Tax+Digest+Assignment+9+

TAX DlGEST – ASSlGNMENT # 9 LOCAL GOV’T TAXATlON A.M.+D.G. TAX ll – Atty.
Mendoza
MANILA ELECTRIC COMPANY vs. PROVINCE OF LAGUNA
FACTS
Manila Electric Company (MERALCO) on various dates (the latest
being January l9, l983) was granted franchises by various
municipalities of Laguna. On Sept. l2 l99l, RA 7l60 "Local
Government Code of l99l" (LGC) was enacted to take effect on
Jan.l l992 enjoining local goverment units to create their own
sources of revenue and to levy taxes, fees and charges, subject to the
limitations, consistent with the basic policy of local autonomy.
Respondent Laguna Province enacted Ordinance No. 0l-92 (effective
Jan. l, l993) providing, in part:
"Sec. 2.09. Franchise Tax. – There is hereby imposed a tax on
businesses enjoying a franchise, at a rate of fifty percent (50%) of
one percent (l%) of the gross annual receipts, which shall include
both cash sales and sales on account realized during the preceding
calendar year within this province, including the territorial limits on
any city located in the province"
MERALCO was then sent a demand letter to pay the corresponding
tax. MERALCO paid the tax under protest (approx. Phpl9.5M) and
later on filed a formal claim for refund. lt contends that the stated
Section 2.09 of the LGC contravened the provisions of Section l of
PD 55l, which provides:
"Any provision of law or local ordinance to the contrary
notwithstanding, the franchise tax payable by all grantees of
franchises to generate, distribute and sell electric current for light,
heat and power shall be two per cent (2%) of their gross receipts
received from the sale of electric current and from transactions
incident to the generation, distribution and sale of electric current.
"Such franchise tax shall be payable to the Commissioner of
lnternal Revenue or his duly authorized representative on or before
the twentieth day of the month following the end of each calendar
quarter or month, as may be provided in the respective franchise or
pertinent municipal regulation and shall, any provision of the Local
Tax Code or any other law to the contrary notwithstanding, be in
lieu of all taxes and assessments of whatever nature imposed by
any national or local authority on earnings, receipts, income and
privilege of generation, distribution and sale of electric current."
MERALCO then filed a complaint for refund with a prayer for the
issuance of a writ of preliminary injunction and/or TRO at the RTC of
Sta. Cruz, Laguna. The RTC dismissed the complaint and ruled that
the Ordinance was valid, binding, reasonable and enforceable.
ISSUES
l. W/N the imposition of a franchise tax under Section 2.09 of
Laguna Provincial Ordinance No. 0l-92, insofar as MERALCO
is concerned, is violative of the non-impairment clause of the
Constitution and Section l of Presidential Decree No. 55l?
NO
2. W/N the LGC, has repealed, amended or modified Presidential
Decree No. 55l? YES
RULING
(As an intro for the ruling as stated by the SC:)
Local Governments do not have the inherent poer to ta! except to
the extent that such power might be de"e#ated to them either by the
basic law or by statute. Presently, Under Article X of the l987
Constitution, a general delegation of that power has been given in
favor of the Local Government Units (LGU).
Under the now prevailing Constitution, where there is neither a grant
nor a prohibition by statute, the tax power must be deemed to exist
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although Congress may provide statutory limitations and guidelines.
The basic rationale for the current rule is to safeguard the viability and
self-sufficiency of local government units by directly granting them
general and broad tax powers. Nevertheless, the ()nda*enta" "a
did not intend the de"e#ation to +e a+so")te and )n,onditiona";
the constitutional objective obviously is to ensure that, while the local
government units are being strengthened and made more
autonomous, the legislature must still see to it that (a) the ta!pa-er
i"" not +e over.+)rdened or sadd"ed ith *)"tip"e and
)nreasona+"e i*positions; (b) ea,h "o,a" #overn*ent )nit i""
have its (air share o( avai"a+"e reso)r,es; (c) the reso)r,es o( the
nationa" #overn*ent i"" not +e )nd)"- dist)r+ed; and (d) "o,a"
ta!ation i"" +e (air/ )ni(or*/ and 0)st.

l. While the Court has, not too infrequently, referred to tax
exemptions contained in special franchises as being in the nature of
contracts and a part of the inducement for carrying on the franchise,
these exemptions, nevertheless, are far from being strictly contractual
in nature. Contra,t)a" ta! e!e*ptions/ in the rea" sense o( the
ter* and here the non.i*pair*ent ,"a)se o( the Constit)tion
,an ri#ht"- +e invo1ed/ are those a#reed to +- the ta!in#
a)thorit- in ,ontra,ts/ s),h as those ,ontained in #overn*ent
+onds or de+ent)res/ "a()""- entered into +- the* )nder
ena+"in# "as in hi,h the #overn*ent/ a,tin# in its private
,apa,it-/ sheds its ,"oa1 o( a)thorit- and aives its
#overn*enta" i**)nit-. Truly, tax exemptions of this kind may not
be revoked without impairing the obligations of contracts. These
contractual tax exemptions, however, are not to be confused with tax
exemptions granted under franchises. A franchise partakes the
nature of a grant which is beyond the purview of the non-impairment
clause of the Constitution.
2. The Local Government Code of l99l explicitly authorizes provincial
governments, notwithstanding "any exemption granted by any law or
other special law, x x x (to) impose a tax on businesses enjoying a
franchise". (Section l37 of the LGC)
lndicative of the legislative intent to carry out the Constitutional
mandate of vesting broad tax powers to local government units, LGC
has effectively withdrawn under Section l93 thereof, tax exemptions
or incentives theretofore enjoyed by certain entities. This law states:
"Section l93 Withdrawal of Tax Exemption Privileges – Unless
otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the effectivity of this Code.
The Code, in addition, contains a general repealing clause in its
Section 534; thus:
"Section 534. Repealing Clause. – x x x.
"(f) All general and special laws, acts, city charters, decrees,
executive orders, proclamations and administrative regulations, or
part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified
accordingly.

