G.R. No.

L-4817             May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,

vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.

Calanog and Alafriz for plaintiffs-appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serreno for defendants-appellants.

REYES, J.:

This suit was commenced in the Court of First Instance of Manila by two lawyers, a medical
practitioner, a public accountant, a dental surgeon and a pharmacist, purportedly "in their own behalf
and in behalf of other professionals practising in the City of Manila who may desire to join it." Object
of the suit is the annulment of Ordinance No. 3398 of the City of Manila together with the provision of
the Manila charter authorizing it and the refund of taxes collected under the ordinance but paid under
protest.

The ordinance in question, which was approved by the municipal board of the City of Manila on July
25, 1950, imposes a municipal occupation tax on persons exercising various professions in the city
and penalizes non-payment of the tax "by a fine of not more than two hundred pesos or by
imprisonment of not more than six months, or by both such fine and imprisonment in the discretion of
the court." Among the professions taxed were those to which plaintiffs belong. The ordinance was
enacted pursuant to paragraph (1) of section 18 of the Revised Charter of the City of Manila (as
amended by Republic Act No. 409), which empowers the Municipal Board of said city to impose a
municipal occupation tax, not to exceed P50 per annum, on persons engaged in the various
professions above referred to.

Having already paid their occupation tax under section 201 of the National Internal Revenue Code,
plaintiffs, upon being required to pay the additional tax prescribed in the ordinance, paid the same
under protest and then brought the present suit for the purpose already stated. The lower court
upheld the validity of the provision of law authorizing the enactment of the ordinance but declared
the ordinance itself illegal and void on the ground that the penalty there in provided for non-payment
of the tax was not legally authorized. From this decision both parties appealed to this Court, and the
only question they have presented for our determination is whether this ruling is correct or not, for
though the decision is silent on the refund of taxes paid plaintiffs make no assignment of error on
this point.

To begin with defendants' appeal, we find that the lower court was in error in saying that the
imposition of the penalty provided for in the ordinance was without the authority of law. The last
paragraph (kk) of the very section that authorizes the enactment of this tax ordinance (section 18 of
the Manila Charter) in express terms also empowers the Municipal Board "to fix penalties for the
violation of ordinances which shall not exceed to(sic) two hundred pesos fine or six months"
imprisonment, or both such fine and imprisonment, for a single offense." Hence, the pronouncement
below that the ordinance in question is illegal and void because it imposes a penalty not authorized
by law is clearly without basis.

As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing it
constitute class legislation, are unjust and oppressive, and authorize what amounts to double
taxation.
In raising the hue and cry of "class legislation", the burden of plaintiffs' complaint is not that the
professions to which they respectively belong have been singled out for the imposition of this
municipal occupation tax; and in any event, the Legislature may, in its discretion, select what
occupations shall be taxed, and in the exercise of that discretion it may tax all, or it may select for
taxation certain classes and leave the others untaxed. (Cooley on Taxation, Vol. 4, 4th ed., pp.
3393-3395.) Plaintiffs' complaint is that while the law has authorized the City of Manila to impose the
said tax, it has withheld that authority from other chartered cities, not to mention municipalities. We
do not think it is for the courts to judge what particular cities or municipalities should be empowered
to impose occupation taxes in addition to those imposed by the National Government. That matter is
peculiarly within the domain of the political departments and the courts would do well not to
encroach upon it. Moreover, as the seat of the National Government and with a population and
volume of trade many times that of any other Philippine city or municipality, Manila, no doubt, offers
a more lucrative field for the practice of the professions, so that it is but fair that the professionals in
Manila be made to pay a higher occupation tax than their brethren in the provinces.

Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination
within a class in that while professionals with offices in Manila have to pay the tax, outsiders who
have no offices in the city but practice their profession therein are not subject to the tax. Plaintiffs
make a distinction that is not found in the ordinance. The ordinance imposes the tax upon every
person "exercising" or "pursuing" — in the City of Manila naturally — any one of the occupations
named, but does not say that such person must have his office in Manila. What constitutes exercise
or pursuit of a profession in the city is a matter of judicial determination. The argument against
double taxation may not be invoked where one tax is imposed by the state and the other is imposed
by the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the
same occupation, calling or activity by both the state and the political subdivisions thereof. (51 Am.
Jur., 341.)

In view of the foregoing, the judgment appealed from is reversed in so far as it declares Ordinance
No. 3398 of the City of Manila illegal and void and affirmed in so far as it holds the validity of the
provision of the Manila charter authorizing it. With costs against plaintiffs-appellants.

Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.
G.R. No. L-67649 June 28, 1988

ENGRACIO FRANCIA, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.

GUTIERREZ, JR., J.:

The petitioner invokes legal and equitable grounds to reverse the questioned decision of the Intermediate Appellate Court, to set aside the
auction sale of his property which took place on December 5, 1977, and to allow him to recover a 203 square meter lot which was, sold at
public auction to Ho Fernandez and ordered titled in the latter's name.

The antecedent facts are as follows:

Engracio Francia is the registered owner of a residential lot and a two-story house built upon it
situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. The lot, with an
area of about 328 square meters, is described and covered by Transfer Certificate of Title No. 4739
(37795) of the Registry of Deeds of Pasay City.

On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the
Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent
to the assessed value of the aforesaid portion.

Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5,
1977, his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section
73 of Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax
delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property.

Francia was not present during the auction sale since he was in Iligan City at that time helping his
uncle ship bananas.

On March 3, 1979, Francia received a notice of hearing of LRC Case No. 1593-P "In re: Petition for
Entry of New Certificate of Title" filed by Ho Fernandez, seeking the cancellation of TCT No. 4739
(37795) and the issuance in his name of a new certificate of title. Upon verification through his
lawyer, Francia discovered that a Final Bill of Sale had been issued in favor of Ho Fernandez by the
City Treasurer on December 11, 1978. The auction sale and the final bill of sale were both annotated
at the back of TCT No. 4739 (37795) by the Register of Deeds.

On March 20, 1979, Francia filed a complaint to annul the auction sale. He later amended his
complaint on January 24, 1980.

On April 23, 1981, the lower court rendered a decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing the

amended complaint and ordering:

(a) The Register of Deeds of Pasay City to issue a new Transfer

Certificate of Title in favor of the defendant Ho Fernandez over the
parcel of land including the improvements thereon, subject to
 whatever encumbrances appearing at the back of TCT No. 4739
(37795) and ordering the same TCT No. 4739 (37795) cancelled.

(b) The plaintiff to pay defendant Ho Fernandez the sum of P1,000.00

as attorney's fees. (p. 30, Record on Appeal)

The Intermediate Appellate Court affirmed the decision of the lower court in toto.

Hence, this petition for review.

Francia prefaced his arguments with the following assignments of grave errors of law:

RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A GRAVE ERROR OF LAW

IN NOT HOLDING PETITIONER'S OBLIGATION TO PAY P2,400.00 FOR SUPPOSED TAX
DELINQUENCY WAS SET-OFF BY THE AMOUNT OF P4,116.00 WHICH THE GOVERNMENT IS
INDEBTED TO THE FORMER.

II

RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A GRAVE AND SERIOUS

ERROR IN NOT HOLDING THAT PETITIONER WAS NOT PROPERLY AND DULY NOTIFIED
THAT AN AUCTION SALE OF HIS PROPERTY WAS TO TAKE PLACE ON DECEMBER 5, 1977
TO SATISFY AN ALLEGED TAX DELINQUENCY OF P2,400.00.

III

RESPONDENT INTERMEDIATE APPELLATE COURT FURTHER COMMITTED A SERIOUS

ERROR AND GRAVE ABUSE OF DISCRETION IN NOT HOLDING THAT THE PRICE OF
P2,400.00 PAID BY RESPONTDENT HO FERNANDEZ WAS GROSSLY INADEQUATE AS TO
SHOCK ONE'S CONSCIENCE AMOUNTING TO FRAUD AND A DEPRIVATION OF PROPERTY
WITHOUT DUE PROCESS OF LAW, AND CONSEQUENTLY, THE AUCTION SALE MADE
THEREOF IS VOID. (pp. 10, 17, 20-21, Rollo)

We gave due course to the petition for a more thorough inquiry into the petitioner's allegations 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.

A careful review of the case, however, discloses that Mr. Francia brought the problems raised in his
petition upon himself. While we commiserate with him at the loss of his property, the law and the
facts militate against the grant of his petition. We are constrained to dismiss it.

Francia contends that his tax delinquency of P2,400.00 has been extinguished by legal
compensation. He claims that the government owed him P4,116.00 when a portion of his land was
expropriated on October 15, 1977. Hence, his tax obligation had been set-off by operation of law as
of October 15, 1977.

There is no legal basis for the contention. By legal compensation, obligations of persons, who in
their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil
Code). The circumstances of the case do not satisfy the requirements provided by Article 1279, to
wit:

(1) that each one of the obligors be bound principally and that he be at the same time
a principal creditor of the other;

xxx xxx xxx

(3) that the two debts be due.

xxx xxx xxx

This principal contention of the petitioner has no merit. We have consistently ruled that there can be
no off-setting 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.

In the case of Republic v. Mambulao Lumber Co. (4 SCRA 622), this Court ruled that Internal
Revenue Taxes can not be the subject of set-off or compensation. We stated that:

A claim for taxes is not such a debt, demand, contract or judgment as is allowed to
be set-off under the statutes of set-off, which are construed uniformly, in the light of
public policy, to exclude the remedy in an action or any indebtedness of the state or
municipality to one who is liable to the state or municipality for taxes. Neither are they
a proper subject of recoupment since they do not arise out of the contract or
transaction sued on. ... (80 C.J.S., 7374). "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. ..."

We stated that a taxpayer cannot refuse to pay his tax when called upon by the collector because he
has a claim against the governmental body not included in the tax levy.

This rule was reiterated in the case of Corders v. Gonda (18 SCRA 331) where we stated that: "...
internal revenue taxes can not be the subject of compensation: Reason: government and taxpayer
are not mutually creditors and debtors of each other' under Article 1278 of the Civil Code and a
"claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off."

There are other factors which compel us to rule against the petitioner. The tax was due to the city
government while the expropriation was effected by the national government. Moreover, the amount
of P4,116.00 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. Notice of the deposit dated September 28, 1977 was received by the petitioner on
September 30, 1977. The petitioner admitted in his testimony that he knew about the P4,116.00
deposited with the bank but he did not withdraw it. It would have been an easy matter to withdraw
P2,400.00 from the deposit so that he could pay the tax obligation thus aborting the sale at public
auction.
Petitioner had one year within which to redeem his property although, as well be shown later, he
claimed that he pocketed the notice of the auction sale without reading it.

Petitioner contends that "the auction sale in question was made without complying with the
mandatory provisions of the statute governing tax sale. No evidence, oral or otherwise, was
presented that the procedure outlined by law on sales of property for tax delinquency was
followed. ... Since defendant Ho Fernandez has the affirmative of this issue, the burden of proof
therefore rests upon him to show that plaintiff was duly and properly notified ... .(Petition for Review,
Rollo p. 18; emphasis supplied)

We agree with the petitioner's claim that Ho Fernandez, the purchaser at the auction sale, has the
burden of proof to show that there was compliance with all the prescribed requisites for a tax sale.

The case of Valencia v. Jimenez (11 Phil. 492) laid down the doctrine that:

xxx xxx xxx

... [D]ue process of law to be followed in tax proceedings must be established by

proof and the general rule is that the purchaser of a tax title is bound to take upon
himself the burden of showing the regularity of all proceedings leading up to the
sale. (emphasis supplied)

There is no presumption of the regularity of any administrative action which results in depriving a
taxpayer of his property through a tax sale. (Camo v. Riosa Boyco, 29 Phil. 437); Denoga v. Insular
Government, 19 Phil. 261). This is actually an exception to the rule that administrative proceedings
are presumed to be regular.

But even if the burden of proof lies with the purchaser to show that all legal prerequisites have been
complied with, the petitioner can not, however, deny that he did receive the notice for the auction
sale. The records sustain the lower court's finding that:

[T]he plaintiff claimed that it was illegal and irregular. He insisted that he was not
properly notified of the auction sale. Surprisingly, however, he admitted in his
testimony that he received the letter dated November 21, 1977 (Exhibit "I") as shown
by his signature (Exhibit "I-A") thereof. He claimed further that he was not present on
December 5, 1977 the date of the auction sale because he went to Iligan City. As
long as there was substantial compliance with the requirements of the notice, the
validity of the auction sale can not be assailed ... .

We quote the following testimony of the petitioner on cross-examination, to wit:

Q. My question to you is this letter marked as Exhibit I for Ho

Fernandez notified you that the property in question shall be sold at
public auction to the highest bidder on December 5, 1977 pursuant to
Sec. 74 of PD 464. Will you tell the Court whether you received the
original of this letter?

