E. Purposes of Taxation
Whether the Municipal Board has the power to
 Revenue 
 regulate and fix license fees.
 Regulatory 
 in question as we interpret it and as intended by the
 Promotion of general welfare 
 appellees is valid. We deem it unnecessary to discuss and
 Reduction of Social Inequality 

 Encourage Economic Growth 
 1. It is a valid ordinance, but it does not regulate the
 Protectionism 
 practice of massage. Instead, the purpose is to
REPUBLIC VS PHILIPPINE RABBIT BUS LINES INC
PHILIPPINE AIR LINES, INC VS ROMEO F EDUETAL
CALTEX PHILIPPINES, INC VS COA ETAL
PHYSICAL THERAPY ORGANIZATION OF THE PHILS., INC VS
MUNICIPAL BOARD OF MANILA,
FACTS
1. Ordinance 3659 was promulgated by the
Municipal Board and approved by the City Mayor.
The Ordinance set out several rules in the
operation of massage clinics in Manila.
a. Sec 2 requires the payment of annual
permit fees of P100 from Operators, and
P50 from attendants or helpers.
b. Sec 3, on Bldg reqt’s, require the
separation of rooms for male and female;
it also require the use of sliding curtains
only and not sliding doors in the
operations room. It also prohibits the use
of private rooms or compartments except
for toilets, kitchen, and the like. Lastly, it
requires that the clinic shall have only one
entrance and shall have no direct or
indirect communication with any
dwelling place.
c. Sec 4 prohibits the commission of
indecent or immoral acts in the clinic, and
that the same shall be used only for
hygienic and aesthetic massage. It also
requires the clinic to open at 8am and
close at 11pm and that massagists, and
attendants shall have the proper
appearance so as to avoid suspicion of
intent to commit indecent acts.
2. The petitioner, an association of registered
massagists and licensed operators of massage
clinics, filed with the CFI an action for declaratory
judgment regarding the validity of the said
ordinance. The petitioner contends that:
a. the ordinance restricts the practice of
massotherapy and imposes
unreasonable fees;
b. the Municipal Board does not have the
power to regulate and fix license fees on
the occupation of massagists because
the power is conferred by Sec 938 of the
Revised Admin Code upon the Director of
Health;
3. CFI dismissed the petition. Hence, this petition.
ISSUE/S
1. Whether the ordinance is a valid regulation of the
occupation.
2.
HELD: In conclusion, we find and hold that the Ordinance
pass upon the other points raised in the appeal, the order
appealed from is. hereby affirmed. No costs.
provide for the health and safety, and promote
morality, peace and general welfare.
The end sought to be attained in the Ordinance is to
prevent the commission of immorality and the
practice of prostitution in an establishment
masquerading as a massage clinic where the
operators thereof offer to massage or manipulate
superficial parts of the bodies of customers for
hygienic and aesthetic purposes. This intention can
readily be understood by the building requirements in
Section 3 of the Ordinance, requiring that there be
separate rooms for male and female customers; that
instead of said rooms being separated by permanent
partitions and swinging doors, there should only be
sliding curtains between them; that there should be
"no private rooms or separated compartments,
except those assigned for toilet, lavatories, dressing
room, office or kitchen"; that every massage clinic
should be provided with only one entrance and shall
have no direct or indirect communication
whatsoever with any dwelling place, house or
building-; and that no operator, massagist, attendant
or helper will be allowed "to use or allow the use of a
massage clinic as a place of assignation or permit the
commission therein of any immoral or indecent act",
and in fixing the operating hours of such clinic
between 8:00 a.m. and 11:00 p.m. Moreover, the fees
are imposed upon the operator and helper, who may
not be a massagist themselves.
2. The Municipal Board has the power to determine the
amount of said fee without considering it as a' tax for
revenue purposes.’
The New Charter of Manila gives legislative powers to
the Municipal Board to enact all ordinances it may
deem necessary and proper for the promotion of the
morality, peace, good order, comfort, convenience
and general welfare of the City and its inhabitants.
This is generally referred to as the General Welfare
Clause.
The amount of tax may be so large as to itself show
that the purpose is to raise revenue and not to
regulate. However, the fee charged by the said
ordinace is not a tax to raise revenue, nor is it a fee
upon useful and beneficial occupation which the
sovereign wishes to regulate but not restrict. The fee
charged in this case is to prohibit occupations which
are inimical and dangerous to the public health,
morality or safety; and in such case, the fee may be
so large without necessarily being a tax.
Therefore, not only is the Municipal Board authorized
to impose the permit fees, but also the fees imposed
are not unreasonable.

