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a. P40 tickets to a banquet given in honor of Sergio In order to maintain the general public’s trust and
Osmena and P28 San Miguel beer given as gifts to confidence in the Government this power must be used
various persons – representation expenses justly and not treacherously. It does not conform with the
Representation expenses: deductible from gross sense of justice for the Government to persuade the
income as expenditures incurred in carrying on a taxpayer to lend it a helping hand and later on penalize
trade or business him for duly answering the urgent call.
In this case, the evidence does not show such link
between the expenses and the business of Roxas In fine, Roxas cannot be considered a real estate dealer
y Cia and is not liable for 100% of the sale. Pursuant to Section 34
of the Tax Code, the lands sold to the farmers are capital
b. Contributions to the Pasay police and fire department assets and the gain derived from the sale thereof is capital
and other police departments as Christmas funds gain, taxable only to the extent of 50%.
Contributions to the Christmas funds are not
deductible for the reason that the Christmas funds
were not spent for public purposes but as
Christmas gifts to the families of the members of
G. Stages, Aspects of Taxation
said entities
Under Section 39(h), a contribution to a Levy
government entity is deductible when used Assessment & collection
exclusively for public purposes Payment
As to the contribution to the Manila Police trust
fund, such is an allowable deduction for said trust H. Taxes Distinguished from Other Impositions
Taxation vs Eminent Domain vs Police Power
An examination of the Charter of Quezon City (Rep. Act
No. 537), does not reveal any provision that would justify
Tax vs Debt
the ordinance in question except the provision granting
Tax vs Toll
police power to the City. Section 9 cannot be justified
under the power granted to Quezon City to tax, fix the
Tax vs License Fee
license fee, and regulate such other business, trades, and
Tax vs Penalty
occupation as may be established or practised in the City.
The power to regulate does not include the power to
QUEZON CITY VS ERICTA prohibit or confiscate. The ordinance in question not only
confiscates but also prohibits the operation of a memorial
park cemetery.
Facts:
Section 9 of Ordinance No. 6118, S-64 provides that at least
6% of the total area of the memorial park cemetery shall Police power is defined by Freund as ‘the power of
be set aside for the charity burial of deceased persons promoting the public welfare by restraining and regulating
who are paupers and have been residents of Quezon City the use of liberty and property’. It is usually exerted in order
for at least 5 years prior to their death. As such, the Quezon to merely regulate the use and enjoyment of property of
City engineer required the respondent, Himlayang Pilipino the owner. If he is deprived of his property outright, it is not
Inc, to stop any further selling and/or transaction of taken for public use but rather to destroy in order to
memorial park lots in Quezon City where the owners promote the general welfare. In police power, the owner
thereof have failed to donate the required 6% space does not recover from the government for injury sustained
intended for paupers burial. in consequence thereof.
The then Court of First Instance and its judge, Hon. Ericta, Under the provisions of municipal charters which are
declared Section 9 of Ordinance No. 6118, S-64 null and known as the general welfare clauses, a city, by virtue of
void. its police power, may adopt ordinances to the peace,
safety, health, morals and the best and highest interests of
the municipality. It is a well-settled principle, growing out
Petitioners argued that the taking of the respondent’s
of the nature of well-ordered and society, that every
property is a valid and reasonable exercise of police
holder of property, however absolute and may be his title,
power and that the land is taken for a public use as it is
holds it under the implied liability that his use of it shall not
intended for the burial ground of paupers. They further
be injurious to the equal enjoyment of others having an
argued that the Quezon City Council is authorized under
equal right to the enjoyment of their property, nor injurious
its charter, in the exercise of local police power, ” to make
to the rights of the community. A property in the state is
such further ordinances and resolutions not repugnant to
held subject to its general regulations, which are necessary
law as may be necessary to carry into effect and
to the common good and general welfare. Rights of
discharge the powers and duties conferred by this Act and
property, like all other social and conventional rights, are
such as it shall deem necessary and proper to provide for
subject to such reasonable limitations in their enjoyment as
the health and safety, promote the prosperity, improve the
shall prevent them from being injurious, and to such
morals, peace, good order, comfort and convenience of
reasonable restraints and regulations, established by law,
the city and the inhabitants thereof, and for the protection
as the legislature, under the governing and controlling
of property therein.”
