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regions centers of
international trade and
tourism, and accelerating
the development of the
means of transportation
and communication in the
country; and
b) upgrade the services
and facilities of the
airports and to formulate
internationally acceptable
standards of airport
accommodation and
service.
Since the time of its creation, petitioner MCIAA enjoyed
the privilege of exemption from payment of realty taxes
in accordance with Section 14 of its Charter.
Sec. 14. Tax Exemptions. The
authority shall be exempt from realty
taxes imposed by the National
Government or any of its political
subdivisions, agencies and
instrumentalities . . .
On October 11, 1994, however, Mr. Eustaquio B. Cesa,
Officer-in-Charge, Office of the Treasurer of the City of
Cebu, demanded payment for realty taxes on several
parcels of land belonging to the petitioner (Lot Nos.
913-G, 743, 88 SWO, 948-A, 989-A, 474, 109(931), I-M,
918, 919, 913-F, 941, 942, 947, 77 Psd., 746 and 991A), located at Barrio Apas and Barrio Kasambagan,
Lahug, Cebu City, in the total amount of P2,229,078.79.
Petitioner objected to such demand for payment as
baseless and unjustified, claiming in its favor the
aforecited Section 14 of RA 6958 which exempt it from
payment of realty taxes. It was also asserted that it is
an instrumentality of the government performing
governmental functions, citing section 133 of the Local
Government Code of 1991 which puts limitations on the
taxing powers of local government units:
(c) . . .
Except as provided herein, any
exemption from payment of real property
tax previously granted to, or presently
enjoyed by all persons, whether natural
or juridical, including government-owned
or controlled corporations are hereby
withdrawn upon the effectivity of this
Code.
As the City of Cebu was about to issue a warrant of levy
against the properties of petitioner, the latter was
compelled to pay its tax account "under protest" and
thereafter filed a Petition for Declaratory Relief with the
Regional Trial Court of Cebu, Branch 20, on December
29, 1994. MCIAA basically contended that the taxing
powers of local government units do not extend to the
levy of taxes or fees of any kind on an instrumentality of
the national government. Petitioner insisted that while it
is indeed a government-owned corporation, it
nonetheless stands on the same footing as an agency or
instrumentality of the national government. Petitioner
insisted that while it is indeed a government-owned
corporation, it nonetheless stands on the same footing
as an agency or instrumentality of the national
government by the very nature of its powers and
functions.
Respondent City, however, asserted that MACIAA is not
an instrumentality of the government but merely a
government-owned corporation performing proprietary
functions As such, all exemptions previously granted to
it were deemed withdrawn by operation of law, as
provided under Sections 193 and 234 of the Local
Government Code when it took effect on January 1,
1992. 3
The petition for declaratory relief was docketed as Civil Case
No. CEB-16900.
In its decision of 22 March 1995, 4 the trial court dismissed the
petition in light of its findings, to wit:
(a) . . .
xxx xxx xxx
10
11
opportunities for graft should be excised from the public system. Builtin checks should be zealously observed so that the ingenious and
shrewd cannot circumvent them and the audacious cannot violate
them with impunity.
Statement of the Case
Before us is a petition for certiorari under Rule 65 of the Rules of
Court
seeking
to
set
aside
the
Ombudsmans
amended
Resolution[2] dated October 28, 1993, which dismissed from
government service Petitioners Callanta, Delos-Reyes and Concon and
suspended the other petitioners from holding office for three (3)
months without pay. Also challenged is the ombudsmans Order [3] dated
April 18, 1994, denying petitioners motion for reconsideration and
urgent motion to stop the execution of the amended Resolution.
The Facts
The parties do not dispute the findings of fact of the deputy
ombudsman[4] for the Visayas, as approved by the ombudsman and
which this Court finds substantiated by the records. The pertinent
portions are as follows:
[G.R. Nos. 115253-74. January 30, 1998]
ANTONIO P. CALLANTA, GILBERTO M. DELOS REYES, CESAR Q.
CONCON,
ALMICAR
EDIRA,[1] JACINTO
PAHAMTANG,
ANTONIO V. ABELLANA, APOLINARIO SALARES, JR. and
SHIRLEY PALMERO, petitioners, vs. OFFICE OF THE
OMBUDSMAN
and
CITY
GOVERNMENT
OF
CEBU,respondents.
DECISION
PANGANIBAN, J.:
May officials and employees of the Office of the City Assessor
reduce the new assessed values of real properties upon requests of the
affected property owners? To forestall the practice of initially setting
unreasonably high reassessment values only to eventually change
them to unreasonably lower values upon requests of property owners,
the law gives no such authority to the city assessor or his
subalterns. Seemingly innocuous occasions for mischief and veiled
xxxxxxxxx
The extent of participation of the individual respondents in the
adjustments [reductions] referred to above, could be
summarized as follows, to wit:
1. Antonio P. Callanta
approved and ordered the adjustments of the
revised assessments reducing both the market
12
13
14
15
16
17
Epilogue
18
19
.[3]
We note that the instant action was filed directly to this Court, in
disregard of the rule on hierarchy of courts. However, we opt to take
primary jurisdiction over the present petition and decide the same on
its merits in view of the significant constitutional issues raised by the
parties dealing with the tax treatment of cooperatives under existing
laws and in the interest of speedy justice and prompt disposition of the
matter.