ESSO STANDARD EASTERN INC VS CIR
DOCTRINE: Margin fee is not a tax but an exaction
designed to curb the excessive demands upon the
international reserves.
FACTS: Petitioner ESSO deducted from its gross income for
1959, as part of its ordinary and necessary business
expenses, the amount it had spent for drilling and
exploration of its petroleum concessions. However,
respondent Commissioner of Internal Revenue (CIR)
disallowed the claim on the ground that the expenses
should be capitalized and might be written off as a loss
only when a “dry hole” should result. ESSO filed an
amended return where it asked for the refund of P323,279
by reason of its abandonment as dry holes of several of its
oil wells. It also claimed as ordinary and necessary
expenses the amount of P340,822.04, representing margin
fees it had paid to the Central Bank on its profit
remittances to its New York head office.
CIR granted a tax credit of P221,033 only, disallowing the
claimed deduction for the margin fees paid.
CIR assessed ESSO a deficiency income tax for the year
1960, amounting to P367,994, plus 18% interest of
P66,238.92 for the period from April 18, 1961 to April 18,
1964, for a total of P434,232.92. The deficiency arose from
the disallowance of the margin fees of P1,226,647.72 paid
by ESSO to the Central Bank on its profit remittances to its
New York head office.
ESSO settled this deficiency assessment by applying the tax
credit of P221,033 representing its overpayment on its
income tax for 1959 and paying under protest the
additional amount of P213,201.92. ESSO claimed the
refund of P39,787.94 as overpayment on the interest on its
deficiency income tax. It argued that the 18% interest
should have been imposed not on the total deficiency of
P367,944 but only on the amount of P146,961, the
difference between the total deficiency and its tax credit
of P221,033.
CIR denied the claim, it insisted on charging the 18%
interest on the entire amount of deficiency tax. It also
denied the claims of ESSO for refund of the overpayment
of its 1959 and 1960 income taxes, holding that the margin
fees paid to the Central Bank could not be considered
taxes or allowed as deductible business expenses.
ESSO appealed to the Court of Tax Appeals (CTA) and
sought the refund of P102,246 for 1959, contending that
the margin fees were deductible from gross income either
as a tax or as an ordinary and necessary business expense.
It also claimed an overpayment of its tax by P434,232.92 in
1960, for the same reason. It also argued that even if the
amount paid as margin fees were not legally deductible,
there was still an overpayment by P39,787.94, representing
excess interest.
CTA denied the claim for refund of P102,246 for 1959 and
P434,234.92 for 1960 but sustained its claim for P39,787.94
as excess interest.
ESSO appealed the CTA decision denying its claims for the
refund of the margin fees of P102,246.00 for 1959 and
P434,234.92 for 1960. It maintains that margin fees are taxes
and cites the background and legislative history of the
Margin Fee Law showing that RA 209 was nothing less than
a revival of the 17% excise tax on foreign exchange
imposed by RA 601. It prays that if margin fees are not
taxes, they should nevertheless be considered necessary
and ordinary business expenses and therefore still
deductible from its gross income.
On the other hand, CTA pointed out that, the history of the
passage of the law through the legislature may be
resorted to as an aid in the interpretation for a statute
which is ambiguous or doubtful. There may be no resort to
the legislative history of the enactment of the statute, the
language of which is plain and unambiguous, since such
legislative history may only be resorted to for the purpose
of solving doubt. In Caltex (Phil) Inc. v. Acting
Commissioner of Customs, the Court held that:
A margin levy on foreign exchange is a form of exchange
control or restriction designed to discourage imports and
encourage exports, and ultimately, ‘curtail any excessive
demand upon the international reserve’ in order to
stabilize the currency. Originally adopted to cope with
balance of payment pressures, exchange restrictions have
come to serve various purposes, such as limiting non-
essential imports, protecting domestic industry–and when
combined with the use of multiple currency rates–
providing a source of revenue to the government, and are
in many developing countries regarded as a more or less
inevitable concomitant of their economic development
programs. As to the contention that the margin levy is a
tax on the purchase of foreign exchange and hence
should not form part of the exchange rate, suffice it to
state that We have already held the contrary for the
reason that a tax is levied to provide revenue for
government operations, while the proceeds of the margin
fee are applied to strengthen our country’s international
reserves.
ISSUE: Whether ESSO may refund the margin fees?
HELD: NO. The applicable provision is Section 30(1) of the
National Internal Revenue Code, it provides:
SEC. 30. Deductions from gross income. –In computing net
income there shall be allowed as deductions– (a)
Expenses:
(1) In general.–All the ordinary and necessary expenses
paid or incurred during the taxable year in carrying
on any trade or business, including a reasonable
allowance for salaries or other compensation for
personal services actually rendered; traveling
expenses while away from home in the pursuit of a
trade or business; and rentals or other payments
required to be made as a condition to the continued
use or possession, for the purpose of the trade or
business, of property to which the taxpayer has not
taken or is not taking title or in which he has no equity.
(2) Expenses allowable to non-resident alien individuals
and foreign corporations. –In the case of a non-
resident alien individual or a foreign corporation, the
expenses deductible are the necessary expenses
 paid or incurred in carrying on any business or trade
conducted within the Philippines exclusively.
The Court of Appeals did not err when it held that:
Margin fees are not expenses in connection with the
production or earning of petitioner’s incomes in the
Philippines. They were expenses incurred in the disposition
of said incomes; expenses for the remittance of funds after
they have already been earned by petitioner’s branch in
the Philippines for the disposal of its Head Office in New
York which is already another distinct and separate
income taxpayer. Since the margin fees in question were
incurred for the remittance of funds to petitioner’s Head
Office in New York, which is a separate and distinct
income taxpayer from the branch in the Philippines, for its
disposal abroad, it can never be said therefore that the
margin fees were appropriate and helpful in the
development of petitioner’s business in the Philippines
exclusively or were incurred for purposes proper to the
conduct of the affairs of petitionerE’s branch in the
Philippines exclusively or for the purpose of realizing a profit
or of minimizing a loss in the Philippines exclusively. If at all,
the margin fees were incurred for purposes proper to the
conduct of the corporate affairs of Standard Vacuum Oil
Company in New York, but certainly not in the Philippines.
ESSO has not shown that the remittance to the head office
of part of its profits was made in furtherance of its own
trade or business. The petitioner merely presumed that all
corporate expenses are necessary and appropriate in the
absence of a showing that they are illegal or ultra vires. This
is error. The public respondent is correct when it asserts that
“the paramount rule is that claims for deductions are a
matter of legislative grace and do not turn on mere
equitable considerations x x x. The taxpayer in every
F.
instance has the burden of justifying the allowance of any
deduction claimed.”
ESSO, having assumed an expense properly attributable to
its head office, cannot now claim this as an ordinary and
necessary expenses paid or incurred in carrying on its own
trade or business.
LUTZ VS ARANETA
FACTS: Appelant in this case Walter Lutz in his capacity as
the Judicial Administrator of the intestate of the deceased
Antonio Jayme Ledesma, seeks to recover from the
Collector of the Internal Revenue the total sum of fourteen
thousand six hundred sixty six and forty cents (P 14, 666.40)
paid by the estate as taxes, under section 3 of
Commonwealth Act No. 567, also known as the Sugar
Adjustment Act, for the crop years 1948-1949 and 1949-
1950. Commonwealth Act. 567 Section 2 provides for an
increase of the existing tax on the manufacture of sugar
on a graduated basis, on each picul of sugar
manufacturer; while section 3 levies on the owners or
persons in control of the land devoted tot he cultivation of
sugarcane and ceded to others for consideration, on
lease or otherwise - "a tax equivalent to the difference
between the money value of the rental or consideration
collected and the amount representing 12 per centum of
the assessed value of such land. It was alleged that such
tax is unconstitutional and void, being levied for the aid
and support of the sugar industry exclusively, which in
plaintiff's opinion is not a public purpose for which a tax
may be constitutionally levied. The action was dismissed
by the CFI thus the plaintiff appealed directly to the
Supreme Court.
ISSUE: Whether or not the tax imposition in the
Commonwealth Act No. 567 are unconstitutional.
HELD: Yes, the Supreme Court held that the fact that sugar
production is one of the greatest industry of our nation,
sugar occupying a leading position among its export
products; that it gives employment to thousands of
laborers in the fields and factories; that it is a great source
of the state's wealth, is one of the important source of
foreign exchange needed by our government and is thus
pivotal in the plans of a regime committed to a policy of
currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general
welfare. Hence it was competent for the legislature to find
that the general welfare demanded that the sugar
industry be stabilized in turn; and in the wide field of its
police power, the law-making body could provide that the
distribution of benefits therefrom be readjusted among its
components to enable it to resist the added strain of the
increase in taxes that it had to sustain.
The subject tax is levied with a regulatory purpose, to
provide means for the rehabilitation and stabilization of
the threatened sugar industry. In other words, the act is
primarily a valid exercise of police power.
Scope of Taxing Power
 Property, person or occupation to be taxed 