A. I just signed it because I was not able to read the same. It was just
sent by mail carrier.
 Q. So you admit that you received the original of Exhibit I and you
signed upon receipt thereof but you did not read the contents of it?

A. Yes, sir, as I was in a hurry.

Q. After you received that original where did you place it?

A. I placed it in the usual place where I place my mails.

Petitioner, therefore, was notified about the auction sale. It was negligence on his part when he
ignored such notice. By his very own admission that he received the notice, his now coming to court
assailing the validity of the auction sale loses its force.

Petitioner's third assignment of grave error likewise lacks merit. As a general rule, gross inadequacy
of price is not material (De Leon v. Salvador, 36 SCRA 567; Ponce de Leon v. Rehabilitation
Finance Corporation, 36 SCRA 289; Tolentino v. Agcaoili, 91 Phil. 917 Unrep.). See also Barrozo
Vda. de Gordon v. Court of Appeals (109 SCRA 388) we held that "alleged gross inadequacy of
price is not material when the law gives the owner the right to redeem as when a sale is made at
public auction, upon the theory that the lesser the price, the easier it is for the owner to effect
redemption." In Velasquez v. Coronel (5 SCRA 985), this Court held:

... [R]espondent treasurer now claims that the prices for which the lands were sold
are unconscionable considering the wide divergence between their assessed values
and the amounts for which they had been actually sold. However, while in ordinary
sales for reasons of equity a transaction may be invalidated on the ground of
inadequacy of price, or when such inadequacy shocks one's conscience as to justify
the courts to interfere, such does not follow when the law gives to the owner the right
to redeem, as when a sale is made at public auction, upon the theory that the lesser
the price the easier it is for the owner to effect the redemption. And so it was aptly
said: "When there is the right to redeem, inadequacy of price should not be material,
because the judgment debtor may reacquire the property or also sell his right to
redeem and thus recover the loss he claims to have suffered by reason of the price
obtained at the auction sale."

The reason behind the above rulings is well enunciated in the case of Hilton et. ux. v. De Long, et
al. (188 Wash. 162, 61 P. 2d, 1290):

If mere inadequacy of price is held to be a valid objection to a sale for taxes, the
collection of taxes in this manner would be greatly embarrassed, if not rendered
altogether impracticable. In Black on Tax Titles (2nd Ed.) 238, the correct rule is
stated as follows: "where land is sold for taxes, the inadequacy of the price given is
not a valid objection to the sale." This rule arises from necessity, for, if a fair price for
the land were essential to the sale, it would be useless to offer the property. Indeed,
it is notorious that the prices habitually paid by purchasers at tax sales are grossly
out of proportion to the value of the land. (Rothchild Bros. v. Rollinger, 32 Wash. 307,
73 P. 367, 369).

In this case now before us, we can aptly use the language of McGuire, et al. v. Bean, et al. (267 P.
555):
 Like most cases of this character there is here a certain element of hardship from
which we would be glad to relieve, but do so would unsettle long-established rules
and lead to uncertainty and difficulty in the collection of taxes which are the life blood
of the state. We are convinced that the present rules are just, and that they bring
hardship only to those who have invited it by their own neglect.

We are inclined to believe the petitioner's claim that the value of the lot has greatly appreciated in
value. Precisely because of the widening of Buendia Avenue in Pasay City, which necessitated the
expropriation of adjoining areas, real estate values have gone up in the area. However, the price
quoted by the petitioner for a 203 square meter lot appears quite exaggerated. At any rate, the
foregoing reasons which answer the petitioner's claims lead us to deny the petition.

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.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition for review is DISMISSED. The decision
of the respondent court is affirmed.

SO ORDERED.
G.R. No. L-18994             June 29, 1963

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner,

vs.
HON. LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of
Leyte,
and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of the late Walter Scott
Price, respondents.

Office of the Solicitor General and Atty. G. H. Mantolino for petitioner.

Benedicto and Martinez for respondents.

LABRADOR, J.:

This is a petition for certiorari and mandamus against the Judge of the Court of First Instance of

Leyte, Ron. Lorenzo C. Garlitos, presiding, seeking to annul certain orders of the court and for an
order in this Court directing the respondent court below to execute the judgment in favor of the
Government against the estate of Walter Scott Price for internal revenue taxes.

It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674, January
30, 1960, this Court declared as final and executory the order for the payment by the estate of the
estate and inheritance taxes, charges and penalties, amounting to P40,058.55, issued by the Court
of First Instance of Leyte in, special proceedings No. 14 entitled "In the matter of the Intestate Estate
of the Late Walter Scott Price." In order to enforce the claims against the estate the fiscal presented
a petition dated June 21, 1961, to the court below for the execution of the judgment. The petition
was, however, denied by the court which held that the execution is not justifiable as the Government
is indebted to the estate under administration in the amount of P262,200. The orders of the court
below dated August 20, 1960 and September 28, 1960, respectively, are as follows:

Atty. Benedicto submitted a copy of the contract between Mrs. Simeona K. Price,
Administratrix of the estate of her late husband Walter Scott Price and Director Zoilo Castrillo
of the Bureau of Lands dated September 19, 1956 and acknowledged before Notary Public
Salvador V. Esguerra, legal adviser in Malacañang to Executive Secretary De Leon dated
December 14, 1956, the note of His Excellency, Pres. Carlos P. Garcia, to Director Castrillo
dated August 2, 1958, directing the latter to pay to Mrs. Price the sum ofP368,140.00, and
an extract of page 765 of Republic Act No. 2700 appropriating the sum of P262.200.00 for
the payment to the Leyte Cadastral Survey, Inc., represented by the administratrix Simeona
K. Price, as directed in the above note of the President. Considering these facts, the Court
orders that the payment of inheritance taxes in the sum of P40,058.55 due the Collector of
Internal Revenue as ordered paid by this Court on July 5, 1960 in accordance with the order
of the Supreme Court promulgated July 30, 1960 in G.R. No. L-14674, be deducted from the
amount of P262,200.00 due and payable to the Administratrix Simeona K. Price, in this
estate, the balance to be paid by the Government to her without further delay. (Order of
August 20, 1960)

The Court has nothing further to add to its order dated August 20, 1960 and it orders that the
payment of the claim of the Collector of Internal Revenue be deferred until the Government
shall have paid its accounts to the administratrix herein amounting to P262,200.00. It may
 not be amiss to repeat that it is only fair for the Government, as a debtor, to its accounts to
its citizens-creditors before it can insist in the prompt payment of the latter's account to it,
specially taking into consideration that the amount due to the Government draws interests
while the credit due to the present state does not accrue any interest. (Order of September
28, 1960)

The petition to set aside the above orders of the court below and for the execution of the claim of the
Government against the estate must be denied for lack of merit. The ordinary procedure by which to
settle claims of indebtedness against the estate of a deceased person, as an inheritance tax, is for
the claimant to present a claim before the probate court so that said court may order the
administrator to pay the amount thereof. To such effect is the decision of this Court in Aldamiz vs.
Judge of the Court of First Instance of Mindoro, G.R. No. L-2360, Dec. 29, 1949, thus:

. . . a writ of execution is not the proper procedure allowed by the Rules of Court for the
payment of debts and expenses of administration. The proper procedure is for the court to
order the sale of personal estate or the sale or mortgage of real property of the deceased
and all debts or expenses of administrator and with the written notice to all the heirs legatees
and devisees residing in the Philippines, according to Rule 89, section 3, and Rule 90,
section 2. And when sale or mortgage of real estate is to be made, the regulations contained
in Rule 90, section 7, should be complied with. 1äwphï1.ñët

Execution may issue only where the devisees, legatees or heirs have entered into
possession of their respective portions in the estate prior to settlement and payment of the
debts and expenses of administration and it is later ascertained that there are such debts
and expenses to be paid, in which case "the court having jurisdiction of the estate may, by
order for that purpose, after hearing, settle the amount of their several liabilities, and order
how much and in what manner each person shall contribute, and may issue execution if
circumstances require" (Rule 89, section 6; see also Rule 74, Section 4; Emphasis supplied.)
And this is not the instant case.

The legal basis for such a procedure is the fact that in the testate or intestate proceedings to settle
the estate of a deceased person, the properties belonging to the estate are under the jurisdiction of
the court and such jurisdiction continues until said properties have been distributed among the heirs
entitled thereto. During the pendency of the proceedings all the estate is in custodia legis and the
proper procedure is not to allow the sheriff, in case of the court judgment, to seize the properties but
to ask the court for an order to require the administrator to pay the amount due from the estate and
required to be paid.

Another ground for denying the petition of the provincial fiscal is the fact that the court having
jurisdiction of the estate had found that the claim of the estate against the Government has been
recognized and an amount of P262,200 has already been appropriated for the purpose by a
corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the
Government for inheritance taxes and the claim of the intestate for services rendered have already
become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place
by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code,
and both debts are extinguished to the concurrent amount, thus:

ART. 1200. When all the requisites mentioned in article 1279 are present, compensation
takes effect by operation of law, and extinguished both debts to the concurrent amount,
eventhough the creditors and debtors are not aware of the compensation.
It is clear, therefore, that the petitioner has no clear right to execute the judgment for taxes against
the estate of the deceased Walter Scott Price. Furthermore, the petition
for certiorari and mandamus is not the proper remedy for the petitioner. Appeal is the remedy.

The petition is, therefore, dismissed, without costs.

 June 18, 1987

G.R. No. L-75697

VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION,
CITY MAYOR and CITY TREASURER OF MANILA, respondents.

Nelson Y. Ng for petitioner.

The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.:

This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on
behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential
Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The
Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days
after completion of its publication in the Official Gazette.

On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential
Decree No. 1994 amended the National Internal Revenue Code providing, inter alia:

SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette,
ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject to sales tax.

On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers,
Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers
Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to
intervene in the case, over petitioner's opposition, upon the allegations that intervention was
necessary for the complete protection of their rights and that their "survival and very existence is
threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to
file their Comment in Intervention.

The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:

1. WHEREAS, the proliferation and unregulated circulation of videograms including, among

others, videotapes, discs, cassettes or any technical improvement or variation thereof, have
greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp
decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the
 collection of sales, contractor's specific, amusement and other taxes, thereby resulting in
substantial losses estimated at P450 Million annually in government revenues;

2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum
from rentals, sales and disposition of videograms, and such earnings have not been
subjected to tax, thereby depriving the Government of approximately P180 Million in taxes
each year;

3. WHEREAS, the unregulated activities of videogram establishments have also affected the
viability of the movie industry, particularly the more than 1,200 movie houses and theaters
throughout the country, and occasioned industry-wide displacement and unemployment due
to the shutdown of numerous moviehouses and theaters;

4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the

Government to create an environment conducive to growth and development of all business
industries, including the movie industry which has an accumulated investment of about P3
Billion;

5. WHEREAS, proper taxation of the activities of videogram establishments will not only
alleviate the dire financial condition of the movie industry upon which more than 75,000
families and 500,000 workers depend for their livelihood, but also provide an additional
source of revenue for the Government, and at the same time rationalize the heretofore
uncontrolled distribution of videograms;

6. WHEREAS, the rampant and unregulated showing of obscene videogram features

constitutes a clear and present danger to the moral and spiritual well-being of the youth, and
impairs the mandate of the Constitution for the State to support the rearing of the youth for
civic efficiency and the development of moral character and promote their physical,
intellectual, and social well-being;

7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb
these blatant malpractices which have flaunted our censorship and copyright laws;

8. WHEREAS, in the face of these grave emergencies corroding the moral values of the
people and betraying the national economic recovery program, bold emergency measures
must be adopted with dispatch; ... (Numbering of paragraphs supplied).

Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:

1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local
government is a RIDER and the same is not germane to the subject matter thereof;

2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in
violation of the due process clause of the Constitution;

3. There is no factual nor legal basis for the exercise by the President of the vast powers
conferred upon him by Amendment No. 6;

4. There is undue delegation of power and authority;

5. The Decree is an ex-post facto law; and

 6. There is over regulation of the video industry as if it were a nuisance, which it is not.

We shall consider the foregoing objections in seriatim.

