(c) From all import duties, compensating taxes and advanced sales tax, and
G.R. No. 149110 April 9, 2003 wharfage fees on import of foreign goods required for its operations and
NATIONAL POWER CORPORATION, petitioner,
vs.
CITY OF CABANATUAN, respondent.
PUNO, J.:
This is a petition for review1 of the Decision2 and the Resolution3 of the Court of Appeals
dated March 12, 2001 and July 10, 2001, respectively, finding petitioner National Power
Corporation (NPC) liable to pay franchise tax to respondent City of Cabanatuan.
Petitioner is a government-owned and controlled corporation created under
Commonwealth Act No. 120, as amended.4 It is tasked to undertake the "development
of hydroelectric generations of power and the production of electricity from nuclear,
geothermal and other sources, as well as, the transmission of electric power on a
nationwide basis."5 Concomitant to its mandated duty, petitioner has, among others, the
power to construct, operate and maintain power plants, auxiliary plants, power stations
and substations for the purpose of developing hydraulic power and supplying such
power to the inhabitants.6
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 latter's gross receipts for the
preceding year.9
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, viz:
"Sec.13. Non-profit Character of the Corporation; Exemption from all Taxes,
Duties, Fees, Imposts and Other Charges by Government and Governmental
Instrumentalities.- The Corporation shall be non-profit and shall devote all its
return from its capital investment, as well as excess revenues from its
operation, for expansion. To enable the Corporation to pay its indebtedness
and obligations and in furtherance and effective implementation of the policy
enunciated in Section one of this Act, the Corporation is hereby exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges, costs and
service fees in any court or administrative proceedings in which it may be a
party, restrictions and duties to the Republic of the Philippines, its provinces,
cities, municipalities and other government agencies and instrumentalities;
(b) From all income taxes, franchise taxes and realty taxes to be paid to the
National Government, its provinces, cities, municipalities and other government
agencies and instrumentalities;
1
projects; and
(d) From all taxes, duties, fees, imposts, and all other charges imposed by the
Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by
the Corporation in the generation, transmission, utilization, and sale of electric
power."12
The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City,
demanding that petitioner pay the assessed tax due, plus a surcharge equivalent to 25%
of the amount of tax, and 2% monthly interest. 13Respondent alleged that petitioner's
exemption from local taxes has been repealed by section 193 of Rep. Act No.
7160,14 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."
On January 25, 1996, the trial court issued an Order15 dismissing the case. It ruled that
the tax exemption privileges granted to petitioner subsist despite the passage of Rep.
Act No. 7160 for the following reasons: (1) Rep. Act No. 6395 is a particular law and it
may not be repealed by Rep. Act No. 7160 which is a general law; (2) section 193 of
Rep. Act No. 7160 is in the nature of an implied repeal which is not favored; and (3)
local governments have no power to tax instrumentalities of the national government.
Pertinent portion of the Order reads:
"The question of whether a particular law has been repealed or not by a
subsequent law is a matter of legislative intent. The lawmakers may expressly
repeal a law by incorporating therein repealing provisions which expressly and
specifically cite(s) the particular law or laws, and portions thereof, that are
intended to be repealed. A declaration in a statute, usually in its repealing
clause, that a particular and specific law, identified by its number or title is
repealed is an express repeal; all others are implied repeal. Sec. 193 of R.A.
No. 7160 is an implied repealing clause because it fails to identify the act or
acts that are intended to be repealed. It is a well-settled rule of statutory
construction that repeals of statutes by implication are not favored. The
presumption is against inconsistency and repugnancy for the legislative is
presumed to know the existing laws on the subject and not to have enacted
inconsistent or conflicting statutes. It is also a well-settled rule that, generally,
general law does not repeal a special law unless it clearly appears that the
legislative has intended by the latter general act to modify or repeal the earlier
special law. Thus, despite the passage of R.A. No. 7160 from which the
questioned Ordinance No. 165-92 was based, the tax exemption privileges of
defendant NPC remain.
 Another point going against plaintiff in this case is the ruling of the Supreme exemptions or incentives granted to, or presently enjoyed by all persons,
Court in the case of Basco vs. Philippine Amusement and Gaming Corporation, whether natural or juridical, including government-owned or controlled
197 SCRA 52, where it was held that: corporations except local water districts xxx are hereby withdrawn.' The repeal
is direct and unequivocal, not implied.
'Local governments have no power to tax instrumentalities of the
National Government. PAGCOR is a government owned or controlled IN VIEW WHEREOF, the motion for reconsideration is hereby DENIED.
corporation with an original charter, PD 1869. All of its shares of
stocks are owned by the National Government. xxx Being an SO ORDERED."20
instrumentality of the government, PAGCOR should be and actually is
exempt from local taxes. Otherwise, its operation might be burdened, In this petition for review, petitioner raises the following issues:
impeded or subjected to control by mere local government.'
"A. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC,
Like PAGCOR, NPC, being a government owned and controlled corporation A PUBLIC NON-PROFIT CORPORATION, IS LIABLE TO PAY A FRANCHISE
with an original charter and its shares of stocks owned by the National TAX AS IT FAILED TO CONSIDER THAT SECTION 137 OF THE LOCAL
Government, is beyond the taxing power of the Local Government. Corollary to GOVERNMENT CODE IN RELATION TO SECTION 131 APPLIES ONLY TO
this, it should be noted here that in the NPC Charter's declaration of Policy, PRIVATE PERSONS OR CORPORATIONS ENJOYING A FRANCHISE.
Congress declared that: 'xxx (2) the total electrification of the Philippines
through the development of power from all services to meet the needs of
B. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC'S
industrial development and dispersal and needs of rural electrification are
EXEMPTION FROM ALL FORMS OF TAXES HAS BEEN REPEALED BY
primary objectives of the nations which shall be pursued coordinately and
THE PROVISION OF THE LOCAL GOVERNMENT CODE AS THE
supported by all instrumentalities and agencies of the government, including its
ENACTMENT OF A LATER LEGISLATION, WHICH IS A GENERAL LAW,
financial institutions.' (underscoring supplied). To allow plaintiff to subject
CANNOT BE CONSTRUED TO HAVE REPEALED A SPECIAL LAW.
defendant to its tax-ordinance would be to impede the avowed goal of this
government instrumentality.
C. THE COURT OF APPEALS GRAVELY ERRED IN NOT CONSIDERING
THAT AN EXERCISE OF POLICE POWER THROUGH TAX EXEMPTION
Unlike the State, a city or municipality has no inherent power of taxation. Its
SHOULD PREVAIL OVER THE LOCAL GOVERNMENT CODE."21
taxing power is limited to that which is provided for in its charter or other
statute. Any grant of taxing power is to be construed strictly, with doubts
resolved against its existence. It is beyond dispute that the respondent city government has the authority to issue
Ordinance No. 165-92 and impose an annual tax on "businesses enjoying a franchise,"
pursuant to section 151 in relation to section 137 of the LGC, viz:
From the existing law and the rulings of the Supreme Court itself, it is very
clear that the plaintiff could not impose the subject tax on the defendant."16
"Sec. 137. Franchise Tax. - Notwithstanding any exemption granted by any law
or other special law, the province may impose a tax on businesses enjoying a
On appeal, the Court of Appeals reversed the trial court's Order 17 on the ground that
franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the
section 193, in relation to sections 137 and 151 of the LGC, expressly withdrew the
gross annual receipts for the preceding calendar year based on the incoming
exemptions granted to the petitioner.18 It ordered the petitioner to pay the respondent
receipt, or realized, within its territorial jurisdiction.
city government the following: (a) the sum of P808,606.41 representing the franchise tax
due based on gross receipts for the year 1992, (b) the tax due every year thereafter
based in the gross receipts earned by NPC, (c) in all cases, to pay a surcharge of 25% In the case of a newly started business, the tax shall not exceed one-twentieth
of the tax due and unpaid, and (d) the sum of P 10,000.00 as litigation expense. 19 (1/20) of one percent (1%) of the capital investment. In the succeeding
calendar year, regardless of when the business started to operate, the tax shall
be based on the gross receipts for the preceding calendar year, or any fraction
On April 4, 2001, the petitioner filed a Motion for Reconsideration on the Court of
thereof, as provided herein." (emphasis supplied)
Appeal's Decision. This was denied by the appellate court, viz:
x x x
"The Court finds no merit in NPC's motion for reconsideration. Its arguments
reiterated therein that the taxing power of the province under Art. 137 (sic) of
the Local Government Code refers merely to private persons or corporations in Sec. 151. Scope of Taxing Powers.- Except as otherwise provided in this
which category it (NPC) does not belong, and that the LGC (RA 7160) which is Code, the city, may levy the taxes, fees, and charges which the province or
a general law may not impliedly repeal the NPC Charter which is a special municipality may impose: Provided, however, That the taxes, fees and charges
law—finds the answer in Section 193 of the LGC to the effect that 'tax levied and collected by highly urbanized and independent component cities

2
 shall accrue to them and distributed in accordance with the provisions of this
Code.
The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent (50%)
except the rates of professional and amusement taxes."
Petitioner, however, submits that it is not liable to pay an annual franchise tax to the
respondent city government. It contends that sections 137 and 151 of the LGC in
relation to section 131, limit the taxing power of the respondent city government to
private entities that are engaged in trade or occupation for profit. 22
Section 131 (m) of the LGC defines a "franchise" as "a right or privilege, affected with
public interest which is conferred upon private persons or corporations, under such
terms and conditions as the government and its political subdivisions may impose in the
interest of the public welfare, security and safety." From the phraseology of this
provision, the petitioner claims that the word "private" modifies the terms "persons" and
"corporations." Hence, when the LGC uses the term "franchise," petitioner submits that it
should refer specifically to franchises granted to private natural persons and to private
corporations.23 Ergo, its charter should not be considered a "franchise" for the purpose
of imposing the franchise tax in question.
On the other hand, section 131 (d) of the LGC defines "business" as "trade or
commercial activity regularly engaged in as means of livelihood or with a view to profit."
Petitioner claims that it is not engaged in an activity for profit, in as much as its charter
specifically provides that it is a "non-profit organization." In any case, petitioner argues
that the accumulation of profit is merely incidental to its operation; all these profits are
required by law to be channeled for expansion and improvement of its facilities and
services.24
Petitioner also alleges that it is an instrumentality of the National Government,25 and as
such, may not be taxed by the respondent city government. It cites the doctrine in Basco
vs. Philippine Amusement and Gaming Corporation26where this Court held that local
governments have no power to tax instrumentalities of the National Government, viz:
"Local governments have no power to tax instrumentalities of the National
Government.
PAGCOR has a dual role, to operate and 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. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed.
579)'
3
This doctrine emanates from the 'supremacy' of the National Government over
local governments.
'Justice Holmes, speaking for the Supreme Court, made reference to
the entire absence of power on the part of the States to touch, in that
way (taxation) at least, the instrumentalities of the United States
(Johnson v. Maryland, 254 US 51) and it can be agreed that no state
or political subdivision can regulate a federal instrumentality in such a
way as to prevent it from consummating its federal responsibilities, or
even seriously burden it from accomplishment of them.'
(Antieau, Modern Constitutional Law, Vol. 2, p. 140, italics supplied)
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 regulation' (U.S. v. Sanchez, 340
US 42).
The power to tax which was called by Justice Marshall as the 'power to destroy'
(Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality
or creation of the very entity which has the inherent power to wield it."27
Petitioner contends that section 193 of Rep. Act No. 7160, withdrawing the tax privileges
of government-owned or controlled corporations, is in the nature of an implied repeal. A
special law, its charter cannot be amended or modified impliedly by the local
government code which is a general law. Consequently, petitioner claims that its
exemption from all taxes, fees or charges under its charter subsists despite the passage
of the LGC, viz:
"It is a well-settled rule of statutory construction that repeals of statutes by
implication are not favored and as much as possible, effect must be given to all
enactments of the legislature. Moreover, it has to be conceded that the charter
of the NPC constitutes a special law. Republic Act No. 7160, is a general law. It
is a basic rule in statutory construction that the enactment of a later legislation
which is a general law cannot be construed to have repealed a special law.
Where there is a conflict between a general law and a special statute, the
special statute should prevail since it evinces the legislative intent more clearly
than the general statute."28
Finally, petitioner submits that the charter of the NPC, being a valid exercise of police
power, should prevail over the LGC. It alleges that the power of the local government to
impose franchise tax is subordinate to petitioner's exemption from taxation; "police
power being the most pervasive, the least limitable and most demanding of all powers,
including the power of taxation."29
The petition is without merit.
Taxes are the lifeblood of the government,30 for without taxes, the government can
neither exist nor endure. A principal attribute of sovereignty,31 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.
In recent years, the increasing social challenges of the times expanded the scope of
state activity, and taxation has become a tool to realize social justice and the equitable
distribution of wealth, economic progress and the protection of local industries as well as
public welfare and similar objectives.33 Taxation assumes even greater significance with
the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer
vested exclusively on Congress; local legislative bodies are now given direct authority to
levy taxes, fees and other charges34 pursuant to Article X, section 5 of the 1987
Constitution, viz:
"Section 5.- Each Local Government unit shall have the power to create its own
sources of revenue, 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. Such taxes, fees and charges shall accrue exclusively to the
Local Governments."
This paradigm shift results from the realization that genuine development can be
achieved only by strengthening local autonomy and promoting decentralization of
governance. For a long time, the country's highly centralized government structure has
bred a culture of dependence among local government leaders upon the national
leadership. It has also "dampened the spirit of initiative, innovation and imaginative
resilience in matters of local development on the part of local government
leaders."35 The only way to shatter this culture of dependence is to give the LGUs a
wider role in the delivery of basic services, and confer them sufficient powers to
generate their own sources for the purpose. To achieve this goal, section 3 of Article X
of the 1987 Constitution mandates Congress to enact a local government code that
will, consistent with the basic policy of local autonomy, set the guidelines and limitations
to this grant of taxing powers, viz:
"Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local government
units their powers, responsibilities, and resources, and provide for the
qualifications, election, appointment and removal, term, salaries, powers and
functions and duties of local officials, and all other matters relating to the
organization and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160,36 also known as the Local
Government Code of 1991 (LGC), various measures have been enacted to promote
local autonomy. These include the Barrio Charter of 1959,37 the Local Autonomy Act of
1959,38 the Decentralization Act of 196739 and the Local Government Code of
1983.40 Despite these initiatives, however, the shackles of dependence on the national
government remained. Local government units were faced with the same problems that
hamper their capabilities to participate effectively in the national development efforts,
among which are: (a) inadequate tax base, (b) lack of fiscal control over external
sources of income, (c) limited authority to prioritize and approve development projects,
(d) heavy dependence on external sources of income, and (e) limited supervisory
control over personnel of national line agencies.41
4
Considered as the most revolutionary piece of legislation on local autonomy, 42 the LGC
effectively deals with the fiscal constraints faced by LGUs. It widens the tax base of
LGUs to include taxes which were prohibited by previous laws such as the imposition of
taxes on forest products, forest concessionaires, mineral products, mining operations,
and the like. The LGC likewise provides enough flexibility to impose tax rates in
accordance with their needs and capabilities. It does not prescribe graduated fixed rates
but merely specifies the minimum and maximum tax rates and leaves the determination
of the actual rates to the respective sanggunian.43
One of the most significant provisions of the LGC is the removal of the blanket exclusion
of instrumentalities and agencies of the national government from the coverage of local
taxation. Although as a general rule, LGUs cannot impose taxes, fees or charges of any
kind on the National Government, its agencies and instrumentalities, this rule now
admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to
impose taxes, fees or charges on the aforementioned entities, viz:
"Section 133. Common Limitations on the Taxing Powers of the Local
Government Units.- Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following:
x x x
(o) Taxes, fees, or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units." (emphasis
supplied)
In view of the afore-quoted provision of the LGC, the doctrine in Basco vs. Philippine
Amusement and Gaming Corporation44 relied upon by the petitioner to support its claim
no longer applies. To emphasize, the Basco case was decided prior to the effectivity of
the LGC, when no law empowering the local government units to tax instrumentalities of
the National Government was in effect. However, as this Court ruled in the case
of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos,45 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, after reviewing the specific provisions of the LGC, this Court held
that MCIAA, although an instrumentality of the national government, was subject to real
property tax, viz:
"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.'"47
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.49 The right under a primary or general franchise
is vested in the individuals who compose the corporation and not in the corporation
itself.50 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.51 The rights under a secondary or special franchise
are vested in the corporation and may ordinarily be conveyed or mortgaged under a
general power granted to a corporation to dispose of its property, except such special or
secondary franchises as are charged with a public use. 52
In section 131 (m) of the LGC, Congress unmistakably defined a franchise in the sense
of a secondary or special franchise. This is to avoid any confusion when the word
franchise is used in the context of taxation. As commonly used, 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.
Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended by Rep.
Act No. 7395, constitutes petitioner's primary and secondary franchises. It serves as the
petitioner's charter, defining its composition, capitalization, the appointment and the
specific duties of its corporate officers, and its corporate life span. 57 As its secondary
franchise, Commonwealth Act No. 120, as amended, vests the petitioner the following
powers which are not available to ordinary corporations, viz:
"x x x
(e) To conduct investigations and surveys for the development of water power
in any part of the Philippines;
(f) To take water from any public stream, river, creek, lake, spring or waterfall in
the Philippines, for the purposes specified in this Act; to intercept and divert the
flow of waters from lands of riparian owners and from persons owning or
interested in waters which are or may be necessary for said purposes, upon
payment of just compensation therefor; to alter, straighten, obstruct or increase
the flow of water in streams or water channels intersecting or connecting
therewith or contiguous to its works or any part thereof: Provided, That just
5
compensation shall be paid to any person or persons whose property is,
directly or indirectly, adversely affected or damaged thereby;
(g) To construct, operate and maintain power plants, auxiliary plants, dams,
reservoirs, pipes, mains, transmission lines, power stations and substations,
and other works for the purpose of developing hydraulic power from any river,
creek, lake, spring and waterfall in the Philippines and supplying such power to
the inhabitants thereof; to acquire, construct, install, maintain, operate, and
improve gas, oil, or steam engines, and/or other prime movers, generators and
machinery in plants and/or auxiliary plants for the production of electric power;
to establish, develop, operate, maintain and administer power and lighting
systems for the transmission and utilization of its power generation; to sell
electric power in bulk to (1) industrial enterprises, (2) city, municipal or
provincial systems and other government institutions, (3) electric cooperatives,
(4) franchise holders, and (5) real estate subdivisions x x x;
(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber
and otherwise dispose of property incident to, or necessary, convenient or
proper to carry out the purposes for which the Corporation was created:
Provided, That in case a right of way is necessary for its transmission lines,
easement of right of way shall only be sought: Provided, however, That in case
the property itself shall be acquired by purchase, the cost thereof shall be the
fair market value at the time of the taking of such property;
(i) To construct works across, or otherwise, any stream, watercourse, canal,
ditch, flume, street, avenue, highway or railway of private and public
ownership, as the location of said works may require xxx;
(j) To exercise the right of eminent domain for the purpose of this Act in the
manner provided by law for instituting condemnation proceedings by the
national, provincial and municipal governments;
x x x
(m) To cooperate with, and to coordinate its operations with those of the
National Electrification Administration and public service entities;
(n) To exercise complete jurisdiction and control over watersheds surrounding
the reservoirs of plants and/or projects constructed or proposed to be
constructed by the Corporation. Upon determination by the Corporation of the
areas required for watersheds for a specific project, the Bureau of Forestry, the
Reforestation Administration and the Bureau of Lands shall, upon written
advice by the Corporation, forthwith surrender jurisdiction to the Corporation of
all areas embraced within the watersheds, subject to existing private rights, the
needs of waterworks systems, and the requirements of domestic water supply;
(o) In the prosecution and maintenance of its projects, the Corporation shall
adopt measures to prevent environmental pollution and promote the
conservation, development and maximum utilization of natural resources xxx
"58
With these powers, petitioner eventually had the monopoly in the generation and
distribution of electricity. This monopoly was strengthened with the issuance of Pres.
Decree No. 40,59 nationalizing the electric power industry. Although Exec. Order No.
21560 thereafter allowed private sector participation in the generation of electricity, the
transmission of electricity remains the monopoly of the petitioner.
Petitioner also fulfills the second requisite. It is operating within the respondent city
government's territorial jurisdiction pursuant to the powers granted to it by
Commonwealth Act No. 120, as amended. From its operations in the City of
Cabanatuan, petitioner realized a gross income of P107,814,187.96 in 1992. Fulfilling
both requisites, petitioner is, and ought to be, subject of the franchise tax in question.
Petitioner, however, insists that it is excluded from the coverage of the franchise tax
simply because its stocks are wholly owned by the National Government, and its charter
characterized it as a "non-profit" organization.
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. By virtue of its charter,
petitioner was created as a separate and distinct entity from the National Government. It
can sue and be sued under its own name,61 and can exercise all the powers of a
corporation under the Corporation Code.62
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. Section 2 of Pres.
Decree No. 202963 classifies government-owned or controlled corporations (GOCCs)
into those performing governmental functions and those performing proprietary
functions, viz:
"A government-owned or controlled corporation is a stock or a non-stock
corporation, whether performing governmental or proprietary functions, which
is directly chartered by special law or if organized under the general
corporation law is owned or controlled by the government directly, or indirectly
through a parent corporation or subsidiary corporation, to the extent of at least
a majority of its outstanding voting capital stock x x x." (emphases supplied)
Governmental functions are those pertaining to the administration of government, and
as such, are treated as absolute obligation on the part of the state to perform while
proprietary functions are those that are undertaken only by way of advancing the
general interest of society, and are merely optional on the government.64 Included in the
class of GOCCs performing proprietary functions are "business-like" entities such as the
National Steel Corporation (NSC), the National Development Corporation (NDC), the
Social Security System (SSS), the Government Service Insurance System (GSIS), and
the National Water Sewerage Authority (NAWASA),65 among others.
Petitioner was created to "undertake the development of hydroelectric generation of
power and the production of electricity from nuclear, geothermal and other sources, as
well as the transmission of electric power on a nationwide basis." 66 Pursuant to this
6
mandate, petitioner generates power and sells electricity in bulk. 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. The public
interest involved in its activities, however, does not distract from the true nature of the
petitioner as a commercial enterprise, in the same league with similar public utilities like
telephone and telegraph companies, railroad companies, water supply and irrigation
companies, gas, coal or light companies, power plants, ice plant among others; all of
which are declared by this Court as ministrant or proprietary functions of government
aimed at advancing the general interest of society.67
A closer reading of its charter reveals that even the legislature treats the character of the
petitioner's enterprise as a "business," although it limits petitioner's profits to twelve
percent (12%), viz:68
"(n) When essential to the proper administration of its corporate affairs or
necessary for the proper transaction of its business or to carry out the
purposes for which it was organized, to contract indebtedness and issue bonds
subject to approval of the President upon recommendation of the Secretary of
Finance;
(o) To exercise such powers and do such things as may be reasonably
necessary to carry out the business and purposes for which it was organized,
or which, from time to time, may be declared by the Board to be necessary,
useful, incidental or auxiliary to accomplish the said purpose xxx."(emphases
supplied)
It is worthy to note that all other private franchise holders receiving at least sixty percent
(60%) of its electricity requirement from the petitioner are likewise imposed the cap of
twelve percent (12%) on profits.69 The main difference is that the petitioner is mandated
to devote "all its returns from its capital investment, as well as excess revenues from its
operation, for expansion"70 while other franchise holders have the option to distribute
their profits to its stockholders by declaring dividends. We do not see why this fact can
be a source of difference in tax treatment. In both instances, the taxable entity is the
corporation, which exercises the franchise, and not the individual stockholders.
We also do not find merit in the petitioner's contention that its tax exemptions under its
charter subsist despite the passage of the LGC.
As a rule, tax exemptions are construed strongly against the claimant. Exemptions must
be shown to exist clearly and categorically, and supported by clear legal provisions. 71 In
the case at bar, the petitioner's sole refuge is section 13 of Rep. Act No. 6395
exempting from, among others, "all income taxes, franchise taxes and realty taxes to be
paid to the National Government, its provinces, cities, municipalities and other
government agencies and instrumentalities." However, section 193 of the LGC
withdrew, subject to limited exceptions, the sweeping tax privileges previously enjoyed
by private and public corporations. Contrary to the contention of petitioner, section 193
of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions
from local taxes.72 It reads:
 "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."
(emphases supplied)
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.73 Not being a local water district, a
cooperative registered under R.A. No. 6938, or a non-stock and non-profit hospital or
educational institution, petitioner clearly does not belong to the exception. It is therefore
incumbent upon the petitioner to point to some provisions of the LGC that expressly
grant it exemption from local taxes.
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).
It is worth mentioning that section 192 of the LGC empowers the LGUs, through
ordinances duly approved, to grant tax exemptions, initiatives or reliefs. 77 But in enacting
section 37 of Ordinance No. 165-92 which imposes an annual franchise tax
"notwithstanding any exemption granted by law or other special law," the respondent
city government clearly did not intend to exempt the petitioner from the coverage
thereof.

