PROV OF BATANGAS V ROMULO DBM for the preparation of the Special Allotment

Release Order (SARO) and Notice of Cash Allocation

FACTS: President Joseph Ejercito Estrada issued (NCA) to effect the release of funds to the said LGUs.
Executive Order (E.O.) No. 48 entitled "ESTABLISHING
A PROGRAM FOR DEVOLUTION ADJUSTMENT AND On January 9, 2002, the Oversight Committee
EQUALIZATION." The program was established to adopted Resolution No. OCD-2002-001 allocating the
"facilitate the process of enhancing the capacities of five billion pesos LGSEF for 2001 as follows:
local government units (LGUs) in the discharge of the
functions and services devolved to them by the Modified Codal Formula P 3.000 billion
National Government Agencies concerned pursuant to Priority Projects 1.900 billion
the Local Government Code.
Capability Building Fund. 100 billion
Further, to address the funding shortfalls of functions
and services devolved to the LGUs and other funding Total P 5.000 billion
requirements of the program, the "Devolution
RESOLVED FURTHER, that the P3.0 B of the CY 2001
Adjustment and Equalization Fund" was created.3 For
LGSEF which is to be allocated according to the
1998, the DBM was directed to set aside an amount to
modified codal formula shall be released to the four
be determined by the Oversight Committee based on
levels of LGUs, i.e., provinces, cities, municipalities
the devolution status appraisal surveys undertaken by
and barangays, as follows:
the DILG.4 The initial fund was to be sourced from the
available savings of the national government for CY LGUs Percentage Amount
1998.5
Provinces 25 P 0.750 billion
In Republic Act No. 8745, otherwise known as the
GAA of 1999, the program was renamed as the LOCAL Cities 25 0.750
GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF).
Municipalities 35 1.050
Under said appropriations law, the amount
ofP96,780,000,000 was allotted as the share of the Barangays 15 0.450
LGUs in the internal revenue taxes.
Total 100 P 3.000 billion
In Resolution No. OCD-99-003, the Oversight
Committee set aside the one billion pesos or 20% of RESOLVED FURTHER, that the P1.9 B earmarked for
the LGSEF to support Local Affirmative Action Projects priority projects shall be distributed according to the
(LAAPs) of LGUs. This remaining amount was intended following criteria:
to "respond to the urgent need for additional funds
1.0 For projects of the 4th, 5th and 6th class LGUs; or
assistance, otherwise not available within the
parameters of other existing fund sources." For LGUs 2.0 Projects in consonance with the President's State
to be eligible for funding under the one-billion-peso of the Nation Address (SONA)/summit commitments.
portion of the LGSEF, the OCD promulgated the
following: CRITERIA FOR ELIGIBILITY: Further, under RESOLVED FURTHER, that the remaining P100 million
the guidelines formulated by the Oversight LGSEF capability building fund shall be distributed in
Committee as contained in Attachment - Resolution accordance with the recommendation of the Leagues
No. OCD-99-003, the LGUs were required to identify of Provinces, Cities, Municipalities and Barangays, and
the projects eligible for funding under the one-billion- approved by the OCD.
peso portion of the LGSEF and submit the project
ISSUE: Whether the assailed provisos in the GAAs of
proposals thereof and other documentary
1999, 2000 and 2001, earmarking for each
requirements to the DILG for appraisal. The project
corresponding year the amount of five billion pesos of
proposals that passed the DILG's appraisal would then
the IRA for the LGSEF and the OCD resolutions
be submitted to the Oversight Committee for review,
promulgated pursuant thereto, transgress the
evaluation and approval. Upon its approval, the
Constitution and the Local Government Code of 1991.
Oversight Committee would then serve notice to the
HELD: The assailed provisos in the GAAs of 1999, 2000
and 2001 and the OCD resolutions violate the
constitutional precept on local autonomy
RATIO: Sec. 6. Local government units shall have a
just share, as determined by law, in the national taxes
which shall be automatically released to them.
When parsed, it would be readily seen that this
provision mandates that (1) the LGUs shall have a
"just share" in the national taxes; (2) the "just share"
shall be determined by law; and (3) the "just share"
shall be automatically released to the LGUs.
The Local Government Code of 1991, among its
salient provisions, underscores the automatic release
of the LGUs' "just share" in this wise:
Sec. 18. Power to Generate and Apply Resources.
Local government units shall have the power and
authority to establish an organization that shall be
responsible for the efficient and effective
implementation of their development plans, program
objectives and priorities; to create their own sources
of revenue and to levy taxes, fees, and charges which
shall accrue exclusively for their use and disposition
and which shall be retained by them; to have a just
share in national taxes which shall be automatically
and directly released to them without need of further
action;
Section 4 of AO 372 cannot, however, be upheld. A
basic feature of local fiscal autonomy is the automatic
release of the shares of LGUs in the National internal
revenue.
Section 4 of AO 372, however, orders the withholding,
effective January 1, 1998, of 10 percent of the LGUs'
IRA "pending the assessment and evaluation by the
Development Budget Coordinating Committee of the
emerging fiscal situation" in the country. Such
withholding clearly contravenes the Constitution and
the law. Although temporary, it is equivalent to a
holdback, which means "something held back or
withheld, often temporarily." Hence, the "temporary"
nature of the retention by the national government
does not matter. Any retention is prohibited.
Significantly, the LGSEF could not be released to the
LGUs without the Oversight Committee's prior
approval. Further, with respect to the portion of the
LGSEF allocated for various projects of the LGUs (P1
billion for 1999;P1.5 billion for 2000 and P2 billion for
2001), the Oversight Committee, through the assailed
OCD resolutions, laid down guidelines and
mechanisms that the LGUs had to comply with before
they could avail of funds from this portion of the
LGSEF.
To the Court's mind, the entire process involving the
distribution and release of the LGSEF is
constitutionally impermissible. The LGSEF is part of
the IRA or "just share" of the LGUs in the national
taxes. To subject its distribution and release to the
vagaries of the implementing rules and regulations,
including the guidelines and mechanisms unilaterally
prescribed by the Oversight Committee from time to
time, as sanctioned by the assailed provisos in the
GAAs of 1999, 2000 and 2001 and the OCD
resolutions, makes the release not automatic, a
flagrant violation of the constitutional and statutory
mandate that the "just share" of the LGUs "shall be
automatically released to them." The LGUs are, thus,
placed at the mercy of the Oversight Committee.
Indeed, the Oversight Committee exercising
discretion, even control, over the distribution and
release of a portion of the IRA, the LGSEF, is an
anathema to and subversive of the principle of local
autonomy as embodied in the Constitution.
