreciated by the trial court. Thus, if the
ground is the insufficiency of the complaint, the same is apparent from the complaint itself and
preliminary injunction may be refused outright, with or without notice to the adverse party. In fact,
under said section, the court may also refuse an injunction on other grounds on the basis of
affidavits which may have been submitted by the parties in connection with such application. In the
foregoing instances, a hearing is not necessary.
The reliance of the petitioner on Section 7 of Rule 58 is misplaced. This section merely specifies the
actions that the court may take on the application for the writ if there is a hearing on the merits; it
does not declare that such hearing is mandatory or a prerequisite therefor. Otherwise, we may have
a situation where courts will be forced to conduct a hearing even if from a consideration of the
pleadings alone it can readily be ascertained that the movant is not entitled to the writ. In fine, it will
thereby entail a useless exercise and unnecessary waste of judicial time.
It would be different, of course, it there is a prima facie showing on the face of the motion and/or
pleadings that the grant of preliminary injunction may be proper, in which case notice to the opposing
party would be necessary since the grant of such writ on an ex parte proceeding is now
proscribed. 10 A hearing should be conducted since, under such circumstances, only in case of extreme urgency will the writ issue prior
to a final hearing.11 Such requirement for prior notice and hearing underscores the necessity that a writ of preliminary injunction is to be
dispensed with circumspection both sides should be heard whenever possible. 12 It does not follow, however, that such a hearing is
indispensable where right at the outset the court is reasonably convinced that the writ will not lie. What was then discouraged, and is now
specifically prohibited, is the issuance of the writ without notice and hearing.

An opinion has been expressed that injunction is available as an ancillary remedy in actions to
determine the construction or validity of a local tax ordinance. 13 Unlike the National Internal Revenue Code, the
Local Tax Code 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.

The issuance of a writ of preliminary injunction in the present case, as in any other case, is
addressed to the sound discretion of the court, conditioned on the existence of a clear and positive
right of the movant which should be protected. It is an extraordinary peremptory remedy available
only on the grounds expressly provided by law, specifically Section 3 of Rule 58 of the Rules of
Court.

The circumstances required for the writ to issue do not obtain in the case at bar. The damage that
may be caused to the petitioner will not, of course, be irrepairable; where so indicated by
subsequent events favorable to it, whatever it shall have paid is easily refundable. Besides, the
damage to its property rights must perforce take a back seat to the paramount need of the State for
funds to sustain governmental functions. Compared to the damage to the State which may be
caused by reduced financial resources, the damage to petitioner is negligible. The policy of the law
is to discountenance any delay in the collection of taxes because of the oft-repeated but
unassailable consideration that taxes are the lifeblood of the Government and their prompt and
certain availability is an imperious need.
Equally pertinent is the rule that courts should avoid issuing a writ of preliminary injunction which, in
effect, would dispose of the main case without trial. 14 In the present case, it is evident that the only ground relied upon
for injunction relief is the alleged patent nullity of the ordinance. 15 If the court should issue the desired writ, premised on that sole
justification therefor of petitioner, it would be a virtual acceptance of his claim that the imposition is patently invalid or, at the very least, that
the ordinance is of doubtful validity. There would, in effect, be a prejudgment of the main case and a reversal of the rule on the burden of
proof since it would assume the proposition which the petitioner is inceptively duty bound to prove.

Furthermore, such action will run counter to the well settled rule that laws are presumed to be valid
unless and until the courts declare the contrary in clear and unequivocal terms. A court should issue
a writ of preliminary injunction only when the petitioner assailing a statute has made out a case of
unconstitutionality or invalidity strong enough to overcome, in the mind of the judge, the presumption
of validity, aside from a showing of a clear legal right to the remedy sought. 16 The case before Us, however,
presents no features sufficient to overcome such presumption. This must have been evident to the trial court from the answer of the
respondents and the well reasoned ruling of the Acting Secretary of Finance.

There mere fact that a statute is alleged to be unconstitutional or invalid will not entitle a party to
have its enforcement enjoined. 17 Under the foregoing disquisitions, We see no plausible reason to consider this case as an
exception.

WHEREFORE, judgment is hereby rendered DISMISSING this petition and SUSTAINING the validity
of the questioned orders of the trial court.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

G.R. Nos. L-49839-46 April 26, 1991

JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,
vs.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROO, in their capacities as appointed
and Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H.
NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed
and Acting Members of the BOARD OF ASSESSMENT APPEALS of Manila; and NICOLAS
CATIIL in his capacity as City Assessor of Manila,respondents.
Barcelona, Perlas, Joven & Academia Law Offices for petitioners.

PARAS, J.:p
This is a petition for review on certiorari to reverse the June 10, 1977 decision of the Central Board
of Assessment Appeals 1 in CBAA Cases Nos. 72-79 entitled "J.B.L. Reyes, Edmundo Reyes, et al. v.
Board of Assessment Appeals of Manila and City Assessor of Manila" which affirmed the March 29, 1976
decision of the Board of Tax Assessment Appeals 2 in BTAA Cases Nos. 614, 614-A-J, 615, 615-A, B, E,
"Jose Reyes, et al. v. City Assessor of Manila" and "Edmundo Reyes and Milagros Reyes v. City Assessor
of Manila" upholding the classification and assessments made by the City Assessor of Manila.
The facts of the case are as follows:
Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in
Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling
sites by tenants. Said tenants were paying monthly rentals not exceeding three hundred pesos
(P300.00) in July, 1971. On July 14, 1971, the National Legislature enacted Republic Act No. 6359
prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands
on which another's dwelling is located, where such rentals do not exceed three hundred pesos
(P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act
also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity
thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease.

On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the
prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the
aforementioned provision of the Civil Code, excepting leases with a definite period. Consequently,
the Reyeses, petitioners herein, were precluded from raising the rentals and from ejecting the
tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the
subject properties based on the schedule of market values duly reviewed by the Secretary of
Finance. The revision, as expected, entailed an increase in the corresponding tax rates prompting
petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They
averred that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and
unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income
derived from their properties. They argued that the income approach should have been used in
determining the land values instead of the comparable sales approach which the City Assessor
adopted (Rollo, pp. 9-10-A). The Board of Tax Assessment Appeals, however, considered the
assessments valid, holding thus:
WHEREFORE, and considering that the appellants have failed to submit concrete
evidence which could overcome the presumptive regularity of the classification and
assessments appear to be in accordance with the base schedule of market values
and of the base schedule of building unit values, as approved by the Secretary of
Finance, the cases should be, as they are hereby, upheld.
SO ORDERED. (Decision of the Board of Tax Assessment Appeals, Rollo, p. 22).
The Reyeses appealed to the Central Board of Assessment Appeals. They submitted, among others,
the summary of the yearly rentals to show the income derived from the properties. Respondent City
Assessor, on the other hand, submitted three (3) deeds of sale showing the different market values
of the real property situated in the same vicinity where the subject properties of petitioners are
located. To better appreciate the locational and physical features of the land, the Board of Hearing
Commissioners conducted an ocular inspection with the presence of two representatives of the City
Assessor prior to the healing of the case. Neither the owners nor their authorized representatives
were present during the said ocular inspection despite proper notices served them. It was found that
certain parcels of land were below street level and were affected by the tides (Rollo, pp. 24-25).
On June 10, 1977, the Central Board of Assessment Appeals rendered its decision, the dispositive
portion of which reads:
WHEREFORE, the appealed decision insofar as the valuation and assessment of the
lots covered by Tax Declaration Nos. (5835) PD-5847, (5839), (5831) PD-5844 and
PD-3824 is affirmed.
For the lots covered by Tax Declaration Nos. (1430) PD-1432, PD-1509, 146 and (1)
PD-266, the appealed Decision is modified by allowing a 20% reduction in their
respective market values and applying therein the assessment level of 30% to arrive
at the corresponding assessed value.
SO ORDERED. (Decision of the Central Board of Assessment Appeals, Rollo, p. 27)

Petitioner's subsequent motion for reconsideration was denied, hence, this petition.
The Reyeses assigned the following error:
THE HONORABLE BOARD ERRED IN ADOPTING THE "COMPARABLE SALES
APPROACH" METHOD IN FIXING THE ASSESSED VALUE OF APPELLANTS'
PROPERTIES.
The petition is impressed with merit.
The crux of the controversy is in the method used in tax assessment of the properties in question.
Petitioners maintain that the "Income Approach" method would have been more realistic for in
disregarding the effect of the restrictions imposed by P.D. 20 on the market value of the properties
affected, respondent Assessor of the City of Manila unlawfully and unjustifiably set increased new
assessed values at levels so high and successive that the resulting annual real estate taxes would
admittedly exceed the sum total of the yearly rentals paid or payable by the dweller tenants under
P.D. 20. Hence, petitioners protested against the levels of the values assigned to their properties as
revised and increased on the ground that they were arbitrarily excessive, unwarranted, inequitable,
confiscatory and unconstitutional (Rollo, p. 10-A).
On the other hand, while respondent Board of Tax Assessment Appeals admits in its decision that
the income approach is used in determining land values in some vicinities, it maintains that when
income is affected by some sort of price control, the same is rejected in the consideration and study
of land values as in the case of properties affected by the Rent Control Law for they do not project
the true market value in the open market (Rollo, p. 21). Thus, respondents opted instead for the
"Comparable Sales Approach" on the ground that the value estimate of the properties predicated
upon prices paid in actual, market transactions would be a uniform and a more credible standards to
use especially in case of mass appraisal of properties (Ibid.). Otherwise stated, public respondents
would have this Court completely ignore the effects of the restrictions of P.D. No. 20 on the market
value of properties within its coverage. In any event, it is unquestionable that both the "Comparable
Sales Approach" and the "Income Approach" are generally acceptable methods of appraisal for
taxation purposes (The Law on Transfer and Business Taxation by Hector S. De Leon, 1988 Edition).
However, it is conceded that the propriety of one as against the other would of course depend on
several factors. Hence, as early as 1923 in the case of Army & Navy Club, Manila v. Wenceslao
Trinidad, G.R. No. 19297 (44 Phil. 383), it has been stressed that the assessors, in finding the value
of the property, have to consider all the circumstances and elements of value and must exercise a
prudent discretion in reaching conclusions.
Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only
be uniform, but must also be equitable and progressive.
Uniformity has been defined as that principle by which all taxable articles or kinds of property of the
same class shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]).
Notably in the 1935 Constitution, there was no mention of the equitable or progressive aspects of
taxation required in the 1973 Charter (Fernando "The Constitution of the Philippines", p. 221,

