SECOND DIVISION captioned Final Demand to Pay, requiring that Petron pay the assessed amount within five
Pay, requiring that Petron pay the assessed amount within five (5) days from
PETRON CORPORATION, G.R. No. 158881
Petitioner,
Present:
- versus - QUISUMBING, J.,
Chairperson,
CARPIO MORALES,
TINGA,
MAYOR TOBIAS M. TIANGCO, VELASCO, JR, and
and MUNICIPAL TREASURER BRION, JJ.
MANUEL T. ENRIQUEZ of the
MUNICIPALITY OF NAVOTAS,
METRO MANILA,
Respondents.
Promulgated:
April 16, 2008
DECISION
TINGA, J.:
The novel but important issue before us is whether a local government unit is empowered under the Local
Government Code (the LGC) to impose business taxes on persons or entities engaged in the sale of
petroleum products.
I.
The present Petition for Review on Certiorari under Rule 45 filed by petitioner Petron Corporation (Petron)
directly assails the Decision of the Regional Trial Court (RTC) of Malabon, Branch 74, which dismissed
petitioners complaint for cancellation of assessment made by the then municipality (now City) of Navotas
(Navotas) for deficiency taxes, and ordering the payment of P10,204,916.17 pesos in business taxes to
Navotas. As the issues raised are pure questions of law, we need not dwell on the facts at length.
Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. Through that depot,
it has engaged in the selling of diesel fuels to vessels used in commercial fishing in and
around Manila Bay.[1] On 1 March 2002, Petron received a letter from the office of Navotas Mayor,
respondent Toby Tiangco, wherein the corporation was assessed taxes relative to the figures covering
sale of diesel declared by your Navotas Terminal from 1997 to 2001. [2] The stated total amount due
was P6,259,087.62, a figure derived from the gross sales of the depot during the years in question. The
computation sheets[3] that were attached to the letter made reference to Ordinance 92-03, or the New
Navotas Revenue Code (Navotas Revenue Code), though such enactment was not cited in the letter
itself.
Petron duly filed with Navotas a letter-protest to the notice of assessment pursuant to Section 195 of
the Code. It argued that it was exempt from local business taxes in view of Art. 232(h) of the Implementing
Rules (IRR) of the Code, as well as a ruling of the Bureau of Local Government Finance of the Department
of Finance dated 31 July 1995, the latter stating that sales of petroleum fuels are not subject to local
taxation. The letter-protest was denied by the Navotas Municipal Treasurer, respondent Manuel T.
Enriquez, in a letter dated 8 May 2002.[4] This was followed by a letter from the Mayor dated 15 May 2002,
receipt thereof, with a threat of closure of Petrons operations within Navotas should there be no
payment.[5] Petron, through counsel, replied to the Mayor by another letter posing objections to the threat
of closure. The Mayor did not respond to this last letter.[6]
Thus, on 20 May 2002, Petron filed with the Malabon RTC a Complaint for Cancellation of
Assessment for Deficiency Taxes with Prayer for the Issuance of a Temporary Restraining Order (TRO)
and/or Preliminary Injunction. The quested TRO was not issued by the Malabon RTC upon manifestation
of respondents that they would not proceed with the closure of Petrons Navotas bulk plant until after the
RTC shall have decided the case on the merits.[7] However, while the case was pending decision,
respondents refused to issue a business permit to Petron, thus prompting Petron to file a Supplemental
Complaint with Prayer for Preliminary Mandatory Injunction against respondents.[8]
On 5 May 2003, the Malabon RTC rendered its Decision dismissing Petrons complaint and
ordering the payment of the assessed amount.[9] Eleven days later, Petron received a Closure Order from
the Mayor, directing Petron to cease and desist from operating the bulk plant. Petron sought a TRO from
the Malabon RTC, but this was denied.[10] Petron also filed a motion for reconsideration of the order of
denial, but this was likewise denied.[11]
On 4 August 2003, this Court issued a TRO, enjoining the respondents from closing Petrons
Navotas bulk plant or otherwise interfering in its operations. [12]
II.
As earlier stated, Petron has opted to assail the RTC Decision directly before this Court since
the matter at hand involves pure questions of law, a characterization conceded by the RTC Decision itself.
Particularly, the controversy hinges on the correct interpretation of Section 133(h) of the LGC, and the
applicability of Article 232 (h) of the IRR.
Section 133(h) of the LGC reads as follows:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and Barangays shall not extend to the levy
of the following:
xxx
(h) Excise taxes on articles enumerated under the National Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products;
Evidently, Section 133 prescribes the limitations on the capacity of local government units to
exercise their taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the
Section mentions two kinds of taxes which cannot be imposed by local government units, namely: excise
taxes on articles enumerated under the National Internal Revenue Code [(NIRC)], as amended; and
taxes, fees or charges on petroleum products.
The power of a municipality to impose business taxes is provided for in Section 143 of the LGC.
Under the provision, a municipality is authorized to impose business taxes on a whole host of business
activities. Suffice it to say, unless there is another provision of law which states otherwise, Section 143,
broad in scope as it is, would undoubtedly cover the business of selling diesel fuels, or any other
petroleum product for that matter.

Nonetheless, Article 232 of the IRR defines with more particularity the capacity of a municipality
to impose taxes on businesses. The enumeration that follows is generally a positive list of businesses
which may be subjected to business taxes, and paragraph (h) of Article 232 does allow the imposition of
local business taxes [o]n any business not otherwise specified in the preceding paragraphs which the
sanggunian concerned may deem proper to tax, but subject to this important qualification, thus:
xxx provided further, that in line with existing national policy, any business
engaged in the production, manufacture, refining, distribution or sale of oil, gasoline
and other petroleum products shall not be subject to any local tax imposed on this
article.
Notably, the Malabon RTC declared Art. 232(h) of the IRR void because the Code purportedly does not
contain a provision prohibiting the imposition of business taxes on petroleum products. [13] This submission
warrants close examination as well.
With all the relevant provisions of law laid out, we address the core issues submitted by Petron, namely:
first, is the challenged tax on sale of the diesel fuels an excise tax on an article enumerated under the
NIRC, thusly prohibited under Section 133(h) of the Code?; second, is the challenged tax prohibited by
Section 133(h) under the proviso, taxes, fees or charges on petroleum products? and; third, does Art.
232(h) of the IRR similarly prohibit the imposition of the challenged tax?
III
As earlier observed, Section 133(h) provides two kinds of taxes which cannot be imposed by
local government units: excise taxes on articles enumerated under the NIRC, as amended; and taxes,
fees or charges on petroleum products. There is no doubt that among the excise taxes on articles
enumerated under the NIRC are those levied on petroleum products, per Section 148 of the NIRC.
We first consider Petrons argument that the business taxes on its sale of diesel fuels partakes
of an excise tax, which if true, could invalidate the challenged tax solely on the basis of the phrase excise
taxes on articles enumerated under the [NIRC]. To support this argument, it cites Cordero v.
Conda,[14] Allied Thread Co. Inc. v. City Mayor of Manila,[15] and Iloilo Bottlers, Inc. v. City of Iloilo,[16] as
having explained that an excise tax is a tax upon the performance, carrying on, or the exercise of an
activity.[17] Respondents, on the other hand, argue that what the provision prohibits is the imposition of
excise taxes on petroleum products, but not the imposition of business taxes on the same. They
cite Philippine Petroleum Corporation v. Municipality of Pililia, [18] where the Court had noted, [a] tax on
business is distinct from a tax on the article itself. [19]
Petrons argument is fraught with far-reaching implications, for if it were sustained, it would mean
that local government units are barred from imposing business taxes on any of the articles subject to
excise taxes under the NIRC. These would include alcohol products, [20] tobacco products,[21] mineral
products[22] automobiles,[23] and such non-essential goods as jewelry, goods made of precious metals,
perfumes, and yachts and other vessels intended for pleasure or sports.[24]
Admittedly, the proffered definition of an excise tax as a tax upon the performance, carrying on,
or exercise of some right, privilege, activity, calling or occupation derives from the compendium American
Jurisprudence, popularly referred to as Am Jur,,[25] and has been cited in previous decisions of this Court,
including those cited by Petron itself. Such a definition would not have been
inconsistent with previous incarnations of our Tax Code, such as the NIRC of 1939, [26] as amended, or
the NIRC of 1977[27] because in those laws the term excise tax was not used at all. In contrast, the
nomenclature used in those prior laws in referring to taxes imposed on specific articles was specific
tax.[28] Yet beginning with the National Internal Revenue Code of 1986, as amended, the term excise
taxes was used and defined as applicable to goods manufactured or produced in the Philippines and to
things imported.[29] This definition was carried over into the present NIRC of 1997. [30] Further, these two
latest codes categorize two different kinds of excise taxes: specific tax which is imposed and based on
weight or volume capacity or any other physical unit of measurement; and ad valorem tax which is
imposed and based on the selling price or other specified value of the goods. In other words, the
meaningof excise tax has undergone a transformation, morphing from the Am Jur definition to its current
signification which is a tax on certain specified goods or articles.
The change in perspective brought forth by the use of the term excise tax in a different
connotation was not lost on the departed author Jose Nolledo as he accorded divergent treatments in his
1973 and 1994 commentaries on our tax laws. Writing in 1973, and essentially alluding to the Am
Jur definition of excise tax, Nolledo observed:
Are specific taxes, taxes on property or excise taxes
In the case of Meralco v. Trinidad ([G.R.] 16738, 1925) it was held that specific
taxes are property taxes, a ruling which seems to be erroneous. Specific taxes are truly
excise taxes for the fact that the value of the property taxed is taken into account will not
change the nature of the tax. It is correct to say that specific taxes are taxes on the
privilege to import, manufacture and remove from storage certain articles specified by
law.[31]
In contrast, after the tax code was amended to classify specific taxes as a subset of excise taxes,
Nolledo, in his 1994 commentaries, wrote:
1. Excise taxes, as used in the Tax Code, refers to taxes applicable to certain
specified goods or articles manufactured or produced in the Philippines for domestic
sale or consumption or for any other disposition and to things imported into the
Philippines. They are either specific or ad valorem.
2. Nature of excise taxes. They are imposed directly on certain specified goods.
(infra) They are, therefore, taxes on property. (see Medina vs. City of Baguio, 91 Phil.
854.)
A tax is not excise where it does not subject directly the produce or goods to
tax but indirectly as an incident to, or in connection with, the business to be taxed.[32]
 In their 2004 commentaries, De Leon and De Leon restate the Am Jur definition of excise tax,
and observe that the term is synonymous with privilege tax and [both terms] are often used
interchangeably.[33] At the same time, they offer a caveat that [e]xcise tax, as [defined by Am Jur], is not
to be confused with excise tax imposed [by the NIRC] on certain specified articles manufactured or
produced in, or imported into, the Philippines, for domestic sale or consumption or for any other
disposition.[34]
It is evident that Am Jur aside, the current definition of an excise tax is that of a tax levied on a
specific article, rather than one upon the performance, carrying on, or the exercise of an activity. This
current definition was already in place when the Code was enacted in 1991, and we can only presume
that it was what the Congress had intended as it specified that local government units could not impose
excise taxes on articles enumerated under the [NIRC]. This prohibition must pertain to the same kind of
excise taxes as imposed by the NIRC, and not those previously defined excise taxes which were not
integrated or denominated as such in our present tax law.
It is quite apparent, therefore, that our current body of taxation law does not explicitly
accommodate the traditional definition of excise tax offered by Petron. In fact, absent any statutory
adoption of the traditional definition, it may be said that starting in 1986 excise taxes in this jurisdiction
refer exclusively to specific or ad valorem taxes imposed under the NIRC. At the very least, it is this
concept of excise tax which we can reasonably assume that Congress had in mind and actually adopted
when it crafted the Code. The palpable absurdity that ensues should the alternative interpretation prevail
all but strengthens this position.
Thus, Petrons argument concerning excise taxes is founded not on what the NIRC or the Code
actually provides, but on a non-statutory definition sourced from a legal paradigm that is no longer
applicable in this jurisdiction. That such definition was referred to again in our 1998 decision in Province
of Bulacan v. Court of Appeals[35] is ultimately of little consequence, and so is Petrons reliance on such
ruling. The Court therein had correctly nullified, on the basis of Section 133(h) of the Code, a province-
imposed tax of 10% of the fair market value in the locality per cubic meter of ordinary stones, sand, gravel,
earth and other quarry resources xxx extracted from public lands, because it noted that under Section
151 of the NIRC, all nonmetallic minerals and quarry resources were assessed with excise taxes of two
percent (2%) based on the actual market value of the gross output thereof at the time of removal, in case
of those locally extracted or produced. [36] Additionally, the Court also observed that the case had
emanated from an attempt to impose the said tax on quarry resources from private lands, despite the
clear language of the tax ordinance limiting the tax to such resources extracted from public lands. [37] On
that score alone, the case could have been correctly decided.
It is true that the Court had additionally reasoned in Province of Bulacan that [t]he tax imposed
by the Province of Bulacan is an excise tax, being a tax upon the performance, carrying on, or exercise
of an activity. As earlier noted, such definition of excise tax however was not explicitly carried over into
the NIRC and was even superseded beginning with the 1986 amendments thereto. To insist on utilizing
this definition simply because it had been reiterated in Province of Bulacan, unnecessary as such
reiteration may have been to the resolution of that case, would have the unfortunate effect of infusing life
into a concept that is diametrically inconsistent with the present state of the law.
We thus can assert with clear comfort that excise taxes, as imposed under the NIRC, do not
pertain to the performance, carrying on, or exercise of an activity, at least not to the extent of equating
excise with business taxes.
IV.
We next consider whether the clause taxes, fees or charges on petroleum products in Section 133(h)
precludes local government units from imposing business taxes based on the sale of petroleum products.
The power of a municipality to impose business taxes derives from Section 143 of the Code that
specifically enumerates several types of business on which it may impose taxes, including manufacturers,
wholesalers, distributors, dealers of any article of commerce of whatever nature; [38] those engaged in the
export or commerce of essential commodities;[39] retailers;[40]contractors and other independent
contractors;[41] banks and financial institutions;[42] and peddlers engaged in the sale of any merchandise
or article of commerce.[43] This obviously broad power is further supplemented by paragraph (h) of Section
143 which authorizes the sanggunian to impose taxes on any other businesses not otherwise specified
under Section 143 which the sanggunian concerned may deem proper to tax.[44]
This ability of local government units to impose business or other local taxes is ultimately rooted in the
1987 Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to
create its own sources of revenues and to levy taxes, fees and charges, though the power is subject to
such guidelines and limitations as the Congress may provide. There is no doubt that following the 1987
Constitution and the Code, the fiscal autonomy of local government units has received greater affirmation
than ever. Previous decisions that have been skeptical of the viability, if not the wisdom of reposing fiscal
autonomy to local government units have fallen by the wayside.
Respondents cite our declaration in City Government of San Pablo v. Reyes[45] that following the 1987
Constitution the rule thenceforth in interpreting statutory provisions on municipal fiscal powers, doubts will
have to be resolved in favor of municipal corporations. [46] Such policy is also echoed in Section 5(a) of
the Code, which states that [a]ny provision on a power of a local government unit shall be liberally
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 government unit. But somewhat conversely, Section 5(b) then proceeds
to assert that [i]n case of doubt, any tax ordinance or revenue measure shall be construed strictly against
the local government unit enacting it, and liberally in favor of the taxpayer.[47] And this latter qualification
has to be respected as a constitutionally authorized limitation which Congress has seen fit to
provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the
power of local government units to impose taxes.
Congress has the constitutional authority to impose limitations on the power to tax of local government
units, and Section 133 of the Code is one such limitation. Indeed, the provision is the explicit statutory
impediment to the enjoyment of absolute taxing power by local government units, not to mention the
reality that such power is a delegated power. To cite one example, under Section 133(g), local government
units are disallowed from levying business taxes on business enterprises certified to by the Board of
Investments as pioneer or non-pioneer for a period of six (6) and (4) four years, respectively from the date
of registration.
Section 133(h) states that local government units shall not extend to the levy of xxx taxes, fees or charges
on petroleum products. Respondents assert that the phrase taxes, fees or charges on petroleum products
pertains to the imposition of direct or excise taxes on petroleum products, and not business taxes. If the
phrase actually pertains to excise taxes, then it would be an exercise in utter redundancy, since the
preceding phrase already prohibits the imposition of excise taxes on articles already subject to such taxes
under the NIRC, such as petroleum products. There would be no sense on the part of the legislature to
twice emphasize in the same sentence that excise taxes on petroleum products are beyond the pale of
local government taxation.
It appears that this argument of respondents was fashioned on the basis of the pronouncement of the
Court in Philippine Petroleum Corporation v. Municipality of Pililla, thus:[48]
xxx [W]hile Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum
products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended
by P.D. 426, wherein the municipality is granted the right to levy taxes on business of
manufacturers, importers, producers of any article of commerce of whatever kind or
nature. A tax on business is distinct from a tax on the article itself. Thus, if the
imposition of tax on business of manufacturers, etc. in petroleum products contravenes
a declared national policy, it should have been expressly stated in P.D. No. 436.
The dicta that [a] tax on a business is distinct from a tax on the article itself might at first blush somehow
lend support to respondents position, yet that dicta has not since been reprised by this Court. It is likewise
worth observing that Pililla did involve a tax ordinance that imposed business taxes on an enterprise
engaged in the manufacture and storage of petroleum products.
Significantly, the legal milieu governing Pililla is vastly different from that existing at bar, to the extent that
the earlier case could not be presently controlling.
At the time the taxes sought to be collected in Pililla were imposed, there was no national law in place
similar to Section 133(h) of the Code that barred local taxes, fees or charges on petroleum products.
There were circulars to that effect issued by the Finance Department, yet the Court could not validate
such issuances since under the tax laws then in place no exemptions were given to
manufacturers, wholesalers, retailers, or dealers in petroleum products. [49] In fact, the Court tellingly
observed that if the imposition of tax on business of manufacturers, etc. in petroleum products
contravenes a declared national policy, it should have been expressly stated in P.D. No. 436. [50] Such
expression conspiciously missing in P.D. No. 436 is now found in Section 133(h).
In view of the difference in statutory paradigm between this case and Pililla, the latter case is severely
diminished as applicable precedent at bar. The Court then was correct in observing that a mere
administrative circular could not prohibit a local tax that is not otherwise barred under a national statute,
yet in this case that conflict is not present since the Code explicitly prohibits the imposition of several
classes of local taxes, including those on petroleum products. The final and only straw Pililla provides that
respondents can still grasp at is the bare statement that [a] tax on a business is distinct from a tax on the
article itself,[51] a sentence which could have been omitted from that decision without any effect.
We can concede that a tax on a business is distinct from a tax on the article itself, or for that matter, that
a business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter
part of Section 133(h) is concerned, for the phrase taxes, fees or charges on petroleum products does
not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the
provision. It would have been a different matter had Congress, in crafting Section 133(h), barred excise
taxes or direct taxes, or any category of taxes only, for then it would be understood that only such specified
taxes on petroleum products could not be imposed under the prohibition. The absence of such a
qualification leads to the conclusion that all sorts of taxes on petroleum products, including business
taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish.
The language of Section 133(h) makes plain that the prohibition with respect to petroleum products
extends not only to excise taxes thereon, but all taxes, fees and charges. The earlier reference in
paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already
covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products,
automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and
yachts and other vessels intended for pleasure or sports. In contrast, the later reference to taxes, fees
and charges pertains only to one class of articles of the many subjects of excise taxes, specifically,
petroleum products. While local government units are authorized to burden all such other class of goods
with taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed barring the levying
of any other type of taxes with respect to petroleum products.
V.
We no longer need to dwell on the arguments centering on Article 232 of the IRR. As earlier
stated, the provision explicitly stipulates that in line with existing national policy, any business engaged in
the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products
shall not be subject to any local tax imposed on this article [on business taxes]. The RTC went as far as
to declare Article 232 as invalid on the premise that the prohibition was not similarly warranted under the
Code.
Assuming that the Code does not, in fact, prohibit the imposition of business taxes on petroleum
products, we would agree that the IRR could not impose such a prohibition. With our ruling that Section
133(h) does indeed prohibit the imposition of local business taxes on petroleum products, however, the
RTC declaration that Article 232 was invalid is, in turn, itself invalid. Even absent Article 232, local
government units cannot impose business taxes on petroleum products. If anything, Article 232 merely
reiterates what the Code itself already provides, with the additional explanation that such prohibition was
in line with existing national policy.
VI.
We have said all that need be said for the resolution of this case, but there is one more line of argument
raised by respondents that deserves a remark. Respondents argue, assuming... that the Oversight
Committee [that drafted the IRR] can legislate, that the existing national policy referred to in Article 232
had been superseded by Republic Act No. 8180, or the Oil Deregulation Law. Boiled down to its essence,
the argument is that since the oil industry is presently deregulated the basis for exempting petroleum
products from business taxes no longer exists.
Of course, the starting premise for this argument, that the IRR can establish a tax or an exemption, is
false and has been flatly rejected by this Court before. [52] The Code itself does not connect its prohibition
on taxation of petroleum products with any existing or future national oil policy, so the change in such
national policy with the regime of oil deregulation is ultimately of no moment. Still, we can divine the
reasoning behind singling out petroleum products, among all other commodities, as beyond the power of
local government units to levy local taxes.
Why the special concern over petroleum products? The answer is quite evident to all sentient persons. In
this age where unfortunately dependence on petroleum as fuel has yet no equally feasible alternative, the
cost of petroleum products, though fully controlled by private enterprise, remains an area of public
concern. To be blunt about it, there is an inevitable link between the fluctuation of oil prices and the prices
of every other commodity. The reality, indeed, is oil is a political commodity. Such fact has received
recognition from this Court. [O]il [is] a commodity whose supply and price affect the ebb and flow of the
lifeblood of the nation. Its shortage of supply or a slight, upward spiral in its price shakes our economic
foundation.Studies show that the areas most impacted by the movement of oil are food manufacture, land
transport, trade, electricity and water.[53] [T]he upswing and downswing of our economymaterially depend
on the oscillation of oil.[54] Fluctuations in the supply and price of oil products have a dramatic effect on
economic development and public welfare.[55]
It can be reasonably presumed that if municipalities, cities and provinces were authorized to impose
business taxes on manufacturers and retailers of petroleum products, the resulting losses to these
enterprises would be passed on to the consumers, triggering the chain of increases that normally
accompany the increase in oil prices. No similarly massive trigger effect would ensue upon the imposition
of business taxes on other commodities, including those already subject to excise taxation under the
NIRC.