power vested in them by the constitution, may think
necessary and expedient. The state, under the police
On the otherhand, respondent Himlayang Pilipino, Inc. power, is possessed with plenary power to deal with all
contended that the taking or confiscation of property was matters relating to the general health, morals, and safety
obvious because the questioned ordinance permanently of the people, so long as it does not contravene any
restricts the use of the property such that it cannot be used positive inhibition of the organic law and providing that
for any reasonable purpose and deprives the owner of all such power is not exercised in such a manner as to justify
beneficial use of his property. the interference of the courts to prevent positive wrong
and oppression.
Issue: Is Section 9 of the ordinance in question a valid
exercise of the police power? However, in the case at hand, there is no reasonable
relation between the setting aside of at least six (6)
Held: No. The Sec. 9 of the ordinance is not a valid exercise percent of the total area of an private cemeteries for
of the police power. charity burial grounds of deceased paupers and the
promotion of health, morals, good order, safety, or the
Occupying the forefront in the bill of rights is the provision general welfare of the people. The ordinance is actually a
which states that ‘no person shall be deprived of life, liberty taking without compensation of a certain area from a
or property without due process of law’ (Art. Ill, Section 1 private cemetery to benefit paupers who are charges of
subparagraph 1, Constitution). On the other hand, there the municipal corporation. Instead of building or
are three inherent powers of government by which the maintaining a public cemetery for this purpose, the city
state interferes with the property rights, namely-. (1) police passes the burden to private cemeteries.
power, (2) eminent domain, (3) taxation. These are said to
exist independently of the Constitution as necessary The expropriation without compensation of a portion of
attributes of sovereignty. private cemeteries is not covered by Section 12(t) of
Republic Act 537, the Revised Charter of Quezon City Facts: Plaintiff is engaged in real estate business,
which empowers the city council to prohibit the burial of developing and selling lots to the public, particularly the
the dead within the center of population of the city and Highway Hills Subdivision along EDSA, Mandaluyong, Rizal.
to provide for their burial in a proper place subject to the
provisions of general law regulating burial grounds and On March 4, 1952, plaintiff entered into separate
cemeteries. When the Local Government Code, Batas agreements of sale with Augusto Padilla y Angeles and
Pambansa Blg. 337 provides in Section 177 (q) that a Natividad Angeles over 2 parcels of land (Lots Nos. 5 and
Sangguniang panlungsod may “provide for the burial of 6, Block 31, of the Highway Hills Subdivision). On July 19,
the dead in such place and in such manner as prescribed 1962 the vendees transferred their rights and interests over
by law or ordinance” it simply authorizes the city to provide the said lots to Emma Chavez. The plaintiff executed the
its own city owned land or to buy or expropriate private corresponding deeds of sale in favor of Emma Chavez
properties to construct public cemeteries. This has been upon payment of the purchase price. Both the
the law and practise in the past. It continues to the present. agreements and the deeds of sale thereafter executed
Expropriation, however, requires payment of just contained the stipulation that the parcels of land subject
compensation. The questioned ordinance is different from of the deeds of sale “shall be used by the Buyer exclusively
laws and regulations requiring owners of subdivisions to set for residential purposes”. The restrictions were later
aside certain areas for streets, parks, playgrounds, and annotated in the Transfer Certificates of Titles covering the
other public facilities from the land they sell to buyers of said lots issued in the name of Chavez.
subdivision lots. The necessities of public safety, health,
and convenience are very clear from said requirements Eventually, defendant-appellee acquired Lots No. 5 and 6
which are intended to insure the development of with the building restrictions also annotated in their
communities with salubrious and wholesome environments. corresponding TCTs. Lot No.5 was bought directly from
The beneficiaries of the regulation, in turn, are made to Chavez “free from all liens and encumbrances” while Lot
pay by the subdivision developer when individual lots are No.6 was acquired through a “Deed of Exchange” from
sold to home-owners. Republic Flour Mills.
