missing cases in tax

8/9/2019 Missing Cases in Tax

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PHILIPPINE JURISPRUDENCE - FULL TEXT

The Lawphil Project - Arellano Law FoundationG.R. No. L-4376 May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC., ET AL. vs.MUNICIPALITY BOARD OF MANILA, ET AL.

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-4376 May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC.,

petitioners-appellants,vs.

THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY

ASSESSOR and THE CITY MAYOR, all of the City of Manila, respondents-appellees.

Teotimo A. Roja for appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.

BAUTISTA ANGELO,J.:

This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passedby the Municipal Board of the City of Manila on March 24, 1950.

The Association of Customs Brokers, Inc., which is composed of all brokers and publicservice operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a

member of said association, also a public service operator of the trucks in said City,challenge the validity of said ordinance on the ground that (1) while it levies a so-

called property tax it is in reality a license tax which is beyond the power of theMunicipal Board of the City of Manila; (2) said ordinance offends against the rule of

uniformity of taxation; and (3) it constitutes double taxation.

The respondents, represented by the city fiscal, contend on their part that thechallenged ordinance imposes a property tax which is within the power of the City ofManila to impose under its Revised Charter [Section 18 (p) of Republic Act No. 409],

and that the tax in question does not violate the rule of uniformity of taxation, nor doesit constitute double taxation.

The issues having been joined, the Court of First Instance of Manila sustained the

validity of the ordinance and dismissed the petition. Hence this appeal.


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The disputed ordinance was passed by the Municipal Board of the City of Manila

under the authority conferred by section 18 (p) of Republic Act No. 409. Said sectionconfers upon the municipal board the power "to tax motor and other vehicles operating

within the City of Manila the provisions of any existing law to the contrarynotwithstanding." It is contended that this power is broad enough to confer upon the

City of Manila the power to enact an ordinance imposing the property tax on motorvehicles operating within the city limits.

In the deciding the issue before us it is necessary to bear in mind the pertinent

provisions of the Motor Vehicles Law, as amended, (Act No. 3992) which has abearing on the power of the municipal corporation to impose tax on motor vehicles

operating in any highway in the Philippines. The pertinent provisions are contained insection 70 (b) which provide in part:

No further fees than those fixed in this Act shall be exacted or demanded byany public highway, bridge or ferry, or for the exercise of the profession of

chauffeur, or for the operation of any motor vehicle by the owner thereof:Provided, however, That nothing in this Act shall be construed to exempt any

motor vehicle from the payment of any lawful and equitable insular, local ormunicipal property tax imposed thereupon. . . .

Note that under the above section no fees may be exacted or demanded for the

operation of any motor vehicle other than those therein provided, the only exceptionbeing that which refers to the property tax which may be imposed by a municipal

corporation. This provision is all-inclusive in that sense that it applies to all motorvehicles. In this sense, this provision should be construed as limiting the broad grant of

power conferred upon the City of Manila by its Charter to impose taxes. When section

18 of said Charter provides that the City of Manila can impose a tax on motor vehiclesoperating within its limit, it can only refers to property tax as a different interpretationwould make it repugnant to the Motor Vehicle Law.

Coming now to the ordinance in question, we find that its title refers to it as "An

Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City ofManila", and that in its section 1 it provides that the tax should be 1 per cent ad

valorem per annum. It also provides that the proceeds of the tax "shall accrue to theStreets and Bridges Funds of the City and shall be expended exclusively for the repair,

maintenance and improvement of its streets and bridges." Considering the wordingused in the ordinance in the light in the purpose for which the tax is created, can we

consider the tax thus imposed as property tax, as claimed by respondents?

While as a rule an ad valorem tax is a property tax, and this rule is supported by some

authorities, the rule should not be taken in its absolute sense if the nature and purposeof the tax as gathered from the context show that it is in effect an excise or a license

tax. Thus, it has been held that "If a tax is in its nature an excise, it does not become aproperty tax because it is proportioned in amount to the value of the property used in

connection with the occupation, privilege or act which is taxed. Every excise


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necessarily must finally fall upon and be paid by property and so may be indirectly a

tax upon property; but if it is really imposed upon the performance of an act,enjoyment of a privilege, or the engaging in an occupation, it will be considered an

excise." (26 R. C. L., 35-36.) It has also been held that

The character of the tax as a property tax or a license or occupation tax must bedetermined by its incidents, and from the natural and legal effect of the

language employed in the act or ordinance, and not by the name by which it isdescribed, or by the mode adopted in fixing its amount. If it is clearly a

property tax, it will be so regarded, even though nominally and in form it is alicense or occupation tax; and, on the other hand, if the tax is levied upon

persons on account of their business, it will be construed as a license oroccupation tax, even though it is graduated according to the property used in

such business, or on the gross receipts of the business. (37 C.J., 172)

The ordinance in question falls under the foregoing rules. While it refers to property

tax and it is fixed ad valorem yet we cannot reject the idea that it is merely levied onmotor vehicles operating within the City of Manila with the main purpose of raising

funds to be expended exclusively for the repair, maintenance and improvement of thestreets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No.

3992) intends to prevent, for the reason that, under said Act, municipal corporationalready participate in the distribution of the proceeds that are raised for the same

purpose of repairing, maintaining and improving bridges and public highway (section73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in

the imposition of fees for the same purpose. It is for this reason that we believe that theordinance in question merely imposes a license fee although under the cloak of an ad

valorem tax to circumvent the prohibition above adverted to.