1. The Constitutional requirement that "every bill shall embrace only one subject which shall be
expressed in the title thereof"   is sufficiently complied with if the title be comprehensive enough to
1

include the general purpose which a statute seeks to achieve. It is not necessary that the title
express each and every end that the statute wishes to accomplish. The requirement is satisfied if all
the parts of the statute are related, and are germane to the subject matter expressed in the title, or
as long as they are not inconsistent with or foreign to the general subject and title.   An act having a
2

single general subject, indicated in the title, may contain any number of provisions, no matter how
diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and
may be considered in furtherance of such subject by providing for the method and means of carrying
out the general object."   The rule also is that the constitutional requirement as to the title of a bill
3

should not be so narrowly construed as to cripple or impede the power of legislation.   It should be
4

given practical rather than technical construction.  5

Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a
rider is without merit. That section reads, inter alia:

Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any

provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of the
purchase price or rental rate, as the case may be, for every sale, lease or disposition of a
videogram containing a reproduction of any motion picture or audiovisual program. Fifty
percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other
fifty percent (50%) shall acrrue to the municipality where the tax is collected; PROVIDED,
That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the
Metropolitan Manila Commission.

x x x           x x x          x x x

The foregoing provision is allied and germane to, and is reasonably necessary for the
accomplishment of, the general object of the DECREE, which is the regulation of the video industry
through the Videogram Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool for regulation   it is simply one
6

of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose
of the DECREE to include taxation of the video industry in order to regulate and rationalize the
heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those
preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE,
which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the
purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to
express all those objectives in the title or that the latter be an index to the body of the DECREE.  7

2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not
cease to be valid merely because it regulates, discourages, or even definitely deters the activities
taxed.   The power to impose taxes is one so unlimited in force and so searching in extent, that the
8

courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest
in the discretion of the authority which exercises it.   In imposing a tax, the legislature acts upon its
9

constituents. This is, in general, a sufficient security against erroneous and oppressive taxation.  10
The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by
the realization that earnings of videogram establishments of around P600 million per annum have
not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is
an end-user tax, imposed on retailers for every videogram they make available for public viewing. It
is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-
owners pay to the government, but which is passed on to the entire cost of the admission ticket, thus
shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all
videogram operators.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes. And while it was also
an objective of the DECREE to protect the movie industry, the tax remains a valid imposition.

The public purpose of a tax may legally exist even if the motive which impelled the legislature
to impose the tax was to favor one industry over another.  11

It is inherent in the power to tax that a state be free to select the subjects of taxation, and it
has been repeatedly held that "inequities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional limitation".   Taxation has been
12

made the implement of the state's police power. 13

At bottom, the rate of tax is a matter better addressed to the taxing legislature.

3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by
the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in
the judgment of the President ... , there exists a grave emergency or a threat or imminence thereof,
or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to
act adequately on any matter for any reason that in his judgment requires immediate action, he may,
in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which
shall form part of the law of the land."

In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause
sufficiently summarizes the justification in that grave emergencies corroding the moral values of the
people and betraying the national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then
President, considering that the issue of the validity of the exercise of legislative power under the said
Amendment still pends resolution in several other cases, we reserve resolution of the question
raised at the proper time.

4. Neither can it be successfully argued that the DECREE contains an undue delegation of
legislative power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the
direct assistance of other agencies and units of the government and deputize, for a fixed and limited
period, the heads or personnel of such agencies and units to perform enforcement functions for the
Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion
as to its execution, enforcement, and implementation. "The true distinction is between the delegation
of power to make the law, which necessarily involves a discretion as to what it shall be, and
conferring authority or discretion as to its execution to be exercised under and in pursuance of the
law. The first cannot be done; to the latter, no valid objection can be made."   Besides, in the very
14

language of the decree, the authority of the BOARD to solicit such assistance is for a "fixed and
limited period" with the deputized agencies concerned being "subject to the direction and control of
the BOARD." That the grant of such authority might be the source of graft and corruption would not
stigmatize the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will
not be without adequate remedy in law.

5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other
categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or
different testimony than the law required at the time of the commission of the offense." It is
petitioner's position that Section 15 of the DECREE in providing that:

All videogram establishments in the Philippines are hereby given a period of forty-five (45)
days after the effectivity of this Decree within which to register with and secure a permit from
the BOARD to engage in the videogram business and to register with the BOARD all their
inventories of videograms, including videotapes, discs, cassettes or other technical
improvements or variations thereof, before they could be sold, leased, or otherwise disposed
of. Thereafter any videogram found in the possession of any person engaged in the
videogram business without the required proof of registration by the BOARD, shall be prima
facie evidence of violation of the Decree, whether the possession of such videogram be for
private showing and/or public exhibition.

raises immediately a prima facie evidence of violation of the DECREE when the required proof of
registration of any videogram cannot be presented and thus partakes of the nature of an ex post
facto law.

The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et
al. 
15

... it is now well settled that "there is no constitutional objection to the passage of a law
providing that the presumption of innocence may be overcome by a contrary presumption
founded upon the experience of human conduct, and enacting what evidence shall be
sufficient to overcome such presumption of innocence" (People vs. Mingoa 92 Phil. 856
[1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL
LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been
proved that they shall be prima facie evidence of the existence of the guilt of the accused
and shift the burden of proof provided there be a rational connection between the facts
proved and the ultimate facts presumed so that the inference of the one from proof of the
others is not unreasonable and arbitrary because of lack of connection between the two in
common experience".  16

Applied to the challenged provision, there is no question that there is a rational connection between
the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the
DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches
only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in
character.

6. We do not share petitioner's fears that the video industry is being over-regulated and being eased
out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation
was apparent. While the underlying objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought
about by the availability of unclassified and unreviewed video tapes containing pornographic films
and films with brutally violent sequences; and losses in government revenues due to the drop in
theatrical attendance, not to mention the fact that the activities of video establishments are virtually
untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in
business.  17

The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video
industry. On the contrary, video establishments are seen to have proliferated in many places
notwithstanding the 30% tax imposed.

In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of
the DECREE. These considerations, however, are primarily and exclusively a matter of legislative
concern.

Only congressional power or competence, not the wisdom of the action taken, may be the
basis for declaring a statute invalid. This is as it ought to be. The principle of separation of
powers has in the main wisely allocated the respective authority of each department and
confined its jurisdiction to such a sphere. There would then be intrusion not allowable under
the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would
substitute its own. If there be adherence to the rule of law, as there ought to be, the last
offender should be courts of justice, to which rightly litigants submit their controversy
precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack
on the validity of the challenged provision likewise insofar as there may be objections, even if
valid and cogent on its wisdom cannot be sustained.  18

In fine, petitioner has not overcome the presumption of validity which attaches to a challenged
statute. We find no clear violation of the Constitution which would justify us in pronouncing
Presidential Decree No. 1987 as unconstitutional and void.

WHEREFORE, the instant Petition is hereby dismissed.

No costs.

SO ORDERED.
G.R. No. L-24756            October 31, 1968

CITY OF BAGUIO, plaintiff-appellee,
vs.
FORTUNATO DE LEON, defendant-appellant.

The City Attorney for plaintiff-appellee.

Fortunato de Leon for and in his own behalf as defendant-appellant.

FERNANDO, J.:

In this appeal, a lower court decision upholding the validity of an ordinance1 of the City of Baguio
imposing a license fee on any person, firm, entity or corporation doing business in the City of Baguio
is assailed by defendant-appellant Fortunato de Leon. He was held liable as a real estate dealer with
a property therein worth more than P10,000, but not in excess of P50,000, and therefore obligated to
pay under such ordinance the P50 annual fee. That is the principal question. In addition, there has
been a firm and unyielding insistence by defendant-appellant of the lack of jurisdiction of the City
Court of Baguio, where the suit originated, a complaint having been filed against him by the City
Attorney of Baguio for his failure to pay the amount of P300 as license fee covering the period from
the first quarter of 1958 to the fourth quarter of 1962, allegedly, inspite of repeated demands. Nor
was defendant-appellant agreeable to such a suit being instituted by the City Treasurer without the
consent of the Mayor, which for him was indispensable. The lower court was of a different mind.

In its decision of December 19, 1964, it declared the above ordinance as amended, valid and
subsisting, and held defendant-appellant liable for the fees therein prescribed as a real estate
dealer. Hence, this appeal. Assume the validity of such ordinance, and there would be no question
about the liability of defendant-appellant for the above license fee, it being shown in the partial
stipulation of facts, that he was "engaged in the rental of his property in Baguio" deriving income
therefrom during the period covered by the first quarter of 1958 to the fourth quarter of 1962.

The source of authority for the challenged ordinance is supplied by Republic Act No. 329, amending
the city charter of Baguio2 empowering it to fix the license fee and regulate "businesses, trades and
occupations as may be established or practiced in the City."

Unless it can be shown then that such a grant of authority is not broad enough to justify the
enactment of the ordinance now assailed, the decision appealed from must be affirmed. The task
confronting defendant-appellant, therefore, was far from easy. Why he failed is understandable,
considering that even a cursory reading of the above amendment readily discloses that the
enactment of the ordinance in question finds support in the power thus conferred.

Nor is the question raised by him as to the validity thereof novel in character. In Medina v. City of
Baguio,3 the effect of the amendatory section insofar as it would expand the previous power vested
by the city charter was clarified in these terms: "Appellants apparently have in mind section 2553,
paragraph (c) of the Revised Administrative Code, which empowers the City of Baguio merely to
impose a license fee for the purpose of rating the business that may be established in the city. The
power as thus conferred is indeed limited, as it does not include the power to levy a tax. But on July
15, 1948, Republic Act No. 329 was enacted amending the charter of said city and adding to its
power to license the power to tax and to regulate. And it is precisely having in view this amendment
that Ordinance No. 99 was approved in order to increase the revenues of the city. In our opinion, the
amendment above adverted to empowers the city council not only to impose a license fee but also to
levy a tax for purposes of revenue, more so when in amending section 2553 (b), the phrase 'as
provided by law' has been removed by section 2 of Republic Act No. 329. The city council of Baguio,
therefore, has now the power to tax, to license and to regulate provided that the subjects affected be
one of those included in the charter. In this sense, the ordinance under consideration cannot be
considered ultra vires whether its purpose be to levy a tax or impose a license fee. The terminology
used is of no consequence."

It would be an undue and unwarranted emasculation of the above power thus granted if defendant-
appellant were to be sustained in his contention that no such statutory authority for the enactment of
the challenged ordinance could be discerned from the language used in the amendatory act. That is
about all that needs to be said in upholding the lower court, considering that the City of Baguio was
not devoid of authority in enacting this particular ordinance. As mentioned at the outset, however,
defendant-appellant likewise alleged procedural missteps and asserted that the challenged
ordinance suffered from certain constitutional infirmities. To such points raised by him, we shall now
turn.

1. Defendant-appellant makes much of the alleged lack of jurisdiction of the City Court of Baguio in
the suit for the collection of the real estate dealer's fee from him in the amount of P300. He
contended before the lower court, and it is his contention now, that while the amount of P300 sought
was within the jurisdiction of the City Court of Baguio where this action originated, since the principal
issue was the legality and constitutionality of the challenged ordinance, it is not such City Court but
the Court of First Instance that has original jurisdiction.

There is here a misapprehension of the Judiciary Act. The City Court has jurisdiction. Only recently,
on September 7, 1968 to be exact, we rejected a contention similar in character in Nemenzo v.
Sabillano.4 The plaintiff in that case filed a claim for the payment of his salary before the Justice of
the Peace Court of Pagadian, Zamboanga del Sur. The question of jurisdiction was raised; the
defendant Mayor asserted that what was in issue was the enforcement of the decision of the
Commission of Civil Service; the Justice of the Peace Court was thus without jurisdiction to try the
case. The above plea was curtly dismissed by Us, as what was involved was "an ordinary money
claim" and therefore "within the original jurisdiction of the Justice of the Peace Court where it was
filed, considering the amount involved." Such is likewise the situation here.

Moreover, in City of Manila v. Bugsuk Lumber Co.,5 a suit to collect from a defendant this license fee
corresponding to the years 1951 and 1952 was filed with the Municipal Court of Manila, in view of
the amount involved. The thought that the municipal court lacked jurisdiction apparently was not
even in the minds of the parties and did not receive any consideration by this Court.

Evidently, the fear is entertained by defendant-appellant that whenever a constitutional question is

raised, it is the Court of First Instance that should have original jurisdiction on the matter. It does not
admit of doubt, however, that what confers jurisdiction is the amount set forth in the complaint. Here,
the sum sought to be recovered was clearly within the jurisdiction of the City Court of Baguio.

Nor could it be plausibly maintained that the validity of such ordinance being open to question as a
defense against its enforcement from one adversely affected, the matter should be elevated to the
Court of First Instance. For the City Court could rely on the presumption of the validity of such
ordinance,6 and the mere fact, however, that in the answer to such a complaint a constitutional
question was raised did not suffice to oust the City Court of its jurisdiction. The suit remains one for
collection, the lack of validity being only a defense to such an attempt at recovery. Since the City
Court is possessed of judicial power and it is likewise axiomatic that the judicial power embraces the
ascertainment of facts and the application of the law, the Constitution as the highest law superseding
any statute or ordinance in conflict therewith, it cannot be said that a City Court is bereft of
competence to proceed on the matter. In the exercise of such delicate power, however, the
admonition of Cooley on inferior tribunals is well worth remembering. Thus: "It must be evident to
any one that the power to declare a legislative enactment void is one which the judge, conscious of
the fallibility of the human judgment, will shrink from exercising in any case where he can
conscientiously and with due regard to duty and official oath decline the responsibility."7 While it
remains undoubted that such a power to pass on the validity of an ordinance alleged to infringe
certain constitutional rights of a litigant exists, still it should be exercised with due care and
circumspection, considering not only the presumption of validity but also the relatively modest rank
of a city court in the judicial hierarchy.