3. MERALCO further contends that in a plethora of cases including
Court in Province of Misamis Oriental vs. Cagayan Electric Power and
Light Company, lnc., the phrase "shall be in lieu of all taxes and at
any time levied, established by, or collected by any authority"
exempted the franchise holder from any other tax imposed by the then
lnternal Revenue Cod and local ordinaces. The SC holds otherwise.
ln the recent case of the City Government of San Pablo, etc., et al. vs.
Hon. Bienvenido V. Reyes, et al., the Court has held that the phrase
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in "ie) o( a"" ta!es "have to give way to the peremptory language of
the Local Government Code specifically providing for the withdrawal
of such exemptions, privileges," and that "upon the effectivity of the
Local Government Code all exemptions except only as provided
therein can no longer be invoked by MERALCO to disclaim liability for
the local tax." In (ine/ the Co)rt has vieed its previo)s r)"in#s as
"a-in# stress *ore on the "e#is"ative intent o( the a*endator- "a
2 hether the ta! e!e*ption privi"e#e is to +e ithdran or not 2
rather than on hether the "a ,an ithdra/ itho)t vio"atin#
the Constit)tion/ the ta! e!e*ption or not.
PROVINCE OF %ULACAN vs. CA
FACTS
On June 26, l992, the Sangguniang Panlalawigan of Bulacan passed
Provincial Ordinance No. 3, known as "An Ordinance Enacting the
Revenue Code of the Bulacan Province." Section 2l of the ordinance
provides as follows:
Sec. 2l m!osition of "a#. There is hereby levied and collected a
tax of l0% of the fair market value in the locality per cubic meter of
ordinary stones, sand, gravel, earth and other quarry resources,
such, but not limited to marble, granite, volcanic cinders, basalt, tuff
and rock phosphate, extracted from !ublic lands or from beds of
seas, lakes, rivers, streams, creeks and other public waters within
its territorial jurisdiction.
Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated
November ll, l993, assessed private respondent Republic Cement
Corporation P2,524,692.l3 for extracting limestone, shale and silica
from several parcels of !rivate land in the province during the third
quarter of l992 until the second quarter of l993. Believing that the
province, on the basis of above-said ordinance, had no authority to
impose taxes on quarry resources extracted from private lands,
Republic Cement formally contested the same on December 23, l993
but was denied by the Provincial Treasurer on January l7, l994.
Republic Cement consequently filed a petition for declaratory relief
with the RTC of Bulacan on February l4, l994. The province filed a
motion to dismiss Republic Cement's petition, which was granted by
the trial court on May l3, l993, which ruled that declaratory relief was
improper, allegedly because a breach of the ordinance had been
committed by Republic Cement.
On July ll, l994, Republic Cement filed a petition for certiorari with
the Supreme Court seeking to reverse the trial court's dismissal of
their petition. The Court, in a resolution dated July 27, l994, referred
the same to the Court of Appeals. ln the interim, the Province of
Bulacan issued a warrant of levy against Republic Cement, allegedly
because of its unpaid tax liabilities. Negotiations between Republic
Cement and petitioners resulted in an agreement and modus vivendi
(temporary agreement) on December l2, l994, whereby Republic
Cement agreed to pay under protest Pl,262,346.00, 50% of the tax
assessed by petitioner, in exchange for the lifting of the warrant of
levy. CA ruled that Province of Bulacan had no legal authority.
ISSUE
W/N the provincial government could impose and/or assess taxes on
quarry resources extracted by Republic Cement from private lands
pursuant to Section 2l of Provincial Ordinance No. 3? No/ a provin,e
*a- not "ev- e!,ise ta!es on arti,"es a"read- ta!ed +- the
Nationa" Interna" Reven)e Code.
RULING
First, with regard to the remedial issue. Petitioners assert that the
Court of Appeals could only rule on the propriety of the trial court's
dismissal of Republic Cement's petition for declaratory relief, allegedly
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because that was the sole relief sought by the latter in its petition for
certiorari. Petitioners claim that the appellate court overstepped its
jurisdiction when it declared null and void the assessment made by
the Province of Bulacan against Republic Cement. However, the SC
declared that under the principle of estoppel, the petitioners can no
longer attack the modus Vivendi approved by the CA.
Second and more importantly, is the issue on the validity of the
ordinance. The pertinent provisions of the Local Government Code
are as follows:
Sec. l34. Sco!e of "a#ing Powers. ÷ Except as otherwise
provided in this Code, the province may levy only the taxes, fees,
and charges as provided in this Article.
Sec. l58. "a# on Sand, Gravel and $ther %uarry Resources. ÷
The province may levy and collect not more than ten percent (l0%)
of fair market value in the locality per cubic meter of ordinary
stones, sand, gravel, earth, and other quarry resources, as defined
under the National lnternal Revenue Code, as amended, extracted
from !ublic lands or from the beds of seas, lakes, rivers, streams,
creeks, and other public waters within its territorial jurisdiction.
xxx xxx xxx
The CA on the basis of Section l34, ruled that a province was
empowered to impose taxes only on sand, gravel, and other quarry
resources extracted from public lands, its authority to tax being limited
by said provision only to those taxes, fees and charges provided in
Article l, Chapter 2, Title l of Book ll of the Local Government Code.
On the other hand, petitioners claim that Sections l29 and l86 of the
Local Government Code authorizes the province to impose taxes
other than those specifically enumerated under the Local Government
Code. The CA erred in ruling that a province can impose only the
taxes specifically mentioned under the Local Government Code. As
correctly pointed out by petitioners, Section l86 allows a province to
levy taxes other than those specifically enumerated under the Code,
subject to the conditions specified therein.
However, in spite of this, province of Bulacan is still prohibited from
imposing taxes on stones, sand, gravel, earth and other quarry
resources extracted from !rivate lands. The tax imposed by the
Province of Bulacan is an excise tax, being a tax upon the
performance, carrying on, or exercise of an activity. The Local
Government Code provides:
Sec. l33. ÷ Common &imitations on the "a#ing Powers of &ocal
Government 'nits. ÷ Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxx xxx xxx
(h) Excise taxes on articles enumerated under the National lnternal
Revenue Code, as amended, and taxes, fees or charges on
petroleum products;
xxx xxx xxx
A province may not, therefore, levy excise taxes on articles already
taxed by the National lnternal Revenue Code. The National lnternal
Revenue Code levies a tax on all quarry resources, regardless of
origin, whether extracted from public or private land. Thus, a province
may not ordinarily impose taxes on stones, sand, gravel, earth and
other quarry resources, as the same are already taxed under the
National lnternal Revenue Code. The province can, however, impose
a tax on stones, sand, gravel, earth and other quarry resources
extracted from public land because it is expressly empowered to do
so under the Local Government Code. As to stones, sand, gravel,
earth and other quarry resources extracted from private land,
however, it may not do so, because of the limitation provided by
Section l33 of the Code in relation to Section l5l of the National
lnternal Revenue Code.
MAGTA3AS vs. PRYCE PROPERTIES
FACTS
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When PAGCOR announced the opening of a casino in Cagayan de
Oro City, Civic organizations angrily denounced the project. The
trouble arose when in l992, PAGCOR decided to expand its
operations to Cagayan de Oro City. lt leased a portion of a building
belonging to Pryce.
The Sangguniang Panlungsod of Cagayan de Oro City enacted
Ordinance No. 3353 which basically prohibits the issuance of
business permits to any establishment for the using and allowing to be
used its premises or portion thereof for the operation of casino.lt also
adopted a sterner Ordinance No. 3375-93 which prohibits the
operation of casino and providing penalty for violation thereof.
Pryce assailed the ordinances before the CA, where it was joined by
PAGCOR as intervenor and supplemental petitioner. The CA declared
the ordinances invalid and issued the writ prayed for to prohibit their
enforcement.
ISSUE
Whether or not the ordinances were unconstitutional and thus void
RULING
Yes.
PAGCOR is a corporation created directly by P.D. l869 to help
centralize and regulate all games of chance, including within the
territorial jurisdiction of the Philippines. ln Basco v. Phili!!ine
(musements and Gaming Cor!oration, this Court sustained the
constitutionality of the decree and even cited the benefits of the entity
to the national economy as the third highest revenue-earner in the
government, next only to the BlR and the Bureau of Customs.
Cagayan de Oro City is empowered to enact ordinances for the
purposes indicated in the Local Government Code. lt is expressly
vested with the police power under what is known as the General
Welfare Clause now embodied in Section l6 as follows:
Sec. l6. ÷ General Welfare. ÷ Every local government unit shall
exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall
ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the right
of the people to a balanced ecology, encourage and support the
development of appropriate and self-reliant scientific and
technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the
comfort and convenience of their inhabitants.
ln addition, Section 458 of the said Code specifically declares that:
Sec. 458. ÷ Powers, Duties, Functions and Compensation. ÷ (a)
The Sangguniang Panlungsod, as the legislative body of the city,
shall enact ordinances, approve resolutions and appropriate funds
for the general welfare of the city and its inhabitants pursuant to
Section l6 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
(l) Approve ordinances and pass resolutions necessary for an
efficient and effective city government, and in this connection, shall:
xxx xxx xxx
(v) Enact ordinances intended to prevent, suppress
and impose appropriate penalties for habitual
drunkenness in public places, vagrancy,
mendicancy, prostitution, establishment and
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maintenance of houses of ill repute, gambling and
other prohibited games of chance, fraudulent
devices and ways to obtain money or property, drug
addiction, maintenance of drug dens, drug pushing,
juvenile delinquency, the printing, distribution or
exhibition of obscene or pornographic materials or
publications, and such other activities inimical to the
welfare and morals of the inhabitants of the city;
The petitioners argue that by virtue of these provisions, the
Sangguniang Panlungsod may prohibit the operation of casinos
because they involve games of chance, which are detrimental to the
people. The legislative power conferred upon local government units
may be exercised over all kinds of gambling and not only over "illegal
gambling" as the respondents erroneously argue. Even if the
operation of casinos may have been permitted under P.D. l869, the
government of Cagayan de Oro City has the authority to prohibit them
within its territory pursuant to the authority entrusted to it by the Local
Government Code.
The petitioners also stress that when the Code expressly authorized
the local government units to prevent and suppress gambling and
other prohibited games of chance, like craps, baccarat, blackjack and
roulette, it meant all forms of gambling without distinction. 'bi le# non
distinguit, nec nos distinguere debemos. Otherwise, it would have
expressly excluded from the scope of their power casinos and other
forms of gambling authorized by special law, as it could have easily
done. The fact that it did not do so simply means that the local
government units are permitted to prohibit all kinds of gambling within
their territories, including the operation of casinos.
The adoption of the Local Government Code, it is pointed out, had the
effect of modifying the charter of the PAGCOR. The Code is not only
a later enactment than P.D. l869 and so is deemed to prevail in case
of inconsistencies between them. More than this, the powers of the
PAGCOR under the decree are expressly discontinued by the Code
insofar as they do not conform to its philosophy and provisions,
pursuant to Par. (f) of its repealing clause reading as follows:
(f) All general and special laws, acts, city charters, decrees,
executive orders, proclamations and administrative regulations, or
part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified
accordingly.
lt is also maintained that assuming there is doubt regarding the effect
of the Local Government Code on P.D. l869, the doubt must be
resolved in favor of the petitioners, in accordance with the direction in
the Code calling for its liberal interpretation in favor of the local
government units. Section 5 of the Code specifically provides:
Sec. 5. Rules of lnterpretation. ÷ ln the interpretation of the
provisions of this Code, the following rules shall apply:
(a) (ny !rovision on a !ower of a local government unit shall be
liberally inter!reted in its favor, and in case of doubt, any )uestion
thereon shall be resolved in favor of devolution of !owers and of
the lower local government unit. Any fair and reasonable doubt as
to the existence of the power shall be interpreted in favor of the
local government unit concerned;
xxx xxx xxx
(c) "he general welfare !rovisions in this Code shall be liberally
inter!reted to give more !owers to local government units in
accelerating economic development and upgrading the quality of
life for the people in the community; . . . (Emphasis supplied.)
Finally, the petitioners also attack gambling as intrinsically harmful
and cite various provisions of the Constitution and several decisions
of this Court expressive of the general and official disapprobation of
the vice. They invoke the State policies on the family and the proper
upbringing of the youth and, as might be expected, call attention to
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the old case of '.S. v. Salaveria,