Municipalities are empowered by law through Sec.3 of RA The lots which were acquired by the petitioners, were all
2264 (Local Autonomy Act) to to adopt zoning and sold by MDC subject to certain conditions and easements
subdivision ordinances or regulations for the municipality. contained in Deed Restrictions which formed a part of
The law does not restrict the exercise of the power through each deed of sale. When MDC sold the above-
an ordinance. Therefore, granting that Resolution No.27 is mentioned lots to appellees' predecessors-in-interest, the
not an ordinance, it certainly is a regulatory measure whole stretch of the commercial block between Buendia
within the intendment of the word “regulation” under the Avenue and Jupiter Street, from Reposo Street in the west
provision. to Zodiac Street in the east, was still undeveloped. Altough
it was not part of the original plan, MDC constructed a
An examination of Sec.12 of the same law reveals that the fence or wall on the commercial block along Jupiter.
implied power of a municipality should be “liberally
construed in its favor” and that “any fair and reasonable In 1975, the municipal council of Makati enacted its
doubt as to the existence of the power should be ordinance No. 81, providing for the zonification of Makati
interpreted in favor of the local government and it shall be (Exh. 18). Under this Ordinance, Bel-Air Village was
presumed to exist.” An exception to the general welfare classified as a Class A Residential Zone, with its boundary
powers delegated to municipalities is when the exercise of in the south extending to the center line of Jupiter Street.
its powers will conflict with vested rights arising from Under the zoning classifications, Jupiter Street, therefore, is
contracts. The exception does not apply to the case at bar. a common boundary of Bel-Air Village and the
commercial zone.
2. While non-impairment of contacts is constitutionally
guaranteed, the rule is not absolute since it has to be Gates had been installed by BAVA (Bell-Arat strategic
reconciled with the legitimate exercise of police power. locations across Jupiter Street which were manned and
Invariably described as the “most essential, insistent and operated by its own security guards who were employed
illimitable of powers” and the “greatest and most powerful to maintain, supervise and enforce traffic regulations in the
attribute of government”, the exercise of police power roads and streets of the village. Then, on January 17, 1977,
may be judicially inquired into and corrected only if it is the Office of the Mayor of Makati directed that, in the
capricious, whimsical, unjust or unreasonable, there interest of public welfare and for the purpose of easing
having been a denial of due process or a violation of any traffic congestion, the streets in Bel-Air Village should be
other applicable constitutional guarantee. opened for public use. The other streets in Bel-Air Village
were voluntarily opened except Jupiter Street. The
Resolution No.27, S-1960 declaring the western part of Municipal Engineer of Makati in a letter addressed to BAVA
EDSA from Shaw Boulevard to the Pasig River as an advised the latter to open for vehicular and pedestrian
industrial or commercial zone was passed by the Municipal traffic the entire portion of Jupiter Street from Makati
Council of Mandaluyong in the exercise of police power Avenue to Reposo Street. Finally, the municipal officials of
to safeguard/promote the health, safety, peace, good Makati concerned allegedly opened, destroyed and
order and general welfare of the people in the locality. removed the gates constructed/located at the corner of
Judicial notice may be taken of the conditions prevailing Reposo Street and Jupiter Street as well as the
in the area, especially where Lots Nos. 5 and 6 are located. gates/fences located/constructed at Jupiter Street and
EDSA supports an endless stream of traffic and the resulting Makati Avenue forcibly, and then opened the entire
activity, noise and pollution which are hardly conducive to length of Jupiter Street to public traffic.
the health, safety or welfare of the residents in its route. The
Municipality of Mandaluyong was reasonably justified Petitioners brought the present action for damages
under the circumstances in passing the subject resolution. against the defendant-appellant Ayala Corporation
predicated on both breach of contract and on tort or
Thus, the state, in order to promote the general welfare, quasi-delict. After trial on the merits, the then Court of First
may interfere with personal liberty, with property, and with Instance favored the petitioners and awarded damages.
business and occupations. Persons may be subjected to Defendant is further ordered to restore/reconstruct the
all kinds of restraint and burdens, in order to secure the perimeter wall at its original position in 1966 from Reposo
general comfort, health and prosperity of the state, and to Street in the west to Zodiac Street in the east, at its own
this fundamental aim of the Government, the rights of the expense,
individual are subordinated.
