People v.

Manantan
GR L-14129, 31 July 1962 (5 SCRA 684)
En Banc, Regala (p): 7 concur, 1 took no part, 1 on leave

Facts: In an information filed by the Provincial Fiscal of Pangasinan in the Court of First Instance
(CFI) of that Province, Guillermo Manantan was charged with a violation of Section 54 of the
Revised Election Code. A preliminary investigation conducted by said court resulted in the
finding of a probable cause that the crime charged was committed by the defendant. Thereafter,
the trial started upon defendants plea of not guilty, the defense moved to dismiss the
information on the ground that as justice of the peace, the defendant is not one of the officers
enumerated in Section 54 of the Revised Election Code. The lower court denied the motion to
dismiss, holding that a justice of the peace is within the purview of Section 54. A second motion
was filed by defense counsel who cited in support thereof the decision of the Court of Appeals
(CA) in People vs. Macaraeg, where it was held that a justice of the peace is excluded from the
prohibition of Section 54 of the Revised Election Code. Acting on various motions and pleadings,
the lower court dismissed the information against the accused upon the authority of the ruling in
the case cited by the defense. Hence, the appeal by the Solicitor General.

Issue: Whether the justice of the peace was excluded from the coverage of Section 54 of the
Revised Election Code

Held: Under the rule of Casus omisus pro omisso habendus est, a person, object or thing
omitted from an enumeration must be held to have been omitted intentionally. The maxim
casus omisus can operate and apply only if and when the omission has been clearly
established. The application of the rule of casus omisus does not proceed from the mere fact
that a case is criminal in nature, but rather from a reasonable certainty that a particular person,
object or thing has been omitted from a legislative enumeration. Substitution of terms is not
omission. For in its most extensive sense the term judge includes all officers appointed to
decide litigated questions while acting in that capacity, including justice of the peace, and even
jurors, it is said, who are judges of facts. The intention of the Legislature did not exclude the
justice of the peace from its operation. In Section 54, there is no necessity to include the justice
of peace in the enumeration, as previously made in Section 449 of the Revised Administrative
Code, as the legislature has availed itself of the more generic and broader term judge,
including therein all kinds of judges, like judges of the courts of First Instance, judges of the
courts of Agrarian Relations, judges of the courts of Industrial Relations, and justices of the
peace.
The Supreme Court set aside the dismissal order entered by the trial court and remanded the
case for trial on the merits.

People v. Manantan [GR L-14129, 31 July 1962]

En Banc, Regala (p): 7 concur, 1 took no part, 1 on leave

Facts: In an information filed by the Provincial Fiscal of Pangasinan in the CFI of that Province,
Guillermo Manantan was charged with a violation of Section 54 of the Revised Election Code. A
preliminary investigation conducted by said court resulted in the finding of a probable cause
that the crime charged was committed by the defendant. Thereafter, the trial started upon
defendants plea of not guilty, the defense moved to dismiss the information on the ground that
as justice of the peace, the defendant is not one of the officers enumerated in Section 54 of the
Revised Election Code. The lower court denied the motion to dismiss, holding that a justice of
the peace is within the purview of Section 54. A second motion was filed by defense counsel
who cited in support thereof the decision of the CA in People vs. Macaraeg, (C.A.-G.R. No. 15613R, 54 Off. Gaz., pp. 1873-76) where it was held that a justice of the peace is excluded from the
prohibition of Section 54 of the Revised Election Code. Acting on this second motion to dismiss,
the answer of the prosecution, the reply of the defense, and the opposition of the prosecution,
the lower court dismissed the information against the accused upon the authority of the ruling in
the case cited by the defense. Hence, the appeal by the Solicitor General.

The Supreme Court set aside the dismissal order entered by the trial court and remanded the
case for trial on the merits.

1.

Justice of peace is a judge; Judge defined

A justice of the peace is sometimes addressed as judge in this jurisdiction. It is because a

justice of the peace is indeed a judge. A judge is a public officer, who, by virtue of his office, is
clothed with judicial authority. A judge is a public officer lawfully appointed to decide litigated
questions according to law. In its most extensive sense the term includes all officers appointed
to decide litigated questions while acting in that capacity, including justice of the peace, and
even jurors, it is said, who are judges of facts. The intention of the Legislature did not exclude
the justice of the peace from its operation. In Section 54, there is no necessity to include the
justice of peace in the enumeration, as previously made in Section 449 of the Revised
Administrative Code, as the legislature has availed itself of the more generic and broader term
judge, including therein all kinds of judges, like judges of the courts of First Instance, judges of
the courts of Agrarian Relations, judges of the courts of Industrial Relations, and justices of the
peace (Still, it is to be noted that the first omission of the words justice of the peace was
effected in Section 48 of Commonwealth Act 357; not the law being contrasted. In every case
the word judge is used, it is not qualified by of the first instance. In every case the word
judge of the first instance, it is followed by justice of the peace).

2.