Section 6.5. Taxes and Duties. The Borrower covenants and agrees that
this Loan Agreement and the Loan provided for herein shall be free
from, and the Principal and interest shall be paid to A.I.D. without
deduction for and free from, any taxation or fees imposed under any
laws or decrees in effect within the Republic of the Philippines or any
such taxes or fees so imposed or payable shall be reimbursed by the
Borrower with funds other than those provided under the Loan. To the
extent that (a) any contractor, including any consulting firm, any
personnel of such contractor financed hereunder, and any property or
transactions relating to such contracts and (b) any commodity
procurement transactions financed hereunder, are not exempt from
identifiable taxes, tariffs, duties and other levies imposed under laws in
effect in the country of the Borrower, the Borrower and/or Beneficiary
shall pay or reimburse the same with funds other than those provided
under the Loan.[4]
Petitioners contend that pursuant to the provisions of P.D. No. 269,
as amended, and the above-mentioned provision in the loan
agreements, they are exempt from payment of local taxes, including
payment of real property tax. With the passage of the Local
Government Code, however, they allege that their tax exemptions
have been invalidly withdrawn. In particular, petitioners assail Sections
193 and 234 of the Local Government Code on the ground that the said
provisions discriminate against them, in violation of the equal
protection clause. Further, they submit that the said provisions are
unconstitutional because they impair the obligation of contracts
between the Philippine Government and the United States
Government.
I
There is No Violation of the Equal Protection Clause
20
.
Senator Aquino. That is why in Article III we have the following
definition:
21
22
events, the power to control and take over the management and
operations of cooperatives registered under it. Thus:
a) the NEA Administrator has the power to designate, subject to
the confirmation of the Board of Administrators, an Acting
General Manager and/or Project Supervisor for a cooperative
where vacancies in the said positions occur and/or when the
interest of the cooperative or the program so requires, and to
prescribe the functions of the said Acting General Manager
and/or Project Supervisor, which powers shall not be
nullified, altered or diminished by any policy or
resolution of the Board of Directors of the cooperative
concerned;[18]
b) the NEA is given the power of supervision and control over
electric cooperatives and pursuant to such powers, NEA may
issue orders, rules and regulations motu propio or upon
petition of third parties to conduct referenda and other similar
actions in all matters affecting electric cooperatives;[19]
c) No cooperative shall borrow money from any source without the
approval of the Board of Administrators of the NEA;[20] and
d) The management of a cooperative shall be vested in
Board, subject to the supervision and control
NEA which shall have the right to be represented and
participate in all Board meetings and deliberations and
approve all policies and resolutions.[21]
its
of
to
to
23
exemptions exist for as long as the Local Government Code and the
provisions therein on local taxation remain good law.
II
There is No Violation of the Non-Impairment Clause
It is ingrained in jurisprudence that the constitutional prohibition
on the impairment of the obligation of contracts does not prohibit
every change in existing laws. To fall within the prohibition, the change
must not only impair the obligation of the existing contract, but the
impairment must be substantial.[27] What constitutes substantial
impairment was explained by this Court in Clemons v. Nolting:[28]
A law which changes the terms of a legal contract between parties,
either in the time or mode of performance, or imposes new conditions,
or dispenses with those expressed, or authorizes for its satisfaction
something different from that provided in its terms, is law which
impairs the obligation of a contract and is therefore null and void.
Moreover, to constitute impairment, the law must affect a change in
the rights of the parties with reference to each other and not with
respect to non-parties.[29]
Petitioners insist that Sections 193 and 234 of the Local
Government Code impair the obligations imposed under the six (6)
loan agreements executed by the NEA as borrower and USAID as
lender. All six agreements contain similarly worded provisions on the
tax treatment of the proceeds of the loan and properties and
commodities acquired through the loan. Thus:
Section 6.5. Taxes and Duties. The Borrower covenants and agrees that
this Loan Agreement and the Loan provided for herein shall be
free from, and the Principal and interest shall be paid to A.I.D.
without deduction for and free from, any taxation or fees
imposed under any laws or decrees in effect within the Republic of the
Philippines or any such taxes or fees so imposed or payable shall be
reimbursed by the Borrower with funds other than those provided
under the Loan. To the extent that (a) any contractor, including
any consulting firm, any personnel of such contractor financed
hereunder, and any property or transactions relating to such
contracts and (b) any commodity procurement transactions
financed hereunder, are not exempt from identifiable taxes,
tariffs, duties and other levies imposed under laws in effect in
the country of the Borrower, the Borrower and/or Beneficiary
shall pay or reimburse the same with funds other than those
provided under the Loan.[30]
24
III
Conclusion
Petitioners lament the difficulties they face in complying with the
implementing rules and regulations issued by the CDA for the
conversion of electric cooperatives under P.D. No. 269, as amended, to
cooperatives under R.A. No. 6938. They allege that because of the
cumbersome legal and technical requirements imposed by the
Omnibus Rules and Regulations on the Registration of Electric
Cooperatives under R.A. No. 6938, petitioners cannot register and
convert as stock cooperatives under the Cooperative Code.[32]
The Court understands the plight of the petitioners. Their remedy,
however, is not judicial. Striking down Sections 193 and 234 of the
Local Government Code as unconstitutional or declaring them
inapplicable to petitioners is not the proper course of action for them to
obtain their previous tax exemptions. The language of the law and the
intention of its framers are clear and unequivocal and courts have no
other duty except to uphold the law. The task to re-examine the rules
and guidelines on the conversion of electric cooperatives to
cooperatives under R.A. No. 6938 and provide every assistance
available to them should be addressed by the proper authorities of
government. This is necessary to encourage the growth and viability of
cooperatives as instruments of social justice and economic
development.