On appeal, CA reversed the lower court, finding the
decision appealed from as not supported by the facts and
SANGALANG VS GASTON the law on the matter, it was set aside and another one
Facts: Jose Sangalang and wife, herein petitioners are entered dismissing the case for lack of a cause of action.
residents of Jupiter Street, Makati Metro Manila.
Sangalang and the other petitioners who are also residents Issues:
of Jupiter Street initially filed a case against Ayala to 1) Whether or not Ayala Corporation is liable for
enforce by specific performance restrictive easement damages as a result of the destruction of the
upon property pursuant to stipulations embodied in the perimeter wall.
2) Whether or not the exercise of police power is valid.
The complaint was issued in the trial court. A TRO was then
Held: issued to prevent the law from being enforced. The
1. NO. Jupiter Street lies as the boundary between Bel-Air respondent court entered its decision declaring the law
Village and Ayala Corporation's commercial section, it valid.
had been considered as a boundary not as a part of either
the residential or commercial zones of Ayala Corporation's Petitioners attack the validity and constitutionality of
real estate development projects, hence it cannot be said Ordinance No. 640 on the grounds that it is ultra vires and
to have been "for the exclusive benefit" of Bel-Air Village an invalid exercise of police power. Petitioners contend
residents. that Ordinance No. 640 is not within the power of’ the
Municipal Board to enact as provided for in Section 15(n)
Jupiter Street lies as a mere boundary, a fact of Republic Act No. 523 where it states that the Muncipal
acknowledged by the authorities of Makati and the board can only fix license fees for theaters and not
National Government and, as a scrutiny of the records admission rates.
themselves reveals, by the petitioners themselves, as the
articles of incorporation of Bel-Air Village Association itself The respondent attempts to justify the enactment of the
would confirm. As a consequence, Jupiter Street was ordinance by invoking the general welfare clause
intended for the use by both -the commercial and embodied in Section 15 (nn) of the cited law.
residential blocks. It was not originally constructed,
therefore, for the exclusive use of either block, least of all ISSUE: W/N Ordinance 640 – prohibiting payment on
the residents of Bel-Air Village, but, we repeat, in favor of theater tickets for children below seven (7) is constitutional?
both, as distinguished from the general public. When the
wall was erected in 1966 and rebuilt twice, in 1970 and HELD: NO, because it infringes theater owners’ right to
1972, it was not for the purpose of physically separating the property.
two blocks. According to Ayala Corporation, it was put up
to enable the Bel-Air Village Association "better control of There is nothing pernicious in demanding equal price for
the security in the area, and as the Ayala Corporation's both children and adults. The petitioners are merely
"show of goodwill". That maintaining the wall was a matter conducting their legitimate businesses. The object of every
of a contractual obligation on the part of Ayala, to be business entrepreneur is to make a profit out of his venture.
pure conjecture. In fine, we cannot hold the Ayala There is nothing immoral or injurious in charging the same
Corporation liable for damages for a commitment it did price for both children and adults. In fact, no person is
not make, much less for alleged resort to machinations in under compulsion to purchase a ticket. It is a totally
evading it. voluntary act on the part of the purchaser if he buys a
ticket to such performances.
2. Yes. While non-impairment of contracts is
constitutionally guaranteed, the rule is not absolute, since Such ticket represents a right, Positive or conditional, as the
it has to be reconciled with the legitimate exercise of case may be, according to the terms of the original
police power, i.e., "the power to prescribe regulations to contract of sale. This right is clearly a right of property. The
promote the health, morals, peace, education, good ticket which represents that right is also, necessarily, a
order or safety and general welfare of the people.' species of property. As such, the owner thereof, in the
Invariably described as "the most essential, insistent, and absence of any condition to the contrary in the contract
illimitable of powers" and "in a sense, the greatest and by which he obtained it, has the clear right to dispose of it,
most powerful attribute of government," the exercise of to sell it to whom he pleases and at such price as he can
the power may be judicially inquired into and corrected obtain. So that an act prohibiting the sale of tickets to
only if it is capricious, whimsical, unjust or unreasonable, theaters or other places of amusement at more than the
there having been a denial of due process or a violation regular price was held invalid as conflicting with the state
of any other applicable constitutional guarantee. constitution securing the right of property.