But this would be an exercise in futility. Section 137 of the LGC clearly states that the Doubtless, the power to tax is the most effective instrument to raise needed revenues to
LGUs can impose franchise tax "notwithstanding any exemption granted by any law or finance and support myriad activities of the local government units for the delivery of
other special law." This particular provision of the LGC does not admit any exception. basic services essential to the promotion of the general welfare and the enhancement of
In City Government of San Pablo, Laguna v. Reyes,74 MERALCO's exemption from the peace, progress, and prosperity of the people. As this Court observed in
payment of franchise taxes was brought as an issue before this Court. The same issue the Mactan case, "the original reasons for the withdrawal of tax exemption privileges
was involved in the subsequent case of Manila Electric Company v. Province of granted to government-owned or controlled corporations and all other units of
Laguna.75 Ruling in favor of the local government in both instances, we ruled that the government were that such privilege resulted in serious tax base erosion and distortions
franchise tax in question is imposable despite any exemption enjoyed by MERALCO in the tax treatment of similarly situated enterprises."78 With the added burden of
under special laws, viz: 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
"It is our view that petitioners correctly rely on provisions of Sections 137 and from them.
193 of the LGC to support their position that MERALCO's tax exemption has
been withdrawn. The explicit language of section 137 which authorizes the IN VIEW WHEREOF, the instant petition is DENIED and the assailed Decision and
province to impose franchise tax 'notwithstanding any exemption granted by Resolution of the Court of Appeals dated March 12, 2001 and July 10, 2001,
any law or other special law' is all-encompassing and clear. The franchise tax respectively, are hereby AFFIRMED.
is imposable despite any exemption enjoyed under special laws.
SO ORDERED.
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
7
8
 SECOND DIVISION Respondent Bayan Telecommunications, Inc.[3] (Bayantel) is a legislative
franchise holder under Republic Act (Rep. Act) No. 3259[4] to establish and operate radio
THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY G.R. No. 162015 stations for domestic telecommunications, radiophone, broadcasting and telecasting.
TREASURER OF QUEZON CITY, DR. VICTOR B. ENRIGA,
Present: Of relevance to this controversy is the tax provision of Rep. Act No. 3259,
Petitioners, embodied in Section 14 thereof, which reads:

SECTION 14. (a) The grantee shall be liable to pay the same
taxes on its real estate, buildings and personal property, exclusive of
PUNO, J., Chairperson, the franchise, as other persons or corporations are now or hereafter
may be required by law to pay. (b) The grantee shall further pay to the
SANDOVAL- Treasurer of the Philippines each year, within ten days after the audit
GUTIERREZ, and approval of the accounts as prescribed in this Act, one and one-
half per centum of all gross receipts from the business transacted
- versus - CORONA, under this franchise by the said grantee (Emphasis supplied).

AZCUNA, and On January 1, 1992, Rep. Act No. 7160, otherwise known as the Local
Government Code of 1991 (LGC), took effect. Section 232 of the Code grants local
GARCIA, JJ. government units within the Metro Manila Area the power to levy tax on real properties,
thus:

SEC. 232. Power to Levy Real Property Tax. A province or city

or a municipality within the Metropolitan Manila Area may levy an
BAYAN TELECOMMUNICATIONS, INC., Promulgated: annual ad valorem tax on real property such as land, building,
machinery and other improvements not hereinafter specifically
Respondent. exempted.

Complementing the aforequoted provision is the second paragraph of Section 234 of the
same Code which withdrew any exemption from realty tax heretofore granted to or
March 6, 2006 enjoyed by all persons, natural or juridical, to wit:

x-----------------------------------------------------------------------------------x SEC. 234 - Exemptions from Real Property Tax. The following
are exempted from payment of the real property tax:
DECISION xxx xxx xxx
GARCIA, J.: Except as provided herein, any exemption from payment of
real property tax previously granted to, or enjoyed by, all persons,
Before the Court, on pure questions of law, is this petition for review on certiorari under Rule whether natural or juridical, including government-owned-or-controlled
45 of the Rules of Court to nullify and set aside the following issuances of the Regional Trial corporations is hereby withdrawn upon effectivity of this
Court (RTC) of Quezon City, Branch 227, in its Civil Case No. Q-02-47292, to wit: Code (Emphasis supplied).

On July 20, 1992, barely few months after the LGC took effect, Congress
1) Decision[1] dated June 6, 2003, declaring respondent enacted Rep. Act No. 7633, amending Bayantels original franchise. The amendatory law
Bayan Telecommunications, Inc. exempt from real estate (Rep. Act No. 7633) contained the following tax provision:
taxation on its real properties located in Quezon City; and
SEC. 11. The grantee, its successors or assigns shall be liable
2) Order[2] dated December 30, 2003, denying petitioners motion for to pay the same taxes on their real estate, buildings and personal
reconsideration. property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay. In
The facts: addition thereto, the grantee, its successors or assigns shall pay a
franchise tax equivalent to three percent (3%) of all gross receipts of
the telephone or other telecommunications businesses transacted
under this franchise by the grantee, its successors or assigns and the
9
 said percentage shall be in lieu of all taxes on this franchise or earnings
thereof. Provided, That the grantee, its successors or assigns shall
continue to be liable for income taxes payable under Title II of the
National Internal Revenue Code .xxx. [Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon City, Bayantel
owned several real properties on which it maintained various telecommunications
facilities. These real properties, as hereunder described, are covered by the following tax
declarations:
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-
096-04072 and D-096-04073 pertaining to Bayantels
Head Office and Operations Center in Roosevelt St., San
Francisco del Monte, Quezon City allegedly the nerve
center of petitioners telecommunications franchise
operations, said Operation Center housing mainly
petitioners Network Operations Group and switching,
transmission and related equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-124-
00920 and D-124-00941 covering Bayantels land, building
and equipment in Maginhawa St., Barangay East Teachers
Village, Quezon City which houses telecommunications
facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-011-
10811, and D-011-11540 referring to
Bayantels Exchange Center located in Proj. 8, Brgy. Bahay
Toro, Tandang Sora, Quezon City which houses the Network
Operations Group and cover switching, transmission and
other related equipment.
In 1993, the government of Quezon City, pursuant to the
taxing power vested on local government units by Section 5, Article X of the 1987
Constitution, infra, in relation to Section 232 of the LGC, supra, enacted City
Ordinance No. SP-91, S-93, otherwise known as the Quezon City Revenue
Code (QCRC),[5]imposing, under Section 5 thereof, a real property tax on all real
properties in Quezon City, and, reiterating in its Section 6, the withdrawal of exemption
from real property tax under Section 234 of the LGC, supra. Furthermore, much like the
LGC, the QCRC, under its Section 230, withdrew tax exemption privileges in general, as
follows:
SEC. 230. 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 RA 6938, non-stock and non-profit hospitals and educational
institutions, business enterprises certified by the Board of Investments
(BOI) as pioneer or non-pioneer for a period of six (6) and four (4) years,
respectively, are hereby withdrawn effective upon approval of this
Code (Emphasis supplied).
10
Conformably with the Citys Revenue Code, new tax declarations for Bayantels
real properties in Quezon City were issued by the City Assessor and were received by
Bayantel on August 13, 1998, except one (Tax Declaration No. 124-01013) which was
received on July 14, 1999.
Meanwhile, on March 16, 1995, Rep. Act No. 7925,[6] otherwise known as
the Public Telecommunications Policy Act of the Philippines, envisaged to level the
playing field among telecommunications companies, took effect. Section 23 of the Act
provides:
SEC. 23. Equality of Treatment in the Telecommunications
Industry. Any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or may hereafter be granted,
shall ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to
the grantees of such franchises: Provided, however, That the foregoing
shall neither apply to nor affect provisions of telecommunications
franchises concerning territory covered by the franchise, the life span
of the franchise, or the type of service authorized by the franchise.
On January 7, 1999, Bayantel wrote the office of the City Assessor seeking the
exclusion of its real properties in the city from the roll of taxable real properties. With its
request having been denied, Bayantel interposed an appeal with the Local Board of
Assessment Appeals (LBAA). And, evidently on its firm belief of its exempt status,
Bayantel did not pay the real property taxes assessed against it by the Quezon
City government.
On account thereof, the Quezon City Treasurer sent out notices of delinquency
for the total amount of P43,878,208.18, followed by the issuance of several warrants of
levy against Bayantels properties preparatory to their sale at a public auction set on July
30, 2002.
Threatened with the imminent loss of its properties, Bayantel
immediately withdrew its appeal with the LBAA and instead filed with the RTC of Quezon
City a petition for prohibition with an urgent application for a temporary restraining order
(TRO) and/or writ of preliminary injunction, thereat docketed as Civil Case No. Q-02-
47292, which was raffled to Branch 227 of the court.
On July 29, 2002, or in the eve of the public auction scheduled the following day,
the lower court issued a TRO, followed, after due hearing, by a writ of preliminary
injunction via its order of August 20, 2002.
And, having heard the parties on the merits, the same court came out with its
challenged Decision of June 6, 2003, the dispositive portion of which reads:
WHEREFORE, premises considered, pursuant to the
enabling franchise under Section 11 of Republic Act No. 7633, the real
estate properties and buildings of petitioner [now, respondent Bayantel]
which have been admitted to be used in the operation of petitioners
franchise described in the following tax declarations are hereby
DECLARED exempt from real estate taxation:
(1) Tax Declaration No. D-096-04071
(2) Tax Declaration No. D-096-04074
(3) Tax Declaration No. D-124-01013
(4) Tax Declaration No. D-011-10810
(5) Tax Declaration No. D-011-10811
(6) Tax Declaration No. D-011-10809
 (7) Tax Declaration No. D-124-00941
(8) Tax Declaration No. D-124-00940
(9) Tax Declaration No. D-124-00939
(10) Tax Declaration No. D-096-04072
(11) Tax Declaration No. D-096-04073
(12) Tax Declaration No. D-011-11540
The preliminary prohibitory injunction issued in the August 20,
2002 Order of this Court is hereby made permanent. Since this is a
resolution of a purely legal issue, there is no pronouncement as to
costs.
SO ORDERED.
Their motion for reconsideration having been denied by the court in its Order
dated December 30, 2003, petitioners elevated the case directly to this Court on pure
questions of law, ascribing to the lower court the following errors:
I. [I]n declaring the real properties of respondent exempt
from real property taxes notwithstanding the fact that the tax
exemption granted to Bayantel in its original franchise had
been withdrawn by the [LGC] and that the said exemption was
not restored by the enactment of RA 7633.
II. [In] declaring the real properties of respondent exempt
from real property taxes notwithstanding the enactment of the
[QCRC] which withdrew the tax exemption which may have
been granted by RA 7633.
III. [In] declaring the real properties of respondent exempt from
real property taxes notwithstanding the vague and ambiguous
grant of tax exemption provided under Section 11 of RA 7633.
IV. [In] declaring the real properties of respondent exempt from
real property taxes notwithstanding the fact that [it] had failed
to exhaust administrative remedies in its claim for real property
tax exemption. (Words in bracket added.)
As we see it, the errors assigned may ultimately be reduced to two (2) basic
issues, namely:
1. Whether or not Bayantels real properties in Quezon City
are exempt from real property taxes under its legislative
franchise; and
2. Whether or not Bayantel is required to exhaust
administrative remedies before seeking judicial relief with the
trial court.
We shall first address the second issue, the same being procedural in nature.
Petitioners argue that Bayantel had failed to avail itself of the administrative
remedies provided for under the LGC, adding that the trial court erred in giving due course
to Bayantels petition for prohibition. To petitioners, the appeal mechanics under the LGC
constitute Bayantels plain and speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following provision of Rule 65 of the
Rules of Court:
SEC. 2. Petition for prohibition. When the proceedings of any
tribunal, are without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and
11
there is no appeal or any other plain, speedy, and adequate remedy in
the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered commanding the respondent to
desist from further proceedings in the action or matter specified therein,
or otherwise, granting such incidental reliefs as law and justice may
require.
With the reality that Bayantels real properties were already levied upon on
account of its nonpayment of real estate taxes thereon, the Court agrees with Bayantel
that an appeal to the LBAA is not a speedy and adequate remedy within the context of
the aforequoted Section 2 of Rule 65. This is not to mention of the auction sale of said
properties already scheduled on July 30, 2002.
Moreover, one of the recognized exceptions to the exhaustion- of-administrative
remedies rule is when, as here, only legal issues are to be resolved. In fact, the Court,
cognizant of the nature of the questions presently involved, gave due course to the instant
petition. As the Court has said in Ty vs. Trampe:[7]
xxx. Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there is a well-
settled exception in cases where the controversy does not involve
questions of fact but only of law. xxx.
Lest it be overlooked, an appeal to the LBAA, to be properly considered, required
prior payment under protest of the amount of P43,878,208.18, a figure which, in the light
of the then prevailing Asian financial crisis, may have been difficult to raise up. Given this
reality, an appeal to the LBAA may not be considered as a plain, speedy and adequate
remedy. It is thus understandable why Bayantel opted to withdraw its earlier appeal with
the LBAA and, instead, filed its petition for prohibition with urgent application for injunctive
relief in Civil Case No. Q-02-47292. The remedy availed of by Bayantel under Section 2,
Rule 65 of the Rules of Court must be upheld.
This brings the Court to the more weighty question of whether or not Bayantels
real properties in Quezon City are, under its franchise, exempt from real property tax.
The lower court resolved the issue in the affirmative, basically owing to the
phrase exclusive of this franchise found in Section 11 of Bayantels amended franchise,
Rep. Act No. 7633. To petitioners, however, the language of Section 11 of Rep. Act No.
7633 is neither clear nor unequivocal. The elaborate and extensive discussion
devoted by the trial court on the meaning and import of
said phrase, they add, suggests as much. It is petitioners thesis that Bayantel was in no
time given any express exemption from the payment of real property tax under its
amendatory franchise.
There seems to be no issue as to Bayantels exemption from real estate taxes by
virtue of the term exclusive of the franchise qualifying the phrase same taxes on its real
estate, buildings and personal property, found in Section 14, supra, of its franchise, Rep.
Act No. 3259, as originally granted.
The legislative intent expressed in the phrase exclusive of this franchise cannot
be construed other than distinguishing between two (2) sets of properties, be they real or
personal, owned by the franchisee, namely, (a) those actually, directly and exclusively
used in its radio or telecommunications business,
and (b) those properties which are not so used. It is worthy
to note that the properties subject of the present controversy are only those which are
admittedly falling under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to
grant or delegate to local governments of Congress inherent power to tax the franchisees
properties belonging to the second group of properties indicated above, that is, all
properties which, exclusive of this franchise, are not actually and directly used in the
pursuit of its franchise. As may be recalled, the taxing power of local governments under
both the 1935 and the 1973 Constitutions solely depended upon an enabling
law. Absent such enabling law, local government units were without authority to impose
and collect taxes on real properties within their respective territorial jurisdictions. While
Section 14 of Rep. Act No. 3259 may be validly viewed as an implied delegation of power
to tax, the delegation under that provision, as couched, is limited to impositions over
properties of the franchisee which are not actually, directly and exclusively used in the
pursuit of its franchise. Necessarily, other properties of Bayantel directly used in the
pursuit of its business are beyond the pale of the delegated taxing power of local
governments. In a very real sense, therefore, real properties of Bayantel, save
those exclusive of its franchise, are subject to realty taxes. Ultimately, therefore, the
inevitable result was that all realties which are actually, directly and exclusively used in
the operation of its franchise are exempted from any property tax.
Bayantels franchise being national in character, the exemption thus granted
under Section 14 of Rep. Act No. 3259 applies to all its real or personal properties found
anywhere within the Philippine archipelago.
However, with the LGCs taking effect on January 1, 1992, Bayantels exemption
from real estate taxes for properties of whatever kind located within the Metro Manila area
was, by force of Section 234 of the Code, supra, expressly withdrawn. But, not long
thereafter, however, or on July 20, 1992, Congress passed Rep. Act No. 7633 amending
Bayantels original franchise. Worthy of note is that Section 11 of Rep. Act No. 7633 is a
virtual reenacment of the tax provision, i.e., Section 14, supra, of Bayantels original
franchise under Rep. Act No. 3259. Stated otherwise, Section 14 of Rep. Act No. 3259
which was deemed impliedly repealed by Section 234 of the LGC was expressly revived
under Section 14 of Rep. Act No. 7633. In concrete terms, the realty tax exemption
heretofore enjoyed by Bayantel under its original franchise, but subsequently withdrawn
by force of Section 234 of the LGC, has been restored by Section 14 of Rep. Act No.
7633.
The Court has taken stock of the fact that by virtue of Section 5, Article X of the
1987 Constitution,[8] local governments are empowered to levy taxes. And pursuant to this
constitutional empowerment, juxtaposed with Section 232[9] of the LGC, the Quezon
City government enacted in 1993 its local Revenue Code, imposing real property tax on
all real properties found within its territorial jurisdiction. And as earlier stated, the
Citys Revenue Code, just like the LGC, expressly withdrew, under Section 230
thereof, supra, all tax exemption privileges in general.
This thus raises the question of whether or not the Citys Revenue Code pursuant
to which the city treasurer of Quezon City levied real property taxes against Bayantels
real properties located within the City effectively withdrew the tax exemption enjoyed by
Bayantel under its franchise, as amended.
Bayantel answers the poser in the negative arguing that once again it
is only liable to pay the same taxes, as any other persons or corporations on all its real
or personal properties, exclusive of its franchise.
Bayantels posture is well-taken. While the system of local government
taxation has changed with the onset of the 1987 Constitution, the power of local
government units to tax is still limited. As we explained
in Mactan Cebu International Airport Authority:[10]
12
The power to tax is primarily vested in the Congress; however,
in our jurisdiction, it may be exercised by local legislative bodies,
no longer merely be virtue of a valid delegation as before, but
pursuant to direct authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the power may be
subject to such guidelines and limitations as the Congress may provide
which, however, must be consistent with the basic policy of local
autonomy. (at p. 680; Emphasis supplied.)
Clearly then, while a new slant on the subject of local taxation now prevails in
the sense that the former doctrine of local government units delegated power to tax had
been effectively modified with Article X, Section 5 of the 1987 Constitution now in
place, .the basic doctrine on local taxation remains essentially the same. For as the Court
stressed in Mactan, the power to tax is [still] primarily vested in the Congress.
This new perspective is best articulated by Fr. Joaquin G. Bernas, S.J., himself
a Commissioner of the 1986 Constitutional Commission which crafted the 1987
Constitution, thus:
What is the effect of Section 5 on the fiscal position of
municipal corporations? Section 5 does not change the doctrine that
municipal corporations do not possess inherent powers of
taxation. What it does is to confer municipal corporations a
general power to levy taxes and otherwise create sources of
revenue. They no longer have to wait for a statutory grant of these
powers. The power of the legislative authority relative to the fiscal
powers of local governments has been reduced to the authority to
impose limitations on municipal powers. Moreover, these limitations
must be consistent with the basic policy of local autonomy. The
important legal effect of Section 5 is thus to reverse the principle
that doubts are resolved against municipal
corporations. Henceforth, in interpreting statutory provisions on
municipal fiscal powers, doubts will be resolved in favor of municipal
corporations. It is understood, however, that taxes imposed by local
government must be for a public purpose, uniform within a locality, must
not be confiscatory, and must be within the jurisdiction of the local unit
to pass.[11] (Emphasis supplied).
In net effect, the controversy presently before the Court involves, at bottom, a
clash between the inherent taxing power of the legislature, which necessarily includes the
power to exempt, and the local governments delegated power to tax under the aegis of
the 1987 Constitution.
Now to go back to the Quezon City Revenue Code which
imposed real estate taxes on all real properties within the citys territory and removed
exemptions theretofore previously granted to, or presently enjoyed by all persons,
whether natural or juridical .,[12] there can really be no dispute that the power of the
Quezon City Government to tax is limited by Section 232 of the LGC which expressly
provides that a province or city or municipality within the Metropolitan Manila Area may
levy an annual ad valorem tax on real property such as land, building, machinery, and
other improvement not hereinafter specifically exempted. Under this law, the
Legislature highlighted its power to thereafter exempt certain realties from the taxing
power of local government units. An interpretation denying Congress such power to
exempt would reduce the phrase not hereinafter specifically exempted as a pure jargon,
without meaning whatsoever. Needless to state, such absurd situation is unacceptable.

For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City
of Davao,[13] this Court has upheld the power of Congress to grant exemptions over the
power of local government units to impose taxes. There, the Court wrote:

Indeed, the grant of taxing powers to local government

units under the Constitution and the LGC does not affect the
power of Congress to grant exemptions to certain persons,
pursuant to a declared national policy. The legal effect of the
constitutional
grant to local governments simply means that in interpreting statutory
provisions on municipal taxing powers, doubts must be resolved in
favor of municipal corporations. (Emphasis supplied.)

As we see it, then, the issue in this case no longer dwells on whether Congress
has the power to exempt Bayantels properties from realty taxes by its enactment of Rep.
Act No. 7633 which amended Bayantels original franchise. The more decisive question
turns on whether Congress actually did exempt Bayantels properties at all by virtue
of Section 11 of Rep. Act No. 7633.

Admittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly
aware that the LGC has already withdrawn Bayantels former exemption from realty taxes,
Congress opted to pass Rep. Act No. 7633 using, under Section 11 thereof, exactly the
same defining phrase exclusive of this franchise which was the basis for Bayantels
exemption from realty taxes prior to the LGC. In plain language, Section 11 of Rep. Act
No. 7633 states that the grantee, its successors or assigns shall be liable to pay the same
taxes on their real estate, buildings and personal property, exclusive of this franchise, as
other persons or corporations are now or hereafter may be required by law to pay. The
Court views this subsequent piece of legislation as an express and real intention on the
part of Congress to once again remove from the LGCs delegated taxing power, all
of the franchisees (Bayantels) properties that are actually, directly and exclusively used
in the pursuit of its franchise.

WHEREFORE, the petition is DENIED.