 Amount or rate of tax 

 Purpose for which tax is levied 

 Kind of tax to be collected 

 Situs of taxation 

 Method of collection
CHURCHILL VS CONCEPCION
DOCTRINE/S:
1. Uniformity in taxation means that all taxable articles
or kinds of property of the same classes shall be taxed
at the same rate. A tax is uniform when it operates
with the same force and effect in every place where
the subject of it is found.
2. The Legislature having the power to impose a tax
upon signs, signboards, and billboards, the courts will
not attempt to restrict such power in the absence of
a showing that the exercise thereof on the part of the
Legislature was so abused as to make it clear to the
judicial mind that the power had been exercised for
the sole purpose of destroying rights which could not
be rightfully destroyed consistently with the principles
of freedom and justice.
FACTS: Section 100 of Act No. 2339 imposed an annual tax
of P4.00 per square meter upon “electric signs, billboards,
and spaces used for posting or displaying temporary signs,
and all signs displayed on premises not occupied by
buildings.”
This section was subsequently amended by Act No. 2432,
effective by reducing the tax on such signs, billboards, etc.
to P2.00 per square meter.
Francis Churchill and Stewart Tait, owners of a sign or
billboard containing an area of 52 square meters
constructed on private property in the city of Manila and
exposed to public view, were taxes thereon P104.00. The
tax was paid under protest.
Plaintiffs assailed that they were gaining lesser profit than
what they ought to receive because of the tax imposed
by the said law. However, it was proven that there was no
attempt on the part of the plaintiffs to raise the advertising
rates in order to cope up with the said tax rates.
It will thus be seen that the contention of the rates charged
for advertising cannot be raised is purely hypothetical,
based entirely upon the opinion of the plaintiffs,
unsupported by actual test, and that the plaintiffs
themselves admit that a number of other persons have
voluntarily and without protest paid the tax herein
complained of.
ISSUE/S: Whether or not the tax is void for lack of uniformity.
HELD: No. A tax is uniform, within the constitutional
requirement, when it operates with the same force and
effect in every place where the subject of it is found.
“Uniformity”, as applied to the constitutional provision that
all taxes shall be uniform, means that all property
belonging to the same class shall be taxed alike.
The statute under consideration imposes a tax of P2.00 per
square meter upon every electrononic sign, billboard, etc.
wherever found in the Philippine Islands. Or in other words,
“the rule of taxation” upon such signs is uniform throughout
the islands. The legislature selected signs and billboards as
a subject for taxation and it must be presumed that it, in
doing so, acted with a full knowledge of the situation.
ROXAS CIA VS CTA
 by Roxas y Cia and the Roxas brothers
Facts:
 Don Pedro Roxas and Dona Carmen Ayala, both
Spanish, transmitted to their grandchildren by
hereditary succession the following properties:
o Agricultural lands with a total area of 19,000
hectares in Nasugbu, Batangas
i. Tenants who have been tilling the lands
expressed their desire to purchase from Roxas
y Cia, the parcels which they actually
occupied
ii. The govt, in line with the constitutional
mandate to acquire big landed estates and
apportion them among landless tenants-
farmers, persuaded the Roxas brothers to
part with their landholdings
iii. The brothers agreed to sell 13,500 hec to the
govt for P2.079Mn, plus 300K survey and
subdivision expenses
iv. Unfortunately, the govt did not have funds
v. A special arrangement was made with the
Rehabilitation Finance Corporation to
advance to Roxas y Cia the amount of
P1.5Mn as loan
vi. Under the arrangement, Roxas y Cia. allowed
the farmers to buy the lands for the same
price but by installment, and contracted with
the RFC to pay its loan from the proceeds of
the yearly amortizations paid by the farmers
vii. In 1953 and 1955, Roxas y Cia. derived from
said installment payments a net gain of
P42,480.83 and P29,500.71. 50% of said net
gain was reported for income tax purposes as
gain on the sale of capital asset held for more
than one year pursuant to Sec. 34 of the Tax
Code
 Residential house and lot at Wright St., Malate, Manila
o After the marriage of Antonio and Eduardo, Jose
lived in the house where he paid rentals of 8K/year
to Roxas y Cia
 Shares of stocks in different corporations
 To manage the properties, Antonio Roxas, Eduardo
Roxas and Jose Roxas, the children, formed a
partnership called Roxas y Compania
 On 1958, CIR demanded from Roxas y Cia the payment
of real estate dealer's tax for 1952 amtg to P150.00 plus
P10.00 compromise penalty for late payment, and
P150.00 tax for dealers of securities plus P10.00
compromise penalty for late payment.
o Basis: house rentals received from Jose, pursuant
to Art. 194 of the Tax Code stating that an owner
of a real estate who derives a yearly rental income
therefrom in the amount of P3,000.00 or more is
considered a real estate dealer and is liable to
pay the corresponding fixed tax
 The Commissioner further assessed deficiency income
taxes against the brothers for 1953 and 1955, resulting
from the inclusion as income of Roxas y Cia of the
unreported 50% of the net profits derived from the sale
of the Nasugbu farm lands to the tenants, and the
disallowance of deductions from gross income of
various business expenses and contributions claimed
 The brothers protested the assessment but was denied,
thus appealing to the CTA
 CTA decision: sustained the assessment except the
demand for the payment of the fixed tax on dealer of
securities and the disallowance of the deductions for
contributions to the Philippine Air Force Chapel and
Hijas de Jesus' Retiro de Manresa
Issue: Should Roxas y Cia be considered a real estate
dealer because it engaged in the business of selling real
estate
Held: NO, being an isolated transaction
 Real estate dealer: any person engaged in the business
of buying, selling, exchanging, leasing or renting
 property on his own account as principal and holding
himself out as a full or part-time dealer in real estate or
as an owner of rental property or properties rented or
offered to rent for an aggregate amount of three
thousand pesos or more a year:
 Section 194 of the Tax Code, in considering as real
estate dealers owners of real estate receiving rentals of
at least P3,000.00 a year, does not provide any
qualification as to the persons paying the rentals
 The fact that there were hundreds of vendees and
them being paid for their respective holdings in
installment for a period of ten years, it would
nevertheless not make the vendor Roxas y Cia. a real
estate dealer during the 10-year amortization period
 The sale of the Nasugbu farm lands to the very farmers
who tilled them for generations was not only in
consonance with, but more in obedience to the
request and pursuant to the policy of our Government
to allocate lands to the landless
 It was the duty of the Government to pay the agreed
compensation after it had persuaded Roxas y Cia. to
sell its haciendas, and to subsequently subdivide them
among the farmers at very reasonable terms and prices.
But due to the lack of funds, Roxas y Cia. shouldered
the Government's burden, went out of its way and sold
lands directly to the farmers in the same way and under
the same terms as would have been the case had the
Government done it itself
 The power of taxation is sometimes called also the
power to destroy. Therefore it should be exercised with
caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and
uniformly
 Therefore, Roxas y Cia. cannot be considered a real
estate dealer for the sale in question. Hence, pursuant
to Section 34 of the Tax Code the lands sold to the
farmers are capital assets, and the gain derived from
the sale thereof is capital gain, taxable only to the
extent of 50%
As to the deductions
a. P40 tickets to a banquet given in honor of Sergio
Osmena and P28 San Miguel beer given as gifts to
various persons – representation expenses
 Representation expenses: deductible from gross
income as expenditures incurred in carrying on a
trade or business
 In this case, the evidence does not show such link
between the expenses and the business of Roxas
y Cia
b. Contributions to the Pasay police and fire department
and other police departments as Christmas funds
 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
said entities
 Under Section 39(h), a contribution to a
government entity is deductible when used
exclusively for public purposes
 As to the contribution to the Manila Police trust
fund, such is an allowable deduction for said trust
fund belongs to the Manila Police, a government
entity, intended to be used exclusively for its
public functions.
c. Contributions to the Philippines Herald's fund for
Manila's neediest families
 The contributions were not made to the Philippines
Herald but to a group of civic spirited citizens
organized by the Philippines Herald solely for
charitable purposes
 There is no question that the members of this
group of citizens do not receive profits, for all the
funds they raised were for Manila's neediest
families. Such a group of citizens may be classified
as an association organized exclusively for
charitable purposes mentioned in Section 30(h) of
the Tax Code
d. Contribution to Our Lady of Fatima chapel at the FEU
 University gives dividends to its stockholders
 Located within the premises of the university, the
chapel in question has not been shown to belong
to the Catholic Church or any religious
organization
 The contributions belongs to the Far Eastern
University, contributions to which are not
deductible under Section 30(h) of the Tax Code
for the reason that the net income of said
university injures to the benefit of its stockholders
No deficiency income tax is due for 1953 from Antonio
Roxas, Eduardo Roxas and Jose Roxas. For 1955 they are
liable to pay deficiency income tax in the sum of P109.00,
P91.00 and P49.00, respectively.
--
Roxas is not liable. It should be borne in mind that the sale
of the farmlands to the very farmers who tilled them for
generations was not only in consonance with, but more in
obedience to the request and pursuant to the policy of our
Government to allocate lands to the landless.
In order to maintain the general public’s trust and
confidence in the Government this power must be used
justly and not treacherously. It does not conform with the
sense of justice for the Government to persuade the
taxpayer to lend it a helping hand and later on penalize
him for duly answering the urgent call.
In fine, Roxas cannot be considered a real estate dealer
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
assets and the gain derived from the sale thereof is capital
gain, taxable only to the extent of 50%.
G. Stages, Aspects of Taxation 

