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G.R. No. 106611 July 21, 1994
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS,
CITYTRUST AN!ING CORPORATION "#$ COURT OF TA% APPEALS, respondents.
The Solicitor General for petitioner.
Palaez, Adriano & Gregorio for private respondent.
REGALA&O, J.:
The judicial proceedings over the present controversy commenced with CTA Case No. 4099,
wherein the Court of Ta Appeals ordered herein petitioner Commissioner of !nternal "evenue to
grant a refund to herein private respondent Citytrust #an$ing Corporation %Citytrust& in the
amount of '(),)(4,*0+.(4, representing its overpaid income taes for (94 and (9*, -ut denied
its claim for the alleged refunda-le amount reflected in its (9) income ta return on the ground
of prescription. 1 That judgment of the ta court was affirmed -y respondent Court of Appeals in
its judgment in CA/.". '
No. 1+)9.
2
The case was then elevated to us in the present petition for reviewon certiorari wherein the latter judgment is impugned and sought to -e nullified and2or set aside.
!t appears that in a letter dated August 1+, (9+, '()(*# +)*"-( )(+o#$(#- /o)+o)"-*o# *l($ "
/l"* o) )(u#$ *-' -'( u)("u o I#-()#"l R((#u( 3IR in the amount of '(9,93(,34*.00
)(+)((#-*#5 -'( "ll(5($ "55)(5"-( o -'( (/( o *- /"))*($7o() -o-"l 8u")-()ly +"y(#-
o() -'( "/-u"l *#/o( -" $u(, +lu /"))*($7o() *-''ol$*#5 -" +"y(#- o# 5o()#(#-
(/u)*-*( "#$ )(#-"l *#/o(, " /o+u-($ *# *- *#"l *#/o( -" )(-u)# o) -'( /"l(#$")
y(") (#$*#5 &(/(() :1, 19;<. :
Two days later, or on August 1, (9+, in order to interrupt the running of the prescriptive
period, Citytrust filed a petition with the Court of Ta Appeals, doc$eted therein as CTA Case
No. 4099, claiming the refund of its income ta overpayments for the years (9), (94 and (9*
in the total amount of '(9,93(,34*.00. 4
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!n the answer filed -y the ffice of the olicitor /eneral, for and in -ehalf of therein respondent
commissioner, it was asserted that the mere averment that Citytrust incurred a net loss in (9*
does not ipso facto merit a refund5 that the amounts of '+,+((,11).00, '(,9*9,*(4.00 and
'1,1).00 claimed -y Citytrust as (9) income ta overpayment, taes withheld on proceeds of
government securities investments, as well as on rental income, respectively, are not properly
documented5 that assuming arguendo that petitioner is entitled to refund, the right to claim the
same has prescri-ed
with respect to income ta payments prior to August 1, (94, pursuant to ections 191 and 19*
of the National !nternal "evenue Code of (933, as amended, since the petition was filed only on
August 1, (9+. <
n 6e-ruary 10, (99(, the case was su-mitted for decision -ased solely on the pleadings andevidence su-mitted -y herein private respondent Citytrust. 7erein petitioner could not present
any evidence -y reason of the repeated failure of the Ta Credit2"efund 8ivision of the #!" to
transmit the records of the case, as well as the investigation report thereon, to the olicitor
/eneral. 6
7owever, on une 14, (99(, herein petitioner filed with the ta court a manifestation and motion
praying for the suspension of the proceedings in the said case on the ground that the claim of
Citytrust for ta refund in the amount of '(9,93(,34*.00 was already -eing processed -y the Ta
Credit2"efund 8ivision of the #!", and that said -ureau was only awaiting the su-mission -y
Citytrust of the re:uired confirmation receipts which would show whether or not the aforestated
amount was actually paid and remitted to the #!". =
Citytrust filed an opposition thereto, contending that since the Court of Ta Appeals already
ac:uired jurisdiction over the case, it could no longer -e divested of the same5 and, further, that
the proceedings therein could not -e suspended -y the mere fact that the claim for refund was
-eing administratively processed, especially where the case had already -een su-mitted for
decision.
!t also argued that the #!" had already conducted an audit, citing therefor ;hi-its <, <(, <1
and <) adduced in the case, which clearly showed that there was an overpayment of income
taes and for which a ta credit or refund was due to Citytrust. The 6oregoing ehi-its are
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allegedly conclusive proof of and an admission -y herein petitioner that there had -een an
overpayment of income taes. ;
The ta court denied the motion to suspend proceedings on the ground that the case had already
-een su-mitted for decision since 6e-ruary 10, (99(. 9
Thereafter, said court rendered its decision in the case, the decretal portion of which declares=
>7;";6";, in view of the foregoing, +(-*-*o#() * (#-*-l($ -o " )(u#$ u-
o#ly o) -'( o()+"*$ -"( *#/u))($ *# 19;4 "#$ 19;<. T'( )(u#$"l(
"ou#- " 'o# *# *- 19;: *#/o( -" )(-u)# * '()(y $(#*($ o# -'(
5)ou#$ o +)(/)*+-*o#. R(+o#$(#- * '()(y o)$()($ -o 5)"#- " )(u#$ -o
+(-*-*o#() C*-y-)u- "#>*#5 Co)+. *# -'( "ou#- o P1:,:14,<06.14
)(+)((#-*#5 -'( o()+"*$ *#/o( -"( o) 19;4 "#$ 19;< , recomputed as
follows=
(94 !ncome ta due ' 4,3(*,*)).00
?ess= (94 @uarterly payments ' (+,1(4,*99.00
(94 Ta Credits B
>2T on int. on govt. sec. (,91(,14*.)3
>2T on rental inc. 1+,+04.)0 (,(+1,44.+3
BBBBBBB BBBBBBB
Ta verpayment %(),44+,9(*.+3&
?ess= 6C8D paya-le (*0,1*1.00
BBBBBBB
Amount refunda-le for (94 ' %(),19+,++).+3&
(9* !ncome ta due %loss& ' B 0 B
?ess= >2T on rentals )+,3(+.43
BBBBBBB
Ta verpayment %)+,3(+.43&
?ess= 6C8D paya-le (,34.00
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BBBBBBB
Amount "efunda-le for (9* ' %(3,41.43&
Note=
These credits are smaller than the claimed amount -ecause only the
a-ove figures are well supported -y the various ehi-its presented
during the hearing.
No pronouncement as to costs.
"8;";8. 10
The order for refund was -ased on the following findings of the Court of Ta Appeals= %(& the
fact of withholding has -een esta-lished -y the statements and certificates of withholding taes
accomplished -y herein private respondents withholding agents, the authenticity of which were
neither disputed nor controverted -y herein petitioner5 %1& no evidence was presented which
could effectively dispute the correctness of the income ta return filed -y herein respondent
corporation and other material facts stated therein5 %)& no deficiency assessment was issued -y
herein petitioner5 and %4& there was an audit report su-mitted -y the #!" Assessment #ranch,
recommending the refund of overpaid taes for the years concerned %;hi-its < to <)&, which
enjoys the presumption of regularity in the performance of official duty. 11
A motion for the reconsideration of said decision was initially filed -y the olicitor /eneral on
the sole ground that the statements and certificates of taes allegedly withheld are not conclusive
evidence of actual payment and remittance of the taes withheld to the #!". 12 A supplemental
motion for reconsideration was thereafter filed, wherein it was contended for the first time that
herein private respondent had outstanding unpaid deficiency income taes. 'etitioner alleged that
through an interoffice memorandum of the Ta Credit2"efund 8ivision, dated August , (99(,
he came to $now only lately that Citytrust had outstanding ta lia-ilities for (94 in the amount
of '*+,*,340.9( representing deficiency income and -usiness taes covered -y
8emand2Assessment Notice No. 6A(400)19(00)19+. 1:
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O++o*-*o# -o o-' -'( "*/ "#$ u++l((#-"l o-*o# o) )(/o#*$()"-*o# ()( *l($ y
+)*"-( )(+o#$(#- C*-y-)u-. 14 T'()("-(), -'( Cou)- o T" A++("l *u($ " )(olu-*o#
$(#y*#5 o-' o-*o# o) -'( )("o# -'"- S(/-*o# <2 3 o -'( T" Co$(, " *+l((#-($ y
R((#u( R(5ul"-*o# 67;<, o#ly )(8u*)( -'"- -'( /l"* o) -" /)($*- o) )(u#$ u- 'o
-'"- -'( *#/o( )(/(*($ " $(/l")($ " +")- o -'( 5)o *#/o(, "#$ -'"- -'( "/- o
*-''ol$*#5 " $uly (-"l*'($. Mo)(o(), *-' )(5")$ -o -'( ")5u(#- )"*($ *# -'(
u++l((#-"l o-*o# o) )(/o#*$()"-*o# "#(#- -'( $(*/*(#/y -" "((#- "5"*#- '()(*#
+(-*-*o#(), -'( -" /ou)- )ul($ -'"- *#/( -'"- "--() " #o- )"*($ *# -'( +l("$*#5, -'(
"( /"##o- ( /o#*$()($, *#o>*#5 -'()(o) -'( "lu-")y +u)+o( o -'( o#*u o-*o#
)ul( '*/' * -o o*"-( ul-*+l*/*-y o o-*o# "#$ -o $*/ou)"5( $*l"-o)y +l("$*#5. 1<
As indicated at the outset, a petition for review was filed -y herein petitioner with respondentCourt of Appeals which in due course promulgated its decision affirming the judgment of the
Court of Ta Appeals. 'etitioner eventually elevated the case to this Court, maintaining that said
respondent court erred in affirming the grant of the claim for refund of Citytrust, considering
that, firstly, said private respondent failed to prove and su-stantiate its claim for such refund5
and, secondly, the -ureaus findings of deficiency income and -usiness ta lia-ilities against
private respondent for the year (94 -ars such payment. 16
After a careful review of the records, we find that under the peculiar circumstances of this case,
the ends of su-stantial justice and pu-lic interest would -e -etter su-served -y the remand of this
case to the Court of Ta Appeals for further proceedings.
!t is the sense of this Court that the #!", represented herein -y petitioner Commissioner of
!nternal "evenue, was denied its day in court -y reason of the mista$es and2or negligence of its
officials and employees. !t can readily -e gleaned from the records that when it was herein
petitioners turn to present evidence, several postponements were sought -y its counsel, the
olicitor /eneral, due to the unavaila-ility of the necessary records which were not transmitted
-y the "efund Audit 8ivision of the #!" to said counsel, as well as the investigation report made
-y the #an$s26inancing and !nsurance 8ivision of the said -ureau2 despite repeated re:uests. 1= !t
was under such a predicament and in deference to the ta court that ultimately, said records -eing
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still unavaila-le, herein petitioners counsel was constrained to su-mit the case for decision on
6e-ruary 10, (99( without presenting any evidence.
6or that matter, the #!" officials and2or employees concerned also failed to heed the order of the
Court of Ta Appeals to remand the records to it pursuant to ection 1, "ule 3 of the "ules of the
Court of Ta Appeals which provides that the Commissioner of !nternal "evenue and the
Commissioner of Customs shall certify and forward to the Court of Ta Appeals, within ten days
after filing his answer, all the records of the case in his possession, with the pages duly
num-ered, and if the records are in separate folders, then the folders shall also -e num-ered.
The aforestated impassE came a-out due to the fact that, despite the filing of the aforementioned
initiatory petition in CTA Case No. 4099 with the Court of Ta Appeals, the Ta "efund 8ivision
of the #!" still continued to act administratively on the claim for refund previously filed therein,
instead of forwarding the records of the case to the Court of Ta Appeals as ordered. 1;
!t is a long and firmly settled rule of law that the /overnment is not -ound -y the errors
committed -y its agents.19 !n the performance of its governmental functions, the tate cannot -e
estopped -y the neglect of its agent and officers. Although the /overnment may generally -e
estopped through the affirmative acts of pu-lic officers acting within their authority, their neglect
or omission of pu-lic duties as eemplified in this case will not and should not produce thateffect.
No'()( * -'( "o)(-"-($ )ul( o)( -)u( -'"# *# -'( *(l$ o -""-*o#. 20 I- * "*o"-*/ -'"-
-'( Go()#(#- /"##o- "#$ u- #o- ( (-o++($ +")-*/ul")ly *# "--() *#ol*#5 -"(.
T"( ")( -'( l*(loo$ o -'( #"-*o# -')ou5' '*/' -'( 5o()#(#- "5(#/*( /o#-*#u( -o
o+()"-( "#$ *-' '*/' -'( S-"-( ((/- *- u#/-*o# o) -'( (l")( o *-
/o#-*-u(#-. 21T'( ())o) o /()-"*# "$*#*-)"-*( o*/() 'oul$ #(() ( "llo($ -o
?(o+")$*@( -'( Go()#(#- *#"#/*"l +o*-*o#, 22(+(/*"lly *# -'( /"( "- ") '()( -'(
"ou#- *#ol( *ll*o# o +(o -'( /oll(/-*o# '()(o, * ?u-**($, -"#$ -o (
+)(?u$*/($ ?u- (/"u( o u)("u/)"-*/ l(-'")5y.
6urther, it is also worth nothing that the Court of Ta Appeals erred in denying petitioners
supplemental motion for reconsideration alleging -ringing to said courts attention the eistence
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of the deficiency income and -usiness ta assessment against Citytrust. The fact of such
deficiency assessment is intimately related to and inetrica-ly intertwined with the right of
respondent -an$ to claim for a ta refund for the same year. To award such refund despite the
eistence of that deficiency assessment is an a-surdity and a polarity in conceptual effects.
7erein private respondent cannot -e entitled to refund and at the same time -e lia-le for a ta
deficiency assessment for the same year.