It is also our opinion that the ordinance infringes the rule of the uniformity of taxationordained by our Constitution. Note that the ordinance exacts the tax upon all motor

vehicles operating within the City of Manila. It does not distinguish between a motorvehicle for hire and one which is purely for private use. Neither does it distinguish

between a motor vehicle registered in the City of Manila and one registered in anotherplace but occasionally comes to Manila and uses its streets and public highways. The

distinction is important if we note that the ordinance intends to burden with the taxonly those registered in the City of Manila as may be inferred from the word

"operating" used therein. The word "operating" denotes a connotation which is akin toa registration, for under the Motor Vehicle Law no motor vehicle can be operated

without previous payment of the registration fees. There is no pretense that theordinance equally applies to motor vehicles who come to Manila for a temporary stay

or for short errands, and it cannot be denied that they contribute in no small degree tothe deterioration of the streets and public highway. The fact that they are benefited by

their use they should also be made to share the corresponding burden. And yet such isnot the case. This is an inequality which we find in the ordinance, and which renders it

offensive to the Constitution.


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Wherefore, reversing the decision appealed from, we hereby declare the ordinance null

and void.

Paras, C.J., Bengzon and Tuason, JJ., concur.Montemayor, Reyes, Jugo and Labrador, JJ., concur in the result.

Separate Opinions

FERIA,J., concurring:

I concur on the ground that it is a license tax.

The Lawphil Project - Arellano Law Foundation


SUPREME COURTManila

EN BANC

G.R. No. 112497 August 4, 1994

HON. FRANKLIN M. DRILON, in his capacity as SECRETARY OF JUSTICE,petitioner,vs.MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA, CITY TREASURERANTHONY ACEVEDO, SANGGUNIANG PANGLUNSOD AND THE CITY OFMANILA, respondents.

The City Legal Officer for petitioner.

Angara, Abello, Concepcion, Regala & Cruz for Caltex (Phils.).

Joseph Lopez for Sangguniang Panglunsod of Manila.

L.A. Maglaya for Petron Corporation.


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CRUZ, J.:

The principal issue in this case is the constitutionality of Section 187 of the LocalGovernment Code reading as follows:

Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures;Mandatory Public Hearings. The procedure for approval of local tax ordinances andrevenue measures shall be in accordance with the provisions of this Code: Provided,That public hearings shall be conducted for the purpose prior to the enactment thereof;Provided, further, That any question on the constitutionality or legality of tax ordinancesor revenue measures may be raised on appeal within thirty (30) days from the effectivitythereof to the Secretary of Justice who shall render a decision within sixty (60) days fromthe date of receipt of the appeal: Provided, however, That such appeal shall not have theeffect of suspending the effectivity of the ordinance and the accrual and payment of thetax, fee, or charge levied therein: Provided, finally, That within thirty (30) days afterreceipt of the decision or the lapse of the sixty-day period without the Secretary of Justiceacting upon the appeal, the aggrieved party may file appropriate proceedings with a courtof competent jurisdiction.

Pursuant thereto, the Secretary of Justice had, on appeal to him of four oil companiesand a taxpayer, declared Ordinance No. 7794, otherwise known as the Manila RevenueCode, null and void for non-compliance with the prescribed procedure in the enactmentof tax ordinances and for containing certain provisions contrary to law and public policy.1

In a petition forcertiorarifiled by the City of Manila, the Regional Trial Court of Manilarevoked the Secretary's resolution and sustained the ordinance, holding inter alia thatthe procedural requirements had been observed. More importantly, it declared Section187 of the Local Government Code as unconstitutional because of its vesture in theSecretary of Justice of the power of control over local governments in violation of the

policy of local autonomy mandated in the Constitution and of the specific provisiontherein conferring on the President of the Philippines only the power of supervision overlocal governments. 2

The present petition would have us reverse that decision. The Secretary argues that theannulled Section 187 is constitutional and that the procedural requirements for theenactment of tax ordinances as specified in the Local Government Code had indeed notbeen observed.

Parenthetically, this petition was originally dismissed by the Court for non-compliancewith Circular 1-88, the Solicitor General having failed to submit a certified true copy of

the challenged decision. 3However, on motion for reconsideration with the requiredcertified true copy of the decision attached, the petition was reinstated in view of theimportance of the issues raised therein.

We stress at the outset that the lower court had jurisdiction to consider theconstitutionality of Section 187, this authority being embraced in the general definition ofthe judicial power to determine what are the valid and binding laws by the criterion oftheir conformity to the fundamental law. Specifically, BP 129 vests in the regional trial


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courts jurisdiction over all civil cases in which the subject of the litigation is incapable ofpecuniary estimation, 4even as the accused in a criminal action has the right to questionin his defense the constitutionality of a law he is charged with violating and of theproceedings taken against him, particularly as they contravene the Bill of Rights.Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court

appellate jurisdiction over final judgments and orders of lower courts in all cases inwhich the constitutionality or validity of any treaty, international or executive agreement,law, presidential decree, proclamation, order, instruction, ordinance, or regulation is inquestion.

In the exercise of this jurisdiction, lower courts are advised to act with the utmostcircumspection, bearing in mind the consequences of a declaration of unconstitutionalityupon the stability of laws, no less than on the doctrine of separation of powers. As thequestioned act is usually the handiwork of the legislative or the executive departments,or both, it will be prudent for such courts, if only out of a becoming modesty, to defer tothe higher judgment of this Court in the consideration of its validity, which is better

determined after a thoroug

hdeliberation by a collegiate body and wit

hthe concurrenceof the majority of those who participated in its discussion. 5

It is also emphasized that every court, including this Court, is charged with the duty of apurposeful hesitation before declaring a law unconstitutional, on the theory that themeasure was first carefully studied by the executive and the legislative departments anddetermined by them to be in accordance with the fundamental law before it was finallyapproved. To doubt is to sustain. The presumption of constitutionality can be overcomeonly by the clearest showing that there was indeed an infraction of the Constitution, andonly when such a conclusion is reached by the required majority may the Courtpronounce, in the discharge of the duty it cannot escape, that the challenged act must

be struck down.