2. To repeat the challenged ordinance cannot be considered ultra vires as there is more than ample
statutory authority for the enactment thereof. Nonetheless, its validity on constitutional grounds is
challenged because of the allegation that it imposed double taxation, which is repugnant to the due
process clause, and that it violated the requirement of uniformity. We do not view the matter thus.

As to why double taxation is not violative of due process, Justice Holmes made clear in this
language: "The objection to the taxation as double may be laid down on one side. ... The 14th
Amendment [the due process clause] no more forbids double taxation than it does doubling the
amount of a tax, short of confiscation or proceedings unconstitutional on other grounds."8With that
decision rendered at a time when American sovereignty in the Philippines was recognized, it
possesses more than just a persuasive effect. To some, it delivered the coup de grace to the bogey
of double taxation as a constitutional bar to the exercise of the taxing power. It would seem though
that in the United States, as with us, its ghost as noted by an eminent critic, still stalks the juridical
state. In a 1947 decision, however,9 we quoted with approval this excerpt from a leading American
decision:10 "Where, as here, Congress has clearly expressed its intention, the statute must be
sustained even though double taxation results."

At any rate, it has been expressly affirmed by us that such an "argument against double taxation
may not be invoked where one tax is imposed by the state and the other is imposed by the city ..., it
being widely recognized that there is nothing inherently obnoxious in the requirement that license
fees or taxes be exacted with respect to the same occupation, calling or activity by both the state
and the political subdivisions thereof."11

The above would clearly indicate how lacking in merit is this argument based on double taxation.

Now, as to the claim that there was a violation of the rule of uniformity established by the
constitution. According to the challenged ordinance, a real estate dealer who leases property worth
P50,000 or above must pay an annual fee of P100. If the property is worth P10,000 but not over
P50,000, then he pays P50 and P24 if the value is less than P10,000. On its face, therefore, the
above ordinance cannot be assailed as violative of the constitutional requirement of uniformity.
In Philippine Trust Company v. Yatco,12 Justice Laurel, speaking for the Court, stated: "A tax is
considered uniform when it operates with the same force and effect in every place where the subject
may be found."

There was no occasion in that case to consider the possible effect on such a constitutional
requirement where there is a classification. The opportunity came in Eastern Theatrical Co. v.
Alfonso.13 Thus: "Equality and uniformity in taxation means that all taxable articles or kinds of
property of the same class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation; ..." About two years later,
Justice Tuason, speaking for this Court in Manila Race Horses Trainers Assn. v. De la
Fuente14 incorporated the above excerpt in his opinion and continued: "Taking everything into
account, the differentiation against which the plaintiffs complain conforms to the practical dictates of
justice and equity and is not discriminatory within the meaning of the Constitution."

To satisfy this requirement then, all that is needed as held in another case decided two years
later, 15 is that the statute or ordinance in question "applies equally to all persons, firms and
corporations placed in similar situation." This Court is on record as accepting the view in a leading
American case16 that "inequalities which result from a singling out of one particular class for taxation
or exemption infringe no constitutional limitation."17

It is thus apparent from the above that in much the same way that the plea of double taxation is
unavailing, the allegation that there was a violation of the principle of uniformity is inherently lacking
in persuasiveness. There is no need to pass upon the other allegations to assail the validity of the
above ordinance, it being maintained that the license fees therein imposed "is excessive,
unreasonable and oppressive" and that there is a failure to observe the mandate of equal protection.
A reading of the ordinance will readily disclose their inherent lack of plausibility.

3. That would dispose of all the errors assigned, except the last two, which would predicate a
grievance on the complaint having been started by the City Treasurer rather than the City Mayor of
Baguio. These alleged errors, as was the case with the others assigned, lack merit.

In much the same way that an act of a department head of the national government, performed
within the limits of his authority, is presumptively the act of the President unless reprobated or
disapproved,18 similarly the act of the City Treasurer, whose position is roughly analogous, may be
assumed to carry the seal of approval of the City Mayor unless repudiated or set aside. This should
be the case considering that such city official is called upon to see to it that revenues due the City
are collected. When administrative steps are futile and unavailing, given the stubbornness and
obduracy of a taxpayer, convinced in good faith that no tax was due, judicial remedy may be
resorted to by him. It would be a reflection on the state of the law if such fidelity to duty would be met
by condemnation rather than commendation.

So, much for the analytical approach. The conclusion thus reached has a reinforcement that comes
to it from the functional and pragmatic test. If a city treasurer has to await the nod from the city
mayor before a municipal ordinance is enforced, then opportunity exists for favoritism and undue
discrimination to come into play. Whatever valid reason may exist as to why one taxpayer is to be
accorded a treatment denied another, the suspicion is unavoidable that such a manifestation of
official favor could have been induced by unnamed but not unknown consideration. It would not be
going too far to assert that even defendant-appellant would find no satisfaction in such a sad state of
affairs. The more desirable legal doctrine therefore, on the assumption that a choice exists, is one
that would do away with such temptation on the part of both taxpayer and public official alike.

WHEREFORE, the lower court decision of December 19, 1964, is hereby affirmed. Costs against
defendant-appellant.
G.R. No. L-41631 December 17, 1976

HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL, as

Secretary to the Mayor; THE MARKET ADMINISTRATOR; and THE MUNICIPAL BOARD OF
MANILA, petitioners,
vs.
HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge of the Court of First Instance of
Manila, Branch XXX and the FEDERATION OF MANILA MARKET VENDORS, INC., respondents.

Santiago F. Alidio and Restituto R. Villanueva for petitioners.

Antonio H. Abad, Jr. for private respondent.

Federico A. Blay for petitioner for intervention.

MARTIN, J.:

The chief question to be decided in this case is what law shall govern the publication of a tax
ordinance enacted by the Municipal Board of Manila, the Revised City Charter (R.A. 409, as
amended), which requires publication of the ordinance before its enactment and after its approval, or
the Local Tax Code (P.D. No. 231), which only demands publication after approval.

On June 12, 1974, the Municipal Board of Manila enacted Ordinance No. 7522, "AN ORDINANCE
REGULATING THE OPERATION OF PUBLIC MARKETS AND PRESCRIBING FEES FOR THE
RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR
OTHER PURPOSES." The petitioner City Mayor, Ramon D. Bagatsing, approved the ordinance on
June 15, 1974.

On February 17, 1975, respondent Federation of Manila Market Vendors, Inc. commenced Civil
Case 96787 before the Court of First Instance of Manila presided over by respondent Judge,
seeking the declaration of nullity of Ordinance No. 7522 for the reason that (a) the publication
requirement under the Revised Charter of the City of Manila has not been complied with; (b) the
Market Committee was not given any participation in the enactment of the ordinance, as envisioned
by Republic Act 6039; (c) Section 3 (e) of the Anti-Graft and Corrupt Practices Act has been violated;
and (d) the ordinance would violate Presidential Decree No. 7 of September 30, 1972 prescribing the
collection of fees and charges on livestock and animal products.
Resolving the accompanying prayer for the issuance of a writ of preliminary injunction, respondent
Judge issued an order on March 11, 1975, denying the plea for failure of the respondent Federation
of Manila Market Vendors, Inc. to exhaust the administrative remedies outlined in the Local Tax
Code.

After due hearing on the merits, respondent Judge rendered its decision on August 29, 1975,
declaring the nullity of Ordinance No. 7522 of the City of Manila on the primary ground of non-
compliance with the requirement of publication under the Revised City Charter. Respondent Judge
ruled:

There is, therefore, no question that the ordinance in question was not published at
all in two daily newspapers of general circulation in the City of Manila before its
enactment. Neither was it published in the same manner after approval, although it
was posted in the legislative hall and in all city public markets and city public
libraries. There being no compliance with the mandatory requirement of publication
before and after approval, the ordinance in question is invalid and, therefore, null and
void.

Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-
publication is required by the Local Tax Code; and (b) private respondent failed to exhaust all
administrative remedies before instituting an action in court.

On September 26, 1975, respondent Judge denied the motion.

Forthwith, petitioners brought the matter to Us through the present petition for review on certiorari.

We find the petition impressed with merits.

1. The nexus of the present controversy is the apparent conflict between the Revised Charter of the
City of Manila and the Local Tax Code on the manner of publishing a tax ordinance enacted by the
Municipal Board of Manila. For, while Section 17 of the Revised Charter provides:

Each proposed ordinance shall be published in two daily newspapers of general

circulation in the city, and shall not be discussed or enacted by the Board until after
the third day following such publication. * * * Each approved ordinance * * * shall be
published in two daily newspapers of general circulation in the city, within ten days
after its approval; and shall take effect and be in force on and after the twentieth day
following its publication, if no date is fixed in the ordinance.

Section 43 of the Local Tax Code directs:

Within ten days after their approval, certified true copies of all provincial, city,
municipal and barrio ordinances levying or imposing taxes, fees or other
charges shall be published for three consecutive days in a newspaper or publication
widely circulated within the jurisdiction of the local government, or posted in the local
legislative hall or premises and in two other conspicuous places within the territorial
jurisdiction of the local government. In either case, copies of all provincial, city,
municipal and barrio ordinances shall be furnished the treasurers of the respective
component and mother units of a local government for dissemination.
In other words, while the Revised Charter of the City of Manila requires publication before the
enactment of the ordinance and after the approval thereof in two daily newspapers of general
circulation in the city, the Local Tax Code only prescribes for publication after the approval of
"ordinances levying or imposing taxes, fees or other charges" either in a newspaper or publication
widely circulated within the jurisdiction of the local government or by posting the ordinance in the
local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction
of the local government. Petitioners' compliance with the Local Tax Code rather than with the
Revised Charter of the City spawned this litigation.

There is no question that the Revised Charter of the City of Manila is a special act since it relates
only to the City of Manila, whereas the Local Tax Code is a general law because it applies
universally to all local governments. Blackstone defines general law as a universal rule affecting the
entire community and special law as one relating to particular persons or things of a class.   And the
1

rule commonly said is that a prior special law is not ordinarily repealed by a subsequent general law.
The fact that one is special and the other general creates a presumption that the special is to be
considered as remaining an exception of the general, one as a general law of the land, the other as
the law of a particular case.   However, the rule readily yields to a situation where the special statute
2

refers to a subject in general, which the general statute treats in particular. The exactly is the
circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila
speaks of "ordinance" in general, i.e., irrespective of the nature and scope thereof, whereas, Section
43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges" in
particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is
doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of
"ordinances levying or imposing taxes, fees or other charges" in particular. There, the Local Tax
Code controls. Here, as always, a general provision must give way to a particular provision.   Special
3

provision governs.   This is especially true where the law containing the particular provision was
4

enacted later than the one containing the general provision. The City Charter of Manila was
promulgated on June 18, 1949 as against the Local Tax Code which was decreed on June 1, 1973.
The law-making power cannot be said to have intended the establishment of conflicting and hostile
systems upon the same subject, or to leave in force provisions of a prior law by which the new will of
the legislating power may be thwarted and overthrown. Such a result would render legislation a
useless and Idle ceremony, and subject the law to the reproach of uncertainty and unintelligibility.  5

The case of City of Manila v. Teotico   is opposite. In that case, Teotico sued the City of Manila for
6

damages arising from the injuries he suffered when he fell inside an uncovered and unlighted
catchbasin or manhole on P. Burgos Avenue. The City of Manila denied liability on the basis of the
City Charter (R.A. 409) exempting the City of Manila from any liability for damages or injury to
persons or property arising from the failure of the city officers to enforce the provisions of the charter
or any other law or ordinance, or from negligence of the City Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce the provisions of the charter or of any other law or
ordinance. Upon the other hand, Article 2189 of the Civil Code makes cities liable for damages for
the death of, or injury suffered by any persons by reason of the defective condition of roads, streets,
bridges, public buildings, and other public works under their control or supervision. On review, the
Court held the Civil Code controlling. It is true that, insofar as its territorial application is concerned,
the Revised City Charter is a special law and the subject matter of the two laws, the Revised City
Charter establishes a general rule of liability arising from negligence in general, regardless of the
object thereof, whereas the Civil Code constitutes a particular prescription for liability due to
defective streets in particular. In the same manner, the Revised Charter of the City prescribes a rule
for the publication of "ordinance" in general, while the Local Tax Code establishes a rule for the
publication of "ordinance levying or imposing taxes fees or other charges in particular.

