TAX

DIGEST ASSIGNMENT # 9 LOCAL GOVT TAXATION A.M.+D.G. TAX II Atty. Mendoza

MANILA ELECTRIC COMPANY vs. PROVINCE OF LAGUNA to the contrary notwithstanding, be in lieu of all taxes and assessments of
whatever nature imposed by any national or local authority on earnings,
receipts, income and privilege of generation, distribution and sale of
FACTS electric current.

Manila Electric Company (MERALCO) on various dates (the latest being MERALCO then filed a complaint for refund with a prayer for the issuance of
January 19, 1983) was granted franchises by various municipalities of a writ of preliminary injunction and/or TRO at the RTC of Sta. Cruz, Laguna.
Laguna. On Sept. 12 1991, RA 7160 "Local Government Code of 1991" (LGC) The RTC dismissed the complaint and ruled that the Ordinance was valid,
was enacted to take effect on Jan.1 1992 enjoining local goverment units to binding, reasonable and enforceable.
create their own sources of revenue and to levy taxes, fees and charges,
subject to the limitations, consistent with the basic policy of local autonomy. ISSUES
Respondent Laguna Province enacted Ordinance No. 01-92 (effective Jan. 1,
1993) providing, in part: 1. W/N the imposition of a franchise tax under Section 2.09 of Laguna
Provincial Ordinance No. 01-92, insofar as MERALCO is concerned, is
Sec. 2.09. Franchise Tax. There is hereby imposed a tax on businesses
enjoying a franchise, at a rate of fifty percent (50%) of one percent (1%)
violative of the non-impairment clause of the Constitution and
of the gross annual receipts, which shall include both cash sales and sales Section 1 of Presidential Decree No. 551? NO
on account realized during the preceding calendar year within this
province, including the territorial limits on any city located in the 2. W/N the LGC, has repealed, amended or modified Presidential
province
Decree No. 551? YES

MERALCO was then sent a demand letter to pay the corresponding tax. RULING
MERALCO paid the tax under protest (approx. Php19.5M) and later on filed
a formal claim for refund. It contends that the stated Section 2.09 of the (As an intro for the ruling as stated by the SC:)
LGC contravened the provisions of Section 1 of PD 551, which provides:
Local Governments do not have the inherent power to tax except to the
Any provision of law or local ordinance to the contrary notwithstanding,
extent that such power might be delegated to them either by the basic law
the franchise tax payable by all grantees of franchises to generate,
distribute and sell electric current for light, heat and power shall be two or by statute. Presently, Under Article X of the 1987 Constitution, a general
per cent (2%) of their gross receipts received from the sale of electric delegation of that power has been given in favor of the Local Government
current and from transactions incident to the generation, distribution and Units (LGU).
sale of electric current.

Such franchise tax shall be payable to the Commissioner of Internal
Under the now prevailing Constitution, where there is neither a grant nor a
Revenue or his duly authorized representative on or before the twentieth prohibition by statute, the tax power must be deemed to exist although
day of the month following the end of each calendar quarter or month, as Congress may provide statutory limitations and guidelines. The basic
may be provided in the respective franchise or pertinent municipal rationale for the current rule is to safeguard the viability and self-sufficiency
regulation and shall, any provision of the Local Tax Code or any other law

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of local government units by directly granting them general and broad tax vesting broad tax powers to local government units, LGC has effectively
powers. Nevertheless, the fundamental law did not intend the delegation withdrawn under Section 193 thereof, tax exemptions or incentives
to be absolute and unconditional; the constitutional objective obviously is theretofore enjoyed by certain entities. This law states:
to ensure that, while the local government units are being strengthened and
made more autonomous, the legislature must still see to it that (a) the Section 193 Withdrawal of Tax Exemption Privileges Unless otherwise
taxpayer will not be over-burdened or saddled with multiple and provided in this Code, tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including
unreasonable impositions; (b) each local government unit will have its fair government-owned or controlled corporations, except local water
share of available resources; (c) the resources of the national government districts, cooperatives duly registered under R.A. No. 6938, non-stock and
will not be unduly disturbed; and (d) local taxation will be fair, uniform, non-profit hospitals and educational institutions, are hereby withdrawn
and just. upon the effectivity of this Code.

1. While the Court has, not too infrequently, referred to tax exemptions The Code, in addition, contains a general repealing clause in its Section 534;
contained in special franchises as being in the nature of contracts and a part thus:
of the inducement for carrying on the franchise, these exemptions,
Section 534. Repealing Clause. x x x.
nevertheless, are far from being strictly contractual in nature. Contractual
tax exemptions, in the real sense of the term and where the non- (f) All general and special laws, acts, city charters, decrees, executive
impairment clause of the Constitution can rightly be invoked, are those orders, proclamations and administrative regulations, or part or parts
agreed to by the taxing authority in contracts, such as those contained in thereof which are inconsistent with any of the provisions of this Code are
government bonds or debentures, lawfully entered into by them under hereby repealed or modified accordingly.
enabling laws in which the government, acting in its private capacity,
sheds its cloak of authority and waives its governmental immunity. Truly, 3. MERALCO further contends that in a plethora of cases including Court in
tax exemptions of this kind may not be revoked without impairing the Province of Misamis Oriental vs. Cagayan Electric Power and Light Company,
obligations of contracts. These contractual tax exemptions, however, are Inc., the phrase "shall be in lieu of all taxes and at any time levied,
not to be confused with tax exemptions granted under franchises. A established by, or collected by any authority" exempted the franchise
franchise partakes the nature of a grant which is beyond the purview of the holder from any other tax imposed by the then Internal Revenue Cod and
non-impairment clause of the Constitution. local ordinaces. The SC holds otherwise.

2. The Local Government Code of 1991 explicitly authorizes provincial In the recent case of the City Government of San Pablo, etc., et al. vs. Hon.
governments, notwithstanding any exemption granted by any law or other Bienvenido V. Reyes, et al., the Court has held that the phrase in lieu of all
special law, x x x (to) impose a tax on businesses enjoying a franchise". taxes have to give way to the peremptory language of the Local
(Section 137 of the LGC) Government Code specifically providing for the withdrawal of such
exemptions, privileges, and that upon the effectivity of the Local
Indicative of the legislative intent to carry out the Constitutional mandate of Government Code all exemptions except only as provided therein can no
longer be invoked by MERALCO to disclaim liability for the local tax. In fine,

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the Court has viewed its previous rulings as laying stress more on the relief was improper, allegedly because a breach of the ordinance had been
legislative intent of the amendatory law whether the tax exemption committed by Republic Cement.
privilege is to be withdrawn or not rather than on whether the law can
withdraw, without violating the Constitution, the tax exemption or not. On July 11, 1994, Republic Cement filed a petition for certiorari with the
Supreme Court seeking to reverse the trial court's dismissal of their petition.
PROVINCE OF BULACAN vs. CA The Court, in a resolution dated July 27, 1994, referred the same to the
Court of Appeals. In the interim, the Province of Bulacan issued a warrant of
FACTS levy against Republic Cement, allegedly because of its unpaid tax liabilities.
Negotiations between Republic Cement and petitioners resulted in an
On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed agreement and modus vivendi (temporary agreement) on December 12,
Provincial Ordinance No. 3, known as "An Ordinance Enacting the Revenue 1994, whereby Republic Cement agreed to pay under protest P1,262,346.00,
Code of the Bulacan Province." Section 21 of the ordinance provides as 50% of the tax assessed by petitioner, in exchange for the lifting of the
follows: warrant of levy. CA ruled that Province of Bulacan had no legal authority.