In the case before us, Judge Rodolfo C. Palattao declared Section 187 of the LocalGovernment Code unconstitutional insofar as it empowered the Secretary of Justice toreview tax ordinances and, inferentially, to annul them. He cited the familiar distinctionbetween control and supervision, the first being "the power of an officer to alter ormodify or set aside what a subordinate officerhad done in the performance ofhis dutiesand to substitute the judgment of the former for the latter," while the second is "thepower of a superior officer to see to it that lower officers perform their functions inaccordance with law." 6His conclusion was that the challenged section gave to theSecretary the power of control and not of supervision only as vested by the Constitutionin the President of the Philippines. This was, in his view, a violation not only of Article X,specifically Section 4 thereof, 7and of Section 5 on the taxing powers of localgovernments, 8and the policy of local autonomy in general.

We do not share that view. The lower court was ratherhasty in invalidating theprovision.


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Section 187 authorizes the Secretary of Justice to review only the constitutionality orlegality of the tax ordinance and, if warranted, to revoke it on either or both of thesegrounds.When he alters or modifies or sets aside a tax ordinance, he is not alsopermitted to substitute his own judgment for the judgment of the local government thatenacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he

did not replace it withhis own version of w

hat t

he Code s

hould be.

He did notpronounce the ordinance unwise or unreasonable as a basis for its annulment. He did

not say that in his judgment it was a bad law. What he found only was that it was illegal.All he did in reviewing the said measure was determine if the petitioners wereperforming their functions in accordance with law, that is, with the prescribed procedurefor the enactment of tax ordinances and the grant of powers to the city governmentunder the Local Government Code. As we see it, that was an act not of control but ofmere supervision.

An officer in control lays down the rules in the doing of an act. If they are not followed,he may, in his discretion, order the act undone or re-done by his subordinate orhe may

even decide to do ithimself. Supervision does not cover suc

haut

hority.

The supervisoror superintendent merely sees to it that the rules are followed, but he himself does not

lay down such rules, nor does he have the discretion to modify or replace them. If therules are not observed, he may order the work done or re-done but only to conform tothe prescribed rules. He may not prescribe his own manner for the doing of the act. Hehas no judgment on this matter except to see to it that the rules are followed. In theopinion of the Court, Secretary Drilon did precisely this, and no more nor less than this,and so performed an act not of control but of mere supervision.

The case ofTaule v. Santos 9cited in the decision has no application here because thejurisdiction claimed by the Secretary of Local Governments over election contests in the

Katipunan ng Mga Barangay wash

eld to belong to th

e Commission on Elections byconstitutional provision. The conflict was over jurisdiction, not supervision or control.

Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, whichprovided in its Section 2 as follows:

A tax ordinance shall go into effect on the fifteenth day after its passage, unless theordinance shall provide otherwise: Provided, however, That the Secretary of Financeshall have authority to suspend the effectivity of any ordinance within one hundred andtwenty days after receipt by him of a copy thereof, if, in his opinion, the tax or fee thereinlevied or imposed is unjust, excessive, oppressive, or confiscatory, or when it is contraryto declared national economy policy, and when the said Secretary exercises this authoritythe effectivity of such ordinance shall be suspended, either in part or as a whole, for a

period of thirty days within which period the local legislative body may either modify thetax ordinance to meet the objections thereto, or file an appeal with a court of competent

jurisdiction; otherwise, the tax ordinance or the part or parts thereof declared suspended,shall be considered as revoked. Thereafter, the local legislative body may not reimposethe same tax or fee until such time as the grounds for the suspension thereof shall haveceased to exist.

That section allowed the Secretary of Finance to suspend the effectivity of a taxordinance if, in his opinion, the tax or fee levied was unjust, excessive, oppressive or


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confiscatory. Determination of these flaws would involve the exercise ofjudgmentordiscretion and not merely an examination of whether or not the requirements orlimitations of the law had been observed; hence, it would smack of control rather thanmere supervision. That power was never questioned before this Court but, at any rate,the Secretary of Justice is not given the same latitude under Section 187. All he is

permitted to do is ascertain the constitutionality or legality of t

he tax measure, wit

houtthe right to declare that, in his opinion, it is unjust, excessive, oppressive or

confiscatory.He has no discretion on this matter. In fact, Secretary Drilon set aside theManila Revenue Code only on two grounds, to with, the inclusion therein of certain ultravires provisions and non-compliance with the prescribed procedure in its enactment.These grounds affected the legality, not the wisdom orreasonableness, of the taxmeasure.

The issue of non-compliance with the prescribed procedure in the enactment of theManila Revenue Code is another matter.

Inhis resolution, Secretary Drilon declared t

hat t

here were no written notices of publichearings on the proposed Manila Revenue Code that were sent to interested parties as

required by Art. 276(b) of the Implementing Rules of the Local Government Code norwere copies of the proposed ordinance published in three successive issues of anewspaper of general circulation pursuant to Art. 276(a). No minutes were submitted toshow that the obligatory public hearings had been held. Neither were copies of themeasure as approved posted in prominent places in the city in accordance with Sec.511(a) of the Local Government Code. Finally, the Manila Revenue Code was nottranslated into Pilipino orTagalog and disseminated among the people for theirinformation and guidance, conformably to Sec. 59(b) of the Code.

Judge Palattao found oth

erwise.H

e declared th

at all th

e procedural requirementsh

adbeen observed in the enactment of the Manila Revenue Code and that the City ofManila had not been able to prove such compliance before the Secretary only becausehe had given it only five days within which to gather and present to him all the evidence(consisting of 25 exhibits) later submitted to the trial court.

To get to the bottom of this question, the Court acceded to the motion of therespondents and called for the elevation to it of the said exhibits.We have carefullyexamined every one of these exhibits and agree with the trial court that the proceduralrequirements have indeed been observed. Notices of the public hearings were sent tointerested parties as evidenced by Exhibits G-1 to 17. The minutes of the hearings arefound in Exhibits M, M-1, M-2, and M-3. Exhibits B and C show that the proposedordinances were published in the Balita and the Manila Standard on April 21 and 25,1993, respectively, and the approved ordinance was published in the July 3, 4, 5, 1993issues of the Manila Standard and in the July 6, 1993 issue ofBalita, as shown byExhibits Q, Q-1, Q-2, and Q-3.