History of the Philippine Election law

The first election law in the Philippines was Act 1582 (Philippine Commission, 1907), and which
was later amended by Acts 1669, 1709*, 1726 and 1768. Act 1582, with its subsequent 4
amendments were later on incorporated in Chapter 18 of the Administrative Code. Under the
Philippine Legislature, several amendments were made through the passage of Act 2310, 3336
and 3387*. During the time of the Commonwealth, the National Assembly passed
Commonwealth Act 233 and later on enacted Commonwealth Act 357, which was the law
enforced until 21 June 1947, when the Revised Election Code was approved. Included as its
basic provisions are the provisions of Commonwealth Acts 233, 357, 605, 666, and 657. The
present Code was further amended by RA 599, 867, 2242 and again, during the session of
Congress in 1960, amended by RA 3036 and 3038.

3.

Of any province construed

The words Of any province cannot remove justices of the peace from the enumeration for the
reason that they are municipal and not provincial officials, as a contrary view would likewise
exclude justices of the Supreme Court and of the Court of Appeals, who are national officials.
The more sensible and logical interpretation of the said phrase is that it qualifies fiscals,
treasurers and assessors who are generally known as provincial officers.

4.

Casus omisus pro omisso habendus est; application

Under the rule, a person, object or thing omitted from an enumeration must be held to have
been omitted intentionally. The maxim casus omisus can operate and apply only if and when
the omission has been clearly established. The application of the rule of casus omisus does
not proceed from the mere fact that a case is criminal in nature, but rather from a reasonable
certainty that a particular person, object or thing has been omitted from a legislative
enumeration. Substitution of terms is not omission.

5. The rule of strict construction of penal statutes not only factor to interpret laws;
Intent or spirit of law may be considered
The rule that penal statutes are given a strict construction is not the only factor controlling the
interpretation of such laws. Instead, the rule merely serves as an additional, single factor to be
considered as an aid in determining the meaning of penal laws. Cases will frequently be found
enunciating the principle that the intent of the legislature will govern. It is to be noted that a
strict construction should not be permitted to defeat the policy and purposes of the statute. The
court may consider the spirit and reason of a statute, as in this particular instance, where a
literal meaning would lead to absurdity, contradiction, injustice, or would defeat the clear
purpose of the law makers. The strict construction of a criminal statute does not mean such
construction of it as to deprive it of the meaning intended. Penal statutes must be construed in
the sense which best harmonizes with their intent and purpose. It must be noted that the
purpose of the statute is to enlarge the officers within its purview; the contention that the justice
of the peace from the enumeration is contrary to the purpose; as the partisan political activities
of judges weaken rather than strengthen the judiciary.

6.

Executive department regard justice of peace within purview of Section 54

The administrative or executive department has regarded justices of the peace within the
purview of Section 54 of the Revised Election Code (See Calo. v. Executive Secretary; the justice
of peace of Carmen, Agusan was dismissed for engaging in electioneering).

7.

Intent of the legislature cannot be derived from a proposed bill

Until the bill becomes a law, it cannot be considered to contain or manifest any legislative
intent. If the motives, opinions, and the reasons expressed by the individual members of the
legislature, even in debates, cannot be properly taken into consideration in ascertaining the
meaning of a statute, fortiori what weight can the Court give to mere draft of a bill.

8.

Expressio unius, est exclusio alterius not applicable in case

Where a statute appears on its face to limit the operation of its provisions to particular persons
or things by enumerating them, but no reason exists why other persons or things not so
enumerated should not have been included, and manifest injustice will follow by not so including
them, the maxim expresio unius est exclusio alterius, should not be invoked.

La Carlota Sugar Central v. Jimenez

GR L-12436, 31 May 1961 (2 SCRA 295)
En Banc, Dizon (p): 10 concurring, 1 took no part.

Facts: Sometime in September, 1955 La Carlota Sugar Central, which was under the
administration of Elizalde, imported 500 short tons of ammonium sulphate and 350 short tons of
ammonium phosphate. When the fertilizers arrived in the Philippines, the Central Bank imposed
17% exchange tax from the Central in accordance with the provisions of Republic Act 601. On 18
November 1955 the Central filed, through the Hongkong & Shanghai Banking Corporation, a
petition for the refund of the P20,872.09 paid (the 17% tax), claiming that it had imported the
fertilizers mentioned heretofore upon request and for the exclusive use of 5 haciendas owned
and managed by Elizalde, and therefore the importation was exempt from the 17% exchange
tax in accordance with Section 2, RA 601, as amended by RA 1375.
On 2 July 1956, the Auditor of the Central Bank denied the petition. The Central requested the
Auditor to reconsider his ruling, but after a re-examination of all pertinent papers the
reconsideration was denied. The Central then appealed to the Auditor General of the Philippines.
On 18 January 1957, the Auditor General affirmed the ruling of the Auditor of the Central Bank
upon the ground that the importation of the fertilizers does not fall within the scope of the
exempting provisions of Section 2 of RA 601, as amended by RA 1375; and thus affirming the
decision of the Auditor, Central Bank of the Philippines. The Central and Elizalde filed the
petition for review in the Supreme Court.

Issue: Whether upon the importation of the fertilizers are covered by the exemption (provided
by Section 1 and 2 of Republic Act No. 601, as amended by Republic Acts 1175, 1197 and 1375).