It may very well be that the policy of deregulation, which was not yet in effect at the time of the
enactment of the Local Government Code, has changed the complexion of the issue, for unlike before,
oil companies are free at will to increase oil prices, thus mitigating the similarly arbitrary consequences
that could develop if petroleum products were subject to local taxes. Still, it cannot be denied that
subjecting petroleum products to business taxes apart from the taxes already imposed by Congress in
this age of deregulation would lead to the same result had they been so taxed during the era of oil
regulation the increase of oil prices. We do not discount the authority of Congress to enact measures that
facilitate the increase in oil prices; witness the Oil Deregulation Law and the most recent Expanded VAT
Law. Yet these hard choices are presumably made by Congress with the expectation that the negative
effects of increased oil prices are offset by the other economic benefits promised by those new laws (i.e.,
a more vibrant oil industry; increased government revenue).

The Court defers to the other branches of government in the formulation of oil policy, but when
the choices are made through legislation, the Court expects that the choices are deliberate, considering
that the stakes are virtually all-in. Herein, respondents may be bolstered by the constitutional and statutory
policy favoring local fiscal autonomy, but it would be utter indolence to reflexively affirm such policy when
the inevitable effect is an increase in oil prices. Any prudent adjudication should fully ascertain the
mandate of local government units to impose taxes on petroleum products, and such mandate should be
cast in so specific terms as to leave no dispute as to the legislative intendment to extend such power in
the name of local autonomy. What we have found instead, from the plain letter of the law is an explicit
disinclination on the part of the legislature to impart that particular taxing power to local government units.

While Section 133(h) does not generally bar the imposition of business taxes on articles
burdened by excise taxes under the NIRC, it specifically prohibits local government units from extending
the levy of any kind of taxes, fees or charges on petroleum products. Accordingly, the subject tax
assessment is ultra vires and void.

WHEREFORE, the Petition is GRANTED. The Decision of the Regional Trial Court of Malabon City in Civil
Case No. 3380-MN is REVERSED and SET ASIDE and the subject assessment for
deficiency taxes on petitioner is ordered CANCELLED. The Temporary Restraining Order dated 4 August
2003 is hereby made PERMANENT. No pronouncement as to costs.

SO ORDERED.
 THIRD DIVISION franchise by the grantee, its successors or assigns, and the said percentage tax shall
be in lieu of all taxes on this franchise or earnings thereof; Provided that the grantee, its
G.R. No. 166408 October 6, 2008 successors or assigns shall continue to be liable for income taxes under Title II of the National
Internal Revenue Code pursuant to Section 2 of Executive No. 72 unless the latter enactment
is amended or repealed, in which case the amendment or repeal shall be applicable thereto.
QUEZON CITY and THE CITY TREASURER OF QUEZON CITY, petitioners, (Emphasis added)
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
ABS-CBN had been paying local franchise tax imposed by Quezon City. However, in view of the above
provision in R.A. No. 9766 that it "shall pay a franchise tax x x x in lieu of all taxes," the corporation
DECISION developed the opinion that it is not liable to pay the local franchise tax imposed by Quezon City.
Consequently, ABS-CBN paid under protest the local franchise tax imposed by Quezon City on the
REYES, R.T., J.: dates, in the amounts and under the official receipts as follows:

CLAIMS for tax exemption must be based on language in law too plain to be mistaken. It cannot be O.R. No. Date Amount Paid
made out of inference or implication. 2464274 7/18/1995 P 1,489,977.28
2484651 10/20/1995 1,489,977.28
The principle is relevant in this petition for review on certiorari of the Decision1 of the Court of Appeals
(CA) and that2 of the Regional Trial Court (RTC) ordering the refund and declaring invalid the imposition 2536134 1/22/1996 2,880,975.65
and collection of local franchise tax by the City Treasurer of Quezon City on ABS-CBN Broadcasting 8354906 1/23/1997 8,621,470.83
Corporation (ABS-CBN). 48756 1/23/1997 2,731,135.81
67352 4/3/1997 2,731,135.81
The Facts Total P19,944,672.665

Petitioner City Government of Quezon City is a local government unit duly organized and existing by
On January 29, 1997, ABS-CBN filed a written claim for refund for local franchise tax paid to Quezon
virtue of Republic Act (R.A.) No. 537, otherwise known as the Revised Charter of Quezon City.
City for 1996 and for the first quarter of 1997 in the total amount of Fourteen Million Two Hundred
Petitioner City Treasurer of Quezon City is primarily responsible for the imposition and collection of
Thirty-Three Thousand Five Hundred Eighty-Two and 29/100 centavos (P14,233,582.29) broken down
taxes within the territorial jurisdiction of Quezon City.
as follows:

Under Section 31, Article 13 of the Quezon City Revenue Code of 1993, 3 a franchise tax was imposed
on businesses operating within its jurisdiction. The provision states: O.R. No. Date Amount Paid
2536134 1-22-96 P 2,880,975.65
Section 31. Imposition of Tax. - Any provision of special laws or grant of tax exemption to the 8354906 1-23-97 8,621,470.83
contrary notwithstanding, any person, corporation, partnership or association enjoying a 0048756 1-23-97 2,731,135.81
franchise whether issued by the national government or local government and, doing business
Total P14,233,582.296
in Quezon City, shall pay a franchise tax at the rate of ten percent (10%) of one percent (1%)
for 1993-1994, twenty percent (20%) of one percent (1%) for 1995, and thirty percent (30%) of
one percent (1%) for 1996 and the succeeding years thereafter, of gross receipts and sales In a letter dated March 3, 1997 to the Quezon City Treasurer, ABS-CBN reiterated its claim for refund of
derived from the operation of the business in Quezon City during the preceding calendar year. local franchise taxes paid.

On May 3, 1995, ABS-CBN was granted the franchise to install and operate radio and television On June 25, 1997, for failure to obtain any response from the Quezon City Treasurer, ABS-CBN filed a
broadcasting stations in the Philippines under R.A. No. 7966.4 Section 8 of R.A. No. 7966 provides the complaint before the RTC in Quezon City seeking the declaration of nullity of the imposition of local
tax liabilities of ABS-CBN which reads: franchise tax by the City Government of Quezon City for being unconstitutional. It likewise prayed for
the refund of local franchise tax in the amount of Nineteen Million Nine Hundred Forty-Four Thousand
Section 8. Tax Provisions. - The grantee, its successors or assigns, shall be liable to pay the Six Hundred Seventy-Two and 66/100 centavos (P19,944,672.66) broken down as follows:
same taxes on their real estate, buildings and personal property, exclusive of this franchise, as
other persons or corporations are now hereafter may be required by law to pay. In addition O.R. No. Date Amount Paid
thereto, the grantee, its successors or assigns, shall pay a franchise tax equivalent to three
2464274 7-18-95 P 1,489,977.28
percent (3%) of all gross receipts of the radio/television business transacted under this
2484651 10-20-95 1,489,977.28
 2536134 1-22-96 2,880,975.65 Ordinance No. SP-91, S-93. The intent of the legislature to excuse ABS-CBN from payment of local
8354906 1-23-97 8,621,470.83 franchise tax could be discerned from the usage of the "in lieu of all taxes" provision and from the
absence of any qualification except income taxes. Had Congress intended to exclude taxes imposed
0048756 1-23-97 2,731,135.81 from the exemption, it would have expressly mentioned so in a fashion similar to the proviso on income
0067352 4-03-97 2,731,135.81 taxes.
Total P19,944,672.667
The RTC also based its ruling on the 1990 case of Province of Misamis Oriental v. Cagayan Electric
Power and Light Company, Inc. (CEPALCO).10 In said case, the exemption of respondent electric
Quezon City argued that the "in lieu of all taxes" provision in R.A. No. 9766 could not have been
company CEPALCO from payment of provincial franchise tax was upheld on the ground that the
intended to prevail over a constitutional mandate which ensures the viability and self-sufficiency of local
franchise of CEPALCO was a special law, while the Local Tax Code, on which the provincial ordinance
government units. Further, that taxes collectible by and payable to the local government were distinct
imposing the local franchise tax was based, was a general law. Further, it was held that whenever there
from taxes collectible by and payable to the national government, considering that the Constitution
is a conflict between two laws, one special and particular and the other general, the special law must be
specifically declared that the taxes imposed by local government units "shall accrue exclusively to the
taken as intended to constitute an exception to the general act.
local governments." Lastly, the City contended that the exemption claimed by ABS-CBN under R.A. No.
7966 was withdrawn by Congress when the Local Government Code (LGC) was passed. 8 Section 193
of the LGC provides: The RTC noted that the legislative franchise of ABS-CBN was granted years after the effectivity of the
LGC. Thus, it was unavoidable to conclude that Section 8 of R.A. No. 7966 was an exception since the
legislature ought to be presumed to have enacted it with the knowledge and awareness of the existence
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this
Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, and prior enactment of Section 13711 of the LGC.
whether natural or juridical, including government-owned or -controlled corporations,
except local water districts, cooperatives duly registered under R.A. 6938, non-stock and non- In addition, the RTC, again citing the case of Province of Misamis Oriental v. Cagayan Electric Power
profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this and Light Company, Inc. (CEPALCO),12 ruled that the imposition of the local franchise tax was an
Code. (Emphasis added) impairment of ABS-CBN's contract with the government. The imposition of another franchise on the
corporation by the local authority would constitute an impairment of the former's charter, which is in the
nature of a private contract between it and the government.
On August 13, 1997, ABS-CBN filed a supplemental complaint adding to its claim for refund the local
franchise tax paid for the third quarter of 1997 in the amount of Two Million Seven Hundred Thirty-One
Thousand One Hundred Thirty-Five and 81/100 centavos (P2,731,135.81) and of other amounts of local As to the amounts to be refunded, the RTC rejected Quezon City's position that a written claim for
franchise tax as may have been and will be paid by ABS-CBN until the resolution of the case. refund pursuant to Section 196 of the LGC was a condition sine qua non before filing the case in court.
The RTC ruled that although Fourteen Million Two Hundred Thirty-Three Thousand Five Hundred
Eighty-Two and 29/100 centavos (P14,233,582.29) was the only amount stated in the letter to the
Quezon City insisted that the claim for refund must fail because of the absence of a prior written claim
Quezon City Treasurer claiming refund, ABS-CBN should nonetheless be also refunded of all payments
for it.
made after the effectivity of R.A. No. 7966. The inaction of the City Treasurer on the claim for refund of
ABS-CBN legally rendered any further claims for refund on the part of plaintiff absurd and futile in
RTC and CA Dispositions relation to the succeeding payments.

On January 20, 1999, the RTC rendered judgment declaring as invalid the imposition on and collection The City of Quezon and its Treasurer filed a motion for reconsideration which was subsequently denied
from ABS-CBN of local franchise tax paid pursuant to Quezon City Ordinance No. SP-91, S-93, after the by the RTC. Thus, appeal was made to the CA. On September 1, 2004, the CA dismissed the petition of
enactment of R.A. No. 7966, and ordered the refund of all payments made. The dispositive portion of Quezon City and its Treasurer. According to the appellate court, the issues raised were purely legal
the RTC decision reads: questions cognizable only by the Supreme Court. The CA ratiocinated:

WHEREFORE, judgment is hereby rendered declaring the imposition on and collection from For another, the issues which appellants submit for this Court's consideration are more of legal
plaintiff ABS-CBN BROADCASTING CORPORATION of local franchise taxes pursuant to query necessitating a legal opinion rather than a call for adjudication on the matter in dispute.
Quezon City Ordinance No. SP-91, S-93 after the enactment of Republic Act No. 7966 to be
invalid, and, accordingly, the Court hereby orders the defendants to refund all its payments
xxxx
made after the effectivity of its legislative franchise on May 3, 1995.

The first issue has earlier been categorized in Province of Misamis Oriental v. Cagayan
SO ORDERED.9
Electric and Power Co., Inc. to be a legal one. There is no more argument to this.