The only exceptions are the posting of the ordinance as approved but this omissiondoes not affect its validity, considering that its publication in three successive issues of a


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newspaper of general circulation will satisfy due process. It has also not been shownthat the text of the ordinance has been translated and disseminated, but thisrequirement applies to the approval of local development plans and public investmentprograms of the local government unit and not to tax ordinances.

We make no ruling on t

he substantive provisions of t

he Manila Revenue Code as t

heirvalidity has not been raised in issue in the present petition.

WHEREFORE, the judgment is hereby rendered REVERSING the challenged decisionof the Regional Trial Court insofar as it declared Section 187 of the Local GovernmentCode unconstitutional but AFFIRMING its finding that the procedural requirements inthe enactment of the Manila Revenue Code have been observed. No pronouncementas to costs.

SO ORDERED.

Narvasa, C.J., Feliciano, Padilla,

Bidin, Regalado, Davide, Jr., Romero,Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.

#Footnotes

1 Annex "E," rollo, pp. 37-55.

2 Annex "A," rollo, pp. 27-36.

3 Rollo, p. 256.

4 Sec. 19(1).

5 Art. VIII, Sec. 4(2), Constitution.

6 Mondano v. Silvosa, 97 Phil. 143; Hebron v. Reyes, 104 Phil. 175; Tecson v. Salas, 34SCRA 282.

7 Sec. 4. The President of the Philippines shall exercise general supervision over localgovernments. Provinces with respect to component cities and municipalities, and citiesand municipalities with respect to component barangays shall ensure that the acts of theircomponent units are within the scope of their prescribed powers and functions.

8 Sec. 5. Each local government unit shall have the power to create its own sources ofrevenues and to levy taxes, fees, and charges subject to such guidelines and limitationsas the Congress may provide, consistent with the basic policy of local autonomy. Suchtaxes, fees, and charges shall accrue exclusively to the local governments.

9 200 SCRA 512.


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SUPREME COURTManila

SECOND DIVISION

G.R. No. 119172 March 25, 1999

BELEN C. FIGUERRES, petitioner,vs.COURT OF APPEALS, CITY OF ASSESSORS OF MANDALUYONG CITYTREASURER OF MANDALUYONG, and SANGGUNIANG BAYAN OFMANDALUYONG, respondents.

MENDOZA, J.:

This is a petition for review on certiorariof the decision of the Court of Appeals, datedFebruary 8, 1995, dismissing a prohibition suit brought by petitioner against therespondent officials of the Municipality, now City, of Mandaluyong to prevent them fromenforcing certain ordinances revising the schedule of fair market values of the variousclasses of real property in that municipality and the assessment levels applicablethereto.

Petitioner Belen C. Figuerres is the owner of a parcel of land, covered by Transfer

Certificate ofTitle No. 413305, and located at Amarillo Street, Barangay Mauway, Cityof Mandaluyong. In 1993, she received a notice of assessment, dated October 20,1993, from the municipal assessor of the then Municipality of Mandaluyong, containingthe following specifics:

TYPE AREA BASE VALUE MARKET ASSESSMENTS ASSESSED

PER SQ.M VALUE LEVEL VALUE

Residential 530sq.m. P2,500.00 P1,325,000.00 20 P265,006.001

The assessment, effective in the year 1994, was based on Ordinance Nos. 119 and125, series of 1993, and Ordinance No. 135, series of 1994, of the Sangguniang Bayanof Mandaluyong. Ordinance No. 119, series of 1993, which was promulgated on April22, 1993, contains a schedule of fair market values of the different classes of realproperty in the municipality. 2 Ordinance No. 125, series of 1993, which waspromulgated on November 11, 1993, on the otherhand, fixes the assessment levelsapplicable to such classes of real property. 3 Finally, Ordinance No. 135, series of 1994,which was promulgated on February 24, 1994, amended Ordinance No. 119, 6 by


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providing that only one third (1/3) of the increase in the market values applicable toresidential lands pursuant to the said ordinance shall be implemented in the years 1994,1995, and 1996. 4

Petitioner brought a prohibition suit in the Court of Appeals against the Assessor, theT

reasurer, and the Sangguniang Bayan to stop t

hem from enforcing t

he ordinances inquestion on the ground that the ordinances were invalid forhaving been adopted

allegedly without public hearings and prior publication or posting and without complyingwith the implementing rules yet to be issued by the Department of Finance. 5

In its decision, dated February 8, 1995, 6 the Court of Appeals threw out the petition.The appellate court said in part:

Petitioner's claim that Ordinance Nos. 119, 125 and 135 are null and void since theywere prepared without the approval and determination of the Department of Finance iswithout merit.

The approval and determination by the Department of Finance is not needed under theLocal Government Code of 1991, since it is now the city council of Mandaluyong that isempowered to determine and approve the aforecited ordinances. Furthermore, contraryto the claim of petitioner that the Department of Finance "has not promulgated thenecessary rules and regulations for the classification, appraisal and assessment of realproperty as prescribed by the 1991 Local Government Code," Department of FinanceLocal Assessment Regulation No. 1-92 dated October 6, 1992, which is addressed toprovincial, city, and municipal assessors and others concerned with the properimplementation of Section 219 of R.A. No. 7160, provides for the rules relative to theconduct of general revisions of real property assessment pursuant to Sections 201 and219 of the Local Government Code of 1991.

Regarding petitioner's claim that there is need for municipal ordinances to be published in

the Official Gazette for their effectivity, the same is also without merit.

Sec. 511 of R.A. No. 7160 provides that

xxx xxx xxx

The secretary to the Sanggunian concerned shall transmit official copiesof such ordinances to the chief executive officer of the Official Gazettewithin seven (7) days following the approval of the said ordinances forpublication purposes. The Official Gazette may publish ordinances withpenal sanctions for archival and reference purposes.