Sec. 21 Imposition of Tax. There is hereby levied and collected a tax of ISSUE
10% of the fair market value in the locality per cubic meter of ordinary
stones, sand, gravel, earth and other quarry resources, such, but not
limited to marble, granite, volcanic cinders, basalt, tuff and rock W/N the provincial government could impose and/or assess taxes on quarry
phosphate, extracted from public lands or from beds of seas, lakes, rivers, resources extracted by Republic Cement from private lands pursuant to
streams, creeks and other public waters within its territorial jurisdiction. Section 21 of Provincial Ordinance No. 3? No, a province may not levy
excise taxes on articles already taxed by the National Internal Revenue
Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated Code.
November 11, 1993, assessed private respondent Republic Cement
Corporation P2,524,692.13 for extracting limestone, shale and silica from RULING
several parcels of private land in the province during the third quarter of
1992 until the second quarter of 1993. Believing that the province, on the First, with regard to the remedial issue. Petitioners assert that the Court of
basis of above-said ordinance, had no authority to impose taxes on quarry Appeals could only rule on the propriety of the trial court's dismissal of
resources extracted from private lands, Republic Cement formally contested Republic Cement's petition for declaratory relief, allegedly because that was
the same on December 23, 1993 but was denied by the Provincial Treasurer the sole relief sought by the latter in its petition for certiorari. Petitioners
on January 17, 1994. Republic Cement consequently filed a petition for claim that the appellate court overstepped its jurisdiction when it declared
declaratory relief with the RTC of Bulacan on February 14, 1994. The null and void the assessment made by the Province of Bulacan against
province filed a motion to dismiss Republic Cement's petition, which was Republic Cement. However, the SC declared that under the principle of
granted by the trial court on May 13, 1993, which ruled that declaratory estoppel, the petitioners can no longer attack the modus Vivendi approved
by the CA.

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Second and more importantly, is the issue on the validity of the ordinance. the taxing powers of provinces, cities, municipalities, and barangays shall
The pertinent provisions of the Local Government Code are as follows: not extend to the levy of the following:
xxx xxx xxx
(h) Excise taxes on articles enumerated under the National Internal
Sec. 134. Scope of Taxing Powers. Except as otherwise provided in this Revenue Code, as amended, and taxes, fees or charges on petroleum
Code, the province may levy only the taxes, fees, and charges as provided products;
in this Article. xxx xxx xxx

Sec. 158. Tax on Sand, Gravel and Other Quarry Resources. The

province may levy and collect not more than ten percent (10%) of fair A province may not, therefore, levy excise taxes on articles already taxed by
market value in the locality per cubic meter of ordinary stones, sand, the National Internal Revenue Code. The National Internal Revenue Code
gravel, earth, and other quarry resources, as defined under the National levies a tax on all quarry resources, regardless of origin, whether extracted
Internal Revenue Code, as amended, extracted from public lands or from from public or private land. Thus, a province may not ordinarily impose
the beds of seas, lakes, rivers, streams, creeks, and other public waters
within its territorial jurisdiction. taxes on stones, sand, gravel, earth and other quarry resources, as the same
xxx xxx xxx are already taxed under the National Internal Revenue Code. The province
can, however, impose a tax on stones, sand, gravel, earth and other quarry
The CA on the basis of Section 134, ruled that a province was empowered to resources extracted from public land because it is expressly empowered to
impose taxes only on sand, gravel, and other quarry resources extracted do so under the Local Government Code. As to stones, sand, gravel, earth
from public lands, its authority to tax being limited by said provision only to and other quarry resources extracted from private land, however, it may
those taxes, fees and charges provided in Article I, Chapter 2, Title 1 of Book not do so, because of the limitation provided by Section 133 of the Code in
II of the Local Government Code. On the other hand, petitioners claim that relation to Section 151 of the National Internal Revenue Code.
Sections 129 and 186 of the Local Government Code authorizes the province
to impose taxes other than those specifically enumerated under the Local MAGTAJAS vs. PRYCE PROPERTIES
Government Code. The CA erred in ruling that a province can impose only
the taxes specifically mentioned under the Local Government Code. As FACTS
correctly pointed out by petitioners, Section 186 allows a province to levy
taxes other than those specifically enumerated under the Code, subject to When PAGCOR announced the opening of a casino in Cagayan de Oro City,
the conditions specified therein. Civic organizations angrily denounced the project. The trouble arose when
However, in spite of this, province of Bulacan is still prohibited from in 1992, PAGCOR decided to expand its operations to Cagayan de Oro City. It
imposing taxes on stones, sand, gravel, earth and other quarry resources leased a portion of a building belonging to Pryce.
extracted from private lands. The tax imposed by the Province of Bulacan is
an excise tax, being a tax upon the performance, carrying on, or exercise of The Sangguniang Panlungsod of Cagayan de Oro City enacted Ordinance No.
an activity. The Local Government Code provides: 3353 which basically prohibits the issuance of business permits to any
establishment for the using and allowing to be used its premises or portion
Sec. 133. Common Limitations on the Taxing Powers of Local thereof for the operation of casino.It also adopted a sterner Ordinance No.
Government Units. Unless otherwise provided herein, the exercise of

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3375-93 which prohibits the operation of casino and providing penalty for support the development of appropriate and self-reliant scientific and
violation thereof. technological capabilities, improve public morals, enhance economic
prosperity and social justice, promote full employment among their
residents, maintain peace and order, and preserve the comfort and
Pryce assailed the ordinances before the CA, where it was joined by convenience of their inhabitants.
PAGCOR as intervenor and supplemental petitioner. The CA declared the
ordinances invalid and issued the writ prayed for to prohibit their In addition, Section 458 of the said Code specifically declares that:
enforcement.
Sec. 458. Powers, Duties, Functions and Compensation. (a) The
ISSUE Sangguniang Panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general
welfare of the city and its inhabitants pursuant to Section 16 of this Code
Whether or not the ordinances were unconstitutional and thus void and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:
RULING
(1) Approve ordinances and pass resolutions necessary for an efficient

and effective city government, and in this connection, shall:
Yes.
PAGCOR is a corporation created directly by P.D. 1869 to help centralize and xxx xxx xxx
regulate all games of chance, including within the territorial jurisdiction of
the Philippines. In Basco v. Philippine Amusements and Gaming Corporation, (v) Enact ordinances intended to prevent, suppress and
this Court sustained the constitutionality of the decree and even cited the impose appropriate penalties for habitual drunkenness
in public places, vagrancy, mendicancy, prostitution,
benefits of the entity to the national economy as the third highest revenue-
establishment and maintenance of houses of ill repute,
earner in the government, next only to the BIR and the Bureau of Customs. gambling and other prohibited games of chance,
fraudulent devices and ways to obtain money or
Cagayan de Oro City is empowered to enact ordinances for the purposes property, drug addiction, maintenance of drug dens,
indicated in the Local Government Code. It is expressly vested with the drug pushing, juvenile delinquency, the printing,
distribution or exhibition of obscene or pornographic
police power under what is known as the General Welfare Clause now materials or publications, and such other activities
embodied in Section 16 as follows: inimical to the welfare and morals of the inhabitants of
the city;
Sec. 16. General Welfare. Every local government unit shall exercise
the powers expressly granted, those necessarily implied therefrom, as The petitioners argue that by virtue of these provisions, the Sangguniang
well as powers necessary, appropriate, or incidental for its efficient and
effective governance, and those which are essential to the promotion of
Panlungsod may prohibit the operation of casinos because they involve
the general welfare. Within their respective territorial jurisdictions, local games of chance, which are detrimental to the people. The legislative power
government units shall ensure and support, among other things, the conferred upon local government units may be exercised over all kinds of
preservation and enrichment of culture, promote health and safety, gambling and not only over "illegal gambling" as the respondents
enhance the right of the people to a balanced ecology, encourage and