 Levy 

 Assessment & collection
 Payment
H. Taxes Distinguished from Other Impositions
  Taxation vs Eminent Domain vs Police Power
 An examination of the Charter of Quezon City (Rep. Act
 Tax vs Debt 
 the ordinance in question except the provision granting
 Tax vs Toll 
 police power to the City. Section 9 cannot be justified
 Tax vs License Fee 

 Tax vs Penalty 
 occupation as may be established or practised in the City.
QUEZON CITY VS ERICTA
Facts:
Section 9 of Ordinance No. 6118, S-64 provides that at least
6% of the total area of the memorial park cemetery shall
be set aside for the charity burial of deceased persons
who are paupers and have been residents of Quezon City
for at least 5 years prior to their death. As such, the Quezon
City engineer required the respondent, Himlayang Pilipino
Inc, to stop any further selling and/or transaction of
memorial park lots in Quezon City where the owners
thereof have failed to donate the required 6% space
intended for paupers burial.
The then Court of First Instance and its judge, Hon. Ericta,
declared Section 9 of Ordinance No. 6118, S-64 null and
void.
Petitioners argued that the taking of the respondent’s
property is a valid and reasonable exercise of police
power and that the land is taken for a public use as it is
intended for the burial ground of paupers. They further
argued that the Quezon City Council is authorized under
its charter, in the exercise of local police power, ” to make
such further ordinances and resolutions not repugnant to
law as may be necessary to carry into effect and
discharge the powers and duties conferred by this Act and
such as it shall deem necessary and proper to provide for
the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort and convenience of
the city and the inhabitants thereof, and for the protection
of property therein.”
On the otherhand, respondent Himlayang Pilipino, Inc.
contended that the taking or confiscation of property was
obvious because the questioned ordinance permanently
restricts the use of the property such that it cannot be used
for any reasonable purpose and deprives the owner of all
beneficial use of his property.
Issue: Is Section 9 of the ordinance in question a valid
exercise of the police power?
Held: No. The Sec. 9 of the ordinance is not a valid exercise
of the police power.
Occupying the forefront in the bill of rights is the provision
which states that ‘no person shall be deprived of life, liberty
or property without due process of law’ (Art. Ill, Section 1
subparagraph 1, Constitution). On the other hand, there
are three inherent powers of government by which the
state interferes with the property rights, namely-. (1) police
power, (2) eminent domain, (3) taxation. These are said to
exist independently of the Constitution as necessary
attributes of sovereignty.
No. 537), does not reveal any provision that would justify
under the power granted to Quezon City to tax, fix the
license fee, and regulate such other business, trades, and
The power to regulate does not include the power to
prohibit or confiscate. The ordinance in question not only
confiscates but also prohibits the operation of a memorial
park cemetery.
Police power is defined by Freund as ‘the power of
promoting the public welfare by restraining and regulating
the use of liberty and property’. It is usually exerted in order
to merely regulate the use and enjoyment of property of
the owner. If he is deprived of his property outright, it is not
taken for public use but rather to destroy in order to
promote the general welfare. In police power, the owner
does not recover from the government for injury sustained
in consequence thereof.
Under the provisions of municipal charters which are
known as the general welfare clauses, a city, by virtue of
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
of the nature of well-ordered and society, that every
holder of property, however absolute and may be his title,
holds it under the implied liability that his use of it shall not
be injurious to the equal enjoyment of others having an
equal right to the enjoyment of their property, nor injurious
to the rights of the community. A property in the state is
held subject to its general regulations, which are necessary
to the common good and general welfare. Rights of
property, like all other social and conventional rights, are
subject to such reasonable limitations in their enjoyment as
shall prevent them from being injurious, and to such
reasonable restraints and regulations, established by law,
as the legislature, under the governing and controlling
power vested in them by the constitution, may think
necessary and expedient. The state, under the police
power, is possessed with plenary power to deal with all
matters relating to the general health, morals, and safety
of the people, so long as it does not contravene any
positive inhibition of the organic law and providing that
such power is not exercised in such a manner as to justify
the interference of the courts to prevent positive wrong
and oppression.
However, in the case at hand, there is no reasonable
relation between the setting aside of at least six (6)
percent of the total area of an private cemeteries for
charity burial grounds of deceased paupers and the
promotion of health, morals, good order, safety, or the
general welfare of the people. The ordinance is actually a
taking without compensation of a certain area from a
private cemetery to benefit paupers who are charges of
the municipal corporation. Instead of building or
maintaining a public cemetery for this purpose, the city
passes the burden to private cemeteries.
The expropriation without compensation of a portion of
private cemeteries is not covered by Section 12(t) of
Republic Act 537, the Revised Charter of Quezon City
which empowers the city council to prohibit the burial of
the dead within the center of population of the city and
to provide for their burial in a proper place subject to the
provisions of general law regulating burial grounds and
cemeteries. When the Local Government Code, Batas
Pambansa Blg. 337 provides in Section 177 (q) that a
Sangguniang panlungsod may “provide for the burial of
the dead in such place and in such manner as prescribed
by law or ordinance” it simply authorizes the city to provide
its own city owned land or to buy or expropriate private
properties to construct public cemeteries. This has been
the law and practise in the past. It continues to the present.
Expropriation, however, requires payment of just
compensation. The questioned ordinance is different from
laws and regulations requiring owners of subdivisions to set
aside certain areas for streets, parks, playgrounds, and
other public facilities from the land they sell to buyers of
subdivision lots. The necessities of public safety, health,
and convenience are very clear from said requirements
which are intended to insure the development of
communities with salubrious and wholesome environments.
The beneficiaries of the regulation, in turn, are made to
pay by the subdivision developer when individual lots are
sold to home-owners.
VELASCO VS VILLEGAS
Facts: In their own behalf and in representation of the
other owners of barbershops in the City of Manila,
petitioners challenge the constitutionality based on
Ordinance No. 4964 of the City of Manila, which prohibited
the business of massaging customers of a barber shop.
They contend that it amounts to a deprivation of property
of their means of livelihood without due process of law.
Issue: Whether said ordinance was unconstitutional, and
therefore an improper exercise of police power
Held: No. The attack against the validity cannot succeed.
As pointed out in the brief of respondents-appellees, it is a
police power measure. The objectives behind its
enactment are: “(1) To be able to impose payment of the
license fee for engaging in the business of massage clinic
under Ordinance No. 3659 as amended by Ordinance
4767, an entirely different measure than the ordinance
regulating the business of barbershops and, (2) in order to
forestall possible immorality which might grow out of the
construction of separate rooms for massage of customers.”
The Court has been most liberal in sustaining ordinances
based on the general welfare clause. As far back as U.S. v.
Salaveria, 4 a 1918 decision, this Court through Justice
Malcolm made clear the significance and scope of such
a clause, which “delegates in statutory form the police
power to a municipality. As above stated, this clause has
been given wide application by municipal authorities and
has in its relation to the particular circumstances of the