Thus, t

he posting and publication in t

he Official Gazette of ordinances wit

hpenalsanctions is not a prerequisite for their effectivity. This finds support in the case of

Taada v. Tuvera (146 SCRA 446), wherein the Supreme Court declared that municipalordinances are covered by the Local Government Code.

Moreover, petitioner failed to exhaust the administrative remedies available to him asprovided for under Section 187 of R.A. No. 7160, before filing the instant petition with thisCourt.


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xxx xxx xxx

In fact, aside from filing an appeal to the Secretary of Justice as provided under Section187 of R.A. No. 7160, the petitioner . . . could have appealed to the Local Board of

Assessment Appeals, the decision of which is in turn appealable to the Central Board ofAssessment Appeals as provided under Sections 226 and 230 of the said law. According

to current jurisprudence, administrative remedies must be exhausted before seekingjudicial intervention. (Gonzales v. Secretary of Education, 5 SCRA 657). If a litigant goes

to court without first pursuing the available administrative remedies, his action isconsidered premature and not yet ripe for judicial determination (Allied BrokerageCorporation v. Commissioner of Customs, 40 SCRA 555).

As the petitionerhas not pursued the administrative remedies available to him, hispetition for prohibition cannot prosper (Gonzales v. Provincial Auditor ofIloilo, 12 SCRA711).

WHEREFORE, the petition is hereby DENIED due course and is hereby DISMISSED.7

Petitioner Figuerres assails the above decision. She contends that

1. THE HONORABLE COURT OF APPEALS PATENTLY ERRED INFINDING LACK OF EXHAUSTION OF ADMINISTRATIVE REMEDIESON THE PART OF HEREIN PETITIONERWHEN UNDER THECIRCUMSTANCES EXHAUSTION OF ADMINISTRATIVE REMEDIESIS NOT REQUIRED BY LAW ANDWOULD HAVE BEEN A USELESSFORMALITY.

2. THE HONORABLE COURT OF APPEALS ERREDWHEN ITSTATED THATTHE CITY COUNCIL OF MANDALUYONG ISEMPOWERED TO DETERMINE AND APPROVE THE AFORECITEDORDINANCES WITHOUTTAKING INTO ACCOUNTTHEMANDATORY PUBLIC HEARINGS REQUIRED BY R.A. No. 7160.

3. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALSPATENTLY ERRED IN STATING THATTHERE IS NO NEED FORPUBLICATION OF TAX ORDINANCES.

4. THERE IS NON COMPLIANCE BY PUBLIC RESPONDENTS OFASSESSMENT REGULATION No. 1-92 DATED OCTOBER 6, 1992,EVEN IF THE HONORABLE COURT OF APPEALS MENTIONED THEEXISTENCE OF THE SAID ASSESSMENT REGULATIONS.

8

On the otherhand, the Municipality of Mandaluyong contends:

(1) the present case does not fall within any of the exceptions to the doctrine ofexhaustion of administrative remedies;

(2) apart from her bare allegations, petitioner Figuerres has not presented any evidenceto show that no public hearings were conducted prior to the enactment of theordinances in question;


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(3) although an ordinance concerning the imposition of real property taxes is notrequired to be published in the Official Gazette in order to be valid, still the subjectordinances were disseminated before their effectivity in accordance with the relevantprovisions of R.A. No. 7160; and

(4) the Municipality of Mandaluyong complied wit

hthe regulations of t

he Department ofFinance in enacting the ordinances.

Exhaustion of administrative remedies

In Lopez v. City of Manila,9

we recently held:

. . . Therefore, where a remedy is available within the administrative machinery, thisshould be resorted to before resort can be made to the courts, not only to give theadministrative agency the opportunity to decide the matter by itself correctly, but also toprevent unnecessary and premature resort to courts. . . .

With

regard to questions on the legality of a tax ordinance, t

he remedies available to t

hetaxpayer are provided under Sections 187, 226, and 252 of R.A. 7160.

Sec. 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality orlegality of a tax ordinance on appeal within thirty (30) days from effectivity thereof, to theSecretary of Justice. The petitioner after finding that his assessment is unjust,confiscatory, or excessive, may bring the case before the Secretary of Justice forquestions of legality or constitutionality of the city ordinance.

Under Section 226 of R.A. 7160, an owner of real property who is not satisfied with theassessment ofhis property may, within sixty (60) days from notice of assessment, appealto the Board of Assessment Appeals.

Should the taxpayer question the excessiveness of the amount of tax, he must first paythe amount due, in accordance with Section 252 of R.A. No. 7160. Then, he must requestthe annotation of the phrase "paid under protest" and accordingly appeal to the Board of

Assessment Appeals by filing a petition under oath together with copies of the taxdeclarations and affidavits or documents to support his appeal.

Although cases raising purely legal questions are excepted from the rule requiringexhaustion of administrative remedies before a party may resort to the courts, in thecase at bar, the legal questions raised by petitioner require, as will presently be shown,proof of facts for their resolution. Therefore, the petitioner's action in the Court of

Appeals was premature, and the appellate court correctly dismissed her action on theground that she failed to exhaust available administrative remedies as above stated.

Petitioner argues that resort to the Secretary of Justice is not mandatory but onlydirectory because R.A. No. 7160, 187 provides that "any question on theconstitutionality or legality of tax ordinances or revenue measures" may be appealed tothe Secretary of Justice. Precisely, the Secretary of Justice can take cognizance of acase involving the constitutionality or legality of tax ordinances where, as in this case,there are factual issues involved.


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There need be no fear that compliance with the rule on exhaustion of administrativeremedies will unduly delay resort to the courts to the detriment of taxpayers. AlthoughR.A. No. 7160, 187 provides that an appeal to the Secretary of Justice "shall not havethe effect of suspending the effectivity of the ordinance and the accrual and payment ofthe tax, fee, or charge levied therein," it likewise requires the Secretary of Justice to

"render a decision within sixty (60) days from t

he date of receipt of t

he appeal," afterwhich "the aggrieved party may file appropriate proceedings with a court of competent

jurisdiction."