Moreover, it finds no statutory basis at all as the
Oversight Committee was created merely to
formulate the rules and regulations for the efficient
and effective implementation of the Local
Government Code of 1991 to ensure "compliance
with the principles of local autonomy as defined
under the Constitution."
Section 285 of the Local Government Code of 1991
Section 28438 of the Local Government Code provides
that, beginning the third year of its effectivity, the
LGUs' share in the national internal revenue taxes
shall be 40%. This percentage is fixed and may not be
reduced except "in the event the national government
incurs an unmanageable public sector deficit" and
only upon compliance with stringent requirements set
forth in the same section:
Sec. 284. ...
Provided, That in the event that the national
government incurs an unmanageable public sector
deficit, the President of the Philippines is hereby
authorized, upon recommendation of Secretary of
Finance, Secretary of Interior and Local Government
and Secretary of Budget and Management, and
subject to consultation with the presiding officers of
both Houses of Congress and the presidents of the
liga, to make the necessary adjustments in the
internal revenue allotment of local government units
but in no case shall the allotment be less than thirty
percent (30%) of the collection of the national internal
revenue taxes of the third fiscal year preceding the
current fiscal year; Provided, further That in the first
year of the effectivity of this Code, the local
government units shall, in addition to the thirty
percent (30%) internal revenue allotment which shall
include the cost of devolved functions for essential
public services, be entitled to receive the amount
equivalent to the cost of devolved personnel services.
Thus, from the above provision, the only possible
exception to the mandatory automatic release of the
LGUs' IRA is if the national internal revenue
collections for the current fiscal year is less than 40
percent of the collections of the preceding third fiscal
year, in which case what should be automatically
released shall be a proportionate amount of the
collections for the current fiscal year.
. In the instant case, however, there is no allegation
that the national internal revenue tax collections for
the fiscal years 1999, 2000 and 2001 have fallen
compared to the preceding three fiscal years.
Section 285 then specifies how the IRA shall be
allocated among the LGUs:
Sec. 285. Allocation to Local Government Units. The
share of local government units in the internal
revenue allotment shall be allocated in the following
manner:
(a) Provinces Twenty-three (23%)
(b) Cities Twenty-three percent (23%);
(c) Municipalities Thirty-four (34%); and
(d) Barangays Twenty percent (20%).
However, this percentage sharing is not followed with
respect to the five billion pesos LGSEF as the assailed
OCD resolutions, implementing the assailed provisos
in the GAAs of 1999, 2000 and 2001, provided for a
different sharing scheme.
The Local Government Code of 1991 is a substantive
law. And while it is conceded that Congress may
amend any of the provisions therein, it may not do so
through appropriations laws or GAAs. Any
amendment to the Local Government Code of 1991
should be done in a separate law, not in the
appropriations law, because Congress cannot include
in a general appropriation bill matters that should be
more properly enacted in a separate legislation.42
Increasing or decreasing the IRA of the LGUs or
modifying their percentage sharing therein, which are
fixed in the Local Government Code of 1991, are
matters of general and substantive law. To permit
Congress to undertake these amendments through
the GAAs, as the respondents contend, would be to
give Congress the unbridled authority to unduly
infringe the fiscal autonomy of the LGUs, and thus put
the same in jeopardy every year. This, the Court
cannot sanction.
ALTERNATIVE CENTER FOR ORGANIZATIONAL
REFORMS AND DEVELOPMENT, INC., VS. ZAMORA
G.R. No. 144256
Subject: Public Corporation
Doctrine: Automatic release of IRA
Facts:
Pres. Estrada, pursuant to Sec 22, Art VII mandating
the Pres to submit to Congress a budget of
expenditures within 30 days before the opening of
every regular session, submitted the National
Expenditures program for FY 2000. The President
proposed an IRA of P121,778,000,000. This became
RA 8760, AN ACT APPROPRIATING FUNDS FOR THE
OPERATION OF THE GOVERNMENT OF THE REPUBLIC
OF THE PHILIPPINES FROM JANUARY ONE TO
DECEMBER THIRTY-ONE, TWO THOUSAND, AND FOR
OTHER PURPOSES also known as General
Appropriations Act (GAA) for the Year 2000. It
provides under the heading ALLOCATIONS TO LOCAL
GOVERNMENT UNITS that the IRA for local
government units shall amount to P111,778,000,000.
In another part of the GAA, under the heading
UNPROGRAMMED FUND, it is provided that an
amount of P10,000,000,000 (P10 Billion), apart from
the P111,778,000,000 mentioned above, shall be used
to fund the IRA, which amount shall be released only
when the original revenue targets submitted by the
President to Congress can be realized based on a
quarterly assessment to be conducted by certain
committees which the GAA specifies, namely, the
Development Budget Coordinating Committee, the
Committee on Finance of the Senate, and the
Committee on Appropriations of the House of
Representatives.
Thus, while the GAA appropriates P111,778,000,000
of IRA as Programmed Fund, it appropriates a
separate amount of P10 Billion of IRA under the
classification of Unprogrammed Fund, the latter
amount to be released only upon the occurrence of
the condition stated in the GAA.
On August 22, 2000, a number of NGOs and POs,
along with 3 barangay officials filed with this Court
the petition at bar, for Certiorari, Prohibition and
Mandamus With Application for Temporary
Restraining Order, against respondents then Executive
Secretary Ronaldo Zamora, then Secretary of the
Department of Budget and Management Benjamin
Diokno, then National Treasurer Leonor Magtolis-
Briones, and the Commission on Audit, challenging
the constitutionality of provision XXXVII
(ALLOCATIONS TO LOCAL GOVERNMENT UNITS)
referred to by petitioners as Section 1, XXXVII (A), and
LIV (UNPROGRAMMED FUND) Special Provisions 1
and 4 of the GAA (the GAA provisions)
Petitioners contend that the said provisions violates
the LGUs autonomy by unlawfully reducing the IRA
allotted by 10B and by withholding its release by
placing the same under Unprogrammed funds.
Although the effectivity of the Year 2000 GAA has
ceased, this Court shall nonetheless proceed to
resolve the issues raised in the present case, it being
impressed with public interest. Petitioners argue that
the GAA violated the constitutional mandate of
automatically releasing the IRAs when it made its
release contingent on whether revenue collections
could meet the revenue targets originally submitted
by the President, rather than making the release
automatic.
ISSUE: WON the subject GAA violates LGUs fiscal
autonomy by not automatically releasing the whole
amount of the allotted IRA.