Held: The law is, therefore, clear that imported fertilizers are exempt from the payment of the
17% tax only if the same were imported by planters or farmers directly or through their
cooperatives. The exemption covers exclusively fertilizers imported by planters or farmers
directly or through their cooperatives. The word directly has been interpreted to mean
without anything intervening. Consequently, an importation of fertilizers made by a farmer or
planter through an agent, other than his cooperative, is not imported directly as required by the
exemption.
When the issue is whether or not the exemption from a tax imposed by law is applicable, the
rule is that the exempting provision is to be construed liberally in favor of the taxing authority
and strictly against exemption from tax liability, the result being that statutory provisions for the
refund of taxes are strictly construed in favor of the State and against the taxpayer. Exempting
from the 17% tax all fertilizers imported by planters or farmers through any agent other than

their cooperatives, this would be rendering useless the only exception expressly established in
the case of fertilizers imported by planters or farmers through their cooperatives.

CIR v. CA
GR 115349, 18 April 1997 (271 SCRA 605)
Third Division, Panganiban (p): 4 concurring
Facts: Private respondent, the Ateneo de Manila University, is a non-stock, non-profit
educational institution with auxiliary units and branches all over the Philippines. One auxiliary
unit is the Institute of Philippine Culture (IPC), which has no legal personality separate and
distinct from that of private respondent. The IPC is a Philippine unit engaged in social science
studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research
activities from international organizations, private foundations and government agencies. On 8
July 1983, private respondent received from Commissioner of Internal Revenue (CIR) a demand
letter dated 3 June 1983, assessing private respondent the sum of P174,043.97 for alleged
deficiency contractors tax, and an assessment dated 27 June 1983 in the sum of P1,141,837 for
alleged deficiency income tax, both for the fiscal year ended 31 March 1978. Denying said tax
liabilities, private respondent sent petitioner a letter-protest and subsequently filed with the
latter a memorandum contesting the validity of the assessments. On 17 March 988, petitioner
rendered a letter-decision canceling the assessment for deficiency income tax but modifying the
assessment for deficiency contractors tax by increasing the amount due to P193,475.55.
Unsatisfied, private respondent requested for a reconsideration or reinvestigation of the
modified assessment.
At the same time, it filed in the respondent court a petition for review of the said letter-decision
of the petitioner. While the petition was pending before the respondent court, petitioner issued a
final decision dated 3 August 1988 reducing the assessment for deficiency contractors tax from
P193,475.55 to P46,516.41, exclusive of surcharge and interest. On 12 July 1993, the
respondent court set aside respondents decision, and canceling the deficiency contractors tax
assessment in the amount of P46,516.41 exclusive of surcharge and interest for the fiscal year
ended 31 March 1978. No pronouncement as to cost. On 27 April 1994, Court of Appeals, in CAGR SP 31790, affirmed the decision of the Court of Tax Appeals. Not in accord with said decision,
petitioner came to Supreme Court via a petition for review.
Issues:
Whether the private respondent has the burden of proof in the tax case.
Whether the private respondent is taxable as an independent contractor.
Held: The Commissioner erred in applying the principles of tax exemption without first applying
the well-settled doctrine of strict interpretation in the imposition of taxes. It is obviously both
illogical and impractical to determine who are exempted without first determining who are
covered by the aforesaid provision. The Commissioner should have determined first if private
respondent was covered by Section 205, applying the rule of strict interpretation of laws
imposing taxes and other burdens on the populace, before asking Ateneo to prove its exemption
therefrom, following the rule of construction where the tax exemptions are to be strictly
construed against the taxpayer.
The doctrine in the interpretation of tax laws is that a statute will not be construed as imposing
a tax unless it does so clearly, expressly, and unambiguously. Tax cannot be imposed without
clear and express words for that purpose. Accordingly, the general rule of requiring adherence to
the letter in construing statutes applies with peculiar strictness to tax laws and the provisions of
a taxing act are not to be extended by implication. In case of doubt, such statutes are to be
construed most strongly against the government and in favor of the subjects or citizens because
burdens are not to be imposed nor presumed to be imposed beyond what statutes expressly and
clearly import. In the present case, Ateneos Institute of Philippine Culture never sold its services
for a fee to anyone or was ever engaged in a business apart from and independently of the
academic purposes of the university. Funds received by the Ateneo de Manila University are
technically not a fee. They may however fall as gifts or donations which are tax-exempt as

shown by private respondents compliance with the requirement of Section 123 of the National
Internal Revenue Code providing for the exemption of such gifts to an educational institution.
The Supreme Court denied the petition and affirmed the assailed Decision of the Court of
Appeals. The Court ruled that the private respondent is not a contractor selling its services for a
fee but an academic institution conducting these researches pursuant to its commitments to
education and, ultimately, to public service. For the institute to have tenaciously continued
operating for so long despite its accumulation of significant losses, we can only agree with both
the Court of Tax Appeals and the Court of Appeals that education and not profit is motive for
undertaking the research projects.

CIR v. CA [GR 115349, 18 April 1997]

Third Division, Panganiban (p): 4 concurring.