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erroneously argue. Even if the operation of casinos may have been Sec. 5. Rules of Interpretation. In the interpretation of the provisions
permitted under P.D. 1869, the government of Cagayan de Oro City has the of this Code, the following rules shall apply:

authority to prohibit them within its territory pursuant to the authority (a) Any provision on a power of a local government unit shall be liberally
entrusted to it by the Local Government Code. interpreted in its favor, and in case of doubt, any question thereon shall
be resolved in favor of devolution of powers and of the lower local
The petitioners also stress that when the Code expressly authorized the government unit. Any fair and reasonable doubt as to the existence of the
power shall be interpreted in favor of the local government unit
local government units to prevent and suppress gambling and other concerned;
prohibited games of chance, like craps, baccarat, blackjack and roulette, it
meant all forms of gambling without distinction. Ubi lex non distinguit, nec xxx xxx xxx
nos distinguere debemos. Otherwise, it would have expressly excluded from
the scope of their power casinos and other forms of gambling authorized by (c) The general welfare provisions in this Code shall be liberally
interpreted to give more powers to local government units in accelerating
special law, as it could have easily done. The fact that it did not do so simply economic development and upgrading the quality of life for the people in
means that the local government units are permitted to prohibit all kinds of the community; . . . (Emphasis supplied.)
gambling within their territories, including the operation of casinos.
Finally, the petitioners also attack gambling as intrinsically harmful and cite
The adoption of the Local Government Code, it is pointed out, had the various provisions of the Constitution and several decisions of this Court
effect of modifying the charter of the PAGCOR. The Code is not only a later expressive of the general and official disapprobation of the vice. They
enactment than P.D. 1869 and so is deemed to prevail in case of invoke the State policies on the family and the proper upbringing of the
inconsistencies between them. More than this, the powers of the PAGCOR youth and, as might be expected, call attention to the old case of U.S. v.
under the decree are expressly discontinued by the Code insofar as they do Salaveria, which sustained a municipal ordinance prohibiting the playing of
not conform to its philosophy and provisions, pursuant to Par. (f) of its panguingue.
repealing clause reading as follows:
The morality of gambling is not a justiciable issue. Gambling is not illegal per
(f) All general and special laws, acts, city charters, decrees, executive se. While it is generally considered inimical to the interests of the people,
orders, proclamations and administrative regulations, or part or parts
there is nothing in the Constitution categorically proscribing or penalizing
thereof which are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly. gambling or, for that matter, even mentioning it at all. It is left to Congress
to deal with the activity as it sees fit. In the exercise of its own discretion,
It is also maintained that assuming there is doubt regarding the effect of the the legislature may prohibit gambling altogether or allow it without
Local Government Code on P.D. 1869, the doubt must be resolved in favor limitation or it may prohibit some forms of gambling and allow others for
of the petitioners, in accordance with the direction in the Code calling for its whatever reasons it may consider sufficient. It is settled that questions
liberal interpretation in favor of the local government units. Section 5 of the regarding the wisdom, morality, or practicibility of statutes are not
Code specifically provides: addressed to the judiciary but may be resolved only by the legislative and

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executive departments, to which the function belongs in our scheme of The apparent flaw in the ordinances in question is that they contravene P.D.
government. That function is exclusive. 1869 and the public policy embodied therein insofar as they prevent
PAGCOR from exercising the power conferred on it to operate a casino in
The only question we can and shall resolve in this petition is the validity of Cagayan de Oro City. The petitioners have an ingenious answer to this
Ordinance No. 3355 and Ordinance No. 3375-93 as enacted by the misgiving. They deny that it is the ordinances that have changed P.D. 1869
Sangguniang Panlungsod of Cagayan de Oro City. And we shall do so only by for an ordinance admittedly cannot prevail against a statute. Their theory is
the criteria laid down by law and not by our own convictions on the that the change has been made by the Local Government Code itself, which
propriety of gambling. was also enacted by the national lawmaking authority. In their view, the
decree has been, not really repealed by the Code, but merely "modified pro
The tests of a valid ordinance are well established. A long line of decisions tanto" in the sense that PAGCOR cannot now operate a casino over the
has held that to be valid, an ordinance must conform to the following objection of the local government unit concerned. This modification of P.D.
substantive requirements: 1869 by the Local Government Code is permissible because one law can
1) It must not contravene the constitution or any statute. change or repeal another law.
2) It must not be unfair or oppressive.
3) It must not be partial or discriminatory. It seems to us that the petitioners are playing with words. While insisting
4) It must not prohibit but may regulate trade. that the decree has only been "modified pro tanto," they are actually
5) It must be general and consistent with public policy. arguing that it is already dead, repealed and useless for all intents and
6) It must not be unreasonable. purposes because the Code has shorn PAGCOR of all power to centralize
and regulate casinos. Strictly speaking, its operations may now be not only
We begin by observing that under Sec. 458 of the Local Government Code, prohibited by the local government unit; in fact, the prohibition is not only
local government units are authorized to prevent or suppress, among discretionary but mandated by Section 458 of the Code if the word "shall"
others, "gambling and other prohibited games of chance." Obviously, this as used therein is to be given its accepted meaning. Local government units
provision excludes games of chance which are not prohibited but are in fact have now no choice but to prevent and suppress gambling, which in the
permitted by law. The petitioners are less than accurate in claiming that the petitioners' view includes both legal and illegal gambling. Under this
Code could have excluded such games of chance but did not. In fact it does. construction, PAGCOR will have no more games of chance to regulate or
The language of the section is clear and unmistakable. Under the rule of centralize as they must all be prohibited by the local government units
noscitur a sociis, a word or phrase should be interpreted in relation to, or pursuant to the mandatory duty imposed upon them by the Code. In this
given the same meaning of, words with which it is associated. Accordingly, situation, PAGCOR cannot continue to exist except only as a toothless tiger
we conclude that since the word "gambling" is associated with "and other or a white elephant and will no longer be able to exercise its powers as a
prohibited games of chance," the word should be read as referring to only prime source of government revenue through the operation of casinos.
illegal gambling which, like the other prohibited games of chance, must be
prevented or suppressed. It is noteworthy that the petitioners have cited only Par. (f) of the repealing
clause, conveniently discarding the rest of the provision which painstakingly

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mentions the specific laws or the parts thereof which are repealed (or Separate Opinions
modified) by the Code. Significantly, P.D. 1869 is not one of them. A reading
of the entire repealing clause, Section 534, will disclose the omission of said PADILLA, J., concurring:
P.D. 1869. Furthermore, it is a familiar rule that implied repeals are not I concur with the majority holding that the city ordinances in question
lightly presumed in the absence of a clear and unmistakable showing of cannot modify much less repeal PAGCOR's general authority to establish
such intention. and maintain gambling casinos anywhere in the Philippines under
Presidential Decree No. 1869.
It is a canon of legal hermeneutics that instead of pitting one statute against
another in an inevitably destructive confrontation, courts must exert every However, despite the legality of the opening and operation of a casino in
effort to reconcile them, remembering that both laws deserve a becoming Cagayan de Oro City by respondent PAGCOR, I wish to reiterate my view
respect as the handiwork of a coordinate branch of the government. On the that gambling in any form runs counter to the government's own efforts to
assumption of a conflict between P.D. 1869 and the Code, the proper action re-establish and resurrect the Filipino moral character which is generally
is not to uphold one and annul the other but to give effect to both by perceived to be in a state of continuing erosion. It is in the light of this
harmonizing them if possible. This is possible in the case before us. The alarming perspective that I call upon government to carefully weigh the
proper resolution of the problem at hand is to hold that under the Local advantages and disadvantages of setting up more gambling facilities in the
Government Code, local government units may (and indeed must) prevent country. That the PAGCOR contributes greatly to the coffers of the
and suppress all kinds of gambling within their territories except only those government is not enough reason for setting up more gambling casinos
allowed by statutes like P.D. 1869. The exception reserved in such laws must because, undoubtedly, this will not help improve, but will cause a further
be read into the Code, to make both the Code and such laws equally deterioration in the Filipino moral character.It is worth remembering in this
effective and mutually complementary. regard that, 1) what is legal is not always moral and 2) the ends do not
always justify the means.
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in the
Constitution strengthening the policy of local autonomy. Without meaning DAVIDE, JR., J., concurring:
to detract from that policy, we here confirm that Congress retains control of While I concur in part with the majority, I wish, however, to express my
the local government units although in significantly reduced degree now views on certain aspects of this case.
than under our previous Constitutions. The power to create still includes the I.
power to destroy. The power to grant still includes the power to withhold or It must at once be noted that private respondent Pryce Properties
recall. True, there are certain notable innovations in the Constitution, like Corporation (PRYCE) directly filed with the Court of Appeals its so-called
the direct conferment on the local government units of the power to tax, petition for prohibition, thereby invoking the said court's original jurisdiction
which cannot now be withdrawn by mere statute. By and large, however, to issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it,
the national legislature is still the principal of the local government units, however, the principal cause of action therein is one for declaratory relief:
which cannot defy its will or modify or violate it. to declare null and unconstitutional for, inter alia, having been enacted