which sustained a municipal
ordinance prohibiting the playing of !anguingue.
The morality of gambling is not a justiciable issue. Gambling is not
illegal !er se. While it is generally considered inimical to the interests
of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning
it at all. lt is left to Congress to deal with the activity as it sees fit. ln
the exercise of its own discretion, the legislature may prohibit
gambling altogether or allow it without limitation or it may prohibit
some forms of gambling and allow others for whatever reasons it may
consider sufficient. lt is settled that questions regarding the wisdom,
morality, or practicibility of statutes are not addressed to the judiciary
but may be resolved only by the legislative and executive
departments, to which the function belongs in our scheme of
government. That function is exclusive.
The only question we can and shall resolve in this petition is the
validity of Ordinance No. 3355 and Ordinance No. 3375-93 as
enacted by the Sangguniang Panlungsod of Cagayan de Oro City.
And we shall do so only by the criteria laid down by law and not by our
own convictions on the propriety of gambling.
The tests of a valid ordinance are well established. A long line of
decisions has held that to be valid, an ordinance must conform to the
following substantive requirements:
l) lt must not contravene the constitution or any
statute.
2) lt must not be unfair or oppressive.
3) lt must not be partial or discriminatory.
4) lt must not prohibit but may regulate trade.
5) lt must be general and consistent with public policy.
6) lt must not be unreasonable.
We begin by observing that under Sec. 458 of the Local Government
Code, local government units are authorized to prevent or suppress,
among others, "gambling and other prohibited games of chance."
Obviously, this provision excludes games of chance which are not
prohibited but are in fact permitted by law. The petitioners are less
than accurate in claiming that the Code could have excluded such
games of chance but did not. ln fact it does. The language of the
section is clear and unmistakable. Under the rule of noscitur a sociis,
a word or phrase should be interpreted in relation to, or given the
same meaning of, words with which it is associated. Accordingly, we
conclude that since the word "gambling" is associated with "and other
prohibited games of chance," the word should be read as referring to
only illegal gambling which, like the other prohibited games of chance,
must be prevented or suppressed.
The apparent flaw in the ordinances in question is that they
contravene P.D. l869 and the public policy embodied therein insofar
as they prevent PAGCOR from exercising the power conferred on it to
operate a casino in Cagayan de Oro City. The petitioners have an
ingenious answer to this misgiving. They deny that it is the ordinances
that have changed P.D. l869 for an ordinance admittedly cannot
prevail against a statute. Their theory is that the change has been
made by the Local Government Code itself, which was also enacted
by the national lawmaking authority. ln their view, the decree has
been, not really repealed by the Code, but merely "modified !ro tanto"
in the sense that PAGCOR cannot now operate a casino over the
objection of the local government unit concerned. This modification of
P.D. l869 by the Local Government Code is permissible because one
law can change or repeal another law.
lt seems to us that the petitioners are playing with words. While
insisting that the decree has only been "modified !ro tanto," they are
actually arguing that it is already dead, repealed and useless for all
intents and purposes because the Code has shorn PAGCOR of all
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power to centralize and regulate casinos. Strictly speaking, its
operations may now be not only prohibited by the local government
unit; in fact, the prohibition is not only discretionary but mandated by
Section 458 of the Code if the word "shall" as used therein is to be
given its accepted meaning. Local government units have now no
choice but to prevent and suppress gambling, which in the petitioners'
view includes both legal and illegal gambling. Under this construction,
PAGCOR will have no more games of chance to regulate or centralize
as they must all be prohibited by the local government units pursuant
to the mandatory duty imposed upon them by the Code. ln this
situation, PAGCOR cannot continue to exist except only as a
toothless tiger or a white elephant and will no longer be able to
exercise its powers as a prime source of government revenue through
the operation of casinos.
lt is noteworthy that the petitioners have cited only Par. (f) of the
repealing clause, conveniently discarding the rest of the provision
which painstakingly mentions the specific laws or the parts thereof
which are repealed (or modified) by the Code. Significantly, P.D. l869
is not one of them. A reading of the entire repealing clause, Section
534, will disclose the omission of said P.D. l869. Furthermore, it is a
familiar rule that implied repeals are not lightly presumed in the
absence of a clear and unmistakable showing of such intention.
lt is a canon of legal hermeneutics that instead of pitting one statute
against another in an inevitably destructive confrontation, courts must
exert every effort to reconcile them, remembering that both laws
deserve a becoming respect as the handiwork of a coordinate branch
of the government. On the assumption of a conflict between P.D.
l869 and the Code, the proper action is not to uphold one and annul
the other but to give effect to both by harmonizing them if possible.
This is possible in the case before us. The proper resolution of the
problem at hand is to hold that under the Local Government Code,
local government units may (and indeed must) prevent and suppress
all kinds of gambling within their territories except only those allowed
by statutes like P.D. l869. The exception reserved in such laws must
be read into the Code, to make both the Code and such laws equally
effective and mutually complementary.
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in the
Constitution strengthening the policy of local autonomy. Without
meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly
reduced degree now than under our previous Constitutions. The
power to create still includes the power to destroy. The power to grant
still includes the power to withhold or recall. True, there are certain
notable innovations in the Constitution, like the direct conferment on
the local government units of the power to tax, which cannot now be
withdrawn by mere statute. By and large, however, the national
legislature is still the principal of the local government units, which
cannot defy its will or modify or violate it.
Separate Opinions

PA'ILLA/ J., concurring:
l concur with the majority holding that the city ordinances in question
cannot modify much less repeal PAGCOR's general authority to
establish and maintain gambling casinos anywhere in the Philippines
under Presidential Decree No. l869.
However, despite the legality of the opening and operation of a casino
in Cagayan de Oro City by respondent PAGCOR, l wish to reiterate
my view that gambling in any form runs counter to the government's
own efforts to re-establish and resurrect the Filipino moral character
which is generally perceived to be in a state of continuing erosion. lt is
in the light of this alarming perspective that l call upon government to
carefully weigh the advantages and disadvantages of setting up more
gambling facilities in the country. That the PAGCOR contributes
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greatly to the coffers of the government is not enough reason for
setting up more gambling casinos because, undoubtedly, this will not
help improve, but will cause a further deterioration in the Filipino moral
character.lt is worth remembering in this regard that, l) what is legal
is not always moral and 2) the ends do not always justify the means.