The grant of a refund is founded on the assumption that the ta return is valid, that is, the facts
stated therein are true and correct. The deficiency assessment, although not yet final, created a
dou-t as to and constitutes a challenge against the truth and accuracy of the facts stated in said
return which, -y itself and without un:uestiona-le evidence, cannot -e the -asis for the grant of
the refund.
ection 1, Chapter !F of the National !nternal "evenue Code of (933, which was the applica-le
law when the claim of Citytrust was filed, provides that G%w&hen an assessment is made in case
of any list, statement, or return, which in the opinion of the Commissioner of !nternal "evenue
was false or fraudulent or contained any understatement or undervaluation, no ta collected
under such assessment shall -e recovered -y any suits unless it is proved that the said list,
statement, or return was not false nor fraudulent and did not contain any understatement or
undervaluation5 -ut this provision shall not apply to statements or returns made or to -e made in
good faith regarding annual depreciation of oil or gas wells and mines.G
Horeover, to grant the refund without determination of the proper assessment and the ta due
would inevita-ly result in multiplicity of proceedings or suits. !f the deficiency assessment
should su-se:uently -e upheld, the /overnment will -e forced to institute anew a proceeding for
the recovery of erroneously refunded taes which recourse must -e filed within the prescriptive
period of ten years after discovery of the falsity, fraud or omission in the false or fraudulent
return involved. 2: This would necessarily re:uire and entail additional efforts and epenses on
the part of the /overnment, impose a -urden on and a drain of government funds, and impede or
delay the collection of muchneeded revenue for governmental operations.
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Thus, to avoid multiplicity of suits and unnecessary difficulties or epenses, it is -oth logically
necessary and legally appropriate that the issue of the deficiency ta assessment against Citytrust
-e resolved jointly with its claim for ta refund, to determine once and for all in a single
proceeding the true and correct amount of ta due or refunda-le.
!n fact, as the Court of Ta Appeals itself has heretofore conceded, 24 it would -e only just and
fair that the tapayer and the /overnment ali$e -e given e:ual opportunities to avail of remedies
under the law to defeat each others claim and to determine all matters of dispute -etween them
in one single case. !t is important to note that in determining whether or not petitioner is entitled
to the refund of the amount paid, it would necessary to determine how much the /overnment is
entitled to collect as taes. This would necessarily include the determination of the correct
lia-ility of the tapayer and, certainly, a determination of this case would constitute res judicataon -oth parties as to all the matters su-ject thereof or necessarily involved therein.
The Court cannot end this adjudication without o-serving that what caused the /overnment to
lose its case in the ta court may hopefully -e ascri-ed merely to the ennui or ineptitude of
officialdom, and not to syndicated intent or corruption. The evidential cul-de-sac in which the
olicitor /eneral found himself once again gives su-stance to the pu-lic perception and
suspicion that it is another prover-ial tip in the ice-erg of venality in a government -ureau which
is pejoratively rated over the years. >hat is so distressing, aside from the financial losses to the
/overnment, is the erosion of trust in a vital institution wherein the reputations of so many
honest and dedicated wor$ers are -esmirched -y the acts or omissions of a few. 7ence, the
li-eral view we have here ta$en pro hac vice, which may give some degree of assurance that this
Court will unhesitatingly react to any -ane in the government service, with a replication of such
response -eing li$ewise epected -y the people from the eecutive authorities.
>7;";6";, the judgment of respondent Court of Appeals in CA/.". ' No. 1+)9 is
here-y ;T A!8; and the case at -ar is ";HAN8;8 to the Court of Ta Appeals for further
proceedings and appropriate action, more particularly, the reception of evidence for petitioner
and the corresponding disposition of CTA Case No. 4099 not otherwise inconsistent with our
adjudgment herein.
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"8;";8.
Narvasa, C.J., Padilla, Puno and endoza, JJ., concur.
G.R. No. 112024 J"#u")y 2;, 1999
PBILIPPINE AN! OF COMMUNICATIONS, petitioner, vs. COMMISSIONER OF
INTERNAL REVENUE, COURT OF TA% APPEALS "#$ COURT OF
APPEALS,respondent.
UISUMING, J.:
This petition for review assails the "esolution 1 of the Court of Appeals dated eptem-er 11,
(99) affir!ing the 8ecision 2 and a "esolution : of the Court f Ta Appeals which denied the
claims of the petitioner for ta refund and ta credits, and disposing as follows=
!N I!;> 6 A??, T7; 6";/!N/, the instant petition for review, is
8;N!;8 due course. The 8ecision of the Court of Ta Appeals dated Hay 10,
(99) and its resolution dated uly 10, (99), are here-y A66!"H;8 in toto.
"8;";8. 4
The Court of Ta Appeals earlier ruled as follows=
>7;";6";, 'etitioners claim for refund2ta credits of overpaid income ta
for (9* in the amount of '*,199,349.9* is here-y denied for having -een filed
-eyond the reglementary period. The (9+ claim for refund amounting to
'1)4,033.+9 is li$ewise denied since petitioner has opted and in all li$elihood
automatically credited the same to the succeeding year. The petition for review is
dismissed for lac$ of merit.
"8;";8. <
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The facts on record show the antecedent circumstances pertinent to this case.
'etitioner, 'hilippine #an$ of Communications %'#Com&, a commercial -an$ing corporation
duly organiJed under 'hilippine laws, filed its :uarterly income ta returns for the first and
second :uarters of (9*, reported profits, and paid the total income ta of '*,0(+,9*4.00. The
taes due were settled -y applying '#Coms ta credit memos and accordingly, the #ureau of
!nternal "evenue %#!"& issued Ta 8e-it Hemo Nos. 034+* and 0343* for '),40(,30(.00
and '(,+(*,1*).00, respectively.
u-se:uently, however, '#Com suffered losses so that when it filed its Annual !ncome Ta
"eturns for the yearended 8ecem-er )(, (9+, the petitioner li$ewise reported a net loss of
'(4,(19,+01.00, and thus declared no ta paya-le for the year.
#ut during these two years, '#Com earned rental income from leased properties. The lessees
withheld and remitted to the #!" withholding credita-le taes of '11,39*.*0 in (9* and
'1)4,033.+9 in (9+.
n August 3, (93, petitioner re:uested the Commissioner of !nternal "evenue, among others,
for a ta credit of '*,0(+,9*4.00 representing the overpayment of taes in the first and second
:uarters of (9*.
Thereafter, on uly 1*, (9, petitioner filed a claim for refund of credita-le taes withheld -y
their lessees from property rentals in (9* for '11,39*.*0 and in (9+ for '1)4,033.+9.
'ending the investigation of the respondent Commissioner of !nternal "evenue, petitioner
instituted a 'etition for "eview on Novem-er (, (9 -efore the Court of Ta Appeals %CTA&.
The petition was doc$eted as CTA Case No. 4)09 entitled= G'hilippine #an$ of Communications
vs. Commissioner of !nternal "evenue.G
The losses petitioner incurred as per the summary of petitioners claims for refund and ta credit
for (9* and (9+, filed -efore the Court of Ta Appeals, are as follows=
(9* (9+
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BBB BBB
Net !ncome %?oss& %'1*,)(3,1.00& %'(4,(19,+01.00&
Ta 8ue N!? N!?
@uarterly ta.
'ayments Hade *,0(+,9*4.00 B
Ta >ithheld at ource 11,39*.*0 1)4,033.+9
BBBBBBBB BBBBBBB
;cess Ta 'ayments '*,199,349.*0D '1)4,033.+9
KKKKKKKKKKKKKKK KKKKKKKKKKKKK
D CTAs decision reflects '#Coms (9* ta claim as
'*,199,349.9*. A forty five centavo difference was noted.
n Hay 10, (99), the CTA rendered a decision which, as stated on the outset, denied the re:uest
of petitioner for a ta refund or credit in the sum amount of '*,199,349.9*, on the ground that it
was filed -eyond the twoyear reglementary period provided for -y law. The petitioners claim
for refund in (9+ amounting to '1)4,033.+9 was li$ewise denied on the assumption that it was
automatically credited -y '#Com against its ta payment in the succeeding year.
n une 11, (99), petitioner filed a Hotion for "econsideration of the CTAs decision -ut the
same was denied due course for lac$ of merit. 6
Thereafter, '#Com filed a petition for review of said decision and resolution of the CTA with the
Court of Appeals. 7owever on eptem-er 11, (99), the Court of Appeals affirmed in toto the
CTAs resolution dated uly 10, (99). 7ence this petition now -efore us.
The issues raised -y the petitioner are=
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!. >hether tapayer '#Com B which relied in good faith on the
formal assurances of #!" in "HC No. 3* and did not
immediately file with the CTA a petition for review as$ing for the
refund2ta credit of its (9*+ ecess :uarterly income ta
payments B can -e prejudiced -y the su-se:uent #!" rejection,
applied retroactivity, of its assurances in "HC No. 3* that the
prescriptive period for the refund2ta credit of ecess :uarterly
income ta payments is not two years -ut ten %(0&. =
!!. >hether the Court of Appeals seriously erred in affirming the
CTA decision which denied '#Coms claim for the refund of
'1)4,033.+9 income ta overpaid in (9+ on the mere speculation,without proof, that there were taes due in (93 and that '#Com
availed of tacrediting that year. ;
imply stated, the main :uestion is '(-'() o) #o- -'( Cou)- o A++("l ())($ *# $(#y*#5
-'( +l(" o) -" )(u#$ o) -" /)($*- o# -'( 5)ou#$ o +)(/)*+-*o#, $(+*-( +(-*-*o#()
)(l*"#/( o# RMC No. =7;<, /'"#5*#5 -'( +)(/)*+-*( +()*o$ o -o y(") -o -(# y(")
'etitioner argues that its claims for refund and ta credits are not yet -arred -y prescriptionrelying on the applica-ility of "evenue Hemorandum Circular No. 3* issued on April (, (9*.
The circular states that overpaid income taes are not covered -y the twoyear prescriptive
period under the ta Code and that tapayers may claim refund or ta credits for the ecess
:uarterly income ta with the #!" within ten %(0& years under Article ((44 of the Civil Code.
The pertinent portions of the circular reads=
";I;ND; H;H"AN8DH C!"CD?A" N. 3*
D#;CT= '"C;!N/ 6 ";6DN8 " TAF
C";8!T 6 ;FC; C"'"AT; !NCH;
TAF ";D?T!N/ 6"H T7; 6!?!N/ 6 T7;
6!NA? A8DTH;NT ";TD"N.
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T= All !nternal "evenue fficers and thers Concerned.
ec. * And + f the National !nternal "evenue Code provide=
The foregoing provisions are implemented -y ection 3 of "evenue "egulations
Nos. (033 which provide5
!t has -een o-served, however, that -ecause of the ecess ta payments,
corporations file claims for recovery of overpaid income ta with the Court of Ta
Appeals within the twoyear period from the date of payment, in accordance with
sections 191 and 19* of the National !nternal "evenue Code. !t is o-vious that the
filing of the case in court is to preserve the judicial right of the corporation to
claim the refund or ta credit.
!t should he noted, however, that this is not a case of erroneously or illegally paid
ta under the provisions of ections 191 and 19* of the Ta Code.
!n the a-ove provision of the "egulations the corporation may re:uest for the
refund of the overpaid income ta or claim for automatic ta credit. To insure
prompt action on corporate annual income ta returns showing refunda-le
amounts arising from overpaid :uarterly income taes, this ffice has
promulgated "evenue Hemorandum rder No. )13+ dated une ((, (93+,
containing the procedure in processing said returns. Dnder these procedures, the
returns are merely preaudited which consist mainly of chec$ing mathematical
accuracy of the figures of the return. After which, the refund or ta credit is
granted, and, this procedure was adopted to facilitate immediate action on cases
li$e this.
!n this regard, therefore, there is no need to file petitions for review in the Court
of Ta Appeals in order to preserve the right to claim refund or ta credit the two
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year period. As already stated, actions hereon -y the #ureau are immediate after
only a cursory preaudit of the income ta returns. Horeover, a tapayer may
recover from the #ureau of !nternal "evenue ecess income ta paid under the
provisions of ection + of the Ta Code within (0 years from the date of
payment considering that it is an o-ligation created -y law %Article ((44 of the
Civil Code&. 9 %;mphasis supplied.&
'etitioner argues that the government is -arred from asserting a position contrary to its declared
circular if it would result to injustice to tapayers. Citing A"S C"N "roadcasting Corporation
vs. Court of Ta# Appeals 10 petitioner claims that rulings or circulars promulgated -y the
Commissioner of !nternal "evenue have no retroactive effect if it would -e prejudicial to
tapayers, !n A#C#N case, the Court held that the government is precluded from adopting a position inconsistent with one previously ta$en where injustice would result therefrom or where
there has -een a misrepresentation to the tapayer.
'etitioner contends that ec. 14+ of the National !nternal "evenue Code eplicitly provides for
this rules as follows=
ec. 14+ Non-retroactivit$ of rulings% Any revocation, modification or reversal
of any of the rules and regulations promulgated in accordance with the precedingsection or any of the rulings or circulars promulgated -y the Commissioner shall
not -e given retroactive application if the revocation, modification or reversal will
-e prejudicial to the tapayers ecept in the following cases=
a&. where the tapayer deli-erately misstates or
omits material facts from his return or in any
document re:uired of him -y the #ureau of !nternal
"evenue5
-&. where the facts su-se:uently gathered -y the
#ureau of !nternal "evenue are materially different
from the facts on which the ruling is -ased5
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c&. where the tapayer acted in -ad faith.
"espondent Commissioner of !nternal "evenue, through olicitor /eneral, argues that the two
year prescriptive period for filing ta cases in court concerning income ta payments of
Corporations is rec$oned from the date of filing the 6inal Adjusted !ncome Ta "eturn, which is
generally done on April (* following the close of the calendar year. As precedents, respondent
Commissioner cited cases which adhered to this principle, to wit ACCA 'nvest!ents Corp. vs.
Court of Appeals, et al., 11 and Co!!issioner of 'nternal evenue vs. T( Sales, 'nc., et
al .. 12"espondent Commissioner also states that since the 6inal Adjusted !ncome Ta "eturn of
the petitioner for the taa-le year (9* was supposed to -e filed on April (*, (9+, the latter had
only until April (*, (9 to see$ relief from the court. 6urther, respondent Commissioner stresses
that when the petitioner filed the case -efore the CTA on Novem-er (, (9, the same was filed -eyond the time fied -y law, and such failure is fatal to petitioners cause of action.