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without or in excess of jurisdiction, for impairing the obligation of contracts, For a period of six years, from 1958 to 1963, P&G paid defendant
and for being inconsistent with public policy the challenged ordinances Municipality, allegedly under protest, storage fees in the total sum of
enacted by the Sangguniang Panglungsod of the City of Cagayan de Oro. 1142,265.13.
The intervention therein of public respondent Philippine Amusement and
Gaming Corporation (PAGCOR) further underscores the "declaratory relief" In 1964, P&G filed this suit in the CFI wherein it prayed that 1) Ordinance
nature of the action. PAGCOR assails the ordinances for being contrary to No. 4 be declared inapplicable to it (it claims that it is not engaged in the
the non-impairment and equal protection clauses of the Constitution, storage of copra for compensation and the tax pf P0.10 for 100 kilos is
violative of the Local Government Code, and against the State's national excessive, unreasonable and oppressive), or that it be pronounced ultra-
policy declared in P.D. No. 1869. Accordingly, the Court of Appeals does not vires and void for being beyond the power of the Municipality to enact; and
have jurisdiction over the nature of the action. Even assuming arguendo 2) that defendant Municipality be ordered to refund to it the amount which
that the case is one for prohibition, then, under this Court's established it had paid under protest; and costs. However, defendant Municipality
policy relative to the hierarchy of courts, the petition should have been filed upheld its power to enact the Ordinance in question; questioned the
with the Regional Trial Court of Cagayan de Oro City. I find no special or jurisdiction of the CFI to take cognizance of the action; and pleaded
compelling reason why it was not filed with the said court. I do not wish to prescription and laches for P&G's failure to timely question the validity of
entertain the thought that PRYCE doubted a favorable verdict therefrom, in the said Ordinance.
which case the filing of the petition with the Court of Appeals may have
been impelled by tactical considerations. A dismissal of the petition by the After the parties had agreed to submit the case for judgment on the
Court of Appeals would have been in order pursuant to our decisions. pleadings, the CFI upheld its jurisdiction as well as defendant Municipality's
power to enact the Ordinance in question under section 2238 of the Revised
P&G vs. MUNICIPALITY OF JUGNA Administrative Code, otherwise known as the general welfare clause, and
declared that P&G's right of action had prescribed under the 5-year period
FACTS provided for by Article 1149 of the Civil Code.

P &G is a domestic corporation engaged in the manufacture of soap, edible ISSUE
oil, margarine and other similar products, and for this purpose maintains a
"bodega" in defendant Municipality where it stores copra purchased in the Whether defendant Municipality was authorized to impose and collect the
municipality and therefrom ships the same for its manufacturing and other storage fee provided for in the challenged Ordinance
operations.
RULING
Subsequently, the Municipal Council of Jagna enacted Municipal Ordinance
No. 4 which imposes storage fees to all exportable copra deposited in a The validity of the Ordinance must be upheld pursuant to the broad
bodega within the jurisdiction of the Municipality. authority conferred upon municipalities by Commonwealth Act No. 472,

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which was the prevailing law when the Ordinance was enacted. Section 1 The Ordinance in question does not amount to double taxation. For double
thereof reads: taxation to exist, the same property must be taxed twice, when it should be
taxed but once. Surely, a tax on P&G's products is different from a tax on
Section 1. A municipal council or municipal district council shall have the the privilege of storing copra in a bodega situated within the territorial
authority to impose municipal license taxes upon persons engaged in boundary of defendant municipality.
any occupation or business, or exercising privileges in the municipality
or municipal district, by requiring them to secure licenses at rates fixed
by the municipal council, or municipal district council, and to collect fees P&G's further contention that the storage fee imposed by the Ordinance is
and charges for services renderedxx actually intended to be an export tax, which is expressly prohibited by
section 2287 of the Revised Administrative Code, is without merit. Said
Under the foregoing provision, a municipality is authorized to impose three provision reads as follows:
kinds of licenses: (1) a license for regulation of useful occupation or
enterprises; (2) license for restriction or regulation of non-useful Section 2287 ... It shall not be in the power of the municipal council to
occupations or enterprises; and (3) license for revenue. It is thus impose a tax in any form whatever upon goods and merchandise carried
into the municipality, or out of the same, and any attempt to impose an
unnecessary, to determine whether the subject storage fee is a tax for import or export tax upon such goods shall be void. xxx xxx xxx
revenue purposes or a license fee to reimburse defendant Municipality for
service of supervision because defendant Municipality is authorized not only We have held that only where there is a clear showing that what is being
to impose a license fee but also to tax for revenue purposes. taxed is an export to any foreign country would the prohibition come into
play. The storage fee impugned is not a tax on export because it is imposed
Moreover, the business of buying and selling and storing copra is property not only upon copra to be exported but also upon copra sold and to be used
the subject of regulation within the police power granted to municipalities for domestic purposes if stored in any warehouse in the Municipality and
under section 2238 of the Revised Administrative Code or the "general the weight thereof is 100 kilos or more.
welfare clause"
On the issue of prescription, the case of Municipality of Opon vs. Caltex Phil.,
P&G's argument that the imposition of P0.10 per 100 kilos of copra stored in is authority for the view that the period for prescription of actions to
a bodega within defendant's territory is beyond the cost of regulation and recover municipal license taxes is six years under Article 1145(2) of the Civil
surveillance is not well taken. As enunciated in the case of Victorias Milling Code. Thus, plaintiff's action brought within six years from the time the right
Co. vs. Municipality of Victorias, The cost of regulation cannot be taken as a of action first accrued in 1958 has not yet prescribed.
gauge, if the municipality really intended to enact a revenue ordinance.
Municipal corporations are allowed wide discretion in determining the rates
of imposable license fees even in cases of purely police power measures. In
the case at bar, P&G has not sufficiently shown that the rate imposed by the
questioned Ordinance is oppressive, excessive and prohibitive.