'AVI'E/ 3R./ J., concurring:
While l concur in part with the majority, l wish, however, to express
my views on certain aspects of this case.
l.
lt must at once be noted that private respondent Pryce Properties
Corporation (PRYCE) directly filed with the Court of Appeals its so-
called petition for !rohibition, thereby invoking the said court's original
jurisdiction to issue writs of prohibition under Section 9(l) of B.P. Blg.
l29. As l see it, however, the principal cause of action therein is one
for declaratory relief: to declare null and unconstitutional ÷ for, inter
alia, having been enacted without or in excess of jurisdiction, for
impairing the obligation of contracts, and for being inconsistent with
public policy ÷ the challenged ordinances enacted by the
Sangguniang Panglungsod of the City of Cagayan de Oro. The
intervention therein of public respondent Philippine Amusement and
Gaming Corporation (PAGCOR) further underscores the "declaratory
relief" nature of the action. PAGCOR assails the ordinances for being
contrary to the non-impairment and equal protection clauses of the
Constitution, violative of the Local Government Code, and against the
State's national policy declared in P.D. No. l869. Accordingly, the
Court of Appeals does not have jurisdiction over the nature of the
action. Even assuming arguendo that the case is one for !rohibition,
then, under this Court's established policy relative to the hierarchy of
courts, the petition should have been filed with the Regional Trial
Court of Cagayan de Oro City. l find no special or compelling reason
why it was not filed with the said court. l do not wish to entertain the
thought that PRYCE doubted a favorable verdict therefrom, in which
case the filing of the petition with the Court of Appeals may have been
impelled by tactical considerations. A dismissal of the petition by the
Court of Appeals would have been in order pursuant to our decisions.
P4G vs. MUNICIPALITY OF 3UGNA
FACTS
P &G is a domestic corporation engaged in the manufacture of soap,
edible oil, margarine and other similar products, and for this purpose
maintains a "bodega" in defendant Municipality where it stores copra
purchased in the municipality and therefrom ships the same for its
manufacturing and other operations.
Subsequently, the Municipal Council of Jagna enacted Municipal
Ordinance No. 4 which imposes storage fees to all exportable copra
deposited in a "bodega" within the jurisdiction of the Municipality.
For a period of six years, from l958 to l963, P&G paid defendant
Municipality, allegedly under protest, storage fees in the total sum of
ll42,265.l3.
ln l964, P&G filed this suit in the CFl wherein it prayed that l)
Ordinance No. 4 be declared inapplicable to it (it claims that it is not
engaged in the storage of copra for compensation and the tax pf
P0.l0 for l00 kilos is excessive, unreasonable and oppressive), or
that it be pronounced ultra*vires and void for being beyond the power
of the Municipality to enact; and 2) that defendant Municipality be
ordered to refund to it the amount which it had paid under protest; and
costs. However, defendant Municipality upheld its power to enact the
Ordinance in question; questioned the jurisdiction of the CFl to take
cognizance of the action; and pleaded prescription and laches for
P&G's failure to timely question the validity of the said Ordinance.
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After the parties had agreed to submit the case for judgment on the
pleadings, the CFl upheld its jurisdiction as well as defendant
Municipality's power to enact the Ordinance in question under section
2238 of the Revised Administrative Code, otherwise known as the
general welfare clause, and declared that P&G's right of action had
prescribed under the 5-year period provided for by Article ll49 of the
Civil Code.
ISSUE
Whether defendant Municipality was authorized to impose and collect
the storage fee provided for in the challenged Ordinance
RULING
The va"idit- o( the Ordinan,e *)st +e )phe"d pursuant to the
broad authority conferred upon municipalities by Commonwealth Act
No. 472, which was the prevailing law when the Ordinance was
enacted. Section l thereof reads:
Section l. A municipal council or municipal district council sha""
have the a)thorit- to i*pose *)ni,ipa" "i,ense ta!es )pon
persons en#a#ed in an- o,,)pation or +)siness/ or e!er,isin#
privi"e#es in the *)ni,ipa"it- or *)ni,ipa" distri,t, by requiring
them to secure licenses at rates fixed by the municipal council, or
municipal district council, and to collect fees and charges for
services renderedxx
Under the foregoing provision, a municipality is authorized to impose
three kinds of licenses: (l) a license for regulation of useful
occupation or enterprises; (2) license for restriction or regulation of
non-useful occupations or enterprises; and (3) license for revenue. lt
is thus unnecessary, to determine whether the subject storage fee is a
tax for revenue purposes or a license fee to reimburse defendant
Municipality for service of supervision because defendant Municipality
is authorized not only to impose a license fee but also to tax for
revenue purposes.
Moreover, the business of buying and selling and storing copra is
property the subject of regulation within the police power granted to
municipalities under section 2238 of the Revised Administrative Code
or the "general welfare clause"
P&G's argument that the imposition of P0.l0 per l00 kilos of copra
stored in a bodega within defendant's territory is beyond the cost of
regulation and surveillance is not well taken. As enunciated in the
case of Victorias +illing Co. vs. +unici!ality of Victorias, ,"he cost of
regulation cannot be ta-en as a gauge, if the munici!ality really
intended to enact a revenue ordinance." Municipal corporations are
allowed wide discretion in determining the rates of imposable license
fees even in cases of purely police power measures. ln the case at
bar, P&G has not sufficiently shown that the rate imposed by the
questioned Ordinance is oppressive, excessive and prohibitive.
The Ordinance in question does not amount to double taxation. For
double taxation to exist, the same property must be taxed twice, when
it should be taxed but once. Surely, a tax on P&G's products is
different from a tax on the privilege of storing copra in a bodega
situated within the territorial boundary of defendant municipality.
P&G's further contention that the storage fee imposed by the
Ordinance is actually intended to be an export tax, which is expressly
prohibited by section 2287 of the Revised Administrative Code, is
without merit. Said provision reads as follows:
Section 2287 ... lt shall not be in the power of the municipal council
to impose a tax in any form whatever upon goods and merchandise
carried into the municipality, or out of the same, and any attempt to
impose an import or export tax upon such goods shall be void. xxx
xxx xxx
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We have held that only where there is a clear showing that what is
being taxed is an export to any foreign country would the prohibition
come into play.

The storage fee impugned is not a tax on export
because it is imposed not only upon copra to be exported but also
upon copra sold and to be used for domestic purposes if stored in any
warehouse in the Municipality and the weight thereof is l00 kilos or
more.
On the issue of prescription, the case of +unici!ality of $!on vs.
Calte# Phil., is authority for the view that the period for prescription of
actions to recover municipal license taxes is six years under Article
ll45(2) of the Civil Code. Thus, plaintiff's action brought within six
years from the time the right of action first accrued in l958 has not yet
prescribed.
VILLANUEVA vs. CITY OF ILOILO
FACTS
On September 30, l946 the municipal board of lloilo City enacted
Ordinance 86, imposing license tax fees on tenement house.This
Court, in City of loilo vs. Remedios Sian Villanueva and .usebio
Villanueva declared the ordinance ultra vires, "it not appearing that
the power to tax owners of tenement houses is one among those
clearly and expressly granted to the City of lloilo by its Charter." On
January l5, l960 the municipal board of lloilo City, believing,
obviously, that with the passage of RA 2264,Local Autonomy Act, it
had acquired the authority or power to enact an ordinance similar to
that previously declared by this Court as ultra vires, enacted
Ordinan,e $$ (AN ORDlNANCE lMPOSlNG MUNlClPAL LlCENSE
TAX ON PERSONS ENGAGED lN THE BUSlNESS OF OPERATlNG
TENEMENT HOUSES).By virtue of the ordinance in question, the
appellant City collected from appellee Villanueva, for the years l960-
l964, the sum of P5,824.30, and from other appellees, for the same
year, the sum of Pl,3l7.00. Hence, plaintiffs-appellees filed a
complaint, against the City of lloilo, praying that Ordinance ll be
declared "invalid for being beyond the powers of the Municipal
Council of the City of lloilo to enact, and unconstitutional for being
violative of the rule as to uniformity of taxation and for depriving said
plaintiffs of the equal protection clause of the Constitution," and that
the City be ordered to refund the amounts collected from them under
the said ordinance. Lower court rendered judgment declaring the
ordinance illegal.
ISSUES
l. ls the City of lloilo empowered by the Local Autonomy Act to
impose tenement taxes? YES.
2. ls Ordinance ll of the City of lloilo, illegal because it imposes
double taxation? NO.
3. ls Ordinance ll oppressive and unreasonable because it
carries a penal clause? NO.
4. Does Ordinance ll violate the rule of uniformity of taxation?
NO.
RULING
l. RA 2264 confer on local governments broad taxing authority which
extends to almost "everything, excepting those which are mentioned
therein," provided that the tax so levied is "for public purposes, just
and uniform," and does not transgress any constitutional provision or
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is not repugnant to a controlling statute.Thus, when a tax, levied
under the authority of a city or municipal ordinance, is not within the
exceptions and limitations aforementioned, the same comes within the
ambit of the general rule, pursuant to the rules of e#!ressio unius est
e#clusio alterius, and e#ce!tio firmat regulum in casibus non e#ce!ti.
The appellees strongly maintain that it is a "property tax" or "real
estate tax,"