case been liberally construed by the courts. Such, it is well
to really is the progressive view of Philippine jurisprudence.”
ORTIGAS VS FEATI BANK
Facts: Plaintiff is engaged in real estate business,
developing and selling lots to the public, particularly the
Highway Hills Subdivision along EDSA, Mandaluyong, Rizal.
On March 4, 1952, plaintiff entered into separate
agreements of sale with Augusto Padilla y Angeles and
Natividad Angeles over 2 parcels of land (Lots Nos. 5 and
6, Block 31, of the Highway Hills Subdivision). On July 19,
1962 the vendees transferred their rights and interests over
the said lots to Emma Chavez. The plaintiff executed the
corresponding deeds of sale in favor of Emma Chavez
upon payment of the purchase price. Both the
agreements and the deeds of sale thereafter executed
contained the stipulation that the parcels of land subject
of the deeds of sale “shall be used by the Buyer exclusively
for residential purposes”. The restrictions were later
annotated in the Transfer Certificates of Titles covering the
said lots issued in the name of Chavez.
Eventually, defendant-appellee acquired Lots No. 5 and 6
with the building restrictions also annotated in their
corresponding TCTs. Lot No.5 was bought directly from
Chavez “free from all liens and encumbrances” while Lot
No.6 was acquired through a “Deed of Exchange” from
Republic Flour Mills.
Plaintiff claims that the restrictions were imposed as part of
its general building scheme designed for the
beautification and development of the Highway Hills
Subdivision which forms part of its big landed estate where
commercial and industrial sites are also designated or
established.
Defendant maintains that the area along the western part
of EDSA from Shaw Boulevard to the Pasig River, has been
declared a commercial and industrial zone, per
Resolution No.27 of the Municipal Council of
Mandaluyong. It alleges that plaintiff “completely sold
and transferred to third persons all lots in said subdivision
facing EDSA” and the subject lots thereunder were
acquired by it “only on June 23, 1962 or more than 2 years
after the area xxx had been declared a commercial and
industrial zone”.
On or about May 5, 1963, defendant-appellee began
construction of a building devoted to banking purposes
but which it claims could also be used exclusively for
residential purposes. The following day, the plaintiff
demanded in writing that the construction of the
commercial building be stopped but the defendant
refused to comply contending that the construction was
in accordance with the zoning regulations.
Issues:
1) Whether Resolution No. 27 s-1960 is a valid exercise of
police power.
2) Whether the said Resolution can nullify or supersede
the contractual obligations assumed by defendant-
appellee.
Held:
1. Yes. The validity of Resolution No.27 was never
questioned. In fact, it was impliedly admitted in the
stipulation of facts, when plaintiff-appellant did not
dispute the same. Having admitted the validity of the
subject resolution, plaintiff-appellant cannot now change
its position on appeal.
However, assuming that it is not yet too late to question the
validity of the said resolution, the posture is unsustainable.
Municipalities are empowered by law through Sec.3 of RA
2264 (Local Autonomy Act) to to adopt zoning and
subdivision ordinances or regulations for the municipality.
The law does not restrict the exercise of the power through
an ordinance. Therefore, granting that Resolution No.27 is
not an ordinance, it certainly is a regulatory measure
within the intendment of the word “regulation” under the
provision.
An examination of Sec.12 of the same law reveals that the
implied power of a municipality should be “liberally
construed in its favor” and that “any fair and reasonable
doubt as to the existence of the power should be
interpreted in favor of the local government and it shall be
presumed to exist.” An exception to the general welfare
powers delegated to municipalities is when the exercise of
its powers will conflict with vested rights arising from
contracts. The exception does not apply to the case at bar.
2. While non-impairment of contacts is constitutionally
guaranteed, the rule is not absolute since it has to be
reconciled with the legitimate exercise of police power.
Invariably described as the “most essential, insistent and
illimitable of powers” and the “greatest and most powerful
attribute of government”, the exercise of police power
may be judicially inquired into and corrected only if it is
capricious, whimsical, unjust or unreasonable, there
having been a denial of due process or a violation of any
other applicable constitutional guarantee.
Resolution No.27, S-1960 declaring the western part of
EDSA from Shaw Boulevard to the Pasig River as an
industrial or commercial zone was passed by the Municipal
Council of Mandaluyong in the exercise of police power
to safeguard/promote the health, safety, peace, good
order and general welfare of the people in the locality.
Judicial notice may be taken of the conditions prevailing
in the area, especially where Lots Nos. 5 and 6 are located.
EDSA supports an endless stream of traffic and the resulting
activity, noise and pollution which are hardly conducive to
the health, safety or welfare of the residents in its route. The
Municipality of Mandaluyong was reasonably justified
under the circumstances in passing the subject resolution.
Thus, the state, in order to promote the general welfare,
may interfere with personal liberty, with property, and with
business and occupations. Persons may be subjected to
all kinds of restraint and burdens, in order to secure the
general comfort, health and prosperity of the state, and to
this fundamental aim of the Government, the rights of the
individual are subordinated.
SANGALANG VS GASTON
Facts: Jose Sangalang and wife, herein petitioners are
residents of Jupiter Street, Makati Metro Manila.
Sangalang and the other petitioners who are also residents
of Jupiter Street initially filed a case against Ayala to
enforce by specific performance restrictive easement
upon property pursuant to stipulations embodied in the
deeds of sale covering the subdivision, and for damages.
The other petitions were also for the enforcement of the
aforesaid restrictions stipulated in the deeds of sale
executed by the Ayala Corporation.
The lots which were acquired by the petitioners, were all
sold by MDC subject to certain conditions and easements
contained in Deed Restrictions which formed a part of
each deed of sale. When MDC sold the above-
mentioned lots to appellees' predecessors-in-interest, the
whole stretch of the commercial block between Buendia
Avenue and Jupiter Street, from Reposo Street in the west
to Zodiac Street in the east, was still undeveloped. Altough
it was not part of the original plan, MDC constructed a
fence or wall on the commercial block along Jupiter.
In 1975, the municipal council of Makati enacted its
ordinance No. 81, providing for the zonification of Makati
(Exh. 18). Under this Ordinance, Bel-Air Village was
classified as a Class A Residential Zone, with its boundary
in the south extending to the center line of Jupiter Street.
Under the zoning classifications, Jupiter Street, therefore, is
a common boundary of Bel-Air Village and the
commercial zone.
Gates had been installed by BAVA (Bell-Arat strategic
locations across Jupiter Street which were manned and
operated by its own security guards who were employed
to maintain, supervise and enforce traffic regulations in the
roads and streets of the village. Then, on January 17, 1977,
the Office of the Mayor of Makati directed that, in the
interest of public welfare and for the purpose of easing
traffic congestion, the streets in Bel-Air Village should be
opened for public use. The other streets in Bel-Air Village
were voluntarily opened except Jupiter Street. The
Municipal Engineer of Makati in a letter addressed to BAVA
advised the latter to open for vehicular and pedestrian
traffic the entire portion of Jupiter Street from Makati
Avenue to Reposo Street. Finally, the municipal officials of
Makati concerned allegedly opened, destroyed and
removed the gates constructed/located at the corner of
Reposo Street and Jupiter Street as well as the
gates/fences located/constructed at Jupiter Street and
Makati Avenue forcibly, and then opened the entire
length of Jupiter Street to public traffic.
Petitioners brought the present action for damages
against the defendant-appellant Ayala Corporation
predicated on both breach of contract and on tort or
