Tax+Digest+Assignment+9+(Lacks+1+Case) (1)

7/30/2019 Tax+Digest+Assignment+9+(Lacks+1+Case) (1)

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TAX DIGEST ASSIGNMENT #9 LOCAL GOVT TAXATION A.M.+D.G. TAX II Atty. Mendoza

1B in 3B DIGEST GROUP Ad Deum Per Excellentia

MANILA ELECTRIC COMPANY vs. PROVINCE OF LAGUNA

FACTS

Manila Electric Company (MERALCO) on various dates (the latest beingJanuary 19, 1983) was granted franchises by various municipalities of Laguna. On Sept. 12 1991, RA 7160 "Local Government Code of 1991" (LGC)was enacted to take effect on Jan.1 1992 enjoining local goverment units tocreate their own sources of revenue and to levy taxes, fees and charges,subject to the limitations, consistent with the basic policy of local autonomy.Respondent Laguna Province enacted Ordinance No. 01-92 (effective Jan. 1,1993) providing, in part:

Sec. 2.09. Franchise Tax. There is hereby imposed a tax on businessesenjoying a franchise, at a rate of fifty percent (50%) of one percent (1%)of the gross annual receipts, which shall include both cash sales and saleson account realized during the preceding calendar year within thisprovince, including the territorial limits on any city located in theprovince

MERALCO was then sent a demand letter to pay the corresponding tax.MERALCO paid the tax under protest (approx. Php19.5M) and later on fileda formal claim for refund. It contends that the stated Section 2.09 of theLGC contravened the provisions of Section 1 of PD 551, which provides:

Any provision of law or local ordinance to the contrary notwithstanding,

the franchise tax payable by all grantees of franchises to generate,distribute and sell electric current for light, heat and power shall be twoper cent (2%) of their gross receipts received from the sale of electriccurrent and from transactions incident to the generation, distribution andsale of electric current.

Such franchise tax shall be payable to the Commissioner of InternalRevenue or his duly authorized representative on or before the twentiethday of the month following the end of each calendar quarter or month, asmay be provided in the respective franchise or pertinent municipalregulation and shall, any provision of the Local Tax Code or any other law

to the contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings,receipts, income and privilege of generation, distribution and sale of electric current.

MERALCO then filed a complaint for refund with a prayer for the issuance of a writ of preliminary injunction and/or TRO at the RTC of Sta. Cruz, Laguna.The RTC dismissed the complaint and ruled that the Ordinance was valid,binding, reasonable and enforceable.

ISSUES

1. W/N the imposition of a franchise tax under Section 2.09 of LagunaProvincial Ordinance No. 01-92, insofar as MERALCO is concerned, isviolative of the non-impairment clause of the Constitution and

Section 1 of Presidential Decree No. 551? NO

2. W/N the LGC, has repealed, amended or modified PresidentialDecree No. 551? YES

RULING

(As an intro for the ruling as stated by the SC:)

Local Governments do not have the inherent power to tax except to theextent that such power might be delegated to them either by the basic lawor by statute. Presently, Under Article X of the 1987 Constitution, a generaldelegation of that power has been given in favor of the Local GovernmentUnits (LGU).

Under the now prevailing Constitution, where there is neither a grant nor aprohibition by statute, the tax power must be deemed to exist althoughCongress may provide statutory limitations and guidelines. The basicrationale for the current rule is to safeguard the viability and self-sufficiency


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of local government units by directly granting them general and broad taxpowers. Nevertheless, the fundamental law did not intend the delegationto be absolute and unconditional ; the constitutional objective obviously isto ensure that, while the local government units are being strengthened and

made more autonomous, the legislature must still see to it that (a) thetaxpayer will not be over-burdened or saddled with multiple andunreasonable impositions ; (b) each local government unit will have its fairshare of available resources ; (c) the resources of the national governmentwill not be unduly disturbed ; and (d) local taxation will be fair, uniform,and just .