HELD:
Article X, Section 6 of the Constitution provides:
SECTION 6. Local government units shall have a just
share, as determined by law, in the national taxes
which shall be automatically released to them.
Petitioners argue that the GAA violated this
constitutional mandate when it made the release of
IRA contingent on whether revenue collections could
meet the revenue targets originally submitted by the
President, rather than making the release automatic.
Respondents counterargue that the above
constitutional provision is addressed not to the
legislature but to the executive, hence, the same does
not prevent the legislature from imposing conditions
upon the release of the IRA.
Respondents thus infer that the subject constitutional
provision merely prevents the executive branch of the
government from unilaterally withholding the IRA,
but not the legislature from authorizing the executive
branch to withhold the same. In the words of
respondents, This essentially means that the
President or any member of the Executive
Department cannot unilaterally, i.e., without the
backing of statute, withhold the release of the IRA.
As the Constitution lays upon the executive the duty
to automatically release the just share of local
governments in the national taxes, so it enjoins the
legislature not to pass laws that might prevent the
executive from performing this duty. To hold that the
executive branch may disregard constitutional
provisions which define its duties, provided it has the
backing of statute, is virtually to make the
Constitution amendable by statute a proposition
which is patently absurd. If indeed the framers
intended to allow the enactment of statutes making
the release of IRA conditional instead of automatic,
then Article X, Section 6 of the Constitution would
have been worded differently.
Since, under Article X, Section 6 of the Constitution,
only the just share of local governments is qualified by
the words as determined by law, and not the
release thereof, the plain implication is that Congress
is not authorized by the Constitution to hinder or
impede the automatic release of the IRA.
In another case, the Court held that the only possible
exception to mandatory automatic release of the IRA
is, as held in Batangas:
if the national internal revenue collections for the
current fiscal year is less than 40 percent of the
collections of the preceding third fiscal year, in which
case what should be automatically released shall be a
proportionate amount of the collections for the
current fiscal year. The adjustment may even be made
on a quarterly basis depending on the actual
collections of national internal revenue taxes for the
quarter of the current fiscal year.
This Court recognizes that the passage of the GAA
provisions by Congress was motivated by the laudable
intent to lower the budget deficit in line with
prudent fiscal management. The pronouncement in
Pimentel, however, must be echoed: [T]he rule of
law requires that even the best intentions must be
carried out within the parameters of the Constitution
and the law. Verily, laudable purposes must be carried
out by legal methods.
WHEREFORE, the petition is GRANTED. XXXVII and LIV
Special Provisions 1 and 4 of the Year 2000 GAA are
hereby declared unconstitutional insofar as they set
apart a portion of the IRA, in the amount of P10
Billion, as part of the UNPROGRAMMED FUND.
VILLANUEVA V OPLE
FACTS: Petitioners alleged that the annual budget for
Fiscal Year (FY) 2003 of the Municipality of Hagonoy
had been submitted by Mayor Ople -- through Vice-
Mayor Contreras -- to the Sangguniang Bayan of
Hagonoy, only on June 11, 2003, instead of on
October 16 of the preceding year, as mandated by
Section 318, paragraph 2 of Book II, Title V, Chapter III
of the LGC. They added that Vice-Mayor Contreras
had failed to refer the budget to the chief legal
counsel of the municipality; and that, together with
the other incumbent members of the Sangguniang
Bayan, she had instead sought the approval of the
alleged Illegal Annual Budget for 2003
Respondents filed their respective Counter-Affidavits,
both dated February 27, 2004, and practically
identical in form and substance.[15] They stated that
the proposed budget had actually been submitted on
June 26, 2003, and not June 11, 2003. It was
submitted only on that date, because Commission on
Audit (COA) Circular No. 2002-2003, otherwise known
as the New Government Accounting System, had
mandated the revision of accounting procedures.[16]
In compliance with that Circular, the municipality had
to review and modify almost all of its financial
transactions beginning January 1, 2002.
ISSUE: Whether or not the admitted flagrant
violation of Respondent Mayor Felix V. Ople of Section
318, LGC, aided and abetted by co-respondent Vice
Mayor Josefina R. Contreras, has been and can be
validated by Section 323 of the LGC.
HELD: The Petition is bereft of merit.
RATIO: First, the mere failure of the local government
to enact a budget did not make all its disbursements
illegal. Section 323 of the LGC provides for the
automatic reenactment of the budget of the
preceding year, in case the Sanggunian fails to enact
one within the first 90 days of the fiscal year. Hence,
the contention in the present case that money was
paid out of the local treasury without any valid
appropriation must necessarily fail.
Second, Section 323 states that only the annual
appropriations for salaries and wages, statutory and
contractual obligations, and essential operating
expenses are deemed reenacted. Petitioner failed to
identify disbursements that had gone beyond this
coverage.
Third, petitioners failed to substantiate their
allegations that the government had suffered undue
injury. They concluded that there had been undue
injury simply on the basis of their unsubstantiated
claims of illegal disbursements. Having failed to prove
any unlawful expenditure, the claim of undue injury
must necessarily fail.
Fourth, petitioners relied solely on Section 318 of the
LGC, which allegedly exposed the mayor to criminal
liability for delay in submitting a budget proposal.
Under the above LGC provision, criminal liability for
delay in submitting the budget is qualified by various
circumstances. For instance, the mayor must first
receive the necessary financial documents from other
city officials in order to be able to prepare the budget.
In addition, criminal liability must conform to the
provisions of the LGC and other applicable laws.
Noteworthy is the fact that petitioners failed to
present evidence that would fulfill these qualifications
stated in the law.
ALBON V FERNANDO
FACTS: City of Marikina undertook a public works
project to widen, clear and repair the existing
sidewalks of Marikina Greenheights Subdivision. It
was undertaken by the city government pursuant to
Ordinance No. 59, s. 1993[3] like other infrastructure
projects relating to roads, streets and sidewalks
previously undertaken by the city.
ISSUE: May a local government unit (LGU) validly use
public funds to undertake the widening, repair and
improvement of the sidewalks of a privately-owned
subdivision?