In fact, there is no rule which prohibits the repeal even by implication of a special or specific act by a
general or broad one.   A charter provision may be impliedly modified or superseded by a later
7
statute, and where a statute is controlling, it must be read into the charter notwithstanding any
particular charter provision.   A subsequent general law similarly applicable to all cities prevails over
8

any conflicting charter provision, for the reason that a charter must not be inconsistent with the
general laws and public policy of the state.   A chartered city is not an independent sovereignty. The
9

state remains supreme in all matters not purely local. Otherwise stated, a charter must yield to the
constitution and general laws of the state, it is to have read into it that general law which governs the
municipal corporation and which the corporation cannot set aside but to which it must yield. When a
city adopts a charter, it in effect adopts as part of its charter general law of such character. 
10

2. The principle of exhaustion of administrative remedies is strongly asserted by petitioners as

having been violated by private respondent in bringing a direct suit in court. This is because Section
47 of the Local Tax Code provides that any question or issue raised against the legality of any tax
ordinance, or portion thereof, shall be referred for opinion to the city fiscal in the case of tax
ordinance of a city. The opinion of the city fiscal is appealable to the Secretary of Justice, whose
decision shall be final and executory unless contested before a competent court within thirty (30)
days. But, the petition below plainly shows that the controversy between the parties is deeply rooted
in a pure question of law: whether it is the Revised Charter of the City of Manila or the Local Tax
Code that should govern the publication of the tax ordinance. In other words, the dispute is sharply
focused on the applicability of the Revised City Charter or the Local Tax Code on the point at issue,
and not on the legality of the imposition of the tax. Exhaustion of administrative remedies before
resort to judicial bodies is not an absolute rule. It admits of exceptions. Where the question litigated
upon is purely a legal one, the rule does not apply.   The principle may also be disregarded when it
11

does not provide a plain, speedy and adequate remedy. It may and should be relaxed when its
application may cause great and irreparable damage.  12

3. It is maintained by private respondent that the subject ordinance is not a "tax ordinance," because
the imposition of rentals, permit fees, tolls and other fees is not strictly a taxing power but a revenue-
raising function, so that the procedure for publication under the Local Tax Code finds no application.
The pretense bears its own marks of fallacy. Precisely, the raising of revenues is the principal object
of taxation. Under Section 5, Article XI of the New Constitution, "Each local government unit shall
have the power to create its own sources of revenue and to levy taxes, subject to such provisions as
may be provided by law."   And one of those sources of revenue is what the Local Tax Code points
13

to in particular: "Local governments may collect fees or rentals for the occupancy or use of public
markets and premises * * *."   They can provide for and regulate market stands, stalls and privileges,
14

and, also, the sale, lease or occupancy thereof. They can license, or permit the use of, lease, sell or
otherwise dispose of stands, stalls or marketing privileges.  15

It is a feeble attempt to argue that the ordinance violates Presidential Decree No. 7, dated
September 30, 1972, insofar as it affects livestock and animal products, because the said decree
prescribes the collection of other fees and charges thereon "with the exception of ante-mortem and
post-mortem inspection fees, as well as the delivery, stockyard and slaughter fees as may be
authorized by the Secretary of Agriculture and Natural Resources."   Clearly, even the exception
16

clause of the decree itself permits the collection of the proper fees for livestock. And the Local Tax
Code (P.D. 231, July 1, 1973) authorizes in its Section 31: "Local governments may collect fees for
the slaughter of animals and the use of corrals * * * "

4. The non-participation of the Market Committee in the enactment of Ordinance No. 7522
supposedly in accordance with Republic Act No. 6039, an amendment to the City Charter of Manila,
providing that "the market committee shall formulate, recommend and adopt, subject to the
ratification of the municipal board, and approval of the mayor, policies and rules or regulation
repealing or maneding existing provisions of the market code" does not infect the ordinance with any
germ of invalidity.   The function of the committee is purely recommendatory as the underscored
17
phrase suggests, its recommendation is without binding effect on the Municipal Board and the City
Mayor. Its prior acquiescence of an intended or proposed city ordinance is not a condition sine qua
non before the Municipal Board could enact such ordinance. The native power of the Municipal
Board to legislate remains undisturbed even in the slightest degree. It can move in its own initiative
and the Market Committee cannot demur. At most, the Market Committee may serve as a legislative
aide of the Municipal Board in the enactment of city ordinances affecting the city markets or, in plain
words, in the gathering of the necessary data, studies and the collection of consensus for the
proposal of ordinances regarding city markets. Much less could it be said that Republic Act 6039
intended to delegate to the Market Committee the adoption of regulatory measures for the operation
and administration of the city markets. Potestas delegata non delegare potest.

5. Private respondent bewails that the market stall fees imposed in the disputed ordinance are
diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said
fees had been let by the City of Manila to the said corporation in a "Management and Operating
Contract." The assumption is of course saddled on erroneous premise. The fees collected do not go
direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation
but for the purpose of raising revenues for the city. That is the object it serves. The entrusting of the
collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is
public, it does not matter whether the agency through which the money is dispensed is public or
private. The right to tax depends upon the ultimate use, purpose and object for which the fund is
raised. It is not dependent on the nature or character of the person or corporation whose
intermediate agency is to be used in applying it. The people may be taxed for a public purpose,
although it be under the direction of an individual or private corporation. 
18

Nor can the ordinance be stricken down as violative of Section 3(e) of the Anti-Graft and Corrupt
Practices Act because the increased rates of market stall fees as levied by the ordinance will
necessarily inure to the unwarranted benefit and advantage of the corporation.   We are concerned
19

only with the issue whether the ordinance in question is intra vires. Once determined in the
affirmative, the measure may not be invalidated because of consequences that may arise from its
enforcement.  20

ACCORDINGLY, the decision of the court below is hereby reversed and set aside. Ordinance No.
7522 of the City of Manila, dated June 15, 1975, is hereby held to have been validly enacted. No.
costs.

SO ORDERED.
 [G.R. No. L-10405. December 29, 1960.]

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of

Rizal, petitioner and appellant, v. THE SECRETARY OF PUBLIC WORKS AND
COMMUNICATIONS, ET AL., respondents and appellees.

Asst. Fiscal Noli M. Cortes and Jose P. Santos for Appellant.

Asst. Solicitor General Jose G. Bautista and Solicitor A.A. Torres

for Appellee.

SYLLABUS

1. CONSTITUTIONAL LAW; LEGISLATIVE POWERS; APPROPRIATION OF PUBLIC

REVENUES ONLY FOR PUBLIC PURPOSES; WHAT DETERMINES VALIDITY OF A
PUBLIC EXPENDITURE. — "It is a general rule that the legislature is without power
to appropriate public revenues for anything but a public purpose. . . . It is the
essential character of the direct object of the expenditure which must determine its
validity as justifying a tax and not the magnitude of the interests to be affected nor
the degree to which the general advantage of the community, and thus the public
welfare, may be ultimately benefited by their promotion. Incidental advantage to
the public or to the state, which results from the promotion of private interests, and
the prosperity of private enterprises or business, does not justify their aid by the
use of public money." (23 R. L. C. pp. 398-450).

2. ID.; ID.; ID.; UNDERLYING REASON FOR THE RULE. — Generally, under the
express or implied provisions of the constitution, public funds may be used only for
a public purpose. The right of the legislature to appropriate public funds is
correlative with its right to tax, and, under constitutional provisions against taxation
except for public purposes and prohibiting the collection of a tax for one purpose
and the devotion thereof to another purpose, no appropriate of state funds can be
made for other than a public purpose. (81 C.J.S. p. 1147).

3. ID.; ID.; ID.; TEST OF CONSTITUTIONALITY. — The test of the constitutionality

of a statute requiring the use of public funds is whether the statute is designed to
promote the public interests, as opposed to the furtherance of the advantage of
individuals, although such advantage to individuals might incidentally serve the
public. (81 C.J.S. p. 1147).

4. ID.; ID.; ID.; ID.; POWERS OF CONGRESS AT THE TIME OF PASSAGE OF A

STATUTE SHOULD BE CONSIDERED. — The validity of a statute depends upon the
powers of Congress at the time of its passage or approval, not upon events
occurring, or acts performed, subsequently thereto, unless the latter consist of an
amendment of the organic law, removing, with retrospective operation, the
constitutional limitation infringed by said statute.

5. ID.; ID.; ID.; APPROPRIATION FOR A PRIVATE PURPOSE NULL AND VOID;
SUBSEQUENT DONATION TO GOVERNMENT NOT CURATIVE OF DEFECT. — Where
the land on which projected feeder roads are to be constructed belongs to a private
person, an appropriation made by Congress for that purpose is null and void, and a
donation to the Government, made over five (5) months after the approval and
effectivity of the Act for the purpose of giving a "semblance of legality" to the
appropriation, does not cure the basic defect. Consequently, a judicial nullification
of said donation need not precede the declaration of unconstitutionality of said
appropriation.

6. ID.; ID.; ID.; ID.; RIGHT OF TAXPAYERS TO CONTEST CONSTITUTIONALITY OF

A LEGISLATION. — The relation between the people of the Philippines and its
taxpayers, on the one hand, and the Republic of the Philippines, on the other, is not
identical to that obtaining between the people and taxpayers of the U.S. and its
Federal Government. It is closer, from a domestic viewpoint, to that existing
between the people and taxpayers of each state and the government thereof,
except that the authority of the Republic of the Philippines over the people of the
Philippines is more fully direct than that of the states of the Union, insofar as the
simple and unitary type of our national government is not subject to limitations
analogous to those imposed by the Federal Constitution upon the states of the
Union, and those imposed upon the Federal Government in the interest of the
states of the Union. For this reason, the rule recognizing the right of taxpayers to
assailed the constitutionality of a legislation appropriating local or state public funds
- which has been upheld by the Federal Supreme Court (Crampton v. Zabriskie, 101
U.S. 601) - has greater application in the Philippines than that adopted with respect
to acts of Congress of the United States appropriating federal funds.

7. CONTRACTS; DEFENSE OF ILLEGALITY; EXCEPTIONS TO ARTICLE 1421 OF THE

CIVIL CODE. — Article 1421 of the Civil Code is subject to exceptions. For instance,
the creditors of a party to an illegal contract may, under the conditions set forth in
Article 1177 of said Code, exercise the rights and actions of the latter, except only
those which are inherent in his person, including his right to the annulment of said
contract, even though such creditors are not affected by the same, except
indirectly, in the manner indicated in said legal provision.
 DECISION

CONCEPCION, J.:

Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First

Instance of Rizal, dismissing the above entitled case and dissolving the writ of
preliminary injunction therein issued, without costs.

On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal,

instituted this action for declaratory relief, with injunction upon the ground that
Republic Act No. 920, entitled An Act Appropriating Funds for Public Works",
approved on June 20, 1953, contained, in section 1-C (a) thereof, an item (43[h])
of P85,000.00, "for the construction, reconstruction, repair, extension and
improvement" of "Pasig feeder road terminals (Gen. Roxas — Gen. Araneta — Gen.
Lucban — Gen. Capinpin — Gen. Segundo — Gen. Delgado — Gen. Malvar — Gen.
Lim)" ; that, at the time of the passage and approval of said Act, the
aforementioned feeder roads were "nothing but projected and planned subdivision
roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . .
Pasig, Rizal" (according to the tracings attached to the petition as Annexes A and B,
near Shaw Boulevard, nor far away from the intersection between the latter and
Highway 54), which projected feeder roads "do not connect any government
property or any important premises to the main highway" ; that the
aforementioned Antonio Subdivision (as well as the lands on which said feeder
roads were to be constructed) were private respondent Jose C. Zulueta, who, at the
time of the passage and approval of said Act, was a member of the Senate of the
Philippines; that on May 29, 1953, respondent Zulueta, addressed a letter to the
Municipal Council of Pasig, Rizal, offering to donate said projected feeder roads to
the municipality of Pasig, Rizal; that, on June 13, 1953, the offer was accepted by
the council, subject to the condition "that the donor would submit a plan of the said
roads and agree to change the names of two of them" ; that no deed of donation in
favor of the municipality of Pasig was, however, executed; that on July 10, 1953,
respondent Zulueta wrote another letter to said council, calling attention to the
approval of Republic Act No. 920, and the sum of P85,000.00 appropriated therein
for the construction of the projected feeder reads in question; that the municipal
council of Pasig endorsed said letter of respondent Zulueta to the District Engineer
of Rizal, who, up to the present "has not made any endorsement thereon" ; that
inasmuch as the projected feeder roads in question were private property at the
time of the passage and approval of Republic Act No. 920, the appropriation of
P85,000.00 therein made, for the construction, reconstruction, repair, extension
and improvement of said projected feeder roads, was "illegal and, therefore, void
ab initio" ; that said appropriation of P85,000.00 was made by Congress because its
members were made to believe that the projected feeder roads in question were
"public roads and not private streets of a private subdivision" ; that, "in order to
give a semblance of legality, when there is absolutely none, to the aforementioned
appropriation", respondent Zulueta executed, on December 12, 1953, while he was
a member of the Senate of the Philippines, an alleged deed of donation — copy of
which is annexed to the petition — of the four (4) parcels of land constituting said
project feeder roads, in favor of the Government of the Republic of the Philippines;
that said alleged deed of donation was on the same date, accepted by the ten
Executive Secretary; that being subject to an onerous condition, said donation
partook of the nature of a contract; that, such, said donation violated the provision
of our fundamental law prohibition members of Congress from being directly or
indirectly financially interested in any contract with the Government, and, hence, is
unconstitutional, as well as null and void ab initio, for the construction of the
projected feeder roads in question with public funds would greatly enhance or
increase the value of the aforementioned subdivision of respondent Zulueta, "aside
from relieving him from the burden of constructing his subdivision streets or roads
at his own expense" ; that the construction of said projected feeder roads was then
being undertaken by the Bureau of Public Highways; and that, unless restrained by
the court, the respondents would continue to execute, comply with, follow and
implement the aforementioned illegal provision of law, "to the irreparable damage,
detriment and prejudice not only to the petitioner but to the Filipino nation."
cralaw virtua1aw library

Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be
declared null and void; that the alleged deed of donation of the feeder roads in
question be "declared unconstitutional and, therefore, illegal" ; that a writ of
injunction be issued enjoining the Secretary of Public Works and Communications,
the Director of the Bureau of Public Works, the Commissioner of the Bureau of
Public Highways and Jose C. Zulueta from ordering or allowing the continuance of
the above-mentioned feeder roads project, and from making and securing any new
and further releases on the aforementioned item of Republic Act No. 926 and the
disbursing officers of the Department of Public Works and Communications, the
Bureau of Public Works and the Bureau of Public Highways from making any further
payments out of said funds provided for in Republic Act No. 920; and that pending
final hearing on the merits, a writ of preliminary injunction be issued enjoining the
aforementioned parties respondent from making and securing any new and further
releases on the aforesaid item of Republic Act No. 920 and from making any further
payments out of said illegally appropriated funds.

Respondents moved to dismiss the petition upon the ground that petitioner had "no
legal capacity to sue", and that the petition did "not state a cause of action." In
support to this motion, respondent Zulueta alleged that the Provincial Fiscal of
Rizal, not its provincial governor, should represent the Province Administrative
Code; that said respondent "not aware of any law which makes illegal the
appropriation of public funds for the improvement of . . . private proper" ; and that,
the constitutional provision invoked by petitioner inapplicable to the donation in
question, the same being a pure act of liberality, not a contract. The other
respondents, in turn, maintained that petitioner could not assail the appropriation in
question because "there is no actual bona fide case . . . in which the validity of
Republic Act No. 920 is necessarily involved and petitioner "has not shown that he
has a personal and substantial interest" in said Act "and that its enforcement has
caused or will cause him a direct injury."
Acting upon said motion to dismiss, the lower court rendered the aforementioned
decision, dated October 29, 1953, holding that, since public interest is involved in
this case, the Provincial Governor of Rizal and the provincial fiscal thereof who
represents him therein, "have the requisite personalities" to question the
constitutionality of the disputed item of Republic Act No. 920; that "the legislature
is without power to appropriate public revenues for anything but a public purpose",
that the construction and improvement of the feeder roads in question, if such
roads were private property, would not be a public purpose; that, being subject to
the following condition: jgc:chanrobles.com.ph

"The within donation is hereby made upon the condition that the Government of the
Republic of the Philippines will use the parcels of land hereby donated for street
purposes only and for no other purposes whatsoever; it being expressly understood
that should the Government of the Republic of the Philippines violate the condition
hereby imposed upon it, the title to the land hereby donated shall, upon such
violation, ipso facto revert to the DONOR, JOSE C. ZULUETA." (Italics supplied.)

which is onerous, the donation in question is a contract; that said donation or

contract is "absolutely forbidden by the Constitution" and consequently illegal", for
Article 1409 of the Civil Code of the Philippines, declares in existent and void from
the very beginning contracts "whose cause, object or purpose is contrary to law,
morals . . . or public policy" ; that the legality of said donation may not be
contested, however, by petitioner herein, because his "interests are not directly
affected" thereby; and that, accordingly, the appropriation in question "should be
upheld" and the case dismissed.

At the outset, it should be noted that we are concerned with a decision granting the
aforementioned motions to dismiss, which as such, are deemed to have admitted
hypothetically the allegations of fact made in the petition of appellant herein.
According to said petition, respondent Zulueta is the owner of several parcels of
residential land, situated in Pasig Rizal, and known as the Antonio Subdivision,
certain portions of which had been reserved for the projected feeder roads
aforementioned, which, admittedly, were private property of said respondent when
Republic Act No. 920, appropriating P85,000.00 for the "construction,
reconstruction, repair, extension and improvement" of said roads, was passed by
Congress, as well as when it was approved by the President on June 20, 1953. The
petition further alleges that the construction of said feeder roads, to be undertaken
with the aforementioned appropriation of P85,000.00, would have the effect of
relieving respondent Zulueta of the burden of constructing its subdivision streets or
roads at his own expenses, 1 and would greatly enhance or increase the value of
the subdivision" of said Respondent. The lower court held that under these
circumstances, the appropriation in question was "clearly for a private, not a public
purpose."cralaw virtua1aw library

Respondents do not deny the accuracy of this conclusion, which is self-evident. 2

However, respondent Zulueta contended, in his motion to dismiss that: jgc:chanrobles.com.ph
"A law passed by Congress and approved by the President can never be illegal
because Congress is the source of all laws . . . . Aside from the fact that the movant
is not aware of any law which makes illegal the appropriation of public funds for the
improvement of what we, in the meantime, may assume as private property . . . ."
(Record on Appeal, pp. 33.)

The first proposition must be rejected most emphatically, it being inconsistent with
the nature of the Government established under the Constitution of the Philippines
and the system of checks and balances underlying our political structure. Moreover,
it is refuted by the decisions of this Court invalidating legislative enactments
deemed violative of the Constitution or organic laws. 3

As regards the legal feasibility of appropriating public funds for a private purpose
the principle according to Ruling Case Law, is this: jgc:chanrobles.com.ph

"It is a general rule that the legislature is without power to appropriate public
revenue for anything but a public purpose. . . . It is the essential character of the
direct object of the expenditure which must determine its validity as justifying a
tax, and not the magnitude of the interests to be affected nor the degree to which
the general advantage of the community, and thus the public welfare, may be
ultimately benefited by their promotion. Incidental advantage to the public or to the
state, which results from the promotion of private interests and the prosperity of
private enterprises or business, does not justify their aid by the use of public
money." (25 R.L.C. pp. 398-400; Italics supplied.)

The rule is set forth in Corpus Juris Secundum in the following language: jgc:chanrobles.com.ph

"In accordance with the rule that the taxing power must be exercised for public
purposes only, discussed supra sec. 14, money raised by taxation can be expanded
only for public purposes and not for the advantage of private individuals." (85
C.J.S. pp. 645-646; Italics supplied.)

Explaining the reason underlying said rule, Corpus Juris Secundum states: jgc:chanrobles.com.ph

"Generally, under the express or implied provisions of the constitution, public funds
may be used for a public purpose. The right of the legislature to appropriate funds
is correlative with its right to tax, under constitutional provisions against taxation
except for public purposes and prohibiting the collection of a tax for one purpose
and the devotion thereof to another purpose, no appropriation of state funds can be
made for other than a public purpose. . .

x          x           x

"The test of the constitutionality of a statute requiring the use of public funds is
whether the statute is designed to promote the public interests, as opposed to the
furtherance of the advantage of individuals, although each advantage to individuals
might incidentally serve the public. . . ." (81 C.J.S. p. 1147; Italics supplied.)
Needless to say, this Court is fully in accord with the foregoing views which, apart
from being patently sound, are a necessary corollary to our democratic system of
government, which, as such, exists primarily for the promotion of the general
welfare. Besides, reflecting as they do, the established jurisprudence in the United
States, after whose constitutional system ours has been patterned, said views and
jurisprudence are, likewise, part and parcel of our own constitutional law.

This notwithstanding, the lower court felt constrained to uphold the appropriation in
question, upon the ground that petitioner may not contest the legality of the
donation above referred to because the same does not affect him directly. This
conclusion is, presumably, based upon the following premises namely: (1) that, if
valid, said donation cured the constitutional infirmity of the aforementioned
appropriation; (2) that the latter may not be annulled without a previous
declaration of unconstitutionality of the said donation; and (3) that the rule set
forth in Article 1421 of the Civil Code is absolute, and admits of no exception. We
do not agree with these premises.

The validity of a statute depends upon the powers of Congress at the time of its
passage or approval, not upon events occupying, or acts performed, subsequently
thereto, unless the latter consist of an amendment of the organic law, removing,
with retrospective operation, the constitutional limitation infringed by said statute.
Referring to the P85,000.00 appropriation for the projected feeder roads in
question, the legality thereof depended upon whether said roads were public or
private property when the bill, which, later on, became Republic Act No. 920, was
passed by Congress, or when said bill was approved by the President and the
disbursement of said sum became effective, or on June 20, 1953 (see section 13 of
said Act). Inasmuch as the land on which the projected feeder roads were to be
constructed belonged then to respondent Zulueta, the result is that said
appropriation sought a private purpose, and, hence, was null and void. 4 The
donation to the Government, over five (5) months after the approval and effectivity
of said Act, made according to the petition, for the purpose of giving a "semblance
of legality", or legalizing, the appropriation in question, did not cure its
aforementioned basic defect. Consequently, a judicial nullification of said donation
need not precede the declaration of unconstitutionality of said appropriation.

Again, Article 1421 of our Civil Code, like many other statutory enactments, is
subject to exceptions. For instance, the creditors of a party to an illegal contract
may, under the conditions set forth in Article 1177 of said Code, exercise the rights
and actions of the latter, except only those which are inherent in his person,
including, therefore, his right to the annulment of said contract, even though such
creditors are not affected by the same, except indirectly, in the manner indicated in
said legal provision.

Again, it is well settled that the validity of a statute may be contested only by one
who will sustain a direct injury in consequence of its enforcement. Yet, there are
many decisions nullifying, at the instance of taxpayers, laws providing for the
disbursement of public funds, 5 upon the theory that "the expenditure of public
funds by an officer of the State for the purpose of administering an unconstitutional
act constitutes an misapplication of such funds," which may be enjoined at the
request of a taxpayer. 6 Although there are some decisions to the contrary, 7 the
prevailing view in the United States is stated in the American Jurisprudence as
follows:
jgc:chanrobles.com.ph

"In the determination of the degree of interest essential to give the requisite
standing to attack the constitutionality of a statute the general rule is that only
persons individually affected, but also taxpayers, have sufficient interest in
preventing the illegal expenditure of moneys raised by taxation and may therefore
question the constitutionality of statutes requiring expenditure of public moneys."
(11 Am. Jur. 761; Italics supplied.)

However, this view was not favored by the Supreme Court of the U.S. in
Frothingham v. Mellon (262 U.S. 447), insofar as federal laws are concerned, upon
the ground that the relationship of a taxpayer of the U.S. to its Federal Government
is different from that of a taxpayer of a municipal corporation to its government.
Indeed, under the composite system of government existing in the U.S., states of
the Union are integral part of the Federation from an international viewpoint, but,
each state enjoys internally a substantial measure of sovereignty, subject to the
limitations imposed by the Federal Constitution. In fact, the same was made by
representatives of each state of the Union, not of the people of the U.S., except
insofar as the former represented the people of the respective States, and the
people of each State has, independently of that of the others, ratified said
Constitution. In other words, the Federal Constitution and the Federal statutes have
become binding upon the people of the U.S. in consequence of an act of, and, in
this sense, through the respective states of the Union of which they are citizens.
The peculiar nature of the relation between said people and the Federal
Government of the U.S. is reflected in the election of its President, who is chosen
directly, not by the people of the U.S., but by electors chosen by each State, in
such manner as the legislature thereof may direct (Article II, section 2, of the
Federal Constitution).