quasi-delict. After trial on the merits, the then Court of First
Instance favored the petitioners and awarded damages.
Defendant is further ordered to restore/reconstruct the
perimeter wall at its original position in 1966 from Reposo
Street in the west to Zodiac Street in the east, at its own
expense,
On appeal, CA reversed the lower court, finding the
decision appealed from as not supported by the facts and
the law on the matter, it was set aside and another one
entered dismissing the case for lack of a cause of action.
Issues:
1) Whether or not Ayala Corporation is liable for
damages as a result of the destruction of the
perimeter wall.
2) Whether or not the exercise of police power is valid.
Held:
1. NO. Jupiter Street lies as the boundary between Bel-Air
Village and Ayala Corporation's commercial section, it
had been considered as a boundary not as a part of either
the residential or commercial zones of Ayala Corporation's
real estate development projects, hence it cannot be said
to have been "for the exclusive benefit" of Bel-Air Village
residents.
Jupiter Street lies as a mere boundary, a fact
acknowledged by the authorities of Makati and the
National Government and, as a scrutiny of the records
themselves reveals, by the petitioners themselves, as the
articles of incorporation of Bel-Air Village Association itself
would confirm. As a consequence, Jupiter Street was
intended for the use by both -the commercial and
residential blocks. It was not originally constructed,
therefore, for the exclusive use of either block, least of all
the residents of Bel-Air Village, but, we repeat, in favor of
both, as distinguished from the general public. When the
wall was erected in 1966 and rebuilt twice, in 1970 and
1972, it was not for the purpose of physically separating the
two blocks. According to Ayala Corporation, it was put up
to enable the Bel-Air Village Association "better control of
the security in the area, and as the Ayala Corporation's
"show of goodwill". That maintaining the wall was a matter
of a contractual obligation on the part of Ayala, to be
pure conjecture. In fine, we cannot hold the Ayala
Corporation liable for damages for a commitment it did
not make, much less for alleged resort to machinations in
evading it.
2. Yes. While non-impairment of contracts is
constitutionally guaranteed, the rule is not absolute, since
it has to be reconciled with the legitimate exercise of
police power, i.e., "the power to prescribe regulations to
promote the health, morals, peace, education, good
order or safety and general welfare of the people.'
Invariably described as "the most essential, insistent, and
illimitable of powers" and "in a sense, the greatest and
most powerful attribute of government," the exercise of
the power may be judicially inquired into and corrected
only if it is capricious, whimsical, unjust or unreasonable,
there having been a denial of due process or a violation
of any other applicable constitutional guarantee.
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
commercial zone, was obviously passed by the Municipal
Council of Mandaluyong, Rizal in the exercise of police
power to safeguard or promote the health, safety, peace,
good order and general welfare of the people in the
locality.
BALACUIT VS CFI OF AGUSAN DEL NORTE
Facts: Petitioners, theater owners, assailed the
constitutionality of Ordinance No. 640 passed by the
Municipal Board of the City of Butuan on April 21, 1969. This
called for a reduction to ½ of the ticket price given to
minors from 7-12 years old. There was a fine from 200-600
pesos or a 2-6 month imprisonment
The complaint was issued in the trial court. A TRO was then
issued to prevent the law from being enforced. The
respondent court entered its decision declaring the law
valid.
Petitioners attack the validity and constitutionality of
Ordinance No. 640 on the grounds that it is ultra vires and
an invalid exercise of police power. Petitioners contend
that Ordinance No. 640 is not within the power of’ the
Municipal Board to enact as provided for in Section 15(n)
of Republic Act No. 523 where it states that the Muncipal
board can only fix license fees for theaters and not
admission rates.
The respondent attempts to justify the enactment of the
ordinance by invoking the general welfare clause
embodied in Section 15 (nn) of the cited law.
ISSUE: W/N Ordinance 640 – prohibiting payment on
theater tickets for children below seven (7) is constitutional?
HELD: NO, because it infringes theater owners’ right to
property.
There is nothing pernicious in demanding equal price for
both children and adults. The petitioners are merely
conducting their legitimate businesses. The object of every
business entrepreneur is to make a profit out of his venture.
There is nothing immoral or injurious in charging the same
price for both children and adults. In fact, no person is
under compulsion to purchase a ticket. It is a totally
voluntary act on the part of the purchaser if he buys a
ticket to such performances.
Such ticket represents a right, Positive or conditional, as the
case may be, according to the terms of the original
contract of sale. This right is clearly a right of property. The
ticket which represents that right is also, necessarily, a
species of property. As such, the owner thereof, in the
absence of any condition to the contrary in the contract
by which he obtained it, has the clear right to dispose of it,
to sell it to whom he pleases and at such price as he can
obtain. So that an act prohibiting the sale of tickets to
theaters or other places of amusement at more than the
regular price was held invalid as conflicting with the state
constitution securing the right of property.
FRANCIA VS INTERMEDIATE APPELLATE COURT
Topic: The taxes assessed are the obligations of the
taxpayer arising from law, while the money judgment
against the government is an obligation arising from
contract, whether express or implied.
FACTS:
 Engracio Francia was the registered owner of a
house and lot located in Pasay City.
 A portion of such property was expropriated by
the Republic of the Philippines on October 15,
1977.
 It appeared that Francia did not pay his real
estate taxes amounting to P 2,400 from 1963 to
1977.
  Thus, his property was sold in a public auction by
the City Treasurer of Pasay City.
 Francia filed a complaint to annual the auction
sale.
 The lower court dismissed the complaint and the
Intermediate Appellate Court affirmed the
decision of the lower court in toto.
 Hence, this petition for review. Francia contends
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
portion of his land was expropriated on 1977.
 Francia also claims that his property was sold at
public auction without notice to him and that the
price paid for the property was shockingly
inadequate, amounting to fraud and deprivation
without due process of law.
ISSUE: Whether the expropriation payment may
compensate for the real estate taxes due?
RULING: No. There can be no offsetting of taxes against the
claims that the taxpayer may have against the
government.
A person cannot refuse to pay a tax on the ground that
the government owes him an amount equal to or greater
than the tax being collected. The collection of a tax
cannot await the results of a lawsuit against the
government. Internal revenue taxes cannot be the subject
of compensation.
The Government and the taxpayer are not mutually
creditors and debtors of each other under Article 1278 of
the Civil Code and a claim of taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off.
Republic v. Mambulao Lumber Co.:
"The general rule based on grounds of public policy is well-
settled that no set-off admissible against demands for
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
party but grow out of duty to, and are the positive acts of
the government to the making and enforcing of which,
the personal consent of individual taxpayers is not
required. ..."
Moreover, the amount of P 4,116 paid by the national
government for the 125 square meter portion of his lot was
deposited with the Philippine National Bank long before
the sale at public auction of his remaining property. It
would have been an easy matter to withdraw P 2,400 from
the deposit so that he could pay the tax obligation thus
aborting the sale at public auction.
And finally, even if we are inclined to give relief to the
petitioner on equitable grounds, there are no strong
considerations of substantial justice in his favor. Mr. Francia
failed to pay his taxes for 14 years from 1963 up to the date
of the auction sale. He claims to have pocketed the notice