In its decision, the RTC ruled that the "in lieu of all taxes" provision contained in Section 8 of R.A. No.
The next issue although it may need the reexamination of the pertinent provisions of the local
7966 absolutely excused ABS-CBN from the payment of local franchise tax imposed under Quezon City
franchise and the legislative franchise given to appellee, also needs no evaluation of facts. It
 suffices that there may be a conflict which may need to be reconciled, without regard to the
factual backdrop of the case.
The last issue deals with a legal question, because whether or not there is a prior written claim
for refund is no longer in dispute. Rather, the question revolves on whether the said
requirement may be dispensed with, which obviously is not a factual issue. 13
On September 23, 2004, petitioner moved for reconsideration. The motion was, however, denied by the
CA in its Resolution dated December 16, 2004. Hence, the present recourse.
Issues
Petitioner submits the following issues for resolution:
I.
Whether or not the phrase "in lieu of all taxes" indicated in the franchise of the respondent
appellee (Section 8 of RA 7966) serves to exempt it from the payment of the local franchise tax
imposed by the petitioners-appellants.
II.
Whether or not the petitioners-appellants raised factual and legal issues before the Honorable Court of
Appeals.14
Our Ruling
The second issue, being procedural in nature, shall be dealt with immediately. But there are other
resultant issues linked to the first.
I. The dismissal by the CA of petitioners' appeal is in order because it raised purely legal issues,
namely:
1) Whether appellee, whose franchise expressly provides that its payment of franchise tax
shall be in lieu of all taxes in this franchise or earnings thereof, is absolutely excused from
paying the franchise tax imposed by appellants;
2) Whether appellants' imposition of local franchise tax is a violation of appellee's legislative
franchise; and
3) Whether one can do away with the requirement on prior written claim for refund.15
Obviously, these are purely legal questions, cognizable by this Court, to the exclusion of all other courts.
There is a question of law when the doubt or difference arises as to what the law is pertaining to a
certain state of facts.16
Section 2, Rule 50 of the Rules of Court provides that an appeal taken to the CA under Rule 41 raising
only questions of law is erroneous and shall be dismissed, issues of pure law not being within its
jurisdiction.17Consequently, the dismissal by the CA of petitioners' appeal was in order.
In the recent case of Sevilleno v. Carilo,18 this Court ruled that the dismissal of the appeal of petitioner
was valid, considering the issues raised there were pure questions of law, viz.:
Petitioners interposed an appeal to the Court of Appeals but it was dismissed for being the
wrong mode of appeal. The appellate court held that since the issue being raised is whether
the RTC has jurisdiction over the subject matter of the case, which is a question of law, the
appeal should have been elevated to the Supreme Court under Rule 45 of the 1997 Rules of
Civil Procedure, as amended. Section 2, Rule 41 of the same Rules which governs appeals
from judgments and final orders of the RTC to the Court of Appeals, provides:
SEC. 2. Modes of appeal. -
(a) Ordinary appeal. - The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a
notice of appeal with the court which rendered the judgment or final order appealed
from and serving a copy thereof upon the adverse party. No record on appeal shall be
required except in special proceedings and other cases of multiple or separate
appeals where the law or these Rules so require. In such cases, the record on appeal
shall be filed and served in like manner.
(b) Petition for review. - The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition for
review in accordance with Rule 42.
(c) Appeal by certiorari. - In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on certiorari
in accordance with Rule 45.
In Macawili Gold Mining and Development Co., Inc. v. Court of Appeals, we summarized the
rule on appeals as follows:
(1) In all cases decided by the RTC in the exercise of its original jurisdiction, appeal
may be made to the Court of Appeals by mere notice of appeal where the appellant
raises questions of fact or mixed questions of fact and law;
(2) In all cases decided by the RTC in the exercise of its original jurisdiction where the
appellant raises only questions of law, the appeal must be taken to the Supreme
Court on a petition for review on certiorari under Rule 45;
(3) All appeals from judgments rendered by the RTC in the exercise of its appellate
jurisdiction, regardless of whether the appellant raises questions of fact, questions of
law, or mixed questions of fact and law, shall be brought to the Court of Appeals by
filing a petition for review under Rule 42.
 It is not disputed that the issue brought by petitioners to the Court of Appeals involves the
jurisdiction of the RTC over the subject matter of the case. We have a long standing rule that a
court's jurisdiction over the subject matter of an action is conferred only by the Constitution or
by statute. Otherwise put, jurisdiction of a court over the subject matter of the action is a matter
of law. Consequently, issues which deal with the jurisdiction of a court over the subject matter
of a case are pure questions of law. As petitioners' appeal solely involves a question of law,
they should have directly taken their appeal to this Court by filing a petition for review on
certiorari under Rule 45, not an ordinary appeal with the Court of Appeals under Rule 41.
Clearly, the appellate court did not err in holding that petitioners pursued the wrong mode of
appeal.
Indeed, the Court of Appeals did not err in dismissing petitioners' appeal. Section 2, Rule 50 of
the same Rules provides that an appeal from the RTC to the Court of Appeals raising only
questions of law shall be dismissed; and that an appeal erroneously taken to the Court of
Appeals shall be dismissed outright, x x x.19(Emphasis added)
However, to serve the demands of substantial justice and equity, the Court opts to relax procedural
rules and rule upon on the merits of the case. In Ong Lim Sing Jr. v. FEB Leasing and Finance
Corporation,20 this Court stated:
Courts have the prerogative to relax procedural rules of even the most mandatory character,
mindful of the duty to reconcile both the need to speedily put an end to litigation and the
parties' right to due process. In numerous cases, this Court has allowed liberal construction of
the rules when to do so would serve the demands of substantial justice and equity. In Aguam
v. Court of Appeals, the Court explained:
"The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a
power conferred on the court, not a duty. The "discretion must be a sound one, to be
exercised in accordance with the tenets of justice and fair play, having in mind the
circumstances obtaining in each case." Technicalities, however, must be avoided.
The law abhors technicalities that impede the cause of justice. The court's primary
duty is to render or dispense justice. "A litigation is not a game of technicalities."
"Lawsuits unlike duels are not to be won by a rapier's thrust. Technicality, when it
deserts its proper office as an aid to justice and becomes its great hindrance and
chief enemy, deserves scant consideration from courts." Litigations must be decided
on their merits and not on technicality. Every party litigant must be afforded the
amplest opportunity for the proper and just determination of his cause, free from the
unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical
grounds is frowned upon where the policy of the court is to encourage hearings of
appeals on their merits and the rules of procedure ought not to be applied in a very
rigid, technical sense; rules of procedure are used only to help secure, not override
substantial justice. It is a far better and more prudent course of action for the court to
excuse a technical lapse and afford the parties a review of the case on appeal to
attain the ends of justice rather than dispose of the case on technicality and cause a
grave injustice to the parties, giving a false impression of speedy disposal of cases
while actually resulting in more delay, if not a miscarriage of justice.21
II. The "in lieu of all taxes" provision in its franchise does not exempt ABS-CBN from payment of
local franchise tax.
A. The present controversy essentially boils down to a dispute between the inherent taxing power of
Congress and the delegated authority to tax of local governments under the 1987 Constitution and
effected under the LGC of 1991.
The power of the local government of Quezon City to impose franchise tax is based on Section 151 in
relation to Section 137 of the LGC, to wit:
Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other
special law, the province may impose a tax on businesses enjoying a franchise, at the rate not
exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized within its territorial
jurisdiction. x x x
xxxx
Section 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city
may levy the taxes, fees and charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied and collected by highly urbanized
and component cities shall accrue to them and distributed in accordance with the provisions of
this Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the
province or municipality by not more than fifty percent (50%) except the rates of professional
and amusement taxes. (Emphasis supplied)
Such taxing power by the local government, however, is limited in the sense that Congress can enact
legislation granting exemptions. This principle was upheld in City Government of Quezon City, et al. v.
Bayan Telecommunications, Inc.22 Said this Court:
This thus raises the question of whether or not the City's Revenue Code pursuant to which the
city treasurer of Quezon City levied real property taxes against Bayantel's real properties
located within the City effectively withdrew the tax exemption enjoyed by Bayantel under its
franchise, as amended.
Bayantel answers the poser in the negative arguing that once again it is only "liable to pay the
same taxes, as any other persons or corporations on all its real or personal properties,
exclusive of its franchise."
Bayantel's posture is well-taken. While the system of local government taxation has changed
with the onset of the 1987 Constitution, the power of local government units to tax is still
limited. As we explained in Mactan Cebu International Airport Authority:
"The power to tax is primarily vested in the Congress; however, in our jurisdiction, it
may be exercised by local legislative bodies, no longer merely be virtue of a valid
delegation as before, but pursuant to direct authority conferred by Section 5, Article X
of the Constitution. Under the latter, the exercise of the power may be subject to such
guidelines and limitations as the Congress may provide which, however, must be
consistent with the basic policy of local autonomy. x x x"
Clearly then, while a new slant on the subject of local taxation now prevails in the sense that
the former doctrine of local government units' delegated power to tax had been effectively
modified with Article X, Section 5 of the 1987 Constitution now in place, the basic doctrine on
local taxation remains essentially the same. For as the Court stressed in Mactan, "the power to
tax is [still] primarily vested in the Congress."
This new perspective is best articulated by Fr. Joaquin G. Bernas, S.J., himself a
Commissioner of the 1986 Constitutional Commission which crafted the 1987 Constitution,
thus:
"What is the effect of Section 5 on the fiscal position of municipal corporations?
Section 5 does not change the doctrine that municipal corporations do not possess
inherent powers of taxation. What it does is to confer municipal corporations a general
power to levy taxes and otherwise create sources of revenue. They no longer have to
wait for a statutory grant of these powers. The power of the legislative authority
relative to the fiscal powers of local governments has been reduced to the authority to
impose limitations on municipal powers. Moreover, these limitations must be
"consistent with the basic policy of local autonomy." The important legal effect of
Section 5 is thus to reverse the principle that doubts are resolved against municipal
corporations. Henceforth, in interpreting statutory provisions on municipal fiscal
powers, doubts will be resolved in favor of municipal corporations. It is understood,
however, that taxes imposed by local government must be for a public purpose,
uniform within a locality, must not be confiscatory, and must be within the jurisdiction
of the local unit to pass."
In net effect, the controversy presently before the Court involves, at bottom, a clash between
the inherent taxing power of the legislature, which necessarily includes the power to exempt,
and the local government's delegated power to tax under the aegis of the 1987 Constitution.
Now to go back to the Quezon City Revenue Code which imposed real estate taxes on all real
properties within the city's territory and removed exemptions theretofore "previously granted to,
or presently enjoyed by all persons, whether natural or juridical [x x x]" there can really be no
dispute that the power of the Quezon City Government to tax is limited by Section 232 of the
LGC which expressly provides that "a province or city or municipality within the Metropolitan
Manila Area may levy an annual ad valorem tax on real property such as land, building,
machinery, and other improvement not hereinafter specifically exempted." Under this law, the
Legislature highlighted its power to thereafter exempt certain realties from the taxing power of
local government units. An interpretation denying Congress such power to exempt would
reduce the phrase "not hereinafter specifically exempted" as a pure jargon, without meaning
whatsoever. Needless to state, such absurd situation is unacceptable.
For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of Davao, this
Court has upheld the power of Congress to grant exemptions over the power of local
government units to impose taxes. There, the Court wrote:
"Indeed, the grant of taxing powers to local government units under the Constitution
and the LGC does not affect the power of Congress to grant exemptions to certain
persons, pursuant to a declared national policy. The legal effect of the constitutional
grant to local governments simply means that in interpreting statutory provisions on
municipal taxing powers, doubts must be resolved in favor of municipal
corporations."23 (Emphasis supplied)
In the case under review, the Philippine Congress enacted R.A. No. 7966 on March 30, 1995,
subsequent to the effectivity of the LGC on January 1, 1992. Under it, ABS-CBN was granted the
franchise to install and operate radio and television broadcasting stations in the Philippines. Likewise,
Section 8 imposed on ABS-CBN the duty of paying 3% franchise tax. It bears stressing, however, that
payment of the percentage franchise tax shall be "in lieu of all taxes" on the said franchise. 24
Congress has the inherent power to tax, which includes the power to grant tax exemptions. On the other
hand, the power of Quezon City to tax is prescribed by Section 151 in relation to Section 137 of the LGC
which expressly provides that notwithstanding any exemption granted by any law or other special law,
the City may impose a franchise tax. It must be noted that Section 137 of the LGC does not prohibit
grant of future exemptions. As earlier discussed, this Court in City Government of Quezon City v. Bayan
Telecommunications, Inc.25 sustained the power of Congress to grant tax exemptions over and above
the power of the local government's delegated power to tax.
B. The more pertinent issue now to consider is whether or not by passing R.A. No. 7966, which contains
the "in lieu of all taxes" provision, Congress intended to exempt ABS-CBN from local franchise tax.
Petitioners argue that the "in lieu of all taxes" provision in ABS-CBN's franchise does not expressly
exempt it from payment of local franchise tax. They contend that a tax exemption cannot be created by
mere implication and that one who claims tax exemptions must be able to justify his claim by clearest
grant of organic law or statute.
Taxes are what civilized people pay for civilized society. They are the lifeblood of the nation. Thus,
statutes granting tax exemptions are construed stricissimi juris against the taxpayer and liberally in favor
of the taxing authority. A claim of tax exemption must be clearly shown and based on language in law
too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. 26 The
burden of proof rests upon the party claiming the exemption to prove that it is in fact covered by the
exemption so claimed.27
The basis for the rule on strict construction to statutory provisions granting tax exemptions or deductions
is to minimize differential treatment and foster impartiality, fairness and equality of treatment among
taxpayers.28 He who claims an exemption from his share of common burden must justify his claim that
the legislature intended to exempt him by unmistakable terms. For exemptions from taxation are not
favored in law, nor are they presumed. They must be expressed in the clearest and most unambiguous
language and not left to mere implications. It has been held that "exemptions are never presumed, the
burden is on the claimant to establish clearly his right to exemption and cannot be made out of inference
or implications but must be laid beyond reasonable doubt. In other words, since taxation is the rule and
exemption the exception, the intention to make an exemption ought to be expressed in clear and
unambiguous terms.29
Section 8 of R.A. No. 7966 imposes on ABS-CBN a franchise tax equivalent to three (3) percent of all
gross receipts of the radio/television business transacted under the franchise and the franchise tax shall
be "in lieu of all taxes" on the franchise or earnings thereof.
The "in lieu of all taxes" provision in the franchise of ABS-CBN does not expressly provide what kind of
taxes ABS-CBN is exempted from. It is not clear whether the exemption would include both local,
whether municipal, city or provincial, and national tax. What is clear is that ABS-CBN shall be liable to
pay three (3) percent franchise tax and income taxes under Title II of the NIRC. But whether the "in lieu
of all taxes provision" would include exemption from local tax is not unequivocal.
As adverted to earlier, the right to exemption from local franchise tax must be clearly established and
cannot be made out of inference or implications but must be laid beyond reasonable doubt. Verily, the
uncertainty in the "in lieu of all taxes" provision should be construed against ABS-CBN. ABS-CBN has
the burden to prove that it is in fact covered by the exemption so claimed. ABS-CBN miserably failed in
this regard.
ABS-CBN cites the cases Carcar Electric & Ice Plant v. Collector of Internal Revenue,30 Manila Railroad
v. Rafferty,31 Philippine Railway Co. v. Collector of Internal Revenue,32 and Visayan Electric Co. v.
David33 to support its claim that that the "in lieu of all taxes" clause includes exemption from all taxes.
However, a review of the foregoing case law reveals that the grantees' respective franchises expressly
exempt them from municipal and provincial taxes. Said the Court in Manila Railroad v. Rafferty:34
On the 7th day of July 1906, by an Act of the Philippine Legislature, a special charter was
granted to the Manila Railroad Company. Subsection 12 of Section 1 of said Act (No. 1510)
provides that:
"In consideration of the premises and of the granting of this concession or franchise,
there shall be paid by the grantee to the Philippine Government, annually, for the
period of thirty (30) years from the date hereof, an amount equal to one-half (1/2) of
one per cent of the gross earnings of the grantee in respect of the lines covered
hereby for the preceding year; after said period of thirty (30) years, and for the fifty
(50) years thereafter, the amount so to be paid annually shall be an amount equal to
one and one-half (1 1/2) per cent of such gross earnings for the preceding year; and
after such period of eighty (80) years, the percentage and amount so to be paid
annually by the grantee shall be fixed by the Philippine Government.
Such annual payments, when promptly and fully made by the grantee, shall be in lieu
of all taxes of every name and nature - municipal, provincial or central - upon its
capital stock, franchises, right of way, earnings, and all other property owned or
operated by the grantee under this concession or franchise."35 (Underscoring
supplied)
In the case under review, ABS-CBN's franchise did not embody an exemption similar to those in Carcar,
Manila Railroad, Philippine Railway, and Visayan Electric. Too, the franchise failed to specify the taxing
authority from whose jurisdiction the taxing power is withheld, whether municipal, provincial, or national.
In fine, since ABS-CBN failed to justify its claim for exemption from local franchise tax, by a grant
expressed in terms "too plain to be mistaken" its claim for exemption for local franchise tax must fail.
C. The "in lieu of all taxes" clause in the franchise of ABS-CBN has become functus officio with the
abolition of the franchise tax on broadcasting companies with yearly gross receipts exceeding Ten
Million Pesos.
In its decision dated January 20, 1999, the RTC held that pursuant to the "in lieu of all taxes" provision
contained in Section 8 of R.A. No. 7966, ABS-CBN is exempt from the payment of the local franchise
tax. The RTC further pronounced that ABS-CBN shall instead be liable to pay a franchise tax of 3% of
all gross receipts in lieu of all other taxes.
On this score, the RTC ruling is flawed. In keeping with the laws that have been passed since the grant
of ABS-CBN's franchise, the corporation should now be subject to VAT, instead of the 3% franchise tax.
At the time of the enactment of its franchise on May 3, 1995, ABS-CBN was subject to 3% franchise tax
under Section 117(b) of the 1977 National Internal Revenue Code (NIRC), as amended, viz.:
SECTION 117. Tax on franchises. - Any provision of general or special laws to the contrary
notwithstanding, there shall be levied, assessed and collected in respect to all franchise, upon
the gross receipts from the business covered by the law granting the franchise, a tax in
accordance with the schedule prescribed hereunder:
(a) On electric utilities, city gas, and water supplies Two (2%) percent
(b) On telephone and/or telegraph systems, radio and/or broadcasting stations
Three (3%) percent
(c) On other franchises Five (5%) percent. (Emphasis supplied)
On January 1, 1996, R.A. No. 7716, otherwise known as the Expanded Value Added Tax Law, 36 took
effect and subjected to VAT those services rendered by radio and/or broadcasting stations. Section 3 of
R.A. No. 7716 provides:
Section 3. Section 102 of the National Internal Revenue Code, as amended is hereby further
amended to read as follows:
SEC. 102. Value-added tax on sale of services and use or lease of properties.
- (a) Rate and base of tax. - There shall be levied, assessed and collected, as value-
added tax equivalent to 10% of gross receipts derived from the sale or exchange of
services, including the use or lease of properties.
The phrase "sale or exchange of services" means the performance of all kinds of
services in the Philippines, for others for a fee, remuneration or consideration,
including those performed or rendered by construction and service contractors; x x
x services of franchise grantees of telephone and telegraph, radio and television
broadcasting and all other franchise grantees except those under Section 117 of this
Code; x x x (Emphasis supplied)
Notably, under the same law, "telephone and/or telegraph systems, broadcasting stations and other
franchise grantees" were omitted from the list of entities subject to franchise tax. The impression was
that these entities were subject to 10% VAT but not to franchise tax. Only the franchise tax on "electric,
gas and water utilities" remained. Section 12 of R.A. No. 7716 provides:
Section 12. Section 117 of the National Internal Revenue Code, as amended, is hereby further
amended to read as follows:
 SEC. 117. Tax on Franchises. - Any provision of general or special law to the contrary The franchise tax, on the other hand, is a percentage tax imposed only on franchise holders. It is
notwithstanding there shall be levied, assessed and collected in respect to all imposed under Section 119 of the Tax Code and is a direct liability of the franchise grantee.
franchises on electric, gas and water utilities a tax of two percent (2%) on the gross
receipts derived from the business covered by the law granting the franchise. The clause "in lieu of all taxes" does not pertain to VAT or any other tax. It cannot apply when what is
(Emphasis added) paid is a tax other than a franchise tax. Since the franchise tax on the broadcasting companies with
yearly gross receipts exceeding ten million pesos has been abolished, the "in lieu of all taxes" clause
Subsequently, R.A. No. 824137 took effect on January 1, 199738 containing more amendments to the has now become functus officio, rendered inoperative.
NIRC. Radio and/or television companies whose annual gross receipts do not exceed P10,000,000.00
were granted the option to choose between paying 3% national franchise tax or 10% VAT. Section 9 of In sum, ABS-CBN's claims for exemption must fail on twin grounds. First, the "in lieu of all taxes" clause
R.A. No. 8241 provides: in its franchise failed to specify the taxes the company is sought to be exempted from. Neither did it
particularize the jurisdiction from which the taxing power is withheld. Second, the clause has
SECTION 9. Section 12 of Republic Act No. 7716 is hereby amended to read as follows: become functus officio because as the law now stands, ABS-CBN is no longer subject to a franchise
tax. It is now liable for VAT.
"Sec. 12. Section 117 of the National Internal Revenue Code, as amended, is hereby further
amended to read as follows: WHEREFORE, the petition is GRANTED and the appealed Decision REVERSED AND SET ASIDE.
The petition in the trial court for refund of local franchise tax is DISMISSED.
"Sec. 117. Tax on franchise. - Any provision of general or special law to the contrary,
notwithstanding, there shall be levied, assessed and collected in respect to all SO ORDERED.
franchises on radio and/or television broadcasting companies whose annual gross
receipts of the preceding year does not exceed Ten million pesos (P10,000,000.00),
subject to Section 107(d) of this Code, a tax of three percent (3%) and on electric, gas
and water utilities, a tax of two percent (2%) on the gross receipts derived from the
business covered by the law granting the franchise: Provided, however, That radio
and television broadcasting companies referred to in this section, shall have an option
to be registered as a value-added tax payer and pay the tax due thereon: Provided,
further, That once the option is exercised, it shall not be revoked. (Emphasis supplied)

On the other hand, radio and/or television companies with yearly gross
receipts exceeding P10,000,000.00 were subject to 10% VAT, pursuant to Section 102 of the NIRC.

On January 1, 1998, R.A. No. 842439 was passed confirming the 10% VAT liability of radio and/or
television companies with yearly gross receipts exceeding P10,000,000.00.

R.A. No. 9337 was subsequently enacted and became effective on July 1, 2005. The said law further
amended the NIRC by increasing the rate of VAT to 12%. The effectivity of the imposition of the 12%
VAT was later moved from January 1, 2006 to February 1, 2006.

In consonance with the above survey of pertinent laws on the matter, ABS-CBN is subject to the
payment of VAT. It does not have the option to choose between the payment of franchise tax or VAT
since it is a broadcasting company with yearly gross receipts exceeding Ten Million Pesos
(P10,000,000.00).