After a careful study of the records and applica-le jurisprudence on the matter, we find that,
contrary to the petitioners contention, -'( )(l""-*o# o )((#u( )(5ul"-*o# y RMC =7;< *
#o- "))"#-($ " *- $*)(5")$ -'( -o7y(") +)(/)*+-*( +()*o$ (- y l".
#asic is the principle that Gtaes are the life-lood of the nation.G The primary purpose is to
generate funds for the tate to finance the needs of the citiJenry and to advance the commonweal. 1: 8ue process of law under the Constitution does not re:uire judicial proceedings in ta
cases. This must necessarily -e so -ecause it is upon taation that the government chiefly relies
to o-tain the means to carry on its operations and it is of utmost importance that the modes
adopted to enforce the collection of taes levied should -e summary and interfered with as little
as possi-le. 14
6rom the same perspective, claims for refund or ta credit should -e eercised within the time
fied -y law -ecause the #!" -eing an administrative -ody enforced to collect taes, its
functions should not -e unduly delayed or hampered -y incidental matters.
ec. 1)0 of the National !nternal "evenue Code %N!"C& of (933 %now ec. 119, N!"C of (993&
provides for the prescriptive period for filing a court proceeding for the recovery of ta
erroneously or illegally collected, viz .=
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ec. 1)0. ecover$ of ta# erroneousl$ or illegall$ collected . B No suit or
proceeding shall -e maintained in any court for the recovery of any national
internal revenue ta hereafter alleged to have -een erroneously or illegally
assessed or collected, or of any penalty claimed to have -een collected without
authority, or of any sum alleged to have -een ecessive or in any manner
wrongfully collected, until a claim for refund or credit has -een duly filed with
the Commissioner5 -ut such suit or proceeding may -e maintained, whether or not
such ta, penalty, or sum has -een paid under protest or duress.
!n any case, no such suit or proceedings shall )egun after the e#piration of t*o
$ears fro! the date of pa$!ent of the ta# or penalt$ regardless of an$
supervening cause that !a$ arise after pa$!ent 5 Provided ho*ever , That theCommissioner may, even without a written claim therefor, refund or credit any
ta, where on the face of the return upon which payment was made, such payment
appears clearly to have -een erroneously paid. %;mphasis supplied&
T'( )ul( -"-( -'"- -'( -"+"y() "y *l( " /l"* o) )(u#$ o) /)($*- *-' -'(
Co**o#() o I#-()#"l R((#u(, *-'*# -o 32 y(") "-() +"y(#- o -", (o)( "#y
u*- *# CTA * /o(#/($. T'( -o7y(") +)(/)*+-*( +()*o$ +)o*$($, 'oul$ ( /o+u-($
)o -'( -*( o *l*#5 -'( A$?u-(#- R(-u)# "#$ *#"l +"y(#- o -'( -" o) -'( y(").
!n Co!!issioner of 'nternal evenue vs. Philippine A!erican +ife 'nsurance Co., 1< this Court
eplained the application of ec. 1)0 of (933 N!"C, as follows=
Clearly, -'( +)(/)*+-*( +()*o$ o -o y(") 'oul$ /o(#/( -o )u# o#ly
)o -'( -*( -'"- -'( )(u#$ * "/()-"*#($, '*/' /"# o#ly ( $(-()*#($
"-() " *#"l "$?u-(#- )(-u)# * "//o+l*'($. !n the present case, this date is
April (+, (94, and two years from this date would -e April (+, (9+. . . . As we
have earlier said in the THF ales case, ections +. 16 +9, 1= and 30 1; on
@uarterly Corporate !ncome Ta 'ayment and ection )1( should -e considered
in conjunction with it 19
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>hen the Acting Commissioner of !nternal "evenue issued "HC 3*, changing the
prescriptive period of two years to ten years on claims of ecess :uarterly income ta payments,
such circular created a clear inconsistency with the provision of ec. 1)0 of (933 N!"C. !n so
doing, the #!" did not simply interpret the law5 rather it legislated guidelines contrary to the
statute passed -y Congress.
!t -ears repeating that "evenue memorandumcirculars are considered administrative rulings %in
the sense of more specific and less general interpretations of ta laws& which are issued from
time to time -y the Commissioner of !nternal "evenue. !t is widely accepted that the
interpretation placed upon a statute -y the eecutive officers, whose duty is to enforce it, is
entitled to great respect -y the courts. Nevertheless, such interpretation is not conclusive and will
-e ignored if judicially found to -e erroneous.
20
Thus, courts will not countenance administrativeissuances that override, instead of remaining consistent and in harmony with the law they see$ to
apply and implement. 21
!n the case of People vs. +i!, 22 it was held that rules and regulations issued -y administrative
officials to implement a law cannot go -eyond the terms and provisions of the latter.
Appellant contends that ection 1 of 6A No. )3( is void -ecause it is not only
inconsistent with -ut is contrary to the provisions and spirit of Act. No 400) asamended, -ecause whereas the prohi-ition prescri-ed in said 6isheries Act was for
any single period of time not eceeding five years duration, 6A No )3( fied
no period, that is to say, it esta-lishes an a-solute -an for all time. This
discrepancy -etween Act No. 400) and 6A No. )3( was pro-a-ly due to an
oversight on the part of ecretary of Agriculture and Natural "esources. f
course, in case of discrepancy, the -asic Act prevails, for the reason that the
regulation or rule issued to implement a law cannot go -eyond the terms and
provisions of the
latter. . . . !n this connection, the attention of the technical men in the offices of
8epartment 7eads who draft rules and regulation is called to the importance and
necessity of closely following the terms and provisions of the law which they
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intended to implement, this to avoid any possi-le misunderstanding or confusion
as in the present case. 2:
6urther, fundamental is the rule that the tate cannot -e put in estoppel -y the mista$es or errors
of its officials or agents. 24 As pointed out -y the respondent courts, the nullification of "HC No.
3* issued -y the Acting Commissioner of !nternal "evenue is an administrative interpretation
which is not in harmony with ec. 1)0 of (933 N!"C. for -eing contrary to the epress provision
of a statute. 7ence, his interpretation could not -e given weight for to do so would, in effect,
amend the statute.
!t is li$ewise argued that the Commissioner of !nternal "evenue, after
promulgating "HC No. 3*, is estopped -y the principle of nonretroactively of
#!" rulings. Again >e do not agree. The Hemorandum Circular, stating that a
tapayer may recover the ecess income ta paid within (0 years from date of
payment -ecause this is an o-ligation created -y law, was issued -y the Acting
Commissioner of !nternal "evenue. n the other hand, the decision, stating that
the tapayer should still file a claim for a refund or ta credit and corresponding
petition fro review within the
twoyear prescription period, and that the lengthening of the period of limitation
on refund from two to ten years would -e adverse to pu-lic policy and run counter
to the positive mandate of ec. 1)0, N!"C, was the ruling and judicial
interpretation of the Court of Ta Appeals. ;stoppel has no application in the case
at -ar -ecause it was not the Commissioner of !nternal "evenue who denied
petitioners claim of refund or ta credit. "ather, it was the Court of Ta Appeals
who denied %al-eit correctly& the claim and in effect, ruled that the "HC No. 3*
issued -y the Commissioner of !nternal "evenue is an administrative
interpretation which is out of harmony with or contrary to the epress provision of
a statute %specifically ec. 1)0, N!"C&, hence, cannot -e given weight for to do so
would in effect amend the statute. 2<
Art. of the Civil Code 26 recogniJes judicial decisions, applying or interpreting statutes as part
of the legal system of the country. #ut administrative decisions do not enjoy that level of
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recognition. A memorandumcircular of a -ureau head could not operate to vest a tapayer with
shield against judicial action. 6or there are no vested rights to spea$ of respecting a wrong
construction of the law -y the administrative officials and such wrong interpretation could not
place the /overnment in estoppel to correct or overrule the same. 2= Horeover, the non
retroactivity of rulings -y the Commissioner of !nternal "evenue is not applica-le in this case
-ecause the nullity of "HC No. 3* was declared -y respondent courts and not -y the
Commissioner of !nternal "evenue. ?astly, it must -e noted that, as repeatedly held -y this
Court, a claim for refund is in the nature of a claim for eemption and should -e construed
in strictissi!i uris against the tapayer. 2;
O# -'( (/o#$ *u(, -'( +(-*-*o#() "ll(5( -'"- -'( Cou)- o A++("l ()*ouly ())($ *#
"*)*#5 CTA $(/**o# $(#y*#5 *- /l"* o) )(u#$ o P2:4,0==.69 3-" o()+"*$ *#19;6, "($ o# ()( +(/ul"-*o#, *-'ou- +)oo, -'"- PCo ""*l($ o -'( "u-o"-*/ -"
/)($*- *# 19;=.
ec. +9 of the (933 N!"C 29 %now ec. 3+ of the (993 N!"C& provides that any ecess of the
total :uarterly payments over the actual income ta computed in the adjustment or final
corporate income ta return, shall either %a& -e refunded to the corporation, or %-& may -e
credited against the estimated :uarterly income ta lia-ilities for the :uarters of the succeeding
taa-le year.
The corporation must signify in its annual corporate adjustment return %-y mar$ing the option
-o provided in the #!" form& its intention, whether to re:uest for a refund or claim for an
automatic ta credit for the succeeding taa-le year. To ease the administration of ta collection,
these remedies are in the alternative, and the choice of one precludes the other.
As stated -y respondent Court of Appeals=
6inally, as to the claimed refund of income ta overpaid in (9+ B the Court of
Ta Appeals, after eamining the adjusted final corporate annual income ta
return for taa-le year (9+, found out that petitioner opted to apply for automatic
ta credit. This was the -asis used %vis-avis the fact that the (93 annual corporate
ta return was not offered -y the petitioner as evidence& -y the CTA in concluding
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that petitioner had indeed availed of and applied the automatic ta credit to the
succeeding year, hence it can no longer as$ for refund, as to L sicM the two
remedies of refund and ta credit are alternative. :0
That the petitioner opted for an automatic ta credit in accordance with ec. +9 of the (933
N!"C, as specified in its (9+ 6inal Adjusted !ncome Ta "eturn, is a finding of fact which we
must respect. Horeover, the (93 annual corporate ta return of the petitioner was not offered as
evidence to contovert said fact. Thus, we are -ound -y the findings of fact -y respondent courts,
there -eing no showing of gross error or a-use on their part to distur- our reliance thereon. :1
>7;";6";, the, petition is here-y 8;N!;8, The decision of the Court of Appeals appealed
from is A66!"H;8, with CT against the petitioner.*phi.n/t
"8;";8.
"ellosillo, Puno, endoza, and "uena, JJ., concur.
G.R. No. L72:64< O/-o() 29, 196;
ENJAMIN P. GOMEH, petitionerappellee, vs. ENRICO PALOMAR, *# '* /"+"/*-y "
Po-"-() G(#()"l, BON. RIGI&O R. VALENCIA, *# '* /"+"/*-y " S(/)(-")y o Pul*/o)> "#$ Cou#*/"-*o#, "#$ &OMINGO GOPEH, *# '* /"+"/*-y " A/-*#5
Po-"-() o S"# F()#"#$o, P"+"#5", respondentappellants.
+orenzo P. Navarro and Narvaro "elar S. Navarro for petitioner-appellee.
0ffice of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General 1rine C. 2a)allero
and Solicitor 3o!inador +. 4uiroz for respondents-appellants.
CASTRO, J.:
This appeal puts in issue the constitutionality of "epu-lic Act (+)*,( as amended -y "epu-lic
Act 1+)(,1 which provides as follows=
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To help raise funds for the 'hilippine Tu-erculosis ociety, the 8irector of 'osts shall
order for the period from August nineteen to eptem-er thirty every year the printing and
issue of semipostal stamps of different denominations with face value showing the
regular postage charge plus the additional amount of five centavos for the said purpose,
and during the said period, no mail matter shall -e accepted in the mails unless it -ears
such semipostal stamps= Provided , That no such additional charge of five centavos shall
-e imposed on newspapers. The additional proceeds realiJed from the sale of the semi
postal stamps shall constitute a special fund and -e deposited with the National Treasury
to -e epended -y the 'hilippine Tu-erculosis ociety in carrying out its no-le wor$ to
prevent and eradicate tu-erculosis.
The respondent 'ostmaster /eneral, in implementation of the law, thereafter issued four %4&administrative orders num-ered ) %une 10, (9*&, 3 %August 9, (9*&, 9 %August 1, (9*&, and
(0 %uly (*, (9+0&. All these administrative orders were issued with the approval of the
respondent ecretary of 'u-lic >or$s and Communications.
The pertinent portions of Adm. rder ) read as follows=
uch semipostal stamps could not -e made availa-le during the period from August (9
to eptem-er )0, (9*3, for lac$ of time. 7owever, two denominations of such stamps,one at G* *G centavos and another at G(0 *G centavos, will soon -e released for use -y
the pu-lic on their mails to -e posted during the same period starting with the year (9*.
8uring the period from August (9 to eptem-er )0 each year starting in (9*, no mail
matter of whatever class, and whether domestic or foreign, posted at any 'hilippine 'ost
ffice and addressed for delivery in this country or a-road, shall -e accepted for mailing
unless it -ears at least one such semipostal stamp showing the additional value of five
centavos intended for the 'hilippine Tu-erculosis ociety.
!n the case of secondclass mails and mails prepaid -y means of mail permits or
impressions of postage meters, each piece of such mail shall -ear at least one such semi
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postal stamp if posted during the period a-ove stated starting with the year (9*, in
addition to -eing charged the usual postage prescri-ed -y eisting regulations. !n the case
of -usiness reply envelopes and cards mailed during said period, such stamp should -e
collected from the addressees at the time of delivery. Hails entitled to fran$ing privilege
li$e those from the office of the 'resident, mem-ers of Congress, and other offices to
which such privilege has -een granted, shall each also -ear one such semipostal stamp if
posted during the said period.