Facts: Private respondent, Ateneo de Manila University, is a non-stock, non-profit educational

institution with auxiliary units and branches all over the country. The Institute of Philippine
Culture (IPC) is an auxiliary unit with no legal personality separate and distinct from private
respondent. The IPC is a Philippine unit engaged in social science studies of Philippine society
and culture. Occasionally, it accepts sponsorships for its research activities from international
organizations, private foundations and government agencies. On 8 July 1983, private respondent
received from CIR a demand letter dated 3 June 1983, assessing private respondent the sum of
P174,043.97 for alleged deficiency contractors tax, and an assessment dated 27 June 1983 in
the sum of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended 31
March 1978. Denying said tax liabilities, private respondent sent petitioner a letter-protest and
subsequently filed with the latter a memorandum contesting the validity of the assessments. On
17 March 988, petitioner rendered a letter-decision canceling the assessment for deficiency
income tax but modifying the assessment for deficiency contractors tax by increasing the
amount due to P193,475.55. Unsatisfied, private respondent requested for a reconsideration or
reinvestigation of the modified assessment. At the same time, it filed in the respondent court a
petition for review of the said letter-decision of the petitioner. While the petition was pending
before the respondent court, petitioner issued a final decision dated 3 August 1988 reducing the
assessment for deficiency contractors tax from P193,475.55 to P46,516.41, exclusive of
surcharge and interest.
On 12 July 1993, the respondent court set aside respondents decision, and canceling the
deficiency contractors tax assessment in the amount of P46,516.41 exclusive of surcharge and
interest for the fiscal year ended 31 March 1978. No pronouncement as to cost.
On 27 April 1994, Court of Appeals, in CA-GR SP 31790, affirmed the decision of the Court of Tax
Appeals. Not in accord with said decision, petitioner came to Supreme Court via a petition for
review.
The Supreme Court denied the petition and affirmed the assailed Decision of the Court of
Appeals. The Court ruled that the private respondent is not a contractor selling its services for a
fee but an academic institution conducting these researches pursuant to its commitments to
education and, ultimately, to public service. For the institute to have tenaciously continued
operating for so long despite its accumulation of significant losses, we can only agree with both
the Court of Tax Appeals and the Court of Appeals that education and not profit is motive for
undertaking the research projects.

1.
Application of Doctrine of strict implementation before Principle of tax
exemption
CIR erred in applying the principles of tax exemption without first applying the well-settled
doctrine of strict interpretation in the imposition of taxes. It is obviously both illogical and
impractical to determine who are exempted without first determining who are covered by the
aforesaid provision. The Commissioner should have determined first if private respondent was
covered by Section 205, applying the rule of strict interpretation of laws imposing taxes and
other burdens on the populace, before asking Ateneo to prove its exemption therefrom,
following the rule of construction where the tax exemptions are to be strictly construed against
the taxpayer.

2.

Doctrine of interpretation of tax laws

The doctrine in the interpretation of tax laws is that (a) statute will not be construed as
imposing a tax unless it does so clearly, expressly, and unambiguously. . . . (A) tax cannot be
imposed without clear and express words for that purpose. Accordingly, the general rule of
requiring adherence to the letter in construing statutes applies with peculiar strictness to tax
laws and the provisions of a taxing act are not to be extended by implication. In case of doubt,
such statutes are to be construed most strongly against the government and in favor of the
subjects or citizens because burdens are not to be imposed nor presumed to be imposed beyond
what
statutes
expressly
and
clearly
import.
Ateneos Institute of Philippine Culture never sold its services for a fee to anyone or was ever
engaged in a business apart from and independently of the academic purposes of the university.
Funds received by the Ateneo de Manila University are technically not a fee. They may however
fall as gifts or donations which are tax-exempt as shown by private respondents compliance
with the requirement of Section 123 of the National Internal Revenue Code providing for the
exemption of such gifts to an educational institution.

3.

Meaning of independent contractors

The term independent contractors include persons (juridical or natural) not enumerated as
excepted (but not including individuals subject to the occupation tax under Section 12 of the
Local Tax Code) whose activity consists essentially of the sale of all kinds of services for a fee
regardless of whether or not the performance of the service calls for the exercise or use of the
physical
or
mental
faculties
of
such
contractors
or
their
employees.
The term independent contractor does not include regional or area headquarters established in
the Philippines by multinational corporations, including their alien executives, and which
headquarters do not earn or derive income from the Philippines and which act as supervisory,
communications and coordinating centers for their affiliates, subsidiaries or branches in the
Asia-Pacific Region.

4.

Meaning of gross receipts

The term gross receipts means all amounts received by the prime or principal contractor as the
total contract price, undiminished by amount paid to the subcontractor, shall be excluded from
the taxable gross receipts of the subcontractor.

5.

Transaction of IPC not a contract of sale nor a contract for a piece of work

The transactions of Ateneos Institute of Philippine Culture cannot be deemed either as a

contract of sale or a contract for a piece of work. By the contract of sale, one of the contracting
parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its equivalent. In the case of a contract for a
piece of work, the contractor binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. . . . If the contractor agrees to produce the
work from materials furnished by him, he shall deliver the thing produced to the employer and
transfer dominion over the thing. . . . In the case at bench, it is clear from the evidence on
record that there was no sale either of objects or services because, as adverted to earlier, there
was no transfer of ownership over the research data obtained or the results of research projects
undertaken by the Institute of Philippine Culture.