of sale without reading it which, if true, is still an act of
inexplicable negligence. He did not withdraw from the
expropriation payment deposited with the Philippine
National Bank an amount sufficient to pay for the back
taxes. The petitioner did not pay attention to another
notice sent by the City Treasurer on November 3, 1978,
during the period of redemption, regarding his tax
delinquency. There is furthermore no showing of bad faith
or collusion in the purchase of the property by Mr.
Fernandez. The petitioner has no standing to invoke equity
in his attempt to regain the property by belatedly asking
for the annulment of the sale.
VICTORIAS MILLING VS MUNICIPALITY OF VICTORIA,
NEGROS OCCIDENTAL
Facts: Ordinance 1 (1956) was approved by the municipal
council of Victorias by way of an amendment to 2
municipal ordinances separately imposing license taxes
on operators of sugar centrals and sugar refineries. The
changes were: (1) with respect to sugar centrals, by
increasing the rates of license taxes; and (2) as to sugar
refineries, by increasing the rates of license taxes as well as
teh range of graduated schedule of annual output
capacity. Victorias Milling questioned the validity of
Ordinance 1 as it, among others, allegedly singled out
Victorias Milling Co. since it is the only operator of a sugar
central and a sugar refinery within the jurisdiction of the
municipality.
Issue: Whether Ordinance 1 is discriminatory.
Held: The ordinance does not single out Victorias as the
only object of the ordinance but is made to apply to any
sugar central or sugar refinery which may happen to
operate in the municipality. The fact that Victorias Milling
is actually the sole operator of a sugar central and a sugar
refinery does not make the ordinance discriminatory. The
ordinance is unlike that in Ormoc Sugar Company vs.
Municipal Board of Ormoc City, which specifically spelled
out Ormoc Sugar as the subject of the taxation, the name
of the company herein was never mentioned in the
ordinance.
PROGRESSIVE DEVELOPMENT CORP VS QUEZON CITY
Facts: The City Council of QC passed an ordinance known
as the Market Code of QC, which imposed a 5%
supervision fee on gross receipts on rentals or lease of
privately-owned market spaces in QC.
In case of failure of the owners of the market spaces to pay
the tax for three consecutive months, the City shall revoke
the permit of the privately-owned market to operate.
Progressive Development Corp, owner and operator of
Farmer’s Market, filed a petition for prohibition against QC
on the ground that the tax imposed by the Market Code
was in reality a tax on income, which the municipal
corporation was prohibited by law to impose.
Issue: Whether or not the supervision fee is an income tax
or a license fee
Held: It is a license fee. A LICENSE FEE is imposed in the
exercise of the police power primarily for purposes of
regulation, while TAX is imposed under the taxing power
primarily for purposes of raising revenues.
If the generating of revenue is the primary purpose and
regulation is merely incidental, the imposition is a tax; but
if regulation is the primary purpose, the fact that
incidentally, revenue is also obtained does not make the
imposition a tax.
To be considered a license fee, the imposition must relate
to an occupation or activity that so engages the public
interest in health, morals, safety, and development as to
require regulation for the protection and promotion of
such public interest; the imposition must also bear a
reasonable relation to the probable expenses of
regulation, taking into account not only the costs of direct
regulation but also its incidental consequences.
In this case, the Farmers’ Market is a privately-owned
market established for the rendition of service to the
general public. It warrants close supervision and control by
the City for the protection of the health of the public by
insuring the maintenance of sanitary conditions,
prevention of fraud upon the buying public, etc.
Since the purpose of the ordinance is primarily regulation
and not revenue generation, the tax is a license fee. The
use of the gross amount of stall rentals as basis for
determining the collectible amount of license tax does not,
by itself, convert the license tax into a prohibited tax on
income.
Such basis actually has a reasonable relationship to the
probable costs of regulation and supervision of
Progressive’s kind of business, since ordinarily, the higher
the amount of rentals, the higher the volume of items sold.
The higher the volume of goods sold, the greater the
extent and frequency of supervision and inspection may
be required in the interest of the buying public.
LAND TRANSPORTATION OFFICE VS CITY OF BUTUAN
FACTS: The Sangguniang Panglungsod (SP) of Butuan on
August 16, 1992 passed an ordinance entitled “An
Ordinance Regulating the Operation of Tricycles for hire,
providing mechanism for the issuance of Franchise,
Registration and Permit, and imposing Penalties for
Violations thereof and for other purposes.” The ordinance
provided for, among other things, the payment of
franchise fees, fees for registration of the vehicle, and fees
for the issuance of a permit for the driving thereof. The City
of Butuan asserts that Sec. 129 and Sec.133 of the Local
Government Code is their basis for said ordinance and that,
said provisions authorize LGUs to collect registration fees or
charges along with, in its view, the corresponding issuance
of all kinds of licenses or permits for the driving of tricycles.
LTO explains that one of the functions of the National
Government, that, indeed has been transferred to LGUs is
the franchising authority over tricycles-for-hire of the LTFRB
but NOT the authority of the LTO to register all motor
vehicles and to issue to qualified persons of licenses to
drive such vehicles.
The RTC of Butuan decreed an issuance of a PERMANENT
WRIT OF INJUCTION against LTO prohibiting and enjoining
LTO, as well as its employees and other persons acting in
its behalf, from (a) registering tricycles and (b) issuing
licenses to tricycle drivers. The CA sustained the trial court’s
decision.
The adverse rulings of both Courts prompted the LTO to file
an instant petition for review on certiorari to annul and set
aside the earlier Court decisions.
ISSUE: Whether under the present set-up the power of
the LTO to register, tricycles in particular, as well as to issue
licenses for the driving thereof has likewise devolved to
Local Government Units.
HELD: No, said powers [to register and issue licenses]
remain under LTO’s exclusive jurisdiction.
The registration and licensing functions are vested in the
LTO (pursuant to Art. 3 Sec. 4(d) [1], 10 of RA 4136-Land
Transportation and Traffic Code) while franchising and
regulatory responsibilities are vested in the LTFRB (Land
Transportation Franchising and Regulatory Board; pursuant
to EO # 202). Under the Local Government Code
(specifically Sec. 458 (8)(3)(VI)), the Local Government
Units now have the power to REGULATE (to fix, establish or
control, to adjust by rule, method or establish mode to
direct by rule or restriction; or to subject to governing
principles or laws) the operation of tricycles for hire and
grant franchises thereof but they are still subject to the
guidelines prescribed by the DOTC (Department of
Transportation and Communications; under Article 458(a)
[3-VI] of the RA 7160).
PLANTERS PRODUCTS VS FERTIPHIL CORP
FACTS: Petitioner PPI and private respondent Fertiphil are
private corporations incorporated under Philippine
laws. They are both engaged in the importation and
distribution of fertilizers, pesticides and agricultural
chemicals.
On June 3, 1985, then President Ferdinand Marcos,
exercising his legislative powers, issued LOI No. 1465 which
provided, among others, for the imposition of a capital
recovery component (CRC) on the domestic sale of all
grades of fertilizers in the Philippines. The LOI provides:
“3. The Administrator of the Fertilizer Pesticide
Authority to include in its fertilizer pricing formula
a capital contribution component of not less
than P10 per bag. This capital contribution shall be
collected until adequate capital is raised to make
PPI viable. Such capital contribution shall be
applied by FPA to all domestic sales of fertilizers in
the Philippines.”
Pursuant to the LOI, Fertiphil paid P10 for every bag of
fertilizer it sold in the domestic market to the Fertilizer and
Pesticide Authority (FPA). FPA then remitted the amount
collected to the Far East Bank and Trust Company, the
depositary bank of PPI. Fertiphil paid P6,689,144 to FPA
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.