VAT is a percentage tax imposed on any person whether or not a franchise grantee, who in the course
of trade or business, sells, barters, exchanges, leases, goods or properties, renders services. It is also
levied on every importation of goods whether or not in the course of trade or business. The tax base of
the VAT is limited only to the value added to such goods, properties, or services by the seller, transferor
or lessor. Further, the VAT is an indirect tax and can be passed on to the buyer.
 EN BANC
provided:
G.R. No. 168584 October 15, 2007
REPUBLIC OF THE PHILIPPINES, represented by THE HONORABLE SECRETARY OF FINANCE,
THE HONORABLE COMMISSIONER OF BUREAU OF INTERNAL REVENUE, THE HONORABLE
COMMISSIONER OF CUSTOMS, and THE COLLECTOR OF CUSTOMS OF THE PORT OF
SUBIC, petitioners,
vs.
HON. RAMON S. CAGUIOA, Presiding Judge, Branch 74, RTC, Third Judicial Region, Olongapo
City, INDIGO DISTRIBUTION CORP., herein represented by ARIEL G. CONSOLACION, W STAR
TRADING AND WAREHOUSING CORP., herein represented by HIERYN R. ECLARINAL,
FREEDOM BRANDS PHILS., CORP., herein represented by ANA LISA RAMAT, BRANDED
WAREHOUSE, INC., herein represented by MARY AILEEN S. GOZUN, ALTASIA INC., herein
represented by ALAN HARROW, TAINAN TRADE (TAIWAN), INC., herein represented by ELENA
RANULLO, SUBIC PARK N SHOP, herein represented by NORMA MANGALINO DIZON,
TRADING GATEWAYS INTERNATIONAL PHILS., herein represented by MA. CHARINA FE C.
RODOLFO, DUTY FREE SUPERSTORE (DFS), herein represented by RAJESH R. SADHWANI,
CHJIMES TRADING INC., herein represented by ANGELO MARK M. PICARDAL, PREMIER
FREEPORT, INC., herein represented by ROMMEL P. GABALDON, FUTURE TRADE SUBIC
FREEPORT, INC., herein represented by WILLIE S. VERIDIANO, GRAND COMTRADE
INTERNATIONAL CORP., herein represented by JULIUS MOLINDA, and FIRST PLATINUM
INTERNATIONAL, INC., herein represented by ISIDRO M. MUOZ,respondents.
DECISION
CARPIO MORALES, J.:
Petitioners seek via petition for certiorari and prohibition to annul (1) the May 4, 2005 Order 1 issued by
public respondent Judge Ramon S. Caguioa of the Regional Trial Court (RTC), Branch 74, Olongapo
City, granting private respondents application for the issuance of a writ of preliminary injunction and (2)
the Writ of Preliminary Injunction2that was issued pursuant to such Order, which stayed the
implementation of Republic Act (R.A.) No. 9334, AN ACT INCREASING THE EXCISE TAX RATES
IMPOSED ON ALCOHOL AND TOBACCO PRODUCTS, AMENDING FOR THE PURPOSE
SECTIONS 131, 141, 142, 143, 144, 145 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE
OF 1997, AS AMENDED.
Petitioners likewise seek to enjoin, restrain and inhibit public respondent from enforcing the impugned
issuances and from further proceeding with the trial of Civil Case No. 102-0-05.
The relevant facts are as follows:
In 1992, Congress enacted Republic Act (R.A) No. 72273 or the Bases Conversion and Development
Act of 1992 which, among other things, created the Subic Special Economic and Freeport Zone (SBF 4)
and the Subic Bay Metropolitan Authority (SBMA).
R.A. No. 7227 envisioned the SBF to be developed into a "self-sustaining, industrial, commercial,
financial and investment center to generate employment opportunities in and around the zone and to
attract and promote productive foreign investments."5 In line with this vision, Section 12 of the law
(b) The Subic Special Economic Zone shall be operated and managed as a separate
customs territory ensuring free flow or movement of goods and capital within, into and
exported out of the Subic Special Economic Zone, as well as provide incentives such as
tax and duty-free importations of raw materials, capital and equipment. However,
exportation or removal of goods from the territory of the Subic Special Economic Zone
to the other parts of the Philippine territory shall be subject to customs duties and taxes
under the Customs and Tariff Code and other relevant tax laws of the Philippines;
(c) The provisions of existing laws, rules and regulations to the contrary
notwithstanding, no taxes, local and national, shall be imposed within the Subic Special
Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all
businesses and enterprises within the Subic Special Economic Zone shall be remitted to the
National Government, one percent (1%) each to the local government units affected by the
declaration of the zone in proportion to their population area, and other factors. In addition,
there is hereby established a development fund of one percent (1%) of the gross income
earned by all businesses and enterprises within the Subic Special Economic Zone to be
utilized for the development of municipalities outside the City of Olongapo and the Municipality
of Subic, and other municipalities contiguous to be base areas.
In case of conflict between national and local laws with respect to tax exemption privileges in
the Subic Special Economic Zone, the same shall be resolved in favor of the latter;
(d) No exchange control policy shall be applied and free markets for foreign exchange, gold,
securities and future shall be allowed and maintained in the Subic Special Economic Zone;
(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations
of banks and other financial institutions within the Subic Special Economic Zone;
(f) Banking and finance shall be liberalized with the establishment of foreign currency
depository units of local commercial banks and offshore banking units of foreign banks with
minimum Central Bank regulation;
(g) Any investor within the Subic Special Economic Zone whose continuing investment shall
not be less than Two hundred fifty thousand dollars ($250,000), his/her spouse and dependent
children under twenty-one (21) years of age, shall be granted permanent resident status within
the Subic Special Economic Zone. They shall have freedom of ingress and egress to and from
the Subic Special Economic Zone without any need of special authorization from the Bureau of
Immigration and Deportation. The Subic Bay Metropolitan Authority referred to in Section 13 of
this Act may also issue working visas renewal every two (2) years to foreign executives and
other aliens possessing highly-technical skills which no Filipino within the Subic Special
Economic Zone possesses, as certified by the Department of Labor and Employment. The
names of aliens granted permanent residence status and working visas by the Subic Bay
Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation within
thirty (30) days after issuance thereof;
x x x x. (Emphasis supplied)
Pursuant to the law, private respondents Indigo Distribution Corporation, W Star Trading and
Warehousing Corporation, Freedom Brands Philippines Corporation, Branded Warehouse, Inc., Altasia,
Inc., Tainan Trade (Taiwan) Inc., Subic Park N Shop, Incorporated, Trading Gateways International
Philipines, Inc., Duty Free Superstore (DFS) Inc., Chijmes Trading, Inc., Premier Freeport, Inc., Future
Trade Subic Freeport, Inc., Grand Comtrade Intl., Corp., and First Platinum International, Inc., which
are all domestic corporations doing business at the SBF, applied for and were granted Certificates of
Registration and Tax Exemption6 by the SBMA.
These certificates allowed them to engage in the business either of trading, retailing or wholesaling,
import and export, warehousing, distribution and/or transshipment of general merchandise, including
alcohol and tobacco products, and uniformly granted them tax exemptions for such importations as
contained in the following provision of their respective Certificates:
ARTICLE IV. The Company shall be entitled to tax and duty-free importation of raw
materials, capital equipment, and household and personal items for use solely within
the Subic Bay Freeport Zonepursuant to Sections 12(b) and 12(c) of the Act and Sections
43, 45, 46 and 49 of the Implementing Rules. All importations by the Company are exempt
from inspection by the Societe Generale de Surveillance if such importations are delivered
immediately to and for use solely within the Subic Bay Freeport Zone. (Emphasis supplied)
Congress subsequently passed R.A. No. 9334, however, effective on January 1, 2005,7 Section 6 of
which provides:
Sec. 6. Section 131 of the National Internal Revenue Code of 1977, as amended, is hereby
amended to read as follows:
Sec. 131. Payment of Excise Taxes on Imported Articles.
(A) Persons Liable. Excise taxes on imported articles shall be paid by the owner or importer
to the Customs Officers, conformably with the regulations of the Department of Finance and
before the release of such articles from the customshouse or by the person who is found in
possession of articles which are exempt from excise taxes other than those legally entitled to
exemption.
In the case of tax-free articles brought or imported into the Philippines by persons, entities or
agencies exempt from tax which are subsequently sold, transferred or exchanged in the
Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered
the importers thereof, and shall be liable for the duty and internal revenue tax due on such
importation.
The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into
the Philippines, even if destined for tax and duty free shops, shall be subject to all
applicable taxes, duties, charges, including excise taxes due thereon. This shall apply
to cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly
into the duly chartered or legislated freeports of the Subic Economic Freeport Zone,
created under Republic Act No. 7227; x x x and such other freeports as may hereafter be
established or created by law: Provided, further, That importations of cigars and cigarettes,
distilled spirits, fermented liquors and wines made directly by a government-owned and
operated duty-free shop, like the Duty Free Philippines (DFP), shall be exempted from all
applicable duties only: x x x Provided, finally, That the removal and transfer of tax and duty-
free goods, products, machinery, equipment and other similar articles other than cigars and
cigarettes, distilled spirits, fermented liquors and wines, from one Freeport to another Freeport,
shall not be deemed an introduction into the Philippine customs territory. x x x. (Emphasis and
underscoring supplied)
On the basis of Section 6 of R.A. No. 9334, SBMA issued on January 10, 2005 a
Memorandum8 declaring that effective January 1, 2005, all importations of cigars, cigarettes, distilled
spirits, fermented liquors and wines into the SBF, including those intended to be transshipped to other
free ports in the Philippines, shall be treated as ordinary importations subject to all applicable taxes,
duties and charges, including excise taxes.
Meanwhile, on February 3, 2005, former Bureau of Internal Revenue (BIR) Commissioner Guillermo L.
Parayno, Jr. requested then Customs Commissioner George M. Jereos to immediately collect the
excise tax due on imported alcohol and tobacco products brought to the Duty Free Philippines (DFP)
and Freeport zones.9
Accordingly, the Collector of Customs of the port of Subic directed the SBMA Administrator to require
payment of all appropriate duties and taxes on all importations of cigars and cigarettes, distilled spirits,
fermented liquors and wines; and for all transactions involving the said items to be covered from then on
by a consumption entry and no longer by a warehousing entry. 10
On February 7, 2005, SBMA issued a Memorandum11 directing the departments concerned to require
locators/importers in the SBF to pay the corresponding duties and taxes on their importations of cigars,
cigarettes, liquors and wines before said items are cleared and released from the freeport. However,
certain SBF locators which were "exclusively engaged in the transshipment of cigarette products for
foreign destinations" were allowed by the SBMA to process their import documents subject to their
submission of an Undertaking with the Bureau of Customs.12
On February 15, 2005, private respondents wrote the offices of respondent Collector of Customs and
the SBMA Administrator requesting for a reconsideration of the directives on the imposition of duties
and taxes, particularly excise taxes, on their shipments of cigars, cigarettes, wines and
liquors.13 Despite these letters, however, they were not allowed to file any warehousing entry for their
shipments.
Thus, private respondent enterprises, through their representatives, brought before the RTC of
Olongapo City a special civil action for declaratory relief 14 to have certain provisions of R.A. No. 9334
declared as unconstitutional, which case was docketed as Civil Case No. 102-0-05.
In the main, private respondents submitted that (1) R.A. No. 9334 should not be interpreted as altering,
modifying or amending the provisions of R.A. No. 7227 because repeals by implication are not favored;
(2) a general law like R.A. No. 9334 cannot amend R.A. No. 7727, which is a special law; and (3) the
assailed law violates the one bill-one subject rule embodied in Section 26(1), Article VI15 of the
Constitution as well as the constitutional proscription against the impairment of the obligation of
contracts.16
Alleging that great and irreparable loss and injury would befall them as a consequence of the imposition
of taxes on alcohol and tobacco products brought into the SBF, private respondents prayed for the
issuance of a writ of preliminary injunction and/or Temporary Restraining Order (TRO) and preliminary
mandatory injunction to enjoin the directives of herein petitioners.
Petitioners duly opposed the private respondents prayer for the issuance of a writ of preliminary
injunction and/or TRO, arguing that (1) tax exemptions are not presumed and even when granted, are
strictly construed against the grantee; (2) an increase in business expense is not the injury
contemplated by law, it being a case of damnum absque injuria; and (3) the drawback mechanism
established in the law clearly negates the possibility of the feared injury.17
Petitioners moreover pointed out that courts are enjoined from issuing a writ of injunction and/or TRO on
the grounds of an alleged nullity of a law, ordinance or administrative regulation or circular or in a
manner that would effectively dispose of the main case. Taxes, they stressed, are the lifeblood of the
government and their prompt and certain availability is an imperious need. They maintained that greater
injury would be inflicted on the public should the writ be granted.
On May 4, 2005, the court a quo granted private respondents application for the issuance of a writ of
preliminary injunction, after it found that the essential requisites for the issuance of a preliminary
injunction were present.
As investors duly licensed to operate inside the SBF, the trial court declared that private respondents
were entitled to enjoy the benefits of tax incentives under R.A. No. 7227, particularly the exemption from
local and national taxes under Section 12(c); the aforecited provision of R.A. No. 7227, coupled with
private respondents Certificates of Registration and Tax Exemption from the SBMA, vested in them a
clear and unmistakable right or right in esse that would be violated should R.A. No. 9334 be
implemented; and the invasion of such right is substantial and material as private respondents would be
compelled to pay more than what they should by way of taxes to the national government.
The trial court thereafter ruled that the prima facie presumption of validity of R.A. No. 9334 had been
overcome by private respondents, it holding that as a partial amendment of the National Internal
Revenue Code (NIRC) of 1997,18 as amended, R.A. No. 9334 is a general law that could not prevail
over a special statute like R.A. No. 7227 notwithstanding the fact that the assailed law is of later
effectivity.
The trial court went on to hold that the repealing provision of Section 10 of R.A. No. 9334 does not
expressly mention the repeal of R. A. No. 7227, hence, its repeal can only be an implied repeal, which is
not favored; and since R.A. No. 9334 imposes new tax burdens, whatever doubts arising therefrom
should be resolved against the taxing authority and in favor of the taxpayer.
The trial court furthermore held that R.A. No. 9334 violates the terms and conditions of private
respondents subsisting contracts with SBMA, which are embodied in their Certificates of Registration
and Exemptions in contravention of the constitutional guarantee against the impairment of contractual
obligations; that greater damage would be inflicted on private respondents if the writ of injunction is not
issued as compared to the injury that the government and the general public would suffer from its
issuance; and that the damage that private respondents are bound to suffer once the assailed statute is
implemented including the loss of confidence of their foreign principals, loss of business opportunity
and unrealized income, and the danger of closing down their businesses due to uncertainty of continued
viability cannot be measured accurately by any standard.
With regard to the rule that injunction is improper to restrain the collection of taxes under Section
21819 of the NIRC, the trial court held that what is sought to be enjoined is not per se the collection of
taxes, but the implementation of a statute that has been found preliminarily to be unconstitutional.
Additionally, the trial court pointed out that private respondents taxes have not yet been assessed, as
they have not filed consumption entries on all their imported tobacco and alcohol products, hence, their
duty to pay the corresponding excise taxes and the concomitant right of the government to collect the
same have not yet materialized.
On May 11, 2005, the trial court issued a Writ of Preliminary Injunction directing petitioners and the
SBMA Administrator as well as all persons assisting or acting for and in their behalf "1) to allow the
operations of [private respondents] in accordance with R.A. No. 7227; 2) to allow [them] to file
warehousing entries instead of consumption entries as regards their importation of tobacco and alcohol
products; and 3) to cease and desist from implementing the pertinent provisions of R.A. No. 9334 by not
compelling [private respondents] to immediately pay duties and taxes on said alcohol and tobacco
products as a condition to their removal from the port area for transfer to the warehouses of [private
respondents]."20
The injunction bond was approved at One Million pesos (P1,000,000).21
Without moving for reconsideration, petitioners have come directly to this Court to question the May 4,
2005 Order and the Writ of Preliminary Injunction which, they submit, were issued by public respondent
with grave abuse of discretion amounting to lack or excess of jurisdiction.
In particular, petitioners contend that public respondent peremptorily and unjustly issued the injunctive
writ despite the absence of the legal requisites for its issuance, resulting in heavy government revenue
losses.22 They emphatically argue that since the tax exemption previously enjoyed by private
respondents has clearly been withdrawn by R.A. No. 9334, private respondents do not have any right in
esse nor can they invoke legal injury to stymie the enforcement of R.A. No. 9334.
Furthermore, petitioners maintain that in issuing the injunctive writ, public respondent showed manifest
bias and prejudice and prejudged the merits of the case in utter disregard of the caveat issued by this
Court in Searth Commodities Corporation, et al. v. Court of Appeals23 and Vera v. Arca.24
Regarding the P1 million injunction bond fixed by public respondent, petitioners argue that the same is
grossly disproportionate to the damages that have been and continue to be sustained by the Republic.
In their Reply25 to private respondents Comment, petitioners additionally plead public respondents bias
and partiality in allowing the motions for intervention of a number of corporations 26 without notice to
them and in disregard of their present pending petition for certiorari and prohibition before this Court.
The injunction bond filed by private respondent Indigo Distribution Corporation, they stress, is not even
sufficient to cover all the original private respondents, much less, intervenor-corporations.
The petition is partly meritorious.
At the outset, it bears emphasis that only questions relating to the propriety of the issuance of the May
4, 2005 Order and the Writ of Preliminary Injunction are properly within the scope of the present petition
and shall be so addressed in order to determine if public respondent committed grave abuse of
discretion. The arguments raised by private respondents which pertain to the constitutionality of R.A. (A) Persons Liable. Excise taxes on imported (A) Persons Liable. Excise taxes on imported
No. 9334 subject matter of the case pending litigation before the trial court have no bearing in resolving articles shall be paid by the owner or importer to articles shall be paid by the owner or importer
the present petition. the Customs Officers, conformably with the the Customs Officers, conformably with the
regulations of the Department of Finance and regulations of the Department of Finance and
Section 3 of Rule 58 of the Revised Rules of Court provides: before the release of such articles from the before the release of such articles from the
customs house or by the person who is found in customs house or by the person who is found i
possession of articles which are exempt from possession of articles which are exempt from
SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be excise taxes other than those legally entitled to excise taxes other than those legally entitled to
granted when it is established. exemption. exemption.

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief In the case of tax-free articles brought or In the case of tax-free articles brought or
consists in restraining the commission or continuance of the act or acts complained of, or in imported into the Philippines by persons, imported into the Philippines by persons,
requiring the performance of an act or acts, either for a limited period or perpetually; entities or agencies exempt from tax which are entities or agencies exempt from tax which are
subsequently sold, transferred or exchanged in subsequently sold, transferred or exchanged in
(b) That the commission, continuance or non-performance of the act or acts complained of the Philippines to non-exempt persons or the Philippines to non-exempt persons or
during the litigation would probably work injustice to the applicant; or entities, the purchasers or recipients shall be entities, the purchasers or recipients shall be
considered the importers thereof, and shall be considered the importers thereof, and shall be
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is liable for the duty and internal revenue tax due liable for the duty and internal revenue tax due
procuring or suffering to be done, some act or acts probably in violation of the rights of the on such importation. on such importation.
applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual. The provision of any special or general law to The provision of any special or general law
the contrary notwithstanding, the importation of to the contrary notwithstanding, the
For a writ of preliminary injunction to issue, the plaintiff must be able to establish that (1) there is a clear cigars and cigarettes, distilled spirits, fermented importation of cigars and cigarettes,
and unmistakable right to be protected, (2) the invasion of the right sought to be protected is material liquors and wines into the Philippines, even if distilled spirits, fermented liquors and wine
and substantial, and (3) there is an urgent and paramount necessity for the writ to prevent serious destined for tax and duty free shops, shall be into the Philippines, even if destined for tax
damage.27 subject to all applicable taxes, duties, charges, and duty free shops, shall be subject to all
including excise taxes due thereon. Provided, applicable taxes, duties, charges, including
however, That this shall not apply to cigars excise taxes due thereon. This shall apply t
Conversely, failure to establish either the existence of a clear and positive right which should be and cigarettes, fermented spirits and wines cigars and cigarettes, distilled spirits,
judicially protected through the writ of injunction, or of the acts or attempts to commit any act which brought directly into the duly chartered or fermented liquors and wines brought
endangers or tends to endanger the existence of said right, or of the urgent need to prevent serious legislated freeports of the Subic Economic directly into the duly chartered or legislated
damage, is a sufficient ground for denying the preliminary injunction. 28 Freeport Zone, created under Republic Act freeports of the Subic Economic Freeport
No. 7227; the Cagayan Special Economic Zone, created under Republic Act No. 7227;
It is beyond cavil that R.A. No. 7227 granted private respondents exemption from local and national Zone and Freeport, created under Republic the Cagayan Special Economic Zone and
taxes, including excise taxes, on their importations of general merchandise, for which reason they Act No. 7922; and the Zamboanga City Special Freeport, created under Republic Act No.
enjoyed tax-exempt status until the effectivity of R.A. No. 9334. Economic Zone, created under Republic Act 7922; and the Zamboanga City Special
No. 7903, and are not transshipped to any other Economic Zone, created under Republic Act
By subsequently enacting R.A. No. 9334, however, Congress expressed its intention to withdraw private port in the Philippines: Provided, further, That No. 7903, and such other freeports as may
respondents tax exemption privilege on their importations of cigars, cigarettes, distilled spirits, importations of cigars and cigarettes, distilled hereafter be established or created by
fermented liquors and wines. Juxtaposed to show this intention are the respective provisions of Section spirits, fermented liquors and wines made law: Provided, further, That importations of
131 of the NIRC before and after its amendment by R.A. No. 9334: directly by a government-owned and operated cigars and cigarettes, distilled spirits, fermente
duty-free shop, like the Duty Free Philippines liquors and wines made directly by a
(DFP), shall be exempted from all applicable government-owned and operated duty-free
x x x x. duties, charges, including excise tax due shop, like the Duty Free Philippines (DFP), sha
thereon; Provided still further, That such articles be exempted from all applicable duties
Sec. 131 of NIRC before R.A. No. 9334 Sec. 131, as amended by R.A. No. 9334 directly imported by a government-owned and only: Provided still further, That such articles
Sec. 131. Payment of Excise Taxes on Sec. 131. Payment of Excise Taxes on operated duty-free shop, like the Duty-Free directly imported by a government-owned and
Imported Articles. Imported Articles. Philippines, shall be labeled "tax and duty-free" operated duty-free shop, like the Duty-Free
and "not for resale": Provided, still further, That Philippines, shall be labeled "tax and duty-free
if such articles brought into the duly chartered and "not for resale": Provided, finally, That the
or legislated freeports under Republic Acts Nos. removal and transfer of tax and duty-free
 7227, 7922 and 7903 are subsequently
introduced into the Philippine customs territory,
then such articles shall, upon such introduction,
be deemed imported into the Philippines and
shall be subject to all imposts and excise taxes
provided herein and other statutes: Provided,
finally, That the removal and transfer of tax and
duty-free goods, products, machinery,
equipment and other similar articles, from one
freeport to another freeport, shall not be
deemed an introduction into the Philippine
customs territory.
x x x x.
goods, products, machinery, equipment and Congress, in the legitimate exercise of its lawmaking powers, can enact a law withdrawing a tax
other similar articles other than cigars and exemption just as efficaciously as it may grant the same under Section 28(4) of Article VI38 of the
cigarettes, distilled spirits, fermented liquors Constitution. There is no gainsaying therefore that Congress can amend Section 131 of the NIRC in a
and wines, from one Freeport to another manner it sees fit, as it did when it passed R.A. No. 9334.
Freeport, shall not be deemed an introduction
into the Philippine customs territory. Fifth. The rights granted under the Certificates of Registration and Tax Exemption of private
respondents are not absolute and unconditional as to constitute rights in esse those clearly founded
x x x x. on or granted by law or is enforceable as a matter of law. 39
These certificates granting private respondents a "permit to operate" their respective businesses are in
the nature of licenses, which the bulk of jurisprudence considers as neither a property nor a property
right.40 The licensee takes his license subject to such conditions as the grantor sees fit to impose,
including its revocation at pleasure.41 A license can thus be revoked at any time since it does not confer
an absolute right.42