6.

Jurisdiction of Court of Tax Appeals in reviewing tax cases

The Court of Tax Appeals is a highly specialized body specifically created for the purpose of
reviewing tax cases. Through its expertise, it is undeniably competent to determine the issue of
whether the Ateneo may be deemed a subject of the three percent contractors tax through the
evidence presented before it. Consequently, as a matter of principle, the Supreme Court will
not set aside the conclusion reached by . . . the Court of Tax Appeals which is, by the very nature
of its function, dedicated exclusively to the study and consideration of tax problems and has
necessarily developed an expertise on the subject unless there has been an abuse or
improvident exercise of authority.

Mactan Cebu (MCIAA) v. Marcos

GR 120082, 11 September 1996 (261 SCRA 667)
Third Division, Davide Jr. (p): 4 concurring.
Facts: Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic
Act 6958. Since the time of its creation, MCIAA enjoyed the privilege of exemption from payment
of realty taxes in accordance with Section 14 of its Charter. However on 11 October 1994, the
Office of the Treasurer of Cebu, demanded for the payment of realty taxes on several parcels of
land belonging to the petitioner. Petitioner objected to such demand for payment as baseless
and unjustified. It also asserted that it is an instrumentality of the government performing a
governmental functions, which puts limitations on the taxing powers of local government units.
It nonetheless stands in the same footing as an agency or instrumentality of the national
government by the very nature of its powers and functions. The City refused to cancel and set
aside petitioners realty tax account, insisting that the MCIAA is a government controlled
corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and
234 of the Local Government Code (LGC), and not an instrumentality of the government but
merely a government owned corporation performing proprietary functions. MCIAA paid its tax
account under protest when City is about to issue a warrant of levy against the MCIAAs
properties.
On 29 December 1994, MCIAA filed a Petition of Declaratory Relief with the Cebu Regional Trial
Court contending that the taxing power of local government units do not extend to the levy of
taxes or fees on an instrumentality of the national government. It contends that by the nature of
its powers and functions, it has the footing of an agency or instrumentality of the national
government; which claim the City rejects. On 22 March 1995, the trial court dismissed the
petition, citing that close reading of the LGC provides the express cancellation and withdrawal of
tax exemptions of Government Owned and Controlled Corporations. MCIAAs motion for
reconsideration having been denied by the trial court in its 4 May 1995 order, the petitioner filed
the instant petition.
Issue: Whether the MCIAA is exempted from realty taxes.

Held: Tax statutes are construed strictly against the government and liberally in favor of the
taxpayer. But since taxes are paid for civilized society, or are the lifeblood of the nation, the law
frowns against exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A
claim of exemption from tax payments must be clearly shown and based on language in the law
too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the
exception. However, if the grantee of the exemption is a political subdivision or instrumentality,
the rigid rule of construction does not apply because the practical effect of the exemption is
merely to reduce the amount of money that has to be handled by the government in the course
of its operations. Further, since taxation is the rule and exemption therefrom the exception, the
exemption may be withdrawn at the pleasure of the taxing authority. The only exception to this
rule is where the exemption was granted to private parties based on material consideration of a
mutual nature, which then becomes contractual and is thus covered by the non-impairment
clause of the Constitution.
Mactan Cebu International Airport Authority (MCIAA) is a taxable person under its Charter (RA
6958), and was only exempted from the payment of real property taxes. The grant of the
privilege only in respect of this tax is conclusive proof of the legislative intent to make it a
taxable person subject to all taxes, except real property tax. Since Republic Act 7160 or the
Local Government Code (LGC) expressly provides that All general and special laws, acts, city
charters, decrees [sic], executive orders, proclamations and administrative regulations, or part
of parts thereof which are inconsistent with any of the provisions of this Code are hereby
repealed or modified accordingly. With that repealing clause in the LGC, the tax exemption
provided for in RA 6958 had been expressly repealed by the provisions of the LGC. Therefore,
MCIAA has to pay the assessed realty tax of its properties effective after January 1, 1992 until
the present.
The Supreme Court denied the petition, and affirmed the challenged decision and order of the
RTC Cebu; without pronouncement as to costs.

Mactan Cebu (MCIAA) v. Marcos [GR 120082, 11 September 1996]

Third Division, Davide Jr. (p): 4 concurring.

Facts: Mactan Cebu International Airport Authority (MCIAA) was created by virtue of RA 6958,
mandated to principally undertake the economical, efficient and effective control, management
and supervision of the Mactan International Airport in the Province of Cebu and the Lahug
Airport in Cebu City and such other airports as may be established in the Province of Cebu. Since
the time of its creation, MCIAA enjoyed the privilege of exemption from payment of realty taxes
in accordance with Section 14 of its Charter.
On 11 October 1994, however, Mr. Eustaquio B. Cesa, OIC, Office of the Treasurer of Cebu City,
demanded payment for realty taxes on several parcels of land belonging to the petitioner (Lots
913-G, 743, 88 SWO, 948-A, 989-A, 474, 109(931), I-M, 918, 919, 913-F, 941, 942, 947, 77 Psd.,
746 and 991-A), located at Bo. Apas and Bo. Kasambagan, Lahug, Cebu City, in the total amount
of P2,229,078.79. MCIAA objected to demand, citing Section 14 of RA6958 and Section 133 of
the 1991 LGC which puts limitations on the taxing power of the local government units. City
refused to cancel MCIAAs realty tax account, insisting that the MCIAA is a GCC whose tax
exemption privileged has been withdrawn by virtue of Section 193 and 234 of the LGC (1
January 1992). MCIAA paid its tax account under protest when City is about to issue a warrant
of levy against the MCIAAs properties.
On 29 December 1994, MCIAA filed a Petition of Declaratory Relief with the Cebu RTC (Branch
20, Civil case CEB-16900) contending that the taxing power of local government units do not
extend to the levy of taxes or fees on an instrumentality of the national government. It contends