Hails posted during the said period starting in (9*, which are found in street or post
office mail -oes without the re:uired semipostal stamp, shall -e returned to the sender,
if $nown, with a notation calling for the affiing of such stamp. !f the sender is un$nown,
the mail matter shall -e treated as nonmaila-le and forwarded to the 8ead ?etter fficefor proper disposition.
Adm. rder 3, amending the fifth paragraph of Adm. rder ), reads as follows=
!n the case of the following categories of mail matter and mails entitled to fran$ing
privilege which are not eempted from the payment of the five centavos intended for the
'hilippine Tu-erculosis ociety, such etra charge may -e collected in cash, for which
official receipt %/eneral 6orm No. (), A& shall -e issued, instead of affiing the semi postal stamp in the manner hereinafter indicated=
(. Second-class !ail . B Aside from the postage at the secondclass rate, the etra charge
of five centavos for the 'hilippine Tu-erculosis ociety shall -e collected on each
separatelyaddressed piece of secondclass mail matter, and the total sum thus collected
shall -e entered in the same official receipt to -e issued for the postage at the second
class rate. !n ma$ing such entry, the total num-er of pieces of secondclass mail posted
shall -e stated, thus= GTotal charge for T# 6und on (00 pieces . .. '*.00.G The etra
charge shall -e entered separate from the postage in -oth of the official receipt and the
"ecord of Collections.
1. 1irst-class and third-class !ail per!its. B Hails to -e posted without postage affied
under permits issued -y this #ureau shall each -e charged the usual postage, in addition
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to the fivecentavo etra charge intended for said society. The total etra charge thus
received shall -e entered in the same official receipt to -e issued for the postage
collected, as in su-paragraph (.
). etered !ail . B 6or each piece of mail matter impressed -y postage meter under
metered mail permit issued -y this #ureau, the etra charge of five centavos for said
society shall -e collected in cash and an official receipt issued for the total sum thus
received, in the manner indicated in su-paragraph (.
4. "usiness repl$ cards and envelopes. B Dpon delivery of -usiness reply cards and
envelopes to holders of -usiness reply permits, the fivecentavo charge intended for said
society shall -e collected in cash on each reply card or envelope delivered, in addition to
the re:uired postage which may also -e paid in cash. An official receipt shall -e issued
for the total postage and total etra charge received, in the manner shown in su-paragraph
(.
*. ails entitled to fran5ing privilege. B /overnment agencies, officials, and other
persons entitled to the fran$ing privilege under eisting laws may pay in cash such etra
charge intended for said society, instead of affiing the semipostal stamps to their mails,
provided that such mails are presented at the postoffice window, where the fivecentavoetra charge for said society shall -e collected on each piece of such mail matter. !n such
case, an official receipt shall -e issued for the total sum thus collected, in the manner
stated in su-paragraph (.
Hail under permits, metered mails and fran$ed mails not presented at the postoffice
window shall -e affied with the necessary semipostal stamps. !f found in mail -oes
without such stamps, they shall -e treated in the same way as herein provided for other
mails.
Adm. rder 9, amending Adm. rder ), as amended, eempts G/overnment and its Agencies and
!nstrumentalities 'erforming /overnmental 6unctions.G Adm. rder (0, amending Adm. rder
), as amended, eempts Gcopies of periodical pu-lications received for mailing under any class
of mail matter, including newspapers and magaJines admitted as secondclass mail.G
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The FACTS . n eptem-er l*, (9+) the petitioner #enjamin '. /omeJ mailed a letter at the post
office in an 6ernando, 'ampanga. #ecause this letter, addressed to a certain Agustin A:uino of
(0(4 8agohoy treet, ingalong, Hanila did not -ear the special antiT# stamp re:uired -y the
statute, it was returned to the petitioner.
!n view of this development, the petitioner -rough suit for declaratory relief in the Court of 6irst
!nstance of 'ampanga, to test the constitutionality of the statute, as well as the implementing
administrative orders issued, contending that it violates the e:ual protection clause of the
Constitution as well as the rule of uniformity and e:uality of taation. The lower court declared
the statute and the orders unconstitutional5 hence this appeal -y the respondent postal authorities.
6or the reasons set out in this opinion, the judgment appealed from must -e reversed.
I.
#efore reaching the merits, we deem it necessary to dispose of the respondents contention that
declaratory relief is unavailing -ecause this suit was filed after the petitioner had committed a
-reach of the statute. >hile conceding that the mailing -y the petitioner of a letter without the
additional antiT# stamp was a violation of "epu-lic Act (+)*, as amended, the trial court
nevertheless refused to dismiss the action on the ground that under section + of "ule +4 of the
"ules of Court, G!f -efore the final termination of the case a -reach or violation of ... a statute ...
should ta$e place, the action may thereupon -e converted into an ordinary action.G
The prime specification of an action for declaratory relief is that it must -e -rought G-efore
-reach or violationG of the statute has -een committed. "ule +4, section ( so provides. ection +
of the same rule, which allows the court to treat an action for declaratory relief as an ordinary
action, applies only if the -reach or violation occurs after the filing of the action -ut -efore the
termination thereof.)
7ence, if, as the trial court itself admitted, there had -een a -reach of the statute -efore the firing
of this action, then indeed the remedy of declaratory relief cannot -e availed of, much less can
the suit -e converted into an ordinary action.
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Nor is there merit in the petitioners argument that the mailing of the letter in :uestion did not
constitute a -reach of the statute -ecause the statute appears to -e addressed only to postal
authorities. The statute, it is true, in terms provides that Gno mail matter shall -e accepted in the
mails unless it -ears such semipostal stamps.G !t does not follow, however, that only postal
authorities can -e guilty of violating it -y accepting mails without the payment of the antiT#
stamp. !t is o-vious that they can -e guilty of violating the statute only if there are people who
use the mails without paying for the additional antiT# stamp. ust as in -ri-ery the mere offer
constitutes a -reach of the law, so in the matter of the antiT# stamp the mere attempt to use the
mails without the stamp constitutes a violation of the statute. !t is not re:uired that the mail -e
accepted -y postal authorities. That re:uirement is relevant only for the purpose of fiing the
lia-ility of postal officials.
Nevertheless, we are of the view that the petitioners choice of remedy is correct -ecause this suit
was filed not only with respect to the letter which he mailed on eptem-er (*, (9+), -ut also
with regard to any other mail that he might send in the future. Thus, in his complaint, the
petitioner prayed that due course -e given to Gother mails without the semipostal stamps which
he may deliver for mailing ... if any, during the period covered -y "epu-lic Act (+)*, as
amended, as well as other mails hereafter to -e sent -y or to other mailers which -ear the
re:uired postage, without collection of additional charge of five centavos prescri-ed -y the same
"epu-lic Act.G As one whose mail was returned, the petitioner is certainly interested in a ruling
on the validity of the statute re:uiring the use of additional stamps.
II.
>e now consider the constitutional o-jections raised against the statute and the implementing
orders.
(. !t is said that the statute is violative of the e:ual protection clause of the Constitution. Hore
specifically the claim is made that it constitutes mail users into a class for the purpose of the ta
while leaving untaed the rest of the population and that even among postal patrons the statute
discriminatorily grants eemption to newspapers while Administrative rder 9 of the respondent
'ostmaster /eneral grants a similar eemption to offices performing governmental functions. .
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The five centavo charge levied -y "epu-lic Act (+)*, as amended, is in the nature of an ecise
ta, laid upon the eercise of a privilege, namely, the privilege of using the mails. As such the
o-jections levelled against it must -e viewed in the light of applica-le principles of taation.
To -egin with, it is settled that the legislature has the inherent power to select the su-jects of
taation and to grant eemptions.4 This power has aptly -een descri-ed as Gof wide range and
flei-ility.G* !ndeed, it is said that in the field of taation, more than in other areas, the legislature
possesses the greatest freedom in classification.+ The reason for this is that traditionally,
classification has -een a device for fitting ta programs to local needs and usages in order to
achieve an e:uita-le distri-ution of the ta -urden.3
That legislative classifications must -e reasona-le is of course undenied. #ut what the petitioner
asserts is that statutory classification of mail users must -ear some reasona-le relationship to the
end sought to -e attained, and that a-sent such relationship the selection of mail users is
constitutionally impermissi-le. This is altogether a different proposition. As eplained
in Co!!on*ealth v. +ife Assurance Co.=
>hile the principle that there must -e a reasona-le relationship -etween classification
made -y the legislation and its purpose is undou-tedly true in some contets, it has no
application to a measure whose sole purpose is to raise revenue ... o long as theclassification imposed is -ased upon some standard capa-le of reasona-le
comprehension, -e that standard -ased upon a-ility to produce revenue or some other
legitimate distinction, e:ual protection of the law has -een afforded. ee Allied tores of
hio, !nc. v. #owers, supra, )* D.. at *13, 39 . Ct. at 44(5 #rown 6orman Co. v.
Commonwealth of Oentuc$y, 1d D.. *+, *3), 0 . Ct. *3, *0 %(9(0&.
( ")( #o- o#- -o *#"l*$"-( l(5*l"-*o# o# (8u"l +)o-(/-*o# 5)ou#$ (/(+- y -'( /l(")(-
$(o#-)"-*o# -'"- *- "#/-*o# *#*$*ou $*/)**#"-*o#, '*/' * "ll -'"- -'( Co#-*-u-*o#
o)*$. T'( )(($y o) u#*( l(5*l"-*o# u- ( ou5'- *# -'( l(5*l"-u)(. No, -'(
/l"**/"-*o# o "*l u() * #o- *-'ou- "#y )("o#. I- * "($ o# "*l*-y -o +"y, l(- "lo#(
-'( (#?oy(#- o " +)**l(5(, "#$ o# "$*#*-)"-*( /o#*#*(#/(. I# -'( "llo/"-*o# o -'( -"
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u)$(#, Co#5)( u- '"( /o#/lu$($ -'"- -'( /o#-)*u-*o# -o -'( "#-*7T u#$ /"# (
"u)($ y -'o( 'o( 'o /"# "o)$ -'( u( o -'( "*l.
T'( /l"**/"-*o# * l*>(*( "($ o# /o#*$()"-*o# o "$*#*-)"-*( /o#(#*(#/(. Fo) *-
* #o " (--l($ +)*#/*+l( o l" -'"- /o#*$()"-*o# o +)"/-*/"l "$*#*-)"-*( /o#(#*(#/(
"#$ /o- *# -'( "$*#*-)"-*o# o -" l" "o)$ "$(8u"-( 5)ou#$ o) *+o*#5 " -" o# "
(ll )(/o5#*@($ "#$ $(*#($ /l".9 I# -'( /"( o -'( "#-*7T -"+, u#$ou-($ly, -'(
*#5l( o- *+o)-"#- "#$ *#lu(#-*"l /o#*$()"-*o# -'"- l($ -'( l(5*l"-u)( -o (l(/- "*l
u() " u?(/- o -'( -" * -'( )(l"-*( ("( "#$ /o#(#*(#/(o /oll(/-*#5 -'( -" -')ou5'
-'( +o- o*/(. T'( "ll "ou#- o *( /(#-"o $o( #o- ?u-*y -'( 5)("- (+(#( "#$
*#/o#(#*(#/( o /oll(/-*#5 -')ou5' -'( )(5ul") ("# o /oll(/-*o#. O# -'( o-'() '"#$, y
+l"/*#5 -'( $u-y o /oll(/-*o# o# +o-"l "u-'o)*-*( -'( -" " "$( "lo- (l7(#o)/*#5,*-' " l*--l( /o- "#$ " l*--l( *#/o#(#*(#/( " +o*l(.
And then of course it is not accurate to say that the statute constituted mail users into a class.
Hail users were already a class -y themselves even -efore the enactment of the statue and all
that the legislature did was merely to select their class. ?egislation is essentially empiric and
"epu-lic Act (+)*, as amended, no more than reflects a distinction that eists in fact. As Hr.
ustice 6ran$furter said, Gto recogniJe differences that eist in fact is living law5 to disregard
LthemM and concentrate on some a-stract identities is lifeless logic.G(0
G)"#-($ -'( +o() -o (l(/- -'( u?(/- o -""-*o#, -'( S-"-( +o() -o 5)"#- ((+-*o#
u- l*>(*( ( /o#/($($ " " #(/(")y /o)oll")y. T" ((+-*o# ")( -oo /oo# *# -'(
l" -'(y '"( #(() ((# -'ou5'- o " )"**#5 *u( u#$() -'( (8u"l +)o-(/-*o# /l"u(.
!t is thus erroneous for the trial court to hold that -ecause certain mail users are eempted from
the levy the law and administrative officials have sanctioned an invidious discrimination
offensive to the Constitution. The application of the lower courts theory would re:uire all mail
users to -e taed, a conclusion that is hardly tena-le in the light of differences in status of mail
users. The Constitution does not re:uire this $ind of e:uality.
As the Dnited tates upreme Court has said, the legislature may withhold the -urden of the ta
in order to foster what it conceives to -e a -eneficent enterprise. (( This is the case of newspapers
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which, under the amendment introduced -y "epu-lic Act 1+)(, are eempt from the payment of
the additional stamp.
A o) -'( Go()#(#- "#$ *- *#-)u(#-"l*-*(, -'(*) ((+-*o# )(- o# -'( S-"-(
o()(*5# *u#*-y )o -""-*o#. T'( S-"-( /"##o- ( -"($ *-'ou- *- /o#(#- "#$ u/'
/o#(#-, (*#5 *# $()o5"-*o# o *- o()(*5#-y, * -o ( -)*/-ly /o#-)u($.12 A$*#*-)"-*(
O)$() 9 o -'( )(+o#$(#- Po-"-() G(#()"l, '*/' l*- -'( ")*ou o*/( "#$
*#-)u(#-"l*-*( o -'( Go()#(#- ((+- )o -'( +"y(#- o -'( "#-*7T -"+, * u-
" )(-"-((#- o -'* (ll7>#o# +)*#/*+l( o /o#-*-u-*o#"l l".