1. While the Court has, not too infrequently, referred to tax exemptionscontained in special franchises as being in the nature of contracts and a partof the inducement for carrying on the franchise, these exemptions,

nevertheless, are far from being strictly contractual in nature. Contractualtax exemptions, in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked, are thoseagreed to by the taxing authority in contracts, such as those contained ingovernment bonds or debentures, lawfully entered into by them underenabling laws in which the government, acting in its private capacity,sheds its cloak of authority and waives its governmental immunity . Truly,tax exemptions of this kind may not be revoked without impairing theobligations of contracts. These contractual tax exemptions, however, arenot to be confused with tax exemptions granted under franchises. Afranchise partakes the nature of a grant which is beyond the purview of thenon-impairment clause of the Constitution.

2. The Local Government Code of 1991 explicitly authorizes provincialgovernments, notwithstanding any exemption granted by any law or otherspecial law, x x x (to) impose a tax on businesses enjoying a franchise".(Section 137 of the LGC)

Indicative of the legislative intent to carry out the Constitutional mandate of

vesting broad tax powers to local government units, LGC has effectivelywithdrawn under Section 193 thereof, tax exemptions or incentivestheretofore enjoyed by certain entities. This law states:

Section 193 Withdrawal of Tax Exemption Privileges Unless otherwiseprovided in this Code, tax exemptions or incentives granted to, orpresently enjoyed by all persons, whether natural or juridical, includinggovernment-owned or controlled corporations, except local waterdistricts, cooperatives duly registered under R.A. No. 6938, non-stock andnon-profit hospitals and educational institutions, are hereby withdrawnupon the effectivity of this Code.

The Code, in addition, contains a general repealing clause in its Section 534;thus:

Section 534. Repealing Clause. x x x.

(f) All general and special laws, acts, city charters, decrees, executiveorders, proclamations and administrative regulations, or part or partsthereof which are inconsistent with any of the provisions of this Code arehereby repealed or modified accordingly.

3. MERALCO further contends that in a plethora of cases including Court inProvince of Misamis Oriental vs. Cagayan Electric Power and Light Company,Inc., the phrase "shall be in lieu of all taxes and at any time levied,established by, or collected by any authority" exempted the franchiseholder from any other tax imposed by the then Internal Revenue Cod and

local ordinaces. The SC holds otherwise.

In the recent case of the City Government of San Pablo, etc., et al. vs. Hon.Bienvenido V. Reyes, et al., the Court has held that the phrase in lieu of alltaxes have to give way to the peremptory language of the LocalGovernment Code specifically providing for the withdrawal of suchexemptions, privileges, and that upon the effectivity of the LocalGovernment Code all exemptions except only as provided therein can nolonger be invoked by MERALCO to disclaim liability for the local tax. In fine,


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the Court has viewed its previous rulings as laying stress more on thelegislative intent of the amendatory law whether the tax exemptionprivilege is to be withdrawn or not rather than on whether the law canwithdraw, without violating the Constitution, the tax exemption or not.

PROVINCE OF BULACAN vs. CA

FACTS

On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passedProvincial Ordinance No. 3, known as "An Ordinance Enacting the RevenueCode of the Bulacan Province." Section 21 of the ordinance provides asfollows:

Sec. 21 Imposition of Tax . There is hereby levied and collected a tax of 10% of the fair market value in the locality per cubic meter of ordinarystones, sand, gravel, earth and other quarry resources, such, but notlimited to marble, granite, volcanic cinders, basalt, tuff and rockphosphate, extracted from public lands or from beds of seas, lakes, rivers,streams, creeks and other public waters within its territorial jurisdiction.

Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter datedNovember 11, 1993, assessed private respondent Republic CementCorporation P2,524,692.13 for extracting limestone, shale and silica fromseveral parcels of private land in the province during the third quarter of 1992 until the second quarter of 1993. Believing that the province, on thebasis of above-said ordinance, had no authority to impose taxes on quarryresources extracted from private lands, Republic Cement formally contestedthe same on December 23, 1993 but was denied by the Provincial Treasureron January 17, 1994. Republic Cement consequently filed a petition fordeclaratory relief with the RTC of Bulacan on February 14, 1994. Theprovince filed a motion to dismiss Republic Cement's petition, which wasgranted by the trial court on May 13, 1993, which ruled that declaratory

relief was improper, allegedly because a breach of the ordinance had beencommitted by Republic Cement.