that by the nature of its powers and functions, it has the footing of an agency or instrumentality
of the national government; which claim the City rejects.
On 22 March 1995, the trial court dismissed the petition, citing that close reading of RA 7160 or
the 1991 LGC provides the express cancellation and withdrawal of tax exemptions of GOCCs.
MCIAAs motion for reconsideration having been denied by the trial court in its 4 May 1995
order, the petitioner filed the instant petition.
The Supreme Court denied the petition, and affirmed the challenged decision and order of the
RTC Cebu; without pronouncement as to costs.

1.
RA 7160s repealed Section 14 of RA 6958; Petitioner liable for assessed realty
tax
RA 7160 expressly provides that All general and special laws, acts, city charters, decrees [sic],
executive orders, proclamations and administrative regulations, or part of parts thereof which
are inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly. (/f/, Section 534, RA 7160) With that repealing clause in RA 7160, the tax
exemption provided for in RA 6958 (creating the MCIAA) had been expressly repealed by the
provisions of the 1991 LGC. MCIAA has to pay the assessed realty tax of its properties effective
after January 1, 1992 until the present.

2.

Overall objective of the 1991 LGC (RA 7160)

The New Local Government Code of 1991, RA 7160 states It is hereby declared the policy of the
State that the territorial and political subdivisions of the State shall enjoy genuine and
meaningful local autonomy to enable them to attain their fullest development as self-reliant
communities and make them more effective partners in the attainment of national goods.
Toward this end, the State shall provide for a more responsive and accountable local
government structure instituted through a system of decentralization whereby local government
units shall be given more powers, authority, responsibilities, and resources. The process of
decentralization shall proceed from the national government to the local government units. . . .

3.

Power to tax

The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its
very nature no limits, so that security against its abuse is to be found only in the responsibility
of the legislature which imposes the tax on the constituency who are to pay it. Nevertheless,
effective limitations thereon may be imposed by the people through their Constitutions. Our
Constitution provides that the rule of taxation shall be uniform and equitable and Congress shall
evolve a progressive system of taxation. So potent indeed is the power that it was once opined
that the power to tax involves the power to destroy. Verily, taxation is a destructive power
which interferes with the personal and property rights of the people and takes from them a
portion of their property for the support of the government.

4.
Tax statutes construed strictly against government and liberally in favor of the
taxpayer; Rigid rule does not apply if the grantee of tax exemption is a political
subdivision or instrumentatlity

Accordingly, tax statutes must be construed strictly against the government and liberally in
favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood
of the nation, the law frowns against exemptions from taxation and statutes granting tax
exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the
taxing authority. A claim of exemption from tax payments must be clearly shown and based on
language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption
therefrom is the exception. However, if the grantee of the exemption is a political subdivision or
instrumentality, the rigid rule of construction does not apply because the practical effect of the
exemption is merely to reduce the amount of money that has to be handled by the government
in the course of its operations.

5.

Congress vested with the power to tax

The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before,
but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the
latter, the exercise of the power may be subject to such guidelines and limitations as the
Congress may provide which, however, must be consistent with the basic policy of local
autonomy.

6.
Taxation is the rule, exemption is exception; exemption may be withdrawn by
taxing authority
Since taxation is the rule and exemption therefrom the exception, the exemption may be
withdrawn at the pleasure of the taxing authority. The only exception to this rule is where the
exemption was granted to private parties based on material consideration of a mutual nature,
which then becomes contractual and is thus covered by the non-impairment clause of the
Constitution.

7.

LGUs power to tax, scope and limitations, and exemptions from taxation

The LGC, enacted pursuant to Section 3, Article X of the Constitution, provides for the exercise
by local government units of their power to tax, the scope thereof or its limitations, and the
exemptions from taxation. Section 133 of the LGC prescribes the common limitations on the
taxing powers of local government units. Among the taxes enumerated in the LGC is real
property tax, which is governed by Section 232. Section 234 of the LGC provides for the
exemptions from payment of real property taxes and withdraws previous exemptions therefrom
granted to natural and juridical persons, including government-owned and controlled
corporations, except as provided therein. Except as provided, any exemption from payment of
real property tax previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or controlled corporations are withdrawn upon the
effectivity of the LGC. Section 193 of the LGC is the general provision on withdrawal of tax
exemption privileges, but still, the LGC authorizes local government units to grant tax exemption
privileges under Section 192.

8.