WHEREFORE, the instant petition is DENIED and the temporary
restraining order heretofore issued is LIFTED.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Panganiban, Quisumbing, YnaresSantiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, CarpioMorales, Callejo, Sr., and Azcuna, JJ.,concur.
25
The respondent city was the only winning bidder at the public
auction conducted by the City Treasurer and the Assessor.
Consequently, the said properties were sold to it, and, conformably
with Section 76 of Presidential Decree (P.D.) No. 464, a certificate of
sale over the properties was executed in its favor.
56325
61745
61747
59949
61741
61742
61744
Warehouse
Building (Shed)
Residential House
Building
Building
Building
Building
26
became the owner of the subject properties. They point out that the
petitioner even declared the properties for taxation purposes under its
name. The respondents, likewise, posit that the exemption on realty
taxes in favor of the petitioner had effectively been withheld under P.D.
No. 1931, and that the petitioner cannot invoke P.D. No. 464 because
the subject properties are being leased to taxable private persons. The
respondents appended to their comment the tax declarations on the
properties under the name of the petitioner.
The petition has no merit.
When P.D. No. 857 took effect on December 23, 1975, the
petitioner became the owner of the facilities and appurtenances,
conformably to Sections 30 to 33 thereof, to wit:
SEC. 30. Transfer of Existing and Completed Physical Facilities In
accordance with the transitory provisions of this Decree, there shall be
transferred to the Authority all existing and completed public port
facilities, quays, wharves, docks, lands, buildings and other property,
movable or immovable, belonging to those ports declared as Ports
Districts for purposes of this Decree.
SEC. 31. Transfer of Intangible Assets In accordance with the transitory
provisions of this Decree, there shall be transferred to the Authority all
intangible assets, powers, rights, foreshore rights, interests and
privileges belonging to the Bureau of Customs, and Bureau of Public
Works and other agencies relating to port works or port operations,
subject to terms to be arranged by and between the Authority and
agencies concerned. Any disagreement relating to such transfer shall
be elevated to the President for decision.
SEC. 32. Projects in Progress In accordance with the transitory
provisions of this Decree, all ongoing projects relating to the
construction of ports and port facilities shall be continued by the
agency or agencies involved until completion. After completion, such
projects shall be transferred to the Authority in accordance with the
agreement among agencies concerned. Any disagreement relating to
such transfer shall be elevated to the President for decision.
SEC. 33. Transfer of Liabilities and Debts Upon the transfer and
acceptance by the Authority of the existing physical facilities,
intangible assets, and completed projects referred to in the Sections
immediately preceding, all debts, liabilities, and obligations of the
Bureau of Customs, the Bureau of Public Works, and other government
agencies or entities concerned in respect of such physical facilities,
intangible assets and completed projects within the Port Districts shall,
likewise, be transferred to or deemed incurred by the Authority.
Section 40 of the law further provides that any and all other
powers, rights, duties and functions vested in and all properties,
authority or instrumentality pertaining to every matter concerning port
facilities, ports operations, or port works were transferred to and were
vested in the petitioner. These provisions are self-executory, without
need of any other formalities or documentations to implement the
same.
That the petitioner has not been issued any torrens title over the
port and port facilities and appurtenances is of no legal consequence.
A torrens title does not, by itself, vest ownership; it is merely an
evidence of title over real properties.[3] The torrens system does not
create or vest title. It has never been recognized as a mode of
acquiring ownership over real properties.[4]
That the petitioner became the owner of said facilities and
appurtenances is bolstered by the fact that under Article VI, Section
10(b) of P.D. No. 857, the initial paid up capital of the petitioner
consists of the following:
(i) The value of assets (including port facilities, quays, wharves, and
equipment) and such other properties, movable and immovable as
may be contributed by the Government or transferred by the
Government or any of its agencies as valued at the date of such
contribution or transfer and after deducting or taking into account the
loans and other liabilities of the Authority at the time of the takeover of
the assets and other properties.
As we held in Mactan Cebu International Airport Authority v.
Marcos:[5]
It may be reasonable to assume that the term lands refer to lands in
Cebu City then administered by the Lahug Air Port and includes the
parcels of land the respondent City of Cebu seeks to levy on for real
property taxes. This section involves a transfer of the lands, among
other things, to the petitioner and not just the transfer of the beneficial
27
use thereof, with the ownership being retained by the Republic of the
Philippines.
This transfer is actually an absolute conveyance of the ownership
thereof because the petitioners authorized capital stock consists
of, inter alia, the value of such real estate owned and/or administered
by the airports. Hence, the petitioner is now the owner of the land in
question and the exception in Section 234(c) of the LGC is inapplicable.
[6]
SEC. 25. Exemption from Realty Taxes The Authority shall be exempt
from the payment of real property taxes imposed by the Republic of
the Philippines, its agencies, instrumentalities or political subdivisions;
Provided, That no tax exemptions shall be extended to any subsidiaries
of the Authority that may be organized; Provided, finally, That
investments in fixed assets shall be deductible for income tax
purposes.
First. Section 1, P.D. No. 1931 which took effect on June 11, 1984,
effectively withdrew the exemption granted to the petitioner, a
government-owned or controlled corporation
28
29
30
We do not agree. Unlike public roads which are open for use by
everyone, the LRT is accessible only to those who pay the required
fare. It is, thus, apparent that petitioner does not exist solely for public
service, and that the LRT carriageways and terminal stations are not
commercial
establishment
or
an
appurtenant
to
the
31
buildings, and not at the 10% special assessment currently imposed for
CHH and its other separate buildingsthe CHHs Dietary and Records
Departments.