HELD:
RATIO: Like all LGUs, the City of Marikina is
empowered to enact ordinances for the purposes set
forth in the Local Government Code (RA 7160). It is
expressly vested with police powers delegated to
LGUs under the general welfare clause of RA 7160.[8]
With this power, LGUs may prescribe reasonable
regulations to protect the lives, health, and property
of their constituents and maintain peace and order
within their respective territorial jurisdictions.[9]
Cities and municipalities also have the power to
exercise such powers and discharge such functions
and responsibilities as may be necessary, appropriate
or incidental to efficient and effective provisions of
the basic services and facilities, including
infrastructure facilities intended primarily to service
the needs of their residents and which are financed by
their own funds.[10] These infrastructure facilities
include municipal or city roads and bridges and similar
facilities
There is no question about the public nature and use
of the sidewalks in the Marikina Greenheights
Subdivision. One of the whereas clauses of PD
1216[12] (which amended PD 957[13]) declares that
open spaces,[14] roads, alleys and sidewalks in a
residential subdivision are for public use and beyond
the commerce of man. In conjunction herewith, PD
957, as amended by PD 1216, mandates subdivision
owners to set aside open spaces which shall be
devoted exclusively for the use of the general public.
Thus, the trial and appellate courts were correct in
upholding the validity of Ordinance No. 59, s. 1993. It
was enacted in the exercise of the City of Marikinas
police powers to regulate the use of sidewalks.
Ownership of the sidewalks in a private subdivision
belongs to the subdivision owner/developer until it is
either transferred to the government by way of
donation or acquired by the government through
expropriation.
Section 335 of RA 7160 is clear and specific that no
public money or property shall be appropriated or
applied for private purposes. This is in consonance
with the fundamental principle in local fiscal
administration that local government funds and
monies shall be spent solely for public purposes.
In Pascual v. Secretary of Public Works,[26] the Court
laid down the test of validity of a public expenditure:
it is the essential character of the direct object of the
expenditure which must determine its validity and not
the magnitude of the interests to be affected nor the
degree to which the general advantage of the
community, and thus the public welfare, may be
ultimately benefited by their promotion.[27]
Incidental advantage to the public or to the State
resulting from the promotion of private interests and
the prosperity of private enterprises or business does
not justify their aid by the use of public money.
Therefore, the use of LGU funds for the widening and
improvement of privately-owned sidewalks is
unlawful as it directly contravenes Section 335 of RA
7160. This conclusion finds further support from the
language of Section 17 of RA 7160 which mandates
LGUs to efficiently and effectively provide basic
services and facilities. The law speaks of infrastructure
facilities intended primarily to service the needs of the
residents of the LGU and which are funded out of
municipal funds.[32] It particularly refers to municipal
roads and bridges and similar facilities.
ALTRES VS EMPLEO
FACTS
Iligan Mayor Quijano advised CSC of its variou career
positions in the city government, of which the latter
proceeded its publication. Petitioners and other
applicants submitted their applications for the
different positions where they felt qualified. Toward
the end of his term, Mayor Quijano issued
appointments to petitioners. In the meantime, the
Sangguniang Panglungsod issued requesting a
suspension of action on the processing of
appointments to all vacant positions until the
enactment of a new budget and another resolution
holding transmission of all appointments. Respondent
city accountant Empleo did not issue a certification as
to availability of funds for the payment of salaries and
wages of petitioners, as required in the LGU
appointment. The CSC Field Office for Lanao del Norte
and Iligan City disapproved the appointments issued
to petitioners invariably due to lack of certification of
availability of funds. Mayor Quijano appealed to CSC
but later dismissed due to lacks a requirement
prescribed by the civil service law, rules and
regulations, it would disapprove it without delving
into the reasons why the requirement was not
complied with.
RTC: denied petitioners petition for mandamus.
Petitioners: filed a motion for reconsideration and is
subsequently denied as well.
SC: The Court, without giving due course to the
petition, required respondents to comment thereon
within ten (10) days from notice, and at the same time
required petitioners to comply, within the same
period, with the relevant provisions of the 1997 Rules
of Civil Procedure.
Petitioners filed a Compliance Report as required.
Respondents: duly filed their Comment, alleging
technical flaws in petitioners petition, to which
Comment petitioners filed their Reply in compliance
with the Courts Resolution. Respondents assail as
defective the verification and certification against
forum shopping attached to the petition as it bears
the signature of only 11 out of the 59 petitioners, and
no competent evidence of identity was presented by
the signing petitioners. They thus move for the
dismissal of the petition
Petitioners, on the other hand, argue that they have a
justifiable cause for their inability to obtain the
signatures of the other petitioners as they could no
longer be contacted or are no longer interested in
pursuing the case.
ISSUE: Whether or not there is a defect in the
verifcation and certification against forum shopping.
HELD:
SC: GRANTED
COURT RATIONALE ON THE ABOVE CASE No.
Court held that in the present case, the signing of the
verification by only 11 out of the 59 petitioners
already sufficiently assures the Court that the
allegations in the pleading are true and correct and
not the product of the imagination or a matter of
speculation; that the pleading is filed in good faith;A
and that the signatories are unquestionably real
parties-in-interest who undoubtedly have sufficient
knowledge and belief to swear to the truth of the
allegations in the petition. Under justifiable
circumstances, we have already allowed the
relaxation of the requirements of verification and
certification so that the ends of justice may be better
served. Verification is simply intended to secure an
assurance that the allegations in the pleading are true
and correct and not the product of the imagination or
a matter of speculation, and that the pleading is filed
in good faith; while the purpose of the aforesaid
certification is to prohibit and penalize the evils of
forum shopping. On the requirement of a certification
of non-forum shopping, the well-settled rule is that all
the petitioners must sign the certification of non-
forum shopping. The reason for this is that the
persons who have signed the certification cannot be
presumed to have the personal knowledge of the
other non-signing petitioners with respect to the filing
or non-filing of any action or claim the same as or
similar to the current petition. The rule, however,
admits of an exception and that is when the
petitioners show reasonable cause for failure to
personally sign the certification. The petitioners must
be able to convince the court that the outright
dismissal of the petition would defeat the
administration of justice. Distinction between non-
com pliance with the requirement on or submission
of defective verification, and non-compliance with the
requirement on or submission of defective
certification against forum shopping.
1) A distinction must be made between non-
compliance with the requirement on or submission of
defective verification, and non-compliance with the
requirement on or submission of defective
certification against forum shopping. 2) As to
verification, non-compliance therewith or a defect
therein does not necessarily render the pleading
fatally defective. The court may order its submission
or correction or act on the pleading if the attending
circumstances are such that strict compliance with the
Rule may be dispensed with in order that the ends of
justice may be served thereby.
3) Verification is deemed substantially complied with
when one who has ample knowledge to swear to the
truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in the
petition have been made in good faith or are true and
correct. 4) As to certification against forum shopping,
non-compliance therewith or a defect therein, unlike
in verification, is generally not curable by its
subsequent submission or correction thereof, unless
there is a need to relax the Rule on the ground of
substantial compliance or presence of special
circumstances or compelling reasons.