Taxes, fees, or charges of any kind; meanings

The taxes, fees or charges referred to in Section 133(o) are of any kind; include all, unless
otherwise provided by the LGC. The term taxes is well understood so as to need no further

elaboration, in light of Section 133s enumeration. The term fees means charges fixed by law
or ordinance for the regulation or inspection of business or activity, 24 while charges are
pecuniary liabilities such as rents or fees against persons or property.

9.

Ambiguities and obscurities in the LGC; General rule

The use of exceptions or provisos in Sections 133, 193, 232 and 234 (unless otherwise provided
herein in the opening paragraph of Section 133; Unless otherwise provided in this Code in
Section 193; not hereafter specifically exempted in Section 232; and Except as provided
herein in the last paragraph of Section 234) initially hampers a ready understanding of the
sections. The aforementioned clause in Section 133 seems to be inaccurately worded. Instead of
the clause unless otherwise provided herein, with the herein to mean, of course, the section,
it should have used the clause unless otherwise provided in this Code. The former results in
absurdity since the section itself enumerates what are beyond the taxing powers of local
government units and, where exceptions were intended, the exceptions are explicitly indicated
in the next. For instance, in item (a) which excepts income taxes when levied on banks and
other financial institutions; item (d) which excepts wharfage on wharves constructed and
maintained by the local government unit concerned; and item (1) which excepts taxes, fees
and charges for the registration and issuance of licenses or permits for the driving of tricycles.
It may also be observed that within the body itself of the section, there are exceptions which can
be found only in other parts of the LGC, but the section interchangeably uses therein the clause,
except as otherwise provided herein as in items (c) and (i), or the clause except as provided
in this Code in item (j). These clauses would be obviously unnecessary or mere surplusages if
the opening clause of the section were Unless otherwise provided in this Code instead of
Unless otherwise provided herein. In any event, even if the latter is used, since under Section
232 local government units have the power to levy real property tax, except those exempted
therefrom under Section 234, then Section 232 must be deemed to qualify Section 133.
As a general rule, thus, the taxing powers of local government units cannot extend to the levy
of, inter alia, taxes, fees and charges of any kind on the National Government, its agencies and
instrumentalities , and local government units; however, pursuant to Section 232, provinces,
cities, and municipalities in the Metropolitan Manila Area may impose the real property tax
except on, inter alia, real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or judicial
persons, including GOCCs, Section 193 of the LGC prescribes the general rule, viz., they are
withdrawn upon the effectivity of the LGC, except those granted to local water districts,
cooperatives duly registered under RA 6938, non-stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section
234 which enumerates the properties exempt from real property tax. But the last paragraph of
Section 234 further qualifies the retention of the exemption insofar as real property taxes are
concerned by limiting the retention only to those enumerated therein; all others not included in
the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real
property owned by the Republic of the Philippines or any of its political subdivisions covered by
item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of
such property has been granted to a taxable person for consideration or otherwise.

10.

Claim of exemption; instrumentalities not included

The exemption from such tax granted MCIAA in Section 14 of its Charter, RA 6958, has been
withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under
any of the exceptions provided in Section 234, but not under Section 133, as it now asserts,
since, as shown above, the said section is qualified by Sections 232 and 234. It must show that

the parcels of land in question, which are real property, are any one of those enumerated in
Section 234, either by virtue of ownership, character, or use of property.

11.
Republic of the Philippines and National Government is not interchangeable;
Definition of Republic of the Philippines; Definition of National Government;
Definition of Agency; Definition of Instrumentality
The legislature used the phrase National Government, its agencies and instrumentalities in
Section 133(o), but only the phrase Republic of the Philippines or any of its political
subdivisions in Section 234(a). The terms Republic of the Philippines and National
Government are not interchangeable.
Republic of the Philippines is broader and synonymous with Government of the Republic of
the Philippines which the Administrative Code of 1987 defines as the corporate governmental
entity through which the functions of government are exercised throughout the Philippines,
including, save as the contrary appears from the context, the various arms through which
political authority is made affective in the Philippines, whether pertaining to the autonomous
regions, the provincial, city, municipal or barangay subdivisions or other forms of local
government. These autonomous regions, provincial, city, municipal or barangay subdivisions
are
the
political
subdivisions.
National Government refers to the entire machinery of the central government, as
distinguished from the different forms of local governments. The National Government then is
composed of the three great departments: the executive, the legislative and the judicial.
An agency of the Government refers to any of the various units of the Government, including
a department, bureau, office, instrumentality, or government-owned or controlled corporation,
or a local government or a distinct unit therein.
An instrumentality refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. This term includes regulatory agencies, chartered
institutions and government-owned and controlled corporations.

12.

Exclusion of GOCCs from exemption

Congress did not wish to expand the scope of the exemption in Section 234(a) to include real
property owned by other instrumentalities or agencies of the government including GOCCs. This
is further borne out by the fact that the source of this exemption is Section 40(a) of PD 464,
(Real Property Tax Code), and its reproduction into the LGC excluded the phrase and any
government-owned or controlled corporation so exempt by its charter. The justification for this
restricted exemption in Section 234(a) is to limit further tax exemption privileges, especially in
light of the general provision on withdrawal of tax exemption privileges in Section 193 and the
special provision on withdrawal of exemption from payment of real property taxes in the last
paragraph of Section 234. These policy considerations are consistent with the State policy to
ensure autonomy to local governments and the objective of the LGC that they enjoy genuine
and meaningful local autonomy to enable them to attain their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals.