No. 62548, which affirmed the January 24, 2000 Decision [3] and October
25, 2000 Resolution[4] of the Central Board of Assessment Appeals
(CBAA); and the March 11, 2002 Resolution [5] of the same court
denying petitioners Motion for Reconsideration.[6] The CBAA upheld the
February 10, 1999 Decision of the Local Board of Assessment Appeals
(LBAA), which overturned the 35% assessment rate of respondent
Cebu City Assessor and ruled that petitioner is entitled to a 10%
with the Cebu City LBAA for reconsideration, asserting that CHHMAC is
part of CHH and ought to be imposed the same special assessment
level of 10% with that of CHH. On September 25, 1998, respondent
formally filed its appeal with the LBAA which was docketed as Case No.
4406, TD No. 97 GR-04-024-02529 entitled Association Benevola de
Cebu, Inc. v. City Assessor.
assessment.
In the September 30, 1998 Order, the LBAA directed petitioner
The Facts
Respondent Association of Benevola de Cebu, Inc. is a nonstock, non-profit organization organized under the laws of the Republic
on
the
scheduled
date
of
hearing. In
the October
7,
32
who consult for diagnosis and relief of bodily ailment together with the
ancillary (or support) services which include the areas of anesthesia,
radiology, pathology, and more. Petitioner concluded the foregoing set
up to be ultimately geared for commercial purposes, and thus having
the proper classification as commercial under Building Permit No. B019750087 pursuant to Section 10 of the Local Assessment Regulations
No. 1-92 issued by the Department of Finance (DOF).
CHHs operations.
Aggrieved,
petitioner
filed
its March
15,
1999 Notice
of
Appeal[9] and March 16, 1999 Appeal Memorandum[10] before the CBAA
Visayas Field Office which docketed the appeal as CBAA Case No. V-15,
In Re: LBAA Case No. 4406, TD No. 97 GR-04-024-02529 entitled City
Assessor of Cebu City v. Local Board of Assessment Appeals of Cebu
City and Associacion Benevola de Cebu, Inc. On June 3, 1999,
respondent filed its Answer[11] to petitioners appeal.
33
Decision[19] which
affirmed
the January
24,
2000 Decision
of
the
Decision[12] affirming in toto the LBAA Decision and resolved the issue
CBAA. It agreed with the CBAA that CHHMAC is part and parcel of CHH
thereto means. Thus, the CA held that the facilities and utilities of
housed
in
the
main
hospital
building
of
CHH. Moreover,
The CA likewise ruled that the fact that rentals are paid by CHH
applied in Abra Valley College, Inc. v. Aquino,[14] the CBAA held that the
fact that the subject building is detached from the main hospital
as a place for medical check-up, diagnosis, treatment, and care for its
The appellate court also applied Secs. 215 and 216 of the Local
Government Code (Republic Act No. 7160) which classify lands,
as
special
cases
of
real
property
and
not
as
establishments.
34
and thus should not enjoy the 10% special assessment. Petitioner
anchors the classification of CHHMAC as commercial, first, on Sec. 10
The Issues
35
reasonably
necessary
for
the
accomplishment
of
the
hospitals
purposes as CHH can still function and accomplish its purpose without
alter it.
clinics in CHHMAC are those duly accredited by CHH, that is, they are
consultants of the hospital and the ones who can treat CHHs patients
confined in it. This fact alone takes away CHHMAC from being
36
confinement of patients. This was the case before 1998 and before
CHHMAC was built. Verily, their transfer to a more spacious and,
perhaps, convenient place and location for the benefit of the hospitals
patients does not remove them from being an integral part of the
overall operation of the hospital.
37
the medical and clinical operations that have been transferred to the
confinement
and
surgical
operations
where
hospital
beds
and
and
where
patient
necessitates
close
then
treatment
and
follow-up
consultations
follow
or
are
emergency
to recoup the investment cost of the building, (2) to cover the rentals
for the lot CHHMAC is built on, and (3) to maintain the CHHMAC
building and its facilities. Third, as correctly pointed out by respondent,
it pays the proper taxes for its rental income. And, fourth, if there is
indeed any net income from the lease income of CHHMAC, such does
not inure to any private or individual person as it will be used for
respondents other charitable projects.
38
DECISION
CARPIO, J.:
The Case
SO ORDERED.
39
In letters dated 10 July 2003 and 8 January 2004, the Pasig City
Treasurer informed MPLDC and IRC that the properties were not exempt
from tax. In a letter dated 16 February 2004, MPLDC General Manager
Antonio Merelos (Merelos) and Jalandoni again informed the Pasig City
Treasurer that the properties were exempt from tax. In a letter dated
11 March 2004, the Pasig City Treasurer again informed Merelos that
the properties were not exempt from tax.
On 20 October 2005, the Pasig City Assessors Office sent MPLDC a
notice of final demand for payment of tax for the period 1987 to
2005 totaling P389,027,814.48. On the same day, MPLDC
paid P2,000,000 partial payment under protest.
On 9 November 2005, MPLDC received two warrants of levy on the
properties. On 1 December 2005, respondent Republic of the
Philippines, through the Presidential Commission on Good Government
(PCGG), filed with the RTC a petition for prohibition with prayer for
issuance of a temporary restraining order or writ of preliminary
injunction to enjoin petitioner Pasig City from auctioning the properties
and from collecting real property tax.