(Emphasis and underscoring supplied)
To note, the old Section 131 of the NIRC expressly provided that all taxes, duties, charges, including
excise taxes shall not apply to importations of cigars, cigarettes, fermented spirits and wines brought
directly into the duly chartered or legislated freeports of the SBF.
On the other hand, Section 131, as amended by R.A. No. 9334, now provides that such taxes, duties
and charges, including excise taxes, shall apply to importation of cigars and cigarettes, distilled spirits,
fermented liquors and wines into the SBF.
Without necessarily passing upon the validity of the withdrawal of the tax exemption privileges of private
respondents, it behooves this Court to state certain basic principles and observations that should throw
light on the propriety of the issuance of the writ of preliminary injunction in this case.
First. Every presumption must be indulged in favor of the constitutionality of a statute.29 The burden of
proving the unconstitutionality of a law rests on the party assailing the law. 30 In passing upon the validity
of an act of a co-equal and coordinate branch of the government, courts must ever be mindful of the
time-honored principle that a statute is presumed to be valid.
Second. There is no vested right in a tax exemption, more so when the latest expression of legislative
intent renders its continuance doubtful. Being a mere statutory privilege,31 a tax exemption may be
modified or withdrawn at will by the granting authority. 32
To state otherwise is to limit the taxing power of the State, which is unlimited, plenary, comprehensive
and supreme. The power to impose taxes is one so unlimited in force and so searching in extent, it is
subject only to restrictions which rest on the discretion of the authority exercising it.33
Third. As a general rule, tax exemptions are construed strictissimi juris against the taxpayer and liberally
in favor of the taxing authority.34 The burden of proof rests upon the party claiming exemption to prove
that it is in fact covered by the exemption so claimed. 35 In case of doubt, non-exemption is favored.36
Fourth. A tax exemption cannot be grounded upon the continued existence of a statute which precludes
its change or repeal.37 Flowing from the basic precept of constitutional law that no law is irrepealable,
While the tax exemption contained in the Certificates of Registration of private respondents may have
been part of the inducement for carrying on their businesses in the SBF, this exemption, nevertheless,
is far from being contractual in nature in the sense that the non-impairment clause of the Constitution
can rightly be invoked.43
Sixth. Whatever right may have been acquired on the basis of the Certificates of Registration and Tax
Exemption must yield to the States valid exercise of police power. 44 It is well to remember that taxes
may be made the implement of the police power.45
It is not difficult to recognize that public welfare and necessity underlie the enactment of R.A. No. 9334.
As petitioners point out, the now assailed provision was passed to curb the pernicious practice of some
unscrupulous business enterprises inside the SBF of using their tax exemption privileges for smuggling
purposes. Smuggling in whatever form is bad enough; it is worse when the same is allegedly
perpetrated, condoned or facilitated by enterprises hiding behind the cloak of their tax exemption
privileges.
Seventh. As a rule, courts should avoid issuing a writ of preliminary injunction which would in effect
dispose of the main case without trial. 46 This rule is intended to preclude a prejudgment of the main
case and a reversal of the rule on the burden of proof since by issuing the injunctive writ, the court
would assume the proposition that petitioners are inceptively duty bound to prove. 47
Eighth. A court may issue a writ of preliminary injunction only when the petitioner assailing a statute has
made out a case of unconstitutionality or invalidity strong enough, in the mind of the judge, to overcome
the presumption of validity, in addition to a showing of a clear legal right to the remedy sought. 48
Thus, it is not enough that petitioners make out a case of unconstitutionality or invalidity to overcome
the prima faciepresumption of validity of a statute; they must also be able to show a clear legal right that
ought to be protected by the court. The issuance of the writ is therefore not proper when the
complainants right is doubtful or disputed. 49
Ninth. The feared injurious effects of the imposition of duties, charges and taxes on imported cigars,
cigarettes, distilled spirits, fermented liquors and wines on private respondents businesses cannot
possibly outweigh the dire consequences that the non-collection of taxes, not to mention the unabated
smuggling inside the SBF, would wreak on the government. Whatever damage would befall private
respondents must perforce take a back seat to the pressing need to curb smuggling and raise revenues
for governmental functions.
All told, while the grant or denial of an injunction generally rests on the sound discretion of the lower
court, this Court may and should intervene in a clear case of abuse. 50
One such case of grave abuse obtained in this case when public respondent issued his Order of May 4,
2005 and the Writ of Preliminary Injunction on May 11, 200551 despite the absence of a clear and
unquestioned legal right of private respondents.
In holding that the presumption of constitutionality and validity of R.A. No. 9334 was overcome by
private respondents for the reasons public respondent cited in his May 4, 2005 Order, he disregarded
the fact that as a condition sine qua non to the issuance of a writ of preliminary injunction, private
respondents needed also to show a clear legal right that ought to be protected. That requirement is not
satisfied in this case.
To stress, the possibility of irreparable damage without proof of an actual existing right would not justify
an injunctive relief.52
Besides, private respondents are not altogether lacking an appropriate relief under the law. As
petitioners point out in their Petition53 before this Court, private respondents may avail themselves of a
tax refund or tax credit should R.A. No. 9334 be finally declared invalid.
Indeed, Sections 20454 and 22955 of the NIRC provide for the recovery of erroneously or illegally
collected taxes which would be the nature of the excise taxes paid by private respondents should
Section 6 of R.A. No. 9334 be declared unconstitutional or invalid.
It may not be amiss to add that private respondents can also opt not to import, or to import less of, those
items which no longer enjoy tax exemption under R.A. No. 9334 to avoid the payment of taxes thereon.
The Court finds that public respondent had also ventured into the delicate area which courts are
cautioned from taking when deciding applications for the issuance of the writ of preliminary injunction.
Having ruled preliminarily against the prima facie validity of R.A. No. 9334, he assumed in effect the
proposition that private respondents in their petition for declaratory relief were duty bound to prove,
thereby shifting to petitioners the burden of proving that R.A. No. 9334 is not unconstitutional or invalid.
In the same vein, the Court finds public respondent to have overstepped his discretion when he
arbitrarily fixed the injunction bond of the SBF enterprises at only P1million.
The alleged sparseness of the testimony of Indigo Corporations representative 56 on the injury to be
suffered by private respondents may be excused because evidence for a preliminary injunction need not
be conclusive or complete. Nonetheless, considering the number of private respondent enterprises and
the volume of their businesses, the injunction bond is undoubtedly not sufficient to answer for the
damages that the government was bound to suffer as a consequence of the suspension of the
implementation of the assailed provisions of R.A. No. 9334.
Rule 58, Section 4(b) provides that a bond is executed in favor of the party enjoined to answer for all
damages which it may sustain by reason of the injunction. The purpose of the injunction bond is to
protect the defendant against loss or damage by reason of the injunction in case the court finally
decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly. 57
Recalling this Courts pronouncements in Olalia v. Hizon58 that:
x x x [T]here is no power the exercise of which is more delicate, which requires greater caution,
deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of
an injunction. It is the strong arm of equity that should never be extended unless to cases of
great injury, where courts of law cannot afford an adequate or commensurate remedy in
damages.
Every court should remember that an injunction is a limitation upon the freedom of action of the
defendant and should not be granted lightly or precipitately. It should be granted only when the
court is fully satisfied that the law permits it and the emergency demands it,
it cannot be overemphasized that any injunction that restrains the collection of taxes, which is the
inevitable result of the suspension of the implementation of the assailed Section 6 of R.A. No. 9334, is a
limitation upon the right of the government to its lifeline and wherewithal.
The power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the people.59 That the enforcement of tax laws and the
collection of taxes are of paramount importance for the sustenance of government has been repeatedly
observed. Taxes being the lifeblood of the government that should be collected without unnecessary
hindrance,60 every precaution must be taken not to unduly suppress it.
Whether this Court must issue the writ of prohibition, suffice it to stress that being possessed of the
power to act on the petition for declaratory relief, public respondent can proceed to determine the merits
of the main case. To halt the proceedings at this point may be acting too prematurely and would not be
in keeping with the policy that courts must decide controversies on the merits.
Moreover, lacking the requisite proof of public respondents alleged partiality, this Court has no ground
to prohibit him from proceeding with the case for declaratory relief. For these reasons, prohibition does
not lie.
WHEREFORE, the Petition is PARTLY GRANTED. The writ of certiorari to nullify and set aside the
Order of May 4, 2005 as well as the Writ of Preliminary Injunction issued by respondent Judge Caguioa
on May 11, 2005 is GRANTED. The assailed Order and Writ of Preliminary Injunction are hereby
declared NULL AND VOID and accordingly SET ASIDE. The writ of prohibition prayed for is,
however, DENIED.
SO ORDERED.
 SECOND DIVISION After pre-trial, the Lazaro Law Firm entered its appearance as counsel for Urdaneta City and
filed an Omnibus Motion[7] with prayer to (1) withdraw Urdaneta Citys Answer; (2) drop Urdaneta City as
ASEAN PACIFIC PLANNERS, APP G.R. No. 162525 defendant and be joined as plaintiff; (3) admit Urdaneta Citys complaint; and (4) conduct a new pre-
CONSTRUCTION AND trial. Urdaneta City allegedly wanted to rectify its position and claimed that inadequate legal representation
DEVELOPMENT CORPORATION* caused its inability to file the necessary pleadings in representation of its interests.
AND CESAR GOCO, Present:
Petitioners, In its Order[8] dated September 11, 2002, the Regional Trial Court (RTC) of Urdaneta City,
QUISUMBING, J., Chairperson, Pangasinan, Branch 45, admitted the entry of appearance of the Lazaro Law Firm and granted the
CARPIO MORALES, withdrawal of appearance of the City Prosecutor. It also granted the prayer to drop the city as defendant
- versus - TINGA, and admitted its complaint for consolidation with Del Castillos complaint, and directed the defendants to
VELASCO, JR., and answer the citys complaint.
BRION, JJ.
CITY OF URDANETA, CEFERINO J. CAPALAD, WALDO In its February 14, 2003 Order,[9] the RTC denied reconsideration of the September 11,
C. DEL CASTILLO, NORBERTO M. DEL PRADO, JESUS Promulgated: 2002 Order. It also granted Capalads motion to expunge all pleadings filed by Atty. Sahagun in his
A. ORDONO AND AQUILINO MAGUISA,** behalf. Capalad was dropped as defendant, and his complaint filed by Atty. Jorito C. Peralta was admitted
Respondents. September 23, 2008 and consolidated with the complaints of Del Castillo and Urdaneta City. The RTC also directed APP and
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x APPCDC to answer Capalads complaint.
DECISION
QUISUMBING, J.: Aggrieved, APP and APPCDC filed a petition for certiorari before the Court of Appeals. In its
April 15, 2003 Resolution, the Court of Appeals dismissed the petition on the following grounds: (1)
The instant petition seeks to set aside the Resolutions [1] dated April 15, 2003 and February 4, defective verification and certification of non-forum shopping, (2) failure of the petitioners to submit
2004 of the Court of Appeals in CA-G.R. SP No. 76170. certified true copies of the RTCs assailed orders as mere photocopies were submitted, and (3) lack of
This case stemmed from a Complaint[2] for annulment of contracts with prayer for preliminary written explanation why service of the petition to adverse parties was not personal.[10] The Court of
prohibitory injunction and temporary restraining order filed by respondent Waldo C. Del Castillo, in his Appeals also denied APP and APPCDCs motion for reconsideration in its February 4, 2004 Resolution.[11]
capacity as taxpayer, against respondents City of Urdaneta and Ceferino J. Capalad doing business under Hence, this petition, which we treat as one for review on certiorari under Rule 45, the proper remedy
the name JJEFWA Builders, and petitioners Asean Pacific Planners (APP) represented by Ronilo G. Goco to assail the resolutions of the Court of Appeals.[12]
and Asean Pacific Planners Construction and Development Corporation (APPCDC) represented by Cesar
D. Goco. Petitioners argue that:
I.
Del Castillo alleged that then Urdaneta City Mayor Rodolfo E. Parayno entered into five contracts THE APPELLATE COURT PALPABLY ERRED AND GRAVELY ABUSED ITS
for the preliminary design, construction and management of a four-storey twin cinema commercial center JUDICIAL PREROGATIVES BY SUMMARILY DISMISSING THE PETITION ON THE
and hotel involving a massive expenditure of public funds amounting to P250 million, funded by a loan BASIS OF PROCEDURAL TECHNICALITIES DESPITE SUBSTANTIAL
from the Philippine National Bank (PNB). For minimal work, the contractor was allegedly paid P95 COMPLIANCE [THEREWITH]
million. Del Castillo also claimed that all the contracts are void because the object is outside the commerce II.
of men. The object is a piece of land belonging to the public domain and which remains devoted to a THE TRIAL COURT PALPABLY ERRED AND GRAVELY ABUSED ITS JUDICIAL
public purpose as a public elementary school. Additionally, he claimed that the contracts, from the PREROGATIVES BY CAPRICIOUSLY
feasibility study to management and lease of the future building, are also void because they were all (a.) Entertaining the taxpayers suits of private respondents del Castillo, del Prado,
awarded solely to the Goco family. Ordono and Maguisa despite their clear lack of legal standing to file the same.
(b.) Allowing the entry of appearance of a private law firm to represent the City
In their Answer,[3] APP and APPCDC claimed that the contracts are valid. Urdaneta City Mayor of Urdaneta despite the clear statutory and jurisprudential prohibitions thereto.
Amadeo R. Perez, Jr., who filed the citys Answer,[4] joined in the defense and asserted that the contracts (c.) Allowing Ceferino J. Capalad and the City of Urdaneta to switch sides, by permitting
were properly executed by then Mayor Parayno with prior authority from the Sangguniang the withdrawal of their respective answers and admitting their complaints as
Panlungsod. Mayor Perez also stated that Del Castillo has no legal capacity to sue and that the complaint well as allowing the appearance of Atty. Jorito C. Peralta to represent Capalad
states no cause of action. For respondent Ceferino J. Capalad, Atty. Oscar C. Sahagun filed an although Atty. Oscar C. Sahagun, his counsel of record, had not withdrawn
Answer[5] with compulsory counterclaim and motion to dismiss on the ground that Del Castillo has no from the case, in gross violation of well settled rules and case law on the
legal standing to sue. matter.[13]

Respondents Norberto M. Del Prado, Jesus A. Ordono and Aquilino Maguisa became parties to We first resolve whether the Court of Appeals erred in denying reconsideration of its April 15,
the case when they jointly filed, also in their capacity as taxpayers, a Complaint-in-Intervention[6] adopting 2003 Resolution despite APP and APPCDCs subsequent compliance.
the allegations of Del Castillo.
 Petitioners argue that the Court of Appeals should not have dismissed the petition on mere
technicalities since they have attached the proper documents in their motion for reconsideration and
substantially complied with the rules.
Respondent Urdaneta City maintains that the Court of Appeals correctly dismissed the petition
because Cesar Goco had no proof he was authorized to sign the certification of non-forum shopping in behalf
of APPCDC.
Indeed, Cesar Goco had no proof of his authority to sign the verification and certification of non-
forum shopping of the petition for certiorari filed with the Court of Appeals.[14]Thus, the Court of Appeals
is allowed by the rules the discretion to dismiss the petition since only individuals vested with authority by
a valid board resolution may sign the certificate of non-forum shopping in behalf of a corporation. Proof
of said authority must be attached; otherwise, the petition is subject to dismissal. [15]
However, it must be pointed out that in several cases,[16] this Court had considered as substantial
compliance with the procedural requirements the submission in the motion for reconsideration of the
authority to sign the verification and certification, as in this case. The Court notes that the attachments in
the motion for reconsideration show that on March 5, 2003, the Board of Directors of APPCDC authorized
Cesar Goco to institute the petition before the Court of Appeals. [17] On March 22, 2003, Ronilo Goco doing
business under the name APP, also appointed his father, Cesar Goco, as his attorney-in-fact to file the
petition.[18] When the petition was filed on March 26, 2003[19] before the Court of Appeals, Cesar Goco
was duly authorized to sign the verification and certification except that the proof of his authority was not
submitted together with the petition.
Similarly, petitioners submitted in the motion for reconsideration certified true copies of the
assailed RTC orders and we may also consider the same as substantial compliance. [20]Petitioners also
included in the motion for reconsideration their explanation[21] that copies of the petition were personally
served on the Lazaro Law Firm and mailed to the RTC and Atty. Peralta because of distance. The affidavit
of service[22] supported the explanation. Considering the substantial issues involved, it was thus error for
the appellate court to deny reinstatement of the petition.
Having discussed the procedural issues, we shall now proceed to address the substantive issues raised by
petitioners, rather than remand this case to the Court of Appeals. In our view, the issue, simply put, is: Did the
RTC err and commit grave abuse of discretion in (a) entertaining the taxpayers suits; (b) allowing a private law
firm to represent Urdaneta City; (c) allowing respondents Capalad and Urdaneta City to switch from being
defendants to becoming complainants; and (d) allowing Capalads change of attorneys?
On the first point at issue, petitioners argue that a taxpayer may only sue where the act
complained of directly involves illegal disbursement of public funds derived from taxation.The allegation
of respondents Del Castillo, Del Prado, Ordono and Maguisa that the construction of the project is funded
by the PNB loan contradicts the claim regarding illegal disbursement since the funds are not directly
derived from taxation.
Respondents Del Castillo, Del Prado, Ordono and Maguisa counter that their personality to sue
was not raised by petitioners APP and APPCDC in their Answer and that this issue was not even
discussed in the RTCs assailed orders.
Petitioners contentions lack merit. The RTC properly allowed the taxpayers suits. In Public
Interest Center, Inc. v. Roxas,[23] we held:
In the case of taxpayers suits, the party suing as a taxpayer must prove that he
has sufficient interest in preventing the illegal expenditure of money raised by
taxation. Thus, taxpayers have been allowed to sue where there is a claim that public
funds are illegally disbursed or that public money is being deflected to any improper
purpose, or that public funds are wasted through the enforcement of an invalid or
unconstitutional law.
xxxx
Petitioners allegations in their Amended Complaint that the loan contracts
entered into by the Republic and NPC are serviced or paid through a disbursement of
public funds are not disputed by respondents, hence, they are invested with personality
to institute the same.[24]
Here, the allegation of taxpayers Del Castillo, Del Prado, Ordono and Maguisa that P95 million
of the P250 million PNB loan had already been paid for minimal work is sufficient allegation of
overpayment, of illegal disbursement, that invests them with personality to sue. Petitioners do not dispute
the allegation as they merely insist, albeit erroneously, that public funds are not involved. Under Article
1953[25] of the Civil Code, the city acquired ownership of the money loaned from PNB, making the money
public fund. The city will have to pay the loan by revenues raised from local taxation or by its internal
revenue allotment.
In addition, APP and APPCDCs lack of objection in their Answer on the personality to sue of the
four complainants constitutes waiver to raise the objection under Section 1, Rule 9 of the Rules of
Court.[26]
On the second point, petitioners contend that only the City Prosecutor can
represent Urdaneta City and that law and jurisprudence prohibit the appearance of the Lazaro Law Firm
as the citys counsel.
The Lazaro Law Firm, as the citys counsel, counters that the city was inutile defending its cause
before the RTC for lack of needed legal advice. The city has no legal officer and both City Prosecutor and
Provincial Legal Officer are busy. Practical considerations also dictate that the city and Mayor Perez must
have the same counsel since he faces related criminal cases.Citing Mancenido v. Court of Appeals,[27] the
law firm states that hiring private counsel is proper where rigid adherence to the law on representation would
deprive a party of his right to redress a valid grievance.[28]
We cannot agree with the Lazaro Law Firm. Its appearance as Urdaneta Citys counsel is against
the law as it provides expressly who should represent it. The City Prosecutor should continue to represent
the city.
Section 481(a)[29] of the Local Government Code (LGC) of 1991[30] mandates the appointment of
a city legal officer. Under Section 481(b)(3)(i)[31] of the LGC, the city legal officer is supposed to represent
the city in all civil actions, as in this case, and special proceedings wherein the city or any of its officials is a
party. In Ramos v. Court of Appeals,[32] we cited that under Section 19[33] of Republic Act No. 5185,[34] city
governments may already create the position of city legal officer to whom the function of the city fiscal (now
prosecutor) as legal adviser and officer for civil cases of the city shall be transferred.[35] In the case
of Urdaneta City, however, the position of city legal officer is still vacant, although its charter[36] was enacted
way back in 1998.
Because of such vacancy, the City Prosecutors appearance as counsel of Urdaneta City is
proper. The City Prosecutor remains as the citys legal adviser and officer for civil cases, a function that could
not yet be transferred to the city legal officer. Under the circumstances, the RTC should not have allowed
the entry of appearance of the Lazaro Law Firm vice the City Prosecutor. Notably, the citys Answer was
sworn to before the City Prosecutor by Mayor Perez. The City Prosecutor prepared the citys pre-trial brief
and represented the city in the pre-trial conference. No question was raised against the City Prosecutors
actions until the Lazaro Law Firm entered its appearance and claimed that the city lacked adequate legal
representation.
Moreover, the appearance of the Lazaro Law Firm as counsel for Urdaneta City is against the law. Section
481(b)(3)(i) of the LGC provides when a special legal officer may be employed, that is, in actions or proceedings
where a component city or municipality is a party adverse to the provincial government. But this case is not
between Urdaneta City and the Province of Pangasinan. And we have consistently held that a local government
unit cannot be represented by private counsel[37] as only public officers may act for and in behalf of public
entities and public funds should not be spent to hire private lawyers.[38] Pro bono representation in collaboration
with the municipal attorney and prosecutor has not even been allowed.[39]
Neither is the law firms appearance justified under the instances listed in Mancenido when local
government officials can be represented by private counsel, such as when a claim for damages could
result in personal liability. No such claim against said officials was made in this case. Note that before it
joined the complainants, the city was the one sued, not its officials.That the firm represents Mayor Perez
in criminal cases, suits in his personal capacity, [40] is of no moment.
On the third point, petitioners claim that Urdaneta City is estopped to reverse admissions in its
Answer that the contracts are valid and, in its pre-trial brief, that the execution of the contracts was in
good faith.
Accordingly, we impose upon Attys. Oscar C. Sahagun and Antonio B. Escalante a fine
of P2,000[48] each payable to this Court within ten days from notice and we remind them that they should
observe and maintain the respect due to the Court of Appeals and judicial officers;[49] abstain from offensive
language before the courts;[50] and not attribute to a Judge motives not supported by the record.[51] Similar acts
in the future will be dealt with more severely.
WHEREFORE, we (1) GRANT the petition; (2) SET ASIDE the Resolutions dated April 15,
2003 and February 4, 2004 of the Court of Appeals in CA-G.R. SP No. 76170; (3) DENY the entry of
appearance of the Lazaro Law Firm in Civil Case No. U-7388 and EXPUNGE all pleadings it filed as
counsel of Urdaneta City; (4) ORDER the City Prosecutor to represent Urdaneta City in Civil Case No. U-
7388; (5) AFFIRM the RTC in admitting the complaint of Capalad; and (6) PROHIBIT Atty. Oscar C.
Sahagun from representing Capaladand EXPUNGE all pleadings that he filed in behalf of Capalad.
Let the records of Civil Case No. U-7388 be remanded to the trial court for further proceedings.
Finally, we IMPOSE a fine of P2,000 each on Attys. Oscar C. Sahagun and Antonio B. Escalante
for their use of offensive language, payable to this Court within ten (10) days from receipt of this Decision.
SO ORDERED.

We disagree. The court may allow amendment of pleadings.

Section 5,[41] Rule 10 of the Rules of Court pertinently provides that if evidence is objected to at the
trial on the ground that it is not within the issues raised by the pleadings, the court may allow the pleadings
to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. Objections need not even arise in this case since the Pre-trial
Order[42] dated April 1, 2002 already defined as an issue whether the contracts are valid. Thus, what is
needed is presentation of the parties evidence on the issue. Any evidence of the city for or against the validity
of the contracts will be relevant and admissible. Note also that under Section 5, Rule 10, necessary
amendments to pleadings may be made to cause them to conform to the evidence.

In addition, despite Urdaneta Citys judicial admissions, the trial court is still given leeway to
consider other evidence to be presented for said admissions may not necessarily prevail over
documentary evidence,[43] e.g., the contracts assailed. A partys testimony in open court may also override
admissions in the Answer.[44]

As regards the RTCs order admitting Capalads complaint and dropping him as defendant, we
find the same in order. Capalad insists that Atty. Sahagun has no authority to represent him. Atty.
Sahagun claims otherwise. We note, however, that Atty. Sahagun represents petitioners who claim that
the contracts are valid. On the other hand, Capalad filed a complaint for annulment of the
contracts. Certainly, Atty. Sahagun cannot represent totally conflicting interests. Thus, we should expunge
all pleadings filed by Atty. Sahagun in behalf of Capalad.

Relatedly, we affirm the order of the RTC in allowing Capalads change of attorneys, if we can
properly call it as such, considering Capalads claim that Atty. Sahagun was never his attorney.