Fertiphil filed a complaint for collection and

damages8 against FPA and PPI with the RTC in Makati. It
questioned the constitutionality of LOI No. 1465 for being
unjust, unreasonable, oppressive, invalid and an unlawful
imposition that amounted to a denial of due process of
law.9 Fertiphil alleged that the LOI solely favored PPI, a
privately owned corporation, which used the proceeds to
maintain its monopoly of the fertilizer industry.

In its Answer, FPA, through the Solicitor General, countered

that the issuance of LOI No. 1465 was a valid exercise of
the police power of the State in ensuring the stability of the
fertilizer industry in the country. It also averred that Fertiphil
did not sustain any damage from the LOI because the
burden imposed by the levy fell on the ultimate consumer,
not the seller.

On November 20, 1991, the RTC rendered judgment in

favor of Fertiphil

On November 28, 2003, the CA handed down its decision

affirming that of the RTC

ISSUE: WON the law constitutes a valid legislation pursuant

to the exercise of taxation and police power for public
purposes.

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.

An inherent limitation on the power of taxation is public

purpose. Taxes are exacted only for a public purpose. They
cannot be used for purely private purposes or for the
exclusive benefit of private persons.46 The reason for this is
simple. The power to tax exists for the general welfare;
hence, implicit in its power is the limitation that it should be
used only for a public purpose. It would be a robbery for
the State to tax its citizens and use the funds generated for
a private purpose. As an old United States case bluntly put
it: "To lay with one hand, the power of the government on
the property of the citizen, and with the other to bestow it
upon favored individuals to aid private enterprises and
build up private fortunes, is nonetheless a robbery
because it is done under the forms of law and is called
taxation."

Here, we do not find anything iniquitous in ordering PPI to

refund the amounts paid by Fertiphil under LOI No. 1465. It
unduly benefited from the levy. It was proven during the
trial that the levies paid were remitted and deposited to its
bank account. Quite the reverse, it would be inequitable
and unjust not to order a refund. To do so would unjustly
enrich PPI at the expense of Fertiphil. Article 22 of the Civil
Code explicitly provides that "every person who, through
an act of performance by another comes into possession
of something at the expense of the latter without just or