Second Edition). Thus, the need to examine closely and determine the specific mandate of the
Constitution.
Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is
progressive when its rate goes up depending on the resources of the person affected (Ibid.).
The power to tax "is an attribute of sovereignty". In fact, it is the strongest of all the powers of
government. But for all its plenitude the power to tax is not unconfined as there are restrictions.
Adversely effecting as it does property rights, both the due process and equal protection clauses of
the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it
were otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that "the power to
tax involves the power to destroy." The web or unreality spun from Marshall's famous dictum was
brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is not the power to
destroy while this Court sits. So it is in the Philippines " (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984];
Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439 [1985]).
In the same vein, the due process clause may be invoked where a taxing statute is so arbitrary that it
finds no support in the Constitution. An obvious example is where it can be shown to amount to
confiscation of property. That would be a clear abuse of power (Sison v. Ancheta, supra).
The taxing power has the authority to make a reasonable and natural classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at the very least
discrimination that finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different both in the privileges conferred and the liabilities imposed
(Ibid., p. 662).
Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first
Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes
is that the property must be "appraised at its current and fair market value."
By no strength of the imagination can the market value of properties covered by P.D. No. 20 be
equated with the market value of properties not so covered. The former has naturally a much lesser
market value in view of the rental restrictions.
Ironically, in the case at bar, not even the factors determinant of the assessed value of subject
properties under the "comparable sales approach" were presented by the public respondents,
namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller
and a willing buyer and (2) the property must be comparable property (Rollo, p. 27). Nothing can
justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially
during the time in question, there were hardly any willing buyers. As a general rule, there were no
takers so that there can be no reasonable basis for the conclusion that these properties were
comparable with other residential properties not burdened by P.D. 20. Neither can the given
circumstances be nonchalantly dismissed by public respondents as imposed under distressed
conditions clearly implying that the same were merely temporary in character. At this point in time,

the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has
existed for around twenty (20) years with no end to it in sight.
Verily, taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. However, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which
is the promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue
Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened
by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle
of social justice should not now be penalized by the same government by the imposition of
excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.
By the public respondents' own computation the assessment by income approach would amount to
only P10.00 per sq. meter at the time in question.
PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed decisions of public
respondents are REVERSED and SET ASIDE; and (e) the respondent Board of Assessment
Appeals of Manila and the City Assessor of Manila are ordered to make a new assessment by the
income approach method to guarantee a fairer and more realistic basis of computation (Rollo, p. 71).
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.

G.R. No. 96516 May 8, 1991

JESUS C. ESTANISLAO, in his capacity as the Secretary of Finance, petitioner,
vs.
HONORABLE AMADO COSTALES, as Presiding Judge of the Regional Trial Court, Branch 14,
at Zamboanga City, and CITY OF ZAMBOANGA, represented by the Honorable City
Mayor, respondents.

GANCAYCO, J.:p

The validity of Ordinance No. 44 of Zamboanga City, dated January 13, 1982 imposing a P0.01 tax
per liter of softdrinks produced, manufactured, and/or bottled within the territorial jurisdiction of the
City of Zamboanga is the issue addressed by this petition.
This Ordinance was passed by the Sangguniang Panglungsod of Zamboanga City. 1 On February 16,
1982, the Sanggunian sent a copy of the Ordinance to the then Minister of Finance by registered mail for
his review pursuant to P.D. No. 231, otherwise known as the Local Tax Code.
On December 3, 1982, the Minister of Finance through Deputy Minister Antonino P. Roman, Jr., sent
the letter addressed to the Sanggunian, suspending the effectivity of Ordinance No. 44 on the
ground that it contravenes Section 19(a) of the Local Tax Code. 2
On January 31, 1983, the City of Zamboanga, represented by its City Mayor, appealed said decision
of the Minister of Finance to the Regional Trial Court, Branch 14, at Zamboanga City.
On December 5, 1990, the lower court rendered a decision finding that the tax levied under said
Ordinance is not among those that the Sanggunian may impose under the Local Tax Code, but
nonetheless, it upheld its validity on the ground that the Minister of Finance did not take appropriate
action on the matter within the prescribed period of 120 days after receipt of a copy thereof. 3
Hence, this petition for review on certiorari filed by the incumbent Secretary of Finance, represented
by the Solicitor General, alleging that the trial court erred when it held that the failure of the Minister
of Finance to suspend the effectivity of Ordinance No. 44 within 120 days from receipt of a copy
thereof rendered said Ordinance valid.
The petition is impressed with merit.
Section 19 (a) of the Local Tax Code provides as follows:
Sec. 19. Tax on business.The municipality may impose a tax on businesses as
follows:
(a) Tax on the business of manufacturing, importing, exporting,
producing, wholesaling or retailing of, or dealing in, any article of
commerce of whatever kind or nature, except those for which fixed
taxes are provided herein:
With gross annual sales Amount of tax
for the preceding calendar per
year in the amount of annum
Less than P1,000.00 P 10.00
P1,000.00 or more but

less than P2,000.00 20.00

P2,000.00 or more but
less than P3,000.00 30.00
P3,000.00 or more but
less than P4,000.00 45.00
P4,000.00 or more but
less than P5,000.00 65.00
P5,000.00 or more but
less than P6,000.00 80.00
P6,000.00 or more but
less than P7,000.00 100.00
P7,000.00 or more but
less than P8,000.00 120.00
P8,000.00 or more but
less than P10,000.00 160.00
P10,000.00 or more but
less than P15,000.00 240.00
P15,000.00 or more but
less than P20,000.00 360.00
P20,000.00 or more but
less than P30,000.00 520.00
P30,000.00 or more but
less than P40,000.00 750.00

P40,000.00 or more but

less than P50,000.00 1,000.00
P50,000.00 or more but
less than P75,000.00 1,500.00
P75,000.00 or more but
less than P100,000.00 2,200.00
P100,000.00 or more but
less than P150,000.00 3,200.00
P150,000.00 or more but
less than P300,000.00 3,900.00
P300,000.00 or more but
less than P500,000.00 7,000.00
P500,000.00 or more but
less than P750,000.00 11,250.00
P750,000.00 to P 1,000.000.00 16,000.00
For every P50,000.00 or fraction
thereof in excess of
P1,000,000.00 200.00
In the case of newly started business, the tax shall be at the rate of not exceeding
one-tenth of one per cent of the capital investment but in no case shall it be less than
the minimum of P10.00 fixed above.
The tax on the business of manufacturing, producing or importing agricultural
implements, fertilizers, medicinal drugs, and dairy products shall be one-half of the
rates above prescribed.
For purposes of collection of this tax, manufacturers and producers maintaining or
operating branch or sales offices elsewhere shall record the sales in the branch or

sales office making the sale and the tax thereon shall accrue to the local government
where the branch or sales office is located. In cases where there is no such branch
or sales office in the locality where the sale is effected, the sale shall be duly
recorded in the principal office and the tax shall accrue to the local government
where said principal office is located.
In relation thereto Section 23 thereof also provides:
Sec. 23. Scope of power.Except as otherwise provided in this Code, the city may
levy and collect, among others, any of the taxes, fees and other impositions that the
province or the municipality may levy and collect. The exercise of the taxing powers
of the city extends to the taxes, fees and other impositions mentioned in Sections 12,
13, 14, 15 and 16 of this Code which the city shall also impose and collect, to the
exclusion of the national and municipal governments.
The rates of the taxes, fees, or other impositions that the city shall fix may exceed
the maximum rates allowed for the province or municipality by not more than fifty per
cent, except the rates of the taxes and fees provided in Sections 12, 13 and 14 in
Chapter II of this Code which shall be uniform for the province and the city.
In lieu of the graduated fixed tax prescribed under Section 19 of this Code as read in
relation with this Section, the city may impose a percentage tax on the sales of nonessential commodities at the rate of not exceeding two per cent and on the sales of
essential commodities at the rate of not exceeding one per cent. In no case,
however, shall the city impose both the graduated fixed tax and the percentage tax
on the same subject.
For purposes of this tax, the following shall be considered essential commodities:
(a) Rice, corn, wheat flour, meat, milk, fish, sugar, salt and other agricultural, marine
and fresh water products;
(b) Laundry soap medicine and household remedies;
(c) Locally manufactured ordinary fabrics and canned foodstuffs;
(d) Commodities covered by the Price Control Law; and
(e) Such other related and similar products necessary to human life and well-being.
The city may levy any tax, fee or other imposition not specifically enumerated or
otherwise provided for in this Code, subject to the provisions of Sections 49 and 50
of this Code. (Emphasis supplied.)
From the foregoing, it is clear that a city, like public respondent Zamboanga City may impose, in lieu
of the graduated fixed tax prescribed under Section 19 of the Local Tax Code, a percentage tax on

the gross sales for the preceding calendar year of non-essential commodities at the rate of not
exceeding two per cent and on the gross sales of essential commodities at the rate of not exceeding
one per cent.
Ordinance No. 44 of the respondent Zamboanga City imposes P0.01 per liter of softdrinks produced,
manufactured, and/or bottled within the territorial jurisdiction of the City of Zamboanga. No doubt this
Ordinance isultra vires as it is not within the authority of the City to impose said tax. The authority of
the City is limited to the imposition of a percentage tax on the gross sales or receipts of said product
which, being non-essential, shall be at the rate of not exceeding 2% of the gross sales or receipts of
the softdrinks for the preceding calendar year. The tax being imposed under said Ordinance is based
on the output or production and not on the gross sales or receipts as authorized under the Local Tax
Code.
Public respondent Zamboanga City, however, invokes the ruling of this Court in Pepsi-Cola Bottling
Company vs.Municipality of Tanauan, Leyte 4 whereby this Court upheld the validity of Municipal
Ordinance No. 27 enacted by the Municipality of Tanauan, Leyte imposing a tax of P0.01 for every gallon
of softdrinks produced in the municipality as follows:
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 alterious, and exceptio
firmat regulum in casibus non excepti. 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 sale of
the taxpayer imposes a sales tax and is nun and void for being outside the power of
the municipality to enact. 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 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 the tax. 5
Said case was decided by this Court on the basis of the provisions of the Local Autonomy Act
(Republic Act No. 2264, as amended, which took effect on June 19, 1959), particularly Section 2
thereof, which gives the cities or municipalities ample taxing authority covering almost "everything,
excepting those mentioned herein."