Before we close, notice is taken of the offensive language used by Attys. Oscar C. Sahagun and
Antonio B. Escalante in their pleadings before us and the Court of Appeals. They unfairly called the Court
of Appeals a court of technicalities[45] for validly dismissing their defectively prepared petition. They also
accused the Court of Appeals of protecting, in their view, an incompetent judge. [46] In explaining the
concededly strong language, Atty. Sahagun further indicted himself. He said that the Court of Appeals
dismissal of the case shows its impatience and readiness to punish petitioners for a perceived slight on
its dignity and such dismissal smacks of retaliation and does not augur for the cold neutrality and
impartiality demanded of the appellate court.[47]
 HIRD DIVISION
G.R. No. 144570 September 21, 2005
VIVENCIO V. JUMAMIL, Petitioners,
vs.
JOSE J. CAFE, GLICERIO L. ALERIA, RUDY G. ADLAON, DAMASCENO AGUIRRE, RAMON
PARING, MARIO ARGUELLES, ROLANDO STA. ANA, NELLIE UGDANG, PEDRO ATUEL, RUBY
BONSOBRE, RUTH FORNILLOS, DANIEL GATCHALIAN, RUBEN GUTIERREZ, JULIET
GATCHALIAN, ZENAIDA POBLETE, ARTHUR LOUDY, LILIAN LU, ISABEL MEJIA, EDUARDO
ARGUELLES, LAO SUI KIEN, SAMUEL CONSOLACION, DR. ARTURO MONTERO, DRA. LILIOSA
MONTERO, PEDRO LACIA, CIRILA LACIA, EVELYN SANGALANG, DAVID CASTILLO, ARSENIO
SARMIENTO, ELIZABETH SY, METODIO NAVASCA, HELEN VIRTUDAZO, IRENE LIMBAGA,
SYLVIA BUSTAMANTE, JUANA DACALUS, NELLIE RICAMORA, JUDITH ESPINOSA, PAZ
KUDERA, EVELYN PANES, AGATON BULICATIN, PRESCILLA GARCIA, ROSALIA OLITAO,
LUZVIMINDA AVILA, GLORIA OLAIR, LORITA MENCIAS, RENATO ARIETA, EDITHA ACUZAR,
LEONARDA VILLACAMPA, ELIAS JARDINICO, BOBINO NAMUAG, FELIMON NAMUAG, EDGAR
CABUNOC, HELEN ARGUELLES, HELEN ANG, FELECIDAD PRIETO, LUISITO GRECIA, LILIBETH
PARING, RUBEN CAMACHO, ROSALINDA LALUNA, LUZ YAP, ROGELIO LAPUT, ROSEMARIE
WEE, TACOTCHE RANAIN, AVELINO DELOS REYES and ROGASIANO OROPEZA, Respondent.
DECISION
CORONA, J.:
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Vivencio V.
Jumamil seeks to reverse the decision of the Court of Appeals dated July 24, 2000 1 in CA-G.R. CV No.
35082, the dispositive portion of which read:
With the foregoing, the assailed Decision of Branch 4, Regional Trial Court of Panabo Davao dated 26
November 1990 in Sp. Civil Action No. 89-1 is hereby AFFIRMED.2
The Regional Trial Court dismissed petitioners petition for declaratory relief with prayer for preliminary
injunction and writ of restraining order, and ordered the petitioner to pay attorneys fees in the amount
of P1,000 to each of the 57 private respondents.3
The factual antecedents follow.
In 1989, petitioner Jumamil4 filed before the Regional Trial Court (RTC) of Panabo, Davao del Norte a
petition for declaratory relief with prayer for preliminary injunction and writ of restraining order against
public respondents Mayor Jose J. Cafe and the members of the Sangguniang Bayan of Panabo, Davao
del Norte. He questioned the constitutionality of Municipal Resolution No. 7, Series of 1989 (Resolution
No. 7).
Resolution No. 7, enacting Appropriation Ordinance No. 111, provided for an initial appropriation
of P765,000 for the construction of stalls around a proposed terminal fronting the Panabo Public
Market5 which was destroyed by fire.
Subsequently, the petition was amended due to the passage of Resolution No. 49, series of 1989
(Resolution No. 49), denominated as Ordinance No. 10, appropriating a further amount of P1,515,000
for the construction of additional stalls in the same public market. 6
Prior to the passage of these resolutions, respondent Mayor Cafe had already entered into contracts
with those who advanced and deposited (with the municipal treasurer) from their personal funds the
sum of P40,000 each. Some of the parties were close friends and/or relatives of the public
respondents.7 The construction of the stalls which petitioner sought to stop through the preliminary
injunction in the RTC was nevertheless finished, rendering the prayer therefor moot and academic. The
leases of the stalls were then awarded by public raffle which, however, was limited to those who had
deposited P40,000 each.8 Thus, the petition was amended anew to include the 57 awardees of the
stalls as private respondents.9
Petitioner alleges that Resolution Nos. 7 and 49 were unconstitutional because they were:
passed for the business, occupation, enjoyment and benefit of private respondents who deposited the
amount of P40,000.00 for each stall, and with whom also the mayor had a prior contract to award the
would be constructed stalls to all private respondents. As admitted by public respondents some of the
private respondents are close friends and/or relatives of some of the public respondents which makes
the questioned acts discriminatory. The questioned resolutions and ordinances did not provide for any
notice of publication that the special privilege and unwarranted benefits conferred on the private
respondents maybe (sic) availed of by anybody who can deposit the amount of P40,000.00.10
Neither was there any prior notice or publication pertaining to contracts entered into by public and
private respondents for the construction of stalls to be awarded to private respondents that the same
can be availed of by anybody willing to deposit P40,000.00.11
In this petition, petitioner prays for the reversal of the decision of the Court of Appeals (CA) and a
declaration of the unconstitutionality, illegality and nullity of the questioned resolutions/ordinances and
lease contracts entered into by the public and private respondents; for the declaration of the illegality of
the award of the stalls during the pendency of this action and for the re-raffling and award of the stalls in
a manner that is fair and just to all interested applicants;12for the issuance of an order to the local
government to admit any and all interested persons who can deposit the amount of P40,000 for a stall
and to order a re-raffling for the award of the stalls to the winners of the re-raffle; for the nullification of
the award of attorneys fees to private respondents on the ground that it was erroneous and
unmeritorious; and for the award of damages in favor of petitioner in the form of attorneys fees. 13
At the outset, we must point out that the issue of the constitutionality of the questioned resolutions was
never ruled upon by both the RTC and the CA.
It appears that on May 21, 1990, both parties agreed14 to await the decision in CA G.R. SP No.
20424,15 which involved similar facts, issues and parties. The RTC, consequently, deferred the
resolution of the pending petition. The appellate court eventually rendered its decision in that case
finding that the petitioners were not entitled to the declaratory relief prayed for as they had no legal
interest in the controversy. Upon elevation to the Supreme Court as UDK Case No. 9948, the petition
for review on certiorari was denied for being insufficient in form and substance. 16
The RTC, after receipt of the entry of the SC judgment, 17 dismissed the pending petition on November
26, 1990. It adopted the ruling in CA G.R. SP No. 20424:
 xxxxxxxxx
We find petitioners aforesaid submission utterly devoid of merit. It is, to say the least, questionable
whether or not a special civil action for declaratory relief can be filed in relation to a contract by persons
who are not parties thereto. Under Sec. 1 of Rule 64 of the Rules of Court, any person interested under
a deed, will, contract, or other written instruments may bring an action to determine any question of the
contract, or validly arising under the instrument for a declaratory (sic) of his rights or duties thereunder.
Since contracts take effect only between the parties (Art. 1311) it is quite plain that one who is not a
party to a contract can not have the interest in it that the rule requires as a basis for declaratory reliefs
(PLUM vs. Santos, 45 SCRA 147).
Following this ruling, the petitioners were not parties in the agreement for the award of the market stalls
by the public respondents, in the public market of Panabo, Davao, and since the petitioners were not
parties to the award of the market stalls and whose rights are never affected by merely stating that they
are taxpayers, they have no legal interest in the controversy and they are not, therefore, entitled to bring
an action for declaratory relief.18
WHEREFORE, the petition of the petitioners as taxpayers being without merit and not in consonance
with law, is hereby ordered DISMISSED.
As to the counterclaim for damages, the same not having been actually and fully proven, the Court
gives no award as to the same. It is not amiss to state here that the petitioners agreed to be bound by
the outcome of Special Civil Case No. 89-10.
However, for unnecessarily dragging into Court the fifty-seven (57) private respondents who are
bonafide businessmen and stall holders in the public market of Panabo, it is fitting and proper for the
petitioners to be ordered payment of attorneys fees.
Accordingly, the herein petitioners are ordered to pay ONE THOUSAND (P1,000.00) PESOS EACH to
the 57 private respondents, as attorneys fees, jointly and severally, and for them to pay the costs of this
suit.
SO ORDERED.19
From this adverse decision, petitioner again appealed to the Court of Appeals in CA-G.R. CV No. 35082
which is now before us for review.
The appellate court, yet again, affirmed the RTC decision and held that:
Res judicata does not set in a case dismissed for lack of capacity to sue, because there has been no
determination on the merits. Neither does the law of the case apply. However, the court a quo took
judicial notice of the fact that petitioners agreed to be bound by the outcome of Special Civil Case No.
89-10. Allegans contraria non est audiendus. (He is not to be heard who alleges things contradictory to
each other.) It must be here observed that petitioners-appellants were the ones who manifested that it
would be practical to await the decision of the Supreme Court in their petition for certiorari, for after all
the facts, circumstances and issues in that case, are exactly the same as in the case that is here
appealed. Granting that they may evade such assumption, a careful evaluation of the case would lead
Us to the same conclusion: that the case for declaratory relief is dismissible. As enumerated by Justice
Regalado in his "Remedial Law Compendium", the requisites of an action for declaratory relief are:
(a) The subject matter of the controversy must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance;
(b) The terms of said documents and the validity thereof are doubtful and require judicial construction;
(c) There must have been no breach of the documents in question;
(d) There must be an actual justiciable controversy or the "ripening seeds" of one between persons
whose interests are adverse;
(e) The issue must be ripe for judicial determination; and
(f) Adequate relief is not available through other means or other forms of action or proceeding.
In Tolentino vs. Board of Accountancy, et al, 90 Phil. 83, 88, the Supreme Court ratiocinated the
requisites of justiciability of an action for declaratory relief by saying that the court must be "satisfied that
an actual controversy, or the ripening seeds of one, exists between parties, all of whom are sui juris and
before the court, and that the declaration sought will be a practical help in ending the controversy."
The petition must show "an active antagonistic assertion of a legal right on one side and a denial thereof
on the other concerning a real, and not a mere theoretical question or issue. The question is whether
the facts alleged a substantial controversy between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory relief. In GSISEA and GSISSU vs. Hon.
Alvendia etc. and GSIS, 108 Phil. 505, the Supreme Court ruled a declaratory relief improper or
unnecessary when it appears to be a moot case, since it seeks to get a judgment on a pretended
controversy, when in reality there is none. In Kawasaki Port Service Corporation vs. Amores, 199 SCRA
230, citing Dy Poco vs. Commissioner of Immigration, et al., 16 SCRA 618, the rule was stated: "where
a declaratory judgment as to a disputed fact would be determinative of issues rather than a construction
of definite stated rights, statuses and other relations, commonly expressed in a written instrument, the
case is not one for declaratory judgment."
Indeed, in its true light, the present petition for declaratory relief seems to be no more than a request for
an advisory opinion to which courts in this and other jurisdiction have cast a definite aversion. The
ordinances being assailed are appropriation ordinances. The passage of the ordinances were pursuant
to the public purpose of constructing market stalls. For the exercise of judicial review, the governmental
act being challenged must have had an adverse effect on the person challenging it, and the person
challenging the act, must have "standing" to challenge, i.e., in the categorical and succinct language of
Justice Laurel, he must have a "personal and substantial interest in the case such that he has
sustained, or will sustain, direct injury as a result of its enforcement." Standing is a special concern in
constitutional law because in some cases suits are brought not by parties who have been personally
injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or
voters who actually sue in the public interest. Hence the question in standing is whether such parties
have "alleged such a personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court largely depends for
illumination of difficult constitutional questions.
A careful analysis of the records of the case at bar would disclose that petitioners-appellants have
suffered no wrong under the terms of the ordinances being assailed and, naturally need no relief in
the form they now seek to obtain. Judicial exercise cannot be exercised in vacuo. The policy of the
courts is to avoid ruling on a constitutional question and to presume that the acts of the political
departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is
to sustain. The issue is not the ordinances themselves, but the award of the market stalls to the private
respondents on the strength of the contracts individually executed by them with Mayor Cafe. To
reiterate, a person who is not a party to a contract cannot file a petition for declaratory relief and seek
judicial interpretation of such contract (Atlas Consolidated Mining Corp. vs. Court of Appeals, 182 SCRA
166). Not having established their locus standi, we see no error committed by the court a quo
warranting reversal of the appealed decision.
With the foregoing, the assailed Decision of Branch 4, Regional Trial Court of Panabo Davao dated 26
November 1990 in Sp. Civil Action No. 89-1 is hereby AFFIRMED.
SO ORDERED.20
Thus, both the RTC and the CA dismissed the case on the ground of petitioners lack of legal standing
and the parties agreement to be bound by the decision in CA G.R. SP. No. 20424.
The issues to be resolved are the following:
(1) whether the parties were bound by the outcome in CA G.R. SP. No. 20424;
(2) whether petitioner had the legal standing to bring the petition for declaratory relief;
(3) whether Resolution Nos. 7 and 49 were unconstitutional; and
(4) whether petitioner should be held liable for damages.
Locus Standi and the
Constitutionality Issue
We will first consider the second issue. The petition for declaratory relief challenged the constitutionality
of the subject resolutions. There is an unbending rule that courts will not assume jurisdiction over a
constitutional question unless the following requisites are satisfied: (1) there must be an actual case
calling for the exercise of judicial review; (2) the question before the Court must be ripe for adjudication;
(3) the person challenging the validity of the act must have standing to do so; (4) the question of
constitutionality must have been raised at the earliest opportunity, and (5) the issue of constitutionality
must be the very lis mota of the case.21
Legal standing or locus standi is a partys personal and substantial interest in a case such that he has
sustained or will sustain direct injury as a result of the governmental act being challenged. It calls for
more than just a generalized grievance. The term "interest" means a material interest, an interest in
issue affected by the decree, as distinguished from mere interest in the question involved, or a mere
incidental interest.22 Unless a persons constitutional rights are adversely affected by the statute or
ordinance, he has no legal standing.
The CA held that petitioner had no standing to challenge the two resolutions/ordinances because he
suffered no wrong under their terms. It also concluded that "the issue (was) not the ordinances
themselves but the award of the market stalls to the private respondents on the strength of the contracts
individually executed by them with Mayor Cafe." Consequently, it ruled that petitioner, who was not a
party to the lease contracts, had no standing to file the petition for declaratory relief and seek judicial
interpretation of the agreements.
We do not agree. Petitioner brought the petition in his capacity as taxpayer of the Municipality of
Panabo, Davao del Norte23 and not in his personal capacity. He was questioning the official acts of the
public respondents in passing the ordinances and entering into the lease contracts with private
respondents. A taxpayer need not be a party to the contract to challenge its validity. 24 Atlas
Consolidated Mining & Development Corporation v. Court of Appeals25 cited by the CA does not apply
because it involved contracts between two private parties.
Parties suing as taxpayers must specifically prove sufficient interest in preventing the illegal expenditure
of
money raised by taxation.26 The expenditure of public funds by an officer of the State for the purpose of
executing an unconstitutional act constitutes a misapplication of such
funds.27 The resolutions being assailed were appropriations ordinances. Petitioner alleged that these
ordinances were "passed for the business, occupation, enjoyment and benefit of private
respondents"28 (that is, allegedly for the private benefit of respondents) because even before they were
passed, respondent Mayor Cafe and private respondents had already entered into lease contracts for
the construction and award of the market stalls.29 Private respondents admitted they deposited P40,000
each with the municipal treasurer, which amounts were made available to the municipality during the
construction of the stalls. The deposits, however, were needed to ensure the speedy completion of the
stalls after the public market was gutted by a series of fires.30 Thus, the award of the stalls was
necessarily limited only to those who advanced their personal funds for their construction. 31
Petitioner did not seasonably allege his interest in preventing the illegal expenditure of public funds or
the specific injury to him as a result of the enforcement of the questioned resolutions and contracts. It
was only in the "Remark to Comment" he filed in this Court did he first assert that "he (was) willing to
engage in business and (was) interested to occupy a market stall."32 Such claim was obviously an
afterthought.
Be that as it may, we have on several occasions relaxed the application of these rules on legal standing:
In not a few cases, the Court has liberalized the locus standi requirement when a petition raises an
issue of transcendental significance or paramount importance to the people. Recently, after holding that
the IBP had no locus standi to bring the suit, the Court in IBP v. Zamora nevertheless entertained the
Petition therein. It noted that "the IBP has advanced constitutional issues which deserve the attention of
this Court in view of their seriousness, novelty and weight as precedents."33
oOo
Objections to a taxpayer's suit for lack of sufficient personality, standing or interest are procedural
matters. Considering the importance to the public of a suit assailing the constitutionality of a tax law,
and in keeping with the Court's duty, specially explicated in the 1987 Constitution, to determine whether
or not the other branches of the Government have kept themselves within the limits of the Constitution
and the laws and that they have not abused the discretion given to them, the Supreme Court may brush
aside technicalities of procedure and take cognizance of the suit.34
oOo
There being no doctrinal definition of transcendental importance, the following determinants formulated
by former Supreme Court Justice Florentino P. Feliciano are instructive: (1) the character of the funds or
other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or
statutory prohibition by the public respondent agency or instrumentality of the government; and (3) the
lack of any other party with a more direct and specific interest in raising the questions being raised. 35
But, even if we disregard petitioners lack of legal standing, this petition must still fail. The subject
resolutions/ordinances appropriated a total of P2,280,000 for the construction of the public market stalls.
Petitioner alleges that these ordinances were discriminatory because, even prior to their enactment, a
decision had already been made to award the market stalls to the private respondents who
deposited P40,000 each and who were either friends or relatives of the public respondents. Petitioner
asserts that "there (was) no publication or invitation to the public that this contract (was) available to all
who (were) interested to own a stall and (were) willing to deposit P40,000."36 Respondents, however,
counter that the "public respondents act of entering into this agreement was authorized by
the Sangguniang Bayan of Panabo per Resolution No. 180 dated October 10, 1988"37 and that "all the
people interested were invited to participate in investing their savings."38
We note that the foregoing was a disputed fact which the courts below did not resolve because the case
was dismissed on the basis of petitioners lack of legal standing. Nevertheless, petitioner failed to prove
the subject ordinances and agreements to be discriminatory. Considering that he was asking this Court
to nullify the acts of the local political department of Panabo, Davao del Norte, he should have clearly
established that such ordinances operated unfairly against those who were not notified and who were
thus not given the opportunity to make their deposits. His unsubstantiated allegation that the public was
not notified did not suffice. Furthermore, there was the time-honored presumption of regularity of official
duty, absent any showing to the contrary. 39 And this is not to mention that:
The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the
political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to
sustain. This presumption is based on the doctrine of separation of powers. This means that the
measure had first been carefully studied by the legislative and executive departments and found to be in
accord with the Constitution before it was finally enacted and approved. 40
Therefore, since petitioner had no locus standi to question the ordinances, there is no need for us to
discuss the constitutionality of said enactments.
Were the Parties Bound by the
Outcome in CA G.R. SP. No. 20424?
Adverting to the first issue, we observe that petitioner was the one who wanted the parties to await the
decision of the Supreme Court in UDK Case No. 9948 since the facts and issues in that case were
similar to this. Petitioner, having expressly agreed to be bound by our decision in the aforementioned
case, should be reined in by the dismissal order we issued, now final and executory. In addition to the
fact that nothing prohibits parties from committing to be bound by the results of another case, courts
may take judicial notice of a judgment in another case as long as the parties give
their consent or do not object.41 As opined by Justice Edgardo L. Paras:
A court will take judicial notice of its own acts and records in the same case, of facts established in prior
proceedings in the same case, of the authenticity of its own records of another case between the same
parties, of the files of related cases in the same court, and of public records on file in the same court. In
addition, judicial notice will be taken of the record, pleadings or judgment of a case in another court
between the same parties or involving one of the same parties, as well as of the record of another case
between different parties in the same court. 42
Damages
Finally, on the issue of damages, petitioner asserts that he impleaded the 57 respondents in good faith
since the award of the stalls to them was made during the pendency of the action. 43 Private
respondents refute this assertion and argue that petitioner filed this action in bad faith and with the
intention of harassing them inasmuch as he had already filed CA G.R. SP. No. 20424 even before
then.44 The RTC, affirmed by the CA, held that petitioner should pay attorneys fees "for unnecessarily
dragging into Court the 57 private respondents who (were) bonafide businessmen and stall holders in
the public market of Panabo."45
We do not agree that petitioner should be held liable for damages. It is not sound public policy to put a
premium on the right to litigate where such right is exercised in good faith, albeit erroneously.46 The
alleged bad faith of petitioner was never established. The special circumstances in Article 2208 of the
Civil Code justifying the award of attorneys fees are not present in this case.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 35082 is
hereby AFFIRMED with the MODIFICATION that the award of attorney's fees to private respondents is
deleted.
Costs against petitioner.
SO ORDERED.
 FIRST DIVISION
G.R. No. 156252 June 27, 2006
COCA-COLA BOTTLERS PHILIPPINES, INC., Petitioner,
vs.
CITY OF MANILA, LIBERTY M. TOLEDO City Treasurer and JOSEPH SANTIAGO Chief,
Licensing Division, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
assailing the Order1 of the Regional Trial Court (RTC) of Manila, Branch 21, dated 8 May 2002,
dismissing petitioners Petition for Injunction, and the Order2 dated 5 December 2002, denying
petitioners Motion for Reconsideration.
Petitioner Coca-Cola Bottlers Philippines, Inc. is a corporation engaged in the business of
manufacturing and selling beverages and maintains a sales office located in the City of Manila.
On 25 February 2000, the City Mayor of Manila approved Tax Ordinance No. 7988, otherwise known as
"Revised Revenue Code of the City of Manila" repealing Tax Ordinance No. 7794 entitled, "Revenue
Code of the City of Manila." Tax Ordinance No. 7988 amended certain sections of Tax Ordinance No.
7794 by increasing the tax rates applicable to certain establishments operating within the territorial
jurisdiction of the City of Manila, including herein petitioner.
Aggrieved by said tax ordinance, petitioner filed a Petition3 before the Department of Justice (DOJ),
against the City of Manila and its Sangguniang Panlungsod, invoking Section 1874 of the Local
Government Code of 1991 (Republic Act No. 7160). Said Petition questions the constitutionality or
legality of Section 21 of Tax Ordinance No. 7988. According to petitioner:
Section 21 of the Old Revenue Code of the City of Manila (Ordinance No. 7794, as amended) was
reproduced verbatim as Section 21 under the new Ordinance except for the last paragraph thereof
which reads: "PROVIDED, that all registered businesses in the City of Manila that are already paying
the aforementioned tax shall be exempted from payment thereof", which was deleted; that said deletion
would, in effect, impose additional business tax on businesses, including herein petitioner, that are
already subject to business tax under the other sections, specifically Sec. 14, of the New Revenue Code
of the City of Manila, which imposition, petitioner claims, "is beyond or exceeds the limitation on the
taxing power of the City of Manila under Sec. 143 (h) of the LGC of 1991; and that deletion is a palpable
and manifest violation of the Local Government Code of 1991, and the clear mandate of Article X, Sec.
5 of the 1987 Constitution, hence Section 21 is "illegal and unconstitutional."
On 17 August 2000, then DOJ Secretary Artemio G. Tuquero issued a Resolution declaring Tax
Ordinance No. 7988 null and void and without legal effect, the pertinent portions of which read:
After a judicious scrutiny of the records of this case, in the light of the pertinent provisions of the Local
Government Code of 1991, this Department finds for the petitioner.
The Local Government Code of 1991 provides:
"Section 188. Publication of Tax Ordinances and Revenue Measures. Within ten (10) days after their
approval, certified true copies of all provincial, city and municipal tax ordinances or revenue measures
shall be published in full for three (3) consecutive days in a newspaper of local circulation; Provided,
however, that in provinces, cities, and municipalities where there are no newspapers or local
circulations the same may be posted in at least two (2) conspicuous and publicly accessible
places." (R.A. No. 7160) (stress supplied)
Upon the other hand, the Rules and Regulations Implementing the Local Government Code of 1991,
insofar as pertinent, mandates:
"Art. 277. Publication of Tax Ordinances and Revenue Measures. (a) within ten (10) days after their
approval, certified true copies of all provincial, city and municipal tax ordinances or revenue measures
shall be published in full for three (3) consecutive days in a newspaper of local circulation provided that
in provinces, cities and municipalities where there are no newspapers of local circulation, the same may
be posted in at least two (2) conspicuous and publicly accessible places.
If the tax ordinances or revenue measure contains penal provisions as authorized under Art. 279 of this
Rule, the gist of such tax ordinance or revenue measure shall be published in a newspaper of general
circulation within the province, posting of such ordinance or measure shall be made in accessible and
conspicuous public places in all municipalities and cities of the province to which the sanggunian
enacting the ordinance or revenue measure belongs.
xxx xxx xxx."
(emphasis ours)
It is clear from the above-quoted provisions of R.A. No. 7160 and its implementing rules that the
requirement of publication is MANDATORY and leaves no choice. The use of the word "shall" in both
provisions is imperative, operating to impose a duty that may be enforced (Soco v. Militante, 123 SCRA
160, 167; Modern Coach Corp. v. Faver 173 SE 2d 497, 499).
Its essence is simply to inform the people and the entities who may likely be affected, of the existence of
the tax measure. It bears emphasis, that, strict observance of the said procedural requirement is the
only safeguard against any unjust and unreasonable exercise of the taxing powers by ensuring that the
taxpayers are notified through publication of the existence of the measure, and are therefore able to
voice out their views or objections to the said measure. For, after all, taxes are obligatory exactions or
enforced contributions corollary to taking of property.
xxxx
In the case at bar, respondents, by its failure to file their comments and present documentary evidence
to show that the mandatory requirement of law on publication, among other things, has been met, may
be deemed to have waived its right to controvert or dispute the documentary evidence submitted by
petitioner which indubitably show that subject tax ordinance was published only once, i.e., on the May
22, 2000 issue of the Philippine Post. Clearly, therefore, herein respondents failed to satisfy the
requirement that said ordinance shall be published for three (3) consecutive days as required by law.
 xxxx
In view of the foregoing, we find it unnecessary to pass upon the other issues raised by the petitioner.
WHEREFORE, premises considered, Tax Ordinance No. 7988 of the City of Manila is hereby declared
NULL and VOID and WITHOUT LEGAL EFFECT for having been enacted in contravention of the
provisions of the Local Government Code of 1991 and its implementing rules and regulations. 5
The City of Manila failed to file a Motion for Reconsideration nor lodge an appeal of said Resolution,
thus, said Resolution of the DOJ Secretary declaring Tax Ordinance No. 7988 null and void has lapsed
into finality.
On 16 November 2000, Atty. Leonardo A. Aurelio wrote the Bureau of Local Government Finance
(BLGF) requesting in behalf of his client, Singer Sewing Machine Company, an opinion on whether the
Office of the City Treasurer of Manila has the right to enforce Tax Ordinance No. 7988 despite the
Resolution, dated 17 August 2000, of the DOJ Secretary. Acting on said letter, the BLGF Executive
Director issued an Indorsement on 20 November 2000 ordering the City Treasurer of Manila to "cease
and desist" from enforcing Tax Ordinance No. 7988. According to the BLGF:
In the attached Resolution dated August 17, 2000 of the Department of Justice, it is stated that "x x x
Ordinance No. 7988 of the City of Manila is hereby declared NULL AND VOID AND WITHOUT LEGAL
EFFECT for having been enacted in contravention of the provisions of the Local Government Code of
1991 and its implementing rules and regulations."
xxxx
In view thereof, that Office is hereby instructed to cease and desist from implementing the
aforementioned Manila Tax Ordinance No. 7988, inviting attention to Section 190 of the Local
Government Code (LGC) of 1991, quoted hereunder:
"Section 190. Attempt to Enforce Void or Suspended Tax Ordinances and Revenue Measures.- The
enforcement of any tax ordinance or revenue measures after due notice of the disapproval or
suspension thereof shall be sufficient ground to administrative disciplinary action against the local
officials and employees responsible therefore."
Be guided accordingly.6
Despite the Resolution of the DOJ declaring Tax Ordinance No. 7988 null and void and the directive of
the BLGF that respondents cease and desist from enforcing said tax ordinance, respondents continued
to assess petitioner business tax for the year 2001 based on the tax rates prescribed under Tax
Ordinance No. 7988. Thus, petitioner filed a Complaint with the RTC of Manila, Branch 21, on 17
January 2001, praying that respondents be enjoined from implementing the aforementioned tax
ordinance.
On 28 November 2001, the RTC of Manila, Branch 21, rendered a Decision in favor of petitioner, the
decretal portion of which states:
The defendants did not follow the procedure in the enactment of Tax Ordinance No. 7988. The Court
agrees with plaintiffs contention that the ordinance should first be published for three (3) consecutive
days in a newspaper of local circulation aside from the posting of the same in at least four (4)
conspicuous public places.
xxxx
WHEREFORE, premises considered, judgment is hereby rendered declaring the injunction permanent.
Defendants are enjoined from implementing Tax Ordinance No. 7988. The bond posted by the plaintiff
is hereby CANCELLED.7
During the pendency of the said case, the City Mayor of Manila approved on 22 February 2001 Tax
Ordinance No. 8011 entitled, "An Ordinance Amending Certain Sections of Ordinance No. 7988." Said
tax ordinance was again challenged by petitioner before the DOJ through a Petition questioning the
legality of the aforementioned tax ordinance on the grounds that (1) said tax ordinance amends a tax
ordinance previously declared null and void and without legal effect by the DOJ; and (2) said tax
ordinance was likewise not published upon its approval in accordance with Section 188 of the Local
Government Code of 1991.
On 5 July 2001, then DOJ Secretary Hernando Perez issued a Resolution declaring Tax Ordinance No.
8011 null and void and legally not existing. According to the DOJ Secretary:
After a careful examination/evaluation of the records of this case and applying the pertinent provisions
of the Local Government Code of 1991, this Department finds the instant petition of Coca-Cola Bottlers,
Philippines, Inc. meritorious.
It bears stress, at the outset, that the subject ordinance was passed and approved by the respondents
principally to amend Ordinance No. 7988 which was earlier nullified by this Department in its Resolution
Dated August 17, 2000, also at the instance of the herein petitioner. x x x
xxxx
x x x [T]he only logical conclusion, therefore, is that Ordinance No. 8011, subject herein, is also null and
void, it being a mere amendatory ordinance of Ordinance No. 7988 which, as earlier stated, had been
nullified by this Department. An invalid or unconstitutional law or ordinance does not, in legal
contemplation, exist (Manila Motors Co., Inc. vs. Flores, 99 Phil. 738). Where a statute which has been
amended is invalid, nothing, in effect, has been amended. As held in People vs. Lim, 108 Phil. 1091:
"If an order or law sought to be amended is invalid, then it does not legally exist. There would be no
occasion or need to amend it; x x x" (at p. 1097)
Instead of amending Ordinance No. 7988, herein respondent should have enacted another tax measure
which strictly complies with the requirements of law, both procedural and substantive. The passage of
the assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any
way, does not legally exist.
xxxx
WHEREFORE, premises considered, Tax Ordinance No. 8011 is hereby declared NULL and VOID and
LEGALLY NOT EXISTING.8
Respondents Motion for Reconsideration of the Resolution of the DOJ was subsequently denied in a
Resolution,9dated 12 March 2002.
The City of Manila appealed the DOJ Resolution, dated 12 March 2002, denying its Motion for
Reconsideration of the Resolution nullifying Tax Ordinance No. 8011 before the RTC of Manila, Branch
17, but the same was dismissed for lack of jurisdiction in an Order, dated 2 December 2002. According
to the trial court:
From whatever angle the recourse of herein petitioners was viewed, either from the standpoint of
Section 1, Rule 43, or Section 1 and the last sentence of the second paragraph of Section 4, Rule 65 of
the 1997 Rules of Civil Procedure, the conclusion was inevitable that petitioners remedial measure from
dispositions of the Secretary of Justice should have been ventilated before the next judicial plane. x x x
Accordingly, by reason of the foregoing premises, Civil Case No. 02-103372 for "Certiorari" is
DISMISSED.
Consequently, respondents appealed the foregoing Order, dated 2 December 2002, via a Petition for
Review on Certiorari to the Supreme Court docketed as G.R. No. 157490. However, said appeal was
dismissed in our Resolution, dated 23 June 2003, the dispositive of which reads:
Pursuant to Rule 45 and other related provisions of the 1997 Rules of Civil Procedure as amended
governing appeals by certiorari to the Supreme Court, only petitions which are accompanied by or which
comply strictly with the requirements specified therein shall be entertained. On the basis thereof, the
Court resolves to DENY the instant petition for review on certiorari of the orders of the Regional Trial
Court, Manila, Branch 17 dated December 2, 2002 and March 7, 2003 for the late filing as the petition
was filed beyond the reglementary period of fifteen (15) days fixed in Sec. 2, Rule 45 in relation to Sec.
5(a), Rule 56.
The omnibus motion of petitioners for reconsideration of the resolution of April 23, 2003 which denied
the motion for an extension of time to file a petition is DENIED for lack of merit.
Respondents Motion for Reconsideration was subsequently denied in a Resolution, dated 11 August
2003, in which the Court resolved as follows:
Acting on the motion of petitioners for reconsideration of the resolution of June 23, 2003 which denied
the petition for review on certiorari and considering that there is no compelling reason to warrant a
modification of this Courts resolution, the Court resolves to DENY reconsideration with FINALITY.
Meanwhile, on the basis of the enactment of Tax Ordinance No. 8011, the City of Manila filed a Motion
for Reconsideration with the RTC of Manila, Branch 21, of its Decision, dated 28 November 2001, which
the court a quo granted in the herein assailed Order dated 8 May 2002, the full text of which reads:
Considering that Ordinance No. 7988 (Amended Revenue Code of the City of Manila) has already been
amended by Ordinance No. 8011 entitled "An Ordinance Amending Certain Sections of Ordinance No.
7988" approved by the City Mayor of Manila on February 22, 2001, let the above-entitled case be as it is
hereby DISMISSED. Without pronouncement as to costs."10
Petitioners Motion for Reconsideration of the abovequoted Order was denied by the trial court in the
second challenged Order, dated 5 December 2002; hence the instant Petition.
The case at bar revolves around the sole pivotal issue of whether or not Tax Ordinance No. 7988 is null
and void and of no legal effect. However, respondents, in their Comment and Memorandum, raise the
procedural issue of whether or not the instant Petition has complied with the requirements of the 1997
Rules on Civil Procedure; thus, the Court resolves to first pass upon this issue before tackling the
substantial matters involved in this case.
Respondents insist that the instant Petition raises questions of fact that are proscribed under Rule 45 of
the 1997 Rules of Civil Procedure which states that Petitions for Certiorari before the Supreme Court
shall raise only questions of law. We do not agree. There is a question of fact when doubt or
controversy arises as to the truth or falsity of the alleged facts, when there is no dispute as to fact, the
question of whether or not the conclusion drawn therefrom is correct is a question of law.11 A thorough
reading of the Petition will reveal that petitioner does not present an issue in which we are called to rule
on the truth or falsity of any fact alleged in the case. Furthermore, the resolution of whether or not the
court a quo erred in dismissing petitioners case in light of the enactment of Tax Ordinance No. 8011,
allegedly amending Tax Ordinance No. 7988, does not necessitate an incursion into the facts attending
the case.
Contrarily, it is respondents who actually raise questions of fact before us. While accusing petitioner of
raising questions of fact, respondents, in the same breath, proceeded to allege that the RTC of Manila,
Branch 21, in its Decision, dated 28 November 2001, failed to take into account the evidence presented
by respondents allegedly proving that Tax Ordinance No. 7988 was published for four times in a
newspaper of general circulation in accordance with the requirements of law. A determination of
whether or not the trial court erred in concluding that Tax Ordinance No. 7988 was indeed published for
four times in a newspaper of general circulation would clearly involve a calibration of the probative value
of the evidence presented by respondents to prove such allegation. Therefore, said issue is a question
of fact which this Court, not being a trier of facts, will decline to pass upon.
Respondents also point out that the Petition was not properly verified and certified because Nelson
Empalmado, the Vice President for Tax and Financial Services of Coca-Cola Bottlers Philippines, Inc.
who verified the subject Petition was not duly authorized to file said Petition. Respondents assert that
nowhere in the attached Secretarys Certificate can it be found the authority of Nelson Empalmado to
institute the instant Petition. Thus, there being a lack of proper verification, respondents contend that the
Petition must be treated as a mere scrap of paper, which has no legal effect as declared in Section 4,
Rule 7 of the 1997 Rules of Civil Procedure.
An inspection of the Secretarys Certificate attached to the petition will show that Nelson Empalmado is
not among those designated as representative to prosecute claims in behalf of Coca-Cola Bottlers
Philippines, Inc. However, it would seem that the authority of Mr. Empalmado to file the instant Petition
emanated from a Special Power of Attorney signed by Ramon V. Lapez, Jr., Associate Legal
Counsel/Assistant Corporate Secretary of Coca-Cola Bottlers Philippines, Inc. and one of those named
in the Secretarys Certificate as authorized to file a Petition in behalf of the corporation. A careful
perusal of said Secretarys Certificate will further reveal that the persons authorized therein to represent
petitioner corporation in any suit are also empowered to designate and appoint any individual as
attorney-in-fact of the corporation for the prosecution of any suit. Accordingly, by virtue of the Special
Power of Attorney executed by Ramon V. Lapez, Jr. authorizing Nelson Emplamado to file a Petition
before the Supreme Court, the instant Petition has been properly verified, in accordance with the 1997
Rules of Civil Procedure.