On July 11, 1994, Republic Cement filed a petition for certiorari with the

Supreme Court seeking to reverse the trial court's dismissal of their petition.The Court, in a resolution dated July 27, 1994, referred the same to theCourt of Appeals. In the interim, the Province of Bulacan issued a warrant of levy against Republic Cement, allegedly because of its unpaid tax liabilities.Negotiations between Republic Cement and petitioners resulted in anagreement and modus vivendi (temporary agreement) on December 12,1994, whereby Republic Cement agreed to pay under protest P1,262,346.00,50% of the tax assessed by petitioner, in exchange for the lifting of thewarrant of levy. CA ruled that Province of Bulacan had no legal authority.

ISSUE

W/N the provincial government could impose and/or assess taxes on quarryresources extracted by Republic Cement from private lands pursuant toSection 21 of Provincial Ordinance No. 3? No, a province may not levyexcise taxes on articles already taxed by the National Internal RevenueCode.

RULING

First, with regard to the remedial issue. Petitioners assert that the Court of Appeals could only rule on the propriety of the trial court's dismissal of Republic Cement's petition for declaratory relief, allegedly because that wasthe sole relief sought by the latter in its petition for certiorari . Petitionersclaim that the appellate court overstepped its jurisdiction when it declarednull and void the assessment made by the Province of Bulacan againstRepublic Cement. However, the SC declared that under the principle of estoppel, the petitioners can no longer attack the modus Vivendi approvedby the CA.


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Second and more importantly, is the issue on the validity of the ordinance.The pertinent provisions of the Local Government Code are as follows:

Sec. 134. Scope of Taxing Powers . Except as otherwise provided in this

Code, the province may levy only the taxes, fees, and charges as providedin this Article.

Sec. 158. Tax on Sand, Gravel and Other Quarry Resources . Theprovince may levy and collect not more than ten percent (10%) of fairmarket value in the locality per cubic meter of ordinary stones, sand,gravel, earth, and other quarry resources, as defined under the NationalInternal Revenue Code, as amended, extracted from public lands or fromthe beds of seas, lakes, rivers, streams, creeks, and other public waterswithin its territorial jurisdiction.xxx xxx xxx

The CA on the basis of Section 134, ruled that a province was empowered toimpose taxes only on sand, gravel, and other quarry resources extractedfrom public lands, its authority to tax being limited by said provision only tothose taxes, fees and charges provided in Article I, Chapter 2, Title 1 of BookII of the Local Government Code. On the other hand, petitioners claim thatSections 129 and 186 of the Local Government Code authorizes the provinceto impose taxes other than those specifically enumerated under the LocalGovernment Code. The CA erred in ruling that a province can impose onlythe taxes specifically mentioned under the Local Government Code. Ascorrectly pointed out by petitioners, Section 186 allows a province to levytaxes other than those specifically enumerated under the Code, subject to

the conditions specified therein.However, in spite of this, province of Bulacan is still prohibited fromimposing taxes on stones, sand, gravel, earth and other quarry resourcesextracted from private lands . The tax imposed by the Province of Bulacan isan excise tax, being a tax upon the performance, carrying on, or exercise of an activity. The Local Government Code provides:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of

the taxing powers of provinces, cities, municipalities, and barangays shallnot extend to the levy of the following:

xxx xxx xxx(h) Excise taxes on articles enumerated under the National InternalRevenue Code, as amended, and taxes, fees or charges on petroleum

products;xxx xxx xxx

A province may not, therefore, levy excise taxes on articles already taxed bythe National Internal Revenue Code. The National Internal Revenue Codelevies a tax on all quarry resources, regardless of origin, whether extractedfrom public or private land. Thus, a province may not ordinarily imposetaxes on stones, sand, gravel, earth and other quarry resources, as the sameare already taxed under the National Internal Revenue Code. The provincecan, however, impose a tax on stones, sand, gravel, earth and other quarryresources extracted from public land because it is expressly empowered todo so under the Local Government Code. As to stones, sand, gravel, earthand other quarry resources extracted from private land, however, it maynot do so, because of the limitation provided by Section 133 of the Code inrelation to Section 151 of the National Internal Revenue Code.