13
14
 G.R. No. 203754 June 16, 2015
FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES, Petitioner,
vs.
COLON HERITAGE REALTY CORPORATION, operator of Oriente Group Theaters,
represented by ISIDORO A. CANIZARES, Respondent.
x-----------------------x
FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES, Petitioner,
vs.
CITY OF CEBU and SM PRIME HOLDINGS, INC., Respondents.
DECISION
VELASCO, JR., J.:
The Constitution is the basic law to which all laws must conform; no act shall be valid if it
conflicts with the Constitution. In the discharge of their defined functions, the three
departments of government have no choice but to yield obedience to the commands of
the Constitution. Whatever limits it imposes must be observed.1
The Case
Once again, We are called upon to resolve a clash between the Inherent taxing power of
the legislature and the constitutionally-delegated power to tax of local governments in
these consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of
Court seeking the reversal of the Decision dated September 25, 2012 of the Regional
Trial Court (RTC), Branch 5 in Cebu City, in Civil Case No. CEB-35601, entitled Colon
Heritage Realty Corp., represented by Isidoro Canizares v. Film Development Council of
the' Philippines, and Decision dated October 24, 2012 of the RTC, Branch 14 in Cebu
City, in Civil Case No. CEB-35529, entitled City of Cebu v. Film Development Council of
the Philippines, collectively declaring Sections 13 and 14 of Republic Act No. (RA) 9167
invalid and unconstitutional.
The Facts
The facts are simple and undisputed.
Sometime in 1993, respondent City of Cebu, in its exercise of its power to impose
amusement taxes under Section 140 of the Local Government Code2 (LGC) anchored
on the constitutional policy on local autonomy,3 passed City Ordinance No. LXIX
otherwise known as the "Revised Omnibus Tax Ordinance of the City of Cebu (tax
ordinance)." Central to the case at bar are Sections 42 and 43, Chapter XI thereof which
require proprietors, lessees or operators of theatres, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement, to pay an amusement tax equivalent to
thirty percent (30%) of the gross receipts of admission fees to the Office of the City
Treasurer of Cebu City. Said provisions read:
CHAPTER XI - Amusement Tax
15
Section 42. Rate of Tax. - There shall be paid to the Office of the City Treasurer by the
proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing
stadia and other places of amusement, an amusement tax at the rate of thirty percent
(30%) of the gross receipts from admission fees.4
Section 43. Manner of Payment. - In the case of theaters or cinemas, the tax shall first
be deducted and withheld by their proprietors, lessees, or operators and paid to the city
treasurer before the gross receipts are divided between said proprietor, lessees,
operators, and the distributors of the cinematographic films.
Almost a decade later, or on June 7, 2002, Congress passed RA 9167,5 creating the
Film Development Council qf the Philippines (FDCP) and abolishing the Film
Development Foundation of the Philippines, Inc. and the Film Rating Board. Secs. 13
and 14 of RA 9167 provided for the tax treatment of certain graded films as follows:
Section 13. Privileges of Graded Films. - Films which have obtained an "A" or "B"
grading from the Council pursuant to Sections 11 and 12 of this Act shall be entitled to
the following privileges:
a. Amusement tax reward. - A grade "A" or "B" film shall entitle its producer to an
incentive equivalent to the amusement tax imposed and collected on the graded films by
cities and municipalities in Metro Manila and other highly urbanized and independent
component cities in the Philippines pursuant to Sections 140 to 151 of Republic Act No.
7160 at the following rates:
1. For grade "A" films - 100% of the amusement tax collected on such
film; and
2. For grade "B" films - 65% of the amusement tax collected on such
films. The remaining thirty-five (35%) shall accrue to the funds of the
Council.
Section 14. Amusement Tax Deduction and Remittance. - All revenue from the
amusement tax on the graded film which may otherwise accrue to the cities and
municipalities in Metropolitan Manila and highly urbanized and independent component
cities in the Philippines pursuant to Section 140 of Republic Act. No. 7160 during the
period the graded film is exhibited, shall be deducted and withheld by the proprietors,
operators or lessees of theaters or cinemas and remitted within thirty (30) days from the
termination of the exhibition to the Council which shall reward the corresponding
amusement tax to the producers of the graded film within fifteen (15) days from receipt
thereof.
Proprietors, operators and lessees of theaters or cinemas who fail to remit the
amusement tax proceeds within the prescribed period shall be liable to a surcharge
equivalent to five percent (5%) of the amount due for each month of delinquency which
shall be paid to the Council. (emphasis added)
According to petitioner, from the time RA 9167 took effect up to the present, all the cities
and municipalities in Metro Manila, as well as urbanized and independent component
cities, with the sole exception of Cebu City, have complied with the mandate of said law.
 Accordingly, petitioner, through the Office of the Solicitor General, sent on January 2009 Because of the persistent refusal of the proprietors and cinema operators to remit the
demand letters for unpaid amusement tax reward (with 5% surcharge for each month of said amounts as FDCP demanded, on one hand, and Cebu City's assertion of a claim
delinquency) due to the producers of the Grade "A" or "B" films to the following cinema on the amounts in question, the city finally filed on May 18, 2009 before the RTC,
proprietors and operators in Cebu City: Branch 14 a petition for declaratory relief with application for a writ of preliminary
injunction, docketed as Civil Case No. CEB-35529 (City of Cebu v. FDCP). In said
petition, Cebu City sought the declaration of Secs. 13 and 14 of RA 9167 as invalid and
Amusement
unconstitutional.
Tax Reward Number
Cinema (with 5% of CEB
Period Covered Similarly, Colon Heritage filed before the RTC, Branch 5 Civil Case No. CEB-35601
Proprietor/Operator surcharge for Graded
each moth of Films (Colon Heritage v. FDCP), seeking to declare Sec. 14 of RA 9167 as unconstitutional.
delinquency)
On May 25, 2010, the RTC, Branch 14 issued a temporary restraining order (TRO)
restraining and enjoining FDCP, et al. from, inter alia:
M Prime Holdings Inc. 76,836,807.08 89 Sept. 11, 2003 - Nov. 4, 2008
(a) Collecting amusement tax incentive award in the City of Cebu and from
imposing surcharges thereon;
Ayala Center Cinemas 43,435,718.23 70 May 14, 2003 - Nov. 4, 2008
(b) Demanding from the owners, proprietors, and lessees of theaters and
cinemas located and operated within Cebu City, payment of said amusement
Colon Heritage Realty 8,071,267.00 50 Aug. 11, 2004-Nov. 4, 2008
tax incentive award which should have been deducted, withheld, and remitted
Corp.
to FDCP, etc. by the owners, etc., or being operated within Cebu City and
imposing surcharges on the unpaid amount; and
Eden Theater 428,938.25 4 May 5, 2005 - Sept. 2, 2008
(c) Filing any suit due to or arising from the failure of the owners, etc., of
theaters or cinemas within Cebu City, to deduct, withhold, and remit the
Cinema Theater 3,100,354.80 22 Feb. 18, 2004-Oct. 7, 2008 incentive to FDCP.

Meanwhile, on August 13, 2010, SM Prime Holdings, Inc. moved for leave to file and
Visaya Cineplex Corp. 17,582,521.89 86 June 25, 2005 - Oct. 21, 2008
admit attached comment-in-intervention and was later granted.6

Rulings of the Trial Courts

Ultra Vistarama Cinema 68,821.60 2 July 2 - 22, 2008
In City of Cebu v. FDCP, the RTC, Branch 14 issued the challenged Decision 7 declaring
Cebu Central Realty Corp. 9,853,559.69 48 Secs. 13 and 14 of RA 9167 unconstitutional, disposing as follows:
Jan. 1, 2004 - Oct. 21, 2008

WHEREFORE, in view of all the disquisitions, judgment is rendered in favor of petitioner

In said letters, the proprietors and cinema operators, including private respondent Colon
Heritage Realty Corp. (Colon Heritage), operator of the Oriente theater, were given ten
(10) days from receipt thereof to pay the aforestated amounts to FDCP. The demand,
however, fell on deaf ears.
Meanwhile, on March 25, 2009, petitioner received a letter from Regal Entertainment,
Inc., inquiring on the status of its receivables for tax rebates in Cebu cinemas for all their
A and B rate films along with those which it co-produced with GMA films. This was
followed by a letter from
Star Cinema ABS-CBN Film Productions, Inc., requesting the immediate remittance of
its amusement tax rewards for its graded films for the years 2004-2008.
City of Cebu against respondent Film Development Council of the Philippines, as
follows:
1. Declaring Sections 13 and 14 of the (sic) Republic Act No. 9167 otherwise
known as an Act Creating the Film Development Council of the Philippines,
Defining its Powers and Functions, Appropriating Funds Therefor and for other
purposes, as violative of Section 5 Article X of the 1997 (sic) Philippine
Constitution; Consequently
2. Declaring that defendant Film Development Council of the Philippines
(FDCP) cannot collect under Sections 13 and 14 of R.A. 9167 as of the finality
of the decision in G.R. Nos. 203754 and 204418;

16
 3. Declaring that Intervenor SM Cinema Corporation has the obligation to remit
the amusement taxes, withheld on graded cinema films to respondent FDCP
under Sections 13 and 14 of R.A. 9167 for taxes due prior to the finality of the
decision in G.R. Nos. 203754 and 204418;
4. Declaring that after the finality of the decision in G.R. Nos. 203 754 and
204418, all amusement taxes withheld and those which may be collected by
Intervenor SM on graded films shown in SM Cinemas in Cebu City shall be
remitted to petitioner Cebu City pursuant to City Ordinance LXIX, Chapter XI,
Section 42.
As to the sum of PhP 76,836,807.08 remitted by the Intervenor SM to petitioner City of
Cebu, said amount shall be remitted by the City of Cebu to petitioner FDCP within thirty
(30) days from finality of this decision in G.R. Nos. 203754 and 204418 without interests
and surcharges.
SO ORDERED.
According to the court, what RA 9167 seeks to accomplish is the segregation of the
amusement taxes raised and collected by Cebu City and its subsequent transfer to
FDCP. The court concluded that this arrangement cannot be classified as a tax
exemption but is a confiscatory measure where the national government extracts money
from the local government's coffers and transfers it to FDCP, a private agency, which in
turn, will award the money to private persons, the film producers, for having produced
graded films.
The court further held that Secs. 13 and 14 of RA 9167 are contrary to the basic policy
in local autonomy that all taxes, fees, and charges imposed by the LGUs shall accrue
exclusively to them, as articulated in A1iicle X,. Sec. 5 of the 1987 Constitution. This
edict, according to the court, is a limitation upon the rule-making power of Congress
when it provides guidelines and limitations on the local government unit's (LGU's) power
of taxation. Therefore, when Congress passed this "limitation," if went beyond its
legislative authority, rendering the questioned provisions unconstitutional.
By the same token, in Colon Heritage v. FDCP, the RTC, Branch 5, in its Decision of
September 25, 2012, also ruled against the constitutionality of said Secs. 13 and 14 of
RA 9167 for the following reasons: (a) while Congress, through the enactment of RA
9167, may have amended Secs. 140(a)8 and 1519 of the LGC, in the exercise of its
plenary power to amend laws, such power must be exercised within constitutional
parameters; (b) the assailed provision violates the constitutional directive that taxes
should accrue exclusively to the LGU concerned; (c) the Constitution, through its Art. X,
Sec. 5,10 directly conferred LGUs with authority to levy taxes-the power is no longer
delegated by the legislature; (d) In CIR v. SM Prime Holdings,11 the Court ruled that
amusement tax on cinema/theater operators or proprietors remain with the LGU,
amusement tax, being, by nature, a local tax. The fallo of the questioned judgment
reads:
WHEREFORE, in view of all the foregoing, Judgment is hereby rendered in favor of
petitioner, as follows:
17
(1) Declaring Republic Act No. 9167 as invalid and unconstitutional;
(2) The obligation to remit amusement taxes for the graded films to respondent
is ordered extinguished;
(3) Directing respondent to refund all the amounts paid by petitioner, by way of
amusement tax, plus the legal rate of interest thereof, until the whole amount is
paid in full.
Notify parties and counsels of this order.
SO ORDERED.
The Issue
Undeterred by two defeats, petitioner has come directly to this Court, presenting the
singular issue: whether or not the RTC (Branches 5 and 14) gravely erred in declaring
Secs. 13 and 14 of RA 9167 invalid for being unconstitutional.
Anent Sec. 13,12 FDCP concedes that the amusement taxes assessed in RA 9167 are
to be given to the producers of graded films who are private persons. Nevertheless,
according to FDCP, this particular tax arrangement is not a violation of the rule on the
use of public funds for RA 9167 was enacted for a public purpose, that is, the promotion
and support of the "development and growth of the local film industry as a medium for
the upliftment of aesthetic, cultural, and social values for the better understanding and
appreciation of the Filipino identity" as well as the "encouragement of the production of
quality films that will promote the growth and development' of the local film
industry."13 Moreover, FDCP suggests that "even if the resultant effect would be a
certain loss of revenue, [LGUs] do not feel deprived nor bitter for they realize that the
benefits for the film industry, the fortification of our values system, and the cultural boost
for the nation as a whole, far outweigh the pecuniary cost they would shoulder by
backing this law."14 Finally, in support of its stance, FDCP invites attention to the
following words of former Associate Justice Isagani A. Cruz: "[t]he mere fact that the tax
will be directly enjoyed by a private individual does not make it invalid so long as some
link to the public welfare is established."15
As regards Sec. 1416 of RA 9167, FDCP is of the position that Sec. 5, Article X of the
Constitution does not change the doctrine that municipal corporations only possess
delegated, not inherent, powers of taxation and that the power to tax is still primarily
vested in the Congress. Thus, wielding its power to impose limitations on this delegated
power, Congress further restricted the LGU's power to impose amusement taxes via
Secs. 13 and 14 of RA 9167-an express and real intention of Congress to further
contain the LGU's delegated taxing power. It, therefore, cannot be construed as an
undue limitation since it is well within the power of Congress to make such restriction.
Furthermore, the LGC is a mere statute which Congress can amend, which it in fact did
when it enacted RA 916417 and, later, the questioned law, RA 9167.18
This, according to FDCP, evinces the overriding intent of Congress to remove from the
LGU' s delegated taxing power all revenues from amusement taxes on grade "A" or "B"
films which would otherwise accrue to the cities and municipalities in Metropolitan
Manila and highly urbanized and independent component cities in the Philippines
pursuant to Secs. 140 and 151 of the LGC.
In fine, it is petitioner's posture that the inclusion in RA 9167 of the questioned
provisions was a valid exercise of the legislature's power to amend laws and an
assertion of its constitutional authority to set limitations on the LGU' s authority to tax.
The Court's Ruling
We find no reason to disturb the assailed rulings.
Local fiscal autonomy and the constitutionally-delegated power to tax
The power of taxation, being an essential and inherent attribute of sovereignty, belongs,
as a matter of right, to every independent government, and needs no express
conferment by the people before it can be exercised. It is purely legislative and, thus,
cannot be delegated to the executive and judicial branches of government without
running afoul to the theory of separation of powers. It, however, can be delegated to
municipal corporations, consistent with the principle that legislative powers may be
delegated to local governments in respect of matters of local concern.19 The authority of
provinces, cities, and municipalities to create their own sources of revenue and to levy
taxes, therefore, is not inherent and may be exercised only to the extent that such power
might be delegated to them either by the basic law or by statute.20 Under the regime of
the 1935 Constitution, there was no constitutional provision on the delegation of the
power to tax to municipal corporations. They only derived such under a limited statutory
authority, outside of which, it was deemed withheld.21 Local governments, thus, had very
restricted taxing powers which they derive from numerous tax laws. This highly-
centralized government structure was later seen to have arrested the growth and
efficient operations of LG Us, paving the way for the adoption of a more decentralized
system which granted LGUs local autonomy, both administrative and fiscal autonomy. 22
Material to the case at bar is the concept and scope of local fiscal autonomy. In
Pimentel v. Aguirre,23 fiscal autonomy was defined as "the power [of LGUs] to create
their own sources of revenue in addition to their equitable share in the national taxes
released by the national government, as well as the power to allocate their resources in
accordance with their own priorities. It extends to the preparation of their budgets, and
local officials in tum have to work within the constraints thereof."
With the adoption of the 1973 Constitution,24 and later the 1987 Constitution, municipal
corporations were granted fiscal autonomy via a general delegation of the power to
tax.25 Section 5, Article XI of the 1973 Constitution gave LGUs the "power to create its
own sources of revenue and to levy taxes, subject to such limitations as may be
provided by law.'' This authority was further strengthened in the 1987 Constitution,
through the inclusion in Section 5, Article X thereof of the condition that " [s]uch taxes,
fees, and charges shall accrue exclusively to local governments."26
Accordingly, under the present Constitution, where there is neither a grant nor a
prohibition by statute, the tax power of municipal corporations must be deemed to exist
although Congress may provide statutory limitations and guidelines. 27 The basic
rationale for the current rule on local fiscal autonomy is the strengthening of LGUs and
18
the safeguarding of their viability and self-sufficiency through a direct grant of general
and broad tax powers. Nevertheless, the fundamental law did not intend the delegation
to be absolute and unconditional. The legislature must still see to it that (a) the taxpayer
will not be over-burdened or saddled with multiple and unreasonable impositions; (b)
each LGU will have its fair share of available resources; ( c) the resources of the
national government will not be unduly disturbed; and ( d) local taxation will be fair,
uniform, and just.28
In conformity to the dictate of the fundamental law for the legislature to "enact a local
government code which shall provide for a more responsive and accountable local
government structure instituted through a system of decentralization," 29 consistent with
the basic policy of local autonomy, Congress enacted the LGC, Book II of which governs
local taxation and fiscal matters and sets forth the guidelines and limitations for the
exercise of this power. In Pelizloy Realty Corporation v. The Province of Benguet, 30 the
Court alluded to the fundamental principles governing the taxing powers of LGUs as laid
out in Section 130 of the LGC, to wit:
1. Taxation shall be uniform in each LGU.
2. Taxes, fees, charges and other impositions shall:
a. be equitable and based as far as practicable on the taxpayer's
ability to pay;
b. be levied and collected only for public purposes;
c. not be unjust, excessive, oppressive, or confiscatory;
d. not be contrary to law, public policy, national economic policy, or in
the restraint of trade.
3. The collection of local taxes, fees, charges and other impositions shall in no
case be let to any private person.
4. The revenue collected pursuant to the provisions of the LGC shall inure
solely to the benefit of, and be subject to the disposition by, the LGU levying
the tax, fee, charge or other imposition unless otherwise specifically provided
by the LGC.
5. Each LGU shall, as far as practicable, evolve a progressive system of
taxation.
It is in the application of the adverted fourth rule, that is-all revenue collected pursuant to
the provisions of the LGC shall inure solely to the benefit of, and be subject to the
disposition by, the LGU levying the tax, fee, charge or other imposition unless otherwise
specifically provided by the LGC-upon which the present controversy grew.
RA 9167 violates local fiscal autonomy
It is beyond cavil that the City of Cebu had the authority to issue its City Ordinance No.
LXIX and impose an amusement tax on cinemas pursuant to Sec. 140 in relation to Sec.
151 of the LGC. Sec. 140 states, among other things, that a "province may levy an
amusement tax to be collected from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate
of not more than thirty percent (30%) of the gross receipts from admission fees." By
operation of said Sec. 151,31 extending to them the authority of provinces and
municipalities to levy certain taxes, fees, and charges, cities, such as respondent city
government, may therefore validly levy amusement taxes subject to the parameters set
forth under the law. Based on this authority, the City of Cebu passed, in 1993, its
Revised Omnibus Tax Ordinance,32 Chapter XI, Secs. 42 and 43 of which reads:
CHAPTER XI - Amusement Tax
Section 42. Rate of Tax. - There shall be paid to the Office of the City Treasurer by the
proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing
stadia and other places of amusement, an amusement tax at the rate of thirty percent
(30%) of the gross receipts from admission fees.33
Section 43. Manner of Payment. - In the case of theaters or cinemas, the tax shall first
be deducted and withheld by their proprietors, lessees, or operators and paid to the city
treasurer before the gross receipts are divided between said proprietor, lessees,
operators, and the distributors of the cinematographic films.
Then, after almost a decade of cities reaping benefits from this imposition, Congress,
through RA 9167, amending Section 140 of the LGC,34 among others, transferred this
income from the cities and municipalities in Metropolitan Manila and highly urbanized
and independent component cities, such as respondent City of Cebu, to petitioner
FDCP, which proceeds will ultimately be rewarded to the producers of graded films. We
reproduce anew Secs. 13 and 14 of RA 9167, thus:
Section 13. Privileges of Graded Films. - Films which have obtained an "A" or "B"
grading from the Council pursuant to Sections 11 and 12 of this Act shall be entitled to
the following privileges: a. Amusement tax reward. - A grade "A" or "B" film shall entitle
its producer to an incentive equivalent to the amusement tax imposed and collected on
the graded films by cities and municipalities in Metro Manila and other highly urbanized
and independent component cities in the Philippines pursuant to Sections 140 to 151 of
Republic Act No. 7160 at the following rates:
1. For grade "A" films - 100% of the amusement tax collected on such film; and
2. For grade "B" films - 65% of the amusement tax collected on such films. The
remaining thirty-five (35%) shall accrue to the funds of the Council.
Section 14. Amusement Tax Deduction and Remittance. -All revenue from the
amusement tax on the graded film which may otherwise accrue to the cities and
municipalities in Metropolitan Manila and highly urbanized and independent component
cities in the Philippines pursuant to Section 140 of Republic Act. No. 7160 during the
period the graded film is exhibited, shall be deducted and withheld by the proprietors,
operators or lessees of theaters or cinemas and remitted within thirty (30) days from the
19
termination of the exhibition to the Council which shall reward the corresponding
amusement tax to the producers of the graded film within fifteen (15) days from receipt
thereof.
Proprietors, operators and lessees of theaters or cinemas who fail to remit the
amusement tax proceeds within the prescribed period shall be liable to a surcharge
equivalent to five percent (5%) of the amount due for each month of delinquency which
shall be paid to the Council.
Considering the amendment, the present rule is that ALL amusement taxes levied by
covered cities and municipalities shall be 2iven by proprietors, operators or lessees of
theatres and cinemas to FDCP, which shall then reward said amount to the producers of
graded films in this wise:
1. For grade "A" films, ALL amusement taxes collected by ALL covered LGUs
on said films shall be given to the producer thereof. The LGU, therefore, is
entitled to NOTHING from its own imposition.
2. For grade "B" films, SIXTY FIVE PERCENT (65%) of ALL amusement taxes
derived by ALL covered LGUs on said film shall be given to the producer
thereof. In this case, however, the LGU is still NOT entitled to any portion of the
imposition, in view of Sec. 16 of RA 9167 which provides that the remaining
35% may be expended for the Council's operational expenses. Thus: Section
16. Funding. - The Executive Secretary shall immediately include in the Office
of the President's program the implementation of this Act, the funding of which
shall be included in the annual General Appropriations Act.
To augment the operational expenses of the Council, the Council may:
a. Utilize the remaining thirty-five (35%) percent of the amusement tax collected during
the period of grade "B" film is exhibited, as provided under Sections 13 and 14 hereof x
x x.
For petitioner, the amendment is a valid legislative manifestation of the intention to
remove from the grasp of the taxing power of the covered LGUs all revenues from
amusement taxes on grade "A" or "B" films which would otherwise accrue to them. An
evaluation of the provisions in question, however, compels Us to disagree.
RA 9167, Sec. 14 states:
Section 14. Amusement Tax Deduction and Remittance. - All revenue from the
amusement tax on the graded film which may otherwise accrue to the cities and
municipalities in Metropolitan Manila and highly urbanized and independent component
cities in the Philippines pursuant to Section 140 of Republic Act. No. 7160 during the
period the graded film is exhibited, shall be deducted and withheld by the proprietors,
operators or lessees of theaters or cinemas and remitted within thirty (30) days from the
termination of the exhibition to the Council which shall reward the corresponding
amusement tax to the producers of the graded film within fifteen (15) days from receipt
thereof.
A reading of the challenged provision reveals that the power to impose amusement
taxes was NOT removed from the covered LGUs, unlike what Congress did for the
taxes enumerated in Sec. 133, Article X of the LGC,35 which lays down the common
limitations on the taxing powers of LGUs. Thus:
Section 133. Common Limitations on the Taxing Powers of Local Government Units. -
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis
causa, except as otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves,
tonnage dues, and all other kinds of customs fees, charges and dues except
wharfage on wharves constructed and maintained by the local government unit
concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or
out of, or passing through, the territorial jurisdictions of local government units
in the guise of charges for wharfage, tolls for bridges or otherwise, or other
taxes, fees, or charges in any form whatsoever upon such goods or
merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by
marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as
pioneer or non-pioneer for a period of six (6) and four (4) years, respectively
from the date of registration;
(h) Excise taxes on articles enumerated under the national Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or
similar transactions on goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code;
(k) Taxes on premiums paid by way or reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving thereof, except
tricycles;
20
(m) Taxes, fees, or other charges on Philippine products actually exported,
except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business
Enterprises and cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938)
otherwise known as the "Cooperative Code of the Philippines" respectively;
and
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units. (emphasis ours)
From the above, the difference between Sec. 133 and the questioned amendment of
Sec. 140 of the LGC by RA 9167 is readily revealed. In Sec. · 133, what Congress did
was to prohibit the levy by LGUs of the enumerated taxes. For RA 9167, however, the
covered LGUs were deprived of the income which they will otherwise be collecting
should they impose amusement taxes, or, in petitioner's own words, "Section 14 of [RA
9167] can be viewed as an express and real intention on the part of Congress to remove
from the LGU's delegated taxing power, all revenues from the amusement taxes on
graded films which would otherwise accrue to [them] pursuant to Section 140 of the
[LGC]."36
In other words, per RA 9167, covered LGUs still have the power to levy amusement
taxes, albeit at the end of the day, they will derive no revenue therefrom. The same,
however, cannot be said for FDCP and the producers of graded films since the amounts
thus levied by the LGUs which should rightfully accrue to them, they being the taxing
authority-will be going to their coffers. As a matter of fact, it is only through the exercise
by the LGU of said power that the funds to be used for the amusement tax reward can
be raised. Without said imposition, the producers of graded films will receive nothing
from the owners, proprietors and lessees of cinemas operating within the territory of the
covered LGU.
Taking the resulting scheme into consideration, it is apparent that what Congress did in
this instance was not to exclude the authority to levy amusement taxes from the taxing
power of the covered LGUs, but to earmark, if not altogether confiscate, the income to
be received by the LGU from the taxpayers in favor of and for transmittal to FDCP,
instead of the taxing authority. This, to Our mind, is in clear contravention of the
constitutional command that taxes levied by LGUs shall accrue exclusively to said LGU
and is repugnant to the power of LGUs to apportion their resources in line with their
priorities.
It is a basic precept that the inherent legislative powers of Congress, broad as they may
be, are limited and confined within the four walls of the Constitution. 37 Accordingly,
whenever the legislature exercises its power to enact, amend, and repeal laws, it should
do so without going beyond the parameters wrought by the organic law.
In the case at bar, through the application and enforcement of Sec. 14 of RA 9167, the
income from the amusement taxes levied by the covered LGUs did not and will under no
circumstance accrue to them, not even partially, despite being the taxing authority
therefor. Congress, therefore, clearly overstepped its plenary legislative power, the
amendment being violative of the fundamental law's guarantee on local autonomy, as
echoed in Sec. 130(d) of the LGC, thus: Section 130. Fundamental Principles. - The
following fundamental principles shall govern the exercise of the taxing and other
revenue-raising powers of local government units:
xxxx
(d) The revenue collected pursuant to the provisions of this Code shall inure solely to
the benefit of, and be subject to the disposition by, the local government unit levying the
tax, fee, charge or other imposition unless otherwise specifically provided herein x x x.
Moreover, in Pimentel,38 the Court elucidated that local fiscal autonomy includes the
power of LGUs to allocate their resources in accordance with their own priorities. By
earmarking the income on amusement taxes imposed by the LGUs in favor of FDCP
and the producers of graded films, the legislature appropriated and distributed the LGUs'
funds-as though it were legally within its control-under the guise of setting a limitation on
the LGUs' exercise of their delegated taxing power. This, undoubtedly, is a usurpation of
the latter's exclusive prerogative to apportion their funds, an impermissible intrusion into
the LGUs' constitutionally-protected domain which puts to naught the guarantee of fiscal
autonomy to municipal corporations enshrined in our basic law.
Grant of amusement tax reward incentive:
not a tax exemption
It was argued that subject Sec. 13 is a grant by Congress of an exemption from
amusement taxes in favor of producers of graded films. Without question, this Court has
previously upheld the power of Congress to grant exemptions over the power of LGUs
to impose taxes.39 This amusement tax reward, however, is not, as the lower court
posited, a tax exemption. Exempting a person or entity from tax is to relieve or to excuse
that person or entity from the burden of the imposition. Here, however, it cannot be said
that an exemption from amusement taxes was granted by Congress to the producers of
graded films. Take note that the burden of paying the amusement tax in question is on
the proprietors, lessors, and operators of the theaters and cinemas that showed the
graded films. Thus, per City Ordinance No. LXIX: CHAPTER XI - Amusement Tax
Section 42. Rate of Tax. - There shall be paid to the Office of the City Treasurer by the
proprietors, lessees, or operators of theaters, cinemas, concert halls,, circuses, boxing
stadia and other places of amusement, an amusement tax at the rate of thirty percent
(30%) of the gross receipts from admission fees.
Section 43. Manner of Payment. - In the case of theaters or cinemas, the tax shall first
be deducted and withheld by their proprietors, lessees, or operators and paid to the city
treasurer before the gross receipts are divided between said proprietor, lessees,
operators, and the distributors of the cinematographic films.
Similarly, the LGC provides as follows:
Section 140. Amusement Tax. –
21
(a) The province may levy an amusement tax to be collected from the
proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement at a rate of not more than thirty
percent (30%) of the gross receipts from admission fees.
(b) In the case of theaters or cinemas, the tax shall first be deducted and
withheld by their proprietors, lessees, or operators and paid to the provincial
treasurer before the gross receipts are divided between said proprietors,
lessees, or operators and the distributors of the cinematographic films.
Simply put, both the burden and incidence of the amusement tax are borne by the
proprietors, lessors, and operators, not by the producers of the graded films. The
transfer of the amount to the film producers is actually a monetary reward given to them
for having produced a graded film, the funding for which was taken by the national
government from the coffers of the covered LGUs. Without a doubt, this is not an
exemption from payment of tax.
Declaration by the RTC, Branch 5 of the
entire RA 9167 as unconstitutional
Noticeably, the RTC, Branch 5, in its September 25, 2012 Decision in Colon Heritage v.
FDCP, ruled against the constitutionality of the entire law, not just the assailed Sec. 14.
The fallo of the judgment reads:
WHEREFORE, in view of all the foregoing, Judgment is hereby rendered in favor of
petitioner, as follows:
(1) Declaring Republic Act No. 9167 as invalid and unconstitutional;
(2) The obligation to remit amusement taxes for the graded films to respondent
is ordered extinguished;
(3) Directing respondent to refund all the amounts paid by petitioner, by way of
amusement tax, plus the legal rate of interest thereof, until the whole amount is
paid in full.
In this regard, it is well to emphasize that if it appears that the rest of the law is free from
the taint of unconstitutionality, then it should remain in force and effect if said law
contains a separability clause. A separability clause is a legislative expression of intent
that the nullity of one provision shall not invalidate the other provisions of the act. Such a
clause is not, however, controlling and the courts, in spite of it, may invalidate the whole
statute where what is left, after the void part, is not complete and workable.40
In this case, not only does RA 9167 have a separability clause, contained in Section 23
thereof which reads:
Section 23. Separability Clause. -If, for any reason, any provision of this Act, or any part
thereof, is declared invalid or unconstitutional, all other sections or provisions not
affected thereby shall remain in force and effect.
it is also true that the constitutionality of the entire law was not put m question in any of
the said cases.
Moreover, a perusal of RA 9167 easily reveals that even with the removal of Secs. 13
and 14 of the law, the remaining provisions can survive as they mandate other matters
like a cinema evaluation system, an incentive and reward system, and local and
international film festivals and activities that "will promote the growth and development
of the local film industry and promote its participation in both domestic and foreign
markets," and to "enhance the skills and expertise of Filipino talents."41
Where a part of a statute is void as repugnant to the Constitution, while another part is
valid, the valid portion, if separable from the invalid, may stand-and be enforced. The
exception to this is when the parts of a statute are so mutually dependent and
connected, as conditions, considerations, inducements, or compensations for each
other, as to warrant a belief that the legislature intended them as a whole, in which case,
the nullity of one part will vitiate the rest.42
Here, the constitutionality of the rest of the provisions of RA 9167 was never put in
question. Too, nowhere in the assailed judgment of the RTC was it explicated why the
entire law was being declared as unconstitutional.
It is a basic tenet that courts cannot go beyond the issues in a case, 43 which the RTC,
Branch 5 did when it declared RA 9167 unconstitutional. This being the case, and in
view of the elementary rule that every statute is presumed valid, 44 the declaration by the
R TC, Branch 5 of the entirety of RA 9167 as unconstitutional, is improper.
Amounts paid by Colon Heritage
need not be returned
Having ruled that the questioned provisions are unconstitutional, the RTC, Branch 5, in
Colon Heritage v. FDCP, ordered the return of all amounts paid by respondent Colon
Heritage to FDCP by way of amusement tax. Thus:
WHEREFORE, in view of all the foregoing, Judgment is hereby rendered in favor of
petitioner, as follows:
(1) Declaring Republic Act No. 9167 as invalid and unconstitutional;
(2) The obligation to remit amusement taxes for the graded films to respondent
is ordered extinguished;
(3) Directing respondent to refund all the amounts paid by petitioner, by way of
amusement tax, plus the legal rate of interest thereof, until the whole amount is
paid in full.
As regards the refund, the Court cannot subscribe to this position.
It is a well-settled rule that an unconstitutional act is not a law; it . confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is inoperative as if it
has not been passed at all. Applying this principle, the logical conclusion would be to
22
order the return of all the amounts remitted to FDCP and given to the producers of
graded films, by all of the covered cities, which actually amounts to hundreds of millions,
if not billions. In fact, just for Cebu City, the aggregate deficiency claimed by FDCP is
ONE HUNDRED FIFTY NINE MILLION THREE HUNDRED SEVENTY SEVEN
THOUSAND NINE HUNDRED EIGHTY-EIGHT PESOS AND FIFTY FOUR CENTAVOS
(₱159,377,988.54). Again, this amount represents the unpaid amounts to FDCP by eight
cinema operators or proprietors in only one covered city.
An exception to the above rule, however, is the doctrine of operative fact, which applies
as a matter of equity and fair play. This doctrine nullifies the effects of an
unconstitutional law or an executive act by recognizing that the existence of a statute
prior to a determination of unconstitutionality is an operative fact and may have
consequences that cannot always be ignored. It applies when a declaration of
unconstitutionality will impose an undue burden on those who have relied on the invalid
law.45
In Hacienda Luisita v. PARC, the Court elucidated the meaning and scope of the
operative fact doctrine, viz:
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it
is stated that a legislative or executive act, prior to its being declared as unconstitutional
by the courts, is valid and must be complied with, thus:
xxx xxx xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension, as we
have no reason to do so, much less retroactively apply such nullification to deprive
private respondent of a compelling and valid reason for not filing the leave application.
For as we have held, a void act though in law a mere scrap of paper nonetheless
confers legitimacy upon past acts or omissions done in reliance thereof. Consequently,
the existence of a statute or executive order prior to its being adjudged void is an
operative fact to which legal consequences are attached. It would indeed be ghastly
unfair to prevent private respondent from relying upon the order of suspension in lieu of
a formal leave application.
The applicability of the operative fact doctrine to executive acts was further explicated
by this Court in Rieta v. People, thus:
Petitioner contends that his arrest by virtue of Arrest . Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated-General Order
No. 60, issued by then President Ferdinand E. Marcos - was subsequently declared by
the Court, in Tanada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any
evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Tanada, the Court addressed the possible effects of its declaration
of the invalidity of various presidential issuances.1a\^/phi1 Discussing therein how such
a declaration might affect acts done on a presumption of their validity, the Court said:
" ... In similar situations in the past this Court had taken the pragmatic and realistic
course set forth in Chicot County Drainage District vs. Baxter Bank to wit:
'The courts below have proceeded on the theory that the Act of Congress, having been
found to be unconstitutional, was not a law; that it was inoperative, conferring no rights
and imposing no duties, and hence affording no basis for the challenged decree. . . . It is
quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute,
prior to [the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to invalidity may have to
be considered in various aspects – with respect to particular conduct, private and
official. Questions of rights claimed to have become vested, of status, of prior
determinations deemed to have finality and acted upon accordingly, of public policy in
the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have
engaged the attention of courts, state and federal, and it is manifest from numerous
decisions that an all-inclusive statement of a principle of absolute retroactive invalidity
cannot be justified.'
xxx xxx xxx
"Similarly, the implementation/ enforcement of presidential decrees prior to their
publication in the Official Gazette is 'an operative fact which may have consequences
which cannot be justly ignored. The past cannot always be erased by a new judicial
declaration ... that an all-inclusive statement of a principle of absolute retroactive
invalidity cannot be justified."
The Chicot doctrine cited in Tanada advocates that, prior to the nullification of a statute,
there is an imperative necessity of taking into account its actual existence as an
operative fact negating the acceptance of "a principle of absolute retroactive invalidity."
Whatever was done while the legislative or the executive act was in operation should be
duly recognized and presumed to be valid in all respects. The ASSO that was issued in
1979 under General Order No. 60 - long before our Deeision n Taiiada and the arrest of
petitioner - is an operative fact that can no longer be disturbed or simply ignored.
(citations omitted; emphasis in the original.)
Bearing in mind that PARC Resolution No. 89-12-2-an executive act-was declared
invalid in the instant case, the operative fact doctrine is clearly applicable. 46
Here, to order FDCP and the producers of graded films which may have already
received the amusement tax incentive reward pursuant to the questioned provisions of
RA 9167, to return the amounts received to the respective taxing authorities would
certainly impose a heavy, and possibly crippling, financial burden upon them who
merely, and presumably in good faith, complied with the legislative fiat subject of this
case. For these reasons, We are of the considered view that the application of the
doctrine of operative facts in the case at bar is proper so as not to penalize FDCP for
having complied with the legislative command in RA 9167, and the producers of graded
films who have already received their tax cut prior to this Decision for having produced
top-quality films.
23
With respect to the amounts retained by the cinema proprietors due to petitioner FDCP,
said proprietors are required under the law to remit the same to petitioner. Obeisance to
the rule of law must always be protected and preserved at all times and the unjustified
refusal of said proprietors cannot be tolerated. The operative fact doctrine equally
applies to the non-remittance by said proprietors since the law produced legal effects
prior to the declaration of the nullity of Secs. 13 and 14 in these instant petitions. It can
be surmised, however, that the proprietors were at a loss whether or not to remit said
amounts to FDCP considering the position of the City of Cebu for them to remit the
amusement taxes directly to the local government. For this reason, the proprietors shall
not be liable for surcharges.
In view of the declaration of nullity of unconstitutionality of Secs. 13 and 14 of RA 9167,
all amusement taxes remitted to petitioner FDCP prior to the date of the finality of this
decision shall remain legal and valid under the operative fact doctrine. Amusement
taxes due to petitioner but unremitted up to the finality of this decision shall be remitted
to petitioner within thirty (30) days from date of finality. Thereafter, amusement taxes
previously covered by RA 9167 shall be remitted to the local governments.
WHEREFORE, premises considered, the consolidated petitions are hereby PARTIALLY
GRANTED. The questioned Decision of the RTC, Branch 5 of Cebu City in Civil Case
No. CEB-35601 dated September 25, 2012 and that of the R TC, Branch 14, Cebu City
in Civil Case No. CEB-35529 dated October 24, 2012, collectively declaring Sections 13
and 14 of Republic Act No. 9167 invalid and unconstitutional, are hereby AFFIRMED
with MODIFICATION.
As modified, the decisions of the lower courts shall read:
1. Civil Case No. CEB-35601 entitled Colon Heritage Realty Corp. v. Film Development
Council of the Philippines:
WHEREFORE, in view of all the foregoing, Judgment is hereby rendered in favor of
Colon Heritage Realty Corp. and against the Film Development council of the
Philippines, as follows: 1. Declaring Sections 13 and 14 of Republic Act No. 9167
otherwise known as an Act Creating the Film Development Council of the Philippines,
Defining its Powers and Functions, Appropriating Funds therefor arid for other purposes,
as invalid and unconstitutional;
2. Declaring that the Film Development Council of the Philippines cannot
collect under Sections 13 and 14 of R.A. 9167 as of the finality of the decision
in G.R. Nos. 203754 and 204418;
3. Declaring that Colon Heritage Realty Corp. has the obligation to remit the
amusement taxes withheld on graded cinema films to FDCP under Sections 13
and 14 of R.A. 9167 for taxes due prior to the finality of this Decision, without
surcharges;
4. Declaring that upon the finality of this decision, all amusement taxes
withheld and those which may be collected by Colon Heritage Realty Corp. on
graded films shown in its cinemas in Cebu City shall be remitted to Cebu City
pursuant to City Ordinance LXIX, Chapter XI, Section 42.
2. Civil Case No. CEB-35529 entitled City of Cebu v. Film Development Council of the
Philippines:

WHEREFORE, in view of all the disquisitions, judgment is rendered in favor of the City
of Cebu against the Film development Council of the Philippines, as follows:

1. Declaring Sections 13 and 14 of Republic Act No. 9167 otherwise known as

an Act Creating the Film Development Council of the Philippines, Defining its
Powers and Functions, Appropriating Funds therefor and for other purposes,
void and unconstitutional;

2. Declaring that the Film Development Council of the Philippines cannot

collect under Sections 13 and 14 of R.A. 9167 as of the finality of this Decision;

3. Declaring that Intervenor SM Cinema Corporation has the obligation to remit

the amusement taxes, withheld on graded cinema films to respondent FDCP
under Sections 13 and 14 of R.A. 9167 for taxes due prior to the finality of this
Decision, without surcharges;

4. Declaring that after the finality of this Decision, all amusement taxes withheld
and those which may be collected by Intervenor SM on graded films shown in
SM Cinemas in Cebu City shall be remitted to petitioner Cebu City pursuant to
City Ordinance LXIX, Chapter XI, Section 42.

As to the sum of PhP 76,836,807.08 remitted by the Intervenor SM to petitioner City of

Cebu, said amount shall be remitted by the City of Cebu to petitioner FDCP within thirty
(30) days from finality of this decision in G.R. Nos. 203754 and 204418 without interests
and surcharges. Since Sections 13 and 14 of Republic Act No. 9167 were declared void
and unconstitutional, all remittances of amusement taxes pursuant to said Sections 13
and 14 of said law prior to the date of finality of this Decision shall remain valid and
legal. Cinema proprietors who failed to remit said amusement taxes to petitioner FDCP
prior to the date of finality of this Decision are obliged to remit the same, without
surcharges, to petitioner FDCP under the doctrine of operative fact.

SO ORDERED.

24
 SECOND DIVISION Petron duly filed with Navotas a letter-protest to the notice of assessment pursuant to
Section 195 of the Code. It argued that it was exempt from local business taxes in view
PETRON CORPORATION, G.R. No. 158881 of Art. 232(h) of the Implementing Rules (IRR) of the Code, as well as a ruling of the
Petitioner, Bureau of Local Government Finance of the Department of Finance dated 31 July 1995,
Present: the latter stating that sales of petroleum fuels are not subject to local taxation. The letter-
protest was denied by the Navotas Municipal Treasurer, respondent Manuel T. Enriquez,
- versus - QUISUMBING, J., in a letter dated 8 May 2002.[4] This was followed by a letter from the Mayor dated 15 May
Chairperson, 2002, captioned Final Demand to Pay, requiring that Petron pay the assessed amount
CARPIO MORALES, within five (5) days from receipt thereof, with a threat of closure of Petrons operations
TINGA, within Navotas should there be no payment. [5] Petron, through counsel, replied to the
MAYOR TOBIAS M. TIANGCO, VELASCO, JR, and Mayor by another letter posing objections to the threat of closure. The Mayor did not
and MUNICIPAL TREASURER BRION, JJ. respond to this last letter.[6]
MANUEL T. ENRIQUEZ of the
MUNICIPALITY OF NAVOTAS, Thus, on 20 May 2002, Petron filed with the Malabon RTC a Complaint for
METRO MANILA, Cancellation of Assessment for Deficiency Taxes with Prayer for the Issuance of a
Respondents. Temporary Restraining Order (TRO) and/or Preliminary Injunction. The quested TRO was
not issued by the Malabon RTC upon manifestation of respondents that they would not
Promulgated: proceed with the closure of Petrons Navotas bulk plant until after the RTC shall have
April 16, 2008 decided the case on the merits.[7] However, while the case was pending decision,
respondents refused to issue a business permit to Petron, thus prompting Petron to file a
x----------------------------------------------------------------------------x Supplemental Complaint with Prayer for Preliminary Mandatory Injunction against
respondents.[8]

DECISION On 5 May 2003, the Malabon RTC rendered its Decision dismissing Petrons
complaint and ordering the payment of the assessed amount. [9] Eleven days later, Petron
TINGA, J.: received a Closure Order from the Mayor, directing Petron to cease and desist from
operating the bulk plant. Petron sought a TRO from the Malabon RTC, but this was
The novel but important issue before us is whether a local government unit is empowered denied.[10] Petron also filed a motion for reconsideration of the order of denial, but this was
under the Local Government Code (the LGC) to impose business taxes on persons or likewise denied.[11]
entities engaged in the sale of petroleum products.
On 4 August 2003, this Court issued a TRO, enjoining the respondents from
I. closing Petrons Navotas bulk plant or otherwise interfering in its operations.[12]