On 2 December 2005, the Pasig City Treasurer offered the properties
for sale at public auction. Since there was no other bidder, Pasig City
bought the properties and was issued the corresponding certificates of
sale.
2.
40
xxxx
xxxx
xxxx
Premised on the foregoing, the payanig properties, being part
of the recovered ill-gotten wealth of President Marcos, and
therefore are owned by the State itself, are exempt from
payment of real property taxes. It is only when the beneficial
use of said properties has been granted to a taxable person
that the same may be subject to imposition of real property
tax.
Furthermore, in real estate taxation, the unpaid tax attaches to
the property and is chargeable against the taxable person who
had actual or beneficial use and possession of it regardless of
whether or not he is the owner (Testate Estate of Concordia T.
Lim vs. City of Manila, 182 SCRA 482).
2.
3.
2.
41
3.
1.
2.
42
did not act with grave abuse of discretion when it issued the
challenged tax assessment.
The foregoing snowball to one conclusion the allegations in
PCGGs petition imputing grave abuse of discretion on the part
of Pasig City, acting through the City Assessor and City
Treasurer, in the assessment and collection of the taxes were
made in order to justify the filing of the petition for certiorari,
prohibition and mandamus with the trial court.
The extraordinary remedies of certiorari, prohibition and
mandamus may be resorted to only when there is no other
plain, available, speedy and adequate remedy in the course of
law. Where administrative remedies are available, petitions for
the issuance of these peremptory writs do not lie in order to
give the administrative body the opportunity to decide the
matter by itself correctly and to prevent unnecessary and
premature resort to courts.
Republic Act No. 7160 or the Local Government Code
of 1991, clearly sets forth the administrative remedies available
to a taxpayer or real property owner who is not satisfied with
the assessment or reasonableness of the real property tax
sought to be collected. The Supreme Court outlined said
remedies, to wit:
Should the taxpayer/real property owner question the
excessiveness or reasonableness of the assessment, Section
252 directs that the taxpayer should first pay the tax due
before his protest can be entertained. There shall be annotated
on the tax receipts the words paid under protest. It is only after
the taxpayer has paid the tax due that he may file a protest in
writing within thirty days from payment of the tax to the
Provincial, City or Municipal Treasurer, who shall decide the
protest within sixty days from receipt. In no case is the local
treasurer obliged to entertain the protest unless the tax due
has been paid.
If the local treasurer denies the protest or fails to act upon it
within the 60-day period provided for in Section 252, the
taxpayer/real property owner may then appeal or directly file a
verified petition with the LBAA within sixty days from denial of
the protest or receipt of the notice of assessment, as provided
in Section 226 of R.A. No. 7160[.]
43
44
xxxx
xxxx
xxxx
In the instant case, the PCGG issued a resolution dated May 28,
1986, granting immunity from both civil and criminal
prosecutions to Jose Y. Campos and his family. The pertinent
provisions of the resolution read as follows:
3.0. In consideration of the full cooperation of Mr. Jose Y.
Campos to this Commission, his voluntary surrender of the
properties and assets disclosed and declared by him to belong
to deposed President Ferdinand E. Marcos to the Government of
the Republic of the Philippines, his full, complete and truthful
45
46
2.
47
July 2, 2004
DECISION
QUISUMBING, J.:
In its decision1 dated July 17, 2001, in CA-G.R. CV No. 58214, the Court
of Appeals affirmed the decision2 dated October 22, 1996 of the
Regional Trial Court of Makati City, Branch 134, in Civil Case No. 912866 dismissing petitioners complaint for recovery of a sum of money
and damages. Petitioners now assail said CA decision as well as the
Resolution3 dated November 9, 2001, which denied their Motion for
Reconsideration.
The facts are as follows:
Sometime in August 1990, Atty. Victor A.L. Valero, then the municipal
attorney of the Municipality of Makati, upon request of the municipal
treasurer, went to the Rural Bank of Makati to inquire about the banks
payments of taxes and fees to the municipality. He was informed,
however, by petitioner Magdalena V. Landicho, corporate secretary of
48
the bank, that the bank was exempt from paying taxes under Republic
Act No. 720, as amended.4
On November 19, 1990, the municipality lodged a complaint with the
Prosecutors Office, charging petitioners Esteban S. Silva, president and
general manager of the bank and Magdalena V. Landicho for violation
of Section 21(a), Chapter II, Article 3 in relation to Sections 105 and
169 of the Metropolitan Tax Code.
On April 5, 1991, an Information docketed as Criminal Case No.
140208, for violation of Municipal Ordinance Nos. 122 and 39 for nonpayment of the mayors permit fee, was filed with the Metropolitan
Trial Court (MeTC) of Makati against petitioners. Another Information,
docketed as Criminal Case No. 140209, for non-payment of annual
business tax, in violation of Metro Manila Commission Ordinance No.
82-03, Section 21(a), Chapter II, Article 3, was likewise filed with the
MeTC.
While said cases were pending with the municipal court, respondent
municipality ordered the closure of the bank. This prompted petitioners
to pay, under protest, the mayors permit fee and the annual fixed tax
in the amount ofP82,408.66.
On October 18, 1991, petitioners filed with the RTC of Makati a
Complaint for Sum of Money and Damages, docketed as Civil Case No.