However, the Local Autonomy Act has been superseded by the Local Tax Code insofar as the taxing
authority in the provinces, cities or municipalities is concerned. By express language of Section
64(a) of the Local Tax Code, "all existing tax ordinances of provinces, cities, municipalities and
barrios shall be deemed ipso facto nullified on June 30, 1974." 6
The applicable law, therefore, to the present case is the Local Tax Code and not the Local Autonomy
Act.
Section 5, Article X of the 1987 Constitution provides "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." 7 Ordinance No. 44 of public respondent Zamboanga City traverses the limitations set by the
Local Tax Code.
Section 44 of the Local Tax Code provides as follows:
Sec. 44. Review and suspension of tax ordinance.Within fifteen days after its
approval, a certified true copy of a tax ordinance shall be furnished: the Secretary of
Finance by the provincial board or city council; the provincial treasurer, by the
municipal or barrio council; or the city treasurer by the barrio council in the city's
jurisdiction. If , within one hundred and twenty days after receipt of a copy thereof,
the Secretary of Finance or the provincial or city treasurer, as the case may be, takes
no action as authorized in this section, the tax ordinance shall remain in force.
The Secretary of Finance, the provincial treasurer, or the city treasurer, as the case
may be, shall review and have the authority to suspend the effectivity of any tax
ordinance within one hundred and twenty days after receipt of a copy thereof, if, in
his opinion, the tax or fee therein levied or imposed is unjust, excessive, oppressive,
confiscatory, or not among those that the particular local government may impose in
the exercise of its power in accordance with this Code; or when the tax ordinance is,
in whole or in part, contrary to declared national economic policy; or when the
ordinance is discriminatory in nature on the conduct of business or calling or in
restraint of trade.
When the Secretary of Finance, the provincial treasurer or city treasurer, as the case
may be, exercises this authority, the effectivity of such ordinance shall be suspended,
either in part or, if necessary, in toto. The local legislative body, within thirty days after
receipt of the notice of suspension, may either modify the tax ordinance to meet the
objections thereto or file an appeal with the proper court, otherwise, the tax
ordinance or the part or parts thereof declared suspended shall be considered as
revoked.
An appeal shall not stay the order of suspension nor does it authorize the local
legislative body to reimpose the same tax or fee levied under a suspended ordinance
until such time as the grounds for the suspension thereof shall have ceased to exist

or the appeal has been resolved in its favor. Any tax or fee paid pursuant to the
ordinance involved shall be considered as having been paid under protest.
In case the appeal is resolved in favor of the local government, the tax or fee that
would have been collected if there were no order of suspension shall immediately be
collected without interest and surcharge. In case the order of suspension is upheld,
the court shall forthwith order the refund of the tax or fee paid under protest to the
taxpayer. 8
In accordance with the foregoing provision, the Sanggunian Panglungsod sent a copy of Ordinance
No. 44 by registered mail to the then Minister of Finance on February 16, 1982. Apparently, said
official failed to act within 120 days after receipt of a copy thereof. It was only on December 6, 1982
when the Minister of Finance, through his deputy, wrote the Sanggunian informing it of the
suspension of the effectivity of Ordinance No. 44 as it contravenes Section 19(a) of the Local Tax
Code, as amended, without prejudice to the Sanggunian filing an appeal within thirty (30) days from
receipt thereof; otherwise the same shall be deemed revoked. Public respondent Zamboanga City
concurs in the position of the respondent judge that since the Minister of Finance failed to act or
otherwise suspend the effectivity of the tax ordinance within 120 days from receipt of a copy thereof,
said Ordinance is valid and remains in force.
There is no authority under Section 44 of the Local Tax Code for this conclusion. All that is provided
therein is that if the Secretary of Finance "takes no action as authorized in this section, the tax
ordinance shall remain in force."
Even if the Secretary of Finance failed to review or act on the Ordinance within the prescribed period
of 120 days it does not follow as a legal consequence thereof that an otherwise invalid ordinance is
thereby validated.
Much less can it be interpreted to mean that the Secretary of Finance can no longer act by
suspending and/or revoking an invalid ordinance even after the lapse of the 120-day period. All that
the law says is that after said period the tax ordinance shall remain in force. The prescribed period
for review is only directory and the Secretary of Finance may still review the ordinance and act
accordingly even after the lapse of the said period provided he acts within a reasonable time.
Consequently even after the prescribed period has lapsed, should the Secretary of Finance, upon
review, find that the tax or fee levied or imposed is unjust, excessive, oppressive, confiscatory, or not
among those that the particular local government may impose in the exercise of its power in
accordance with this Code; or when the tax ordinance is, in whole or in part, contrary to the declared
national economic policy; or when the ordinance is discriminatory in nature on the conduct of
business or calling or in restraint of trade, 9 the Secretary of Finance may certainly suspend the
effectivity of such ordinance and revoke the same, without prejudice to the right to appeal to the courts
within 30 days after receipt of the notice of suspension. The same rule should apply to the provincial and
city treasurers, as the case may be, under Section 44 of the Local Tax Code.
WHEREFORE, the petition is hereby GRANTED. City Ordinance No. 44 dated January 13, 1982
enacted by the Sangguniang Panglunsod of public respondent Zamboanga City is hereby declared

null and void. Any taxes paid under protest thereunder should be accordingly refunded to the
taxpayers concerned. 10 No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin,
Sarmiento, Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.

[G.R. No. L-31249. August 19, 1986.]

SALVADOR VILLACORTA as City Engineer of Dagupan City, and JUAN S. CAGUIOA as Register of
Deeds of Dagupan City, Petitioners, v. GREGORIO BERNARDO and HON. MACARIO OFILADA as
Judge of Court of First Instance of Pangasinan, Respondents.
Victor T. Llamas, Jr. for Respondents.

SYLLABUS

1. ADMINISTRATIVE LAW; DELEGATION OF POWERS; MUNICIPAL BOARD; ORDINANCE NO. 22, NOT VALID
FOR IMPOSING ADDITIONAL REQUIREMENTS OTHER THAN THAT PROVIDED FOR BY THE NATIONAL LAW.
To sustain the ordinance No. 22, "An Ordinance Regulating Subdivision Plans over Parcels of Land in
Dagupan City" would be to open the floodgates to other ordinances amending and so violating national laws
in the guise of implementing them. Thus, ordinances could be passed imposing additional requirements for
the issuance of marriage licenses, to prevent bigamy; the registration of vehicles, to minimize carnapping;
the execution of contracts, to forestall fraud; the validation of passports, to deter imposture; the exercise of
freedom of speech, to reduce disorder; and so on. The list is endless, but the means, even if the end be
valid, would be ultra vires. Ordinance No. 22 suffers from the additional defect of violating this authority for
legislating in contravention of the national law by adding to its requirements.
2. CONSTITUTIONAL LAW; POLICE POWER; PROTECTION OF RIGHTS OF INDIVIDUAL, IMPORTANT AS
PROTECTION OF RIGHT OF PUBLIC. We urge that proper care attend the exercise of the police power lest
it deteriorate into an unreasonable intrusion into the purely private affairs of the individual. The so-called
"general welfare" is too amorphous and convenient an excuse for official arbitrariness. Let it always be
remembered that in the truly democratic state, protecting the rights of the individual is as important as, if
not more so than, protecting the rights of the public. This advice is especially addressed to the local
governments which exercise the police power only by virtue of a valid delegation from the national
legislature under the general welfare clause.

DECISION

CRUZ, J.:

This is a petition for certiorari against a decision of the Court of First Instance of Pangasinan annulling an
ordinance adopted by the municipal board of Dagupan City.
The ordinance reads in full as follows:

jgc:chanroble s.com.ph

"ORDINANCE 22
"AN ORDINANCE REGULATING SUBDIVISION PLANS OVER PARCELS OF LAND IN THE CITY OF DAGUPAN.
"Be it ordained by the Municipal Board of Dagupan City in session assembled:

jgc:chanroble s.com.ph

"Section 1. Every proposed subdivision plan over any lot in the City of Dagupan, shall, before the same is
submitted for approval and/or verification by the Bureau of Lands and/or the Land Registration Commission,
be previously submitted to the City Engineer of the City who shall see to it that no encroachment is made on
any portion of the public domain, that the zoning ordinance and all other pertinent rules and regulations are
observed.
"Section 2. As service fee thereof, an amount equivalent to P0.30 per square meter of every lot resulting or
will result from such subdivision shall be charged by the City Engineers Office.
"Section 3. It shall be unlawful for the Register of Deeds of Dagupan City to allow the registration of a
subdivision plan unless there is prior written certification issued by the City Engineer that such plan has
already been submitted to his office and that the same is in order.
"Section 4. Any violation of this ordinance shall be punished by a fine not exceeding two hundred (P200.00)
pesos or imprisonment not exceeding six (6) months or both in the discretion of the judge.
"Section 5. This ordinance shall take effect immediately upon approval."
In declaring the said ordinance null and void, the court a quo declared:

cralaw virtua1aw library

jgc:chanroble s.com.ph

"From the above-recited requirements, there is no showing that would justify the enactment of the
questioned ordinance. Section 1 of said ordinance clearly conflicts with Section 44 of Act 496, because the
latter law does not require subdivision plans to be submitted to the City Engineer before the same is
submitted for approval to and verification by the General Land Registration Office or by the Director of Lands
as provided for in Section 58 of said Act. Section 2 of the same ordinance also contravenes the provisions of
Section 44 of Act 496, the latter being silent on a service fee of P0.03 per square meter of every lot subject
of such subdivision application; Section 3 of the ordinance in question also conflicts with Section 44 of Act
496, because the latter law does not mention of a certification to be made by the City Engineer before the
Register of Deeds allows registration of the subdivision plan; and the last section of said ordinance imposes
a penalty for its violation, which Section 44 of Act 496 does not impose. In other words, Ordinance 22 of the
City of Dagupan imposes upon a subdivision owner additional conditions.
x