MAGTAJAS vs. PRYCE PROPERTIES

FACTS

When PAGCOR announced the opening of a casino in Cagayan de Oro City,

Civic organizations angrily denounced the project. The trouble arose whenin 1992, PAGCOR decided to expand its operations to Cagayan de Oro City. Itleased a portion of a building belonging to Pryce.

The Sangguniang Panlungsod of Cagayan de Oro City enacted Ordinance No.3353 which basically prohibits the issuance of business permits to anyestablishment for the using and allowing to be used its premises or portionthereof for the operation of casino.It also adopted a sterner Ordinance No.


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3375-93 which prohibits the operation of casino and providing penalty forviolation thereof.

Pryce assailed the ordinances before the CA, where it was joined by

PAGCOR as intervenor and supplemental petitioner. The CA declared theordinances invalid and issued the writ prayed for to prohibit theirenforcement.

ISSUE

Whether or not the ordinances were unconstitutional and thus void

RULING

Yes.PAGCOR is a corporation created directly by P.D. 1869 to help centralize andregulate all games of chance, including within the territorial jurisdiction of the Philippines. In Basco v. Philippine Amusements and Gaming Corporation , this Court sustained the constitutionality of the decree and even cited thebenefits of the entity to the national economy as the third highest revenue-earner in the government, next only to the BIR and the Bureau of Customs.

Cagayan de Oro City is empowered to enact ordinances for the purposesindicated in the Local Government Code. It is expressly vested with thepolice power under what is known as the General Welfare Clause nowembodied in Section 16 as follows:

Sec. 16. General Welfare. Every local government unit shall exercisethe powers expressly granted, those necessarily implied therefrom, aswell as powers necessary, appropriate, or incidental for its efficient andeffective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, localgovernment units shall ensure and support, among other things, thepreservation and enrichment of culture, promote health and safety,enhance the right of the people to a balanced ecology, encourage and

support the development of appropriate and self-reliant scientific andtechnological capabilities, improve public morals, enhance economicprosperity and social justice, promote full employment among theirresidents, maintain peace and order, and preserve the comfort andconvenience of their inhabitants.

In addition, Section 458 of the said Code specifically declares that:

Sec. 458. Powers, Duties, Functions and Compensation. (a) TheSangguniang Panlungsod, as the legislative body of the city, shall enactordinances, approve resolutions and appropriate funds for the generalwelfare of the city and its inhabitants pursuant to Section 16 of this Codeand in the proper exercise of the corporate powers of the city asprovided for under Section 22 of this Code, and shall:

(1) Approve ordinances and pass resolutions necessary for an efficientand effective city government, and in this connection, shall:

xxx xxx xxx

(v) Enact ordinances intended to prevent, suppress andimpose appropriate penalties for habitual drunkennessin public places, vagrancy, mendicancy, prostitution,establishment and maintenance of houses of ill repute,gambling and other prohibited games of chance,fraudulent devices and ways to obtain money orproperty, drug addiction, maintenance of drug dens,drug pushing, juvenile delinquency, the printing,distribution or exhibition of obscene or pornographicmaterials or publications, and such other activitiesinimical to the welfare and morals of the inhabitants of the city;

The petitioners argue that by virtue of these provisions, the SangguniangPanlungsod may prohibit the operation of casinos because they involvegames of chance, which are detrimental to the people. The legislative powerconferred upon local government units may be exercised over all kinds of gambling and not only over "illegal gambling" as the respondents


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erroneously argue. Even if the operation of casinos may have beenpermitted under P.D. 1869, the government of Cagayan de Oro City has theauthority to prohibit them within its territory pursuant to the authorityentrusted to it by the Local Government Code.

The petitioners also stress that when the Code expressly authorized thelocal government units to prevent and suppress gambling and otherprohibited games of chance, like craps, baccarat, blackjack and roulette, itmeant all forms of gambling without distinction. Ubi lex non distinguit, necnos distinguere debemos . Otherwise, it would have expressly excluded fromthe scope of their power casinos and other forms of gambling authorized byspecial law, as it could have easily done. The fact that it did not do so simplymeans that the local government units are permitted to prohibit all kinds of gambling within their territories, including the operation of casinos.