91-2866. Petitioners alleged that they were constrained to pay the
amount ofP82,408.66 because of the closure order, issued despite the
pendency of Criminal Cases Nos. 140208-09 and the lack of any notice
or assessment of the fees to be paid. They averred that the collection
of the taxes/fees was oppressive, arbitrary, unjust and illegal.
Additionally, they alleged that respondent Atty. Valero had no power to
enforce laws and ordinances, thus his action in enforcing the collection
of the permit fees and business taxes was ultra vires. Petitioners
claimed that the bank lost expected earnings in the amount
of P19,778. Petitioners then assailed the municipal ordinances of
Makati as invalid for want of the requisite publication.
In its Answer, respondent municipality asserted that petitioners
payment of P82,408.66 was for a legal obligation because the payment
of the mayors permit fee as well as the municipal business license was
required of all business concerns. According to respondent, said
requirement was in furtherance of the police power of the municipality
to regulate businesses.
For his part, Atty. Valero filed an Answer claiming that there was no
coercion committed by the municipality, that payment was a legal
obligation of the bank, and that its claim of exemption had no legal
basis. He further alleged that petitioners action was clearly intended
to harass and humiliate him and as counterclaim, he asked for moral
and other damages.
On October 22, 1996, the RTC decided Civil Case No. 91-2866 as
follows:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered dismissing the complaint.
On the counterclaim, the plaintiffs are hereby ordered jointly
and severally to pay to defendant Victor Valero the sum
of P200,000.00 as moral damages and the amount
of P50,000.00 as attorneys fees.
The counterclaim of defendant Municipality is dismissed.
Cost against the plaintiffs.
SO ORDERED.5
In finding for respondents, the RTC ruled that the bank was engaged in
business as a rural bank. Hence, it should secure the necessary permit
and business license, as well as pay the corresponding charges and
fees. It found that the municipality had authority to impose licenses
and permit fees on persons engaging in business, under its police
power embodied under the general welfare clause. Also, the RTC
declared unmeritorious petitioners claim for exemption under Rep. Act
No. 720 since said exemption had been withdrawn by Executive Order
No. 936 and the Rural Bank Act of 1992.7 These statutes no longer
exempted rural banks from paying corporate income taxes and local
taxes, fees and charges. It also found petitioners claim of lack of
publication of MMC Ordinance Nos. 82-03 and Municipal Ordinance No.
122 to be mere allegations unsupported by clear and convincing
evidence.
In awarding damages to Atty. Valero, the RTC found that he had been
maliciously impleaded as defendant. It noted that Atty. Valero, as a
municipal legal officer, was tasked to enforce municipal ordinances. In
short, he was merely an agent of the local chief executive and should
not be faulted for performing his assigned task.
49
The Court of Appeals found the order of closure of the bank valid and
justified since the bank was operating without any permit and without
having paid the requisite permit fee. Thus, declared the Court of
Appeals, "it is not merely a matter of enforcement and collection of
fees, as the appellants would have it, but a violation of the
municipalitys authority to regulate the businesses operating within its
territory."10
The appellate court also brushed aside petitioners claim that the
general welfare clause is limited only to legislative action. It declared
that the exercise of police power by the municipality was mandated by
the general welfare clause, which authorizes the local government
units to enact ordinances, not only to carry into effect and discharge
such duties as are conferred upon them by law, but also those for the
good of the municipality and its inhabitants. This mandate includes the
regulation of useful occupations and enterprises.
50
only questions of law are properly raised. On this score, the refund
sought by petitioners could not be entertained much less granted.
Anent the second issue, petitioner bank claims that the closure of
respondent bank was an improper exercise of police power because a
municipal corporation has no inherent but only delegated police power,
which must be exercised not by the municipal mayor but by the
municipal council through the enactment of ordinances. It also assailed
the Court of Appeals for invoking the General Welfare Clause embodied
in Section 1617 of the Local Government Code of 1991, which took
effect in 1992,18 when the closure of the bank was actually done on July
31, 1991.
Indeed the Local Government Code of 1991 was not yet in effect when
the municipality ordered petitioner banks closure on July 31, 1991.
However, the general welfare clause invoked by the Court of Appeals is
not found on the provisions of said law alone. Even under the old Local
Government Code (Batas Pambansa Blg. 337)19 which was then in
effect, a general welfare clause was provided for in Section 7 thereof.
Municipal corporations are agencies of the State for the promotion and
maintenance of local self-government and as such are endowed with
police powers in order to effectively accomplish and carry out the
declared objects of their creation.20 The authority of a local government
unit to exercise police power under a general welfare clause is not a
recent development. This was already provided for as early as the
Administrative Code of 1917.21 Since then it has been reenacted and
implemented by new statutes on the matter. Thus, the closure of the
bank was a valid exercise of police power pursuant to the general
welfare clause contained in and restated by B.P. Blg. 337, which was
then the law governing local government units. No reversible error
arises in this instance insofar as the validity of respondent
municipalitys exercise of police power for the general welfare is
concerned.
The general welfare clause has two branches. The first, known as
the general legislative power, authorizes the municipal council to enact
ordinances and make regulations not repugnant to law, as may be
necessary to carry into effect and discharge the powers and duties
conferred upon the municipal council by law. The second, known as
thepolice power proper, authorizes the municipality to enact
ordinances as may be necessary and proper for the health and safety,
prosperity, morals, peace, good order, comfort, and convenience of the
municipality and its inhabitants, and for the protection of their
property.22
51
52
in the honest belief that it is exempt from paying taxes and fees. Since
Atty. Valero was the official charged with the implementation of the
ordinances of respondent municipality, he was rightly impleaded as a
necessary party in the case.