The present Petition for Review on Certiorari under Rule 45 filed by petitioner Petron
Corporation (Petron) directly assails the Decision of the Regional Trial Court (RTC) of
Malabon, Branch 74, which dismissed petitioners complaint for cancellation of II.
assessment made by the then municipality (now City) of Navotas (Navotas) for
deficiency taxes, and ordering the payment of P10,204,916.17 pesos in business taxes As earlier stated, Petron has opted to assail the RTC Decision directly before
to Navotas. As the issues raised are pure questions of law, we need not dwell on the this Court since the matter at hand involves pure questions of law, a characterization
facts at length. conceded by the RTC Decision itself. Particularly, the controversy hinges on the correct
interpretation of Section 133(h) of the LGC, and the applicability of Article 232 (h) of the
Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. IRR.
Through that depot, it has engaged in the selling of diesel fuels to vessels used in
commercial fishing in and around Manila Bay.[1] On 1 March 2002, Petron received a Section 133(h) of the LGC reads as follows:
letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the corporation
was assessed taxes relative to the figures covering sale of diesel declared by your Sec. 133. Common Limitations on the Taxing Powers of
Navotas Terminal from 1997 to 2001.[2] The stated total amount due was P6,259,087.62, Local Government Units. - Unless otherwise provided herein, the
a figure derived from the gross sales of the depot during the years in question. The exercise of the taxing powers of provinces, cities, municipalities, and
computation sheets[3] that were attached to the letter made reference to Ordinance 92- Barangays shall not extend to the levy of the following:
03, or the New Navotas Revenue Code (Navotas Revenue Code), though such enactment
was not cited in the letter itself.
25
 xxx
(h) Excise taxes on articles enumerated under the National
Internal Revenue Code, as amended, and taxes, fees or charges on
petroleum products;
Evidently, Section 133 prescribes the limitations on the capacity of local
government units to exercise their taxing powers otherwise granted to them under the
LGC. Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot
be imposed by local government units, namely: excise taxes on articles enumerated under
the National Internal Revenue Code [(NIRC)], as amended; and taxes, fees or charges
on petroleum products.
The power of a municipality to impose business taxes is provided for in Section
143 of the LGC. Under the provision, a municipality is authorized to impose business
taxes on a whole host of business activities. Suffice it to say, unless there is another
provision of law which states otherwise, Section 143, broad in scope as it is, would
undoubtedly cover the business of selling diesel fuels, or any other petroleum product for
that matter.
Nonetheless, Article 232 of the IRR defines with more particularity the capacity
of a municipality to impose taxes on businesses. The enumeration that follows is generally
a positive list of businesses which may be subjected to business taxes, and paragraph (h)
of Article 232 does allow the imposition of local business taxes [o]n any business not
otherwise specified in the preceding paragraphs which the sanggunian concerned may
deem proper to tax, but subject to this important qualification, thus:
xxx provided further, that in line with existing national policy,
any business engaged in the production, manufacture, refining,
distribution or sale of oil, gasoline and other petroleum products shall
not be subject to any local tax imposed on this article.
Notably, the Malabon RTC declared Art. 232(h) of the IRR void because the Code
purportedly does not contain a provision prohibiting the imposition of business
taxes on petroleum products.[13] This submission warrants close examination as
well.
With all the relevant provisions of law laid out, we address the core issues submitted by
Petron, namely: first, is the challenged tax on sale of the diesel fuels an excise tax on an
article enumerated under the NIRC, thusly prohibited under Section 133(h) of the Code?;
second, is the challenged tax prohibited by Section 133(h) under the proviso, taxes, fees
or charges on petroleum products? and; third, does Art. 232(h) of the IRR similarly prohibit
the imposition of the challenged tax?
III
As earlier observed, Section 133(h) provides two kinds of taxes which cannot be
imposed by local government units: excise taxes on articles enumerated under the NIRC,
26
as amended; and taxes, fees or charges on petroleum products. There is no doubt that
among the excise taxes on articles enumerated under the NIRC are those levied on
petroleum products, per Section 148 of the NIRC.
We first consider Petrons argument that the business taxes on its sale of diesel
fuels partakes of an excise tax, which if true, could invalidate the challenged tax solely on
the basis of the phrase excise taxes on articles enumerated under the [NIRC]. To support
this argument, it cites Cordero v. Conda,[14] Allied Thread Co. Inc. v. City Mayor
of Manila,[15] and Iloilo Bottlers, Inc. v. City of Iloilo,[16] as having explained that an excise
tax is a tax upon the performance, carrying on, or the exercise of an
activity.[17] Respondents, on the other hand, argue that what the provision prohibits is the
imposition of excise taxes on petroleum products, but not the imposition of business taxes
on the same. They cite Philippine Petroleum Corporation v. Municipality of Pililia,[18] where
the Court had noted, [a] tax on business is distinct from a tax on the article itself. [19]
Petrons argument is fraught with far-reaching implications, for if it were
sustained, it would mean that local government units are barred from imposing business
taxes on any of the articles subject to excise taxes under the NIRC. These would include
alcohol products,[20] tobacco products,[21] mineral products[22] automobiles,[23] and such
non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts
and other vessels intended for pleasure or sports.[24]
Admittedly, the proffered definition of an excise tax as a tax upon the
performance, carrying on, or exercise of some right, privilege, activity, calling or
occupation derives from the compendium American Jurisprudence, popularly referred to
as Am Jur,,[25] and has been cited in previous decisions of this Court, including
those cited by Petron itself. Such a definition would not have been inconsistent with
previous incarnations of our Tax Code, such as the NIRC of 1939, [26] as amended, or the
NIRC of 1977[27] because in those laws the term excise tax was not used at all. In contrast,
the nomenclature used in those prior laws in referring to taxes imposed on specific articles
was specific tax.[28] Yet beginning with the National Internal Revenue Code of 1986, as
amended, the term excise taxes was used and defined as applicable to goods
manufactured or produced in the Philippines and to things imported.[29]This definition was
carried over into the present NIRC of 1997.[30] Further, these two latest codes categorize
two different kinds of excise taxes: specific tax which is imposed and based on weight or
volume capacity or any other physical unit of measurement; and ad valorem tax which is
imposed and based on the selling price or other specified value of the goods. In other
words, the meaning of excise tax has undergone a transformation, morphing from the Am
Jur definition to its current signification which is a tax on certain specified goods or articles.
The change in perspective brought forth by the use of the term excise tax in a
different connotation was not lost on the departed author Jose Nolledo as he accorded
divergent treatments in his 1973 and 1994 commentaries on our tax laws. Writing in 1973,
and essentially alluding to the Am Jur definition of excise tax, Nolledo observed:
Are specific taxes, taxes on property or excise taxes
In the case of Meralco v. Trinidad ([G.R.] 16738, 1925) it was
held that specific taxes are property taxes, a ruling which seems to be
erroneous. Specific taxes are truly excise taxes for the fact that the value
of the property taxed is taken into account will not change the nature of
 the tax. It is correct to say that specific taxes are taxes on the privilege
to import, manufacture and remove from storage certain articles
specified by law.[31]
In contrast, after the tax code was amended to classify specific taxes as a subset
of excise taxes, Nolledo, in his 1994 commentaries, wrote:
1. Excise taxes, as used in the Tax Code, refers to taxes applicable to
certain specified goods or articles manufactured or produced in the Philippines
for domestic sale or consumption or for any other disposition and to things
imported into the Philippines. They are either specific or ad valorem.
2. Nature of excise taxes. They are imposed directly on certain
specified goods. (infra) They are, therefore, taxes on property.
(see Medina vs. City of Baguio, 91 Phil. 854.)
A tax is not excise where it does not subject directly the
produce or goods to tax but indirectly as an incident to, or in connection
with, the business to be taxed.[32]
In their 2004 commentaries, De Leon and De Leon restate the Am Jur definition
of excise tax, and observe that the term is synonymous with privilege tax and [both terms]
are often used interchangeably.[33] At the same time, they offer a caveat that [e]xcise tax,
as [defined by Am Jur], is not to be confused with excise tax imposed [by the NIRC] on
certain specified articles manufactured or produced in, or imported into, the Philippines,
for domestic sale or consumption or for any other disposition. [34]
It is evident that Am Jur aside, the current definition of an excise tax is that of a
tax levied on a specific article, rather than one upon the performance, carrying on, or the
exercise of an activity. This current definition was already in place when the Code was
enacted in 1991, and we can only presume that it was what the Congress had intended
as it specified that local government units could not impose excise taxes on articles
enumerated under the [NIRC]. This prohibition must pertain to the same kind of excise
taxes as imposed by the NIRC, and not those previously defined excise taxes which were
not integrated or denominated as such in our present tax law.
It is quite apparent, therefore, that our current body of taxation law does not
explicitly accommodate the traditional definition of excise tax offered by Petron. In fact,
absent any statutory adoption of the traditional definition, it may be said that starting in
1986 excise taxes in this jurisdiction refer exclusively to specific or ad valorem taxes
imposed under the NIRC. At the very least, it is this concept of excise tax which we can
reasonably assume that Congress had in mind and actually adopted when it crafted the
Code. The palpable absurdity that ensues should the alternative interpretation prevail all
but strengthens this position.
Thus, Petrons argument concerning excise taxes is founded not on what the
NIRC or the Code actually provides, but on a non-statutory definition sourced from a legal
paradigm that is no longer applicable in this jurisdiction. That such definition was referred
to again in our 1998 decision in Province of Bulacan v. Court of Appeals [35] is ultimately
of little consequence, and so is Petrons reliance on such ruling. The Court therein had
27
correctly nullified, on the basis of Section 133(h) of the Code, a province-imposed tax of
10% of the fair market value in the locality per cubic meter of ordinary stones, sand, gravel,
earth and other quarry resources xxx extracted from public lands, because it noted that
under Section 151 of the NIRC, all nonmetallic minerals and quarry resources were
assessed with excise taxes of two percent (2%) based on the actual market value of the
gross output thereof at the time of removal, in case of those locally extracted or
produced.[36] Additionally, the Court also observed that the case had emanated from an
attempt to impose the said tax on quarry resources from private lands, despite the clear
language of the tax ordinance limiting the tax to such resources extracted from public
lands.[37] On that score alone, the case could have been correctly decided.
It is true that the Court had additionally reasoned in Province of Bulacan that
[t]he tax imposed by the Province of Bulacan is an excise tax, being a tax upon the
performance, carrying on, or exercise of an activity. As earlier noted, such definition of
excise tax however was not explicitly carried over into the NIRC and was even superseded
beginning with the 1986 amendments thereto. To insist on utilizing this definition simply
because it had been reiterated in Province of Bulacan, unnecessary as such reiteration
may have been to the resolution of that case, would have the unfortunate effect of infusing
life into a concept that is diametrically inconsistent with the present state of the law.
We thus can assert with clear comfort that excise taxes, as imposed under the
NIRC, do not pertain to the performance, carrying on, or exercise of an activity, at least
not to the extent of equating excise with business taxes.
IV.
We next consider whether the clause taxes, fees or charges on petroleum products in
Section 133(h) precludes local government units from imposing business taxes based
on the sale of petroleum products.
The power of a municipality to impose business taxes derives from Section 143 of the
Code that specifically enumerates several types of business on which it may impose
taxes, including manufacturers, wholesalers, distributors, dealers of any article of
commerce of whatever nature;[38] those engaged in the export or commerce of essential
commodities;[39] retailers;[40] contractors and other independent contractors;[41] banks and
financial institutions;[42] and peddlers engaged in the sale of any merchandise or article of
commerce.[43] This obviously broad power is further supplemented by paragraph (h) of
Section 143 which authorizes the sanggunian to impose taxes on any other businesses
not otherwise specified under Section 143 which the sanggunian concerned may deem
proper to tax.[44]
This ability of local government units to impose business or other local taxes is ultimately
rooted in the 1987 Constitution. Section 5, Article X assures that [e]ach local government
unit shall have the power to create its own sources of revenues and to levy taxes, fees
and charges, though the power is subject to such guidelines and limitations as the
Congress may provide. There is no doubt that following the 1987 Constitution and the
Code, the fiscal autonomy of local government units has received greater affirmation than
ever. Previous decisions that have been skeptical of the viability, if not the wisdom of
reposing fiscal autonomy to local government units have fallen by the wayside.
Respondents cite our declaration in City Government of San Pablo v. Reyes[45] that
following the 1987 Constitution the rule thenceforth in interpreting statutory provisions on
municipal fiscal powers, doubts will have to be resolved in favor of municipal
corporations.[46] Such policy is also echoed in Section 5(a) of the Code, which states that
[a]ny provision on a power of a local government unit shall be liberally interpreted in its
favor, and in case of doubt, any question thereon shall be resolved in favor of devolution
of powers and of the lower local government unit. But somewhat conversely, Section 5(b)
then proceeds to assert that [i]n case of doubt, any tax ordinance or revenue measure
shall be construed strictly against the local government unit enacting it, and liberally in
favor of the taxpayer.[47] And this latter qualification has to be respected as a
constitutionally authorized limitation which Congress has seen fit to provide. Evidently,
local fiscal autonomy should not necessarily translate into abject deference to the power
of local government units to impose taxes.
Congress has the constitutional authority to impose limitations on the power to tax of local
government units, and Section 133 of the Code is one such limitation. Indeed, the
provision is the explicit statutory impediment to the enjoyment of absolute taxing power
by local government units, not to mention the reality that such power is a delegated power.
To cite one example, under Section 133(g), local government units are disallowed from
levying business taxes on business enterprises certified to by the Board of Investments
as pioneer or non-pioneer for a period of six (6) and (4) four years, respectively from the
date of registration.
Section 133(h) states that local government units shall not extend to the levy of xxx taxes,
fees or charges on petroleum products. Respondents assert that the phrase taxes, fees
or charges on petroleum products pertains to the imposition of direct or excise taxes on
petroleum products, and not business taxes. If the phrase actually pertains to excise
taxes, then it would be an exercise in utter redundancy, since the preceding phrase
already prohibits the imposition of excise taxes on articles already subject to such taxes
under the NIRC, such as petroleum products. There would be no sense on the part of the
legislature to twice emphasize in the same sentence that excise taxes on petroleum
products are beyond the pale of local government taxation.
It appears that this argument of respondents was fashioned on the basis of the
pronouncement of the Court in Philippine Petroleum Corporation v. Municipality of Pililla,
thus:[48]
xxx [W]hile Section 2 of P.D. 436 prohibits the imposition of local taxes
on petroleum products, said decree did not amend Sections 19 and 19
(a) of P.D. 231 as amended by P.D. 426, wherein the municipality is
granted the right to levy taxes on business of manufacturers, importers,
producers of any article of commerce of whatever kind or nature. A tax
on business is distinct from a tax on the article itself. Thus, if the
imposition of tax on business of manufacturers, etc. in petroleum
products contravenes a declared national policy, it should have been
expressly stated in P.D. No. 436.
28
The dicta that [a] tax on a business is distinct from a tax on the article itself might at first
blush somehow lend support to respondents position, yet that dicta has not since been
reprised by this Court. It is likewise worth observing that Pililla did involve a tax ordinance
that imposed business taxes on an enterprise engaged in the manufacture and storage
of petroleum products.
Significantly, the legal milieu governing Pililla is vastly different from that existing at bar,
to the extent that the earlier case could not be presently controlling.
At the time the taxes sought to be collected in Pililla were imposed, there was no national
law in place similar to Section 133(h) of the Code that barred local taxes, fees or charges
on petroleum products. There were circulars to that effect issued by the Finance
Department, yet the Court could not validate such issuances since
under the tax laws then in place no exemptions were given to manufacturers,
wholesalers, retailers, or dealers in petroleum products. [49] In fact, the Court tellingly
observed that if the imposition of tax on business of manufacturers, etc. in petroleum
products contravenes a declared national policy, it should have been expressly stated in
P.D. No. 436.[50] Such expression conspiciously missing in P.D. No. 436 is now found in
Section 133(h).
In view of the difference in statutory paradigm between this case and Pililla, the latter case
is severely diminished as applicable precedent at bar. The Court then was correct in
observing that a mere administrative circular could not prohibit a local tax that is not
otherwise barred under a national statute, yet in this case that conflict is not present since
the Code explicitly prohibits the imposition of several classes of local taxes, including
those on petroleum products. The final and only straw Pililla provides that respondents
can still grasp at is the bare statement that [a] tax on a business is distinct from a tax on
the article itself,[51] a sentence which could have been omitted from that decision without
any effect.
We can concede that a tax on a business is distinct from a tax on the article itself, or for
that matter, that a business tax is distinct from an excise tax. However, such distinction is
immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase taxes,
fees or charges on petroleum products does not qualify the kind of taxes, fees or charges
that could withstand the absolute prohibition imposed by the provision. It would have been
a different matter had Congress, in crafting Section 133(h), barred excise taxes or direct
taxes, or any category of taxes only, for then it would be understood that only such
specified taxes on petroleum products could not be imposed under the prohibition. The
absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum
products, including business taxes, are prohibited by Section 133(h). Where the law does
not distinguish, we should not distinguish.
The language of Section 133(h) makes plain that the prohibition with respect to petroleum
products extends not only to excise taxes thereon, but all taxes, fees and charges. The
earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects
of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol
products, tobacco products, mineral products, automobiles, and such non-essential
goods as jewelry, goods made of precious metals, perfumes, and yachts and other
vessels intended for pleasure or sports. In contrast, the later reference to taxes, fees and
charges pertains only to one class of articles of the many subjects of excise taxes,
specifically, petroleum products. While local government units are authorized to burden
all such other class of goods with taxes, fees and charges, excepting excise taxes, a
specific prohibition is imposed barring the levying of any other type of taxes with respect
to petroleum products.
V.
We no longer need to dwell on the arguments centering on Article 232 of the IRR.
As earlier stated, the provision explicitly stipulates that in line with existing national policy,
any business engaged in the production, manufacture, refining, distribution or sale of oil,
gasoline and other petroleum products shall not be subject to any local tax imposed on
this article [on business taxes]. The RTC went as far as to declare Article 232 as invalid
on the premise that the prohibition was not similarly warranted under the Code.
Assuming that the Code does not, in fact, prohibit the imposition of business taxes
on petroleum products, we would agree that the IRR could not impose such a prohibition.
With our ruling that Section 133(h) does indeed prohibit the imposition of local business
taxes on petroleum products, however, the RTC declaration that Article 232 was invalid
is, in turn, itself invalid. Even absent Article 232, local government units cannot impose
business taxes on petroleum products. If anything, Article 232 merely reiterates what the
Code itself already provides, with the additional explanation that such prohibition was in
line with existing national policy.
VI.
We have said all that need be said for the resolution of this case, but there is one more
line of argument raised by respondents that deserves a remark. Respondents argue,
assuming... that the Oversight Committee [that drafted the IRR] can legislate, that the
existing national policy referred to in Article 232 had been superseded by Republic Act
No. 8180, or the Oil Deregulation Law. Boiled down to its essence, the argument is that
since the oil industry is presently deregulated the basis for exempting petroleum products
from business taxes no longer exists.
Of course, the starting premise for this argument, that the IRR can establish a tax or an
exemption, is false and has been flatly rejected by this Court before. [52] The Code itself
does not connect its prohibition on taxation of petroleum products with any existing or
future national oil policy, so the change in such national policy with the regime of oil
deregulation is ultimately of no moment. Still, we can divine the reasoning behind singling
out petroleum products, among all other commodities, as beyond the power of local
government units to levy local taxes.
Why the special concern over petroleum products? The answer is quite evident to all
sentient persons. In this age where unfortunately dependence on petroleum as fuel has
yet no equally feasible alternative, the cost of petroleum products, though fully controlled
by private enterprise, remains an area of public concern. To be blunt about it, there is an
inevitable link between the fluctuation of oil prices and the prices of every other
commodity. The reality, indeed, is oil is a political commodity. Such fact has received
recognition from this Court. [O]il [is] a commodity whose supply and price affect the ebb
and flow of the lifeblood of the nation. Its shortage of supply or a slight, upward spiral in
its price shakes our economic foundation. Studies show that the areas most impacted by
the movement of oil are food manufacture, land transport, trade, electricity and
29
water.[53] [T]he upswing and downswing of our economy materially depend on the
oscillation of oil.[54] Fluctuations in the supply and price of oil products have a dramatic
effect on economic development and public welfare. [55]
It can be reasonably presumed that if municipalities, cities and provinces were authorized
to impose business taxes on manufacturers and retailers of petroleum products, the
resulting losses to these enterprises would be passed on to the consumers, triggering the
chain of increases that normally accompany the increase in oil prices. No similarly
massive trigger effect would ensue upon the imposition of business taxes on other
commodities, including those already subject to excise taxation under the NIRC.
It may very well be that the policy of deregulation, which was not yet in effect at
the time of the enactment of the Local Government Code, has changed the complexion
of the issue, for unlike before, oil companies are free at will to increase oil prices, thus
mitigating the similarly arbitrary consequences that could develop if petroleum products
were subject to local taxes. Still, it cannot be denied that subjecting petroleum products
to business taxes apart from the taxes already imposed by Congress in this age of
deregulation would lead to the same result had they been so taxed during the era of oil
regulation the increase of oil prices. We do not discount the authority of Congress to enact
measures that facilitate the increase in oil prices; witness the Oil Deregulation Law and
the most recent Expanded VAT Law. Yet these hard choices are presumably made by
Congress with the expectation that the negative effects of increased oil prices are offset
by the other economic benefits promised by those new laws (i.e., a more vibrant oil
industry; increased government revenue).
The Court defers to the other branches of government in the formulation of oil
policy, but when the choices are made through legislation, the Court expects that the
choices are deliberate, considering that the stakes are virtually all-in. Herein, respondents
may be bolstered by the constitutional and statutory policy favoring local fiscal autonomy,
but it would be utter indolence to reflexively affirm such policy when the inevitable effect
is an increase in oil prices. Any prudent adjudication should fully ascertain the mandate
of local government units to impose taxes on petroleum products, and such mandate
should be cast in so specific terms as to leave no dispute as to the legislative intendment
to extend such power in the name of local autonomy. What we have found instead, from
the plain letter of the law is an explicit disinclination on the part of the legislature to impart
that particular taxing power to local government units.
While Section 133(h) does not generally bar the imposition of business taxes on
articles burdened by excise taxes under the NIRC, it specifically prohibits local
government units from extending the levy of any kind of taxes, fees or charges on
petroleum products. Accordingly, the subject tax assessment is ultra vires and void.
WHEREFORE, the Petition is GRANTED. The Decision of
the Regional Trial Court of Malabon City in Civil Case No. 3380-
MN is REVERSED and SET ASIDE and the subject assessment for
deficiency taxes on petitioner is ordered CANCELLED. The Temporary Restraining Order
dated 4 August 2003 is hereby made PERMANENT. No pronouncement as to costs.
SO ORDERED.

30
 [G.R. No. 137621. February 6, 2002]
HAGONOY MARKET VENDOR ASSOCIATION, petitioner, vs. MUNICIPALITY OF
HAGONOY, BULACAN, respondent.
DECISION
PUNO, J.:
Laws are of two (2) kinds: substantive and procedural. Substantive laws, insofar as
their provisions are unambiguous, are rigorously applied to resolve legal issues on the
merits. In contrast, courts generally frown upon an uncompromising application of
procedural laws so as not to subvert substantial justice. Nonetheless, it is not totally
uncommon for courts to decide cases based on a rigid application of the so-called
technical rules of procedure as these rules exist for the orderly administration of
justice. Interestingly, the case at bar singularly illustrates both instances, i.e., when
procedural rules are unbendingly applied and when their rigid application may be relaxed.
This is a petition for review of the Resolution [1] of the Court of Appeals,
dated February 15, 1999, dismissing the appeal of petitioner Hagonoy Market Vendor
Association from the Resolutions of the Secretary of Justice for being formally deficient.
The facts: On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan,
enacted an ordinance, Kautusan Blg. 28,[2] which increased the stall rentals of the market
vendors in Hagonoy. Article 3 provided that it shall take effect upon approval. The subject
ordinance was posted from November 4-25, 1996.[3]
In the last week of November, 1997, the petitioners members were personally given
copies of the approved Ordinance and were informed that it shall be enforced in January,
1998. On December 8, 1997, the petitioners President filed an appeal with the Secretary
of Justice assailing the constitutionality of the tax ordinance. Petitioner claimed it was
unaware of the posting of the ordinance.
Respondent opposed the appeal. It contended that the ordinance took effect
on October 6, 1996 and that the ordinance, as approved, was posted as required by
law. Hence, it was pointed out that petitioners appeal, made over a year later, was already
time-barred.
The Secretary of Justice dismissed the appeal on the ground that it was filed out of
time, i.e., beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996,
as prescribed under Section 187 of the 1991 Local Government Code. Citing the case
of Taada vs. Tuvera,[4] the Secretary of Justice held that the date of effectivity of the
subject ordinance retroacted to the date of its approval in October 1996, after the required
publication or posting has been complied with, pursuant to Section 3 of said ordinance. [5]
After its motion for reconsideration was denied, petitioner appealed to the Court of
Appeals. Petitioner did not assail the finding of the Secretary of Justice that their
appeal was filed beyond the reglementary period. Instead, it urged that the Secretary
of Justice should have overlooked this mere technicality and ruled on its petition on the
merits. Unfortunately, its petition for review was dismissed by the Court of Appeals for
31
being formally deficient as it was not accompanied by certified true copies of the assailed
Resolutions of the Secretary of Justice.[6]
Undaunted, the petitioner moved for reconsideration but it was denied. [7]
Hence, this appeal, where petitioner contends that:
I
THE HONORABLE COURT OF APPEALS, WITH DUE RESPECT, ERRED IN ITS
STRICT, RIGID AND TECHNICAL ADHERENCE TO SECTION 6, RULE 43 OF THE
1997 RULES OF COURT AND THIS, IN EFFECT, FRUSTRATED THE VALID LEGAL
ISSUES RAISED BY THE PETITIONER THAT ORDINANCE (KAUTUSAN) NO. 28
WAS NOT VALIDLY ENACTED, IS CONTRARY TO LAW AND IS
UNCONSTITUTIONAL, TANTAMOUNT TO AN ILLEGAL EXACTION IF ENFORCED
RETROACTIVELY FROM THE DATE OF ITS APPROVAL ON OCTOBER 1, 1996.
II
THE HONORABLE COURT OF APPEALS, WITH DUE RESPECT, ERRED IN
DENYING THE MOTION FOR RECONSIDERATION NOTWITHSTANDING
PETITIONERS EXPLANATION THAT ITS FAILURE TO SECURE THE CERTIFIED
TRUE COPIES OF THE RESOLUTIONS OF THE DEPARTMENT OF JUSTICE WAS
DUE TO THE INTERVENTION OF AN ACT OF GOD TYPHOON LOLENG, AND THAT
THE ACTUAL COPIES RECEIVED BY THE PETITIONER MAY BE CONSIDERED AS
SUBSTANTIAL COMPLIANCE WITH THE RULES.
III
PETITIONER WILL SUFFER IRREPARABLE DAMAGE IF ORDINANCE/KAUTUSAN
NO. 28 BE NOT DECLARED NULL AND VOID AND IS ALLOWED TO BE ENFORCED
RETROACTIVELY FROM OCTOBER 1, 1996, CONTRARY TO THE GENERAL RULE,
ARTICLE 4 OF THE CIVIL CODE, THAT NO LAW SHALL HAVE RETROACTIVE
EFFECT.
The first and second assigned errors impugn the dismissal by the Court of Appeals
of its petition for review for petitioners failure to attach certified true copies of the assailed
Resolutions of the Secretary of Justice. The petitioner insists that it had good reasons for
its failure to comply with the rule and the Court of Appeals erred in refusing to accept its
explanation.
We agree.
In its Motion for Reconsideration before the Court of Appeals, [8] the petitioner
satisfactorily explained the circumstances relative to its failure to attach to its appeal
certified true copies of the assailed Resolutions of the Secretary of Justice, thus:
x x x (D)uring the preparation of the petition on October 21, 1998, it was raining very
hard due to (t)yphoon Loleng. When the petition was completed, copy was served on
the Department of Justice at about (sic) past 4:00 p.m. of October 21, 1998, with (the)
instruction to have the Resolutions of the Department of Justice be stamped as certified
true copies. However, due to bad weather, the person in charge (at the Department
of Justice) was no longer available to certify to (sic) the Resolutions.
The following day, October 22, 1998, was declared a non-working holiday because
of (t)yphoon Loleng. Thus, petitioner was again unable to have the Resolutions of the
Department of Justice stamped certified true copies. In the morning of October 23,
1998, due to time constraint(s), herein counsel served a copy by personal service
on (r)espondents lawyer at (sic) Malolos, Bulacan, despite the flooded roads and heavy
rains. However, as the herein counsel went back to Manila, (official business in)
government offices were suspended in the afternoon and the personnel of the
Department of Justice tasked with issuing or stamping certified true copies of their
Resolutions were no longer available.
To avoid being time-barred in the filing of the (p)etition, the same was filed with the
Court of Appeals as is.
We find that the Court of Appeals erred in dismissing petitioners appeal on
the ground that it was formally deficient. It is clear from the records that the petitioner
exerted due diligence to get the copies of its appealed Resolutions certified by the
Department of Justice, but failed to do so on account of typhoon Loleng. Under the
circumstances, respondent appellate court should have tempered its strict application of
procedural rules in view of the fortuitous event considering that litigation is not a game of
technicalities.[9]
Nonetheless, we hold that the petition should be dismissed as the appeal of the
petitioner with the Secretary of Justice is already time-barred. The applicable law is
Section 187 of the 1991 Local Government Code which provides:
SEC. 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue
Measures; Mandatory Public Hearings. - The procedure for the approval of local tax
ordinances and revenue measures shall be in accordance with the provisions of this
Code: Provided, That public hearings shall be conducted for the purpose prior to the
enactment thereof: Provided, further, That any question on the constitutionality or
legality of tax ordinances or revenue measures may be raised on appeal within
thirty (30) days from the effectivity thereof to the Secretary of Justice who shall
render a decision within sixty (60) days from the receipt of the appeal: Provided,
however, That such appeal shall not have the effect of suspending the effectivity
of the ordinance and accrual and payment of the tax, fee or charge levied
therein: Provided, finally, That within thirty (30) days after receipt of the decision or
the lapse of the sixty-day period without the Secretary of Justice acting upon the
appeal, the aggrieved party may file appropriate proceedings.
The aforecited law requires that an appeal of a tax ordinance or revenue measure
should be made to the Secretary of Justice within thirty (30) days from effectivity of
the ordinance and even during its pendency, the effectivity of the assailed
ordinance shall not be suspended. In the case at bar, Municipal Ordinance No. 28 took
effect in October 1996. Petitioner filed its appeal only in December 1997, more than a
year after the effectivity of the ordinance in 1996. Clearly, the Secretary of Justice
correctly dismissed it for being time-barred. At this point, it is apropos to state that the
timeframe fixed by law for parties to avail of their legal remedies before competent courts
32
is not a mere technicality that can be easily brushed aside. The periods stated in
Section 187 of the Local Government Code are mandatory. [10] Ordinance No. 28 is a
revenue measure adopted by the municipality of Hagonoy to fix and collect public market
stall rentals. Being its lifeblood, collection of revenues by the government is of paramount
importance. The funds for the operation of its agencies and provision of basic services to
its inhabitants are largely derived from its revenues and collections. Thus, it is essential
that the validity of revenue measures is not left uncertain for a considerable length
of time.[11] Hence, the law provided a time limit for an aggrieved party to assail the legality
of revenue measures and tax ordinances.
In a last ditch effort to justify its failure to file a timely appeal with the Secretary of
Justice, the petitioner contends that its period to appeal should be counted not from the
time the ordinance took effect in 1996 but from the time its members were personally
given copies of the approved ordinance in November 1997. It insists that it was unaware
of the approval and effectivity of the subject ordinance in 1996 on two (2) grounds: first,
no public hearing was conducted prior to the passage of the ordinance and, second, the
approved ordinance was not posted.
We do not agree.
Petitioners bold assertion that there was no public hearing conducted prior to
the passage of Kautusan Blg. 28 is belied by its own evidence. In petitioners two (2)
communications with the Secretary of Justice,[12] it enumerated the various objections
raised by its members before the passage of the ordinance in several meetings called by
the Sanggunian for the purpose. These show beyond doubt that petitioner was aware of
the proposed increase and in fact participated in the public hearings therefor. The
respondent municipality likewise submitted the Minutes and Report of the public hearings
conducted by the Sangguniang Bayans Committee on Appropriations and Market on
February 6, July 15 and August 19, all in 1996, for the proposed increase in the stall
rentals.[13]
Petitioner cannot gripe that there was practically no public hearing conducted as its
objections to the proposed measure were not considered by the Sangguniang Bayan. To
be sure, public hearings are conducted by legislative bodies to allow interested parties to
ventilate their views on a proposed law or ordinance. These views, however, are not
binding on the legislative body and it is not compelled by law to adopt the
same. Sanggunian members are elected by the people to make laws that will promote the
general interest of their constituents.They are mandated to use their discretion and best
judgment in serving the people. Parties who participate in public hearings to give their
opinions on a proposed ordinance should not expect that their views would be patronized
by their lawmakers.
On the issue of publication or posting, Section 188 of the Local Government
Code provides:
Section 188. Publication of Tax Ordinance and Revenue Measures. Within ten (10)
days after their approval, certified true copies of all provincial, city, and municipal tax
ordinances or revenue measures shall be published in full for three (3) consecutive days
in a newspaper of local circulation; Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local circulation, the same may be
posted in at least two (2) conspicuous and publicly accessible places. (emphasis
supplied)