Having disposed of the procedural issues raised by respondents, We now come to the pivotal issue in
this petition.

It is undisputed from the facts of the case that Tax Ordinance No. 7988 has already been declared by
the DOJ Secretary, in its Order, dated 17 August 2000, as null and void and without legal effect due to
respondents failure to satisfy the requirement that said ordinance be published for three consecutive
days as required by law. Neither is there quibbling on the fact that the said Order of the DOJ was never
appealed by the City of Manila, thus, it had attained finality after the lapse of the period to appeal.

Furthermore, the RTC of Manila, Branch 21, in its Decision dated 28 November 2001, reiterated the
findings of the DOJ Secretary that respondents failed to follow the procedure in the enactment of tax
measures as mandated by Section 188 of the Local Government Code of 1991, in that they failed to
publish Tax Ordinance No. 7988 for three consecutive days in a newspaper of local circulation. From
the foregoing, it is evident that Tax Ordinance No. 7988 is null and void as said ordinance was
published only for one day in the 22 May 2000 issue of the Philippine Post in contravention of the
unmistakable directive of the Local Government Code of 1991.

Despite the nullity of Tax Ordinance No. 7988, the court a quo, in the assailed Order, dated 8 May 2002,
went on to dismiss petitioners case on the force of the enactment of Tax Ordinance No. 8011,
amending Tax Ordinance No. 7988. Significantly, said amending ordinance was likewise declared null
and void by the DOJ Secretary in a Resolution, dated 5 July 2001, elucidating that "[I]nstead of
amending Ordinance No. 7988, [herein] respondent should have enacted another tax measure which
strictly complies with the requirements of law, both procedural and substantive. The passage of the
assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any way,
does not legally exist." Said Resolution of the DOJ Secretary had, as well, attained finality by virtue of
the dismissal with finality by this Court of respondents Petition for Review on Certiorari in G.R. No.
157490 assailing the dismissal by the RTC of Manila, Branch 17, of its appeal due to lack of jurisdiction
in its Order, dated 11 August 2003.

Based on the foregoing, this Court must reverse the Order of the RTC of Manila, Branch 21, dismissing
petitioners case as there is no basis in law for such dismissal. The amending law, having been declared
as null and void, in legal contemplation, therefore, does not exist. Furthermore, even if Tax Ordinance
No. 8011 was not declared null and void, the trial court should not have dismissed the case on the
reason that said tax ordinance had already amended Tax Ordinance No. 7988. As held by this Court in
the case of People v. Lim,12 if an order or law sought to be amended is invalid, then it does not legally
exist, there should be no occasion or need to amend it.13

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Orders of the RTC
of Manila, Branch 21, dated 8 May 2002 and 5 December 2002, respectively, are hereby REVERSED
and SET ASIDE.