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VILLANUEVA vs. CITY OF ILOILO 3. Is Ordinance 11 oppressive and unreasonable because it carries a
penal clause? NO.
FACTS
4. Does Ordinance 11 violate the rule of uniformity of taxation? NO.
On September 30, 1946 the municipal board of Iloilo City enacted Ordinance
86, imposing license tax fees on tenement house.This Court, in City of Iloilo RULING
vs. Remedios Sian Villanueva and Eusebio Villanueva declared the ordinance
ultra vires, "it not appearing that the power to tax owners of tenement 1. RA 2264 confer on local governments broad taxing authority which
houses is one among those clearly and expressly granted to the City of Iloilo extends to almost "everything, excepting those which are mentioned
by its Charter." On January 15, 1960 the municipal board of Iloilo City, therein," provided that the tax so levied is "for public purposes, just and
believing, obviously, that with the passage of RA 2264,Local Autonomy Act, uniform," and does not transgress any constitutional provision or is not
it had acquired the authority or power to enact an ordinance similar to that repugnant to a controlling statute.Thus, when a tax, levied under the
previously declared by this Court as ultra vires, enacted Ordinance 11 (AN authority of a city or municipal ordinance, is not within the exceptions and
ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS ENGAGED IN limitations aforementioned, the same comes within the ambit of the
THE BUSINESS OF OPERATING TENEMENT HOUSES).By virtue of the general rule, pursuant to the rules of expressio unius est exclusio alterius,
ordinance in question, the appellant City collected from appellee Villanueva, and exceptio firmat regulum in casibus non excepti.
for the years 1960-1964, the sum of P5,824.30, and from other appellees,
for the same year, the sum of P1,317.00. Hence, plaintiffs-appellees filed a The appellees strongly maintain that it is a "property tax" or "real estate
complaint, against the City of Iloilo, praying that Ordinance 11 be declared tax," and not a "tax on persons engaged in any occupation or business or
"invalid for being beyond the powers of the Municipal Council of the City of exercising privileges," or a license tax, or a privilege tax, or an excise tax. It is
Iloilo to enact, and unconstitutional for being violative of the rule as to our view, contrary to the appellees' contention, that the tax in question is
uniformity of taxation and for depriving said plaintiffs of the equal not a real estate tax. The tax imposed by the ordinance in question does not
protection clause of the Constitution," and that the City be ordered to possess the attributes of a real estate tax. It is not a tax on the land on
refund the amounts collected from them under the said ordinance. Lower which the tenement houses are erected, although both land and tenement
court rendered judgment declaring the ordinance illegal. houses may belong to the same owner. The tax is not a fixed proportion of
the assessed value of the tenement houses, and does not require the
ISSUES intervention of assessors or appraisers. It is not payable at a designated
time or date, and is not enforceable against the tenement houses either by
1. Is the City of Iloilo empowered by the Local Autonomy Act to sale or distraint. Clearly, therefore, the tax in question is not a real estate
impose tenement taxes? YES. tax. On the contrary, it is plain from the context of the ordinance that the
intention is to impose a license tax on the operation of tenement houses,
2. Is Ordinance 11 of the City of Iloilo, illegal because it imposes which is a form of business or calling. The ordinance, in both its title and
double taxation? NO. body, particularly sections 1 and 3 thereof, designates the tax imposed as a

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"municipal license tax" which, by itself, means an "imposition or exaction on There is nothing inherently obnoxious in the exaction of license fees or
the right to use or dispose of property, to pursue a business, occupation, or taxes with respect to the same occupation, calling or activity by both the
calling, or to exercise a privilege. In City of Iloilo vs. Remedios Sian State and a political subdivision thereof.

Villanueva, et al., tenement house is defined as "any house or building, or
portion thereof, which is rented, leased, or hired out to be occupied, or is The contention that the plaintiffs-appellees are doubly taxed because they
occupied, as the home or residence of three families or more living are paying the real estate taxes and the tenement tax imposed by the
independently of each other and doing their cooking in the premises or by ordinance in question, is also devoid of merit. It is a well-settled rule that a
more than two families upon any floor, so living and cooking, but having a license tax may be levied upon a business or occupation although the land
common right in the halls, stairways, yards, water-closets, or privies, or or property used in connection therewith is subject to property tax. To
some of them." Tenement houses, being necessarily offered for rent or constitute double taxation in the objectionable or prohibited sense the
lease by their very nature and essence, therefore constitute a distinct form same property must be taxed twice when it should be taxed but once; both
of business or calling, similar to the hotel or motel business, or the taxes must be imposed on the same property or subject-matter, for the
operation of lodging houses or boarding houses. same purpose, by the same State, Government, or taxing authority, within
the same jurisdiction or taxing district, during the same taxing period, and
The lower court has interchangeably denominated the tax in question as a they must be the same kind or character of tax. It has been shown that a
tenement tax or an apartment tax. Called by either name, it is not among real estate tax and the tenement tax imposed by the ordinance, although
the exceptions listed in section 2 of the Local Autonomy Act. On the other imposed by the same taxing authority, are not of the same kind or
hand, the imposition by the ordinance of a license tax on persons engaged character.
in the business of operating tenement houses finds authority in section 2 of
the Local Autonomy Act which provides that chartered cities have the 3. A tax is not a debt in the sense of an obligation incurred by contract,
authority to impose municipal license taxes or fees upon persons engaged in express or implied, and therefore is not within the meaning of constitutional
any occupation or business, or exercising privileges within their respective or statutory provisions abolishing or prohibiting imprisonment for debt, and
territories, and "otherwise to levy for public purposes, just and uniform a statute or ordinance which punishes the non-payment thereof by fine or
taxes, licenses, or fees." imprisonment is not, in conflict with that prohibition. Nor is the tax in
question a poll tax, for the latter is a tax of a fixed amount upon all persons,
2. The trial court condemned the ordinance as constituting "not only double or upon all persons of a certain class, resident within a specified territory,
taxation but treble at that," because "buildings pay real estate taxes and without regard to their property or the occupations in which they may be
also income taxes as provided for in Sec. 182 (A) (3) (s) of the NIRC, besides engaged. Therefore, the tax in question is not oppressive in the manner the
the tenement tax under the said ordinance." While it is true that the lower court puts it. On the other hand, the charter of Iloilo City empowers
plaintiffs-appellees are taxable under the aforesaid provisions of the NIRC as its municipal board to "fix penalties for violations of ordinances, which shall
real estate dealers, and still taxable under the ordinance in question, the not exceed a fine of two hundred pesos or six months' imprisonment, or
argument against double taxation may not be invoked. The same tax may be both such fine and imprisonment for each offense.
imposed by the national government as well as by the local government.

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4. The trial court brands the ordinance as violative of the rule of uniformity case at bar was enacted pursuant to the provisions of the Local Autonomy
of taxation because while the owners of the other buildings only pay real Act.
estate tax and income taxes, the ordinance imposes aside from these two
taxes an apartment or tenement tax. Appellees also argue that there is "lack MUNICIPALITY OF OPON vs. CALTEX
of uniformity" and "relative inequality," because "only the taxpayers of the
City of Iloilo are singled out to pay taxes on their tenement houses, while FACTS
citizens of other cities, where their councils do not enact a similar tax
ordinance, are permitted to escape such imposition." Caltex (Philippines) Inc., is a domestic corporation engaged in the business
of importing, distributing and selling gasoline, kerosene and other
It is our view that both assertions are undeserving of extended attention. petroleum products. For the purpose of storing its imported petroleum
This Court has already ruled that tenement houses constitute a distinct class products it has an establishment called 'Caltex Opon Terminal' located in
of property. It has likewise ruled that "taxes are uniform and equal when the Municipality of Opon, Cebu. In addition, the said 'Caltex Opon Terminal'
imposed upon all property of the same class or character within the taxing has a tin can factory whereby plaintiff-appellant manufactures 5-gallon tin
authority." The fact, therefore, that the owners of other classes of buildings cans for its use in the sale and distribution of its petroleum products.
in the City of Iloilo do not pay the taxes imposed by the ordinance in
question is no argument at all against uniformity and equality of the tax Pursuant, however, to a service agreement dated August 1, 1946 and
imposition. Neither is the rule of equality and uniformity violated by the fact entered into between plaintiff-appellant and Tidewater Associated Oil
that tenement taxes are not imposed in other cities, for the same rule does Company, plaintiff-appellant agreed to arrange, within its ability to do so, in
not require that taxes for the same purpose should be imposed in different drum and package factories owned and operated by it, to manufacture,
territorial subdivisions at the same time.So long as the burden of the tax supply and/or fill cans and drums for Tidewater, provided the latter
falls equally and impartially on all owners or operators of tenement houses reimburses herein plaintiff-appellant for all cost and expense caused
similarly classified or situated, equality and uniformity of taxation is thereby, plus three (3%) per cent of such cost and expense.
accomplished.
From 1950 to 1955, plaintiff-appellants9 tin can factory at its 'Caltex Opon
The last important issue posed by the appellees is that since the ordinance Terminal' manufactured 8,037,775 tin cans out of which 6,883,429 were
in the case at bar is a mere reproduction of Ordinance 86 of the City of Iloilo used for the sale and distribution of its own products and 1,154,346 tin cans
which was declared by this Court as ultra vires, the decision in that case were delivered to Tidewater by virtue of the service agreement
should be accorded the effect of res judicata in the present case or should abovementioned.
constitute estoppel by judgment. To dispose of this contention, it suffices to
say that there is no identity of subject-matter in that case and this case Ordinance No. 9, series of 1949, of defendant-appellee Municipality of Opon,
because the subject-matter in it was an ordinance which dealt not only with Cebu, imposes a municipal license tax on tin factory on the basis of its
tenement houses but also warehouses, and the said ordinance was enacted maximum annual output capacity, with a schedule of graduated rates.
pursuant to the provisions of the City charter, while the ordinance in the Section 1, in part, provides: "A municipal license tax on tin factory" is