The adoption of the Local Government Code, it is pointed out, had theeffect of modifying the charter of the PAGCOR. The Code is not only a laterenactment than P.D. 1869 and so is deemed to prevail in case of inconsistencies between them. More than this, the powers of the PAGCORunder the decree are expressly discontinued by the Code insofar as they donot conform to its philosophy and provisions, pursuant to Par. (f) of itsrepealing clause reading as follows:

(f) All general and special laws, acts, city charters, decrees, executiveorders, proclamations and administrative regulations, or part or parts

thereof which are inconsistent with any of the provisions of this Code arehereby repealed or modified accordingly.

It is also maintained that assuming there is doubt regarding the effect of theLocal Government Code on P.D. 1869, the doubt must be resolved in favorof the petitioners, in accordance with the direction in the Code calling for itsliberal interpretation in favor of the local government units. Section 5 of theCode specifically provides:

Sec. 5. Rules of Interpretation. In the interpretation of the provisionsof this Code, the following rules shall apply:

(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall

be resolved in favor of devolution of powers and of the lower local government unit . Any fair and reasonable doubt as to the existence of thepower shall be interpreted in favor of the local government unitconcerned;

xxx xxx xxx

(c) The general welfare provisions in this Code shall be liberally interpreted to give more powers to local government units in acceleratingeconomic development and upgrading the quality of life for the people inthe community; . . . (Emphasis supplied.)

Finally, the petitioners also attack gambling as intrinsically harmful and citevarious provisions of the Constitution and several decisions of this Courtexpressive of the general and official disapprobation of the vice. Theyinvoke the State policies on the family and the proper upbringing of theyouth and, as might be expected, call attention to the old case of U.S. v.Salaveria , which sustained a municipal ordinance prohibiting the playing of

panguingue .

The morality of gambling is not a justiciable issue. Gambling is not illegal per se . While it is generally considered inimical to the interests of the people,there is nothing in the Constitution categorically proscribing or penalizinggambling or, for that matter, even mentioning it at all. It is left to Congressto deal with the activity as it sees fit. In the exercise of its own discretion,the legislature may prohibit gambling altogether or allow it withoutlimitation or it may prohibit some forms of gambling and allow others forwhatever reasons it may consider sufficient. It is settled that questionsregarding the wisdom, morality, or practicibility of statutes are notaddressed to the judiciary but may be resolved only by the legislative and


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executive departments, to which the function belongs in our scheme of government. That function is exclusive.

The only question we can and shall resolve in this petition is the validity of

Ordinance No. 3355 and Ordinance No. 3375-93 as enacted by theSangguniang Panlungsod of Cagayan de Oro City. And we shall do so only bythe criteria laid down by law and not by our own convictions on thepropriety of gambling.

The tests of a valid ordinance are well established. A long line of decisionshas held that to be valid, an ordinance must conform to the followingsubstantive requirements:

1) It must not contravene the constitution or any statute.2) It must not be unfair or oppressive.

3) It must not be partial or discriminatory.4) It must not prohibit but may regulate trade.5) It must be general and consistent with public policy.6) It must not be unreasonable.

We begin by observing that under Sec. 458 of the Local Government Code,local government units are authorized to prevent or suppress, amongothers, "gambling and other prohibited games of chance." Obviously, thisprovision excludes games of chance which are not prohibited but are in factpermitted by law. The petitioners are less than accurate in claiming that theCode could have excluded such games of chance but did not. In fact it does.The language of the section is clear and unmistakable. Under the rule of noscitur a sociis , a word or phrase should be interpreted in relation to, orgiven the same meaning of, words with which it is associated. Accordingly,we conclude that since the word "gambling" is associated with "and other prohibited games of chance," the word should be read as referring to onlyillegal gambling which, like the other prohibited games of chance, must beprevented or suppressed.