5) The certification against forum shopping must be
signed by all the plaintiffs or petitioners in a case;
otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or
petitioners share a common interest and invoke a
common cause of action or defense, the signature of
only one of them in the certification against forum
shopping substantially complies with the Rule. 6)
Finally, the certification against forum shopping must
be executed by the party-pleader, not by his counsel.
If, however, for reasonable or justifiable reasons, the
party-pleader is unable to sign, he must execute a
Special Power of Attorney designating his counsel of
record to sign on his behalf.
FACTS: Sometime in July 2003, Mayor Quijano sent
notices of numerous vacant career positions in the
city government to the CSC. The city government and
the CSC thereupon proceeded to publicly announce
the existence of the vacant positions. Petitioners and
other applicants submitted their applications for the
different positions where they felt qualified.
Toward the end of his term or on May 27, June 1, and
June 24, 2004, Mayor Quijano issued appointments to
petitioners.
In the meantime, the Sangguniang Panglungsod
issued Resolution No. 04-242[3] addressed to the CSC
Iligan City Field Office requesting a suspension of
action on the processing of appointments to all vacant
positions in the plantilla of the city government as of
March 19, 2004 until the enactment of a new budget.
Respondent city accountant Empleo did not thus issue
a certification as to availability of funds for the
payment of salaries and wages of petitioners, as
required by Section 1(e)(ii), Rule V of CSC
Memorandum Circular No. 40, Series of 1998 reading:
xxxx
e. LGU Appointment. Appointment in local
government units for submission to the Commission
shall be accompanied, in addition to the common
requirements, by the following:
xxxx
ii. Certification by the Municipal/City Provincial
Accountant/Budget Officer that funds are available.
(Emphasis and underscoring supplied)
And the other respondents did not sign petitioners
position description forms.
The CSC Field Office for Lanao del Norte and Iligan City
disapproved the appointments issued to petitioners
invariably due to lack of certification of availability of
funds.
ISSUE: whether it is Section 474(b)(4) or Section 344
of the Local Government Code of 1991 which applies
to the requirement of certification of availability of
funds under Section 1(e)(ii), Rule V of CSC
Memorandum Circular Number 40, Series of 1998.
HELD:
RATIO: Section 344 of the Local Government Code of
1991 thus applies only when there is already an
obligation to pay on the part of the local government
unit, precisely because vouchers are issued only when
services have been performed or expenses incurred.
The requirement of certification of availability of
funds from the city treasurer under Section 344 of the
Local Government Code of 1991 is for the purpose of
facilitating the approval of vouchers issued for the
payment of services already rendered to, and
expenses incurred by, the local government unit.
The trial court thus erred in relying on Section 344 of
the Local Government Code of 1991 in ruling that the
ministerial function to issue a certification as to
availability of funds for the payment of the wages and
salaries of petitioners pertains to the city treasurer.
For at the time material to the required issuance of
the certification, the appointments issued to
petitioners were not yet approved by the CSC, hence,
there were yet no services performed to speak of. In
other words, there was yet no due and demandable
obligation of the local government to petitioners.
Section 474, subparagraph (b)(4) of the Local
Government Code of 1991, on the other hand,
requires the city accountant to certify to the
availability of budgetary allotment to which
expenditures and obligations may be properly
charged.[44] By necessary implication, it includes the
duty to certify to the availability of funds for the
payment of salaries and wages of appointees to
positions in the plantilla of the local government unit,
as required under Section 1(e)(ii), Rule V of CSC
Memorandum Circular Number 40, Series of 1998, a
requirement before the CSC considers the approval of
the appointments.
In fine, whenever a certification as to availability of
funds is required for purposes other than actual
payment of an obligation which requires
disbursement of money, Section 474(b)(4) of the Local
Government Code of 1991 applies, and it is the
ministerial duty of the city accountant to issue the
certification.
PEPSI-COLA VS CITY OF BUTUAN
Facts: Ordinance 110 was enacted by the City of
Butuan imposing a tax of P0.10 per case of 24 bottles
of softdrinks or carbonated drinks. The tax was
imposed upon dealers engeged in selling softdrinks or
carbonated drinks. When Ordinance 110, the tax was
imposed upon an agent or consignee of any person,
association, partnership, company or corporation
engaged in selling softdrinks or carbonated drinks,
with agent or consignee being particularly defined
on the inserted provision Section 3-A. In effect,
merchants engaged in the sale of softdrinks, etc. are
not subject to the tax unless they are agents or
consignees of another dealer who must be one
engaged in business outside the City. Pepsi-Cola
Bottling Co. filed suit to recover sums paid by it to the
city pursuant to the Ordinance, which it claims to be
null and void.
Issue: Whether the Ordinance is discriminatory.
Held: The Ordinance, as amended, is discriminatory
since only sales by agents or consignees of outside
dealers would be subject to the tax. Sales by local
dealers, not acting for or on behalf of other
merchants, regardless of the volume of their sales ,
and even if the same exceeded those made by said
agents or consignees of producers or merchants
established outside the city, would be exempt from
the tax. The classification made in the exercise of the
authority to tax, to be valid must be reasonable,
which would be satisfied if the classification is based
upon substantial distinctions which makes real
differences; these are germane to the purpose of
legislation or ordinance; the classification applies not
only to present conditions but also to future
conditions substantially identical to those of the
present; and the classification applies equally to all
those who belong to the same class. These conditions
are not fully met by the ordinance in question.
PEPSI-COLA V CITY OF BUTUAN
FACTS: That Ordinance No. 110 as amended, imposes
a tax on any person, association, etc., of P0.10 per
case of 24 bottles of Pepsi-Cola and the plaintiff paid
under protest the amount of P4,926.63 from August
16 to December 31, 1960 and the amount of
P9,250.40 from January 1 to July 30, 1961.
ISSUE: Plaintiff maintains that the disputed ordinance
is null and void because: (1) it partakes of the nature
of an import tax; (2) it amounts to double taxation; (3)
it is excessive, oppressive and confiscatory; (4) it is
highly unjust and discriminatory; and (5) section 2 of
Republic Act No. 2264, upon the authority of which it
was enacted, is an unconstitutional delegation of
legislative powers.
HELD:
RATIO: (2) it amounts to double taxation (5) section 2
of Republic Act No. 2264, upon the authority of which
it was enacted, is an unconstitutional delegation of
legislative powers.
Then, again, the general principle against delegation
of legislative powers, in consequence of the theory of
separation of powers2 is subject to one well-
established exception, namely: legislative powers
may be delegated to local governments to which
said theory does not apply3 in respect of matters
of local concern.