Resolution No. 27, 1960 declaring the western part of High
way 54, now E. de los Santos Avenue (EDSA, for short) from
Shaw Boulevard to the Pasig River as an industrial and FRANCIA VS INTERMEDIATE APPELLATE COURT
commercial zone, was obviously passed by the Municipal Topic: The taxes assessed are the obligations of the
Council of Mandaluyong, Rizal in the exercise of police taxpayer arising from law, while the money judgment
power to safeguard or promote the health, safety, peace, against the government is an obligation arising from
good order and general welfare of the people in the contract, whether express or implied.
locality.
FACTS:
Engracio Francia was the registered owner of a
BALACUIT VS CFI OF AGUSAN DEL NORTE house and lot located in Pasay City.
A portion of such property was expropriated by
Facts: Petitioners, theater owners, assailed the the Republic of the Philippines on October 15,
constitutionality of Ordinance No. 640 passed by the 1977.
Municipal Board of the City of Butuan on April 21, 1969. This It appeared that Francia did not pay his real
called for a reduction to ½ of the ticket price given to estate taxes amounting to P 2,400 from 1963 to
minors from 7-12 years old. There was a fine from 200-600 1977.
pesos or a 2-6 month imprisonment
Thus, his property was sold in a public auction by taxes. The petitioner did not pay attention to another
the City Treasurer of Pasay City. notice sent by the City Treasurer on November 3, 1978,
Francia filed a complaint to annual the auction during the period of redemption, regarding his tax
sale. delinquency. There is furthermore no showing of bad faith
The lower court dismissed the complaint and the or collusion in the purchase of the property by Mr.
Intermediate Appellate Court affirmed the Fernandez. The petitioner has no standing to invoke equity
decision of the lower court in toto. in his attempt to regain the property by belatedly asking
Hence, this petition for review. Francia contends for the annulment of the sale.
that his tax delinquency of P 2,400 has been
extinguished by legal compensation. He claims
that the government owed him P 4,116 when a VICTORIAS MILLING VS MUNICIPALITY OF VICTORIA,
portion of his land was expropriated on 1977. NEGROS OCCIDENTAL
Francia also claims that his property was sold at
public auction without notice to him and that the Facts: Ordinance 1 (1956) was approved by the municipal
price paid for the property was shockingly council of Victorias by way of an amendment to 2
inadequate, amounting to fraud and deprivation municipal ordinances separately imposing license taxes
without due process of law. on operators of sugar centrals and sugar refineries. The
changes were: (1) with respect to sugar centrals, by
ISSUE: Whether the expropriation payment may increasing the rates of license taxes; and (2) as to sugar
compensate for the real estate taxes due? refineries, by increasing the rates of license taxes as well as
teh range of graduated schedule of annual output
RULING: No. There can be no offsetting of taxes against the capacity. Victorias Milling questioned the validity of
claims that the taxpayer may have against the Ordinance 1 as it, among others, allegedly singled out
government. Victorias Milling Co. since it is the only operator of a sugar
central and a sugar refinery within the jurisdiction of the
A person cannot refuse to pay a tax on the ground that municipality.
the government owes him an amount equal to or greater
than the tax being collected. The collection of a tax Issue: Whether Ordinance 1 is discriminatory.
cannot await the results of a lawsuit against the
government. Internal revenue taxes cannot be the subject Held: The ordinance does not single out Victorias as the
of compensation. only object of the ordinance but is made to apply to any
sugar central or sugar refinery which may happen to
The Government and the taxpayer are not mutually operate in the municipality. The fact that Victorias Milling
creditors and debtors of each other under Article 1278 of is actually the sole operator of a sugar central and a sugar
the Civil Code and a claim of taxes is not such a debt, refinery does not make the ordinance discriminatory. The
demand, contract or judgment as is allowed to be set-off. ordinance is unlike that in Ormoc Sugar Company vs.