Public hearings on tax ordinance.

Petitioner is right in contending that public hearings are required to be conducted priorto the enactment of an ordinance imposing real property taxes. R.A. No. 7160, 186provides that an ordinance levying taxes, fees, or charges "shall not be enacted withoutany prior public hearing conducted for the purpose."

However, it is notewort

hy th

at apart fromh

er bare assertions, petitioner Figuerreshasnot presented any evidence to show that no public hearings were conducted prior to the

enactment of the ordinances in question. On the otherhand, the Municipality ofMandaluyong claims that public hearings were indeed conducted before the subjectordinances were adopted, 10 although it likewise failed to submit any evidence toestablish this allegation. However, in accordance with the presumption of validity infavor of an ordinance, their constitutionality or legality should be upheld in the absenceof evidence showing that the procedure prescribed by law was not observed in theirenactment. In an analogous case, United States v. Cristobal, 11 it was alleged that theordinance making it a crime for anyone to obstruct waterways had not been submittedby the provincial board as required by 2232-2233 of the Administrative Code. In

rejecting th

is contention, th

e Courth

eld:

From the judgment of the Court of First Instance the defendant appealed to this courtupon the theory that the ordinance in question was adopted without authority on the partof the municipality and was therefore unconstitutional. The appellant argues that therewas no proof adduced during the trial of the cause showing that said ordinance had beenapproved by the provincial board. Considering the provisions of law that it is the duty ofthe provincial board to approve or disapprove ordinances adopted by the municipalcouncils of the different municipalities, we will assume, in the absence of proof to thecontrary, that the law has been complied with. We have a right to assume that officialshave done that which the law requires them to do, in the absence of positive proof to thecontrary.

12

Furthermore, the lack of a public hearing is a negative allegation essential to petitioner'scause of action in the present case. Hence, as petitioner is the party asserting it, shehas the burden of proof. 13 Since petitioner failed to rebut the presumption of validity infavor of the subject ordinances and to discharge the burden of proving that no publichearings were conducted prior to the enactment thereof, we are constrained to upholdtheir constitutionality or legality.

Publication and posting of schedule of fair market values


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Petitioner is also right that publication or posting of the proposed schedule of fair marketvalues of the difference classes of real property in a local government unit is requiredpursuant to R.A. No. 7160, 212 which in part states:

. . . The schedule of fair market values shall be published in a newspaper of generalcirculation in the province, city, or municipality concerned, or in the absence thereof, shall

be posted in the provincial capitol, city or municipal hall and in two other conspicuouspublic places therein.

In Ty v. Trampe, 14 it was held that, if the local government unit is part of Metro Manila,the abovequoted portion of 212 must be understood to refer to the schedule of fairmarket values of the different classes of real property in the district to which the city ormunicipality belongs, as prepared jointly by the local assessors concerned.

In addition, an ordinance imposing real property taxes (such as Ordinance Nos. 119 and135) must be posted or published as required by R.A. No. 7160, 188 which provides:

Sec. 188. Publication ofTax Ordinances and Revenue Measures. Within ten (10) daysafter their approval, certified true copies of all provincial, city, and municipal taxordinances or revenue measures shall be published in full for three (3) consecutive daysin a newspaper of local circulation: Provided, however, That in provinces, cities andmunicipalities where there no newspapers of local circulation, the same may be posted inat least two (2) conspicuous and publicly accessible places.

Hence, after the proposed schedule of fair market values of the different classes of realproperty in a local government unit within Metro Manila, as prepared jointly by the localassessors of the district to which the city or municipality belongs, has been published orposted in accordance with 212 of R.A. No. 7160 and enacted into ordinances by thesanggunians of the municipalities and cities concerned, the ordinances containing the

schedule of fair market values must themselves be published or posted in the mannerprovided by 188 of R.A. No. 7160.

With respect to ordinances which fix the assessment levels (such as Ordinance No.125), being in the nature of a tax ordinance, 188 likewise applies. Moreover, as,Ordinance No. 125, 7 provides for a penal sanction for violations thereof by means of afine of not less than P1,000.00 nor more than P5,000.00, or imprisonment of not lessthan one (1) month nor more than six (6) months, or both, in the discretion of the court,not only 188 but 511(a) also must be observed:

Ordinances with penal sanctions shall be posted at prominent places in the provincialcapitol, city, municipal or barangay hall, as the case may be, for a minimum period ofthree (3) consecutive weeks. Such ordinances shall also be published in a newspaper ofgeneral circulation, where available, within the territorial jurisdiction of the localgovernment unit concerned, except in the case of barangay ordinances. Unlessotherwise provided therein, said ordinances shall take effect on the day following itspublication, or at the end of the period of posting, whichever occurs later.

In view of 188 and 511(a) of R.A. No. 7160, an ordinance fixing the assessmentlevels applicable to the different classes of real property in a local government unit and


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imposing penal sanctions for violations thereof (such as Ordinance No. 125) should bepublished in full for three (3) consecutive days in a newspaper of local circulation, whereavailable, within ten (10) days of its approval, and posted in at least two (2) prominentplaces in the provincial capitol, city, municipal, or barangay hall for a minimum of three(3) consecutive weeks.

Apart from her allegations, petitionerhas not presented any evidence to show that thesubject ordinances were nor disseminated in accordance with these provisions of R.A.No. 7160. On the otherhand, the Municipality of Mandaluyong presented a certificate,dated November 12, 1993, ofWilliard S. Wong, Sanggunian Secretary of theMunicipality of Mandaluyong that "Ordinance No. 125, S-1993 . . . has been posted inaccordance with 59(b) of R.A. No. 7160, otherwise known as the Local GovernmentCode of 1991." 15Thus, considering the presumption of validity in favor of theordinances and the failure of petitioner to rebut such presumption, we are constrained todismiss the petition in this case.