"The Court takes note of the laudable purpose of the ordinance in bringing to a halt the surreptitious
registration of lands belonging to the government. But as already intimidated above, the powers of the
board in enacting such a laudable ordinance cannot be held valid when it shall impede the exercise of rights
granted in a general law and/or make a general law subordinated to a local ordinance."
cralaw virtua1aw library

We affirm.
To sustain the ordinance would be to open the floodgates to other ordinances amending and so violating
national laws in the guise of implementing them. Thus, ordinances could be passed imposing additional
requirements for the issuance of marriage licenses, to prevent bigamy; the registration of vehicles, to

minimize carnaping; the execution of contracts, to forestall fraud; the validation of passports, to deter
imposture; the exercise of freedom of speech, to reduce disorder; and so on. The list is endless, but the
means, even if the end be valid, would be ultra vires.
So many excesses are attempted in the name of the police power that it is time, we feel, for a brief
admonition.
Regulation is a fact of life in any well-ordered community. As society becomes more and more complex, the
police power becomes correspondingly ubiquitous. This has to be so for the individual must subordinate his
interests to the common good, on the time-honored justification of Salus populi est suprema lex.
In this prolix age, practically everything a person does and owns affects the public interest directly or at
least vicariously, unavoidably drawing him within the embrace of the police power. Increasingly, he is
hemmed in by all manner of statutory, administrative and municipal requirements and restrictions that he
may find officious and even oppressive.
It is necessary to stress that unless the creeping interference of the government in essentially private
matters is moderated, it is likely to destroy that prized and peculiar virtue of the free society: individualism.
Every member of society, while paying proper deference to the general welfare, must not be deprived of the
right to be left alone or, in the idiom of the day, "to do his thing." As long as he does not prejudice others,
his freedom as an individual must not be unduly curtailed.
We therefore urge that proper care attend the exercise of the police power lest it deteriorate into an
unreasonable intrusion into the purely private affairs of the individual. The so-called "general welfare" is too
amorphous and convenient an excuse for official arbitrariness.
Let it always be remembered that in the truly democratic state, protecting the rights of the individual is as
important as, if not more so than, protecting the rights of the public.
This advice is especially addressed to the local governments which exercise the police power only by virtue
of a valid delegation from the national legislature under the general welfare clause. In the instant case,
Ordinance No. 22 suffers from the additional defect of violating this authority for legislation in contravention
of the national law by adding to its requirements.
WHEREFORE, the decision of the lower court annulling the challenged ordinance is AFFIRMED, without any
pronouncement as to costs.
SO ORDERED.
Yap (Chairman), Narvasa, Melencio-Herrera and Paras, JJ., concur.

[G.R. No. 143867. March 25, 2003]

PHILIPPINE
LONG
DISTANCE
TELEPHONE
COMPANY,
INC., petitioner, vs. CITY OF DAVAO and ADELAIDA B.
BARCELONA, in her capacity as the City Treasurer of
Davao, respondents.
RESOLUTION
Mendoza, J.:

Petitioner seeks a reconsideration of the decision of the Second Division

in this case. Because the decision bears directly on issues involved in other
cases brought by petitioner before other Divisions of the Court, the motion for
reconsideration was referred to the Court en banc for resolution. The parties
were heard in oral arguments by the Court en banc on January 21, 2003 and
were later granted time to submit their memoranda. Upon the filing of the last
memorandum by the City of Davao on February 10, 2003, the motion was
deemed submitted for resolution.
[1]

To provide perspective, it will be helpful to restate the basic facts.

Petitioner PLDT paid a franchise tax equal to three percent (3%) of its
gross receipts. The franchise tax was paid in lieu of all taxes on this
franchise or earnings thereof pursuant to R.A. No. 7082 amending its charter,
Act. No. 3436. The exemption from all taxes on this franchise or earnings
thereof was subsequently withdrawn by R.A. No. 7160 (Local Government
Code of 1991), which at the same time gave local government units the power
to tax businesses enjoying a franchise on the basis of income received or
earned by them within their territorial jurisdiction. The Local Government
Code (LGC) took effect on January 1, 1992.
The pertinent provisions of the LGC state:
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. . . .
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.
Pursuant to these provisions, the City of Davao enacted Ordinance No.
519, Series of 1992, which in pertinent part provides:
Notwithstanding any exemption granted by any law or other special law, there is
hereby imposed a tax on businesses enjoying a franchise, at a rate of Seventy-five
percent (75%) of one percent (1%) of the gross annual receipts for the preceding
calendar year based on the income or receipts realized within the territorial
jurisdiction of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and
Radio Corp. (Globe) and Smart Information Technologies, Inc. (Smart)
franchises which contained in lieu of all taxes provisos. In 1995, it enacted
[2]

[3]

R.A. No. 7925 (Public Telecommunications Policy of the Philippines), 23 of

which provides that 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. The law took effect on March 16, 1995.
In January 1999, when PLDT applied for a mayors permit to operate its
Davao Metro Exchange, it was required to pay the local franchise tax for the
first to the fourth quarter of 1999 which then had amounted
to P3,681,985.72. PLDT challenged the power of the city government to
collect the local franchise tax and demanded a refund of what it had paid as
local franchise tax for the year 1997 and for the first to the third quarters of
1998. For this reason, it filed a petition in the Regional Trial Court of
Davao. However, its petition was dismissed and its claim for exemption under
R.A. No. 7925 was denied. The trial court ruled that the LGC had withdrawn
tax exemptions previously enjoyed by persons and entities and authorized
local government units to impose a tax on businesses enjoying franchises
within their territorial jurisdictions, notwithstanding the grant of tax exemption
to them. Petitioner, therefore, brought this appeal.
In its decision of August 22, 2001, this Court, through its Second Division,
held that R.A. No. 7925, 23 cannot be so interpreted as granting petitioner
exemption from local taxes because the word exemption, taking into
consideration the context of the law, does not mean tax exemption. Hence
this motion for reconsideration.
The question is whether, by virtue of R.A. No. 7925, 23, PLDT is again
entitled to exemption from the payment of local franchise tax in view of the
grant of tax exemption to Globe and Smart.
Petitioner contends that because their existing franchises contain in lieu
of all taxes clauses, the same grant of tax exemption must be deemed to
have become ipso facto part of its previously granted telecommunications
franchise. But the rule is that tax exemptions should be granted only by clear
and unequivocal provision of law expressed in a language too plain to be
mistaken. If, as PLDT contends, the word exemption in R.A. No. 7925
[4]

means tax exemption and assuming for the nonce that the charters of Globe
and of Smart grant tax exemptions, then this runabout way of granting tax
exemption to PLDT is not a direct, clear and unequivocal way of
communicating the legislative intent.
But the best refutation of PLDTs claim that R.A. No. 7925, 23 grants tax
exemption is the fact that after its enactment on March 16, 1995, Congress
granted several franchises containing both an equality clause similar to 23
and an in lieu of all taxes clause. If the equality clause automatically
extends the tax exemption of franchises with in lieu of all taxes clauses,
there would be no need in the same statute for the in lieu of all taxes clause
in order to extend its tax exemption to other franchises not containing such
clause. For example, the franchise of Island Country Telecommunications,
Inc., granted under R.A. No. 7939 and which took effect on March 22, 1995,
contains the following provisions:
Sec. 8. Equality Clause. If any subsequent franchise for telecommunications
service is awarded or granted by the Congress of the Philippines with terms, privileges
and conditions more favorable and beneficial than those contained in this Act, then the
same privileges or advantages shall ipso facto accrue to the herein grantee and be
deemed part of this Act.
Sec. 10. Tax Provisions. The grantee shall be liable to pay the same taxes on their
real estate, buildings and personal property exclusive of this franchise, as other
persons or telecommunications entities are now or hereafter may be required by law to
pay. In addition hereto, the grantee, its successors or assigns, shall pay a franchise tax
equivalent to three percent (3%) of all gross receipts transacted under this franchise,
and the said percentage shall be in lieu of all taxes on this franchise or earnings
thereof; Provided, That the grantee shall continue to be liable for income taxes
payable under Title II of the National Internal Revenue Code. The grantee shall file
the return with and pay the taxes due thereon to the Commissioner of Internal
Revenue or his duly authorized representatives in accordance with the National
Revenue Code and the return shall be subject to audit by the Bureau of Internal
Revenue. (Emphasis added)

Similar provisions (in lieu of all taxes and equality clauses) are also found in
the franchises of Cruz Telephone Company, Inc., Isla Cellular
Communications, Inc., and Islatel Corporation.
[5]

[6]

[7]