The records is bereft of any evidence to prove petitioners negative allegation that
the subject ordinance was not posted as required by law. In contrast, the respondent
Sangguniang Bayan of the Municipality of Hagonoy, Bulacan, presented evidence
which clearly shows that the procedure for the enactment of the assailed ordinance
was complied with.Municipal Ordinance No. 28 was enacted by the Sangguniang Bayan
of Hagonoy on October 1, 1996. Then Acting Municipal Mayor Maria
Garcia Santos approved the Ordinance on October 7, 1996. After its approval, copies of
the Ordinance were given to the Municipal Treasurer on the same day. On November 9,
1996, the Ordinance was approved by the Sangguniang Panlalawigan. The
Ordinance was posted during the period from November 4 - 25, 1996 in three (3)
public places, viz: in front of the municipal building, at the bulletin board of
the Sta. Ana Parish Church and on the front door of the Office of the Market Master in the
public market.[14] Posting was validly made in lieu of publication as there was no
newspaper of local circulation in the municipality of Hagonoy. This fact was known
to and admitted by petitioner. Thus, petitioners ambiguous and unsupported claim that it
was only sometime in November 1997 that the Provincial Board approved Municipal
Ordinance No. 28 and so the posting could not have been made in November 1996[15] was
sufficiently disproved by the positive evidence of respondent municipality. Given the
foregoing circumstances, petitioner cannot validly claim lack of knowledge of the
approved ordinance. The filing of its appeal a year after the effectivity of the subject
ordinance is fatal to its cause.

Finally, even on the substantive points raised, the petition must fail. Section 6c.04
of the 1993 Municipal Revenue Code and Section 191 of the Local Government Code
limiting the percentage of increase that can be imposed apply to tax rates, not
rentals. Neither can it be said that the rates were not uniformly imposed or that the public
markets included in the Ordinance were unreasonably determined or classified. To be
sure, the Ordinance covered the three (3) concrete public markets: the two-
storey Bagong Palengke, the burnt but reconstructed Lumang Palengke and the more
recent Lumang Palengke with wet market. However, the Palengkeng Bagong
Munisipyo or Gabaldon was excluded from the increase in rentals as it is only a makeshift,
dilapidated place, with no doors or protection for security, intended for transient peddlers
who used to sell their goods along the sidewalk.[16]

IN VIEW WHEREOF, the petition is DISMISSED for lack of merit. No

pronouncement as to costs.

SO ORDERED.

33
34
 G. R. No. L-9319
May 31, 1952 122.00
PANALIGAN VS CITY OF TACLOBAN
June 7, 1952 120.00
FELIX, J.:
Oct. 1952 60.00
The City of Tacloban and the Treasurer thereof appeal from a decision of the Court of
First Instance of Leyte rendered in Civil Case No. 1767 declaring Ordinances Nos. 13 Nov. 18 1952 35.00
and 18, series of 1949, and Nos. 34 and 42, series of 1952, null and void. The facts of
the case are as follows:
Dec. 2, 1952 30.00
On March 26, 1954, AgustIn Panaligan, Casimiro Sebolino, Epifania Udtujan, Valentin
Camposano, Angeles Guantero, Esteban Juntilla, Ciriaca de Galagar, Marcos Samson, _________
Ramon Hernandez or Arandes, Epifanio Pabilona and Pedro Rodriguez, all residents; of
the City of Tacloban, filed a petition for mandamus With the Court of First Instance of P1,418.00
Leyte. The petition alleged that pursuant to Ordinance No. 13, as amended by
Ordinance No. 18, series of 1999, and further amended by Ordinances Nos. 34 and 42,
series of 1952, imposing inspection fees for every head of hog, cattle and carabao that
was shipped or transported between the months of April and December, 1952, from 2. CASIMIRO SEBOLINO:
Tacloban to other places, respondents City of Tacloban and the Treasurer thereof
collected from petitioners, duly receipted, the following amounts, to wit:

Date Amount
1. AGUSTlN PAMALIGAN:

May 7, 1952 P140.00

Date Amount
June 30 1952 38.00

Aug. 18 1952 280.00

March 20, 1952 P143.00
Sept. 10, 1952 20.00
April 21 1952 90.00
Sept. 27 1952 140.00
April 21, 1952 116.00
Oct. 10, 1952 160.00
April 21, 1952 44.00
Nov. 29, 1952 80.00
May 3 1952 110.00
_________
May 10, 1952 102.00
P1,200.00
May 12, 1952 86.00

May 17, 1952 92.00

1. EPIFANlA UDTUJAN:
May 24, 1952 122.00

35
 Date Amount ________

P300.00

July 26, 1952 P120.00

Aug. 16, 1952 800.00 6. ESIEBAN JUNTILLA: .

Sept. 5, 1952 . 300.00

Sept. 11, 1952 220.00 Date Amount

Sept. 22 1952 100.00

Oct. 13 1952 160.00 5 May 19, 1952 P200.00

Oct. 22 1952 100.00

_________ 7. CIRIACA DE GALAGAR:

P1,800.00

Date Amount

4. VAIENTlH CAMPOSANO:

May 8, 1952 P100.00

Date Amount

8. MARCOS SAMSON:

May 5, 1952 P240.00

Date Amount

5. ANGELES GUANTERO:

Apr. 21, 1952 P180.00

Date Amount June 2, 1952 180.00

________

Oct. 7, 19?2 P200.00 P360.00

Nov.. 18, 1952 100.00

36
 that the so-called "inspection fee" imposed by said ordinances in reality partook of the
9. RAMON HERNANDEZ OR ARANDES: nature of an export tax which under Section 2287 of the Administrative Code a
municipal council it cannot impose; that for this reason and in virtue of the
Department of Finance provincial circular dated April 17, 1947, implementing the
aforesaid section of the Administrative Code, the Undersecretary of Finance, in answer
to a query by one of the petitioners, rendered an opinion holding that the fees thus
Date Amount
collected were illegal and same must be refunded to the taxpayers; ''that
notwithstanding the fact that this view was subscribed to by the City Treasurer and City
Attorney of Tacloban, respondents failed to refund the same to petitioners. Petitioners,
therefore, prayed that the ordinances in question be declared null and void; that
Apr. 8, 1952 P240.00 respondents be ordered to refund to petitioners the respective amounts due them; that
every petitioner be awarded moral damages in the amount of P5,000.00 and attorney's
June 25, 19?2 300.00 fees in the sum of P3,000.00; for costs and for such other relief as may be
deemed just and equitable in the premises.
________
On April 6, 1954, respondents filed a motion to dismiss contending that an action for
P540 mandamus was not proper in the case at bar for although administrative officials
as the Secretary of Finance, the City Treasurer and the City Attorney formed opinions
that the collections made in accordance with the ordinances were null and void, still
unless the same were declared illegal by the courts, petitioners acquired no specific,
clear and certain legal rights which could be enforced by a special civil action, and that
10. BRIFARIO PABILONA: petitioners could have prosecuted the same by means of an ordinary civil case.

This motion was denied by the lower Court on the ground that the Supreme Court had
ruled that the question of the constitutionality of a law or order could be entertained in a
Date Amount mandamus proceedings and respondents were thus required to answer the petition in
five days from receipt of the order of denial.

Within the prescribed period, respondents filed their answer contending, among other
April 3, 1952 P100.00 things, that petitioners had not exhausted all the administrative and judicial remedies in
the ordinary course of law before resorting to a special civil action; that respondents
were willing to make a refund of the amounts collected from petitioners when ordered by
the Court to do so, and that the Municipal Board of the City of Tacloban was an
indispensable party to the action which should be made a party respondent.
11. 'PEDRO RODRIGUEZ:
The records show that the parties entered into a stipulation of facts which reads as
follows:

Date Amount
1. That the parties-petitioners are all of age and residents of the City of Tacloban,
represented by Atty. Antonio C. Veloso, and the respondents are the City of
Tacloban, represented by the City Mayor, and the City Treasurer, both
July 23, 1952 P168.00 represented by the City Attorney;

July 23, 1952 140.00

2. That the collection of the alleged illegal taxes has been collected and effected
July 29, 1952 134.00 by the defunct municipality of Tacloban through the Municipal Treasurer of said
municipality, which amounted to P6,700.00, all, supported, by official receipts
___________ and (showing) the respective dates of issuance thereof;

GRAND TOTAL P6,700.00;

37
 3. That a demand has been made by the petitioners in person and through their
counsel asking for the refund of the alleged illegal taxes, but which the City
Treasurer could not properly effect such refund for lack of appropriation;
4. That the City Treasurer and the City Mayor, in line with their respective duties
enjoined upon them by law which is to approve and effect the refund up to the
present the Municipal Board of the City of Tacloban has not appropriated an
amount to cover up the refund of the claim of the petitioners and for which
reason no refund up to the present has been made;
5. That the parties through their respective counsel are willing to submit to the
court the determination of the legality of municipal ordinances Nos. 18 and 135
both series of 1952, municipal ordinance No.34, series of 1949, and municipal
ordinance No. 42 series of 1949, and the latest ordinance on the matter
Which is ordinance No. 18, series of 1952, approved on March 25, 1952, on
the basis of the pleadings and the supporting papers thereto, copies of which
are hereto attached as Annexes "A", "B", "C", and "D".
6. That the parties-petitioners are willing to forego all claims for damages and
attorney's fees as contained in paragraph 8 of the petition."
Based.on the foregoing stipulation the trial Court rendered decision dated May
27, 1954, declaring the ordinances in question, as last amended by Ordinance
No. 18, series of 1952, illegal because they contravened the provisions of Section
2287 of the Revised Administrative Code and, consequently, ordered respondents to
provide for the necessary funds with ¦which to reimburse petitioners of the amounts
collected from them.
After their motion for reconsideration was denied, respondents brought the matter on
appeal to the Court of Appeals but the latter certified the case to Us on
the ground that as it involves the validity of Ordinances Nos. 34, 42, 13 and 18 of the
City of Tacloban, the appeal should properly be taken to this Court pursuant to Section
14( 1) of the Judiciary Act of 1948.
Ordinance No. 18, the latest amendment to Ordinance No. 34 (s-1949) of the City of
Tacloban which was approved on March 25, 1952, reads as follows:
MUNICIPAL ORDINANCE NO. 18
AN ORDINANCE AMENDING MUNICIPAL ORDINANCES NOS. 34 and 42, SERIES
OF 1949, AND MUNICIPAL ORDINANCE NO. 13, SERIES OF 1952,
IMPOSING INSPECTION FEES OF TWO PESOS FOR EACH HOG, TEN PESOS
FOR EACH CATTLE AND TWENTY PESOS FOR EACH CARABAO TRANSPORTED
TO OTHER PLACES AND PENALTIES FOR THE VIOLATION THEREFOR.
38
Be it ordained by authority of the Municipal Council of Tacloban, that:
Section 1. No person, commercial firm or corporation shall transport, ship, carry or
transfer cattle, carabao, or carabaos, and hog or hogs to any other places from the Port
of Tacloban or from any place "within the jurisdiction of the municipality of Tacloban,
without first submitting said animals for inspection by the Municipal Mayor or his
authorized representative of Tacloban and the Veterinary Officer or Inspector, showing
the number of cattle, carabaos or hogs, males or females, their corresponding weights,
age and condition and the place where same are to be transported.
Section 2. There will be collected an "inspection fee" of ten pesos for each head of
cattle, twenty pesos for each head of carabao and two pesos for each head of hog by
the Municipal Treasurer of Tacloban, or his legal representative to be transported,
shipped, carried or transferred to other places for which the inspection certificate is
issued.
Section 3. Any person, firm or corporation who violates any of the provisions hereof,
shall be punished upon, conviction by a fine of not exceeding two hundred pesos., or
imprisonment of not exceeding three months, or both, at the discretion of the Court. In
the case of a firm or corporation, the President or Manager, or the person in charge
shall be held personally liable and criminally responsible for the violation of this
ordinance.
Section 4. This ordinance shall take effect immediately upon its,approval.
APPROVED, March 25, 1952.
Section 2287 of the Revised Administrative Code prescribes:
SEC. 2287. FUNDAMENTAL PRINCIPLES GOVERNING MUNICIPAL TAXATION.
- x x x.
It shall not be in the power of the municipal council to impose a tax in any form whatever
upon goods and merchandise carried into the municipality, or out of the Same; and any
attempt to impose an import or export tax upon such goods in the guise of an
unreasonable charge for wharfage, use of bridges or otherwise, shall be void. x x.
Considering the provisions of this section, the issue in the instant case is whether the
municipal council of Tacloban, which became a city in June, 1952, can impose an
"inspection fee" on certain animals shipped or transported from said place to
another, and consequently whether or not * the ordinances imposing such "inspection
fee" are valid.
Respondents-appellants, treating the amounts collected in the case at bar as license
fees, assert that in the determination of the reasonableness, of a license fee, it must
be remembered that there are 3 classes of licenses, each with
distinct characteristics: (1) licenses for the regulation of useful occupations or
enterprises; (2) licenses for the regulation or restriction of non-useful occupations or
enterprises; and (3) licenses for revenue (purposes) only. The first 2 classes are
based on the exercise of police power and although there are conflict of authority on
this point, the better rule on the matter seems to be that the conferred power to
regulate and to issue such licenses carries with it the fc right to fix a license
fee (Cu Unjieng vs. Patstone, 42 Phil. 818). Respondents maintain that the fees in
question fall under the first class of licenses they being required purely as a regulatory
measure enacted in the exercise of the police power of the municipal corporation, and
the most that the courts can do is merely to reduce the amount of fees if they are
deemed excessive, but not to declare the same as illegal.

Granting arguendo that the respondent City enacted the questioned ordinances in
virtue of its police power and that in the exercise of the same a municipal corporation
has the right to grant licenses and impose license fees (City of Birmingham vs. Hood-
McPherson Realty Co., 172 So. 114 108 ALR 1140), yet such power may be restricted
by statutory provisions, and nowhere in the Charter of the City of Tacloban (Republic
Act No. 760, enacted long after the effectivity of the Revised Administrative Code), can
be found; any specific provision bestowing on the Municipal Board the power to
impose tax or fees of any kind on goods, merchandise or commodities destined to be
exported from that City to other parts of the country. Therefore, Section 2287 of the
Revised Administrative Code aforequoted, which takes away from the municipal
council (or board) the power to impose export taxes, remains to be the rule on the
matter. While it is true that Section 14 (e) of Republic Act No. 760 confers on the
Municipal Board the power

(e) To fix the tariff of fees and charges for all services rendered by the city, or any of its
department, branches or officials,

a close scrutiny of the ordinances complained of reveals that the fees therein imposed
are not by reason of the services performed by the Mayor or the Veterinary Officer, but
as an imposition on every head of the specified animals to be transported. The fact
that the ordinances in question make no reference to the purpose for which they were
enacted, and that such purpose was to preserve the public health or welfare of the
residents.and people of the City of Tacloban is a clear indication that leads Us to
believe that the fees exacted were not as "a regulatory measure in the: exercise of its
police power, but for the purpose of raising revenue under the guise of license or
inspection fees.

In order that an act or ordinance imposing an excise or license tax may be sustained as
a valid exercise of the police .power, it must be intended to promote or be sufficiently
related to the public health, morals, safety or welfare. An act or ordinance imposing
a license or license tax under the police power as a means of regulation .is valid only
when it is within the limits of such power and is intended for regula- tion, otherwise, it
is invalid as where the license or tax is unnecessarily imposed on an occupation or
business not inherently subject to police regulation (Southwest Utility Ice Co. vs.
Liebmann, 52 P. 2d 349), for an act' or ordinance imposing a license or license tax
for revenue purposes, under the guise of a police or regulatory measure, is
invalid (Southern Fruit Co. vs. Porter, 199 S.E. 537).

WHEREFORE and on the strength of the foregoing considerations, the decision

appealed from is hereby affirmed, without pronouncement as to costs.