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imposed upon "(a) Tin factory with a maximum output capacity of 30,000 further articulation. For petitioners insist that respondent's factory also
tins P150.00" serves the needs of another entity Tidewater. To be noted here is that of
the tin cans produce for the period 1950-1955, 85.63% were used by
Pursuant to this ordinance, defendants-appellees levied and collected from respondent; 14.361% delivered to Tidewater. Jurisprudential support is not
plaintiff-appellant license taxes based on the production of the tin factory at wanting for the decision of the Court of Appeals establishing a dividing line
its 'Caltex Opon Terminal' for the years 1950 to 1955. between the tin cans manufactured for respondent's own business and
those for Tidewater.
Plaintiff contends that respondent company is liable for the entire output of
the tin can factory because profit is the motivating factor in the For the tin cans produced for Tidewater license tax was correctly assessed.
manufacture thereof. Petitioners' view is that the tin cans whether for its But for those produced by respondent for its own use, no license tax is due,
own use or for Tidewater upon the contract heretofore stated, are taxable. because the manufacture thereof is "incidental to" and tends "to better
Reason therefor, so petitioners point out, is that the license tax is based on accomplish the principal end in view" its main business.
the maximum annual output capacity of the factory.
2. A rule which has earned acceptance is that the period for prescription of
ISSUES action to recover municipal license taxes is six years under Article 1145 (2)
of the Civil Code. The two-year prescriptive period in Section 306 of the
1. Whether or not respondent tin can factory is taxable as a separate National Internal Revenue Code relied upon by petitioners finds no
business of respondent NO. application. For, this codal provision, as we have said in one case, "clearly
refers exclusively to claims for refund of `national internal revenue tax'
2. Whether or not period to claim refund has prescribed NO. erroneously or illegally collected" and not "to a refund of `local or municipal
license fees' illegally collected."
RULING
PHILIPPINE BASKETBALL ASSOCIATION vs. CA
1. When a person or company is already taxed on its main business, it may
not be further taxed for doing something or engaging in an activity or work FACTS
which is merely a part of, incidental to and is necessary to its main business.
In the sale and distribution of its products in liquid form respondent uses PBA received a tax assessment from the BIR for deficiency on amusement
containers. The container is a part of the product sold. By maintaining its taxes
factory for tin cans respondent is assured of continuous supply thereof.
Therefore, the tin cans it manufactures for its ownership are not within the PBA contested the said deficiency on amusement taxes with the CTA
coverage of petitioner municipality's taxing power under Ordinance No. 9. however was denied. The same was raised to the CA and was also denied as
well as a subsequent MR.
The entire-output-of-factory argument advanced by petitioners needs

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PBA now raises the case to the SC With the reference to PD 871 by PD 1456 and PD 1959, there is a
recognition under the laws of this country that the amusement tax on
ISSUES professional basketball games is a national, and not a local, tax. Even up to
the present, the category of amusement taxes on professional basketball
1. Does the National government have jurisdiction to tax PBA or is it games as a national tax remains the same. This is so provided under Section
the local government as provided in SEC. 13 of the Local Tax code? 125 of the 1997 National Internal Revenue Code. Section 140 of the Local
NO Government Code of 1992 (Republic Act 7160), meanwhile, retained the
areas (theaters, cinematographs, concert halls, circuses and other places of
2. Is the Petitioner liable for the said amusement taxes? YES amusement) where the province may levy an amusement tax without
including therein professional basketball games.
Petitioner contends PD 231, otherwise known as the Local Tax Code of 1973,
transferred the power and authority to levy and collect amusement taxes Last issue for resolution concerns the liability of petitioner for the payment
from the sale of admission tickets to places of amusement from the national of surcharge and interest on the deficiency amount due. Petitioner
government to the local governments. Petitioner cited BIR Memorandum contends that it is not liable, as it acted in good faith, having relied upon the
Circular No. 49-73 providing that the power to levy and collect amusement issuances of the respondent Commissioner. This issue must necessarily fail
tax on admission tickets was transferred to the local governments by virtue as the same has never been posed as an issue before the respondent court.
of the Local Tax Code; and BIR Ruling No. 231-86 which held that "the Issues not raised in the court a quo cannot be raised for the first time on
jurisdiction to levy amusement tax on gross receipts from admission tickets appeal.
to places of amusement was transferred to local governments under P.D. All things studiedly considered, the Court rules that the petitioner is liable to
No. 231, as amended. pay amusement tax to the national government, and not to the local
government, in accordance with the rates prescribed by PD 1959.
RULING
HAGONOY MARKET VENDOR ASSOCIATION vs. MUNICIPALITY OF
Sec. 13. Amusement tax on admission. -The province shall impose a tax HAGONOY
on admission to be collected from the proprietors, lessees, or operators
of theaters, cinematographs, concert halls, circuses and other places of
amusement xxx." FACTS

The foregoing provision of law in point indicates that the province can only On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enacted
impose a tax on admission from the proprietors, lessees, or operators of an ordinance, Kautusan Blg. 28, which increased the stall rentals of the
theaters, cinematographs, concert halls, circuses and other places of market vendors in Hagonoy. Article 3 provided that it shall take effect upon
amusement. The authority to tax professional basketball games is not approval. The subject ordinance was posted from November 4-25, 1996. In
therein included. the last week of November, 1997, the petitioners members were personally
given copies of the approved Ordinance and were informed that it shall be

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enforced in January, 1998. On December 8, 1997, the petitioners President easily brushed aside. The periods stated in Section 187 of the Local
filed an appeal with the Secretary of Justice assailing the constitutionality of Government Code are mandatory. Ordinance No. 28 is a revenue measure
the tax ordinance. Petitioner claimed it was unaware of the posting of the adopted by the municipality of Hagonoy to fix and collect public market
ordinance. stall rentals. Being its lifeblood, collection of revenues by the government is
of paramount importance. The funds for the operation of its agencies and
Respondent opposed the appeal. It contended that the ordinance took provision of basic services to its inhabitants are largely derived from its
effect on October 6, 1996 and that the ordinance, as approved, was posted revenues and collections. Thus, it is essential that the validity of revenue
as required by law. Hence, it was pointed out that petitioners appeal, measures is not left uncertain for a considerable length of time. Hence, the
made over a year later, was already time-barred. The Secretary of Justice law provided a time limit for an aggrieved party to assail the legality of
dismissed the appeal on the ground that it was filed out of time, i.e., beyond revenue measures and tax ordinances.
thirty (30) days from the effectivity of the Ordinance on October 1, 1996, as
prescribed under Section 187 of the 1991 Local Government Code. Citing YAMANE vs. BA LEPANTO
the case of Taada vs. Tuvera, the Secretary of Justice held that the date of
effectivity of the subject ordinance retroacted to the date of its approval in FACTS
October 1996, after the required publication or posting has been complied
with, pursuant to Section 3 of said ordinance. Respondent BA-Lepanto Condominium Corporation (the Corporation) is a
duly organized condominium corporation constituted in accordance with
ISSUE the Condominium Act, which owns and holds title to the common and
limited common areas of the BA-Lepanto Condominium (the
Was the appeal by the petitioner with the Secretary of Justice time-barred? Condominium), situated in Paseo de Roxas, Makati City. Its membership
comprises the various unit owners of the Condominium. The Corporation is
RULING authorized, under Article V of its Amended By-Laws, to collect regular
assessments from its members for operating expenses, capital expenditures
YES. Section 187 of the Local Govt Code requires that an appeal of a tax on the common areas, and other special assessments as provided for in the
ordinance or revenue measure should be made to the Secretary of Justice Master Deed with Declaration of Restrictions of the Condominium.
within thirty (30) days from effectivity of the ordinance and even during its
pendency, the effectivity of the assailed ordinance shall not be suspended. The Corporation received a Notice of Assessment signed by the City
In the case at bar, Municipal Ordinance No. 28 took effect in October 1996. Treasurer stating that the Corporation is liable to pay the correct city
Petitioner filed its appeal only in December 1997, more than a year after the business taxes, fees and charges, computed as totaling P1,601,013.77 for
effectivity of the ordinance in 1996. Clearly, the Secretary of Justice the years 1995 to 1997. The Notice of Assessment was silent as to the
correctly dismissed it for being time-barred. At this point, it is apropos to statutory basis of the business taxes assessed. The Corporation responded
state that the timeframe fixed by law for parties to avail of their legal with a written tax protest addressed to the City Treasurer. It was evident in
remedies before competent courts is not a mere technicality that can be