The trial court li$ewise held the law invalid on the ground that it singles out tu-erculosis to the
eclusion of other diseases which, it is said, are e:ually a menace to pu-lic health. #ut it is never
a re:uirement of e:ual protection that all evils of the same genus -e eradicated or none at
all.() As this Court has had occasion to say, Gif the law presuma-ly hits the evil where it is most
felt, it is not to -e overthrown -ecause there are other instances to which it might have -een
applied.G(4
1. The petitioner further argues that the ta in :uestion is invalid, first, -ecause it is not levied for
a pu-lic purpose as no special -enefits accrue to mail users as tapayers, and second, -ecause it
violates the rule of uniformity in taation.
The eradication of a dreaded disease is a pu-lic purpose, -ut if -y pu-lic purpose the petitioner
means -enefit to a tapayer as a return for what he pays, then it is sufficient answer to say that
the only -enefit to which the tapayer is constitutionally entitled is that derived from his
enjoyment of the privileges of living in an organiJed society, esta-lished and safeguarded -y the
devotion of taes to pu-lic purposes. Any other view would preclude the levying of taes ecept
as they are used to compensate for the -urden on those who pay them and would involve the
a-andonment of the most fundamental principle of government B that it eists primarily to
provide for the common good.(*
Nor is the rule of uniformity and e:uality of taation infringed -y the imposition of a flat rate
rather than a graduated ta. A ta need not -e measured -y the weight of the mail or the etent of
the service rendered. >e have said that considerations of administrative convenience and cost
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afford an ade:uate ground for classification. The same considerations may induce the legislature
to impose a flat ta which in effect is a charge for the transaction, operating e:ually on all
persons within the class regardless of the amount involved.(+ As Hr. ustice 7olmes said in
sustaining the validity of a stamp act which imposed a flat rate of two cents on every P(00 face
value of stoc$ transferred=
ne of the stoc$s was worth P)0.3* a share of the face value of P(00, the other P(31. The
ine:uality of the ta, so far as actual values are concerned, is manifest. #ut, here again
e:uality in this sense has to yield to practical considerations and usage. There must -e a
fied and indisputa-le mode of ascertaining a stamp ta. !n another sense, moreover,
there is e:uality. >hen the taes on two sales are e:ual, the same num-er of shares is
sold in each case5 that is to say, the same privilege is used to the same etent. Ialuation isnot the only thing to -e considered. As was pointed out -y the court of appeals, the
familiar stamp ta of 1 cents on chec$s, irrespective of income or earning capacity, and
many others, illustrate the necessity and practice of sometimes su-stituting count for
weight ...(3
A//o)$*#5 -o -'( -)*"l /ou)-, -'( o#(y )"*($ )o -'( "l( o -'( "#-*7T -"+ * +(#-
o) -'( (#(*- o -'( P'*l*++*#( Tu()/ulo* So/*(-y, " +)*"-( o)5"#*@"-*o#, *-'ou-
"++)o+)*"-*o# y l". u- " -'( Sol*/*-o) G(#()"l +o*#- ou-, -'( So/*(-y * #o- )("lly -'(
(#(*/*")y u- o#ly -'( "5(#/y -')ou5' '*/' -'( S-"-( "/- *# /"))y*#5 ou- '"- *
((#-*"lly " +ul*/ u#/-*o#. T'( o#(y * -)("-($ " " +(/*"l u#$ "#$ " u/' #(($ #o- (
"++)o+)*"-($ y l".1;
). 6inally, the claim is made that the statute is so -roadly drawn that to eecute it the respondents
had to issue administrative orders far -eyond their powers. !ndeed, this is one of the grounds on
which the lower court invalidated "epu-lic Act (+)(, as amended, namely, that it constitutes an
undue delegation of legislative power.
Administrative rder ), as amended -y Administrative rders 3 and (0, provides that for certain
classes of mail matters %such as mail permits, metered mails, -usiness reply cards, etc.&, the five
centavo charge may -e paid in cash instead of the purchase of the antiT# stamp. !t further states
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that mails deposited during the period August (9 to eptem-er )0 of each year in mail -oes
without the stamp should -e returned to the sender, if $nown, otherwise they should -e treated as
nonmaila-le.
!t is true that the law does not epressly authoriJe the collection of five centavos ecept through
the sale of antiT# stamps, -ut such authority may -e implied in so far as it may -e necessary to
prevent a failure of the underta$ing. The authority given to the 'ostmaster /eneral to raise funds
through the mails must -e li-erally construed, consistent with the principle that where the end is
re:uired the appropriate means are given.(9
The antiT# stamp is a distinctive stamp which shows on its face not only the amount of the
additional charge -ut also that of the regular postage. !n the case of -usiness reply cards, for
instance, it is o-vious that to re:uire mailers to affi the antiT# stamp on their cards would -e to
ma$e them pay much more -ecause the cards li$ewise -ear the amount of the regular postage.
!t is li$ewise true that the statute does not provide for the disposition of mails which do not -ear
the antiT# stamp, -ut a declaration therein that Gno mail matter shall -e accepted in the mails
unless it -ears such semipostal stampG is a declaration that such mail matter is nonmaila-le
within the meaning of section (9*1 of the Administrative Code. Administrative rder 3 of the
'ostmaster /eneral is -ut a restatement of the law for the guidance of postal officials andemployees. As for Administrative rder 9, we have already said that in listing the offices and
entities of the /overnment eempt from the payment of the stamp, the respondent 'ostmaster
/eneral merely o-served an esta-lished principle, namely, that the /overnment is eempt from
taation.
ACC"8!N/?<, the judgment a 6uo is reversed, and the complaint is dismissed, without
pronouncement as to costs.
Concepcion, C.J., e$es, J.".+., 3izon, a5alintal, Sanchez, Angeles and Capistrano,
JJ., concur.
2aldivar, J., is on leave.
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G.R. No. L7416:1 &(/(() 1=, 19=6
BON. RAMON &. AGATSING, " M"yo) o -'( C*-y o M"#*l" ROMAN G.
GARGANTIEL, " S(/)(-")y -o -'( M"yo) TBE MAR!ET A&MINISTRATOR "#$
TBE MUNICIPAL OAR& OF MANILA, petitioners, vs. BON. PE&RO A. RAMIREH, *#
'* /"+"/*-y " P)(*$*#5 Ju$5( o -'( Cou)- o F*)- I#-"#/( o M"#*l", )"#/' %%% "#$
-'( FE&ERATION OF MANILA MAR!ET VEN&ORS, INC., respondents.
Santiago 1. Alidio and estituto . 7illanueva for petitioners.
Antonio 8. A)ad, Jr. for private respondent.
1ederico A. "la$ for petitioner for intervention.
MARTIN, J.:
The chief :uestion to -e decided in this case is what law shall govern the pu-lication of a ta
ordinance enacted -y the Hunicipal #oard of Hanila, the "evised City Charter %".A. 409, as
amended&, which re:uires pu-lication of the ordinance -efore its enactment and after its
approval, or the ?ocal Ta Code %'.8. No. 1)(&, which only demands pu-lication after approval.
n une (1, (934, the Hunicipal #oard of Hanila enacted rdinance No. 3*11, GAN
"8!NANC; ";/D?AT!N/ T7; ';"AT!N 6 'D#?!C HA"O;T AN8
'";C"!#!N/ 6;; 6" T7; ";NTA? 6 TA?? AN8 '"I!8!N/ ';NA?T!;
6" I!?AT!N T7;";6 AN8 6" T7;" 'D"';.G The petitioner City Hayor,
"amon 8. #agatsing, approved the ordinance on une (*, (934.
n 6e-ruary (3, (93*, respondent 6ederation of Hanila Har$et Iendors, !nc. commenced Civil
Case 9+33 -efore the Court of 6irst !nstance of Hanila presided over -y respondent udge,
see$ing the declaration of nullity of rdinance No. 3*11 for the reason that %a& the pu-lication
re:uirement under the "evised Charter of the City of Hanila has not -een complied with5 %-& the
Har$et Committee was not given any participation in the enactment of the ordinance, as
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envisioned -y "epu-lic Act +0)95 %c& ection ) %e& of the Anti/raft and Corrupt 'ractices Act
has -een violated5 and %d& the ordinance would violate 'residential 8ecree No. 3 of eptem-er
)0, (931 prescri-ing the collection of fees and charges on livestoc$ and animal products.
"esolving the accompanying prayer for the issuance of a writ of preliminary injunction,
respondent udge issued an order on Harch ((, (93*, denying the plea for failure of the
respondent 6ederation of Hanila Har$et Iendors, !nc. to ehaust the administrative remedies
outlined in the ?ocal Ta Code.
After due hearing on the merits, respondent udge rendered its decision on August 19, (93*,
declaring the nullity of rdinance No. 3*11 of the City of Hanila on the primary ground of non
compliance with the re:uirement of pu-lication under the "evised City Charter. "espondent
udge ruled=
There is, therefore, no :uestion that the ordinance in :uestion was not pu-lished
at all in two daily newspapers of general circulation in the City of Hanila -efore
its enactment. Neither was it pu-lished in the same manner after approval,
although it was posted in the legislative hall and in all city pu-lic mar$ets and city
pu-lic li-raries. There -eing no compliance with the mandatory re:uirement of
pu-lication -efore and after approval, the ordinance in :uestion is invalid and,therefore, null and void.
'etitioners moved for reconsideration of the adverse decision, stressing that %a& only a post
pu-lication is re:uired -y the ?ocal Ta Code5 and %-& private respondent failed to ehaust all
administrative remedies -efore instituting an action in court.
n eptem-er 1+, (93*, respondent udge denied the motion.
6orthwith, petitioners -rought the matter to Ds through the present petition for review on
certiorari.
>e find the petition impressed with merits.
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(. The ne#us of the present controversy is the apparent conflict -etween the "evised Charter of
the City of Hanila and the ?ocal Ta Code on the manner of pu-lishing a ta ordinance enacted
-y the Hunicipal #oard of Hanila. 6or, while ection (3 of the "evised Charter provides=
9ach proposed ordinance shall -e pu-lished in two daily newspapers of general
circulation in the city, and shall not -e discussed or enacted -y the #oard until
after the third day following such pu-lication. 9ach approved ordinance
shall -e pu-lished in two daily newspapers of general circulation in the city,
within ten days after its approval5 and shall ta$e effect and -e in force on and after
the twentieth day following its pu-lication, if no date is fied in the ordinance.
ection 4) of the ?ocal Ta Code directs=
>ithin ten days after their approval , certified true copies of all provincial, city,
municipal and -arrioordinances lev$ing or i!posing ta#es, fees or other
charges shall -e pu-lished for three consecutive days in a newspaper or
pu-lication 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. !n either case,
copies of all provincial, city, municipal and -arrio ordinances shall -e furnishedthe treasurers of the respective component and mother units of a local government
for dissemination.
!n other words, while the "evised Charter of the City of Hanila re:uires pu-lication )efore the
enactment of the ordinance and after the approval thereof in two daily newspapers of general
circulation in the city, the ?ocal Ta Code only prescri-es for pu-lication after the approval of
Gordinances lev$ing or i!posing ta#es, fees or other chargesG either in a newspaper or
pu-lication widely circulated within the jurisdiction of the local government or -y posting the
ordinance in the local legislative hall or premises and in two other conspicuous places within the
territorial jurisdiction of the local government. 'etitioners compliance with the ?ocal Ta Code
rather than with the "evised Charter of the City spawned this litigation.
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There is no :uestion that the "evised Charter of the City of Hanila is a special act since it relates
only to the City of Hanila, whereas the ?ocal Ta Code is a general law -ecause it applies
universally to all local governments. #lac$stone 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. 1 And the rule commonly said is that a prior special law is not ordinarily repealed -y a
su-se:uent general law. The fact that one is special and the other general creates a presumption
that the special is to -e considered as remaining an eception of the general, one as a general law
of the land, the other as the law of a particular case. 2 7owever, the rule readily yields to a
situation where the special statute refers to a su-ject in general, which the general statute treats
in particular . The eactly is the circumstance o-taining in the case at -ar. ection (3 of the
"evised Charter of the City of Hanila spea$s of GordinanceG in general, i.e., irrespective of the
nature and scope thereof,*hereas, ection 4) of the ?ocal Ta Code relates to Gordinances
levying or imposing taes, fees or other chargesG in particular. !n regard, therefore, to ordinances
in general, the "evised Charter of the City of Hanila is dou-tless dominant, -ut, that dominant
force loses its continuity when it approaches the realm of Gordinances levying or imposing taes,
fees or other chargesG in particular. There, the ?ocal Ta Code controls. 7ere, as always, a
general provision must give way to a particular provision. : pecial provision governs. 4 This is
especially true where the law containing the particular provision was enacted later than the one
containing the general provision. The City Charter of Hanila was promulgated on une (, (949
as against the ?ocal Ta Code which was decreed on une (, (93). The lawma$ing power
cannot -e said to have intended the esta-lishment of conflicting and hostile systems upon the
same su-ject, or to leave in force provisions of a prior law -y which the new will of the
legislating power may -e thwarted and overthrown. uch a result would render legislation a
useless and !dle ceremony, and su-ject the law to the reproach of uncertainty and
unintelligi-ility. <
The case of Cit$ of anila v. Teotico 6 is opposite. !n that case, Teotico sued the City of Hanila
for damages arising from the injuries he suffered when he fell inside an uncovered and unlighted
catch-asin or manhole on '. #urgos Avenue. The City of Hanila denied lia-ility on the -asis of
the City Charter %".A. 409& eempting the City of Hanila from any lia-ility for damages or
injury to persons or property arising from the failure of the city officers to enforce the provisions
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of the charter or any other law or ordinance, or from negligence of the City Hayor, Hunicipal
#oard, or other officers while enforcing or attempting to enforce the provisions of the charter or
of any other law or ordinance. Dpon the other hand, Article 1(9 of the Civil Code ma$es cities
lia-le for damages for the death of, or injury suffered -y any persons -y reason of the defective
condition of roads, streets, -ridges, pu-lic -uildings, and other pu-lic wor$s under their control
or supervision. n review, the Court held the Civil Code controlling. !t is true that, insofar as its
territorial application is concerned, the "evised City Charter is a special law and the su-ject
matter of the two laws, the "evised City Charter esta-lishes a general rule of lia-ility arising
from negligence in general, regardless of the o-ject thereof, whereas the Civil Code constitutes a
particular prescription for lia-ility due to defective streets in particular. !n the same manner, the
"evised Charter of the City prescri-es a rule for the pu-lication of GordinanceG in general , while
the ?ocal Ta Code esta-lishes a rule for the pu-lication of Gordinance levying or imposing taes
fees or other charges in particular .