IT IS SO ORDERED.
39
40
 G.R. No. 152492. October 16, 2003]
PALMA DEVELOPMENT CORPORATION, petitioner, vs. MUNICIPALITY
MALANGAS, ZAMBOANGA DEL SUR, respondent.
DECISION
PANGANIBAN, J.:
In accordance with the Local Government Code of 1991, a municipal ordinance
imposing fees on goods that pass through the issuing municipalitys territory is null and
void.
The Case
The Petition for Review[1]before us assails the August 31, 2001 Decision[2]and
the February 6, 2002 Resolution[3]of the Court of Appeals (CA) in CA-GR CV No.
56477. The dispositiveportion of the challenged Decision reads as follows:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the assailed Decision
is VACATED and SET ASIDE, and this case is ordered REMANDED to the court a
quo for the reception of evidence of the parties on the matter or point delineated in the
final sentence above-stated.[4]
The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
The facts are undisputed. Petitioner Palma Development Corporation is engaged in
milling and selling rice and corn to wholesalers in Zamboanga City. It uses the
municipal port of Malangas, Zamboanga del Sur as transshipment point for its
goods. The port, as well as the surrounding roads leading to it, belong to and are
maintained by the Municipality of Malangas, Zamboanga del Sur.
On January 16, 1994, the municipality passed Municipal Revenue Code No. 09,
Series of 1993, which was subsequently approved by
the Sangguniang Panlalawigan of Zamboanga del Sur in Resolution No. 1330
dated August 4, 1994. Section 5G.01 of the ordinance reads:
Section 5G.01. Imposition of fees. There shall be collected service fee for its use of the
municipal road[s] or streets leading to the wharf and to any point along the shorelines
within the jurisdiction of the municipality and for police surveillance on all goods and all
equipment harbored or sheltered in the premises of the wharf and other within the
jurisdiction of this municipality in the following schedule:
a) Vehicles and Equipment: rate of fee
1. Automatic per unit P10.00
2. Ford Fiera P10.00
OF 3. Trucks P10.00
xxxxxxxxx
b) Other Goods, Construction Material products:
1. Bamboo craft P20.00
2. Bangus/Kilo 0.30
xxxxxxxxx
41. Rice and corn grits/sack 0.50[5]
Accordingly, the service fees imposed by Section 5G.01 of the ordinance was paid
by petitioner under protest. It contended that under Republic Act No. 7160, otherwise
known as the Local Government Code of 1991, municipal governments did not have the
authority to tax goods and vehicles that passed through their jurisdictions. Thereafter,
before the Regional Trial Court (RTC) of Pagadian City, petitioner filed against
the Municipality of Malangas on November 20, 1995, an action for declaratory relief
assailing the validity of Section 5G.01 of the municipal ordinance.
On the premise that the case involved the validity of a municipal ordinance, the RTC
directed respondent to secure the opinion of the Office of the Solicitor General. The trial
court likewise ordered that the opinions of the Departments of Finance and of Justice be
sought. As these opinions were still unavailable as of October 17, 1996, petitioners
counsel filed, without objection from respondent, a Manifestation seeking the submission
of the case for the RTCs decision on a pure question of law.
In due time, the trial court rendered its November 13, 1996 Decision declaring the
entire Municipal Revenue Code No. 09 as ultra vires and, hence, null and void.
Ruling of the Court of Appeals
The CA held that local government units already had revenue-raising powers as
provided for under Sections 153 and 155 of RA No. 7160. It ruled as well that within the
purview of these provisions -- and therefore valid -- is Section 5G.01, which provides for
a service fee for the use of the municipal road or streets leading to the wharf and to any
point along the shorelines within the jurisdiction of the municipality and for police
surveillance on all goods and all equipment harbored or sheltered in the premises of the
wharf and other within the jurisdiction of this municipality.
However, since both parties had submitted the case to the trial court for decision on
a pure question of law without a full-blown trial on the merits, the CA could not determine
whether the facts of the case were within the ambit of the aforecited sections of RA No.
7160. The appellate court ruled that petitioner still had to adduce evidence to substantiate
its allegations that the assailed ordinance had imposed fees on the movement of goods
within the Municipality of Malangas in the guise of a toll fee for the use of municipal roads
41
and a service fee for police surveillance. Thus, the CA held that the absence of such
evidence necessitated the remand of the case to the trial court.
Hence, this Petition.[6]
Issues
Petitioner raises the following issues for our consideration:
1. Whether or not the Court of Appeals erred when it ordered that the extant
case be remanded to the lower court for reception of evidence.
2. Whether or not the Court of Appeals erred when it ruled that a full blown trial
on the merits is necessary and that plaintiff-appellee, now petitioner, has
to adduce evidence to substantiate its thesis that the assailed municipal
ordinance, in fact, imposes fees on the movement of goods within the
jurisdiction of the defendant and that this imposition is merely in the guise
of a toll fee for the use of municipal roads and service fee for police
surveillance.
3. Whether or not the Court of Appeals erred when it did not rule that the
questioned municipal ordinance is contrary to the provisions of R.A. No.
7160 or the Local Government Code of the Philippines.[7]
In brief, the issues boil down to the following: 1) whether Section 5G.01 of Municipal
Revenue Code No. 09 is valid; and 2) whether the remand of the case to the trial court is
necessary.
The Courts Ruling
The Petition is meritorious.
First Issue:
Validity of the Imposed Fees
Petitioner argues that while respondent has the power to tax or impose fees
on vehicles using its roads, it cannot tax the goods that are transported by the vehicles.
The provision of the ordinance imposing a service fee for police surveillance on goods is
allegedly contrary to Section 133(e) of RA No. 7160, which reads:
Section 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangaysshall not extend to the levy of the following:
xxxxxxxxx
e) Taxes, fees and charges and other impositions upon goods carried into and out of, or
passing through, the territorial jurisdictions of local government units in the guise of
42
charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in
any form whatsoever upon such goods or merchandise;
On the other hand, respondent maintains that the subject fees are intended for
services rendered, the use of municipal roads and police surveillance. The fees are
supposedly not covered by the prohibited impositions under Section 133(e) of RA No.
7160.[8] It further contends that it was empowered by the express mandate of Sections
153 and 155 of RA No. 7160 to enact Section 5G.01 of the ordinance. The pertinent
provisions of this statute read as follows:
Section 153. Service Fees and Charges. -- Local government units may impose and
collect such reasonable fees and charges for services rendered.
xxxxxxxxx
Section 155. Toll Fees or Charges. -- The sanggunian concerned may prescribe the
terms and conditions and fix the rates for the imposition of toll fees or charges for the
use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication
system funded and constructed by the local government unit concerned: Provided, That
no such toll fees or charges shall be collected from officers and enlisted men of the
Armed Forces of the Philippines and members of the Philippine National Police on
mission, post office personnel delivering mail, physically-handicapped, and disabled
citizens who are sixty-five (65) years or older.
When public safety and welfare so requires, the sanggunian concerned may discontinue
the collection of the tolls, and thereafter the said facility shall be free and open for public
use.
Respondent claims that there is no proof that the P0.50 fee for every sack of rice or
corn is a fraudulent legislation enacted to subvert the limitation imposed by Section 133(e)
of RA No. 7160. Moreover, it argues that allowing petitioner to use its roads without paying
the P0.50 fee for every sack of rice or corn would contravene the principle of unjust
enrichment.
By express language of Sections 153 and 155 of RA No. 7160, local government
units, through their Sanggunian, may prescribe the terms and conditions for the imposition
of toll fees or charges for the use of any public road, pier or wharf funded and constructed
by them. A service fee imposed on vehicles using municipal roads leading to the wharf is
thus valid.However, Section 133(e) of RA No. 7160 prohibits the imposition, in the guise
of wharfage, of fees -- as well as all other taxes or charges in any form whatsoever --
on goods or merchandise. It is therefore irrelevant if the fees imposed are actually for
police surveillance on the goods, because any other form of imposition on goods passing
through the territorial jurisdiction of the municipality is clearly prohibited by Section 133(e).
Under Section 131(y) of RA No. 7160, wharfage is defined as a fee assessed
against the cargo of a vessel engaged in foreign or domestic trade based on quantity,
weight, or measure received and/or discharged by vessel. It is apparent that
a wharfage does not lose its basic character by being labeled as a service fee for police
surveillance on all goods.
 Unpersuasive is the contention of respondent that petitioner would unjustly be
enriched at the formers expense. Though the rules thereon apply equally well to the
government,[9]for unjust enrichment to be deemed present, two conditions must generally
concur: (a) a person is unjustly benefited, and (b) such benefit is derived at anothers
expense or damage.[10]
In the instant case, the benefits from the use of the municipal roads and the wharf
were not unjustly derived by petitioner. Those benefits resulted from the infrastructure that
the municipality was mandated by law to provide.[11] There is no unjust enrichment where
the one receiving the benefit has a legal right or entitlement thereto, or when there is no
causal relation between ones enrichment and the others impoverishment. [12]
Second Issue:
Remand of the Case
Petitioner asserts that the remand of the case to the trial court for further reception
of evidence is unnecessary, because the facts are undisputed by both parties. It has
already been clearly established, without need for further evidence, that petitioner
transports rice and corn on board trucks that pass through the municipal roads leading to
the wharf. Under protest, it paid the service fees, a fact that respondent has readily
admitted without qualification.
Respondent, on the other hand, is silent on the issue of the remand of the case to
the trial court. The former merely defends the validity of the ordinance, arguing neither for
nor against the remand.
We rule against the remand. Not only is it frowned upon by the Rules of Court; [13]it
is also unnecessary on the basis of the facts established by the admissions of the
parties. Besides, the fact sought to be established with the reception of additional
evidence is irrelevant to the due settlement of the case.
The pertinent portion of the assailed CA Decision reads:
To be stressed is the fact that local government units now have the following common
revenue raising powers under the Local Government Code:
Section 153. Service Fees and Charges. -- Local government units may impose and
collect such reasonable fees and charges for services rendered.
xxxxxxxxx
Section 155. Toll Fees or Charges. -- The Sanggunian concerned may prescribe the
terms and conditions and fix the rates for the imposition of toll fees or charges for the
use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication
system funded and constructed by the local government unit concerned: Provided, That
no such toll fees or charges shall be collected from officers and enlisted men of the
Armed Forces of the Philippines and members of the Philippine National Police on
mission, post office personnel delivering mail, physically-handicapped, and disabled
citizens who are sixty-five (65) years or older.
43
When public safety and welfare so requires, the Sanggunian concerned may
discontinue the collection of the tolls, and thereafter the said facility shall be free and
open for public use. x x x
As we see it, the disputed municipal ordinance, which provides for a service fee for
the use of the municipal road or streets leading to the wharf and to any point along the
shorelines within the jurisdiction of the municipality and for police surveillance on all
goods and all equipment harbored or sheltered in the premises of the wharf and other
within the jurisdiction of this municipality, seems to fall within the compass of the above
cited provisions of R.A. No. 7160. As elsewhere indicated, the parties in this case,
nonetheless, chose to submit the issue to the Trial Court on a pure question of law,
without a full-blown trial on the merits: consequently, we are not prepared to say, at this
juncture, that the facts of the case inevitably call for the application, and/or that these
make out a clear-cut case within the ambit and purview, of the aforecited section. The
plaintiff, thus, has to adduce evidence to substantiate its thesis that the assailed
municipal ordinance, in fact, imposes fees on the movement of goods within the
jurisdiction of the defendant, and that this imposition is merely in the guise of a toll fee
for the use of municipal roads and service fee for police surveillance. Competent
evidence upon this score must, thus, be presented. [14]
We note that Section 5G.01 imposes two types of service fees: 1) one for the use of
the municipal roads and 2) another for police surveillance on all goods and equipment
sheltered in the premises of the wharf. The amount of service fees, however, is based on
the type of vehicle that passes through the road and the type of goods being transported.
While both parties admit that the service fees imposed are for the use of the
municipal roads, petitioner maintains that the service fee for police surveillance on goods
harbored on the wharf is in the guise of a wharfage,[15]a prohibited imposition under
Section 133(e) of RA No. 7160.
Thus, the CA held that the case should be remanded to the trial court in order to
resolve this factual dispute. The appellate court noted that under Section 155 of RA No.
7160, municipalities apparently now have the power to impose fees for the use of
municipal roads.
Nevertheless, a remand is still unnecessary even if the service fee charged against
the goods are for police surveillance, because Section 133(e) of RA No. 7160 expressly
prohibits the imposition of all other taxes, fees or charges in any form whatsoever upon
the merchandise or goods that pass through the territorial jurisdiction of local government
units. It is therefore immaterial to the instant case whether the service fee on the goods
is for police surveillance or not, since the subject provision of the revenue ordinance is
invalid. Reception of further evidence to establish this fact would not legalize the
imposition of such fee in any way.
Furthermore, neither party disputes any of the other material facts of the case. From
their respective Briefs before the CA and their Memoranda before this Court, they do not
dispute the fact that petitioner, from its principal place of business, transports rice and
corn on board trucks bound for respondents wharf. The trucks traverse the municipal
roads en route to the wharf, where the sacks of rice and corn are manually loaded into
marine vessels bound for Zamboanga City. Likewise undisputed is the fact that
respondent imposed and collected fees under the ordinance from petitioner. The former
admits that it has been collecting, in addition to the fees on vehicles, P0.50 for every sack
of rice or corn that the latter has been shipping through the wharf.[16]

The foregoing allegations are formal judicial admissions that are conclusive upon
the parties making them. They require no further proof in accordance with Section 4 of
Rule 129 of the Rules of Court, which reads:

SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the

course of the proceedings in the same case, does not require proof. The admission may
be contradicted only by showing that it was made through palpable mistake or that no
such admission was made.

Judicial admissions made by parties in the pleadings, in the course of the trial, or in
other proceedings in the same case are conclusive. No further evidence is required to
prove them.Moreover, they cannot be contradicted unless it is shown that they have been
made through palpable mistake, or that they have not been made at all. [17]

WHEREFORE, the Petition is GRANTED. The assailed Decision and Resolution of

the Court of Appeals are hereby SET ASIDE. The imposition of a service fee for police
surveillance on all goods harbored or sheltered in the premises of the
municipal port of Malangas under Sec. 5G.01 of the Malangas Municipal Revenue Code
No. 09, series of 1993, is declared NULL AND VOID for being violative of Republic Act
No. 7160.

SO ORDERED.