Compliance with

regulations issued by th

e

Department of Finance

Also without merit is the contention of petitioner that Ordinance No, 119 and OrdinanceNo. 135 are void for not having been enacted in accordance with Local AssessmentRegulation No. 1-92, dated October 6, 1992, of the Department of Finance, whichprovides guidelines for the preparation of proposed schedules of fair market values ofthe different classes of real property in a local government unit, such as time tables forobtaining information from owners of affected lands and buildings regarding the valuethereof. As in the case of the procedural requirements for the enactment of tax

ordinances and revenue measures,h

owever, petitionerhas not s

hown t

hat t

heordinances in this case were enacted in accordance with the applicable regulations of

the Department of Finance. The Municipality of Mandaluyong claims that, although theregulations are merely directory, it has complied with them. 16Hence, in the absence ofproof that the ordinances were not enacted in accordance with such regulations, saidordinances presumed to have been enacted in accordance with such regulations.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

B

ellosillo, Puno, Quisumbing andB

uena, JJ., concur.

Footnotes

1 CA Rollo; p. 56.

2 Id., pp. 21-48.

3 Id., pp. 16-19.


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4 Id., p. 51.

5 CA Rollo, pp. 1-15.

6 Per Associate Justice Jorge S. Imperial and concurred in by Associate Justices PacitaCaizares-Nye and Conrado M. Vasquez, Jr.

7 Rollo, pp. 21-24.

8 Rollo, pp. 5-6.

9 G.R. No. 127139, Feb. 19, 1999.

10 Rejoinder, Rollo, p. 68.

11 34 Phil. 825 (1916).

12 Id. at 826.

13 Industrial Finance Corporation v. Tobias, 78 SCRA 28 (1977).

14 250 SCRA 500, 516-517 (1995).

15 CA Rollo, p. 20.

16 Rejoinder, Rollo, p. 68.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-45355 January 12, 1990

THE PROVINCE OF MISAMIS ORIENTAL, represented by its PROVINCIALTREASURER, petitioner,vs.CAGAYAN ELECTRIC POWER AND LIGHT COMPANY, INC. (CEPALCO),respondent.

Jaime A. Chaves for petitioner.

Quiason, Makalintal, Barot & Torres for respondent.

GRIO-AQUINO, J.:


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The issue in this case is a legal one: whether or not a corporation whose franchiseexpressly provides that the payment of the "franchise tax of three per centum of thegross earnings shall be in lieu of all taxes and assessments of whatever authority uponprivileges, earnings, income, franchise, and poles, wires, transformers, and insulators ofthe grantee." (p. 20, Rollo), is exempt from paying a provincial franchise tax.

Cagayan Electric Power and Light Company, Inc. (CEPALCO for short) was granted afranchise on June 17, 1961 under Republic Act No. 3247 to install, operate andmaintain an electric light, heat and power system in the City of Cagayan de Oro and itssuburbs. Said franchise was amended on June 21, 1963 by R.A. No. 3570 which addedthe municipalities ofTagoloan and Opol to CEPALCO's sphere of operation, and wasfurther amended on August 4, 1969 by R.A. No. 6020 which extended its field ofoperation to the municipalities of Villanueva and Jasaan.

R.A. Nos. 3247, 3570 and 6020 uniformly provide that:

Sec. 3. In consideration of the franchise and rights hereby granted, the grantee shall paya franchise tax equal to three per centum of the gross earnings for electric current soldunder this franchise, of which two per centum goes into the National Treasury and one

per centum goes into the treasury of the Municipalities ofTagoloan, Opol, Villanueva andJasaan and Cagayan de Oro City, as the case may be: Provided, That the said franchisetax of three per centum of the gross earnings shall be in lieu of all taxes andassessments of whatever authority upon privileges earnings, income, franchise, and

poles, wires, transformers, and insulators of the grantee from which taxes andassessments the grantee is hereby expressly exempted. (Emphasis supplied.)

On June 28, 1973, the Local Tax Code (P.D. No. 231) was promulgated, Section 9 ofwhich provides:

Sec. 9. Franchise Tax.Any provision of special laws to the contrary notwithstanding,the province may impose a tax on businesses enjoying franchise, based on the grossreceipts realized within its territorial jurisdiction, at the rate of not exceeding one-half ofone per cent of the gross annual receipts for the preceding calendar year.

In the case of newly started business, the rate shall not exceed three thousand pesos peryear. Sixty per cent of the proceeds of the tax shall accrue to the general fund of theprovince and forty per cent to the general fund of the municipalities serviced by thebusiness on the basis of the gross annual receipts derived therefrom by the franchiseholder. In the case of a newly started business, forty per cent of the proceeds of the taxshall be divided equally among the municipalities serviced by the business. (Emphasissupplied.)

Pursuant thereto, the Province of Misamis Oriental (herein petitioner) enacted ProvincialRevenue Ordinance No. 19, whose Section 12 reads:

Sec. 12. Franchise Tax.There shall be levied, collected and paid on businessesenjoying franchise tax of one-half of one per cent of their gross annual receipts for thepreceding calendar year realized within the territorial jurisdiction of the province ofMisamis Oriental. (p. 27, Rollo.)


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The Provincial Treasurer of Misamis Oriental demanded payment of the provincialfranchise tax from CEPALCO. The company refused to pay, alleging that it is exemptfrom all taxes except the franchise tax required by R.A. No. 6020. Nevertheless, in viewof the opinion rendered by the Provincial Fiscal, upon CEPALCO's request, upholdingthe legality of the Revenue Ordinance, CEPALCO paid under proteston May 27, 1974

the sum of P 4,276.28 and appealed t

he fiscal's ruling to t

he Secretary of Justice w

horeversed it and ruled in favor of CEPALCO.

On June 26, 1976, the Secretary of Finance issued Local Tax Regulation No. 3-75adopting entirely the opinion of the Secretary of Justice.