We shall now turn to the other points raised in the motion for
reconsideration of PLDT.
First. Petitioner contends that the legislative intent to promote the
development of the telecommunications industry is evident in the use of words
as development, growth, and financial viability, and that the way to
achieve this purpose is to grant tax exemption or exclusion to franchises
belonging in this industry. Furthermore, by using the words advantage,
favor, privilege, exemption, and immunity and the terms ipso facto,
immediately, and unconditionally, Congress intended to automatically
extend whatever tax exemption or tax exclusion has been granted to the
holder of a franchise enacted after the LGC to the holder of a franchise
enacted prior thereto, such as PLDT.
The contention is untenable. The thrust of the law is to promote the
gradual deregulation of entry, pricing, and operations of all public
telecommunications entities and thus to level the playing field in the
telecommunications industry. An intent to grant tax exemption cannot even be
discerned from the law. The records of Congress are bereft of any discussion
or even mention of tax exemption. To the contrary, what the Chairman of the
Committee on Transportation, Rep. Jerome V. Paras, mentioned in his
sponsorship of H.B. No. 14028, which became R.A. No. 7925, were equal
access clauses in interconnection agreements, not tax exemptions. He said:
There is also a need to promote a level playing field in the telecommunications
industry. New entities must be granted protection against dominant carriers through
the encouragement of equitable access charges and equal access clauses in
interconnection agreements and the strict policing of predatory pricing by dominant
carriers. Equal access should be granted to all operators connecting into the
interexchange network. There should be no discrimination against any carrier in
terms of priorities and/or quality of service.
[8]

Nor does the term exemption in 23 of R.A. No. 7925 mean tax
exemption. The term refers to exemption from certain regulations and
requirements imposed by the National Telecommunications Commission
(NTC). For instance, R.A. No. 7925, 17 provides: The Commission shall
exempt any specific telecommunications service from its rate or tariff
regulations if the service has sufficient competition to ensure fair and
reasonable rates or tariffs. Another exemption granted by the law in line with
its policy of deregulation is the exemption from the requirement of securing
permits from the NTC every time a telecommunications company imports
equipment.
[9]

Second. PLDT says that the policy of the law is to promote healthy
competition in the telecommunications industry. According to PLDT, the LGC
did not repeal the in lieu of all taxes provision in its franchise but only
excluded from it local taxes, such as the local franchise tax. However, some
franchises, like those of Globe and Smart, which contain in lieu of all taxes
provisions were subsequently granted by Congress, with the result that the
holders of franchises granted prior to January 1, 1992, when the LGC took
effect, had to pay local franchise tax in view of the withdrawal of their local tax
exemption. It is argued that it is this disparate situation which R.A. No. 7925,
23 seeks to rectify.
[10]

One can speak of healthy competition only between equals. For this
reason, the law seeks to break up monopoly in the telecommunications
industry by gradually dismantling the barriers to entry and granting to new
telecommunications entities protection against dominant carriers through
equitable access charges and equal access clauses in interconnection
agreements and through the strict policing of predatory pricing by dominant
carriers. Interconnection among carriers is made mandatory to prevent a
dominant carrier from delaying the establishment of connection with a new
entrant and to deter the former from imposing excessive access charges.
[11]

[12]

That is also the reason there are franchises granted by Congress after
the effectivity of R.A. No. 7925 which do not contain the in lieu of all taxes
clause, just as there are franchises, also granted after March 16, 1995, which
contain such exemption from other taxes. If, by virtue of 23, the tax
exemption granted under existing franchises or thereafter granted is deemed
[13]

[14]

applicable to previously granted franchises (i.e., franchises granted before the

effectivity of R.A. No. 7925 on March 16, 1995), then those franchises granted
after March 16, 1995, which do not contain the in lieu of all taxes clause, are
not entitled to tax exemption. The in lieu of all taxes provision in the
franchises of Globe and Smart, which are relatively new entrants in the
telecommunications industry, cannot thus be deemed applicable to PLDT,
which had virtual monopoly in the telephone service in the country for a long
time, without defeating the very policy of leveling the playing field of which
PLDT speaks.
[15]

Third. Petitioner argues that the rule of strict construction of tax

exemptions does not apply to this case because the in lieu of all taxes
provision in its franchise is more a tax exclusion than a tax
exemption. Rather, the applicable rule should be that tax laws are to be
construed most strongly against the government and in favor of the taxpayer.
This is contrary to the uniform course of decisions of this Court which
consider in lieu of all taxes provisions as granting tax exemptions. As such,
it is a privilege to which the rule that tax exemptions must be interpreted
strictly against the taxpayer and in favor of the taxing authority applies. Along
with the police power and eminent domain, taxation is one of the three
necessary attributes of sovereignty. Consequently, statutes in derogation of
sovereignty, such as those containing exemption from taxation, should be
strictly construed in favor of the state. A state cannot be stripped of this most
essential power by doubtful words and of this highest attribute of sovereignty
by ambiguous language.
[16]

[17]

Indeed, both in their nature and in their effect there is no difference

between tax exemption and tax exclusion. Exemption is an immunity or
privilege; it is freedom from a charge or burden to which others are subjected.
Exclusion, on the other hand, is the removal of otherwise taxable items from
the reach of taxation, e.g., exclusions from gross income and allowable
deductions. Exclusion is thus also an immunity or privilege which frees a
taxpayer from a charge to which others are subjected. Consequently, the rule
that tax exemption should be applied in strictissimi juris against the taxpayer
and liberally in favor of the government applies equally to tax exclusions. To
construe otherwise the in lieu of all taxes provision invoked is to be
[18]

[19]

inconsistent with the theory that R.A. No. 7925, 23 grants tax exemption
because of a similar grant to Globe and Smart.
Petitioner cites Cagayan Electric Power & Light Co., Inc. v. Commissioner
of Internal Revenue in support of its argument that a tax exemption is
restored by a subsequent law re-enacting the tax exemption. It contends that
by virtue of R.A. No. 7925, its tax exemption or exclusion was restored by the
grant of tax exemptions to Globe and Smart. Cagayan Electric Power & Light
Co., Inc., however, is not in point. For there, the re-enactment of the
exemption was made in an amendment to the charter of Cagayan Electric
Power and Light Co.
[20]

Indeed, petitioners justification for its claim of tax exemption rests on a

strained interpretation of R.A. No. 7925, 23. For petitioners claim for
exemption is not based on an amendment to its charter but on a circuitous
reasoning involving inquiry into the grant of tax exemption to other
telecommunications companies and the lack of such grant to others, when
Congress could more clearly and directly have granted tax exemption to all
franchise holders or amend the charter of PLDT to again exempt it from tax if
this had been its purpose.
[21]

The fact is that after petitioners tax exemption by R.A. No. 7082 had been
withdrawn by the LGC, no amendment to re-enact its previous tax exemption
has been made by Congress. Considering that the taxing power of local
government units under R.A. No. 7160 is clear and is ordained by the
Constitution, petitioner has the heavy burden of justifying its claim by a clear
grant of exemption.
[22]

[23]

Tax exemptions should be granted only by clear and unequivocal provision

of law on the basis of language too plain to be mistaken. They cannot be
extended by mere implication or inference. Thus, it was held in Home
Insurance & Trust Co. v. Tennessee that a law giving a corporation all the
powers, rights reservations, restrictions, and liabilities of another company
does not give an exemption from taxation which the latter may
possess. In Rochester R. Co. v. Rochester, the U.S. Supreme Court, after
reviewing cases involving the effect of the transfer to one company of the
powers and privileges of another in conferring a tax exemption possessed by
[24]

[25]

[26]

the latter, held that a statute authorizing or directing the grant or transfer of the
privileges of a corporation which enjoys immunity from taxation or regulation
should not be interpreted as including that immunity. Thus:
We think it is now the rule, notwithstanding earlier decisions and dicta to the contrary,
that a statute authorizing or directing the grant or transfer of the privileges of a
corporation which enjoys immunity from taxation or regulation should not be
interpreted as including that immunity. We, therefore, conclude that the words the
estate, property, rights, privileges, and franchises did not embrace within their
meaning the immunity from the burden of paving enjoyed by the Brighton Railroad
Company. Nor is there anything in this, or any other statute, which tends to show that
the legislature used the words with any larger meaning than they would have standing
alone. The meaning is not enlarged, as faintly suggested, by the expression in the
statute that they are to be held by the successor fully and entirely, and without change
and diminution, words of unnecessary emphasis, without which all included in
estate, property, rights, privileges, and franchises would pass, and with which
nothing more could pass. On the contrary, it appears, as clearly as it did in the Phoenix
Fire Insurance Company Case, that the legislature intended to use the words rights,
franchises, and privileges in the restricted sense. . . .
[27]

Fourth. It is next contended that, in any event, a special law prevails over
a general law and that the franchise of petitioner giving it tax exemption, being
a special law, should prevail over the LGC, giving local governments taxing
power, as the latter is a general law. Petitioner further argues that as between
two laws on the same subject matter which are irreconcilably inconsistent, that
which is passed later prevails as it is the latest expression of legislative will.
This proposition flies in the face of settled jurisprudence. In City
Government of San Pablo, Laguna v. Reyes, this Court held that the phrase
in lieu of all taxes found in special franchises should give way to the
peremptory language of 193 of the LGC specifically providing for the
withdrawal of such exemption privileges. Thus, the rule that a special law
must prevail over the provisions of a later general law does not apply as the
legislative purpose to withdraw tax privileges enjoyed under existing laws or
charters is apparent from the express provisions of 137 and 193 of the
LGC.
[28]

As to the alleged inconsistency between the LGC and R.A. No. 7925, this
Court has already explained in the decision under reconsideration that no
inconsistency exists and that the rule that the later law is the latest expression
of the legislature does not apply. The matter need not be further discussed.
In any case, it is contended, the ruling of the Bureau of Local Government
Finance (BLGF) that petitioners exemption from local taxes has been
restored is a contemporaneous construction of 23 and, as such, it is entitled
to great weight.
The ruling of the BLGF has been considered in this case. But unlike the
Court of Tax Appeals, which is a special court created for the purpose of
reviewing tax cases, the BLGF was created merely to provide consultative
services and technical assistance to local governments and the general public
on local taxation and other related matters. Thus, the rule that the Court will
not set aside conclusions rendered by the CTA, which is, by the very nature of
its function, dedicated exclusively to the study and consideration of tax
problems and has necessarily developed an expertise on the subject, unless
there has been an abuse or improvident exercise of authority cannot apply
in the case of BLGF.
[29]

[30]

WHEREFORE, the motion for reconsideration is DENIED and this denial

is final.
SO ORDERED.