The relation between the people of the Philippines and its taxpayers, on the other
hand, and the Republic of the Philippines, on the other, is not identical to that
obtaining between the people and taxpayers of the U.S. and its Federal
Government. It is closer, from a domestic viewpoint, to that existing between the
people and taxpayers of each state and the government thereof, except that the
authority of the Republic of the Philippines over the people of the Philippines is
more fully direct than that of the states of the Union, insofar as the simple and
unitary type of our national government is not subject to limitations analogous to
those imposed by the Federal Constitution upon the states of the Union, and those
imposed upon the Federal Government in the interest of the states of the Union.
For this reason, the rule recognizing the right of taxpayers to assail the
constitutionality of a legislation appropriating local or state public funds — which
has been upheld by the Federal Supreme Court (Crampton v. Zabriskie, 101 U.S.
601) — has greater application in the Philippines than that adopted with respect to
acts of Congress of the United States appropriating federal funds.
Indeed, in the Province of Tayabas v. Perez (56 Phil., 257), involving the
expropriation of a land by the Province of Tayabas, two (2) taxpayers thereof were
allowed to intervene for the purpose of contesting the price being paid to the owner
thereof, as unduly exorbitant. It is true that in Custodio v. President of the Senate
(42 Off. Gaz., 1243), a taxpayer and employee of the Government was not
permitted to question the constitutionality of an appropriation for backpay of
members of Congress. However, in Rodriguez v. Treasurer of the Philippines and
Barredo v. Commission on Election (84 Phil., 368; 45 Off. Gaz., 4411), we
entertained the action of taxpayers impugning the validity of certain appropriations
of public funds, and invalidated the same. Moreover, the reason that impelled this
Court to take such position in said two (2) cases — the importance of the issues
therein raised — is present in the case at bar. Again, like the petitioners in the
Rodriguez and Barredo cases, petitioner herein is not merely a taxpayer. The
province of Rizal, which he represents officially as it Provincial Governor, is our
most populated political subdivision, 7 and, the taxpayers therein bear a substantial
portion of the burden of taxation, in the Philippines.

Hence, it is our considered opinion that the circumstances surrounding this case
sufficiently justify petitioner’s action in contesting the appropriation and donation in
question; that this action should not have been dismissed by the lower court; and
that the writ of preliminary injunction should have been maintained.

Wherefore, the decision appealed from is hereby reversed, and the records are
remanded to the lower court for further proceedings not inconsistent with this
decision, with the costs of this instance against respondent Jose C. Zulueta. It is so
ordered.
G.R. No. L-18125             May 31, 1963

BOARD OF ASSESSMENT APPEALS, PROVINCE OF LAGUNA, petitioner,

vs.
COURT OF TAX APPEALS and THE NATIONAL WATERWORKS AND SEWERAGE
AUTHORITY (NAWASA), respondents.

Gabriel V. Valero and Rodolfo F. de Gorostiza for petitioner.

Manuel B. Roño for respondent National Waterworks and Sewerage Authority.

CONCEPCION, J.:

This is a petition for review of a decision of the Court of Tax Appeals reversing a resolution or
decision of the Board of Assessment Appeals for the Province of Laguna.

The question involved in this case is whether the water pipes, reservoir, intake and buildings used by
herein respondent, National Waterworks and Sewerage Authority — hereinafter referred to as
NAWASA — in the operation of its waterworks system in the municipalities of Cabuyao, Sta. Rosa
and Biñan, province of Laguna, are subject to real estate tax.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts. 
1äwphï1.ñët

The parties have submitted in the Court of Tax Appeals a stipulation of facts. The pertinent parts
thereof are to the effect:

1. That the petitioner National Waterworks and Sewerage Authority (NWSA) is a public
corporation created by virtue of Republic Act No. 1383, and that it is owned by the
Government of the Philippines as well as all property comprising waterworks and sewerage
systems placed under it:.

2. That, pursuant to the provisions of Republic Act No. 1383, petitioner NWSA took over all
the property of the former Metropolitan Water District and all the existing local government-
owned waterworks and sewerage systems all over the Philippines, including the Cabuyao-
Sta. Rosa-Biñan Waterworks System owned by the Province of Laguna (Section 8, Republic
Act No. 1283);
 3. That the functions and activities of petitioner NWSA, as enumerated in Republic Act No.
1383, more particularly Section 2 thereof, are the same and identical with the functions of the
defunct Metropolitan Water District, particularly Section 2, Act 2832, is amended;

4. That petitioner National Waterworks and Sewerage Authority (NWSA) has no capital stock
divided into shares of stocks, no stockholders, and is not authorized by its Charter to
distribute dividends; and, on the other hand, whatever surplus funds it has realized, may and
will after meeting its yearly obligations, have been, are and may be, used for the
construction, expansion and improvement of its waterworks and sewer services;

5. That at the time that the Cabuyao-Sta. Rosa-Biñan Waterworks System was taken over by
petitioner NWSA in 1956, the former was self-supporting and revenue-producing, but that all
its surplus income are not declared as profits as this surplus are or may be invested for the
expansion thereof;

6. That in the year 1956 the Provincial Assessor of Laguna assessed, for purposes of real
estate taxes, the property comprising the Cabuyao-Sta. Rosa-Biñan Waterworks System and
described in Tax Declaration No. 5987 (Exh. "A-l") which, as stated in Paragraph 2 hereof,
herein petitioner NWSA had taken over;

7. That against the above-mentioned assessment made by the Provincial Assessor of

Laguna, petitioner NWSA protested, claiming that the property described under Tax
Declaration No. 5987 (Exh. "A-l") are exempted from the payment of real estate taxes in view
of the nature and kind of said property and functions and activities of petitioner, as provided
in Republic Act No. 1383;.

8. That the said protest of petitioner NWSA was overruled on appeal before the herein
respondent Board of Assessment Appeals, hence the present petition for review filed by
petitioner;

xxx     xxx     xxx"

After appropriate proceedings, the Court of Tax Appeals rendered the aforementioned decision
reversing the action taken by petitioner Board, which, accordingly, has brought the case to us for
review, under the provisions of Republic Act No. 1125, contending that the properties in question are
subject to real estate tax because: (1) although said properties belong to the Republic of the
Philippines, the same holds it, not in its governmental, political or sovereign capacity, but in a
private, proprietary or patrimonial character, which, allegedly, is not covered by the exemption
contained in section 3(a) of Republic Act No. 470; and 2) this exemption, even if applicable to
patrimonial property, must yield to the provisions of section 1 of Republic Act No. 104, under which
all corporations, agencies or instrumentalities owned or controlled by the Government are subject to
taxation, according to petitioner appellant.

Sections 2 and 3(a) of Commonwealth Act No. 470 provide:

SEC. 2. Incidence of real property tax. — Except in chartered cities, there shall be levied,
assessed, and collected, an annual ad valorem tax on real property, including land,
buildings, machinery, and other improvements not hereinafter specifically exempted.

SEC. 3. Property exempt from tax. — The exemptions shall be as follows:

 (a) Property owned by . . . the Republic of the Philippines, any province, city, municipality or
municipal district. . . .

It is conceded, in the stipulation of facts, that the property involved in this case "is owned by the
Government of the Philippines". Hence, it belongs to the Republic of the Philippines and falls
squarely within the letter of the above provision. This notwithstanding, petitioner Board maintains
that respondent NAWASA is not entitled to the benefits of the exemption established in said section
3(a), inasmuch as, in the case of the City of Cebu vs. NAWASA, G. R. No. L-12892, decided on April
30, 1960, we ruled that the assets of the water system of the City of Cebu, which the NAWASA had
sought to take over, pursuant to the provisions of Republic Act No. 1383 — as it did in the case at
bar, with respect to the Cabuyao-Sta. Rosa-Biñan Waterworks System — are patrimonial property of
said city, which held it in a proprietary character, not in its governmental capacity.

We did not declare, however, in the Cebu case that said assets were subject to taxation. In that case
we merely reiterated the doctrine, laid down in the case of City of Baguio vs. NAWASA, G. R. No. L-
12032, decided on August 31, 1959, that municipal corporations hold in their proprietary character,
the assets of their respective waterworks, which, accordingly, cannot be taken or appropriated by the
National Government and placed under the NAWASA without payment of just compensation. Neither
the Cebu case nor that of Baguio sustains the theory that said assets are taxable.

Upon the other hand, in exempting from taxation "property owned by the Republic of the Philippines,
any province, city, municipality or municipal district . . .," said section 3(a) of Republic Act No. 470
makes no distinction between property held in a sovereign, governmental or political capacity and
those possessed in a private, proprietary or patrimonial character. And where the law does not
distinguish neither may we, unless there are facts and circumstances clearly showing that the
lawmaker intended the contrary, but no such facts and circumstances have been brought to our
attention. Indeed, the noun "property" and the verb "owned" used in said section 3(a) strongly
suggest that the object of exemption is considered more from the view point of dominion, than from
that of domain. Moreover, taxes are financial burdens imposed for the purpose of raising revenues
with which to defray the cost of the operation of the Government, and a tax on property of the
Government, whether national or local, would merely have the effect of taking money from one
pocket to put it in another pocket (Cooley on Taxation, Sec. 621, 4th Edition.) Hence, it would not
serve, in the final analysis, the main purpose of taxation. What is more, it would tend to defeat it, on
account of the paper work, time and consequently, expenses it would entail. (The Law on Local
Taxation, by Justiniano Y. Castillo, p. 13.)

Section 1 of the Republic Act No. 101, upon which petitioner relies, reads:

. . . All corporations, agencies, or instrumentalities owned or controlled by the government

shall pay such duties, taxes, fees and other charges upon their transaction, business,
industries, sale, or income as are imposed by law upon individuals, associations or
corporations engaged in any taxable business, industry, or activity except on goods or
commodities imported or purchased and sold or distributed for relief purposes as may be
determined by the President of the Philippines.

This provision is inapplicable to the case at bar for it refers only to duties, taxes, fees and other
charges upon "transaction, business, industry, sale or income" and does not include taxes on
property like real estate tax.

WHEREFORE, the decision appealed from is hereby affirmed, without special pronouncement as to
costs. It is so ordered.
G.R. No. L-22814           August 28, 1968

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD,
THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN, defendants-
appellees.

Sabido, Sabido and Associates for plaintiff-appellant.

The City Attorney of Butuan City for defendants-appellees.

CONCEPCION, C.J.:

Direct appeal to this Court, from a decision of the Court of First Instance of Agusan, dismissing
plaintiff's complaint, with costs.

Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and
principal place of business in Quezon City. The defendants are the City of Butuan, its City Mayor,
the members of its municipal board and its City Treasurer. Plaintiff — seeks to recover the sums
paid by it to the City of Butuan — hereinafter referred to as the City and collected by the latter,
pursuant to its Municipal Ordinance No. 110, as amended by Municipal Ordinance No. 122, both
series of 1960, which plaintiff assails as null and void, and to prevent the enforcement thereof. Both
parties submitted the case for decision in the lower court upon a stipulation to the effect:

1. That plaintiff's warehouse in the City of Butuan serves as a storage for its products the
"Pepsi-Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities
in the Province of Agusan. These "Pepsi-Cola Cola" soft drinks are bottled in Cebu City and
shipped to the Butuan City warehouse of plaintiff for distribution and sale in the City of
Butuan and all municipalities of Agusan. .

2. That on August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was
subsequently amended by Ordinance No. 122 and effective November 28, 1960. A copy of
Ordinance No. 110, Series of 1960 and Ordinance No. 122 are incorporated herein as
Exhibits "A" and "B", respectively.

3. That Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of
P0.10 per case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of
 P4,926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January
1 to July 30, 1961.

4. That the plaintiff filed the foregoing complaint for the recovery of the total amount of
P14,177.03 paid under protest and those that if may later on pay until the termination of this
case on the ground that Ordinance No. 110 as amended of the City of Butuan is illegal, that
the tax imposed is excessive and that it is unconstitutional.

5. That pursuant to Ordinance No. 110 as amended, the City Treasurer of Butuan City, has
prepared a form to be accomplished by the plaintiff for the computation of the tax. A copy of
the form is enclosed herewith as Exhibit "C".

6. That the Profit and Loss Statement of the plaintiff for the period from January 1, 1961 to
July 30, 1961 of its warehouse in Butuan City is incorporated herein as Exhibits "D" to "D-1"
to "D-5". In this Profit and Loss Statement, the defendants claim that the plaintiff is not
entitled to a depreciation of P3,052.63 but only P1,202.55 in which case the profit of plaintiff
will be increased from P1,254.44 to P3,104.52. The plaintiff differs only on the claim of
depreciation which the company claims to be P3,052.62. This is in accordance with the
findings of the representative of the undersigned City Attorney who verified the records of the
plaintiff.

7. That beginning November 21, 1960, the price of Pepsi-Cola per case of 24 bottles was
increased to P1.92 which price is uniform throughout the Philippines. Said increase was
made due to the increase in the production cost of its manufacture.