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the protest that the Corporation was perplexed on the statutory basis of the Appeals. Initially, the petition was dismissed outright on the ground that
tax assessment. only decisions of the RTC brought on appeal from a first level court
could be elevated for review under the mode of review prescribed
Proceeding from the premise that its tax liability arose from Section under Rule 42. However, the Corporation pointed out in its Motion for
3A.02(m) of the Makati Revenue Code, the Corporation proceeded to argue Reconsideration that under Section 195 of the Local Government Code,
that under both the Makati Code and the Local Government Code, the remedy of the taxpayer on the denial of the protest filed with the
business is defined as trade or commercial activity regularly engaged in local treasurer is to appeal the denial with the court of competent
as a means of livelihood or with a view to profit. It was submitted that the jurisdiction.
Corporation, as a condominium corporation, was organized not for profit,
but to hold title over the common areas of the Condominium, to manage The CA reversed the RTC and declared that the Corporation was not liable
the Condominium for the unit owners, and to hold title to the parcels of to pay business taxes to the City of Makati.
land on which the Condominium was located. Neither was the Corporation
authorized, under its articles of incorporation or by-laws to engage in profit- ISSUES
making activities. The assessments it did collect from the unit owners were
for capital expenditures and operating expenses. 1. Whether the RTC, in deciding an appeal taken from a denial of a
protest by a local treasurer under Section 195 of the Local
The protest was rejected by the City Treasurer, insisting that the collection Government Code, exercises original jurisdiction or appellate
of dues from the unit owners was effected primarily to sustain and jurisdiction.
maintain the expenses of the common areas, with the end in view of getting
full appreciative living values for the individual condominium occupants and 2. Whether or not the City of Makati may collect business taxes on
to command better marketable prices for those occupants who would in condominium corporations.
the future sell their respective units. Thus, she concluded since the chances RULING
of getting higher prices for well-managed common areas of any
condominium are better and more effective that condominiums with poor 1. Original Jurisdiction. The question assumes a measure of importance to
managed common areas, the corporation activity is a profit venture this petition, for the adoption of the position of the City Treasurer that the
making. mode of review of the decision taken by the RTC is governed by Rule 41 of
the Rules of Civil Procedure means that the decision of the RTC would have
From the denial of the protest, the Corporation filed an Appeal with the RTC long become final and executory by reason of the failure of the Corporation
which dismissed the apeal for lack of merit, accepting the premise laid by to file a notice of appeal.
the City Treasurer.
Labelling the said review as an exercise of appellate jurisdiction is
From this Decision of the RTC, the Corporation filed a Petition for inappropriate, since the denial of the protest is not the judgment or order of
Review under Rule 42 of the Rules of Civil Procedure with the Court of a lower court, but of a local government official.

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From these premises, it is evident that the stance of the City Treasurer is Section 195. However in this case, the Revenue Code provides multiple
correct as a matter of law, and that the proper remedy of the Corporation provisions on business taxes, and at varying rates. Hence, we could
from the RTC judgment is an ordinary appeal under Rule 41 to the Court of appreciate the Corporations confusion, as expressed in its protest, as to the
Appeals. However, we make this pronouncement subject to two important exact legal basis for the tax.
qualifications. First, in this particular case there are nonetheless significant
reasons for the Court to overlook the procedural error and ultimately uphold Moreover, a careful examination of the Revenue Code shows that while
the adjudication of the jurisdiction exercised by the Court of Appeals in this Section 3A.02(m) seems designed as a catch-all provision, Section 3A.02(f),
case. Second, the doctrinal weight of the pronouncement is confined to which provides for a different tax rate from that of the former provision,
cases and controversies that emerged prior to the enactment of Republic Act may be construed to be of similar import. While Section 3A.02(f) is quite
No. 9282, the law which expanded the jurisdiction of the Court of Tax exhaustive in enumerating the class of businesses taxed under the provision,
Appeals (CTA). the listing, while it does not include condominium-related enterprises, ends
with the abbreviation etc., or et cetera.
2. No. The coverage of business taxation particular to the City of Makati is
provided by the Makati Revenue Code (Revenue Code), enacted through (m) On owners or operators of any business not specified above shall pay
Municipal Ordinance No. 92-072. The Revenue Code remains in effect as of the tax at the rate of two percent (2%) for 1993, two and one-half percent (2
this writing. Article A, Chapter III of the Revenue Code governs business %) for 1994 and 1995, and three percent (3%) for 1996 and the years
taxes in Makati, and it is quite specific as to the particular businesses which thereafter of the gross receipts during the preceding year.
are covered by business taxes. We do note our discomfort with the unlimited breadth and the dangerous
At no point has the City Treasurer informed the Corporation, the RTC, the uncertainty which are the twin hallmarks of the words et
Court of Appeals, or this Court for that matter, as to what exactly is the cetera. Certainly, we cannot be disposed to uphold any tax imposition that
precise statutory basis under the Makati Revenue Code for the levying of the derives its authority from enigmatic and uncertain words such as et cetera.
business tax on petitioner. Yet we cannot even say with definiteness whether the tax imposed on the
Corporation in this case is based on et cetera, or on Section 3A.02(m), or
The notice of assessment, which stands as the first instance the taxpayer is on any other provision of the Revenue Code. Assuming that the assessment
officially made aware of the pending tax liability, should be sufficiently made on the Corporation is on a provision other than Section 3A.02(m), the
informative to apprise the taxpayer the legal basis of the tax. Section 195 of main legal issue takes on a different complexion. For example, if it is based
the Local Government Code does not go as far as to expressly require that on et cetera under Section 3A.02(f), we would have to examine whether
the notice of assessment specifically cite the provision of the ordinance the Corporation faces analogous comparison with the other businesses listed
involved but it does require that it state the nature of the tax, fee or charge, under that provision.
the amount of deficiency, surcharges, interests and penalties. In this case,
the notice of assessment sent to the Corporation did state that the Certainly, the City Treasurer has not been helpful in that regard, as she has
assessment was for business taxes, as well as the amount of the assessment. been silent all through out as to the exact basis for the tax imposition which
There may have been prima facie compliance with the requirement under she wishes that this Court uphold. Indeed, there is only one thing that