44
 G.R. No. 72841 January 29, 1987
PROVINCE OF CEBU, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT and ATTY. PABLO P.
GARCIA, respondents.
GUTIERREZ, JR., J.:
This is a petition to review the decision of the respondent Intermediate Appellate Court
in A.C. G.R. CV No. 66502 entitled "Governor Rene Espina, et. at v. Mayor Sergio
Osmeña, Jr., et. al, Atty. Pablo P. Garcia v. Province of Cebu" 1 affirming with
modification the order of the Court of First Instance of Cebu, Branch VII, granting
respondent Pablo P. Garcia's claim for compensation for services rendered as counsel
in behalf of the respondent Province of Cebu.
The facts of the case are not in dispute. On February 4, 1964, while then incumbent
Governor Rene Espina was on official business in Manila, the Vice-Governor, Priscillano
Almendras and three (3) members of the Provincial Board enacted Resolution No. 188,
donating to the City of Cebu 210 province. owned lots all located in the City of Cebu,
with an aggregate area of over 380 hectares, and authorizing the Vice-Governor to sign
the deed of donation on behalf of the province. The deed of donation was immediately
executed in behalf of the Province of Cebu by Vice-Governor Almendras and accepted
in behalf of the City of Cebu by Mayor Sergio Osmeña, Jr. The document of donation
was prepared and notarized by a private lawyer. The donation was later approved by
the Office of the President through Executive Secretary Juan Cancio.
According to the questioned deed of donation the lots donated were to be sold by the
City of Cebu to raise funds that would be used to finance its public improvement
projects. The City of Cebu was given a period of one (1) year from August 15, 1964
within which to dispose of the donated lots.
Upon his return from Manila, Governor Espina denounced as Legal and immoral the
action of his colleagues in donating practically all the patrimonial property of the
province of Cebu, considering that the latter's income was less than one. fourth (1/4) of
that of the City of Cebu.
To prevent the sale or disposition of the lots, the officers and members of the Cebu
Mayor's League (in behalf of their respective municipalities) along with some taxpayers,
including Atty. Garcia, filed a case seeking to have the donation declared illegal, null
and void. It was alleged in the complaint that the plaintiffs were filing it for and in behalf
of the Province of Cebu in the nature of a derivative suit. Named defendants in the suit
were the City of Cebu, City Mayor Sergio Osmeña, Jr. and the Cebu provincial officials
responsible for the donation of the province-owned lots. The case was docketed as Civil
Case No. R-8669 of the Court of First Instance of Cebu and assigned to Branch VI
thereof.
Defendants City of Cebu and City Mayor Osmeña, Jr. filed a motion to dismiss the case
on the ground that plaintiffs did not have the legal capacity to sue.
45
Subsequently, in an order, dated May, 1965, the court dismissed Case No. R-8669 on
the ground that plaintiffs were not the real parties in interest in the case. Plaintiffs filed a
motion for reconsideration of the order of dismissal. This motion was denied by the
Court.
Meanwhile, Cebu City Mayor Sergio Osmeña, Jr. announced that he would borrow
funds from the Philippine National Bank (PNB) and would use the donated lots as
collaterals. In July, 1965, the City of Cebu advertised the sale of an the lots remaining
unsold. Thereupon, Governor Espina, apprehensive that the lots would be irretrievably
lost by the Province of Cebu, decided to go to court. He engaged the services of
respondent Garcia in filing and prosecuting the case in his behalf and in behalf of the
Province of Cebu.
Garcia filed the complaint for the annulment of the deed of donation with an application
for the issuance of a writ of preliminary injunction, which application was granted on the
same day, August 6, 1965.
The complaint was later amended to implead Cebu City Mayor Carlos P. Cuizon as
additional defendant in view of Fiscal Numeriano Capangpangan's manifestation stating
that on September 9, 1965, Sergio Osmeña, Jr. filed his certificate of Candidacy for
senator, his position/office having been assumed by City Mayor Carlos P. Cuizon.
Sometime in 1972, the Provincial Board passed a resolution authorizing the Provincial
Attorney, Alfredo G. Baguia, to enter his appearance for the Province of Cebu and for
the incumbent Governor, Vice-Governor and members of the Provincial Board in this
case.
On January 30, 1973, Alfredo G. Baguia, Provincial Attorney of the Province of Cebu,
entered his appearance as additional counsel for the Province of Cebu and as counsel
for Governor Osmundo Rama, Vice-Governor Salutario Fernandez and Board Members
Leonardo Enad, Guillermo Legazpi, and Rizalina Migallos.
On January 31, 1973, Atty. Baguia filed a complaint in intervention stating that
intervenors Province of Cebu and Provincial Board of Cebu were joining or uniting with
original plaintiff, former Governor of Cebu, Rene Espina. They adopted his causes of
action, claims, and position stated in the original complaint filed before the court on
August 6, 1965.
On June 25, 1974, a compromise agreement was reached between the province of
Cebu and the city of Cebu. On July 15, 1974, the court approved the compromise
agreement and a decision was rendered on its basis.
On December 4, 1974, the court issued an order directing the issuance of a writ of
execution to implement the decision dated July 15, 1974, to wit:
1. Ordering the City of Cebu to return and deliver to the Province of
Cebu all the lots enumerated in the second paragraph hereof;
2. Ordering the Province of Cebu to pay the amount of One Million
Five Hundred Thousand Pesos (P1,500,000.00) to the City of Cebu
 for and in consideration of the return by the latter to the former of the
aforesaid lots;
3. Declaring the retention by the City of Cebu of the eleven (11) lots
mentioned in paragraph No. 1 of the compromise agreement, namely,
Lot Nos. 1141, 1261, 1268, 1269, 1272, 1273, 917, 646-A, 646A-4-0
and 10107-C;
4. Ordering the City of Cebu or the City Treasurer to turn over to the
Province of Cebu the amount of P187948.93 mentioned in Annex "A"
of the defendants manifestation dated October 21, 1974;
5. Declaring the City of Cebu and an its present and past officers
completely free from liabilities to third persons in connection with the
aforementioned lots, which liabilities if any, shall be assumed by the
Province of Cebu;
6. Ordering the Register of Deeds of the City of Cebu to cancel the
certification of titles in the name of the City of Cebu covering the lots
enumerated in the second paragraph of this order and to issue new
ones in lieu thereof in the name of the Province of Cebu.
For services rendered in Civil Case no. 238-BC, CFI of Cebu, respondent Pablo P.
Garcia filed through counsel a Notice of Attorney's Lien, dated April 14, 1975, praying
that his statement of claim of attorney's lien in said case be entered upon the records
thereof, pursuant to Section 37, Rule 138 of the Rules of Court.
To said notice, petitioner Province of Cebu filed through counsel, its opposition dated
April 23, 1975, stating that the payment of attorney's fees and reimbursement of
incidental expenses are not allowed by law and settled jurisprudence to be paid by the
Province. A rejoinder to this opposition was filed by private respondent Garcia.
After hearing, the Court of First Instance of Cebu, then presided over by Judge Alfredo
Marigomen, rendered judgment dated May 30, 1979, in favor of private respondent and
against petitioner Province of Cebu, declaring that the former is entitled to recover
attorney's fees on the basis of quantum meruit and fixing the amount thereof at
P30,000.00.
Both parties appealed from the decision to the Court of Appeals. In the case of private
respondent, however, he appealed only from that portion of the decision which fixed his
attorney's fees at P30,000.00 instead of at 30% of the value of the properties involved in
the litigation as stated in his original claim
On October 18, 1985, the Intermediate Appellate Court rendered a decision affirming
the findings and conclusions of the trial court that the private respondent is entitled to
recover attorney's fees but fixing the amount of such fees at 5% of the market value of
the properties involved in the litigation as of the date of the filing of the claim in 1975.
The dispositive portion of the decision reads:
46
WHEREFORE, except for the aforementioned modification that the
compensation for the services rendered by the Claimant Atty. Pablo
P. Garcia is fixed at five percent (5%) of the total fair market value of
the lots in question, the order appealed from is hereby affirmed in all
other respects.
Both parties went to the Supreme Court with private respondent questioning the fixing of
his attorney's fees at 5% instead of 30% of the value of the properties in litigations as
prayed for in his claims. However, the private respondent later withdrew his petition in
G.R. No. 72818 with the following explanation:
That after a long and serious reflection and reassessment of his
position and intended course of action and, after seeking the views of
his friends, petitioner has come to the definite conclusion that
prosecuting his appeal would only result in further delay in the final
disposition of his claim (it has been pending for the last 10 years 4 in
the CFI and 6 in the Court of Appeals, later Intermediate Appellate
Court) and that it would be more prudent and practicable to accept in
full the decision of the Intermediate Appellate Court.
Hence, only the petition of the Province of Cebu is pending before this Court.
The matter of representation of a municipality by a private attorney has been settled
in Ramos v. Court of Appeals(108 SCRA 728). Collaboration of a private law firm with
the fiscal and the municipal attorney is not allowed. Section 1683 of the Revised
Administrative Code provides:
.Section 1683. Duty of fiscal to represent provinces and provincial
subdivisions in litigation. — The provincial fiscal shall represent the
province and any municipality, or municipal district thereof in any
court, except in cases whereof original jurisdiction is vested in the
Supreme Court or in cases where the municipality, or municipal
district in question is a party adverse to the provincial government or
to some other municipality, or municipal district in the same province.
When the interests of a provincial government and of any political
division thereof are opposed, the provincial fiscal shall act on behalf of
the province.
When the provincial fiscal is disqualified to serve any municipality or
other political subdivision of a province, a special attorney may be
employed by its council
The above provision, complemented by Section 3 of the Local Autonomy Law, is clear in
providing that only the provincial fiscal and the municipal attorney can represent a
province or municipality in its lawsuits. The provision is mandatory. The municipality's
authority to employ a private lawyer is expressly limited only to situations where the
provincial fiscal is disqualified to represent it (De Guia v. The Auditor General 44 SCRA
169; Municipality of Bocaue, et. al. v. Manotok, 93 Phil. 173; Enriquez, Sr., v. Honorable
Gimenez, 107 Phil. 932) as when he represents the province against a municipality.
The lawmaker, in requiring that the local government should be represented in its court
cases by a government lawyer, like its municipal attorney and the provincial fiscal
intended that the local government should not be burdened with the expenses of hiring a
private lawyer. The lawmaker also assumed that the interests of the municipal
corporation would be best protected if a government lawyer handles its litigations. It is to
be expected that the municipal attorney and the fiscal would be faithful and dedicated to
the corporation's interests, and that, as civil service employees, they could be held
accountable for any misconduct or dereliction of duty (See Ramos v. Court of Appeals,
supra).
However, every rule is not without an exception, Ibi quid generaliter conceditur; inest
haec exceptio, si non aliquid sit contra jus fasque (Where anything is granted generally,
this exception is implied; that nothing shall be contrary to law and right). Indeed, equity,
as well as the exceptional situation facing us in the case at bar, require a departure from
the established rule.
The petitioner anchors its opposition to private respondent's claim for compensation on
the grounds that the employment of claimant as counsel for the Province of Cebu by
then Governor Rene Espina was unauthorized and violative of Section 1681 to 1683 in
relation to Section 1679 of the Revised Administrative Code and that the claim for
attorney's fees is beyond the purview of Section 37, Rule 138 of the Rules of Court.
It is argued that Governor Espina was not authorized by the Provincial Board, through a
board resolution, to employ Atty. Pablo P. Garcia as counsel of the Province of Cebu.
Admittedly, this is so.
However, the circumstances obtaining in the case at bar are such that the rule cannot
be applied. The Provincial Board would never have given such authorization. The
decision of the respondent court elucidates the matter thus:
... The provisions of Sections 1681 to 1683 of the Revised
Administrative Code contemplate a normal situation where the
adverse party of the province is a third person as in the case
of Enriquez v. Auditor General, 107 Phil 932. In the present case, the
controversy involved an intramural fight between the Provincial
Governor on one hand and the members of the Provincial Board on
the other hand. Obviously it is unthinkable for the Provincial Board to
adopt a resolution authorizing the Governor to employ Atty. Garcia to
act as counsel for the Province of Cebu for the purpose of filing and
prosecuting a case against the members to the same Provincial Board
According to the claimant Atty. Garcia, how can Governor Espina be
expected to secure authority from the Provincial Board to employ
claimant as counsel for the Province of Cebu when the very officials
from whom authority is to be sought are the same officials to be sued,
It is simply impossible that the Vice-Governor and the members of the
Provincial Board would pass a resolution authorizing Governor Espina
to hire a lawyer to file a suit against themselves.
xxx xxx xxx
47
Under Section 2102 of the Revised Administrative Code it is the
Provincial Board upon whom is vested the authority "to direct, in its
discretion, the bringing or defense of civil suits on behalf of the
Provincial Governor ___." Considering that the members of the
Provincial Board are the very ones involved in this case, they cannot
be expected to directed the Provincial Fiscal the filing of the suit on
behalf of the provincial government against themselves. Moreover, as
argued by the claimant, even if the Provincial Fiscal should side with
the Governor in the bringing of this suit, the Provincial Board whose
members are made defendants in this case, can simply frustrate his
efforts by directing him to dismiss the case or by refusing to
appropriate funds for the expenses of the litigation.
... Consequently, there could have been no occasion for the exercise
by the Provincial Fiscal of his powers and duties since the members
of the Provincial Board would not have directed him to file a suit
against them.
A situation obtains, therefore, where the Provincial Governor, in behalf of the Province
of Cebu, seeks redress against the very members of the body, that is, the Provincial
Board, which, under the law, is to provide it with legal assistance. A strict application of
the provisions of the Revise Administrative Code on the matter would deprive the
plaintiffs in the court below of redress for a valid grievance. The provincial board
authorization required by law to secure the services of special counsel becomes an
impossibility. The decision of the respondent court is grounded in equity — a correction
applied to law, where on account of the general comprehensiveness of the law,
particular exceptions not being provided against, something is wanting to render it
perfect.
It is also argued that the employment of claimant was violative of sections 1681 to 1683
of the Revised Administrative Code because the Provincial Fiscal who was the only
competent official to file this case was not disqualified to act for the Province of Cebu.
Respondent counsel's representation of the Province of Cebu became necessary
because of the Provincial Board's failure or refusal to direct the bringing of the action to
recover the properties it had donated to the City of Cebu. The Board more effectively
disqualified the Provincial Fiscal from representing the Province of Cebu when it
directed the Fiscal to appear for its members in Civil Case No. R-8669 filed by Atty.
Garcia, and others, to defend its actuation in passing and approving Provincial Board
Resolution No. 186. The answer of the Provincial Fiscal on behalf of the Vice-Governor
and the Provincial Board members filed in Civil Case No. R-8669; (Exhibit "K") upholds
the validity and legality of the donation. How then could the Provincial Fiscal represent
the Province of Cebu in the suit to recover the properties in question? How could
Governor Espina be represented by the Provincial Fiscal or seek authorization from the
Provincial Board to employ special counsel? Nemo tenetur ad impossibile (The law
obliges no one to perform an impossibility).lwphl@itç Neither could a prosecutor be
designated by the Department of Justice. Malacañang had already approved the
questioned donation
Anent the question of liability for respondent counsel's services, the general rule that an
attorney cannot recover his fees from one who did not employ him or authorize his
employment, is subject to its own exception.
Until the contrary is clearly shown an attorney is presumed to be acting under authority
of the litigant whom he purports to represent (Azotes v. Blanco, 78 Phil. 739) His
authority to appear for and represent petitioner in litigation, not having been questioned
in the lower court, it will be presumed on appeal that counsel was properly authorized to
file the complaint and appear for his client. (Republic v. Philippine Resources
Development Corporation, 102 Phil. 960) Even where an attorney is employed by an
unauthorized person to represent a client, the latter will be bound where it has
knowledge of the fact that it is being represented by an attorney in a particular litigation
and takes no prompt measure to repudiate the assumed authority. Such acquiescence
in the employment of an attorney as occurred in this case is tantamount to ratification
(Tan Lua v. O' Brien, 55 Phil. 53). The act of the successor provincial board and
provincial officials in allowing respondent Atty. Pablo P. Garcia to continue as counsel
and in joining him in the suit led the counsel to believe his services were still necessary.
We apply a rule in the law of municipal corporations: "that a municipality may become
obligated upon an implied contract to pay the reasonable value of the benefits accepted
or appropriated by it as to which it has the general power to contract. The doctrine of
implied municipal liability has been said to apply to all cases where money or other
property of a party is received under such circumstances that the general law,
independent of express contract implies an obligation upon the municipality to do justice
with respect to the same." (38 Am Jur. Sec. 515, p. 193):
The obligation of a municipal corporation upon the doctrine of an
implied contract does not connote an enforceable obligation. Some
specific principle or situation of which equity takes cognizance must
be the foundation of the claim. The principle of liability rests upon the
theory that the obligation implied by law to pay does not originate in
the unlawful contract, but arises from considerations outside it. The
measure of recovery is the benefit received by the municipal
corporation. The amount of the loan, the value of the property or
services, or the compensation specified in the contract, is not the
measure. If the price named in the invalid contract is shown to be
entirely fair and reasonable not only in view of the labor done, but also
in reference to the benefits conferred, it may be taken as the true
measure of recovery.
The petitioner can not set up the plea that the contract was ultra vires and still retain
benefits thereunder. Having regarded the contract as valid for purposes of reaping some
benefits, the petitioner is estopped to question its validity for the purposes of denying
answerability.
The trial court discussed the services of respondent Garcia as follows:
... Thus because of his effort in the filing of this case and in securing
the issuance of the injunction preventing the City of Cebu and Sergio
Osmeña, Jr., from selling or disposing the lots to third parties, on the
part of the members of the Provincial Board from extending the date
48
of the automatic reversion beyond August 15, 1965, on the part of the
Register of Deeds — from effecting the transfer of title of any of the
donated lots to any vendee or transferee, the disposition of these lots
by the City of Cebu to third parties was frustrated and thus: saved
these lots for their eventual recovery by the province of Cebu.
Actually it was Governor Espina who filed the case against Cebu City and Mayor
Osmeña. Garcia just happened to be the lawyer, Still Atty. Garcia is entitled to
compensation. To deny private respondent compensation for his professional services
would amount to a deprivation of property without due process of law (Cristobal v.
Employees' Compensation Commission, 103 SCRA 329).
The petitioner alleges that although they do not deny Atty. Garcia's services for
Governor Espina (who ceased to be such Governor of Cebu on September 13, 1969)
and the original plaintiffs in the case, "it cannot be said with candor and fairness that
were it not for his services the lots would have already been lost to the province forever,
because the donation itself he was trying to enjoin and annul in said case was subject to
a reversion clause under which lots remaining undisposed of by the City as of August
15, 1965 automatically reverted to the province and only about 17 lots were disposed of
by August 15, 1965." We quote respondent counsel's comment with approval:
xxx xxx xxx
While it is true that the donation was subject to a reversion clause, the
same clause gave the Provincial Board the discretion to extend the
period of reversion beyond August 15, 1965 (see paragraph 3 of
donation).
With the known predisposition of the majority of the members of the
Provincial Board, there would have been no impediment to the
extension of the reversion date to beyond August 15, 1965. Once the
date of reversion is extended, the disposition of an the donated lots
would be only a matter of course.
We have carefully reviewed the records of this case and conclude that 30% or even 5%
of properties already worth (P120,000,000.00) in 1979 as compensation for the private
respondent's services is simply out of the question. The case handled by Atty. Garcia
was decided on the basis of a compromise agreement where he no longer participated.
The decision was rendered after pre-trial and without any hearing on the merits.
The factual findings and applicable law in this petition are accurately discussed in the
exhaustive and well-written Order of then Trial Judge, now Court of Appeals Justice
Alfredo Marigomen We agree with his determination of reasonable fees for the private
lawyer on the basis of quantum meruit. The trial court fixed the compensation at
P30,000.00 and ordered reimbursement of actual expenses in the amount of P289.43.
WHEREFORE, the questioned October 18, 1985 decision of the Intermediate Appellate
Court is set aside. The Order of the Trial Court dated May 30, 1979 is REINSTATED.
SO ORDERED.
 [G.R. No. 126232. November 27, 1998]
THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE
CHAVEZ, and MANUEL DJ SIAYNGCO in their capacity as PROVINCIAL
GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL LEGAL ADVISE,
respectively, petitioners, vs. THE HONORABLE COURT OF APPEALS
(FORMER SPECIAL 12TH DIVISION), PUBLIC CEMENT
CORPORATION, respondents.
DECISION
ROMERO, J.:
Before us is a petition for certiorari seeking the reversal of the decision of the Court
of Appeals dated September 27, 1995 declaring petitioner without authority to levy taxes
on stones, sand, gravel, earth and other quarry resources extracted from private lands,
as well as the August 26, 1996 resolution of the appellate court denying its motion for
reconsideration.
The facts are as follows:
On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed Provincial
Ordinance No. 3, known as "An ordinance Enacting the Revenue Code of the Bulacan
Province," which was to take effect on July 1, 1992, section 21 of the ordinance provides
as follows:
Section 21. Imposition of Tax. There is hereby levied and collected a tax of 10% of the
fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth
and other quarry resources, such, but not limited to marble, granite, volcanic cinders,
basalt, tuff and rock phosphate, extracted from public lands or from beds of seas, lakes,
rivers, streams, creeks and other public waters within its territorial jurisdiction. (Italics
ours)
Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated November
11, 1993, assessed private respondent Republic Cement Corporation (hereafter Republic
Cement) P2,524,692.13 for extracting limestone, shale and silica from several parcels
of private land in the province during the third quarter of 1992 until the second quarter of
1993. Believing that the province, on the basis of above-said ordinance, had no authority
to impose taxes on quarry resources extracted from private lands, Republic Cement
formally contested the same on December 23, 1993. The same was, however, denied by
the Provincial Treasurer on January 17, 1994. Republic Cement, consequently filed a
petition for declaratory relief with the Regional Trial Court of Bulacan on February 14,
1994. The province filed a motion to dismiss Republic Cement's petition, which was
granted by the trial court on May 13, 1993, which ruled that declaratory relief was
improper, allegedly because a breach of the ordinance had been committed by Republic
Cement.
On July 11, 1994, Republic Cement filed a petition for certiorari with the Supreme
Court seeking to reverse the trial court's dismissal of their petition. The Court, in a
resolution dated July 27, 1994, referred the same to the Court of Appeals, where it was
49
docketed as CA G.R. SP No. 34915. The appellate court required petitioners to file a
comment, which they did on September 7, 1994.
In the interim, the Province of Bulacan issued a warrant of levy against Republic
Cement, allegedly because of its unpaid tax liabilities. Negotiations between Republic
Cement and petitioners resulted in an agreement and modus vivendi on December 12,
1994, whereby Republic Cement agreed to pay under protest P1,262,346.00, 50% of the
tax assessed by petitioner, in exchange for the lifting of the warrant of levy. Furthermore,
Republic Cement and petitioners agreed to limit the issue for resolution by the Court of
Appeals to the question as to whether or not the provincial government could impose
and/or assess taxes on quarry resources extracted by Republic Cement from private
lands pursuant to Section 21 of the Provincial Ordinance No. 3. This agreement
and modus vivendi were embodied in a joint manifestation and motion signed by
Governor Roberto Pagdanganan, on behalf of the Province of Bulacan, by Provincial
Treasurer Florence Chavez, and by Provincial Legal Officer Manuel Siayngco, as
petitioner's counsel and filed with the Court of Appeals on December 13, 1994. In a
resolution dated December 29, 1994, the appellate court approved the same and limited
the issue to be resolved to the question whether or not the provincial government could
impose taxes on stones, sand, gravel, earth and other quarry resources extracted from
private lands.
After due trial, the Court of Appeals, on September 27, 1995, rendered the following
judgment:
WHEREFORE, judgment is hereby rendered declaring the Province of
Bulacan under its Provincial Ordinance No. 3 entitled "An Ordinance
Enacting the Revenue Code of Bulacan Province" to be without legal
authority to impose and assess taxes on quarry resources extracted by RCC
from private lands, hence the interpretation of Respondent Treasurer of
Chapter II, Article D, Section 21 of the Ordinance, and the assessment made
by the Province of Bulacan against RCC is null and void.
Petitioner's motion for reconsideration, as well as their supplemental motion for
reconsideration, was denied by the appellate court on august 26, 1996, hence this appeal.
Petitioner's claim that the Court of Appeals erred in:
1. NOT HAVING OUTRIGHTLY DISMISSED THE SUBJECT
PETITION ON THE GROUND THAT THE SAME IS NOT THE
APPROPRIATE REMEDY FROM THE TRIAL COURT'S
GRANT OF THE PRIVATE RESPONDENTS' (HEREIN
PETITIONER) MOTION TO DISMISS;
2. NOT DISMISSING THE SUBJECT PETITION FOR BEING
VIOLATIVE OF CIRCULAR 2-90 ISSUED BY THE SUPREME
COURT;
3. NOT DISMISSING THE PETITION FOR REVIEW ON THE
GROUND THAT THE TRIAL COURT'S ORDER OF MAY 13,
1994 HAD LONG BECOME FINAL AND EXECUTORY;
 4. GOING BEYOND THE PARAMETERS OF ITS APPELLATE
JURISDICTION IN RENDERING THE SEPTEMBER 27, 1995
DECISION;
5. HOLDING THAT PRIVATE RESPONDENT (HEREIN PETITIONER)
ARE ESTOPPED FROM RAISING THE PROCEDURAL ISSUE
IN THE MOTION FOR RECONSIDERATION;
6. THE INTERPRETATION OF SECTION 134 OF THE LOCAL
GOVERNMENT CODE AS STATED IN THE SECOND TO THE
LAST PARAGRAPH OF PAGE 5 OF ITS SEPTEMBER 27,
1995 DECISION;
7. SUSTAINING THE ALLEGATIONS OF HEREIN RESPONDENT
WHICH UNJUSTLY DEPRIVED PETITIONER THE POWER TO
CREATE ITS OWN SOURCES OF REVENUE;
8. DECLARING THAT THE ASSESSMENT MADE BY THE
PROVINCE OF BULACAN AGAINST RCC AS NULL AND
VOID WHICH IN EFFECT IS A COLLATERAL ATTACK ON
PROVINCIAL ORDINANCE NO. 3; AND
9. FAILING TO CONSIDER THE REGALIAN DOCTRINE IN FAVOR
OF THE LOCAL GOVERNMENT.
The issues raised by petitioners are devoid of merit. The number and diversity of
errors raised by appellants impel us, however, to discuss the points raised seriatim.
In their first assignment of error, petitioners contend that instead of filing a petition
for certiorari with the Supreme Court, Republic Cement should have appealed from the
order of the trial court dismissing their petition. Citing Martinez vs. CA,[1] they allege that
a motion to dismiss is a final order, the remedy against which is not a petition for certiorari,
but an appeal, regardless of the questions sought to be raised on appeal, whether of fact
or of law, whether involving jurisdiction or grave abuse of discretion of the trial court.
Petitioners' argument is misleading. While it is true that the remedy against a final
order is an appeal, and not a petition for certiorari, the petition referred to is a petition for
certiorari under Rule 65. As stated in Martinez, the party aggrieved does not have the
option to substitute the special civil action for certiorari under Rule 65 for the remedy of
appeal. The existence and availability of the right of appeal are antithetical to the
availment of the special civil action for certiorari.
Republic Cement did not, however, file a petition for certiorari under Rule 65, but an
appeal by certiorari under Rule 45. Even law students know that certiorari under Rule 45
is a mode of appeal, an appeal from the Regional Trial Court being taken in either of two
ways (a) by writ of error (involving questions of fact and law) and (b) by certiorari (limited
only to issues of law), with an appeal by certiorari being brought to the Supreme Court,
there being no provision of law for taking appeals by certiorari to the Court of Appeals.[2] It
is thus clearly apparent that Republic Cement correctly contested the trial court's order of
dismissal by filing an appeal by certiorari under Rule 45. In fact, petitioners, in their
50
second assignment of error, admit that a petition for review on certiorari under Rule 45 is
available to a party aggrieved by an order granting a motion to dismiss. [3] They claim,
however, that Republic Cement could not avail of the same allegedly because the latter
raised issues of fact, which is prohibited, Rule 45 providing that "(t)he petition shall raise
only questions of law which must be distinctly set forth." [4] In this respect, petitioners claim
that Republic Cement's petition should have been dismissed by the appellate court,
Circular 2-90 providing:
4. Erroneous Appeals. - An appeal taken to either the Supreme Court or the
Court of Appeals by the wrong or inappropriate mode shall be dismissed.
xxxxxxxxx
d) No transfer of appeals erroneously taken. -- No transfers of appeals
erroneously taken to the Supreme Court or to the Court of Appeals to
whichever of these Tribunals has appropriate appellate jurisdiction will be
allowed; continued ignorance or wilful disregard of the law on appeals will
not be tolerated.
Petitioners even fault the Court for referring Republic Cement's petition to the Court
of Appeals, claiming that the same should have been dismissed pursuant to Circular 2-
90. Petitioners conveniently overlook the other provisions of Circular 2-90, specifically 4b)
thereof, which provides:
b) Raising factual issues in appeal by certiorari. - Although submission of
issues of fact in an appeal by certiorari taken to the Supreme Court from the
regional trial court is ordinarily proscribed, the Supreme Court nonetheless
retains the option, in the exercise of its sound discretion and considering the
attendant circumstances, either itself to take cognizance of and decide such
issues or to refer them to the Court of Appeals for determination.
As can be clearly adduced from the foregoing, when an appeal by certiorari under
Rule 45 erroneously raises factual issues, the Court has the option to refer the petition to
the Court of Appeals. The exercise by the Court of this option may not now be questioned
by petitioners.
As the trial court's order was properly appealed by Republic Cement, the trial court's
May 13, 1994 order never became final and executory, rendering petitioner's third
assignment of error moot and academic.
Petitioners' fourth and fifth assignment of errors are likewise without
merit. Petitioners assert that the Court of Appeals could only rule on the propriety of the
trial court's dismissal of Republic Cement's petition for declaratory relief, allegedly
because that was the sole relief sought by the latter in its petition for certiorari. Petitioners
claim that the appellate court overstepped its jurisdiction when it declared null and void
the assessment made by the Province of Bulacan against Republic Cement.
Petitioners gloss over the fact that, during the proceedings before the Court of
Appeals, they entered into an agreement and modus vivendi whereby they limited the
issue for resolution to the question as to whether or not the provincial government could
impose and/or assess taxes on stones, sand, gravel, earth and other quarry resources
extracted by Republic Cement from private lands. This agreement and modus
vivendi were approved by the appellate court on December 29, 1994. All throughout the
proceedings, petitioners never questioned the authority of the Court of Appeals to decide
this issue, an issue which it brought itself within the purview of the appellate court. Only
when an adverse decision was rendered by the Court of Appeals did petitioners question
the jurisdiction of the former.
Petitioners are barred by the doctrine of estoppel from contesting the authority of
the Court of Appeals to decide the instant case, as this Court has consistently held that
"(a) party cannot invoke the jurisdiction of a court to secure affirmative relief against his
opponent and after obtaining or failing to obtain such relief, repudiate or question that
same jurisdiction."[5] The Supreme Court frowns upon the undesirable practice of a party
submitting his case for decision and then accepting the judgment, only if favorable, and
attacking it for lack of jurisdiction when adverse.[6]
In a desperate attempt to ward off defeat, petitioners now repudiate the above-
mentioned agreement and modus vivendi, claiming that the same was not binding in the
Province of Bulacan, not having been authorized by the Sangguniang Panlalawigan of
Bulacan. While it is true that the Provincial Governor can enter into contract and obligate
the province only upon authority of the sangguniang panlalawigan,[7] the same is
inapplicable to the case at bar. The agreement and modus vivendi may have been signed
by petitioner Roberto Pagdanganan, as Governor of the Province of Bulacan, without
authorization from the sangguniang panlalawigan, but it was also signed by Manuel
Siayngco, the Provincial Legal Officer, in his capacity as such, and as counsel of
petitioners.
It is a well-settled rule that all proceedings in court to enforce a remedy, to bring a
claim, demand, cause of action or subject matter of a suit to hearing, trial, determination,
judgment and execution are within the exclusive control of the attorney. [8] With respect to
such matters of ordinary judicial procedure, the attorney needs no special authority to bind
his client.[9] Such questions as what action or pleading to file, where and when to file it,
what are its formal requirements, what should be the theory of the case, what defenses
to raise, how may the claim or defense be proved, when to rest the case, as well as those
affecting the competency of a witness, the sufficiency, relevancy, materiality or
immateriality of certain evidence and the burden of proof are within the authority of the
attorney to decide.[10] Whatever decision an attorney makes on any of these procedural
questions, even if it adversely affects a client's case, will generally bind a client. The
agreement and modus vivendi signed by petitioner's counsel is binding upon petitioners,
even if the Sanggunian had not authorized the same, limitation of issues being a
procedural question falling within the exclusive authority of the attorney to decide.
In any case, the remaining issues raised by petitioner are likewise devoid of merit,
a province having no authority to impose taxes on stones, sand, gravel, earth and other
quarry resources extracted from private lands. The pertinent provisions of the Local
Government Code are as follows:
Sec. 134. Scope of Taxing Powers. - Except as otherwise provided in this
Code, the province may levy only the taxes, fees, and charges as provided
in this Article.
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Sec. 138. Tax on Sand, Gravel and Other Quarry Resources. - The province
may levy and collect not more than ten percent (10%) of fair market value in
the locality per cubic meter of ordinary stones, sand, gravel, earth, and other
quarry resources, as defined under the National Internal Revenue Code, as
amended, extracted from public lands or from the beds of seas, lakes, rivers,
streams, creeks, and other public waters within its territorial jurisdiction.
x x x x x x x x x (Italics supplied)
The appellate court, on the basis of Section 134, ruled that a province was
empowered to impose taxes only on sand, gravel, and other quarry resources extracted
from public lands, its authority to tax being limited by said provision only to those taxes,
fees and charges provided in Article One, Chapter 2, Title One of Book II of the Local
Government Code.[11] On the other hand, petitioners claim that Sections 129[12] and
186[13] of the Local Government Code authorizes the province to impose taxes other than
those specifically enumerated under the Local Government Code.
The Court of Appeals erred in ruling that a province can impose only the taxes
specifically mentioned under the Local Government Code. As correctly pointed out by
petitioners, Section 186 allows a province to levy taxes other than those specifically
enumerated under the Code, subject to the conditions specified therein.
This finding, nevertheless, affords cold comfort to petitioners as they are still
prohibited from imposing taxes on stones, sand, gravel, earth and other quarry resources
extracted from private lands. The tax imposed by the Province of Bulacan is an excise
tax, being a tax upon the performance, carrying on, or exercise of an activity. [14] The Local
Government Code provides:
Section 133. - Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following:
xxxxxxxxx
(h) Excise taxes on articles enumerated under the National Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products;
xxxxxxxxx
A province may not, therefore, levy excise taxes on articles already taxed by the
National Internal Revenue Code. Unfortunately for petitioners, the National Internal
Revenue Code provides:
Section 151. - Mineral Products. -
(A) Rates of Tax. - There shall be levied, assessed and collected on
minerals, mineral products and quarry resources, excise tax as follows:
xxxxxxxxx
 (2) On all nonmetallic minerals and quarry resources, a tax of two
percent (2%) based on the actual market value of the gross output
thereof at the time of removal, in case of those locally extracted or
produced; or the values used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax and value-
added tax, in the case of importation.
Section 21 of Provincial Ordinance No. 3 as the latter clearly applies only to quarry
resources extracted from public lands. Petitioners may not invoke the Regalian doctrine
to extend the coverage of their ordinance to quarry resources extracted from private lands,
for taxes, being burdens, are not to be presumed beyond what the applicable statute
expressly and clearly declares, tax statutes being construed strictissimi juris against the
government.[16]

xxxxxxxxx WHEREFORE, premises considered, the instant petition is DISMISSED for lack of
merit and the decision of the Court of Appeals is hereby AFFIRMED in toto. Costs against
(B) [Definition of Terms]. - For purposes of this Section, the term- petitioner.

xxxxxxxxx SO ORDERED.

(4) Quarry resources shall mean any common stone or other

common mineral substances as the Director of the Bureau of
Mines and Geo-Sciences may declare to be quarry resources
such as, but not restricted to, marl, marble, granite, volcanic
cinders, basalt, tuff and rock phosphate; Provided, That they
contain no metal or metals or other valuable minerals in
economically workable quantities.

It is clearly apparent from the above provision that the National Internal Revenue
Code levies a tax on all quarry resources, regardless of origin, whether extracted from
public or private land. Thus, a province may not ordinarily impose taxes on stones, sand,
gravel, earth and other quarry resources, as the same are already taxed under the
National Internal Revenue Code. The province can, however, impose a tax on stones,
sand, gravel, earth and other quarry resources extracted from public land because it is
expressly empowered to do so under the Local Government Code. As to stones, sand,
gravel, earth and other quarry resources extracted from private land, however, it may not
do so, because of the limitation provided by Section 133 of the Code in relation to Section
151 of the National Internal Revenue Code.

Given the above disquisition, petitioners cannot claim that the appellate court
unjustly deprived them of the power to create their sources of revenue, their assessment
of taxes against Republic Cement being ultra vires, traversing as it does the limitations
set by the Local Government Code.

Petitioners likewise aver that the appellate court's declaration of nullity of its
assessment against Republic Cement is a collateral attack on Provincial Ordinance No.
3, which is prohibited by public policy.[15] Contrary to petitioners' claim, the legality of the
ordinance was never questioned by the Court of Appeals. Rather, what the appellate court
questioned was petitioners' assessment of taxes on Republic Cement on the basis of
Provincial Ordinance No. 3, not the ordinance itself.

Furthermore, Section 21 of Provincial Ordinance No. 3 is practically only a

reproduction of Section 138 of the Local Government Code. A cursory reading of both
would show that both refer to ordinary sand, stone, gravel, earth and other quarry
resources extracted from public lands. Even if we disregard the limitation set by Section
133 of the Local Government Code, petitioners may not impose taxes on stones, sand,
gravel, earth and other quarry resources extracted from private lands on the basis of
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