and not a "tax on !ersons engaged in any occupation or
business or exercising privileges," or a license tax, or a privilege tax,
or an excise tax. lt is our view, contrary to the appellees' contention,
that the tax in question is not a real estate tax. The tax imposed by the
ordinance in question does not possess the attributes of a real estate
tax. lt is not a tax on the land on which the tenement houses are
erected, although both land and tenement houses may belong to the
same owner. The tax is not a fixed proportion of the assessed value of
the tenement houses, and does not require the intervention of
assessors or appraisers. lt is not payable at a designated time or
date, and is not enforceable against the tenement houses either by
sale or distraint. Clearly, therefore, the tax in question is not a real
estate tax. On the contrary, it is plain from the context of the
ordinance that the intention is to impose a license tax on the operation
of tenement houses, which is a form of business or calling. The
ordinance, in both its title and body, particularly sections l and 3
thereof, designates the tax imposed as a "municipal license tax"
which, by itself, means an "imposition or exaction on the right to use
or dispose of property, to pursue a business, occupation, or calling, or
to exercise a privilege." ln City of loilo vs. Remedios Sian Villanueva,
et al., tenement house

is defined as "any house or building, or portion
thereof, which is rented, leased, or hired out to be occu!ied, or is
occu!ied, as the home or residence of three families or more living
independently of each other and doing their cooking in the premises
or by more than two families upon any floor, so living and cooking, but
having a common right in the halls, stairways, yards, water-closets, or
privies, or some of them." Tenement houses, being necessarily
offered for rent or lease by their very nature and essence, therefore
constitute a distinct form of business or calling, similar to the hotel or
motel business, or the operation of lodging houses or boarding
houses.
The lower court has interchangeably denominated the tax in question
as a tenement tax or an apartment tax. Called by either name, it is not
among the exceptions listed in section 2 of the Local Autonomy Act.
On the other hand, the imposition by the ordinance of a license tax on
persons engaged in the business of operating tenement houses finds
authority in section 2 of the Local Autonomy Act which provides that
chartered cities have the authority to impose municipal license taxes
or fees upon persons engaged in any occupation or business, or
exercising privileges within their respective territories, and "otherwise
to levy for public purposes, just and uniform taxes, licenses, or fees."
2. The trial court condemned the ordinance as constituting "not only
double taxation but treble at that," because "buildings pay real estate
taxes and also income taxes as provided for in Sec. l82 (A) (3) (s) of
the NlRC, besides the tenement tax under the said ordinance." While
it is true that the plaintiffs-appellees are taxable under the aforesaid
provisions of the NlRC as real estate dealers, and still taxable under
the ordinance in question, the argument against double taxation may
not be invoked. The same tax may be imposed by the national
government as well as by the local government. There is nothing
inherently obnoxious in the exaction of license fees or taxes with
respect to the same occupation, calling or activity by both the State
and a political subdivision thereof.
The contention that the plaintiffs-appellees are doubly taxed because
they are paying the real estate taxes and the tenement tax imposed
by the ordinance in question, is also devoid of merit. lt is a well-settled
rule that a license tax may be levied upon a business or occupation
although the land or property used in connection therewith is subject
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to property tax. To constitute double taxation in the objectionable or
prohibited sense the same property must be taxed twice when it
should be taxed but once; both taxes must be imposed on the same
property or subject-matter, for the same purpose, by the same State,
Government, or taxing authority, within the same jurisdiction or taxing
district, during the same taxing period, and they must be the same
kind or character of tax. lt has been shown that a real estate tax and
the tenement tax imposed by the ordinance, although imposed by the
same taxing authority, are not of the same kind or character.
3. A tax is not a debt in the sense of an obligation incurred by
contract, express or implied, and therefore is not within the meaning
of constitutional or statutory provisions abolishing or prohibiting
imprisonment for debt, and a statute or ordinance which punishes the
non-payment thereof by fine or imprisonment is not, in conflict with
that prohibition. Nor is the tax in question a poll tax, for the latter is a
tax of a fixed amount upon all persons, or upon all persons of a
certain class, resident within a specified territory, without regard to
their property or the occupations in which they may be engaged.
Therefore, the tax in question is not oppressive in the manner the
lower court puts it. On the other hand, the charter of lloilo City
empowers its municipal board to "fix penalties for violations of
ordinances, which shall not exceed a fine of two hundred pesos or six
months' imprisonment, or both such fine and imprisonment for each
offense.
4. The trial court brands the ordinance as violative of the rule of
uniformity of taxation because while the owners of the other buildings
only pay real estate tax and income taxes, the ordinance imposes
aside from these two taxes an apartment or tenement tax. Appellees
also argue that there is "lack of uniformity" and "relative inequality,"
because "only the taxpayers of the City of lloilo are singled out to pay
taxes on their tenement houses, while citizens of other cities, where
their councils do not enact a similar tax ordinance, are permitted to
escape such imposition."
lt is our view that both assertions are undeserving of extended
attention. This Court has already ruled that tenement houses
constitute a distinct class of property. lt has likewise ruled that "taxes
are uniform and equal when imposed upon all property of the same
class or character within the taxing authority."