WHEREFORE, the assailed Decision dated July 17, 2001, of the Court
of Appeals in CA-G.R. CV No. 58214 is AFFIRMED with MODIFICATIONS,
so that (1) the order denying any claim for refunds and fees allegedly
overpaid by the bank, as well as the denial of any award for damages
and unrealized profits, is hereby SUSTAINED; (2) the order decreeing
the closure of petitioner bank is SET ASIDE; and (3) the award of moral
damages and attorneys fees to Atty. Victor A.L. Valero is DELETED. No
pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., and Tinga, JJ., concur.
Austria-Martinez, J., on leave.
Said Section 62 did not provide for closure. Moreover, the order of
closure violated petitioners right to due process, considering that the
records show that the bank exercised good faith and presented what it
thought was a valid and legal justification for not paying the required
taxes and fees. The violation of a municipal ordinance does not
empower a municipal mayor to avail of extrajudicial remedies.29 It
should have observed due process before ordering the banks closure.
Finally, on the issue of damages, we agree with both the trial and the
appellate courts that the bank is not entitled to any damages. The
award of moral damages cannot be granted to a corporation, it being
an artificial person that exists only in legal contemplation and cannot,
therefore, experience physical suffering and mental anguish, which can
be experienced only by one having a nervous system.30 There is also
no sufficient basis for the award of exemplary damages. There being
no moral damages, exemplary damages could not be awarded also. As
to attorneys fees, aside from lack of adequate support and proof on
the matter, these fees are not recoverable as a matter of right but
depend on the sound discretion of the courts.31
Under the circumstances of this case, the award of damages to Atty.
Valero is also baseless. We cannot ascribe any illegal motive or malice
to the bank for impleading Atty. Valero as an officer of respondent
municipality. The bank filed the case against respondent municipality
53
Subsequently, Chan passed away and his estate sold the same
property to petitioners Francisco and Joaquin Wong on September 29,
1967. Because the estate of Chan was unable to produce the estate
tax clearance and the owners duplicate of title, petitioners were only
allowed to annotate a notice of adverse claim on TCT No. T-7373
Spouses FRANCISCO and G.R. No. 161748
BETTY WONG and Spouses
JOAQUIN and LOLITA WONG, Petitioners,
-versusCITY OF ILOILO, ROMEO
MANIKAN as City Treasurer
of Iloilo, MELANIE UY and
the ESTATE OF FELIPE UY,
Respondents. Promulgated:
July 3, 2009
x-------------------------------------------------x
RESOLUTION
stating:[2]
Entry No. 40286Notice of Adverse Claim filed by
[petitioners] to protect [their] rights and interest in the
parcel of land described herein in view that the same
[was] acquired by Vicente Chan from C.N. Hodges and
the same [was] also acquired by Joaquin Wong from
Adelfa Remaylon vda. de Chan by purchase for the sum
of P38,500 .[3]
CORONA, J.:
Hodges. However, the said notice was returned with the annotation
cannot be located.[6]
54
They asserted that the tax sale was void since the City Treasurer
Aggrieved,
petitioners
moved
for
reconsideration.
In
resolution dated July 24, 1998 the RTC granted the motion and set
55
aside the March 6, 1998 decision.[11] It noted that no notice of sale was
sent to petitioners who were the legitimate owners of the property.
of the tax sale. Under the law, only registered owners are entitled to a
(CA).[13] They argued that the RTC erred in taking cognizance of the
names of the Hodges spouses in TCT No. T-7373, said spouses were the
Section 83 of PD 464 states that the RTC shall not entertain any
complaint assailing the validity of a tax sale of real property unless the
complainant deposits with the court the amount for which the said
property was sold plus interest equivalent to 20% per annum from the
date of sale until the institution of the complaint. This provision was
[14]
56
FIRST DIVISION
adopted in Section 267 of the Local Government Code, albeit the
ANGELES CITY,
[19]
holds
Present:
- versus -
that the deposit required under Section 267 of the Local Government
Code is a jurisdictional requirement, the nonpayment of which
warrants the dismissal of the action. Because petitioners in this case
did not make such deposit, the RTC never acquired jurisdiction over the
complaints.
DECISION
of taxes applies only to national internal revenue taxes, and not to local
taxes.
This Petition[1] for Certiorari under Rule 65 of the Rules of Court seeks
to set aside the Writ of Preliminary Injunction issued by the Regional Trial
Court (RTC) of Angeles City, Branch 57, in Civil Case No. 11401,
enjoining Angeles City and its City Treasurer from levying, seizing, disposing
and selling at public auction the properties owned by Angeles Electric
Corporation (AEC).