!n fact, there is no rule which prohi-its the repeal even -y implication of a special or specific act
-y a general or -road one. = A charter provision may -e impliedly modified or superseded -y a
later statute, and where a statute is controlling, it must -e read into the charter notwithstanding
any particular charter provision. ; A su-se:uent general law similarly applica-le to all cities
prevails over any conflicting charter provision, for the reason that a charter must not -e
inconsistent with the general laws and pu-lic policy of the state. 9 A chartered city is not an
independent sovereignty. The state remains supreme in all matters not purely local. therwise
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 -ut to which it must yield. >hen a city adopts a charter, it in effect adopts as part of its
charter general law of such character. 10
1. The principle of ehaustion of administrative remedies is strongly asserted -y petitioners as
having -een violated -y private respondent in -ringing a direct suit in court. This is -ecause
ection 43 of the ?ocal Ta Code provides that any :uestion or issue raised against the legality
of any ta ordinance, or portion thereof, shall -e referred for opinion to the city fiscal in the case
of ta ordinance of a city. The opinion of the city fiscal is appeala-le to the ecretary of ustice,
whose decision shall -e final and eecutory unless contested -efore a competent court within
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thirty %)0& days. #ut, the petition -elow plainly shows that the controversy -etween the parties is
deeply rooted in a pure :uestion of law= whether it is the "evised Charter of the City of Hanila
or the ?ocal Ta Code that should govern the pu-lication of the ta ordinance. !n other words,
the dispute is sharply focused on the applica-ility of the "evised City Charter or the ?ocal Ta
Code on the point at issue, and not on the legality of the imposition of the ta. ;haustion of
administrative remedies -efore resort to judicial -odies is not an a-solute rule. !t admits of
eceptions. >here the :uestion litigated upon is purely a legal one, the rule does not
apply. 11 The principle may also -e disregarded when it does not provide a plain, speedy and
ade:uate remedy. !t may and should -e relaed when its application may cause great and
irrepara-le damage. 12
). !t is maintained -y private respondent that the su-ject ordinance is not a Gta ordinance,G -ecause the imposition of rentals, permit fees, tolls and other fees is not strictly a taing power
-ut a revenueraising function, so that the procedure for pu-lication under the ?ocal Ta Code
finds no application. The pretense -ears its own mar$s of fallacy. 'recisely, the raising of
revenues is the principal o-ject of taation. Dnder ection *, Article F! of the New Constitution,
G;ach local government unit shall have the power to create its own sources of revenue and to
levy taes, su-ject to such provisions as may -e provided -y law.G 1: And one of those sources of
revenue is what the ?ocal Ta Code points to in particular= G?ocal governments may collect fees
or rentals for the occupancy or use of pu-lic mar$ets and premises .G 14 They can provide for
and regulate mar$et stands, stalls and privileges, and, also, the sale, lease or occupancy thereof.
They can license, or permit the use of, lease, sell or otherwise dispose of stands, stalls or
mar$eting privileges. 1<
!t is a fee-le attempt to argue that the ordinance violates 'residential 8ecree No. 3, dated
eptem-er )0, (931, insofar as it affects livestoc$ and animal products, -ecause the said decree
prescri-es the collection of other fees and charges thereon Gwith the eception of antemortem
and postmortem inspection fees, as well as the delivery, stoc$yard and slaughter fees as may -e
authoriJed -y the ecretary of Agriculture and Natural "esources.G 16Clearly, even the eception
clause of the decree itself permits the collection of the proper fees for livestoc$. And the ?ocal
Ta Code %'.8. 1)(, uly (, (93)& authoriJes in its ection )(= G?ocal governments may collect
fees for the slaughter of animals and the use of corrals G
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4. The nonparticipation of the Har$et Committee in the enactment of rdinance No. 3*11
supposedly in accordance with "epu-lic Act No. +0)9, an amendment to the City Charter of
Hanila, providing that Gthe mar$et committee shall formulate, recommend and adopt, su)ect to
the ratification of the !unicipal )oard, and approval of the !a$or , policies and rules or
regulation repealing or maneding eisting provisions of the mar$et codeG does not infect the
ordinance with any germ of invalidity. 1= The function of the committee is purely
recommendatory as the underscored phrase suggests, its recommendation is without -inding
effect on the Hunicipal #oard and the City Hayor. !ts prior ac:uiescence of an intended or
proposed city ordinance is not a condition sine :ua non -efore the Hunicipal #oard could enact
such ordinance. The native power of the Hunicipal #oard to legislate remains undistur-ed even
in the slightest degree. !t can move in its own initiative and the Har$et Committee cannot demur.
At most, the Har$et Committee may serve as a legislative aide of the Hunicipal #oard in the
enactment of city ordinances affecting the city mar$ets or, in plain words, in the gathering of the
necessary data, studies and the collection of consensus for the proposal of ordinances regarding
city mar$ets. Huch less could it -e said that "epu-lic Act +0)9 intended to delegate to the
Har$et Committee the adoption of regulatory measures for the operation and administration of
the city mar$ets. Potestas delegata non delegare potest .
*. P)*"-( )(+o#$(#- ("*l -'"- -'( ")>(- -"ll (( *+o($ *# -'( $*+u-($ o)$*#"#/(
")( $*()-($ -o -'( (/lu*( +)*"-( u( o -'( A*"-*/ I#-(5)"-($ Co)+o)"-*o# *#/( -'(
/oll(/-*o# o "*$ (( '"$ ((# l(- y -'( C*-y o M"#*l" -o -'( "*$ /o)+o)"-*o# *# "
M"#"5((#- "#$ O+()"-*#5 Co#-)"/-. T'( "u+-*o# * o /ou)( "$$l($ o# ())o#(ou
+)(*(. T'( (( /oll(/-($ $o #o- 5o $*)(/- -o -'( +)*"-( /o() o -'( /o)+o)"-*o#.
O)$*#"#/( No. =<22 " #o- "$( o) -'( /o)+o)"-*o# u- o) -'( +u)+o( o )"**#5
)((#u( o) -'( /*-y. T'"- * -'( o?(/- *- ()(. T'( (#-)u-*#5 o -'( /oll(/-*o# o -'( ((
$o( #o- $(-)oy -'( +ul*/ +u)+o( o -'( o)$*#"#/(. So lo#5 " -'( +u)+o( * +ul*/, *-
$o( #o- "--() '(-'() -'( "5(#/y -')ou5' '*/' -'( o#(y * $*+(#($ * +ul*/ o)
+)*"-(. T'( )*5'- -o -" $(+(#$ u+o# -'( ul-*"-( u(, +u)+o( "#$ o?(/- o) '*/' -'(
u#$ * )"*($. I- * #o- $(+(#$(#- o# -'( #"-u)( o) /'")"/-() o -'( +()o# o) /o)+o)"-*o#
'o( *#-()($*"-( "5(#/y * -o ( u($ *# "++ly*#5 *-. T'( +(o+l( "y ( -"($ o) "
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+ul*/ +u)+o(, "l-'ou5' *- ( u#$() -'( $*)(/-*o# o "# *#$**$u"l o) +)*"-(
/o)+o)"-*o#. 1;
Nor can the ordinance -e stric$en down as violative of ection )%e& of the Anti/raft and Corrupt
'ractices Act -ecause the increased rates of mar$et stall fees as levied -y the ordinance will
necessarily inure to the unwarranted -enefit and advantage of the corporation. 19 >e are
concerned only with the issue whether the ordinance in :uestion is intra vires. nce determined
in the affirmative, the measure may not -e invalidated -ecause of conse:uences that may arise
from its enforcement. 20
ACC"8!N/?<, the decision of the court -elow is here-y reversed and set aside. rdinance
No. 3*11 of the City of Hanila, dated une (*, (93*, is here-y held to have -een validly enacted.
No. costs.
"8;";8.
Castro, C.J., "arredo, a5asiar, Antonio, u:oz Pal!a, A6uino and Concepcion, Jr., JJ.,
concur.
Teehan5ee, J., reserves his vote.
G.R. No. L729646 No(() 10, 19=;
MAYOR ANTONIO J. VILLEGAS, petitioner, vs. BIU CBIONG TSAI PAO BO "#$
JU&GE FRANCISCO ARCA, respondents.
Angel C. Cruz, Gregorio A. 9ercito, 1eli# C. Chaves & Jose +aureta for petitioner.
Sotero 8. +aurel for respondents.
FERNAN&EH, J.:
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This is a petition for certiorari to review tile decision dated eptem-er (3, (9+ of respondent
udge 6rancisco Arca of the Court of 6irst !nstance of Hanila, #ranch !, in Civil Case No.
31393, the dispositive portion of winch reads.
>herefore, judgment is here-y rendered in favor of the petitioner and against the
respondents, declaring rdinance No. + )3 of the City of Hanila null and void.
The preliminary injunction is made permanent. No pronouncement as to cost.
"8;";8.
Hanila, 'hilippines, eptem-er (3, (9+.
gd. Arca, udge
The controverted rdinance No. +*)3 was passed -y the Hunicipal #oard of Hanila on
6e-ruary 11, (9+ and signed -y the herein petitioner Hayor Antonio . Iillegas of Hanila on
Harch 13, (9+. 2
City rdinance No. +*)3 is entitled=
AN "8!NANC; HAO!N/ !T DN?A>6D? 6" AN< ';"N NT A
C!T!Q;N 6 T7; '7!?!''!N; T #; ;H'?<;8 !N AN< '?AC; 6
;H'?<H;NT " T #; ;N/A/;8 !N AN< O!N8 6 T"A8;,
#D!N; " CCD'AT!N >!T7!N T7; C!T< 6 HAN!?A >!T7DT
6!"T ;CD"!N/ AN ;H'?<H;NT ';"H!T 6"H T7; HA<" 6
HAN!?A5 AN8 6" T7;" 'D"';. :
ection ( of said rdinance No. +*)3 4 prohi-its aliens from -eing employed or to engage or
participate in any position or occupation or -usiness enumerated therein, whether permanent,temporary or casual, without first securing an employment permit from the Hayor of Hanila and
paying the permit fee of '*0.00 ecept persons employed in the diplomatic or consular missions
of foreign countries, or in the technical assistance programs of -oth the 'hilippine /overnment
and any foreign government, and those wor$ing in their respective households, and mem-ers of
religious orders or congregations, sect or denomination, who are not paid monetarily or in $ind.
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Iiolations of this ordinance is punisha-le -y an imprisonment of not less than three %)& months
to si %+& months or fine of not less than '(00.00 -ut not more than '100.00 or -oth such fine
and imprisonment, upon conviction.<
n Hay 4, (9+, private respondent 7iu Chiong Tsai 'ao 7o who was employed in Hanila, filed
a petition with the Court of 6irst !nstance of Hanila, #ranch !, denominated as Civil Case No.
31393, praying for the issuance of the writ of preliminary injunction and restraining order to stop
the enforcement of rdinance No. +*)3 as well as for a judgment declaring said rdinance No.
+*)3 null and void. 6
!n this petition, 7iu Chiong Tsai 'ao 7o assigned the following as his grounds for wanting the
ordinance declared null and void=
(& As a revenue measure imposed on aliens employed in the City of Hanila,
rdinance No. +*)3 is discriminatory and violative of the rule of the uniformity
in taation5
1& As a police power measure, it ma$es no distinction -etween useful and non
useful occupations, imposing a fied '*0.00 employment permit, which is out of
proportion to the cost of registration and that it fails to prescri-e any standard to
guide and2or limit the action of the Hayor, thus, violating the fundamental
principle on illegal delegation of legislative powers=
)& !t is ar-itrary, oppressive and unreasona-le, -eing applied only to aliens who
are thus, deprived of their rights to life, li-erty and property and therefore,
violates the due process and e:ual protection clauses of the Constitution. =
n Hay 14, (9+, respondent udge issued the writ of preliminary injunction and on eptem-er
(3, (9+ rendered judgment declaring rdinance No. +*)3 null and void and ma$ing permanent
the writ of preliminary injunction. ;
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Contesting the aforecited decision of respondent udge, then Hayor Antonio . Iillegas filed the
present petition on Harch 13, (9+9. 'etitioner assigned the following as errors allegedly
committed -y respondent udge in the latters decision of eptem-er (3,(9+= 9
!
T7; ";'N8;NT D8/; CHH!TT;8 A ;"!D AN8 'AT;NT
;""" 6 ?A> !N "D?!N/ T7AT "8!NANC; N. +*)3 I!?AT;8
T7; CA"8!NA? "D?; 6 DN!6"H!T< 6 TAFAT!N.
!!
";'N8;NT D8/; ?!O;>!; CHH!TT;8 A /"AI; AN8 'AT;NT;""" 6 ?A> !N "D?!N/ T7AT "8!NANC; N. +*)3 I!?AT;8
T7; '"!NC!'?; A/A!NT DN8D; 8;!/NAT!N 6 ?;/!?AT!I;
'>;".
!!!