The apparent flaw in the ordinances in question is that they contravene P.D.1869 and the public policy embodied therein insofar as they preventPAGCOR from exercising the power conferred on it to operate a casino inCagayan de Oro City. The petitioners have an ingenious answer to this

misgiving. They deny that it is the ordinances that have changed P.D. 1869for an ordinance admittedly cannot prevail against a statute. Their theory isthat the change has been made by the Local Government Code itself, whichwas also enacted by the national lawmaking authority. In their view, thedecree has been, not really repealed by the Code, but merely "modified protanto " in the sense that PAGCOR cannot now operate a casino over theobjection of the local government unit concerned. This modification of P.D.1869 by the Local Government Code is permissible because one law canchange or repeal another law.

It seems to us that the petitioners are playing with words. While insistingthat the decree has only been "modified pro tanto ," they are actuallyarguing that it is already dead, repealed and useless for all intents andpurposes because the Code has shorn PAGCOR of all power to centralizeand regulate casinos. Strictly speaking, its operations may now be not onlyprohibited by the local government unit; in fact, the prohibition is not onlydiscretionary but mandated by Section 458 of the Code if the word "shall"as used therein is to be given its accepted meaning. Local government unitshave now no choice but to prevent and suppress gambling, which in thepetitioners' view includes both legal and illegal gambling. Under thisconstruction, PAGCOR will have no more games of chance to regulate orcentralize as they must all be prohibited by the local government unitspursuant to the mandatory duty imposed upon them by the Code. In thissituation, PAGCOR cannot continue to exist except only as a toothless tigeror a white elephant and will no longer be able to exercise its powers as aprime source of government revenue through the operation of casinos.

It is noteworthy that the petitioners have cited only Par. (f) of the repealingclause, conveniently discarding the rest of the provision which painstakingly


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mentions the specific laws or the parts thereof which are repealed (ormodified) by the Code. Significantly, P.D. 1869 is not one of them. A readingof the entire repealing clause, Section 534, will disclose the omission of saidP.D. 1869. Furthermore, it is a familiar rule that implied repeals are not

lightly presumed in the absence of a clear and unmistakable showing of such intention.

It is a canon of legal hermeneutics that instead of pitting one statute againstanother in an inevitably destructive confrontation, courts must exert everyeffort to reconcile them, remembering that both laws deserve a becomingrespect as the handiwork of a coordinate branch of the government. On theassumption of a conflict between P.D. 1869 and the Code, the proper actionis not to uphold one and annul the other but to give effect to both byharmonizing them if possible. This is possible in the case before us. Theproper resolution of the problem at hand is to hold that under the LocalGovernment Code, local government units may (and indeed must) preventand suppress all kinds of gambling within their territories except only thoseallowed by statutes like P.D. 1869. The exception reserved in such laws mustbe read into the Code, to make both the Code and such laws equallyeffective and mutually complementary.

This basic relationship between the national legislature and the localgovernment units has not been enfeebled by the new provisions in theConstitution strengthening the policy of local autonomy. Without meaningto detract from that policy, we here confirm that Congress retains control of the local government units although in significantly reduced degree nowthan under our previous Constitutions. The power to create still includes thepower to destroy. The power to grant still includes the power to withhold orrecall. True, there are certain notable innovations in the Constitution, likethe direct conferment on the local government units of the power to tax,which cannot now be withdrawn by mere statute. By and large, however,the national legislature is still the principal of the local government units,which cannot defy its will or modify or violate it.

Separate Opinions

PADILLA, J., concurring:I concur with the majority holding that the city ordinances in question

cannot modify much less repeal PAGCOR's general authority to establishand maintain gambling casinos anywhere in the Philippines underPresidential Decree No. 1869.

However, despite the legality of the opening and operation of a casino inCagayan de Oro City by respondent PAGCOR, I wish to reiterate my viewthat gambling in any form runs counter to the government's own efforts tore-establish and resurrect the Filipino moral character which is generallyperceived to be in a state of continuing erosion. It is in the light of thisalarming perspective that I call upon government to carefully weigh theadvantages and disadvantages of setting up more gambling facilities in thecountry. That the PAGCOR contributes greatly to the coffers of thegovernment is not enough reason for setting up more gambling casinosbecause, undoubtedly, this will not help improve, but will cause a furtherdeterioration in the Filipino moral character.It is worth remembering in thisregard that, 1) what is legal is not always moral and 2) the ends do notalways justify the means.