Municipal Board of Ormoc City, which specifically spelled
Republic v. Mambulao Lumber Co.: out Ormoc Sugar as the subject of the taxation, the name
"The general rule based on grounds of public policy is well- of the company herein was never mentioned in the
settled that no set-off admissible against demands for ordinance.
taxes levied for general or local governmental purposes.
The reason on which the general rule is based, is that taxes
are not in the nature of contracts between the party and PROGRESSIVE DEVELOPMENT CORP VS QUEZON CITY
party but grow out of duty to, and are the positive acts of
the government to the making and enforcing of which, Facts: The City Council of QC passed an ordinance known
the personal consent of individual taxpayers is not as the Market Code of QC, which imposed a 5%
required. ..." supervision fee on gross receipts on rentals or lease of
privately-owned market spaces in QC.
Moreover, the amount of P 4,116 paid by the national
government for the 125 square meter portion of his lot was In case of failure of the owners of the market spaces to pay
deposited with the Philippine National Bank long before the tax for three consecutive months, the City shall revoke
the sale at public auction of his remaining property. It the permit of the privately-owned market to operate.
would have been an easy matter to withdraw P 2,400 from
the deposit so that he could pay the tax obligation thus Progressive Development Corp, owner and operator of
aborting the sale at public auction. Farmer’s Market, filed a petition for prohibition against QC
on the ground that the tax imposed by the Market Code
And finally, even if we are inclined to give relief to the was in reality a tax on income, which the municipal
petitioner on equitable grounds, there are no strong corporation was prohibited by law to impose.
considerations of substantial justice in his favor. Mr. Francia
failed to pay his taxes for 14 years from 1963 up to the date Issue: Whether or not the supervision fee is an income tax
of the auction sale. He claims to have pocketed the notice or a license fee
of sale without reading it which, if true, is still an act of
inexplicable negligence. He did not withdraw from the Held: It is a license fee. A LICENSE FEE is imposed in the
expropriation payment deposited with the Philippine exercise of the police power primarily for purposes of
National Bank an amount sufficient to pay for the back
regulation, while TAX is imposed under the taxing power
primarily for purposes of raising revenues. The RTC of Butuan decreed an issuance of a PERMANENT
WRIT OF INJUCTION against LTO prohibiting and enjoining
If the generating of revenue is the primary purpose and LTO, as well as its employees and other persons acting in
regulation is merely incidental, the imposition is a tax; but its behalf, from (a) registering tricycles and (b) issuing
if regulation is the primary purpose, the fact that licenses to tricycle drivers. The CA sustained the trial court’s
incidentally, revenue is also obtained does not make the decision.
imposition a tax.
The adverse rulings of both Courts prompted the LTO to file
To be considered a license fee, the imposition must relate an instant petition for review on certiorari to annul and set
to an occupation or activity that so engages the public aside the earlier Court decisions.
interest in health, morals, safety, and development as to
require regulation for the protection and promotion of ISSUE: Whether under the present set-up the power of
such public interest; the imposition must also bear a the LTO to register, tricycles in particular, as well as to issue
reasonable relation to the probable expenses of licenses for the driving thereof has likewise devolved to
regulation, taking into account not only the costs of direct Local Government Units.
regulation but also its incidental consequences.