";'N8;NT D8/; 6D"T7;" CHH!TT;8 A ;"!D AN8 'AT;NT
;""" 6 ?A> !N "D?!N/ T7AT "8!NANC; N. +*)3 I!?AT;8T7; 8D; '"C; AN8 ;@DA? '"T;CT!N C?AD; 6 T7;
CNT!TDT!N.
'etitioner Hayor Iillegas argues that rdinance No. +*)3 cannot -e declared null and void on
the ground that it violated the rule on uniformity of taation -ecause the rule on uniformity of
taation applies only to purely ta or revenue measures and that rdinance No. +*)3 is not a ta
or revenue measure -ut is an eercise of the police power of the state, it -eing principally a
regulatory measure in nature.
The contention that rdinance No. +*)3 is not a purely ta or revenue measure -ecause its
principal purpose is regulatory in nature has no merit. >hile it is true that the first part which
re:uires that the alien shall secure an employment permit from the Hayor involves the eercise
of discretion and judgment in the processing and approval or disapproval of applications for
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employment permits and therefore is regulatory in character the second part which re:uires the
payment of '*0.00 as employees fee is not regulatory -ut a revenue measure. There is no logic
or justification in eacting '*0.00 from aliens who have -een cleared for employment. !t is
o-vious that the purpose of the ordinance is to raise money under the guise of regulation.
The '*0.00 fee is unreasona-le not only -ecause it is ecessive -ut -ecause it fails to consider
valid su-stantial differences in situation among individual aliens who are re:uired to pay it.
Although the e:ual protection clause of the Constitution does not for-id classification, it is
imperative that the classification should -e -ased on real and su-stantial differences having a
reasona-le relation to the su-ject of the particular legislation. The same amount of '*0.00 is
-eing collected from every employed alien whether he is casual or permanent, part time or full
time or whether he is a lowly employee or a highly paid eecutive
rdinance No. +*)3 does not lay down any criterion or standard to guide the Hayor in the
eercise of his discretion. !t has -een held that where an ordinance of a municipality fails to state
any policy or to set up any standard to guide or limit the mayors action, epresses no purpose to
-e attained -y re:uiring a permit, enumerates no conditions for its grant or refusal, and entirely
lac$s standard, thus conferring upon the Hayor ar-itrary and unrestricted power to grant or deny
the issuance of -uilding permits, such ordinance is invalid, -eing an undefined and unlimited
delegation of power to allow or prevent an activity per se lawful. 10
!n Chinese 1lour '!porters Association vs. Price Sta)ilization "oard , 11 where a law granted a
government agency power to determine the allocation of wheat flour among importers, the
upreme Court ruled against the interpretation of uncontrolled power as it vested in the
administrative officer an ar-itrary discretion to -e eercised without a policy, rule, or standard
from which it can -e measured or controlled.
!t was also held in Pri!icias vs. 1ugoso 12 that the authority and discretion to grant and refuse
permits of all classes conferred upon the Hayor of Hanila -y the "evised Charter of Hanila is
not uncontrolled discretion -ut legal discretion to -e eercised within the limits of the law.
rdinance No. +*)3 is void -ecause it does not contain or suggest any standard or criterion to
guide the mayor in the eercise of the power which has -een granted to him -y the ordinance.
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The ordinance in :uestion violates the due process of law and e:ual protection rule of the
Constitution.
"e:uiring a person -efore he can -e employed to get a permit from the City Hayor of Hanila
who may withhold or refuse it at will is tantamount to denying him the -asic right of the people
in the 'hilippines to engage in a means of livelihood. >hile it is true that the 'hilippines as a
tate is not o-liged to admit aliens within its territory, once an alien is admitted, he cannot -e
deprived of life without due process of law. This guarantee includes the means of livelihood. The
shelter of protection under the due process and e:ual protection clause is given to all persons,
-oth aliens and citiJens. 1:
The trial court did not commit the errors assigned.
>7;";6";, the decision appealed from is here-y affirmed, without pronouncement as to
costs.
"8;";8.
"arredo, a5asiar, u:oz Pal!a, Santos and Guerrero, JJ., concur.
Castro, C.J., Antonio and A6uino, 1ernando, JJ., concur in the result.
Concepcion, Jr., J., too5 no part.
G.R. No. <1<9: No(() <, 1992
NATIONAL &EVELOPMENT COMPANY, plaintiffappellee, vs. CEU CITY "#$
AUGUSTO PACIS " T)("u)() o C(u C*-y, defendantappellants.
ELLOSILLO, J.:
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!s a pu-lic land reserved -y the 'resident for warehousing purposes in favor of a government
owned or controlled corporation, 1 as well as the warehouse su-se:uently erected thereon,
eempt from real property taR
'etitioner National 8evelopment Company %N8C&, a governmentowned or controlled
corporation %/CC& eisting -y virtue of C.A. (1 2 and ;.. )99, : is authoriJed to engage in
commercial, industrial, mining, agricultural and other enterprises necessary or contri-utory to
economic development or important to pu-lic interest. !t also operates, in furtherance of its
o-jectives, su-sidiary corporations one of which is the now defucnt National >arehousing
Corporation %N>C&. 4
n August (0, (9)9, the 'resident issued 'roclamation No. 4)0 < reserving #loc$ no. 4,
"eclamation Area No. 4, of Ce-u City, consisting of 4,*99 s:uare meters, for warehousing
purposes under the administration of N>C. 6 u-se:uently, in (940, a warehouse with a floor
area of (,940 s:uare meters more or less, was constructed thereon. =
n cto-er 4, (943, ;.. 9) dissolved N>C ; with N8C ta$ing over its assets and functions. 9
Commencing (94, Ce-u City %C;#D& assessed and collected from N8C real estate taes on the
land and the warehouse thereon. 10 #y the first :uarter of (930, a total of '(00,)(+.)( was paid
-y N8C 11 of which only '),9*.0+ was under protest. 12
n 10 Harch (930, N8C wrote the City Assessor demanding full refund of the real estate taes
paid to C;#D claiming that the land and the warehouse standing thereon -elonged to the
"epu-lic and therefore eempt from taation. 1: C;#D did not ac:uiesce in the demand, hence,
the present suit filed 1* cto-er (931 in the Court of 6irst !nstance of Hanila.
n 19 Hay (93), the Court of 6irst !nstance of Hanila, #ranch FF!!, promulgated a
decision 14 the dispositive portion of which reads B
>7;";6";, judgment is here-y rendered sentencing the City of Ce-u, thru
the Treasurer of said City, to refund to the plaintiff, National 8evelopment
Company, the real estate taes paid -y it for the parcel of land covered -y
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'residential 'roclamation No. 4)0 of August (0, (9)9, and the warehouse erected
thereon from and after cto-er 1*, (9++, with interests thereon at the legal rate
from the date of the filing of the complaint and the costs of the suit.
The defendants appealed to the Court of Appeals which however certified the case to Ds as one
involving pure :uestions of law, pursuant to ec. (3, ".A. 19+.
!n this appeal, C;#D assigns five %*& errors 1< imputed to the trial court which may -e
synopsiJed into whether N8C is eempted from payment of the real estate taes on the land
reserved -y the 'resident for warehousing purposes as well as the warehouse constructed
thereon, and in the affirmative, whether N8C may recover in refund unprotested real estate taes
it paid from (94 to (930.
n the first :uestion, C;#D insists on taa-ility of the su-ject properties, claiming that no law
grants N8C eemption from real estate taes, and that N8C, as recipient of the land reserved -y
the 'resident pursuant to ec. ) of the 'u-lic ?and Act, 16 is lia-le for payment or ordinary %real
estate& taes under ec. ((* therefore. C;#D contends that the properties have ceased to -e ta
eempt under the Assessment ?aw. 1= when the government disposed of them in favor of N8C,
and even assuming that title to the land remains with the government %ownership -eing the -asis
for real estate taa-ility under the Assessment ?aw&, the upreme Court rulings esta-lishincreasing rather than GownershipG as -asis for real estate ta lia-ility.
n the other hand, N8C maintains the ec. ) of the Assessment ?aw, which eempts properties
owned -y the "epu-lic from real estate ta, includes su-ject properties in the eemption. !t
invo$es the ruling in "oard of Assess!ent Appeals vs. CTA & N;SA 1; which held that properties
of N>A, a /CC, were eempt from real estate ta -ecause ec. ) of the Assessment ?aw
applied to all government properties whether held in governmental or proprietary capacity. N8C
rejects the applica-ility of ec. ((* of the 'u-lic ?and Act to the su-ject land, claiming that
provision contemplates dispositions of pu-lic land with eventual transfer of title. !n addition,
N8C -elieves that it is neither a grantee of a pu-lic land nor an applicant within the purview of
the same provision.
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As already adverted to, one of the principal issues -efore Ds is the interpretation of a provision
of the Assessment ?aw, the precursor of the then "eal 'roperty Ta Code and the ?ocal
/overnment Code, where GownershipG of the property and not GuseG is the test of ta lia-ility. 19
ection, ) par. %a&, of the Assessment ?aw, on which N8C claims real estate ta eemption,
provides B
ection ). Propert$ e#e!pt fro! ta#. B The eemptions shall -e as follows= %a&
'roperty owned -y the Dnited tates of America, the Commonwealth of the
'hilippines, any province, city, municipality at municipal district . . .
The same opinion of N8C was passed upon in National 3evelop!ent Co. v. Province of Nueva
9cia 20 where >e held that its properties were not comprehended in ec. ), par %a&, of the
Assessment ?aw. !n part, >e stated=
(. Commonwealth Act No. (1 which created N8C contains no provision
eempting it from the payment of real estate ta on properties it may ac:uire . . .
There is justification in the contention of plaintiffappellee that . . . L!Mt is
undenia-le that to any municipality the principal source of revenue with which it
would defray its operation will came from real property taes. !f the National
8evelopment Company would -e eempt from paying real property taes over
these properties, the town of /a-aldon will -ee deprived of much needed
revenues with which it will maintain itself and finance the compelling needs of its
inha-itants %p. +, #rief of 'laintiffAppellee&.
1. 8efendantappellant N8C does not come under classification of municipal or
pu-lic corporation in the sense that it may sue and -e sued in the same manner as
any other private corporations, and in this sense, it is an entity different from the
government, defendant corporation may -e sued without its consent, and is
su-ject to taation. !n the case N8C vs. ose <ulo To-ias, 3 C"A +91, it was
held that . . . plaintiff is neither the /overnment of the "epu-lic nor a -ranch or
su-division thereof, -ut a government owned and controlled corporation which
cannot -e said to eercise a sovereign function %Association Cooperativa de
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Credito Agricola de Hiagao vs. Honteclaro, 34 'hil. 1(&. it is a -usiness
corporation, and as such, its causes of action are su-ject to the statute of
limitations. . . . That plaintiff herein does not eercise sovereign powers B and,
hence, cannot invo$e the eemptions thereof SS -ut is an agency for the
performance of purely corporate, proprietary or -usiness functions, is apparent
from its rganic Act %Commonwealth Act (1, as amended -y Commonwealth
Act )((& pursuant to ection ) of which it Gshall -e su-ject to the provisions of
the Corporation ?aw insofar as they are not inconsistentG with the provisions of
said Commonwealth Act, Gand shall have the general powers mentioned in saidG
Corporation ?aw, and, hence, Gmay engage in commercial, industrial, mining,
agricultural, and other enterprises which may -e necessary or contri-utory to the
economic development of the country, or important in the pu-lic interest,G as well
as Gac:uire, hold, mortgage and alienate personal and real property in the
'hilippines or elsewhere5 . . . ma$e contracts of any $ind and descriptionG, and
Gperform any and all acts which a corporation or natural persons is authoriJed to
perform under the laws now eisting or which may -e enacted hereafter.G
>e find no compelling reason why the foregoing ruling, although referring to lands which would
eventually -e transferred to private individuals, should not apply e:ually to this case.
N8C cites "oard of Assess!ent Appeals, Province of +aguna v. Court of Ta# Appeal and
National ;ater*or5s and Se*erage Authorit$ <N;SA=. !n that case, >e held that properties of
N>A, a /CC, were eempt from real estate ta -ecause ec. ), par %c&, of ".A. 430 did not
distinguish -etween those possessed -y the government in sovereign2governmental2political
capacity and those in private2proprietary2patrimonial character.
The conflict -etween N3C v. Nueva 9cia, supra, and "AA v. CTA and N;SA, supra, is more
superficial than real. The N3C decision spea$s of properties owned -y N8C, while
the "AA ruling concerns properties -elonging to the "epu-lic. The latter case appears to -e
eceptional -ecause the parties therein stipulated B
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(. That the petitioner National >aterwor$s and ewerage Authority %NA>AA&
is a pu-lic corporation created -y virtue of "epu-lic Act. No. ()), and that it is
o*ned )$ the Govern!ent of the Philippines as *ell as all propert$ co!prising
*ater*or5s and se*erage s$ste!s placed under it %;mphasis supplied&.
There, the Court o-served= G!t is conceded, in the stipulation of facts, that the property involved
in this case Gis owned -y the /overnment of the 'hilippines.G 7ence, it -elongs to the "epu-lic
of the 'hilippines and falls s:uarely within letter of the a-ove provision.G
I# -'( /"( "- "), #o **l") -"-((#- "++(") *# -'( -*+ul"-*o# o "/-, '(#/(, o#()'*+
o u?(/- +)o+()-*( 'oul$ *)- ( (-"l*'($. Fo), '*l( *- "y ( -"-($ -'"- -'(
R(+ul*/ o# N&C, *- $o( #o- #(/(")y ollo -'"- +)o+()-*( o#($ y N&C, ")( "lo
o#($ y R(+ul*/ K *# -'( "( "y -'"- -o/>'ol$() ")( #o- ipso facto o#() o -'(
+)o+()-*( o -'(*) /o)+o)"-*o#.