The fact, therefore, that
the owners of other classes of buildings in the City of lloilo do not pay
the taxes imposed by the ordinance in question is no argument at all
against uniformity and equality of the tax imposition. Neither is the rule
of equality and uniformity violated by the fact that tenement taxes are
not imposed in other cities, for the same rule does not require that
taxes for the same purpose should be imposed in different territorial
subdivisions at the same time.So long as the burden of the tax falls
equally and impartially on all owners or operators of tenement houses
similarly classified or situated, equality and uniformity of taxation is
accomplished.
The last important issue posed by the appellees is that since the
ordinance in the case at bar is a mere reproduction of Ordinance 86 of
the City of lloilo which was declared by this Court as ultra vires, the
decision in that case should be accorded the effect of res /udicata in
the present case or should constitute estoppel by judgment. To
dispose of this contention, it suffices to say that there is no identity of
subject-matter in that case and this case because the subject-matter
in it was an ordinance which dealt not only with tenement houses but
also warehouses, and the said ordinance was enacted pursuant to the
provisions of the City charter, while the ordinance in the case at bar
was enacted pursuant to the provisions of the Local Autonomy Act.
MUNICIPALITY OF OPON vs. CALTE5
FACTS
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Caltex (Philippines) lnc., is a domestic corporation engaged in the
business of importing, distributing and selling gasoline, kerosene and
other petroleum products. For the purpose of storing its imported
petroleum products it has an establishment called 'Caltex Opon
Terminal' located in the Municipality of Opon, Cebu. ln addition, the
said 'Caltex Opon Terminal' has a tin can factory whereby plaintiff-
appellant manufactures 5-gallon tin cans for its use in the sale and
distribution of its petroleum products.
Pursuant, however, to a service agreement dated August l, l946 and
entered into between plaintiff-appellant and Tidewater Associated Oil
Company, plaintiff-appellant agreed to arrange, within its ability to do
so, in drum and package factories owned and operated by it, to
manufacture, supply and/or fill cans and drums for Tidewater,
provided the latter reimburses herein plaintiff-appellant for all cost and
expense caused thereby, plus three (3%) per cent of such cost and
expense.
From l950 to l955, plaintiff-appellant’s9 tin can factory at its 'Caltex
Opon Terminal' manufactured 8,037,775 tin cans out of which
6,883,429 were used for the sale and distribution of its own products
and l,l54,346 tin cans were delivered to Tidewater by virtue of the
service agreement abovementioned.
Ordinance No. 9, series of l949, of defendant-appellee Municipality of
Opon, Cebu, imposes a municipal license tax on tin factory on the
basis of its maximum annual output capacity, with a schedule of
graduated rates. Section l, in part, provides: "A municipal license tax
on tin factory" is imposed upon "(a) Tin factory with a maximum output
capacity of 30,000 tins ÷ Pl50.00"
Pursuant to this ordinance, defendants-appellees levied and collected
from plaintiff-appellant license taxes based on the production of the tin
factory at its 'Caltex Opon Terminal' for the years l950 to l955.
Plaintiff contends that respondent company is liable for the entire
output of the tin can factory because profit is the motivating factor in
the manufacture thereof. Petitioners' view is that the tin cans whether
for its own use or for Tidewater upon the contract heretofore stated,
are taxable. Reason therefor, so petitioners point out, is that the
license tax is based on the maximum annual output capacity of the
factory.
ISSUES
l. Whether or not respondent tin can factory is taxable as a
separate business of respondent – NO.
2. Whether or not period to claim refund has prescribed – NO.
RULING
l. When a person or company is already taxed on its main business,
it may not be further ta#ed for doing something or engaging in an
activity or work which is merely a part of, incidental to and is
necessary to its main business.
ln the sale and distribution of its products in liquid form respondent
uses containers. The container is a part of the product sold. By
maintaining its factory for tin cans respondent is assured of
continuous supply thereof. Therefore, the tin cans it manufactures for
its ownership are not within the coverage of petitioner municipality's
taxing power under Ordinance No. 9.
The entire-output-of-factory argument advanced by petitioners needs
further articulation. For petitioners insist that respondent's factory also
serves the needs of another entity ÷ Tidewater. To be noted here is
that of the tin cans produce for the period l950-l955, 85.63% were
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used by respondent; l4.36l% delivered to Tidewater. Jurisprudential
support is not wanting for the decision of the Court of Appeals
establishing a dividing line between the tin cans manufactured for
respondent's own business and those for Tidewater.
For the tin cans produced for Tidewater license tax was correctly
assessed. But for those produced by respondent for its own use, no
license tax is due, because the manufacture thereof is "incidental to"
and tends "to better accom!lish the !rinci!al end in view" ÷ its main
business.
2. A rule which has earned acceptance is that the period for
prescription of action to recover municipal license taxes is six years
under Article ll45 (2) of the Civil Code.

The two-year prescriptive
period in Section 306 of the National lnternal Revenue Code relied
upon by petitioners finds no application. For, this codal provision, as
we have said in one case,

"clearly refers e#clusively to claims for
refund of `national internal revenue tax' erroneously or illegally
collected" and not "to a refund of `local or municipal license fees'
illegally collected."
P6ILIPPINE %AS7ET%ALL ASSOCIATION vs. CA
FACTS
PBA received a tax assessment from the BlR for deficiency on
amusement taxes
PBA contested the said deficiency on amusement taxes with the CTA
however was denied. The same was raised to the CA and was also
denied as well as a subsequent MR.
PBA now raises the case to the SC
ISSUES
l. Does the National government have jurisdiction to tax PBA or
is it the local government as provided in SEC. l3 of the Local
Tax code? NO
2. ls the Petitioner liable for the said amusement taxes? YES
Petitioner contends PD 23l, otherwise known as the Local Tax Code
of l973, transferred the power and authority to levy and collect
amusement taxes from the sale of admission tickets to places of
amusement from the national government to the local governments.
Petitioner cited BlR Memorandum Circular No. 49-73 providing that
the power to levy and collect amusement tax on admission tickets was
transferred to the local governments by virtue of the Local Tax Code;
and BlR Ruling No. 23l-86 which held that "the jurisdiction to levy
amusement tax on gross receipts from admission tickets to places of
amusement was transferred to local governments under P.D. No. 23l,
as amended.
RULING
Sec. l3. Amusement tax on admission. -The province shall impose
a tax on admission to be collected from the proprietors, lessees, or
operators of theaters, cinematographs, concert halls, circuses and
other places of amusement xxx."
The foregoing provision of law in point indicates that the province can
only impose a tax on admission from the proprietors, lessees, or
operators of theaters, cinematogra!hs, concert halls, circuses and
other places of amusement. The authority to tax professional
basketball games is not therein included.
With the reference to PD 87l by PD l456 and PD l959, there is a
recognition under the laws of this country that the amusement tax on
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professional basketball games is a national, and not a local, tax. Even
up to the present, the category of amusement taxes on professional
basketball games as a national tax remains the same. This is so
provided under Section l25 of the l997 National lnternal Revenue
Code. Section l40 of the Local Government Code of l992 (Republic
Act 7l60), meanwhile, retained the areas (theaters, cinematographs,
concert halls, circuses and other places of amusement) where the
province may levy an amusement tax without including therein
professional basketball games.
Last issue for resolution concerns the liability of petitioner for the
payment of surcharge and interest on the deficiency amount due.
Petitioner contends that it is not liable, as it acted in good faith, having
relied upon the issuances of the respondent Commissioner. This
issue must necessarily fail as the same has never been posed as an
issue before the respondent court. lssues not raised in the court a
)uo cannot be raised for the first time on appeal.
All things studiedly considered, the Court rules that the petitioner is
liable to pay amusement tax to the national government, and not to
the local government, in accordance with the rates prescribed by PD
l959.
6AGONOY MAR7ET VEN'OR ASSOCIATION vs. MUNICIPALITY
OF 6AGONOY
FACTS
On October l, l996, the Sangguniang Bayan of Hagonoy, Bulacan,
enacted an ordinance, Kautusan Blg. 28, which increased the stall
rentals of the market vendors in Hagonoy. Article 3 provided that it
shall take effect upon approval. The subject ordinance was posted
from November 4-25, l996. ln the last week of November, l997, the
petitioner’s members were personally given copies of the approved
Ordinance and were informed that it shall be enforced in January,
l998. On December 8, l997, the petitioner’s President filed an
appeal with the Secretary of Justice assailing the constitutionality of
the tax ordinance. Petitioner claimed it was unaware of the posting of
the ordinance.
Respondent opposed the appeal. lt contended that the ordinance
took effect on October 6, l996 and that the ordinance, as approved,
was posted as required by law. Hence, it was pointed out that
petitioner’s appeal, made over a year later, was already time-barred.
The Secretary of Justice dismissed the appeal on the ground that it
was filed out of time, i.e., beyond thirty (30) days from the effectivity of
the Ordinance on October l, l996, as prescribed under Section l87
of the l99l Local Government Code. Citing the case of Tañada vs.
Tuvera, the Secretary of Justice held that the date of effectivity of the
subject ordinance retroacted to the date of its approval in October
l996, after the required publication or posting has been complied
with, pursuant to Section 3 of said ordinance.
ISSUE
Was the appeal by the petitioner with the Secretary of Justice time-
barred?
RULING
YES. Section l87 of the Local Gov’t Code requires that an appea" o(
a ta! ordinan,e or reven)e *eas)re sho)"d +e *ade to the
Se,retar- o( 3)sti,e ithin thirt- 8&9: da-s (ro* e((e,tivit- o( the
ordinan,e and even d)rin# its penden,-/ the e((e,tivit- o( the
assai"ed ordinan,e sha"" not +e s)spended . ln the case at bar,
Municipal Ordinance No. 28 took effect in October l996. Petitioner
filed its appeal only in December l997, more than a year after the
effectivity of the ordinance in l996. Clearly, the Secretary of Justice
correctly dismissed it for being time-barred. At this point, it is apropos
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to state that the timeframe fixed by law for parties to avail of their legal
remedies before competent courts is not a "mere technicality" that can
be easily brushed aside. The periods stated in Se,tion $;< o( the
Lo,a" Govern*ent Code are *andator-. Ordinance No. 28 is a
revenue measure adopted by the municipality of Hagonoy to fix and
collect public market stall rentals. Being its lifeblood, collection of
revenues by the government is of paramount importance. The funds
for the operation of its agencies and provision of basic services to its
inhabitants are largely derived from its revenues and collections.
Thus, it is essential that the validity of revenue measures is not left
uncertain for a considerable length of time. Hence, the law provided a
time limit for an aggrieved party to assail the legality of revenue
measures and tax ordinances.
YAMANE vs. %A LEPANTO
FACTS
Respondent BA-Lepanto Condominium Corporation (the
"Corporation") is a duly organized condominium corporation
constituted in accordance with the Condominium Act, which owns and
holds title to the common and limited common areas of the BA-
Lepanto Condominium (the "Condominium"), situated in Paseo de
Roxas, Makati City. lts membership comprises the various unit
owners of the Condominium. The Corporation is authorized, under
Article V of its Amended By-Laws, to collect regular assessments from
its members for operating expenses, capital expenditures on the
common areas, and other special assessments as provided for in the
Master Deed with Declaration of Restrictions of the Condominium.
The Corporation received a Notice of Assessment signed by the City
Treasurer stating that the Corporation is "liable to pay the correct city
business taxes, fees and charges," computed as totaling
Pl,60l,0l3.77 for the years l995 to l997. The Notice of Assessment
was silent as to the statutory basis of the business taxes assessed.
The Corporation responded with a written tax protest addressed to the
City Treasurer. lt was evident in the protest that the Corporation was
perplexed on the statutory basis of the tax assessment.
Proceeding from the premise that its tax liability arose from Section
3A.02(m) of the Makati Revenue Code, the Corporation proceeded to
argue that under both the Makati Code and the Local Government
Code, "business" is defined as "trade or commercial activity regularly
engaged in as a means of livelihood or with a view to profit." lt was
submitted that the Corporation, as a condominium corporation, was
organized not for profit, but to hold title over the common areas of the
Condominium, to manage the Condominium for the unit owners, and
to hold title to the parcels of land on which the Condominium was
located. Neither was the Corporation authorized, under its articles of
incorporation or by-laws to engage in profit-making activities. The
assessments it did collect from the unit owners were for capital
expenditures and operating expenses.
The protest was rejected by the City Treasurer, insisting that the
collection of dues from the unit owners was effected primarily "to
sustain and maintain the expenses of the common areas, with the end
in view of getting full appreciative living values for the individual
condominium occupants and to command better marketable prices for
those occupants" who would in the future sell their respective units.
Thus, she concluded since the "chances of getting higher prices for
well-managed common areas of any condominium are better and
more effective that condominiums with poor managed common
areas," the corporation activity "is a profit venture making".