G. R. No. 152534

February 23, 2007

DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner,

vs.
PROVINCE OF PANGASINAN represented by RAMON A. CRISOSTOMO, Pangasinan
Provincial Treasurer,Respondent.
DECISION

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended, seeking
the reversal of the Decision1 dated 14 June 2001, and the Resolution2 dated 15 February 2002, both
rendered by the Regional Trial Court (RTC) of Lingayen, Pangasinan, Branch 68 in Civil Case No.
18037, with the latter ruling in favor of respondent Province of Pangasinan.
The present petition stemmed from a Complaint3 for Mandamus, Collection of Sum of Money and
Damages instituted by respondent Province of Pangasinan represented by its Provincial Treasurer,
Ramon A. Crisostomo, against petitioner Digital Telecommunications Philippines, Inc. (DIGITEL) on
1 March 2000. Said complaint docketed as Civil Case No. 18037, was filed before RTC, Br. 68 of
Lingayen, Pangasinan.
Republic Act No. 7160, otherwise known as the Local Government Code of 1991, took effect on 1
January 1992. Of significance to the present petition are Sections 137 and 232 4 of the Local
Government Code. Section 137 of the Local Government Code, in principle, withdrew any
exemption5 from the payment of a tax on businesses enjoying a franchise. Expressly, it authorized
local governments to impose a franchise tax on businesses enjoying a franchise within its territorial
jurisdiction, to wit:
SECTION 137. Franchise Tax. Notwithstanding any exemption granted by any law or other special
law, the province may impose a tax on business enjoying a franchise, at the rate not exceeding fifty
percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year
based on the income receipt, or realized, within its territorial jurisdiction. (Emphasis supplied.)
Section 232 likewise authorizes the imposition of an ad valorem tax on real property by the local
government of a province, city or municipality within the Metropolitan Manila Area wherein the land,
building, machinery and other improvement not thereinafter specifically exempted. The particular
provision reads:
SECTION 232. Power to Levy Real Property Tax. A province or city or a municipality within the
Metropolitan Manila Arena may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter specially exempted. (Emphasis
supplied.)
On 13 November 1992, petitioner DIGITEL was granted, under Provincial Ordinance No. 18-92, a
provincial franchise to install, maintain and operate a telecommunications system within the territorial
jurisdiction of respondent Province of Pangasinan. Under the said provincial franchise, the grantee is
required to pay franchise and real property taxes, viz:
SECTION 6. The grantee shall pay to the Province of Pangasinan the applicable franchise tax as
maybe provided by appropriate ordinances in accordance with the Local Government Code and
other existing laws. Except for the foregoing and the real estate tax on its land and building, it shall
be subject to no other tax. The telephone posts, apparatus, equipment and communication facilities
of the grantee are exempted from the real estate tax. (Emphasis supplied.)

Pursuant to the mandate of Sections 137 and 232 of the Local Government Code, the Sangguniang
Panlalawigan of respondent Province of Pangasinan enacted on 29 December 1992, Provincial Tax
Ordinance No. 1, entitled "The Real Property Tax Ordinance of 1992." Section 4 thereof imposed a
real property tax on real properties located within the territorial jurisdiction of the province. The
particular provision, however, technically expanded the application of Sec. 6 of the provincial
franchise of petitioner DIGITEL to include machineries and other improvements, not thereinafter
exempted, to wit:
Section 4. Imposition of Real Property Tax. There shall be levied an annual AD VALOREM tax on
real property such as land, building, machinery, and other improvement not hereinafter specifically
exempted, situated or located within the territorial jurisdiction of Pangasinan at the rate of one
percent (1%) of the assessed value of said real property. (Emphasis supplied.) 6
On 10 September 1993, Provincial Tax Ordinance No. 4, otherwise known as "The Pangasinan
Franchising Ordinance of 1993," was similarly ratified. Sections 4, 5 and 6 thereof, positively
imposed a franchise tax on businesses enjoying a franchise within the territorial jurisdiction of
respondent Province of Pangasinan.
Thereafter, petitioner DIGITEL was granted by Republic Act No. 7678, 7 a legislative franchise
authorizing the grantee to install, operate and maintain telecommunications systems, this time,
throughout the Philippines. Under its legislative franchise, particularly Sec. 5 thereof, petitioner
DIGITEL became liable for the payment of a franchise tax "as may be prescribed by law of all gross
receipts of the telephone or other telecommunications businesses transacted under it by the
grantee,"8 as well as real property tax "on its real estate, and buildings "exclusive of this franchise."
Sec. 5 reads in full that:
SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate,
buildings, and personal property exclusive of this franchise as other persons or corporations are now
or hereafter may be required by law to pay. In addition thereto, the grantee shall pay to the Bureau
of Internal Revenue each year, within thirty (30) days after the audit and approval of the
accounts, franchise tax as may be prescribed by law of all gross receipts of the telephone or other
telecommunications business transacted under this franchise by the grantee: Provided, that the
grantee 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. The
grantee shall file the return with and pay the tax due thereon to the Commissioner of Internal
Revenue or his duly authorized representative in accordance with the National Internal Revenue
Code and the return shall be subject to audit by the Bureau of Internal Revenue. [Emphasis
supplied.]
1awphi1.net

Later, respondent Province of Pangasinan, in its examination of its record found that petitioner
DIGITEL had a franchise tax deficiency for the years 1992, 1993 and 1994. It was alleged that apart
from the Php40,000.00 deposit representing the grantees acquiescence or acceptance of the
franchise, as required by respondent Province of Pangasinan, petitioner DIGITEL had never paid
any franchise tax to respondent Province of Pangasinan since the former started its operation in

1992. Accordingly, the Sangguniang Panlalawigan passed Resolution No. 364 on 14 October 1994,
categorically directing petitioner DIGITEL to:
[C]ommunicate its conformity to Ordinance No. 40 to the Sanggunian thru the Sangguniang
Panlalawigan Secretary and to pay the necessary and overdue franchise taxes to the Provincial
Treasurer of Pangasinan within fifteen (15) days from receipt hereof otherwise its franchise shall be
declared in operative (sic) and its operations terminated;"
In the interregnum, on 16 March 1995, Congress passed Republic Act No. 7925, otherwise known
as "The Public Telecommunications Policy Act of the Philippines." Section 23 of this law entitled
Equality of Treatment in the Telecommunications Industry, provided for the ipso facto application to
any previously granted telecommunications franchises of any advantage, favor, privilege, exemption
or immunity granted under existing franchises, or those still to be granted, to be accorded
immediately and unconditionally to earlier grantees. Section 23 reads below:
SECTION 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 x x x. (Emphasis
supplied.)
The provincial franchise and real property taxes remained unpaid despite the foregoing measures
instituted. Consequently, in a letter9 dated 30 October 1998, the Provincial Legal Officer of
respondent Province of Pangasinan, Atty. Geraldine U. Baniqued, demanded from petitioner
DIGITEL compliance with Provincial Tax Ordinance No. 4., specifically the first paragraph of Section
4 thereof but which was wittingly or unwittingly misquoted10 to read:
No persons shall establish and / or operate a public utility business enterprises (sic) within the
territorial jurisdiction of the Province of Pangasinan whether in one municipality or group of
municipalities, except by virtue of a franchise granted by the Sangguniang Panlalawigan of
Pangasinan.
On 17 November 1998, petitioner DIGITEL took exception to respondent Province of Pangasinans
claim on the ground that prior to the approval of its legislative franchise, its operation of a
telecommunications system was done under a Facilities Management Agreement it had previously
executed with the Department of Transportation and Communication (DOTC). Such agreement was
purportedly the result of a public bidding wherein petitioner DIGITEL was "awarded the right to
manage the operation, maintenance and development of government telecommunications facilities
under its Regional Telecommunications Development Project Phases A and B x x x and National
Telephone Program Phase I Tranche 1 x x x covering Regions I to V." 11 It clarified that since "the
facilities in the Province of Pangasinan are just part of the government owned facilities awarded to
DIGITEL," not only did the DOTC retain ownership of said facilities, the latter likewise "provided for
the budget for (the) expenses under its allocation from the government;" hence, "all revenues
generated from the operation of the facilities inured to the DOTC;" and all the fees received by
petitioner DIGITEL were purely for services rendered.