13.
Reference of airports, lands, and transfer; MCIAA, not Republic of the
Philippines
owner
of
land
in
question

The airports referred to are the Lahug Air Port in Cebu City and the Mactan International
Airport in the Province of Cebu, which belonged to the Republic of the Philippines, then under
the Air Transportation Office (ATO). Lands reasonably refer to lands in Cebu City then
administered by the Lahug Air Port and included the parcels of land Cebu City seeks to levy on
for real property taxes. Section 15 of the Charter of Cebu City involves a transfer of the
lands, among other things, to the petitioner and not just the transfer of the beneficial use
thereof, with the ownership being retained by the Republic of the Philippines. This transfer is
actually an absolute conveyance of the ownership thereof because the petitioners authorized
capital stock consists of, inter alia, the value of such real estate owned and/or administered by
the airports. Hence, the petitioner is now the owner of the land in question and the exception in
Section 234(c) of the LGC is inapplicable.

14.

MCIAA a taxable person under its Charter

MCIAA is a taxable person under its Charter, and was only exempted from the payment of real
property taxes. The grant of the privilege only in respect of this tax is conclusive proof of the
legislative intent to make it a taxable person subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes of real property
tax, it had already become, even if it be conceded to be an agency or instrumentality of the
Government, a taxable person for such purpose in view of the withdrawal in the last paragraph
of Section 234 of exemptions from the payment of real property taxes applies to the MCIAA.

Serfino v. CA
GR L-40858, 15 September 1987
Second Division, Paras (p): 4 concurring.

Facts: On 25 August 1937, a parcel of land was patented in the name of Pacifico Casamayor
(OCT 1839). On 14 December 1945, he sold said land in favor of Nemesia D. Balatazar (TCT No.
57-N, 18 January 1946). OCT 1839 was lost during the war and upon petition of Nemesia
Baltazar, the Court of First Instance of Negros Occidental ordered the reconstitution thereof.
Pursuant thereto, OCT 14-R (1839) was issued on 18 January 1946 in the name of Pacifico
Casamayor. On that same day, TCT 57-N was issued in the name of Nemesia Baltazar but after
the cancellation of OCT 14-R (1839). On 15 August 1951, Nemesia Baltazar, sold said property to
Lopez Sugar Central Mill Co., and the latter did not present the documents for registration until
17 December 1964 to the Office of the Registry of Deeds. Said office refused registration upon
its discovery that the same property was covered by another certificate of title, TCT 38985, in
the name of Federico Serfino. On 19 November 1964, the spouses Serfinos mortgaged the land
to the Philippine National Bank (PNB) to secure a loan in the amount of P5,000.00; which was
inscribed in TCT No. 38985.
The Lopez Sugar Central instituted an action to recover said land; and the lower court rendered
a decision ordering the cancellation of TCT No. 38985; issuance of a new TCT in the name of
plaintiff; and the payment of the plaintiff PNB the loan of spouses Serfinos secured by said land.
Both parties appealed from this decision of the trial court. Ruling on the assignment of errors,
the appellate court affirmed the judgment of the trial court with modification in its decision
setting aside the decision of the trial court declaring plaintiff liable to PNB for payment,
however, ordering the plaintiff to reimburse the Serfino spouses of the sum P1,839.49,

representing the unpaid taxes and penalties paid by the latter when they repurchased the
property. Hence, the appeal by the spouses Serfino and PNB to the Supreme Court.

Issue: Whether the auction sale of the disputed property was null and void.

Held: The assailed decision of the appellate court declares that the prescribed procedure in
auction sales of property for tax delinquency being in derogation of property rights should be
followed punctiliously. Strict adherence to the statutes governing tax sales is imperative not only
for the protection of the tax payers, but also to allay any possible suspicion of collusion between
the buyer and the public officials called upon to enforce such laws. Notice of sale to the
delinquent land owners and to the public in general is an essential and indispensable
requirement of law, the non-fulfillment of which vitiates the sale. In the present case, Lopez
Sugar Central was not entirely negligent in its payment of land taxes. The record shows that
taxes were paid for the years 1950 to 1953 and a receipt therefor was obtained in its name. The
sale therefore by the Province of Negros Occidental of the land in dispute to the spouses
Serfinos was void since the Province of Negros Occidental was not the real owner of the property
thus sold. In turn, the spouses Serfinos title which has been derived from that of the Province of
Negros Occidental is likewise void. However, the fact that the public auction sale of the disputed
property was not valid cannot in any way be attributed to the mortgagees fault. The inability of
the Register of Deeds to notify the actual owner or Lopez Sugar Central of the scheduled public
auction sale was partly due to the failure of Lopez Sugar Central to declare the land in its name
for a number of years and to pay the complete taxes thereon. PNB is therefore entitled to the
payment of the mortgage loan as ruled by the trial court and exempted from the payment of
costs.
The Supreme Court affirmed the assailed decision, with modification that PNB mortgage credit
must be paid by Lopez Sugar Central.