From the denial of the protest, the Corporation filed an (!!eal with
the RTC which dismissed the apeal for lack of merit, accepting the
premise laid by the City Treasurer.

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From this 0ecision of the RTC, the Corporation filed a Petition for
Review under Rule 42 of the Rules of Civil Procedure with the
Court of Appeals. lnitially, the petition was dismissed outright on
the ground that only decisions of the RTC brought on appeal from
a first level court could be elevated for review under the mode of
review prescribed under Rule 42. However, the Corporation
pointed out in its +otion for Reconsideration that under Section
l95 of the Local Government Code, the remedy of the taxpayer
on the denial of the protest filed with the local treasurer is to
appeal the denial with the court of competent jurisdiction.
The CA reversed the RTC and declared that the Corporation was not
liable to pay business taxes to the City of Makati.
ISSUES
l. Whether the RTC, in deciding an appeal taken from a denial of
a protest by a local treasurer under Section l95 of the Local
Government Code, exercises "original jurisdiction" or "appellate
jurisdiction."
2. Whether or not the City of Makati may collect business taxes
on condominium corporations.
RULING
l. Original Jurisdiction. The question assumes a measure of
importance to this petition, for the adoption of the position of the City
Treasurer that the mode of review of the decision taken by the RTC is
governed by Rule 4l of the Rules of Civil Procedure means that the
decision of the RTC would have long become final and executory by
reason of the failure of the Corporation to file a notice of appeal.

Labelling the said review as an exercise of appellate jurisdiction is
inappropriate, since the denial of the protest is not the judgment or
order of a lower court, but of a local government official.
From these premises, it is evident that the stance of the City Treasurer
is correct as a matter of law, and that the proper remedy of the
Corporation from the RTC judgment is an ordinary appeal under Rule
4l to the Court of Appeals. However, we make this pronouncement
subject to two important qualifications. First, in this particular case
there are nonetheless significant reasons for the Court to overlook the
procedural error and ultimately uphold the adjudication of the
jurisdiction exercised by the Court of Appeals in this case. Second, the
doctrinal weight of the pronouncement is confined to cases and
controversies that emerged prior to the enactment of Republic Act No.
9282, the law which expanded the jurisdiction of the Court of Tax
Appeals (CTA).
2. No. The coverage of business taxation particular to the City of
Makati is provided by the Makati Revenue Code ("Revenue Code"),
enacted through Municipal Ordinance No. 92-072. The Revenue Code
remains in effect as of this writing. Article A, Chapter lll of the
Revenue Code governs business taxes in Makati, and it is quite
specific as to the particular businesses which are covered by business
taxes.
At no point has the City Treasurer informed the Corporation, the RTC,
the Court of Appeals, or this Court for that matter, as to what exactly is
the precise statutory basis under the Makati Revenue Code for the
levying of the business tax on petitioner.

The notice of assessment, which stands as the first instance the
taxpayer is officially made aware of the pending tax liability, should be
sufficiently informative to apprise the taxpayer the legal basis of the
tax. Section l95 of the Local Government Code does not go as far as
to expressly require that the notice of assessment specifically cite the
provision of the ordinance involved but it does require that it state the
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nature of the tax, fee or charge, the amount of deficiency, surcharges,
interests and penalties. ln this case, the notice of assessment sent to
the Corporation did state that the assessment was for business taxes,
as well as the amount of the assessment. There may have been !rima
facie compliance with the requirement under Section l95. However in
this case, the Revenue Code provides multiple provisions on business
taxes, and at varying rates. Hence, we could appreciate the
Corporation’s confusion, as expressed in its protest, as to the exact
legal basis for the tax.

Moreover, a careful examination of the Revenue Code shows that
while Section 3A.02(m) seems designed as a catch-all provision,
Section 3A.02(f), which provides for a different tax rate from that of the
former provision, may be construed to be of similar import. While
Section 3A.02(f) is quite exhaustive in enumerating the class of
businesses taxed under the provision, the listing, while it does not
include condominium-related enterprises, ends with the abbreviation
"etc.", or "et cetera".

(m) On owners or operators of any business not specified above shall
pay the tax at the rate of two percent (2%) for l993, two and one-half
percent (2 ½%) for l994 and l995, and three percent (3%) for l996
and the years thereafter of the gross receipts during the preceding
year.
We do note our discomfort with the unlimited breadth and the
dangerous uncertainty which are the twin hallmarks of the words "et
cetera." Certainly, we cannot be disposed to uphold any tax
imposition that derives its authority from enigmatic and uncertain
words such as "et cetera." Yet we cannot even say with definiteness
whether the tax imposed on the Corporation in this case is based on
"et cetera," or on Section 3A.02(m), or on any other provision of the
Revenue Code. Assuming that the assessment made on the
Corporation is on a provision other than Section 3A.02(m), the main
legal issue takes on a different complexion. For example, if it is based
on "et cetera" under Section 3A.02(f), we would have to examine
whether the Corporation faces analogous comparison with the other
businesses listed under that provision.

Certainly, the City Treasurer has not been helpful in that regard, as
she has been silent all through out as to the exact basis for the tax
imposition which she wishes that this Court uphold. lndeed, there is
only one thing that prevents this Court from ruling that there has been
a due process violation on account of the City Treasurer’s failure to
disclose on paper the statutory basis of the tax–that the Corporation
itself does not allege injury arising from such failure on the part of the
City Treasurer.