(3) it is excessive, oppressive and confiscatory
The tax of "P0.10 per case of 24 bottles," of soft drinks
or carbonated drinks in the production and sale of
which plaintiff is engaged or less than P0.0042 per
bottle, is manifestly too small to be excessive,
oppressive, or confiscatory.
(1) it partakes of the nature of an import tax; (4) it is
highly unjust and discriminatory;
The first and the fourth objections merit, however,
serious consideration. In this connection, it is
noteworthy that the tax prescribed in section 3 of
Ordinance No. 110, as originally approved, was
imposed upon dealers "engaged in selling" soft drinks
or carbonated drinks. Thus, it would seem that the
intent was then to levy a tax upon the sale of said
merchandise. As amended by Ordinance No. 122, the
tax is, however, imposed only upon "any agent and/or
consignee of any person, association, partnership,
company or corporation engaged in selling ... soft
drinks or carbonated drinks." And, pursuant to section
3-A, which was inserted by said Ordinance No. 122:
... Definition of the Term Consignee or Agent.
For purposes of this Ordinance, a consignee of agent
shall mean any person, association, partnership,
company or corporation who acts in the place of
another by authority from him or one entrusted with
the business of another or to whom is consigned or
shipped no less than 1,000 cases of hard liquors or
soft drinks every month for resale, either retail or
wholesale.
As a consequence, merchants engaged in the sale of
soft drink or carbonated drinks, are not subject to the
tax, unless they are agents and/or consignees of
another dealer, who, in the very nature of things,
must be one engaged in business outside the City.
Besides, the tax would not be applicable to such agent
and/or consignee, if less than 1,000 cases of soft
drinks are consigned or shipped to him every month.
When we consider, also, that the tax "shall be based
and computed from the cargo manifest or bill of
lading ... showing the number of cases" not sold
but "received" by the taxpayer, the intention to limit
the application of the ordinance to soft drinks and
carbonated drinks brought into the City from outside
thereof becomes apparent. Viewed from this angle,
the tax partakes of the nature of an import duty,
which is beyond defendant's authority to impose by
express provision of law.
PHILIPPINE PETROLEUM CORPORATION V PILILLA
FACTS: Philippine Petroleum Corporation (PPC for
short) is a business enterprise engaged in the
manufacture of lubricated oil
Under Section 142 of the National Internal Revenue
Code of 1939, manufactured oils and other fuels are
subject to specific tax.
On June 28, 1973, Presidential Decree No. 231,
otherwise known as the Local Tax Code was issued by
former President Ferdinand E. Marcos governing the
exercise by provinces, cities, municipalities and
barrios of their taxing and other revenue-raising
powers. Sections 19 and 19 (a) thereof, provide
among others, that the municipality may impose taxes
on business, except on those for which fixed taxes are
provided on manufacturers, importers or producers of
any article of commerce of whatever kind or nature,
including brewers, distillers, rectifiers, repackers, and
compounders of liquors, distilled spirits and/or wines
in accordance with the schedule listed therein.
The Secretary of Finance issued Provincial Circular No.
26-73 dated December 27, 1973, directed to all
provincial, city and municipal treasurers to refrain
from collecting any local tax imposed in old or new tax
ordinances in the business of manufacturing,
wholesaling, retailing, or dealing in petroleum
products subject to the specific tax under the National
Internal Revenue Code (Rollo, p. 76).
Likewise, Provincial Circular No. 26 A-73 dated
January 9, 1973 was issued by the Secretary of
Finance instructing all City Treasurers to refrain from
collecting any local tax imposed in tax ordinances
enacted before or after the effectivity of the Local Tax
Code on July 1, 1973, on the businesses of
manufacturing, wholesaling, retailing, or dealing in,
petroleum products subject to the specific tax under
the National Internal Revenue Code (Rollo, p. 79).
Respondent Municipality of Pililla, Rizal, through
Municipal Council Resolution No. 25, S-1974 enacted
Municipal Tax Ordinance No. 1, S-1974 otherwise
known as "The Pililla Tax Code of 1974" on June 14,
1974, which took effect on July 1, 1974 (Rollo, pp.
181-182). Sections 9 and 10 of the said ordinance
imposed a tax on business, except for those for which
fixed taxes are provided in the Local Tax Code on
manufacturers, importers, or producers of any article
of commerce of whatever kind or nature, including
brewers, distillers, rectifiers, repackers, and
compounders of liquors, distilled spirits and/or wines
in accordance with the schedule found in the Local
Tax Code, as well as mayor's permit, sanitary
inspection fee and storage permit fee for flammable,
combustible or explosive substances (Rollo, pp. 183-
187), while Section 139 of the disputed ordinance
imposed surcharges and interests on unpaid taxes,
fees or charges (Ibid., p. 193).
On June 3, 1977, P.D. 1158 otherwise known as the
National Internal Revenue Code of 1977 was enacted,
Section 153 of which specifically imposes specific tax
on refined and manufactured mineral oils and motor
fuels.
ISSUE: whether or not petitioner PPC whose oil
products are subject to specific tax under the NIRC, is
still liable to pay (a) tax on business and (b) storage
fees, considering Provincial Circular No. 6-77; and
mayor's permit and sanitary inspection fee unto the
respondent Municipality of Pililla, Rizal, based on
Municipal Ordinance No. 1.
HELD:
RATIO: There is no question that Pililla's Municipal Tax
Ordinance No. 1 imposing the assailed taxes, fees and
charges is valid especially Section 9 (A) which
according to the trial court "was lifted in toto and/or
is a literal reproduction of Section 19 (a) of the Local
Tax Code as amended by P.D. No. 426." It conforms
with the mandate of said law.
But P.D. No. 426 amending the Local Tax Code is
deemed to have repealed Provincial Circular Nos. 26-
73 and 26 A-73 issued by the Secretary of Finance
when Sections 19 and 19 (a), were carried over into
P.D. No. 426 and no exemptions were given to
manufacturers, wholesalers, retailers, or dealers in
petroleum products.
Necessarily, there could not be any other logical
conclusion than that the framers of P.D. No. 426 really
and actually intended to terminate the effectivity
and/or enforceability of Provincial Circulars Nos. 26-
73 and 26 A-73 inasmuch as clearly these circulars are
in contravention with Sec. 19 (a) of P.D. 426-the
amendatory law to P.D. No. 231. That intention to
terminate is very apparent and in fact it is expressed
in clear and unequivocal terms in the effectivity and
repealing clause of P.D. 426 . . .