T'( R(+ul*/, l*>( "#y *#$**$u"l, "y o) " /o)+o)"-*o# *-' +()o#"l*-y "#$ (*-(#/(
$*-*#/- )o *- o#. T'( (+")"-( +()o#"l*-y "llo " GOCC -o 'ol$ "#$ +o(
+)o+()-*( *# *- o# #"( "#$, -'u, +()*- 5)("-() *#$(+(#$(#/( "#$ l(**l*-y *# *-
o+()"-*o#. I- "y, -'()(o)(, ( -"-($ -'"- -" ((+-*o# o +)o+()-y o#($ y -'(
R(+ul*/ o -'( P'*l*++*#( )(() -o +)o+()-*( o#($ y -'( Go()#(#- "#$ y *-"5(#/*( '*/' $o #o- '"( (+")"-( "#$ $*-*#/- +()o#"l*-*( 3u#*#/o)+o)"-($ (#-*-*(.
>e find the separate opinion of ustice #autistaAngelo in Gonzales v. 8echanova, et
al ., 21 appropriate and enlightening B
. . . The /overnment of the "epu-lic of the 'hilippines under the "evised
Administrative Code refers to that entity through which the functions of
government are eercised, including the various arms through which political
authority is made effective whether they -e provincial, municipal or other form of
local government, whereas a government instrumentality refers to corporations
owned or controlled -y the government to promote certain aspects of the
economic life of our people. A government agency therefore, must necessarily
after refer to the government itself to the "epu-lic, as distinguished from any
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government instrumentality which has a personality distinct and separate from it
%ection 1&.
The foregoing discussion does not mean that -ecause N8C, li$e most /CCs engages in
commercial enterprises all properties of the government and its unincorporated agencies
possessed in propriety character are taa-le. imilarly, in the case at -ar, N8C proceeded on the
premise that the "AA ruling declared all properties owed -y /CCs as properties in the name of
the "epu-lic, hence, eempt under ec. ) of the Assessment ?aw.22
To come within the am-it of the eemption provided in Art. ), par. %a&, of the Assessment ?aw, it
is important to esta-lish that the property is owned -y the government or its unincorporated
agency, and once government ownership is determined, the nature of the use of the property,
whether for proprietary or sovereign purposes, -ecomes immaterial. >hat appears to have -een
ceded to N>C %later transferred to N8C&, in the case -efore Ds, is merely the administration of
the property while the government retains ownership of what has -een declared reserved for
warehousing purposes under 'roclamation No. 4)0.
!ncidentally, the parties never raised the issued the issue of ownership from the court a 6uo to
this Court.
A reserved land is defined as a GLpMu-lic land that has -een withheld or $ept -ac$ from sale or
disposition.G 2: The land remains Ga-solute property of the government.G 24 The government
Gdoes not part with its title -y reserving them %lands&, -ut simply gives notice to all the world that
it desires them for a certain purpose.G 2< A-solute disposition of land is not implied from
reservation5 26 it merely means Ga withdrawal of a specified portion of the pu-lic domain from
disposal under the land laws and the appropriation thereof, for the time -eing, to some particular
use or purpose of the general government.G 2= As its title remains with the "epu-lic, the reserved
land is clearly recovered -y the ta eemption provision.
C;#D nevertheless contends that the reservation of the property in favor of N>C or N8C is a
form of disposition of pu-lic land which, su-jects the recipient %N8C & to real estate taation
under ec. ((* of the 'u-lic ?and Act. as amended -y ".A. 4)+, 2; which estate=
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ec ((*. All lands granted -y virtue of this Act, including homesteads upon which
final proof has not -een made or approved shall, even though and while the title
remains in the tate, -e su-ject to the ordinary taes, which shall -e paid -y the
grantee or the applicant, -eginning with the year net following the one in which
the homestead application has -een filed, or the concession has -een approved, or
the contract has -een signed, as the case may -e, on the -asis of the value fied in
such filing, approval or signing of the application, concession or contract.
The essential :uestion then * '(-'() l"#$ )(()($ +u)u"#- -o S(/. ;: ")( /o+)('(#$($
*# S(/. 11< "#$, -'()(o)(, -""l(.
ection ((* of the 'u-lic ?and Act should -e treated as an eception to Art. ), par. %a&, of the
Assessment ?aw. >hile ordinary pu-lic lands are ta eempt -ecause title thereto -elongs to the
"epu-lic, ec. ((* su-jects them to real estate ta even -efore ownership thereto is transferred in
the name of the -eneficiaries. ec. ((* comprehends three %)& modes of disposition of ?ands
under the 'u-lic ?and Act, to wit= homestead, concession, and contract.
?ia-ility to real property taes under ec. ((* is predicated on %a& filing of homestead
application, %-& approval of concession and, %c& signing of contract. ignificantly, without these
words, the date of the accrual of the real estate ta would -e indeterminate. ince N8C is not ahomesteader and no GcontractG %-ilateral agreement& was signed, it would appear, then, that
reservation under ec. ), -eing a unilateral act of the 'resident, falls under GconcessionG.
GConcessionG as a technical term under the 'u-lic ?and Act is synonymous with GalienationG and
GdispositionG, and is defined in ec. (0 as Gany of the methods authoriJed -y this Act for the
ac:uisition, lease, use, or -enefit of the lands of the pu-lic domain other than tim-er or mineral
lands.G ?ogically, where ec. ((* contemplates authoriJed methods for ac:uisition, lease, use, or
-enefit under the Act, the taa-ility of the land would depend on whether reservation under ec.
) is one such method of ac:uisition, etc. Tersely put, is reservation synonymous with
alienationR r, are the two terms antithetical and mutually eclusiveR !ndeed, reservation
connotes retention, while concession %alienation& signifies cession.
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ection and of the 'u-lic ?and Act provide that reserved lands are ecluded from that may
-e su-ject of disposition, to wit SB
ec. . nly those lands shall -e declared open to disposition or concession which
have -een officially delimited and classified and, when practica-le, surveyed,
and *hich have not )een reserved for pu-lic or :uasipu-lic uses, nor appropriated
-y the /overnment, nor in any manner -ecome private property , nor those on
which a private right authoriJed and recogniJed -y this Act or any valid law may
-e claimed, or *hich, having )een reserved or appropriated, have ceased to )e so.
ec. . The tract or tracts of land reserved under the provisions of section eighty
three shall -e non-aliena)le and shall not )e su)ect to occupation, entr$, sale,
lease, or other disposition until again declared aliena)le under the provisions of
this Act or -y proclamation of the 'resident %;mphasis supplied&
As >e view it, -'( ((/- o )(()"-*o# u#$() S(/. ;: * -o (5)(5"-( " +*(/( o +ul*/ l"#$
"#$ -)"#o) *- *#-o #o#7"l*(#"l( o) #o#7$*+o"l( u#$() -'( Pul*/ L"#$ A/-. S(/-*o#
11<, o# -'( o-'() '"#$, "++l*( -o $*+o"l( +ul*/ l"#$. Cl(")ly, -'()(o)(, S(/. 11< $o(
#o- "++ly -o l"#$ )(()($ u#$() S(/. ;:. Co#(8u(#-ly, -'( u?(/- )(()($ +ul*/ l"#$
)("*# -" ((+-.
Bo((), " )(5")$ -'( ")('ou( /o#-)u/-($ o# " +ul*/ )(()"-*o#, " $*()(#- )ul(
'oul$ "++ly (/"u( -'( ((+-*o# o +ul*/ +)o+()-y )o -""-*o# $o( #o- (-(#$ -o
*+)o((#- o# -'( +ul*/ l"#$ "$( y +)(7(+-*o#(), 'o(-("$() "#$ o-'()
/l"*"#-, o) o//u+"#-, "- -'(*) o# (+(#(, "#$ -'(( ")( -""l( y -'(
-"-( . . . 29 Co#(8u(#-ly, -'( ")('ou( /o#-)u/-($ o# -'( )(()($ l"#$ y NC 3#o
u#$() "$*#*-)"-*o# y N&C, *#$(($, 'oul$ +)o+()ly ( "(($ )("l (-"-( -" " u/'
*+)o((#- $o( #o- "++(") -o (lo#5 -o -'( R(+ul*/.
S*#/( -'( )(()"-*o# * ((+- )o )("l-y -", -'( ())o#(ou -" +"y(#- /oll(/-($ y
CEU 'oul$ ( )(u#$($ -o N&C. T'* * *# /o#o#"#/( *-' S(/. 40, +"). 3" o -'(
o)() R("l P)o+()-y T" Co$( '*/' ((+-($ )o -""-*o# )("l +)o+()-y o#($ y -'(
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R(+ul*/ o -'( P'*l*++*#( o) "#y o *- +ol*-*/"l u$***o#, " (ll " "#y GOCC o
((+- y *- /'")-(). :0
As regards the re:uirement of paying under protest -efore judicial recourse, C;#D argues that in
any case N8C is not entitled to refund -ecause ec. 3* of ".A. )*3, the "evised Charter of the
City of Ce-u, :1 re:uires payment under protest -efore resorting to judicial action for ta refund5
that it could not have acted on the first demand letter of N8C of 10 Hay (930 -ecause it was
sent to the City Assessor and not to the City Treasurer5 that, conse:uently, there having -een no
appropriate prior demand, resort to judicial remedy is premature5 and, that even on the premise
that there was proper demand, N8C has yet to ehaust administrative remedies -y way of appeal
to the 8epartment of 6inance and2or Auditor /eneral -efore ta$ing judicial action.
N8C does not agree. !t disputes the applica-ility of the pa$!ent-under-protest re:uirement is
ec. 3* of the "evised Ce-u City Charter -ecause the issue is not the validity of ta assessment
-ut recovery of erroneous payments under Arts. 1(*4 and 1(** of the Civil Code. :2 !t cites the
case of 9ast Asiatic Co. , +td . v. Cit$ of 3avao:: which held that where the ta is unauthoriJed, Git
is not a ta assessed under the charter of the appellant City of 8avao and for that reason no
protest is necessary for a claim or demand for its refund.G !n a!ie Te#tiles, 'nc. vs. atha$,
Sr . , :4;e held %
. . . 'rotest is not a re:uirement in order that a tapayer who paid under a
mista$en -elief that it is re:uired -y law, may claim for a refund. ection *4 :< of
Commonwealth Act No. 430 does not apply to petitioner which could conceiva-ly
not have -een epected to protest a payment it honestly -elieved to -e due. The
same refers only to the case where the tapayer, despite his $nowledge of the
erroneous or illegal assessment, still pays and fails to ma$e the proper protest, for
in such case, he should manifest an unwillingness to pay, and failing so, the
tapayer is deemed to have waved his right to claim a refund.
!n the case at -ar, petitioner, therefore, cannot -e said to have waived his right. 7e
had no $nowledge of the fact that it was eempted from payment of the realty ta
under Commonwealth Act No. 430. 'ayment was made through error or mista$e,
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in the honest -elief that petitioner was lia-le, and therefore could not have -een
made under protest, -ut with complete voluntariness. !n any case, a tapayer
should not -e held to suffer loss -y his good intention to comply with what he
-elieves is his legal o-ligation, where such o-ligation does not really eist . . . The
fact that petitioner paid thru error or mista$e, and the government accepted the
payment, gave rise to the application of the principle of solutio inde)iti under
Article 1(*4 of the New Civil Code, which provides that Gif something is received
when there is no right to demand it, and it was unduly delivered through mista$e,
the o-ligation to return it arises.G There is, therefore, created a tie or juridical
relation in the nature of solutio inde)iti, epressly classified as :uasicontract
under ection 1, Chapter ! of Title FI!! of the New Civil code.
The :uasicontract of solutio inde)iti is one of the concrete manifestations of the
ancient principle that no one shall enrich himself unjustly at the epense of
another . . . 7ence, it would seem unedifying for the government, that $nowing it
has no right at all to collect or to receive money for alleged taes paid -y mista$e,
it would -e reluctant to return the same . . . 'etitioner is not unsatisfied in the
assessment of its property. Assessment having -een made, it paid the real estate
taes without $nowing that it is eempt.
As regards the claim for refund of ta payments spanning more than twenty %10& years, >e also
said in a!ie Te#tiles that B
Solutio inde)iti is a :uasicontract, and the instant case -eing in the nature
of solutio inde)iti, the claim for refund must -e commenced within si %+& years
from date of payment pursuant to Article ((4* %1& of the New Civil Code :6 . . .
>e sustain the appellate court to the etent that its decision covers improperly collected taes on
the reserved land under 'roclamation No. 4)0, thus B
The defense of prescription invo$ed -y the defendant which counsel for the
plaintiff, however, did not answer in its memorandum, is partly wellta$en.
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Actions for refund of taes illegally collected must -e commenced within si %+&
years from the date of collection. . . . .
The stipulation of facts and the pleadings filed -y the parties do not contain data
specifying when and how much were paid -y the year, of the taes sought to -e
refunded. Accordingly, the Court has no other alternative -ut to order the refund
of an undetermined amount -ased, however, on the date of payment counted si
%+& years -ac$ward from cto-er 1*, (931, when the complaint in this case was
filed. :=
As regards ehaustion of administrative remedies, >e agree with the trial court that the case
constitutes an eception to the rule, as it involves purely :uestion of law. :; pecifically, on the
re:uirement of appeal to the ecretary of 6inance, >e further held in the same a!ie
Te#tiles that GL;M:ually not applica-le is ection (3 of Commonwealth Act No. 430 :9 cited -y
respondent in relation to the right of a, property owner to contest the validity of assessment . . .G
"espondent C;#D li$ewise invites ur attention to the availa-ility of appeal to the /overnment
Auditing ffice although no authority is cited to Ds. >e do not find any either to sustain the
procedure.
>7;";6";, finding that National 8evelopment Company %N8C& is eempt from real estate
ta on the reserved land -ut lia-le for the warehouse erected thereon, the decision appealed from
is accordingly 03'1'93. Conse:uently, let this case -e remanded to the court of origin, now
the "egional Trial Court of Hanila, to determine the proper lia-ility of N8C, particularly on its
warehouse, and effect the corresponding refund, payment or setoff, as the case may -e,
conforma-ly with this decision. No costs.
"8;";8.
Cruz, Padilla and Gri:o-A6uino, JJ., concur.