Factual Antecedents
57
Republic Act No. (RA) 4079[2] to construct, maintain and operate an electric
No. 33, S-93, otherwise known as the Revised Revenue Code of Angeles City
light, heat, and power system for the purpose of generating and distributing
(RRCAC).
electric light, heat and power for sale in Angeles City, Pampanga. Pursuant to
Section 3-A thereof,[3] AECs payment of franchise tax for gross earnings from
electric current sold was in lieu of all taxes, fees and assessments.
a review
of
the
provisions
of
the
RRCAC
was
filed
with
Industry Inc. (MACCI) of which AEC is a member. There being no action taken
that:
that the RRCAC is oppressive, excessive, unjust and confiscatory; that it was
published only once, simultaneously on January 22, 1994; and that no public
hearings were conducted prior to its enactment. Acting on the petition, the
BLGF issued a First Indorsement[6] to the City Treasurer of Angeles City,
instructing the latter to make representations with the Sangguniang
Thereafter, starting July 1995, AEC has been paying the local
franchise tax to the Office of the City Treasurer on a quarterly basis, in
addition to the national franchise tax it pays every quarter to the Bureau of
Internal Revenue (BIR).
with
the
LGC,
[4]
In
the Sangguniang
58
Assessment[7] to AEC for payment of business tax, license fee and other
AEC.[11] A Notice of Auction Sale[12] was published and posted announcing that
charges for the period 1993 to 2004 in the total amount of P94,861,194.10.
Within the period prescribed by law, AEC protested the assessment claiming
2004.
that:
This prompted AEC to file with the RTC, where the petition for
(a)
Order
and/or
Writ
of
Preliminary
Injunction [13] to
enjoin Angeles City and its City Treasurer from levying, annotating the levy,
(b)
(c)
its
City
Treasurer
filed
an
Answer
with
[8]
After due notice and hearing, the RTC issued a Temporary Restraining
Order (TRO)[16] on May 4, 2004, followed by an Order [17] dated May 24, 2004
granting the issuance of a Writ of Preliminary Injunction, conditioned upon
On February 17, 2004, the City Treasurer denied the protest for lack
of merit and requested AEC to settle its tax liabilities.
[9]
[10]
59
Private respondent AEC on the other hand asserts that there was no grave
Issue
abuse of discretion on the part of the RTC in issuing the writ of preliminary
injunction because it was issued after due notice and hearing, and was
Being a special civil action for certiorari, the issue in the instant case
claims that the issuance of the writ of injunction was proper since the tax
assessment issued by the City Treasurer is not yet final, having been
and its City Treasurer from levying, selling, and disposing the properties of
seasonably appealed pursuant to Section 195 [24] of the LGC. AEC likewise
AEC. All other matters pertaining to the validity of the tax assessment and
AECs tax exemption must therefore be left for the determination of the RTC
not violate the prohibition against injunction to restrain the collection of taxes
because the proceedings are directed at the right of the City Treasurer to
Petitioners Arguments
collect the tax by distraint or levy. As to its tax liability, AEC maintains that it
is exempt from paying local business tax. In any case, AEC counters that the
issue of whether it is liable to pay the assessed local business tax is a factual
enjoined by the RTC, citing Valley Trading Co., Inc. v. Court of First Instance of
issue that should be determined by the RTC and not by the Supreme Court
Isabela, Branch II,[23] wherein the lower courts denial of a motion for the
Our Ruling
the properties of a delinquent taxpayer are proper and lawful acts specifically
allowed by the LGC, these cannot be the subject of an injunctive
writ. Petitioner likewise insists that AEC must first pay the tax before it can
protest the assessment. Finally, petitioner contends that the tax exemption
claimed by AEC has no legal basis because RA 4079 has been expressly
repealed by the LGC.
The
LGC
does
specifically
prohibit
injunction enjoining
collection of taxes
not
an
the
lifeblood
of
the
government
should
be
collected
promptly,
60
taxes are frowned upon. Courts therefore should exercise extreme caution in
court shall have the authority to grant an injunction to restrain the collection
of any national internal revenue tax, fee or charge imposed by the code.
[29]
An exception to this rule obtains only when in the opinion of the Court of
Tax Appeals (CTA) the collection thereof may jeopardize the interest of the
No
grave
abuse
of
discretion was committed
by the RTC
local taxes as there is no express provision in the LGC prohibiting courts from
issuing an injunction to restrain local governments from collecting
taxes. Thus, in the case of Valley Trading Co., Inc. v. Court of First Instance of
Isabela, Branch II, cited by the petitioner, we ruled that:
Unlike the National Internal Revenue Code, the Local Tax
Code[31] does not contain any specific provision prohibiting
courts from enjoining the collection of local taxes. Such
statutory lapse or intent, however it may be viewed, may
have allowed preliminary injunction where local taxes are
involved but cannot negate the procedural rules and
requirements under Rule 58.[32]
61
62
had a clear and unmistakable legal right over the properties to be levied and
the discretion of the court taking cognizance of the case and will not be
that it would sustain serious damage if these properties, which are vital to its
for certiorari, it must be demonstrated that the lower court or tribunal has
exercised its power in an arbitrary and despotic manner, by reason of passion
property rights generally takes a back seat to the paramount need of the
State for funds to sustain governmental functions, [40] this rule finds no
application in the instant case where the disputed tax assessment is not yet
enough.[38]
due and demandable. Considering that AEC was able to appeal the denial of
its protest within the period prescribed under Section 195 of the LGC, the
collection of business taxes[41] through levy at this time is, to our mind, hasty,
part of the RTC in issuing the writ of injunction. Petitioner, who has the burden
to prove grave abuse of discretion, [39] failed to show that the RTC acted
and the alleged retroactive application of the RRCAC, raised in the protest of
AEC now pending with the RTC, must first be resolved before the properties of
able to prove that the injunction was issued without any factual or legal
local taxes. Records also show that before issuing the injunction, the RTC
conducted a hearing where both parties were given the opportunity to
SO ORDERED.
present their arguments. During the hearing, AEC was able to show that it
63