Furthermore, while Section 2 of P.D. 436 prohibits the
imposition of local taxes on petroleum products, said
decree did not amend Sections 19 and 19 (a) of P.D.
231 as amended by P.D. 426, wherein the municipality
is granted the right to levy taxes on business of
manufacturers, importers, producers of any article of
commerce of whatever kind or nature. A tax on
business is distinct from a tax on the article itself
The exercise by local governments of the power to tax
is ordained by the present Constitution.1wphi1 To
allow the continuous effectivity of the prohibition set
forth in PC No. 26-73 (1) would be tantamount to
restricting their power to tax by mere administrative
issuances. Under Section 5, Article X of the 1987
Constitution, only guidelines and limitations that may
be established by Congress can define and limit such
power of local governments. Thus:
Each local government unit shall have the power to
create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent
with the basic policy of local autonomy . ..
BASCO VS PAGCOR
FACTS:
PAGCOR is a GOCC which operates and regulates
gambling casinos. Its charter excludes PAGCOR from
paying all kinds of taxes except for 5% franchise tax.
ISSUE:
WON the PAGCOR is excluded by its charter from local
fees and taxes of Manila.
HELD:
YES. Power is an instrumentality of the national
government with its regulatory power over gambling
casinos and therefore is exempt from tax.
SC: AGENCIES AND INSTRUMENTALITIES of the
national government are exempt from local taxes.
LGUs have no power TO TAX AGENCIES AND
INSTRUMENTALITIES OF THE NATIONAL
GOVERNMENT. LGUs have no inherent power to tax
instrumentalities of the national government.
Otherwise the operation of the instrumentalities are
impeded or subjected to the control of the local
government. This doctrine emanates from the
supremacy of the national government over the LGUs.
BASCO V PAGCOR
FACTS: The Philippine Amusements and Gaming
Corporation (PAGCOR) was created by virtue of P.D.
1067-A dated January 1, 1977 and was granted a
franchise under P.D. 1067-B also dated January 1,
1977 "to establish, operate and maintain gambling
casinos on land or water within the territorial
jurisdiction of the Philippines."
Subsequently, on July 11, 1983, PAGCOR was created
under P.D. 1869 to enable the Government to
regulate and centralize all games of chance authorized
by existing franchise or permitted by law, under the
following declared policy
(a) To centralize and integrate the right and
authority to operate and conduct games of chance
into one corporate entity to be controlled,
administered and supervised by the Government.
ISSUE: Whether or no PAGCOR should be taxed
HELD: no
RATIO: Their contention stated hereinabove is
without merit for the following reasons:
(a) The City of Manila, being a mere Municipal
corporation has no inherent right to impose taxes
(Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v.
Villanueva, 105 Phil. 337; Santos v. Municipality of
Caloocan, 7 SCRA 643). Thus, "the Charter or statute
must plainly show an intent to confer that power or
the municipality cannot assume it" (Medina v. City of
Baguio, 12 SCRA 62). Its "power to tax" therefore
must always yield to a legislative act which is superior
having been passed upon by the state itself which has
the "inherent power to tax" (Bernas, the Revised
[1973] Philippine Constitution, Vol. 1, 1983 ed. p.
445).
(b) The Charter of the City of Manila is subject to
control by Congress. It should be stressed that
"municipal corporations are mere creatures of
Congress" (Unson v. Lacson, G.R. No. 7909, January
18, 1957) which has the power to "create and abolish
municipal corporations" due to its "general legislative
powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo
v. Orandia, 5 SCRA 541). Congress, therefore, has the
power of control over Local governments (Hebron v.
Reyes, G.R. No. 9124, July 2, 1950). And if Congress
can grant the City of Manila the power to tax certain
matters, it can also provide for exemptions or even
take back the power.
(c) The City of Manila's power to impose license
fees on gambling, has long been revoked. As early as
1975, the power of local governments to regulate
gambling thru the grant of "franchise, licenses or
permits" was withdrawn by P.D. No. 771 and was
vested exclusively on the National Government
Therefore, only the National Government has the
power to issue "licenses or permits" for the operation
of gambling. Necessarily, the power to demand or
collect license fees which is a consequence of the
issuance of "licenses or permits" is no longer vested in
the City of Manila.
(d) Local governments have no power to tax
instrumentalities of the National Government.
PAGCOR is a government owned or controlled
corporation with an original charter, PD 1869. All of its
shares of stocks are owned by the National
Government.
PAGCOR has a dual role, to operate and to regulate
gambling casinos. The latter role is governmental,
which places it in the category of an agency or
instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should
be and actually is exempt from local taxes. Otherwise,
its operation might be burdened, impeded or
subjected to control by a mere Local government.
The states have no power by taxation or otherwise, to
retard, impede, burden or in any manner control the
operation of constitutional laws enacted by Congress
to carry into execution the powers vested in the
federal government.
Otherwise, mere creatures of the State can defeat
National policies thru extermination of what local
authorities may perceive to be undesirable activities
or enterprise using the power to tax as "a tool for
regulation"
The power of local government to "impose taxes and
fees" is always subject to "limitations" which Congress
may provide by law.
In the absence of express grant of power to enact,
ordinance provisions on this subject which are
inconsistent with the state laws are void.
NAPOCOR V CITY OF CABANATUAN
FACTS: Petitioner, whose capital stock was subscribed
and paid wholly by the Philippine Government,10
refused to pay the tax assessment. It argued that the
respondent has no authority to impose tax on
government entities. Petitioner also contended that
as a non-profit organization, it is exempted from the
payment of all forms of taxes, charges, duties or
fees11 in accordance with sec. 13 of Rep. Act No.
6395, as amended,
ISSUE: Whether or not the City of Cabanatuan cannot
impose tax on NAPOCOR
HELD:
RATIO: nothing prevents Congress from decreeing
that even instrumentalities or agencies of the
government performing governmental functions may
be subject to tax.46 In enacting the LGC, Congress
exercised its prerogative to tax instrumentalities and
agencies of government as it sees fit.
"Thus, reading together sections 133, 232, and 234 of
the LGC, we conclude that as a general rule, as laid
down in section 133, the taxing power of local
governments 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 the item
(a) of the first paragraph of section 12.'"
In the case at bar, section 151 in relation to section
137 of the LGC clearly authorizes the respondent city
government to impose on the petitioner the franchise
tax in question.