Further, it argued that under its legislative franchise, the payment of a franchise tax to the Bureau of
Internal Revenue (BIR) would be "in lieu of all taxes" on said franchise or the earnings therefrom.
Unconvinced, on 8 December 1998, respondent Province of Pangasinan countered 12 the provisions
of its franchise were subject not only to the provisions of the Constitution, but to "applicable laws,
rules and regulations" as well; that among the applicable laws being referred to were Sec. 137 of the
Local Government Code, which authorizes it to "impose a tax on business enjoying a franchise x x
x;" and Sec. 6 of Provincial Ordinance No. 4, which similarly imposes a tax on a business enjoying a
franchise.
On 1 March 2000, no settlement having been made, respondent Province of Pangasinan,
represented by the latters Provincial Treasurer, Ramon A. Crisostomo, filed a Complaint 13 for
Mandamus, Collection of Sum of Money and Damages before Branch 68 of the RTC of Lingayen,
Pangasinan, docketed as Civil Case No. 18037. The Complaint prayed that petitioner DIGITEL be
ordered:
1. to x x x open its books, records and other pertinent documents so that the provincial
government can make the proper assessment of the Taxes due.
2. after determination of the defendants capital investment and subsequent gross receipts,
to pay plaintiff the sum equivalent to 1/20th of one percent (1%) of the total capital
investment for the first year of its operation and thereafter, fifty percent (50%) of one percent
(1%) of the gross receipts realized during the preceding calendar year for the year 1993,
1994, 1995, 1996, 1997, 1998 and up to the present.
3. after determination of all of defendants real properties, to pay the Real Property Tax due
after its proper computation.
4. to pay legal interest of the amounts from the time it was due until the whole amount is fully
complied with.
5. to pay the cost of this suit.
On 14 June 2001, the court a quo rendered a Decision14 in favor of respondent Province of
Pangasinan, the dispositive part of which reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of the plaintiff,
as follows:
1. Ordering the defendant to open its books, records and other pertinent documents so that
the provincial government can make the proper assessment of the franchise tax and real
property tax due;
2. After the determination of the defendants capital investment and subsequent gross
receipts, to pay plaintiff the sum equivalent to 1/20th of one percent (1%) of the total capital
investment for the first year of its operation (1993), and thereafter, fifty percent (50%) of one

percent (1%) of the gross receipts realized during the preceding calendar year 1993, 1994,
1995, 1996, 1997, 1998 and up to the present;
3. After determination of all of defendants real properties, to pay Real Property Tax due after
its proper computation, pursuant to Section 4 of the Real Property Tax Ordinance of 1992 of
the plaintiff;
4. To pay 1) A surcharge of twenty-five percent of the amount of the franchise tax due or a
fraction thereof until the delinquent tax shall have been fully paid; 2) To pay an interest of two
percent (2%) per month on the unpaid amount or a fraction thereof, until the delinquent tax
shall have been fully paid, but in no case shall the total interest on the unpaid tax or
proportion thereof exceed 36 months;
5. To pay the cost of this suit.
In ruling against the claimed exemption, the court a quo held that petitioner DIGITELs legislative
franchise does not work to exempt the latter from payment of provincial franchise and real property
taxes. The court a quo reasoned that the provincial and legislative franchises are separate and
distinct from each other; and, that prior to the grant of its legislative franchise, petitioner DIGITEL
had already benefited from the use of it. Moreover, it pointed out that Section 137 of the Local
Government Code had already withdrawn any exemption granted to anyone; as such, the local
government of a province may impose a tax on a business enjoying a franchise.
On the other hand, petitioner DIGITEL maintains that its legislative franchise being an earlier
enactment, by virtue of Section 23 of Republic Act No. 7925, the ipso facto, immediate and
unconditional application to it of the tax exemption found in the franchises of Globe, Smart and
Bell, i.e., in Section 9 (b) of Republic Act No. 7229, Globes legislative franchise; in Section 9 of
Republic Act No. 7294, Smarts legislative franchise; and Section 9 of Republic Act No. 7294, Bells
legislative franchise, all basically or similarly containing the phrase "shall pay a franchise tax
equivalent to x x x 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.
Stated simply, Section 23 of Republic Act No. 7925, in relation to the pertinent provisions of the
legislative franchises of Globe, Smart and Bell, "the national franchise tax for which petitioner
(DIGITEL) is liable to pay shall be in lieu of any and all taxes of any kind, nature or description
levied, established or collected by any authority whatsoever, municipal, provincial, or national, from
which the grantee is hereby expressly granted.
Petitioner DIGITELs Motion for Reconsideration was denied in a Resolution dated 15 February
2002.
As the controversy involves pure questions of law, this Petition for Review on Certiorari under Rule
45 of the Rules of Court, as amended, was filed directly with this Court, predicated on the following
arguments:

I.
THE HONORABLE COURT ERRED IN DECLARING THAT THE LOCAL GOVERNMENT CODE IS
A SPECIAL LAW.
II.
THE LOWER COURT ERRED IN RULING THAT PETITIONER IS LIABLE TO PAY REAL
PROPERTY TAX AND FRANCHISE TAX.
III.
THE PROVISIONS OF THE LOCAL GOVERNMENT CODE MAY BE RECONCILED WITH THOSE
OF PETITIONERS LEGISLATIVE FRANCHISE.
IV.
THE HONORABLE COURT ERRED IN NOT RULING THAT PETITIONERS LEGISLATIVE
FRANCHISE, REPUBLIC ACT NO. 7678, IS IN CONFORMITY WITH THE CONSTITUTION.
V.
THE HONORABLE COURT ERRED IN RULING THAT THE NON-IMPAIRMENT CLAUSE OF THE
CONSTITUTION DOES NOT EXTEND TO NOR COVER FRANCHISES ISSUED BY CONGRESS.
VI.
ASSUMING ARGUENDO THAT PETITIONER SHOULD BE HELD LIABLE TO PAY FRANCHISE
AND REAL PROPERTY TAXES, IT IS NONETHELESS STILL EXEMPT FROM PAYMENT
THEREOF IN VIEW OF ITS REGISTRATION WITH THE BOARD OF INVESTMENTS AS A NONPIONEER BUSINESS ENTERPRISE IN ACCORDANCE WITH SECTION 133 (G) OF THE LOCAL
GOVERNMENT CODE.
The plethora of arguments raised can be reduced to two basic but essential issues, namely: 1)
Whether or not petitioner DIGITEL is entitled to the exemption from the payment of provincial
franchise tax in view of Section 23 of Republic Act No. 7925,15 otherwise known as the "Public
Telecommunications Policy Act of the Philippines," in relation to the tax exemption provisions found
in the legislative franchises of Globe Mackay Cable and Radio Corporation, Smart Information
Technologies, Incorporated and Bell Telecommunication Philippines, Incorporated.
Stated otherwise, are the "in-lieu-of-all-taxes" clauses/provisos found in Republic Act No. 7229, the
legislative franchise of Globe; Republic Act No. 7294, the legislative franchise of Smart; and
Republic Act No. 7692, the legislative franchise of Bell, vis--vis Section 23 of Republic Act No.
7925, applicable to petitioner DIGITEL such that the latter is now exempt from the payment of any
other taxes except the national franchise and income taxes?
lavvphi1.net

And, 2) if answered in the negative, whether or not petitioner DIGITELs real properties found within
the territorial jurisdiction of respondent Province of Pangasinan are exempt from the payment of real
property taxes by virtue of the phrase "exclusive of this franchise" found in Section 5 of its legislative
franchise, Republic Act No. 7678?
At the outset, worth noting is the fact that prior to the enactment and effectivity of its legislative
franchise, with only a provincial franchise to speak of, petitioner DIGITEL did not enjoy any
exemption from the payment of franchise and real property taxes. In fact, Provincial Ordinance No.
18-92, its provincial franchise, categorically made it liable for the payment of such taxes. It was only
with the enactment of Republic Act No. 7925 in 1995 and succeeding legislative franchises
containing the "in-lieu-of-all-taxes" clauses/provisos that petitioner DIGITEL can claim exemption to
such tax liabilities.
The case at bar is actually not one of first impression. Indeed, as far back as 2001, this Court has
had the occasion to rule against the claim for tax exemption under Republic Act No. 7925. In the
case of Philippine Long Distance Telephone Company, Inc. v. City of Davao,16 we already clarified
the confusion brought about by the effect of Section 23 of Republic Act No. 7925 that the word
"exemption" as used in the statute refers or pertains merely to an exemption from regulatory or
reporting requirements of the DOTC or the NTC and not to the grantees tax liability.
The issue in the PLDT v. City of Davao case was whether or not, by virtue of Section 23 of Republic
Act No. 7925 (Public Telecommunications Policy of the Philippines), PLDT is again entitled to an
exemption from the payment of local franchise tax in view of the grant of a tax exemption to Globe
and Smart telecommunications companies. Before the enactment of Republic Act No. 7925 in 1995,
the Congress of the Philippines granted in favor of Globe17 and Smart18 franchises19 that contain "inlieu-of-all-taxes" clauses or provisos. Then came Republic Act No. 7925, particularly Section 23
thereof, providing, more or less, that any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted, shall be made part of previously enacted
franchises and made automatically applicable to the grantees thereof. Subsequently, in "January
1999, when PLDT applied for a mayors permit to operate its Davao Metro Exchange, it was required
to pay the local franchise tax for the first to the fourth quarter of 1999 x x x. PLDT challenged the
power of the city government to collect the local franchise tax and demanded a refund of what it had
paid as local franchise tax for the year 1997 and for the first to the third quarters of 1998." 20 The latter
believed itself to be exempt from payment of such tax even though Section 12 of its franchise
(Republic Act No. 7082) containing the "in-lieu-of-all-taxes" proviso had already been withdrawn by
the provisions of the Local Government Code. Its belief was anchored on the effect of the abovementioned Section 23 of Republic Act No. 7925 that because the franchises of Globe and Smart
contain "in-lieu-of-all-taxes" clauses or provisos, the same grant of tax exemption must be regarded
to have become ipso facto part of PLDTs previously granted telecommunications franchise.
In denying PLDTs petition, this Court, speaking through Mr. Justice Vicente V. Mendoza, held that in
approving Section 23 of Republic Act No. 7925, Congress did not intend it to operate as a blanket
tax exemption to all telecommunications entities; thus, it cannot be considered as having amended
petitioner PLDTs franchise so as to entitle it to exemption from the imposition of local franchise
taxes. The ponencia went on further to elucidate that:

To begin with, tax exemptions are highly disfavored. x x x

The 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 if it is granted, the exemption must be
interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
(Citation omitted.)
In the present case, petitioner justifies its claim of tax exemption by strained inferences. First, it cites
R.A. No. 7925, otherwise known as the Public Telecommunications Policy Act of the Philippines, 23
xxx
xxxx
Petitioner then claims that Smart and Globe enjoy exemption from the payment of the franchise tax
by virtue of their legislative franchises per opinion of the Bureau of Local Government Finance of the
Department of Finance. Finally, it argues that because Smart and Globe are exempt from the
franchise tax, it follows that it must likewise be exempt from the tax being collected by the City of
Davao because the grant of tax exemption to Smart and Globe ipso facto extended the same
exemption to it.
The acceptance of petitioner's theory would result in absurd consequences. To illustrate: In its
franchise, Globe is required to pay a franchise tax of only one and one-half percentum (1%) of all
gross receipts from its transactions while Smart is required to pay a tax of three percent (3%) on all
gross receipts from business transacted. Petitioner's theory would require that, to level the playing
field, any advantage, favor, privilege, exemption, or immunity granted to Globe must be extended to
all telecommunications companies, including Smart. If, later, Congress again grants a franchise to
another telecommunications company imposing, say, one percent (1%) franchise tax, then all other
telecommunications franchises will have to be adjusted to level the playing field so to speak. This
could not have been the intent of Congress in enacting 23 of Rep. Act 7925. Petitioner's theory will
leave the Government with the burden of having to keep track of all granted telecommunications
franchises, lest some companies be treated unequally. It is different if Congress enacts a law
specifically granting uniform advantages, favor, privilege, exemption, or immunity to all
telecommunications entities.
The fact is that the term "exemption" in 23 is too general. A cardinal rule in statutory construction is
that legislative intent must be ascertained from a consideration of the statute as a whole and not
merely of a particular provision. x x x Hence, a consideration of the law itself in its entirety and the
proceedings of both Houses of Congress is in order. [Citation omitted.]
xxxx
Art. VIII, entitled Telecommunications Development, where 23 is found, provides for public
ownership of telecommunications entities, privatization of existing facilities, and the equality of
treatment provision. (Citation omitted.)
xxxx

R.A. No. 7925 is thus a legislative enactment designed to set the national policy on
telecommunications and provide the structures to implement it to keep up with the technological
advances in the industry and the needs of the public. The thrust of the law is to promote gradually
the deregulation of the entry, pricing, and operations of all public telecommunications entities and
thus promote a level playing field in the telecommunications industry(citation omitted). There is
nothing in the language of 23 nor in the proceedings of both the House of Representatives and the
Senate in enacting R.A. No. 7925 which shows that it contemplates the grant of tax exemptions to all
telecommunications entities, including those whose exemptions had been withdrawn by the LGC.
x x x When exemption is claimed, it must be shown indubitably to exist. At the outset, every
presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of the
concession are too explicit to admit fairly of any other construction that the proposition can be
supported. In this case, the word exemption in 23 of R.A. No. 7925 could contemplate exemption
from certain regulatory or reporting requirements, bearing in mind the policy of the law x x x. 21
From the preceding discourse, there is nothing more left to be argued. The issue has been settled.
The Courts pronouncement in the above-discussed case has been reiterated in a number of cases
concerning the import of Section 23 of Republic Act No. 7925. Therefore, this Court has no recourse
but to deny petitioner DIGITELs claim for exemption from payment of provincial franchise tax.
The foregoing pronouncement notwithstanding, in view of the passage of Republic Act No.
7716,22 abolishing the franchise tax imposed on telecommunications companies effective 1 January
1996 and in its place is imposed a 10 percent Value-Added-Tax (VAT), 23 the "in-lieu-of-all-taxes"
clause/provision in the legislative franchises of Globe, Smart and Bell, among others, has now
become functus officio, made inoperative for lack of a franchise tax. Therefore, taking into
consideration the above, from 1 January 1996, petitioner DIGITEL ceased to be liable for
national franchise tax and in its stead is imposed a 10% VAT in accordance with Section 108
of the Tax Code.
As to the issue relating to the claim of payment of real property taxes, of particular import is Section
5 of Republic Act No. 7678, the legislative franchise of petitioner DIGITEL. Sec. 5 of said law again
states that:
SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate,
buildings, and personal property exclusive of this franchise as other persons or corporations are now
or hereafter may be required by law to pay x x x. (Emphasis supplied.)
Owing to the phrase "exclusive of this franchise," petitioner DIGITEL stands firm in its position that it
is equally exempt from the payment of real property tax. It maintains that said phrase found in
Section 5 above-quoted qualifies or delimits the scope of its liability respecting real property tax that
real property tax should only be imposed on its assets that are actually, directly and exclusively used
in the conduct of its business pursuant to its franchise.
According to respondent Province of Pangasinan, however, "the phrase exclusive (of this) franchise
in the legislative franchise of Petitioner Digitel did not specifically or categorically express that such

franchise grant intended to provide privilege to the extent of impliedly repealing Republic Act No.
7160."
Thus, the question is, whether or not petitioner DIGITELs real properties located within the territorial
jurisdiction of respondent Province of Pangasinan are exempt from real property taxes by virtue of
Section 5 of Republic Act No. 7678.
We rule in the affirmative. However, it is with the caveat that such exemption solely applies to those
real properties actually, directly and exclusively used by the grantee in its franchise.
The present issue actually boils down to a dispute between the inherent taxing power of Congress
and the delegated authority to tax of the local government borne by the 1987 Constitution. In the
afore-quoted case of PLDT v. City of Davao, we already sustained the power of Congress to grant
exemptions over and above the power of the local governments delegated taxing authority
notwithstanding the source of such power. And fairly recently, in the case of The City Government of
Quezon City v. Bayan Telecommunications, Inc.,24 we again had the opportunity to echo the
ponencia of Mr. Justice Vicente V. Mendoza that:
Indeed, the grant of taxing powers to local government units under the Constitution and the LGC
does not affect the power of Congress to grant exemptions to certain persons, pursuant to a
declared national policy. The legal effect of the constitutional grant to local governments simply
means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved
in favor of municipal corporations. [Emphasis supplied.]
Succinctly put, had the Congress of the Philippines intended to tax each and every real property of
petitioner DIGITEL, regardless of whether or not it is used in the business or operation of its
franchise, it would not have incorporated a qualifying phrase, which such manifestation admittedly is.
And, to our minds, "the issue in this case no longer dwells on whether Congress has the power to
exempt"25 petitioner DIGITELs properties from realty taxes by its enactment of Republic Act No.
7678 which contains the phrase "exclusive of this franchise," in the face of the mandate of the Local
Government Code. The more pertinent issue to consider is whether or not, by passing Republic Act
No. 7678, Congress intended to exempt petitioner DIGITELs real properties actually, directly and
exclusively used by the grantee in its franchise.
The fact that Republic Act No. 7678 was a later piece of legislation can be taken to mean that
Congress, knowing fully well that the Local Government Code had already withdrawn exemptions
from real property taxes, chose to restore such immunity even to a limited degree. Accordingly:
The Court views this subsequent piece of legislation as an express and real intention on the part of
Congress to once again remove from the LGC's delegated taxing power, all of the franchisee's x x x
properties that are actually, directly and exclusively used in the pursuit of its franchise. 26
In view of the unequivocal intent of Congress to exempt from real property tax those real properties
actually, directly and exclusively used by petitioner DIGITEL in the pursuit of its franchise,
respondent Province of Pangasinan can only levy real property tax on the remaining real properties
of the grantee located within its territorial jurisdiction not part of the above-stated classification. Said

exemption, however, merely applies from the time of the effectivity of petitioner DIGITELs legislative
franchise and not a moment sooner.
In fine, petitioner DIGITEL is found accountable to respondent Province of Pangasinan for the
following tax liabilities: 1) as to provincial franchise tax, from 13 November 1992 until actually paid;
and 2) as to real property tax, for the period starting from 13 November 1992 until 28 December
1992, it shall be imposed only on the lands and buildings of petitioner DIGITEL located within the
subject jurisdiction; for the period commencing from 29 December 1992 until 16 February 1994, in
addition to the lands and buildings aforementioned, it shall similarly be imposed on machineries and
other improvements;27 and, by virtue of the National Franchise of petitioner DIGITEL or Republic Act
No. 7678, in accordance with the Courts ruling in the abovementioned Bayantel case, from the date
of effectivity on 17 February 1994 until the present, it shall be imposed only on real
properties NOTactually, directly and exclusively used in the franchise of petitioner DIGITEL. In
addition to the foregoing summary, pertinent provisions of law respecting interests, penalties and
surcharges shall also be made to apply to herein subject tax liabilities.
WHEREFORE, in view of the foregoing, the instant petition is DENIED. The assailed Decision dated
14 June 2001, and the Resolution dated 15 February 2002, both rendered by the RTC of Lingayen,
Pangasinan, Branch 68 in Civil Case No. 18037, are hereby AFFIRMED in so far as it finds petitioner
DIGITEL liable for the payment of provincial franchise and real property taxes. However, the amount
of taxes owing to respondent Province of Pangasinan must be recomputed in accordance with the
foregoing discussion. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:

COCA-COLA
BOTTLERS
PHILIPPINES, INC.,
Petitioner,
- versus -

G.R. No. 156252

Present:
PANGANIBAN, CJ
Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

CITY
OF MANILA, LIBERTY M.TOLEDO
City
Treasurer
and
Promulgated:
JOSEPH SANTIAGO
Chief,
Licensing Division,
June 27, 2006
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:

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 petitioners Petition for
Injunction, and the Order[2] dated 5 December 2002, denying petitioners 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:
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 of the 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
(emphasis ours)

xxx

xxx.

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.
xxxx
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.
xxxx
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.
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 x x x 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.
xxxx
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 plaintiffs 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.
xxxx
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.
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. x x x
xxxx
x x x [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; x x x (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.
xxxx
WHEREFORE, premises considered, Tax Ordinance No. 8011 is hereby
declared NULL and VOID and LEGALLY NOT EXISTING.[8]

Respondents 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.
xxx
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:
Pursuant to Rule 45 and other related provisions of the 1997 Rules of Civil
Procedure as amended governing appeals by certiorari 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 on certiorari 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
Courts 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]

Petitioners 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.
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 forCertiorari 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.[11] A 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 petitioners 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 trierof 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 Secretarys 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 Secretarys 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 Secretarys Certificate as
authorized to file a Petition in behalf of the corporation. A careful perusal of said
Secretarys 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.
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.

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 of the 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 petitioners 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 petitioners 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 ofPeople 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.

SO ORDERED.