SO ORDERED.
G.R. No. 181845 August 4, 2009
THE CITY OF MANILA, LIBERTY M. TOLEDO, in her capacity as THE TREASURER OF MANILA
and JOSEPH SANTIAGO, in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OF
MANILA, petitioners,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
CHICO-NAZARIO, J.:
This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Civil Procedure
seeking to review and reverse the Decision1 dated 18 January 2008 and Resolution2 dated 18 February
2008 of the Court of Tax Appeals en banc (CTA en banc) in C.T.A. EB No. 307. In its assailed Decision,
the CTA en banc dismissed the Petition for Review of herein petitioners City of Manila, Liberty M.
Toledo (Toledo), and Joseph Santiago (Santiago); and affirmed the Resolutions dated 24 May 2007, 3 8
June 2007,4 and 26 July 2007,5 of the CTA First Division in C.T.A. AC No. 31, which, in turn, dismissed
the Petition for Review of petitioners in said case for being filed out of time. In its questioned Resolution,
the CTA en banc denied the Motion for Reconsideration of petitioners.
Petitioner City of Manila is a public corporation empowered to collect and assess business taxes,
revenue fees, and permit fees, through its officers, petitioners Toledo and Santiago, in their capacities
as City Treasurer and Chief of the Licensing Division, respectively. On the other hand, respondent
Coca-Cola Bottlers Philippines, Inc. is a corporation engaged in the business of manufacturing and
selling beverages, and which maintains a sales office in the City of Manila.
The case stemmed from the following facts:
Prior to 25 February 2000, respondent had been paying the City of Manila local business tax only under
Section 14 of Tax Ordinance No. 7794,6 being expressly exempted from the business tax under Section
21 of the same tax ordinance. Pertinent provisions of Tax Ordinance No. 7794 provide:
Section 14. Tax on Manufacturers, Assemblers and Other Processors. There is hereby imposed a
graduated tax on manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and
compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce of
whatever kind or nature, in accordance with any of the following schedule:
xxxx
over P6,500,000.00 up to
P25,000,000.00 - - - - - - - - - - - - - - - - - - - -- P36,000.00 plus 50% of 1%
in excess of P6,500,000.00
xxxx
Section 21. Tax on Businesses Subject to the Excise, Value-Added or Percentage Taxes under the
NIRC. On any of the following businesses and articles of commerce subject to excise, value-added or
percentage taxes under the National Internal Revenue Code hereinafter referred to as NIRC, as
amended, a tax of FIFTY PERCENT (50%) of ONE PERCENT (1%) per annum on the gross sales or
receipts of the preceding calendar year is hereby imposed:
(A) On persons who sell goods and services in the course of trade or business; and those who import
goods whether for business or otherwise; as provided for in Sections 100 to 103 of the NIRC as
administered and determined by the Bureau of Internal Revenue pursuant to the pertinent provisions of
the said Code.
xxxx
(D) Excisable goods subject to VAT
(1) Distilled spirits
(2) Wines
xxxx
(8) Coal and coke
(9) Fermented liquor, brewers wholesale price, excluding the ad valorem tax
xxxx
PROVIDED, that all registered businesses in the City of Manila that are already paying the
aforementioned tax shall be exempted from payment thereof.
Petitioner City of Manila subsequently approved on 25 February 2000, Tax Ordinance No.
7988,7 amending certain sections of Tax Ordinance No. 7794, particularly: (1) Section 14, by increasing
the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of
Manila; and (2) Section 21, by deleting the proviso found therein, which stated "that all registered
businesses in the City of Manila that are already paying the aforementioned tax shall be exempted from
payment thereof." Petitioner City of Manila approved only after a year, on 22 February 2001, another tax
ordinance, Tax Ordinance No. 8011, amending Tax Ordinance No. 7988.
Tax Ordinances No. 7988 and No. 8011 were later declared by the Court null and void in Coca-Cola
Bottlers Philippines, Inc. v. City of Manila8 (Coca-Cola case) for the following reasons: (1) Tax
Ordinance No. 7988 was enacted in contravention of the provisions of the Local Government Code
(LGC) of 1991 and its implementing rules and regulations; and (2) Tax Ordinance No. 8011 could not
cure the defects of Tax Ordinance No. 7988, which did not legally exist.
However, before the Court could declare Tax Ordinance No. 7988 and Tax Ordinance No. 8011 null and
void, petitioner City of Manila assessed respondent on the basis of Section 21 of Tax Ordinance No.
7794, as amended by the aforementioned tax ordinances, for deficiency local business taxes, penalties,
and interest, in the total amount of P18,583,932.04, for the third and fourth quarters of the year 2000.
Respondent filed a protest with petitioner Toledo on the ground that the said assessment amounted to
double taxation, as respondent was taxed twice, i.e., under Sections 14 and 21 of Tax Ordinance No.
7794, as amended by Tax Ordinances No. 7988 and No. 8011. Petitioner Toledo did not respond to the
protest of respondent.
Consequently, respondent filed with the Regional Trial Court (RTC) of Manila, Branch 47, an action for
the cancellation of the assessment against respondent for business taxes, which was docketed as Civil
Case No. 03-107088.
On 14 July 2006, the RTC rendered a Decision9 dismissing Civil Case No. 03-107088. The RTC ruled
that the business taxes imposed upon the respondent under Sections 14 and 21 of Tax Ordinance No.
7988, as amended, were not of the same kind or character; therefore, there was no double taxation.
The RTC, though, in an Order10dated 16 November 2006, granted the Motion for Reconsideration of
respondent, decreed the cancellation and withdrawal of the assessment against the latter, and barred
petitioners from further imposing/assessing local business taxes against respondent under Section 21 of
Tax Ordinance No. 7794, as amended by Tax Ordinance No. 7988 and Tax Ordinance No. 8011. The
16 November 2006 Decision of the RTC was in conformity with the ruling of this Court in the Coca-Cola
case, in which Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were declared null and void. The
Motion for Reconsideration of petitioners was denied by the RTC in an Order11 dated 4 April 2007.
Petitioners received a copy of the 4 April 2007 Order of the RTC, denying their Motion for
Reconsideration of the 16 November 2006 Order of the same court, on 20 April 2007.
On 4 May 2007, petitioners filed with the CTA a Motion for Extension of Time to File Petition for Review,
praying for a 15-day extension or until 20 May 2007 within which to file their Petition. The Motion for
Extension of petitioners was docketed as C.T.A. AC No. 31, raffled to the CTA First Division.
Again, on 18 May 2007, petitioners filed, through registered mail, a Second Motion for Extension of
Time to File a Petition for Review, praying for another 10-day extension, or until 30 May 2007, within
which to file their Petition.
On 24 May 2007, however, the CTA First Division already issued a Resolution dismissing C.T.A. AC
No. 31 for failure of petitioners to timely file their Petition for Review on 20 May 2007.
Unaware of the 24 May 2007 Resolution of the CTA First Division, petitioners filed their Petition for
Review therewith on 30 May 2007 via registered mail. On 8 June 2007, the CTA First Division issued
another Resolution, reiterating the dismissal of the Petition for Review of petitioners.
Petitioners moved for the reconsideration of the foregoing Resolutions dated 24 May 2007 and 8 June
2007, but their motion was denied by the CTA First Division in a Resolution dated 26 July 2007. The
CTA First Division reasoned that the Petition for Review of petitioners was not only filed out of time -- it
also failed to comply with the provisions of Section 4, Rule 5; and Sections 2 and 3, Rule 6, of the
Revised Rules of the CTA.
Petitioners thereafter filed a Petition for Review before the CTA en banc, docketed as C.T.A. EB No.
307, arguing that the CTA First Division erred in dismissing their Petition for Review in C.T.A. AC No. 31
for being filed out of time, without considering the merits of their Petition.
The CTA en banc rendered its Decision on 18 January 2008, dismissing the Petition for Review of
petitioners and affirming the Resolutions dated 24 May 2007, 8 June 2007, and 26 July 2007 of the CTA
First Division. The CTA en banc similarly denied the Motion for Reconsideration of petitioners in a
Resolution dated 18 February 2008.
Hence, the present Petition, where petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS SUBSTANTIALLY COMPLIED WITH THE
REGLEMENTARY PERIOD TO TIMELY APPEAL THE CASE FOR REVIEW BEFORE THE
[CTA DIVISION].
II. WHETHER OR NOT THE RULING OF THIS COURT IN THE EARLIER [COCA-COLA
CASE] IS DOCTRINAL AND CONTROLLING IN THE INSTANT CASE.
III. WHETHER OR NOT PETITIONER CITY OF MANILA CAN STILL ASSESS TAXES
UNDER [SECTIONS] 14 AND 21 OF [TAX ORDINANCE NO. 7794, AS AMENDED].
IV. WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21 OF THE [TAX
ORDINANCE NO. 7794, AS AMENDED] CONSTITUTES DOUBLE TAXATION.
Petitioners assert that Section 1, Rule 712 of the Revised Rules of the CTA refers to certain provisions of
the Rules of Court, such as Rule 42 of the latter, and makes them applicable to the tax court. Petitioners
then cannot be faulted in relying on the provisions of Section 1, Rule 4213 of the Rules of Court as
regards the period for filing a Petition for Review with the CTA in division. Section 1, Rule 42 of the
Rules of Court provides for a 15-day period, reckoned from receipt of the adverse decision of the trial
court, within which to file a Petition for Review with the Court of Appeals. The same rule allows an
additional 15-day period within which to file such a Petition; and, only for the most compelling reasons,
another extension period not to exceed 15 days. Petitioners received on 20 April 2007 a copy of the 4
April 2007 Order of the RTC, denying their Motion for Reconsideration of the 16 November 2006 Order
of the same court. On 4 May 2007, believing that they only had 15 days to file a Petition for Review with
the CTA in division, petitioners moved for a 15-day extension, or until 20 May 2007, within which to file
said Petition. Prior to the lapse of their first extension period, or on 18 May 2007, petitioners again
moved for a 10-day extension, or until 30 May 2007, within which to file their Petition for Review. Thus,
when petitioners filed their Petition for Review with the CTA First Division on 30 May 2007, the same
was filed well within the reglementary period for doing so.
Petitioners argue in the alternative that even assuming that Section 3(a), Rule 8 14 of the Revised Rules
of the CTA governs the period for filing a Petition for Review with the CTA in division, still, their Petition
for Review was filed within the reglementary period. Petitioners call attention to the fact that prior to the
lapse of the 30-day period for filing a Petition for Review under Section 3(a), Rule 8 of the Revised
Rules of the CTA, they had already moved for a 10-day extension, or until 30 May 2007, within which to
file their Petition. Petitioners claim that there was sufficient justification in equity for the grant of the 10-
day extension they requested, as the primordial consideration should be the substantive, and not the
procedural, aspect of the case. Moreover, Section 3(a), Rule 8 of the Revised Rules of the CTA, is silent
as to whether the 30-day period for filing a Petition for Review with the CTA in division may be extended
or not.
Petitioners also contend that the Coca-Cola case is not determinative of the issues in the present case
because the issue of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 is not the lis mota
herein. The Coca-Cola case is not doctrinal and cannot be considered as the law of the case.
Petitioners further insist that notwithstanding the declaration of nullity of Tax Ordinance No. 7988 and
Tax Ordinance No. 8011, Tax Ordinance No. 7794 remains a valid piece of local legislation. The nullity
of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 does not effectively bar petitioners from
imposing local business taxes upon respondent under Sections 14 and 21 of Tax Ordinance No. 7794,
as they were read prior to their being amended by the foregoing null and void tax ordinances.
Petitioners finally maintain that imposing upon respondent local business taxes under both Sections 14
and 21 of Tax Ordinance No. 7794 does not constitute direct double taxation. Section 143 of the LGC
gives municipal, as well as city governments, the power to impose business taxes, to wit:
SECTION 143. Tax on Business. The municipality may impose taxes on the following businesses:
(a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and
compounders of liquors, distilled spirits, and wines or manufacturers of any article of
commerce of whatever kind or nature, in accordance with the following schedule:
xxxx
(b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or
nature in accordance with the following schedule:
xxxx
(c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers
or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half
(1/2) of the rates prescribed under subsections (a), (b) and (d) of this Section:
xxxx
Provided, however, That barangays shall have the exclusive power to levy taxes, as provided
under Section 152 hereof, on gross sales or receipts of the preceding calendar year of Fifty
thousand pesos (P50,000.00) or less, in the case of cities, and Thirty thousand pesos
(P30,000) or less, in the case of municipalities.
(e) On contractors and other independent contractors, in accordance with the following
schedule:
xxxx
(f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one
percent (1%) on the gross receipts of the preceding calendar year derived from interest,
commissions and discounts from lending activities, income from financial leasing, dividends,
rentals on property and profit from exchange or sale of property, insurance premium.
(g) On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not
exceeding Fifty pesos (P50.00) per peddler annually.
(h) On any business, not otherwise specified in the preceding paragraphs, which the
sanggunian concerned may deem proper to tax: Provided, That on any business subject to the
excise, value-added or percentage tax under the National Internal Revenue Code, as
amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the
preceding calendar year.
Section 14 of Tax Ordinance No. 7794 imposes local business tax on manufacturers, etc. of liquors,
distilled spirits, wines, and any other article of commerce, pursuant to Section 143(a) of the LGC. On the
other hand, the local business tax under Section 21 of Tax Ordinance No. 7794 is imposed upon
persons selling goods and services in the course of trade or business, and those importing goods for
business or otherwise, who, pursuant to Section 143(h) of the LGC, are subject to excise tax, value-
added tax (VAT), or percentage tax under the National Internal Revenue Code (NIRC). Thus, there can
be no double taxation when respondent is being taxed under both Sections 14 and 21 of Tax Ordinance
No. 7794, for under the first, it is being taxed as a manufacturer; while under the second, it is being
taxed as a person selling goods in the course of trade or business subject to excise, VAT, or percentage
tax.
The Court first addresses the issue raised by petitioners concerning the period within which to file with
the CTA a Petition for Review from an adverse decision or ruling of the RTC.
The period to appeal the decision or ruling of the RTC to the CTA via a Petition for Review is specifically
governed by Section 11 of Republic Act No. 9282,15 and Section 3(a), Rule 8 of the Revised Rules of
the CTA.
Section 11 of Republic Act No. 9282 provides:
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. Any party adversely affected by a
decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central
Board of Assessment Appeals or the Regional Trial Courts may file an Appeal with the CTA within thirty
(30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for
action as referred to in Section 7(a)(2) herein.
Appeal shall be made by filing a petition for review under a procedure analogous to that provided for
under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt
of the decision or ruling or in the case of inaction as herein provided, from the expiration of the period
fixed by law to act thereon. x x x. (Emphasis supplied.)
Section 3(a), Rule 8 of the Revised Rules of the CTA states:
SEC 3. Who may appeal; period to file petition. (a) A party adversely affected by a decision, ruling or
the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of
internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of
Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in
the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty
days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the
Commissioner of Internal Revenue to act on the disputed assessments. x x x. (Emphasis supplied.)
It is crystal clear from the afore-quoted provisions that to appeal an adverse decision or ruling of the
RTC to the CTA, the taxpayer must file a Petition for Review with the CTA within 30 days from receipt of
said adverse decision or ruling of the RTC.
It is also true that the same provisions are silent as to whether such 30-day period can be extended or
not. However, Section 11 of Republic Act No. 9282 does state that the Petition for Review shall be filed
with the CTA following the procedure analogous to Rule 42 of the Revised Rules of Civil Procedure.
Section 1, Rule 4216 of the Revised Rules of Civil Procedure provides that the Petition for Review of an
adverse judgment or final order of the RTC must be filed with the Court of Appeals within: (1) the
original 15-day period from receipt of the judgment or final order to be appealed; (2) an extended period
of 15 days from the lapse of the original period; and (3) only for the most compelling reasons, another
extended period not to exceed 15 days from the lapse of the first extended period.
Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure, the 30-day original
period for filing a Petition for Review with the CTA under Section 11 of Republic Act No. 9282, as
implemented by Section 3(a), Rule 8 of the Revised Rules of the CTA, may be extended for a period of
15 days. No further extension shall be allowed thereafter, except only for the most compelling reasons,
in which case the extended period shall not exceed 15 days.
Even the CTA en banc, in its Decision dated 18 January 2008, recognizes that the 30-day period within
which to file the Petition for Review with the CTA may, indeed, be extended, thus:
Being suppletory to R.A. 9282, the 1997 Rules of Civil Procedure allow an additional period of fifteen
(15) days for the movant to file a Petition for Review, upon Motion, and payment of the full amount of
the docket fees. A further extension of fifteen (15) days may be granted on compelling reasons in
accordance with the provision of Section 1, Rule 42 of the 1997 Rules of Civil Procedure x x x. 17
In this case, the CTA First Division did indeed err in finding that petitioners failed to file their Petition for
Review in C.T.A. AC No. 31 within the reglementary period.
From 20 April 2007, the date petitioners received a copy of the 4 April 2007 Order of the RTC, denying
their Motion for Reconsideration of the 16 November 2006 Order, petitioners had 30 days, or until 20
May 2007, within which to file their Petition for Review with the CTA. Hence, the Motion for Extension
filed by petitioners on 4 May 2007 grounded on their belief that the reglementary period for filing their
Petition for Review with the CTA was to expire on 5 May 2007, thus, compelling them to seek an
extension of 15 days, or until 20 May 2007, to file said Petition was unnecessary and superfluous.
Even without said Motion for Extension, petitioners could file their Petition for Review until 20 May 2007,
as it was still within the 30-day reglementary period provided for under Section 11 of Republic Act No.
9282; and implemented by Section 3(a), Rule 8 of the Revised Rules of the CTA.
The Motion for Extension filed by the petitioners on 18 May 2007, prior to the lapse of the 30-day
reglementary period on 20 May 2007, in which they prayed for another extended period of 10 days, or
until 30 May 2007, to file their Petition for Review was, in reality, only the first Motion for Extension of
petitioners. The CTA First Division should have granted the same, as it was sanctioned by the rules of
procedure. In fact, petitioners were only praying for a 10-day extension, five days less than the 15-day
extended period allowed by the rules. Thus, when petitioners filed via registered mail their Petition for
Review in C.T.A. AC No. 31 on 30 May 2007, they were able to comply with the reglementary period for
filing such a petition.
Nevertheless, there were other reasons for which the CTA First Division dismissed the Petition for
Review of petitioners in C.T.A. AC No. 31; i.e., petitioners failed to conform to Section 4 of Rule 5, and
Section 2 of Rule 6 of the Revised Rules of the CTA. The Court sustains the CTA First Division in this
regard.
Section 4, Rule 5 of the Revised Rules of the CTA requires that:
SEC. 4. Number of copies. The parties shall file eleven signed copies of every paper for cases before
the Court en banc and six signed copies for cases before a Division of the Court in addition to the
signed original copy, except as otherwise directed by the Court. Papers to be filed in more than one
case shall include one additional copy for each additional case. (Emphasis supplied.)
Section 2, Rule 6 of the Revised Rules of the CTA further necessitates that:
SEC. 2. Petition for review; contents. The petition for review shall contain allegations showing the
jurisdiction of the Court, a concise statement of the complete facts and a summary statement of the
issues involved in the case, as well as the reasons relied upon for the review of the challenged decision.
The petition shall be verified and must contain a certification against forum shopping as provided in
Section 3, Rule 46 of the Rules of Court. A clearly legible duplicate original or certified true copy of the
decision appealed from shall be attached to the petition. (Emphasis supplied.)
The aforesaid provisions should be read in conjunction with Section 1, Rule 7 of the Revised Rules of
the CTA, which provides:
SECTION 1. Applicability of the Rules of Court on procedure in the Court of Appeals, exception. The
procedure in the Court en banc or in Divisions in original or in appealed cases shall be the same as
those in petitions for review and appeals before the Court of Appeals pursuant to the applicable
provisions of Rules 42, 43, 44, and 46 of the Rules of Court, except as otherwise provided for in these
Rules. (Emphasis supplied.)
As found by the CTA First Division and affirmed by the CTA en banc, the Petition for Review filed by
petitioners via registered mail on 30 May 2007 consisted only of one copy and all the attachments
thereto, including the Decision dated 14 July 2006; and that the assailed Orders dated 16 November
2006 and 4 April 2007 of the RTC in Civil Case No. 03-107088 were mere machine copies. Evidently,
petitioners did not comply at all with the requirements set forth under Section 4, Rule 5; or with Section
2, Rule 6 of the Revised Rules of the CTA. Although the Revised Rules of the CTA do not provide for
the consequence of such non-compliance, Section 3, Rule 42 of the Rules of Court may be applied
suppletorily, as allowed by Section 1, Rule 7 of the Revised Rules of the CTA. Section 3, Rule 42 of the
Rules of Court reads:
SEC. 3. Effect of failure to comply with requirements. The failure of the petitioner to comply with any of
the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for
costs, proof of service of the petition, and the contents of and the documents which should accompany
the petition shall be sufficient ground for the dismissal thereof. (Emphasis supplied.)
True, petitioners subsequently submitted certified copies of the Decision dated 14 July 2006 and
assailed Orders dated 16 November 2006 and 4 April 2007 of the RTC in Civil Case No. 03-107088, but
a closer examination of the stamp on said documents reveals that they were prepared and certified only
on 14 August 2007, about two months and a half after the filing of the Petition for Review by petitioners.
Petitioners never offered an explanation for their non-compliance with Section 4 of Rule 5, and Section
2 of Rule 6 of the Revised Rules of the CTA. Hence, although the Court had, in previous instances,
relaxed the application of rules of procedure, it cannot do so in this case for lack of any justification.
Even assuming arguendo that the Petition for Review of petitioners in C.T.A. AC No. 31 should have
been given due course by the CTA First Division, it is still dismissible for lack of merit.
Contrary to the assertions of petitioners, the Coca-Cola case is indeed applicable to the instant case.
The pivotal issue raised therein was whether Tax Ordinance No. 7988 and Tax Ordinance No. 8011
were null and void, which this Court resolved in the affirmative. Tax Ordinance No. 7988 was declared
by the Secretary of the Department of Justice (DOJ) as null and void and without legal effect due to the
failure of herein petitioner City of Manila to satisfy the requirement under the law that said ordinance be
published for three consecutive days. Petitioner City of Manila never appealed said declaration of the
DOJ Secretary; thus, it attained finality after the lapse of the period for appeal of the same. The passage
of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988, did not cure the defects of the latter,
which, in any way, did not legally exist.
By virtue of the Coca-Cola case, Tax Ordinance No. 7988 and Tax Ordinance No. 8011 are null and
void and without any legal effect. Therefore, respondent cannot be taxed and assessed under the
amendatory laws--Tax Ordinance No. 7988 and Tax Ordinance No. 8011.
Petitioners insist that even with the declaration of nullity of Tax Ordinance No. 7988 and Tax Ordinance
No. 8011, respondent could still be made liable for local business taxes under both Sections 14 and 21
of Tax Ordinance No. 7944 as they were originally read, without the amendment by the null and void tax
ordinances.
Emphasis must be given to the fact that prior to the passage of Tax Ordinance No. 7988 and Tax
Ordinance No. 8011 by petitioner City of Manila, petitioners subjected and assessed respondent only for
the local business tax under Section 14 of Tax Ordinance No. 7794, but never under Section 21 of the
same. This was due to the clear and unambiguous proviso in Section 21 of Tax Ordinance No. 7794,
which stated that "all registered business in the City of Manila that are already paying the
aforementioned tax shall be exempted from payment thereof." The "aforementioned tax" referred to in
said proviso refers to local business tax. Stated differently, Section 21 of Tax Ordinance No. 7794
exempts from the payment of the local business tax imposed by said section, businesses that are
already paying such tax under other sections of the same tax ordinance. The said proviso, however,
was deleted from Section 21 of Tax Ordinance No. 7794 by Tax Ordinances No. 7988 and No. 8011.
Following this deletion, petitioners began assessing respondent for the local business tax under Section
21 of Tax Ordinance No. 7794, as amended.1avvphi1
The Court easily infers from the foregoing circumstances that petitioners themselves believed that prior
to Tax Ordinance No. 7988 and Tax Ordinance No. 8011, respondent was exempt from the local
business tax under Section 21 of Tax Ordinance No. 7794. Hence, petitioners had to wait for the
deletion of the exempting proviso in Section 21 of Tax Ordinance No. 7794 by Tax Ordinance No. 7988
and Tax Ordinance No. 8011 before they assessed respondent for the local business tax under said
section. Yet, with the pronouncement by this Court in the Coca-Cola case that Tax Ordinance No. 7988
and Tax Ordinance No. 8011 were null and void and without legal effect, then Section 21 of Tax
Ordinance No. 7794, as it has been previously worded, with its exempting proviso, is back in effect.
Accordingly, respondent should not have been subjected to the local business tax under Section 21 of
Tax Ordinance No. 7794 for the third and fourth quarters of 2000, given its exemption therefrom since it
was already paying the local business tax under Section 14 of the same ordinance.
Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their
own detriment. Said exempting proviso was precisely included in said section so as to avoid double
taxation.
Double taxation means taxing the same property twice when it should be taxed only once; that is,
"taxing the same person twice by the same jurisdiction for the same thing." It is obnoxious when the
taxpayer is taxed twice, when it should be but once. Otherwise described as "direct duplicate taxation,"
the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing
authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same
kind or character.18
Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is
subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being
imposed: (1) on the same subject matter the privilege of doing business in the City of Manila; (2) for
the same purpose to make persons conducting business within the City of Manila contribute to city
revenues; (3) by the same taxing authority petitioner City of Manila; (4) within the same taxing
jurisdiction within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods per
calendar year; and (6) of the same kind or character a local business tax imposed on gross sales or
receipts of the business.
The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax
Ordinance No. 7794 is specious. The Court revisits Section 143 of the LGC, the very source of the
power of municipalities and cities to impose a local business tax, and to which any local business tax
imposed by petitioner City of Manila must conform. It is apparent from a perusal thereof that when a
municipality or city has already imposed a business tax on manufacturers, etc. of liquors, distilled spirits,
wines, and any other article of commerce, pursuant to Section 143(a) of the LGC, said municipality or
city may no longer subject the same manufacturers, etc. to a business tax under Section 143(h) of the
same Code. Section 143(h) may be imposed only on businesses that are subject to excise tax, VAT, or
percentage tax under the NIRC, and that are "not otherwise specified in preceding paragraphs." In the
same way, businesses such as respondents, already subject to a local business tax under Section 14
of Tax Ordinance No. 7794 [which is based on Section 143(a) of the LGC], can no longer be made
liable for local business tax under Section 21 of the same Tax Ordinance [which is based on Section
143(h) of the LGC].
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby DENIED.
No costs.
SO ORDERED.