In its general signification, a franchise is a privilege
conferred by government authority, which does not
belong to citizens of the country generally as a matter
of common right.48 In its specific sense, a franchise
may refer to a general or primary franchise, or to a
special or secondary franchise. The former relates to
the right to exist as a corporation, by virtue of duly
approved articles of incorporation, or a charter
pursuant to a special law creating the corporation
On the other hand, the latter refers to the right or
privileges conferred upon an existing corporation such
as the right to use the streets of a municipality to lay
pipes of tracks, erect poles or string wires.
a franchise tax is "a tax on the privilege of transacting
business in the state and exercising corporate
franchises granted by the state."53 It is not levied on
the corporation simply for existing as a corporation,
upon its property54 or its income,55 but on its
exercise of the rights or privileges granted to it by the
government. Hence, a corporation need not pay
franchise tax from the time it ceased to do business
and exercise its franchise.56 It is within this context
that the phrase "tax on businesses enjoying a
franchise" in section 137 of the LGC should be
interpreted and understood. Verily, to determine
whether the petitioner is covered by the franchise tax
in question, the following requisites should concur: (1)
that petitioner has a "franchise" in the sense of a
secondary or special franchise; and (2) that it is
exercising its rights or privileges under this franchise
within the territory of the respondent city
government.
These contentions must necessarily fail.
To stress, a franchise tax is imposed based not on the
ownership but on the exercise by the corporation of a
privilege to do business. The taxable entity is the
corporation which exercises the franchise, and not the
individual stockholders.
To be sure, the ownership by the National
Government of its entire capital stock does not
necessarily imply that petitioner is not engaged in
business.
proprietary functions are those that are undertaken
only by way of advancing the general interest of
society, and are merely optional on the government
Certainly, these activities do not partake of the
sovereign functions of the government. They are
purely private and commercial undertakings, albeit
imbued with public interest.
NATIONAL POWER CORPORATION, petitioner,
vs.
CITY OF CABANATUAN, respondent.
FACTS: Petitioner is a government-owned and
controlled corporation created under Commonwealth
Act No. 120, as amended.
For many years now, petitioner sells electric power to
the residents of Cabanatuan City, posting a gross
income of P107,814,187.96 in 1992.7 Pursuant to
section 37 of Ordinance No. 165-92,8 the respondent
assessed the petitioner a franchise tax amounting to
P808,606.41, representing 75% of 1% of the latters
gross receipts for the preceding year.
Petitioner refused to pay the tax assessment arguing
that the respondent has no authority to impose tax on
government entities. Petitioner also contended that
as a non-profit organization, it is exempted from the
payment of all forms of taxes, charges, duties or fees
in accordance with sec. 13 of Rep. Act No. 6395, as
amended.
The respondent filed a collection suit in the RTC,
demanding that petitioner pay the assessed tax due,
plus surcharge. Respondent alleged that petitioners
exemption from local taxes has been repealed by
section 193 of the LGC, which reads as follows:
Sec. 193. Withdrawal of Tax Exemption Privileges.-
Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical,
including government owned or controlled
corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938,
non-stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the
effectivity of this Code.
RTC upheld NPCs tax exemption. On appeal the CA
reversed the trial courts Order on the ground that
section 193, in relation to sections 137 and 151 of the
LGC, expressly withdrew the exemptions granted to
the petitioner.
ISSUE: W/N the respondent city government has the
authority to issue Ordinance No. 165-92 and impose
an annual tax on businesses enjoying a franchise
HELD: YES. Taxes are the lifeblood of the government,
for without taxes, the government can neither exist
nor endure. A principal attribute of sovereignty, the
exercise of taxing power derives its source from the
very existence of the state whose social contract with
its citizens obliges it to promote public interest and
common good. The theory behind the exercise of the
power to tax emanates from necessity;32 without
taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the
people.
Section 137 of the LGC clearly states that the LGUs
can impose franchise tax notwithstanding any
exemption granted by any law or other special law.
This particular provision of the LGC does not admit
any exception. In City Government of San Pablo,
Laguna v. Reyes,74 MERALCOs exemption from the
payment of franchise taxes was brought as an issue
before this Court. The same issue was involved in the
subsequent case of Manila Electric Company v.
Province of Laguna.75 Ruling in favor of the local
government in both instances, we ruled that the
franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special
laws, viz:
It is our view that petitioners correctly rely on
provisions of Sections 137 and 193 of the LGC to
support their position that MERALCOs tax exemption
has been withdrawn. The explicit language of section
137 which authorizes the province to impose
franchise tax notwithstanding any exemption granted
by any law or other special law is all-encompassing
and clear. The franchise tax is imposable despite any
exemption enjoyed under special laws.
Section 193 buttresses the withdrawal of extant tax
exemption privileges. By stating that unless otherwise
provided in this Code, tax exemptions or incentives
granted to or presently enjoyed by all persons,
whether natural or juridical, including government-
owned or controlled corporations except (1) local
water districts, (2) cooperatives duly registered under
R.A. 6938, (3) non-stock and non-profit hospitals and
educational institutions, are withdrawn upon the
effectivity of this code, the obvious import is to limit
the exemptions to the three enumerated entities. It is
a basic precept of statutory construction that the
express mention of one person, thing, act, or
consequence excludes all others as expressed in the
familiar maxim expressio unius est exclusio alterius. In
the absence of any provision of the Code to the
contrary, and we find no other provision in point, any
existing tax exemption or incentive enjoyed by
MERALCO under existing law was clearly intended to
be withdrawn.
Reading together sections 137 and 193 of the LGC, we
conclude that under the LGC the local government unit
may now impose a local tax at a rate not exceeding
50% of 1% of the gross annual receipts for the
preceding calendar based on the incoming receipts
realized within its territorial jurisdiction. The
legislative purpose to withdraw tax privileges enjoyed
under existing law or charter is clearly manifested by
the language used on (sic) Sections 137 and 193
categorically withdrawing such exemption subject
only to the exceptions enumerated. Since it would be
not only tedious and impractical to attempt to
enumerate all the existing statutes providing for
special tax exemptions or privileges, the LGC provided
for an express, albeit general, withdrawal of such
exemptions or privileges. No more unequivocal
language could have been used.76 (emphases
supplied)
Doubtless, the power to tax is the most effective
instrument to raise needed revenues to finance and
support myriad activities of the local government
units for the delivery of basic services essential to the
promotion of the general welfare and the
enhancement of peace, progress, and prosperity of
the people. As this Court observed in the Mactan
case, the original reasons for the withdrawal of tax
exemption privileges granted to government-owned
or controlled corporations and all other units of
government were that such privilege resulted in
serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises. With the
added burden of devolution, it is even more
imperative for government entities to share in the
requirements of development, fiscal or otherwise, by
paying taxes or other charges due from them.