On February 16, 1976, the Province filed in the Court of First Instance of MisamisOriental a complaint for declaratory relief praying, among others, that the Court exerciseits power to construe P.D. No. 231 in relation to the franchise of CEPALCO (R.A. No.6020), and to declare the franchise as having been amended by P.D. No. 231. TheCourt dismissed the complaint and ordered the Province to return to CEPALCO the sum

of P4,276.28 paid under protest.

The Province has appealed to this Court, alleging that the lower court erred in holdingthat:

1) CEPALCO's tax exemption under Section 3 of Republic Act No. 6020 was notamended or repealed by P.D. No. 231;

2) the imposition of the provincial franchise tax on CEPALCO would subvert thepurpose of P.D. No. 231;

3) CEPALCO is exempt from paying th

e provincial franchise tax; and

4) petitioner should refund CEPALCO's tax payment of P4,276.28.

We find no merit in the petition for review.

There is no provision in P.D. No. 231 expressly or impliedly amending or repealingSection 3 of R.A. No. 6020. The perceived repugnancy between the two statutes shouldbe very clear before the Court may hold that the prior one has been repealed by thelater, since there is no express provision to that effect (Manila Railroad Co. vs. Rafferty,40 Phil. 224). The rule is that a special and local statute applicable to a particular case

is not repealed by a later statute wh

ich

is general in its terms, provisions and applicationeven if the terms of the general act are broad enough to include the cases in the speciallaw (id.) unless there is manifest intent to repeal or alter the special law.

Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO,while P.D. No. 231 is a general tax law. The presumption is that the special statutes areexceptions to the general law (P.D. No. 231) because they pertain to a special chartergranted to meet a particular set of conditions and circumstances.


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The franchise of respondent CEPALCO expressly exempts it from payment of "all taxesof whatever authority" except the three per centum (3%) tax on its gross earnings.

In an earlier case, the phrase "shall be in lieu of all taxes and at any time levied,established by, or collected by any authority" found in the franchise of the Visayan

Electric Company washeld to exempt t

he company from payment of t

he 5% tax oncorporate franchise provided in Section 259 of the Internal Revenue Code (Visayan

Electric Co. vs. David, 49 O.G. [No. 4] 1385).

Similarly, we ruled that the provision: "shall be in lieu of all taxes of every name andnature" in the franchise of the Manila Railroad (Subsection 12, Section 1, Act No. 1510)exempts the Manila Railroad from payment of internal revenue tax for its importations ofcoal and oil under Act No. 2432 and the Amendatory Acts of the Philippine Legislature(Manila Railroad vs. Rafferty, 40 Phil. 224).

The same phrase found in the franchise of the Philippine Railway Co. (Sec. 13, Act No.

1497) justified th

e exemption of the P

hilippine Railway Company from payment of t

hetax on its corporate franchise under Section 259 of the Internal Revenue Code, as

amended by R.A. No. 39 (Philippine Railway Co. vs. Collector ofInternal Revenue, 91Phil. 35).

Those magic words: "shall be in lieu of all taxes" also excused the Cotabato Light andIce Plant Company from the payment of the tax imposed by Ordinance No. 7 of the Cityof Cotabato (Cotabato Light and Power Co. vs. City of Cotabato, 32 SCRA 231).

So was the exemption upheld in favor of the Carcar Electric and Ice Plant Companywhen it was required to pay the corporate franchise tax under Section 259 of theInternal Revenue Code, as amended by R.A. No. 39 (Carcar Electric &

Ice Plant vs.Collector ofInternal Revenue, 53 O.G. [No. 4] 1068). This Court pointed out that such

exemption is part of the inducement for the acceptance of the franchise and therendition of public service by the grantee. As a charter is in the nature of a privatecontract, the imposition of another franchise tax on the corporation by the local authoritywould constitute an impairment of the contract between the government and thecorporation.

Recently, this Court ruled that the franchise (R.A. No. 3843) of the Lingayen GulfElectric Power Company which provided that the company shall pay:

tax equal to 2% per annum of the gross receipts . . . and shall be in lieu of any and all

taxes . . . now or in the future . . . from which taxes . . . the grantee is hereby expresslyexempted and . . . no other tax . . . other than the franchise tax of 2% on the grossreceipts as provided for in the original franchise shall be collected.

exempts the company from paying the franchise tax under Section 259 of theNational Internal Revenue Code (Commissioner ofInternal Revenue vs.Lingayen Gulf Electric Power Co., Inc., G.R. No. 23771, August 4, 1988).


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On the otherhand, the Balanga Power Plant Company, Imus Electric Company, Inc.,Guagua Electric Company, Inc. were subjected to the 5% tax on corporate franchiseunder Section 259 of the Internal Revenue Code, as amended, because Act No. 667 ofthe Philippine Commission and the ordinance or resolutions granting their respectivefranchises did not contain the "in-lieu-of-all-taxes" clause (Balanga Power Plant Co. vs.

Commissioner ofInternal Revenue, G.R. No. L-20499, June 30, 1965;

Imus Electric Co.vs. Court ofTax Appeals, G.R. No. L-22421, March 18, 1967; Guagua Electric Light vs.

Collector ofInternal Revenue, G.R. No. L-23611, April 24, 1967).

Local Tax Regulation No. 3-75 issued by the Secretary of Finance on June 26, 1976,has made it crystal clear that the franchise tax provided in the Local Tax Code (P.D. No.231, Sec. 9) may only be imposed on companies with franchises that do not contain theexempting clause. Thus it provides:

The franchise tax imposed under local tax ordinance pursuant to Section 9 of the LocalTax Code, as amended, shall be collected from businesses holding franchise but notfrom business establishments whose franchise contain the "in-lieu-of-all-taxes-proviso".

Manila Electric Company vs. Vera, 67 SCRA 351, cited by the petitioner, is notapplicable here because what the Government sought to impose on Meralco in thatcase was not a franchise tax but a compensating taxon the poles, wires, transformersand insulators which it imported for its use.

WHEREFORE, the petition for review is denied, and the decision of the Court of FirstInstance is hereby affirmed in toto. No costs.

SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

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