As stated earlier, local tax on businesses is authorized under Section
l43 of the Local Government Code. The word "business" itself is
defined under Section l3l(d) of the Code as "trade or commercial
activity regularly engaged in as a means of livelihood or with a view to
profit." This definition of "business" takes on importance, since Section
l43 allows local government units to impose local taxes on businesses
other than those specified under the provision. Moreover, even those
business activities specifically named in Section l43 are themselves
susceptible to broad interpretation.
lt is thus imperative that in order that the Corporation may be
subjected to business taxes, its activities must fall within the definition
of business as provided in the Local Government Code. And to hold
that they do is to ignore the very statutory nature of a condominium
corporation.

For orderly administration over common areas which are jointly owned
by the various unit owners, the Condominium Act permits the creation
of a condominium corporation, which is specially formed for the
purpose of holding title to the common area, in which the holders of
separate interests shall automatically be members or shareholders, to
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the exclusion of others, in proportion to the appurtenant interest of
their respective units.
ln line with the authority of the condominium corporation to manage
the condominium project, it may be authorized, in the deed of
restrictions, "to make reasonable assessments to meet authorized
expenditures, each condominium unit to be assessed separately for its
share of such expenses in proportion (unless otherwise provided) to its
owner’s fractional interest in any common areas." lt is the collection of
these assessments from unit owners that form the basis of the City
Treasurer’s claim that the Corporation is doing business.

We can elicit from the Condominium Act that a condominium
corporation is precluded by statute from engaging in corporate
activities other than the holding of the common areas, the
administration of the condominium project, and other acts necessary,
incidental or convenient to the accomplishment of such purposes.
Neither the maintenance of livelihood, nor the procurement of profit,
fall within the scope of permissible corporate purposes of a
condominium corporation under the Condominium Act.

The Court has examined the particular Articles of lncorporation and
By-Laws of the Corporation, and these documents unmistakably hew
to the limitations contained in the Condominium Act. Obviously, none
of these corporate purposes are geared towards obtaining of profit.
Even though the Corporation is empowered to levy assessments or
dues from the unit owners, these amounts collected are not intended
for the incurrence of profit by the Corporation or its members, but to
shoulder the multitude of necessary expenses that arise from the
maintenance of the Condominium Project. Just as much is confirmed
by Section l, Article V of the Amended By-Laws, which enumerate the
particular expenses to be defrayed by the regular assessments
collected from the unit owners. These would include the salaries of the
employees of the Corporation, and the cost of maintenance and
ordinary repairs of the common areas.
The City Treasurer nonetheless contends that the collection of these
assessments and dues are "with the end view of getting full
appreciative living values" for the condominium units, and as a result,
profit is obtained once these units are sold at higher prices. The Court
cites with approval the two counterpoints raised by the Court of
Appeals in rejecting this contention. First, if any profit is obtained by
the sale of the units, it accrues not to the corporation but to the unit
owner. Second, if the unit owner does obtain profit from the sale of the
corporation, the owner is already required to pay capital gains tax on
the appreciated value of the condominium unit.

The City Treasurer also contends that the fact that the Corporation is
engaged in business is evinced by the Articles of lncorporation, which
specifically empowers the Corporation "to acquire, own, hold, enjoy,
lease, operate and maintain, and to convey, sell, transfer mortgage or
otherwise dispose of real or personal property." What the City
Treasurer fails to add is that every corporation organized under the
Corporation Code is so specifically empowered. Section 36(7) of the
Corporation Code states that every corporation incorporated under the
Code has the power and capacity "to purchase, receive, take or grant,
hold, convey, sell, lease, pledge, mortgage and otherwise deal with
such real and personal property . . . as the transaction of the lawful
business of the corporation may reasonably and necessarily
require . . . ." Without this power, corporations, as juridical persons,
would be deprived of the capacity to engage in most meaningful legal
relations.

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

Accordingly, and with a significant degree of comfort, we hold that
condominium corporations are generally exempt from local business
taxation under the Local Government Code, irrespective of any local
ordinance that seeks to declare otherwise.
SAN 3UAN vs. CASTRO
FACTS
Romulo D. San Juan, registered owner of real properties in Marikina
City conveyed, by Deed of Assignment, the properties to the Saints
and Angels Realty Corporation (SARC), then under the process of
incorporation, in exchange for 258,434 shares of stock therein with a
total par value of P2,584,340.
Mr. San Juan then paid the transfer tax based on the consideration
stated in the Deed of Assignment. Marikina City Treasurer Ricardo L.
Castro informed him, however, that the tax due is based on the fair
market value of the property. ln turn, Mr. San Juan in writing protested
the basis of the tax due but on July l5, 2005, via a letter, Mr. Castro
responded on the negative.
Mr. San Juan thus filed before RTC a Petition for mandamus and
damages against Mr. Castro in his capacity as Marikina City
Treasurer praying that the latter be compelled to "perform a ministerial
duty, that is, to accept the payment of transfer tax based on the actual
consideration of the transfer/assignment." Mr. San Juan claims that
the intention of the law in Sec. l35 of the LGC is not to automatically
apply the "whichever is higher" rule. Clearly, from reading the
provision, it is only when there is a monetary consideration involved
and the monetary consideration is not substantial that the tax rate is
based on the higher fair market value. But the RTC dismissed the
case holding that "[M]onetary consideration" as used in Section l35 of
R.A. 7l60 does not only pertain to the price or money involved but
likewise, as in the case of donations or barters, this refers to the value
or monetary equivalent of what is received by the transferor. And in
this case the fair market value of the stocks which is P7M is higher
than the consideration which is only P2.58M, hence, the former
amount must be used as tax base. Moreover, The s)+0e,t o( this
Petition is the per(or*an,e o( a d)t- hi,h is not *inisteria" in
,hara,ter. Assess*ent o( ta! "ia+i"ities or o+"i#ations and the
,orrespondin# d)t- to ,o""e,t the sa*e invo"ves a de#ree o(
dis,retion. It is erroneo)s to ass)*e that the Cit- Treas)rer is
poer"ess to as,ertain i( the pa-*ent o( the ta! o+"i#ation is
proper or ,orre,t. Manda*)s ,annot "ie to ,o*pe" the Cit-
Treas)rer to a,,ept as ()"" ,o*p"ian,e a ta! pa-*ent hi,h in
his reasonin# and assess*ent is de(i,ient and in,orre,t.
ISSUE
Did the RTC err in dismissing the petition for mandamus?
RULING
NO. For a petition for Mandamus to lie, there must be no other plain,
speedy and adequate remedy in the ordinary course of law. ln this
case, the said condition was not satisfied. A taxpayer who disagrees
with a tax assessment made by a local treasurer may file a written
protest as prescribed by Sec. l95 of the LGC: The ta!pa-er sha""
have thirt- 8&9: da-s (ro* the re,eipt o( the denia" o( the protest
or (ro* the "apse o( the si!t-.da- 8=9: period pres,ri+ed herein
ithin hi,h to appea" ith the ,o)rt o( ,o*petent 0)risdi,tion/
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otherise the assess*ent +e,o*es ,on,")sive and
)nappea"a+"e.
That Mr. San Juan protested in writing against the assessment of tax
due and the basis thereof is on record as in fact it was on that account
that Mr. Castro sent him the July l5, 2005 letter which operated as a
denial of Mr. San Juan’s written protest. Mr. San Juan should thus
have, in accordance with Sec. l95 of the LGC, either appealed the
assessment before the court of competent jurisdiction or paid the tax
and then sought a refund. He did not observe any of these remedies
available to him, however. He instead opted to file a petition for
mandamus to compel Mr. Castro to accept payment of transfer tax as
computed by him.
Mandamus lies only to compel an officer to perform a ministerial duty
(one which is so clear and specific as to leave no room for the
exercise of discretion in its performance) but not a discretionary
function (one which by its nature requires the exercise of judgment).
Mr. Castro’s argument that "[m]andamus cannot lie to compel the City
Treasurer to accept as full compliance a tax payment which in his
reasoning and assessment is deficient and incorrect" is thus
persuasive.
MACTAN CE%U INTERNATIONAL AIRPORT vs. MARCOS 8TO
FOLLO>:
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