8. That the parties reserve the right to submit arguments on the constitutionality and illegality
of Ordinance No. 110, as amended of the City of Butuan in their respective memoranda.

xxx     xxx     xxx 1äwphï1.ñët

Section 1 of said Ordinance No. 110, as amended, states what products are "liquors", within the
purview thereof. Section 2 provides for the payment by "any agent and/or consignee" of any dealer
"engaged in selling liquors, imported or local, in the City," of taxes at specified rates. Section 3
prescribes a tax of P0.10 per case of 24 bottles of the soft drinks and carbonated beverages therein
named, and "all other soft drinks or carbonated drinks." Section 3-A, defines the meaning of the term
"consignee or agent" for purposes of the ordinance. Section 4 provides that said taxes "shall be paid
at the end of every calendar month." Pursuant to Section 5, the taxes "shall be based and computed
from the cargo manifest or bill of lading or any other record showing the number of cases of soft
drinks, liquors or all other soft drinks or carbonated drinks received within the month." Sections 6, 7
and 8 specify the surcharge to be added for failure to pay the taxes within the period prescribed and
the penalties imposable for "deliberate and willful refusal to pay the tax mentioned in Sections 2 and
3" or for failure "to furnish the office of the City Treasurer a copy of the bill of lading or cargo
manifest or record of soft drinks, liquors or carbonated drinks for sale in the City." Section 9 makes
the ordinance applicable to soft drinks, liquors or carbonated drinks "received outside" but "sold
within" the City. Section 10 of the ordinance provides that the revenue derived therefrom "shall be
alloted as follows: 40% for Roads and Bridges Fund; 40% for the General Fund and 20% for the
School Fund."

Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature
of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory;
(4) it is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264, upon the
authority of which it was enacted, is an unconstitutional delegation of legislative powers.
The second and last objections are manifestly devoid of merit. Indeed — independently of whether
or not the tax in question, when considered in relation to the sales tax prescribed by Acts of
Congress, amounts to double taxation, on which we need not and do not express any opinion -
double taxation, in general, is not forbidden by our fundamental law. We have not adopted, as part
thereof, the injunction against double taxation found in the Constitution of the United States and of
some States of the Union.1 Then, again, the general principle against delegation of legislative
powers, in consequence of the theory of separation of powers2 is subject to one well-established
exception, namely: legislative powers may be delegated to local governments — to which said
theory does not apply3 — in respect of matters of local concern.

The third objection is, likewise, untenable. The tax of "P0.10 per case of 24 bottles," of soft drinks or
carbonated drinks — in the production and sale of which plaintiff is engaged — or less than P0.0042
per bottle, is manifestly too small to be excessive, oppressive, or confiscatory.

The first and the fourth objections merit, however, serious consideration. In this connection, it is
noteworthy that the tax prescribed in section 3 of Ordinance No. 110, as originally approved, was
imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. Thus, it would seem that
the intent was then to levy a tax upon the sale of said merchandise. As amended by Ordinance No.
122, the tax is, however, imposed only upon "any agent and/or consignee of any person,
association, partnership, company or corporation engaged in selling ... soft drinks or carbonated
drinks." And, pursuant to section 3-A, which was inserted by said Ordinance No. 122:

... — Definition of the Term Consignee or Agent. — For purposes of this Ordinance, a
consignee of agent shall mean any person, association, partnership, company or corporation
who acts in the place of another by authority from him or one entrusted with the business of
another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft
drinks every month for resale, either retail or wholesale.

As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not subject
to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of
things, must be one engaged in business outside the City. Besides, the tax would not be applicable
to such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to
him every month. When we consider, also, that the tax "shall be based and computed from
the cargo manifest or bill of lading ... showing the number of cases" — not sold — but "received" by
the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated
drinks brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax
partakes of the nature of an import duty, which is beyond defendant's authority to impose by express
provision of law.4

Even however, if the burden in question were regarded as a tax on the sale of said beverages, it
would still be invalid, as discriminatory, and hence, violative of the uniformity required by the
Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers
would be subject to the tax. Sales by local dealers, not acting for or on behalf of other
merchants, regardless of the volume of their sales, and even if the same exceeded those made by
said agents or consignees of producers or merchants established outside the City of Butuan, would
be exempt from the disputed tax.

It is true that the uniformity essential to the valid exercise of the power of taxation does not require
identity or equality under all circumstances, or negate the authority to classify the objects of
taxation.5 The classification made in the exercise of this authority, to be valid, must, however, be
reasonable6 and this requirement is not deemed satisfied unless: (1) it is based upon substantial
distinctions which make real differences; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions
substantially identical to those of the present; and (4) the classification applies equally all those who
belong to the same class.7

These conditions are not fully met by the ordinance in question.8 Indeed, if its purpose were merely
to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales
thereof by sealers other than agents or consignees of producers or merchants established outside
the City of Butuan should be exempt from the tax.

WHEREFORE, the decision appealed from is hereby reversed, and another one shall be entered
annulling Ordinance No. 110, as amended by Ordinance No. 122, and sentencing the City of Butuan
to refund to plaintiff herein the amounts collected from and paid under protest by the latter, with
interest thereon at the legal rate from the date of the promulgation of this decision, in addition to the
costs, and defendants herein are, accordingly, restrained and prohibited permanently from enforcing
said Ordinance, as amended. It is so ordered.
G.R. No. L-31156 February 27, 1976

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees.

Sabido, Sabido & Associates for appellant.

Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant
Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.

MARTIN, J.:

This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294,
which was certified to Us by the Court of Appeals on October 6, 1969, as involving only pure
questions of law, challenging the power of taxation delegated to municipalities under the Local
Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959).

On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc.,
commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for
that court to declare Section 2 of Republic Act No. 2264.  otherwise known as the Local Autonomy
1

Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances

Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void.

On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state
that, first, both Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the
production tax rates imposed therein are practically the same, and second, that on January 17,
1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the Manager
of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by the latter of the
provisions of said Ordinance No. 27, series of 1962.

Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies
and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo
for every bottle of soft drink corked."   For the purpose of computing the taxes due, the person, firm,
2

company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly
report, of the total number of bottles produced and corked during the month.  3
On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies
and collects "on soft drinks produced or manufactured within the territorial jurisdiction of this
municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity."   For the purpose of computing the taxes due, the person, fun company, partnership,
4

corporation or plant producing soft drinks shall submit to the Municipal Treasurer a monthly report of
the total number of gallons produced or manufactured during the month.  5

The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'

On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the
complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring
Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due under
the oft the said Ordinances; and to pay the costs."

From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals,
which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as
amended.

There are three capital questions raised in this appeal:

1. — Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory

and oppressive?

2. — Do Ordinances Nos. 23 and 27 constitute double taxation and impose

percentage or specific taxes?

3. — Are Ordinances Nos. 23 and 27 unjust and unfair?

1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter
of right to every independent government, without being expressly conferred by the people.   It is a
6

power that is purely legislative and which the central legislative body cannot delegate either to the
executive or judicial department of the government without infringing upon the theory of separation
of powers. The exception, however, lies in the case of municipal corporations, to which, said theory
does not apply. Legislative powers may be delegated to local governments in respect of matters of
local concern.   This is sanctioned by immemorial practice.   By necessary implication, the legislative
7 8

power to create political corporations for purposes of local self-government carries with it the power
to confer on such local governmental agencies the power to tax.   Under the New Constitution, local
9

governments are granted the autonomous authority to create their own sources of revenue and to
levy taxes. Section 5, Article XI provides: "Each local government unit shall have the power to create
its sources of revenue and to levy taxes, subject to such limitations as may be provided by law."
Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere
of the legislative power to enact and vest in local governments the power of local taxation.

The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense,
would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the
authority, the State is not limited 6 the exact measure of that which is exercised by itself. When it is
said that the taxing power may be delegated to municipalities and the like, it is meant that there may
be delegated such measure of power to impose and collect taxes as the legislature may deem
expedient. Thus, municipalities may be permitted to tax subjects which for reasons of public policy
the State has not deemed wise to tax for more general purposes.   This is not to say though that the
10

constitutional injunction against deprivation of property without due process of law may be passed
over under the guise of the taxing power, except when the taking of the property is in the lawful
exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of
taxation is observed; (3) either the person or property taxed is within the jurisdiction of the
government levying the tax; and (4) in the assessment and collection of certain kinds of taxes notice
and opportunity for hearing are provided.   Due process is usually violated where the tax imposed is
11

for a private as distinguished from a public purpose; a tax is imposed on property outside the State,
i.e., extraterritorial taxation; and arbitrary or oppressive methods are used in assessing and
collecting taxes. But, a tax does not violate the due process clause, as applied to a particular
taxpayer, although the purpose of the tax will result in an injury rather than a benefit to such
taxpayer. Due process does not require that the property subject to the tax or the amount of tax to
be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of the
tax and the manner in which it shall be apportioned are generally not necessary to due process of
law. 
12

There is no validity to the assertion that the delegated authority can be declared unconstitutional on
the theory of double taxation. It must be observed that the delegating authority specifies the
limitations and enumerates the taxes over which local taxation may not be exercised.   The reason is
13

that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation,
in general, is not forbidden by our fundamental law, since We have not adopted as part thereof the
injunction against double taxation found in the Constitution of the United States and some states of
the Union.  Double taxation becomes obnoxious only where the taxpayer is taxed twice for the
14

benefit of the same governmental entity   or by the same jurisdiction for the same purpose,   but not
15 16

in a case where one tax is imposed by the State and the other by the city or municipality.  17

2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because
these two ordinances cover the same subject matter and impose practically the same tax rate. The
thesis proceeds from its assumption that both ordinances are valid and legally enforceable. This is
not so. As earlier quoted, Ordinance No. 23, which was approved on September 25, 1962, levies or
collects from soft drinks producers or manufacturers a tax of one-sixteen (1/16) of a centavo for
.every bottle corked, irrespective of the volume contents of the bottle used. When it was discovered
that the producer or manufacturer could increase the volume contents of the bottle and still pay the
same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28,
1962, imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks
produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No.
27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The
intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was
intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter,
even without words to that effect.   Plaintiff-appellant in its brief admitted that defendants-appellees
18

are only seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms
the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the
plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned
admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-
appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that
Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of
the latter are inconsistent with the provisions of the former."

That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or
a specific tax. Undoubtedly, the taxing authority conferred on local governments under Section 2,
Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting those which
are mentioned therein." As long as the text levied under the authority of a city or municipal ordinance
is not within the exceptions and limitations in the law, the same comes within the ambit of the
general rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in cabisus non
excepti   The limitation applies, particularly, to the prohibition against municipalities and municipal
19
districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes
on articles subject to specific tax except gasoline, under the provisions of the National Internal
Revenue Code." For purposes of this particular limitation, a municipal ordinance which prescribes a
set ratio between the amount of the tax and the volume of sale of the taxpayer imposes a sales tax
and is null and void for being outside the power of the municipality to enact.   But, the imposition of
20

"a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft
drinks produced or manufactured under Ordinance No. 27 does not partake of the nature of a
percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the produce
(whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft
drinks is considered solely for purposes of determining the tax rate on the products, but there is not
set ratio between the volume of sales and the amount of the tax. 21

Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified
articles, such as distilled spirits, wines, fermented liquors, products of tobacco other than cigars and
cigarettes, matches firecrackers, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel
oil, cinematographic films, playing cards, saccharine, opium and other habit-forming drugs.   Soft
22

drink is not one of those specified.

3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all
softdrinks, produced or manufactured, or an equivalent of 1-½ centavos per case,   cannot be
23

considered unjust and unfair. 24 an increase in the tax alone would not support the claim that the tax
is oppressive, unjust and confiscatory. Municipal corporations are allowed much discretion in
determining the reates of imposable taxes. 25 This is in line with the constutional policy of according
the widest possible autonomy to local governments in matters of local taxation, an aspect that is
given expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so
excessive as to be prohibitive, courts will go slow in writing off an ordinance as unreasonable. 27
Reluctance should not deter compliance with an ordinance such as Ordinance No. 27 if the purpose
of the law to further strengthen local autonomy were to be realized. 28

Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than ten
crowners or P2,000.00 with ten but not more than twenty crowners imposed on manufacturers,
producers, importers and dealers of soft drinks and/or mineral waters under Ordinance No. 54,
series of 1964, as amended by Ordinance No. 41, series of 1968, of defendant
Municipality,   appears not to affect the resolution of the validity of Ordinance No. 27. Municipalities
29

are empowered to impose, not only municipal license taxes upon persons engaged in any business
or occupation but also to levy for public purposes, just and uniform taxes. The ordinance in question
(Ordinance No. 27) comes within the second power of a municipality.

ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the
Local Autonomy Act, as amended, is hereby upheld and Municipal Ordinance No. 27 of the
Municipality of Tanauan, Leyte, series of 1962, re-pealing Municipal Ordinance No. 23, same series,
is hereby declared of valid and legal effect. Costs against petitioner-appellant.

SO ORDERED.