HELD: No, said powers [to register and issue licenses]
In this case, the Farmers’ Market is a privately-owned remain under LTO’s exclusive jurisdiction.
market established for the rendition of service to the The registration and licensing functions are vested in the
general public. It warrants close supervision and control by LTO (pursuant to Art. 3 Sec. 4(d) [1], 10 of RA 4136-Land
the City for the protection of the health of the public by Transportation and Traffic Code) while franchising and
insuring the maintenance of sanitary conditions, regulatory responsibilities are vested in the LTFRB (Land
prevention of fraud upon the buying public, etc. Transportation Franchising and Regulatory Board; pursuant
to EO # 202). Under the Local Government Code
Since the purpose of the ordinance is primarily regulation (specifically Sec. 458 (8)(3)(VI)), the Local Government
and not revenue generation, the tax is a license fee. The Units now have the power to REGULATE (to fix, establish or
use of the gross amount of stall rentals as basis for control, to adjust by rule, method or establish mode to
determining the collectible amount of license tax does not, direct by rule or restriction; or to subject to governing
by itself, convert the license tax into a prohibited tax on principles or laws) the operation of tricycles for hire and
income. grant franchises thereof but they are still subject to the
guidelines prescribed by the DOTC (Department of
Such basis actually has a reasonable relationship to the Transportation and Communications; under Article 458(a)
probable costs of regulation and supervision of [3-VI] of the RA 7160).
Progressive’s kind of business, since ordinarily, the higher
the amount of rentals, the higher the volume of items sold.
PLANTERS PRODUCTS VS FERTIPHIL CORP
The higher the volume of goods sold, the greater the
extent and frequency of supervision and inspection may FACTS: Petitioner PPI and private respondent Fertiphil are
be required in the interest of the buying public. private corporations incorporated under Philippine
laws. They are both engaged in the importation and
distribution of fertilizers, pesticides and agricultural
LAND TRANSPORTATION OFFICE VS CITY OF BUTUAN chemicals.
FACTS: The Sangguniang Panglungsod (SP) of Butuan on On June 3, 1985, then President Ferdinand Marcos,
August 16, 1992 passed an ordinance entitled “An exercising his legislative powers, issued LOI No. 1465 which
Ordinance Regulating the Operation of Tricycles for hire, provided, among others, for the imposition of a capital
providing mechanism for the issuance of Franchise, recovery component (CRC) on the domestic sale of all
Registration and Permit, and imposing Penalties for grades of fertilizers in the Philippines. The LOI provides:
Violations thereof and for other purposes.” The ordinance
provided for, among other things, the payment of “3. The Administrator of the Fertilizer Pesticide
franchise fees, fees for registration of the vehicle, and fees Authority to include in its fertilizer pricing formula
for the issuance of a permit for the driving thereof. The City a capital contribution component of not less
of Butuan asserts that Sec. 129 and Sec.133 of the Local than P10 per bag. This capital contribution shall be
Government Code is their basis for said ordinance and that, collected until adequate capital is raised to make
said provisions authorize LGUs to collect registration fees or PPI viable. Such capital contribution shall be
charges along with, in its view, the corresponding issuance applied by FPA to all domestic sales of fertilizers in
of all kinds of licenses or permits for the driving of tricycles. the Philippines.”
LTO explains that one of the functions of the National Pursuant to the LOI, Fertiphil paid P10 for every bag of
Government, that, indeed has been transferred to LGUs is fertilizer it sold in the domestic market to the Fertilizer and
the franchising authority over tricycles-for-hire of the LTFRB Pesticide Authority (FPA). FPA then remitted the amount
but NOT the authority of the LTO to register all motor collected to the Far East Bank and Trust Company, the
vehicles and to issue to qualified persons of licenses to depositary bank of PPI. Fertiphil paid P6,689,144 to FPA
drive such vehicles. from July 8, 1985 to January 24, 1986. After the 1986 Edsa
Revolution, FPA voluntarily stopped the imposition of legal ground shall return the same to him." We cannot
the P10 levy. With the return of democracy, Fertiphil allow PPI to profit from an unconstitutional law. Justice and
demanded from PPI a refund of the amounts it paid under equity dictate that PPI must refund the amounts paid by
LOI No. 1465, but PPI refused to accede to the demand. Fertiphil.
HELD: The P10 levy under LOI No. 1465 is an exercise of the
power of taxation. Taxes are exacted only for a public
purpose. The P10 levy is unconstitutional because it was
not for a public purpose. The levy was imposed to give
undue benefit to PPI.