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prevents this Court from ruling that there has been a due process violation owners that form the basis of the City Treasurers claim that the Corporation
on account of the City Treasurers failure to disclose on paper the statutory is doing business.
basis of the taxthat the Corporation itself does not allege injury arising from
such failure on the part of the City Treasurer. We can elicit from the Condominium Act that a condominium corporation is
precluded by statute from engaging in corporate activities other than the
As stated earlier, local tax on businesses is authorized under Section 143 of holding of the common areas, the administration of the condominium
the Local Government Code. The word business itself is defined under project, and other acts necessary, incidental or convenient to the
Section 131(d) of the Code as trade or commercial activity regularly accomplishment of such purposes. Neither the maintenance of livelihood,
engaged in as a means of livelihood or with a view to profit. This definition nor the procurement of profit, fall within the scope of permissible corporate
of business takes on importance, since Section 143 allows local purposes of a condominium corporation under the Condominium Act.
government units to impose local taxes on businesses other than those
specified under the provision. Moreover, even those business activities The Court has examined the particular Articles of Incorporation and By-Laws
specifically named in Section 143 are themselves susceptible to broad of the Corporation, and these documents unmistakably hew to the
interpretation. limitations contained in the Condominium Act. Obviously, none of these
corporate purposes are geared towards obtaining of profit. Even though the
It is thus imperative that in order that the Corporation may be subjected to Corporation is empowered to levy assessments or dues from the unit
business taxes, its activities must fall within the definition of business as owners, these amounts collected are not intended for the incurrence of
provided in the Local Government Code. And to hold that they do is to profit by the Corporation or its members, but to shoulder the multitude of
ignore the very statutory nature of a condominium corporation. necessary expenses that arise from the maintenance of the Condominium
Project. Just as much is confirmed by Section 1, Article V of the Amended By-
For orderly administration over common areas which are jointly owned by Laws, which enumerate the particular expenses to be defrayed by the
the various unit owners, the Condominium Act permits the creation of a regular assessments collected from the unit owners. These would include
condominium corporation, which is specially formed for the purpose of the salaries of the employees of the Corporation, and the cost of
holding title to the common area, in which the holders of separate interests maintenance and ordinary repairs of the common areas.
shall automatically be members or shareholders, to the exclusion of others,
in proportion to the appurtenant interest of their respective units. The City Treasurer nonetheless contends that the collection of these
assessments and dues are with the end view of getting full appreciative
In line with the authority of the condominium corporation to manage the living values for the condominium units, and as a result, profit is obtained
condominium project, it may be authorized, in the deed of restrictions, to once these units are sold at higher prices. The Court cites with approval the
make reasonable assessments to meet authorized expenditures, each two counterpoints raised by the Court of Appeals in rejecting this
condominium unit to be assessed separately for its share of such expenses in contention. First, if any profit is obtained by the sale of the units, it accrues
proportion (unless otherwise provided) to its owners fractional interest in not to the corporation but to the unit owner. Second, if the unit owner does
any common areas. It is the collection of these assessments from unit

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TAX DIGEST ASSIGNMENT # 9 LOCAL GOVT TAXATION A.M.+D.G. TAX II Atty. Mendoza


obtain profit from the sale of the corporation, the owner is already required SAN JUAN vs. CASTRO
to pay capital gains tax on the appreciated value of the condominium unit.
FACTS
The City Treasurer also contends that the fact that the Corporation is Romulo D. San Juan, registered owner of real properties in Marikina City
engaged in business is evinced by the Articles of Incorporation, which conveyed, by Deed of Assignment, the properties to the Saints and Angels
specifically empowers the Corporation to acquire, own, hold, enjoy, lease, Realty Corporation (SARC), then under the process of incorporation, in
operate and maintain, and to convey, sell, transfer mortgage or otherwise exchange for 258,434 shares of stock therein with a total par value of
dispose of real or personal property. What the City Treasurer fails to add P2,584,340.
is that every corporation organized under the Corporation Code is so
specifically empowered. Section 36(7) of the Corporation Code states that Mr. San Juan then paid the transfer tax based on the consideration stated in
every corporation incorporated under the Code has the power and capacity the Deed of Assignment. Marikina City Treasurer Ricardo L. Castro informed
to purchase, receive, take or grant, hold, convey, sell, lease, pledge, him, however, that the tax due is based on the fair market value of the
mortgage and otherwise deal with such real and personal property . . . as the property. In turn, Mr. San Juan in writing protested the basis of the tax due
transaction of the lawful business of the but on July 15, 2005, via a letter, Mr. Castro responded on the negative.
corporation may reasonably and necessarily require . . . . Without this
power, corporations, as juridical persons, would be deprived of the capacity Mr. San Juan thus filed before RTC a Petition for mandamus and damages
to engage in most meaningful legal relations. against Mr. Castro in his capacity as Marikina City Treasurer praying that the
latter be compelled to perform a ministerial duty, that is, to accept the
Again, whatever capacity the Corporation may have pursuant to its power to payment of transfer tax based on the actual consideration of the
exercise acts of ownership over personal and real property is limited by its transfer/assignment. Mr. San Juan claims that the intention of the law in
stated corporate purposes, which are by themselves further limited by the Sec. 135 of the LGC is not to automatically apply the whichever is higher
Condominium Act. A condominium corporation, while enjoying such powers rule. Clearly, from reading the provision, it is only when there is a monetary
of ownership, is prohibited by law from transacting its properties for the consideration involved and the monetary consideration is not substantial
purpose of gainful profit. that the tax rate is based on the higher fair market value. But the RTC
dismissed the case holding that [M]onetary consideration as used in
Accordingly, and with a significant degree of comfort, we hold that Section 135 of R.A. 7160 does not only pertain to the price or money
condominium corporations are generally exempt from local business involved but likewise, as in the case of donations or barters, this refers to
taxation under the Local Government Code, irrespective of any local the value or monetary equivalent of what is received by the transferor. And
ordinance that seeks to declare otherwise. in this case the fair market value of the stocks which is P7M is higher than
the consideration which is only P2.58M, hence, the former amount must be
used as tax base. Moreover, The subject of this Petition is the performance
of a duty which is not ministerial in character. Assessment of tax liabilities
or obligations and the corresponding duty to collect the same involves a

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TAX DIGEST ASSIGNMENT # 9 LOCAL GOVT TAXATION A.M.+D.G. TAX II Atty. Mendoza


degree of discretion. It is erroneous to assume that the City Treasurer is Mandamus lies only to compel an officer to perform a ministerial duty (one
powerless to ascertain if the payment of the tax obligation is proper or which is so clear and specific as to leave no room for the exercise of
correct. Mandamus cannot lie to compel the City Treasurer to accept as discretion in its performance) but not a discretionary function (one which by
full compliance a tax payment which in his reasoning and assessment is its nature requires the exercise of judgment). Mr. Castros argument that
deficient and incorrect. [m]andamus cannot lie to compel the City Treasurer to accept as full
compliance a tax payment which in his reasoning and assessment is
ISSUE deficient and incorrect is thus persuasive.

Did the RTC err in dismissing the petition for mandamus? MACTAN CEBU INTERNATIONAL AIRPORT vs. MARCOS (TO FOLLOW)

RULING

NO. For a petition for Mandamus to lie, there must be no other plain,
speedy and adequate remedy in the ordinary course of law. In this case, the
said condition was not satisfied. A taxpayer who disagrees with a tax
assessment made by a local treasurer may file a written protest as
prescribed by Sec. 195 of the LGC: The taxpayer shall have thirty (30) days
from the receipt of the denial of the protest or from the lapse of the sixty-
day (60) period prescribed herein within which to appeal with the court of
competent jurisdiction, otherwise the assessment becomes conclusive and
unappealable.

That Mr. San Juan protested in writing against the assessment of tax due
and the basis thereof is on record as in fact it was on that account that Mr.
Castro sent him the July 15, 2005 letter which operated as a denial of Mr.
San Juans written protest. Mr. San Juan should thus have, in accordance
with Sec. 195 of the LGC, either appealed the assessment before the court
of competent jurisdiction or paid the tax and then sought a refund. He did
not observe any of these remedies available to him, however. He instead
opted to file a petition for mandamus to compel Mr. Castro to accept
payment of transfer tax as computed by him.

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