DAVIDE, JR., J., concurring:While I concur in part with the majority, I wish, however, to express myviews on certain aspects of this case.

I.It must at once be noted that private respondent Pryce PropertiesCorporation (PRYCE) directly filed with the Court of Appeals its so-calledpetition for prohibition, thereby invoking the said court's original jurisdictionto issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it,however, the principal cause of action therein is one for declaratory relief:to declare null and unconstitutional for, inter alia , having been enacted


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without or in excess of jurisdiction, for impairing the obligation of contracts,and for being inconsistent with public policy the challenged ordinancesenacted by the Sangguniang Panglungsod of the City of Cagayan de Oro.The intervention therein of public respondent Philippine Amusement and

Gaming Corporation (PAGCOR) further underscores the "declaratory relief"nature of the action. PAGCOR assails the ordinances for being contrary tothe non-impairment and equal protection clauses of the Constitution,violative of the Local Government Code, and against the State's nationalpolicy declared in P.D. No. 1869. Accordingly, the Court of Appeals does nothave jurisdiction over the nature of the action. Even assuming arguendothat the case is one for prohibition , then, under this Court's establishedpolicy relative to the hierarchy of courts, the petition should have been filedwith the Regional Trial Court of Cagayan de Oro City. I find no special orcompelling reason why it was not filed with the said court. I do not wish toentertain the thought that PRYCE doubted a favorable verdict therefrom, inwhich case the filing of the petition with the Court of Appeals may havebeen impelled by tactical considerations. A dismissal of the petition by theCourt of Appeals would have been in order pursuant to our decisions.

P&G vs. MUNICIPALITY OF JUGNA

FACTS

P &G is a domestic corporation engaged in the manufacture of soap, edibleoil, margarine and other similar products, and for this purpose maintains a"bodega" in defendant Municipality where it stores copra purchased in themunicipality and therefrom ships the same for its manufacturing and otheroperations.

Subsequently, the Municipal Council of Jagna enacted Municipal OrdinanceNo. 4 which imposes storage fees to all exportable copra deposited in abodega within the jurisdiction of the Municipality.

For a period of six years, from 1958 to 1963, P&G paid defendantMunicipality, allegedly under protest, storage fees in the total sum of 1142,265.13.

In 1964, P&G filed this suit in the CFI wherein it prayed that 1) OrdinanceNo. 4 be declared inapplicable to it (it claims that it is not engaged in thestorage of copra for compensation and the tax pf P0.10 for 100 kilos isexcessive, unreasonable and oppressive), or that it be pronounced ultra-vires and void for being beyond the power of the Municipality to enact; and2) that defendant Municipality be ordered to refund to it the amount whichit had paid under protest; and costs. However, defendant Municipalityupheld its power to enact the Ordinance in question; questioned the jurisdiction of the CFI to take cognizance of the action; and pleadedprescription and laches for P&G's failure to timely question the validity of the said Ordinance.

After the parties had agreed to submit the case for judgment on thepleadings, the CFI upheld its jurisdiction as well as defendant Municipality'spower to enact the Ordinance in question under section 2238 of the RevisedAdministrative Code, otherwise known as the general welfare clause, anddeclared that P&G's right of action had prescribed under the 5-year periodprovided for by Article 1149 of the Civil Code.

ISSUE

Whether defendant Municipality was authorized to impose and collect thestorage fee provided for in the challenged Ordinance

RULING

The validity of the Ordinance must be upheld pursuant to the broadauthority conferred upon municipalities by Commonwealth Act No. 472,


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VILLANUEVA vs. CITY OF ILOILO

FACTS

On September 30, 1946 the municipal board of Iloilo City enacted Ordinance86, imposing license tax fees on tenement house.This Court, in City of Iloilovs. Remedios Sian Villanueva and Eusebio Villanueva declared the ordinanceultra vires , "it not appearing that the power to tax owners of tenementhouses is one among those clearly and expressly granted to the City of Iloiloby its Charter." On January 15, 1960 the municipal board of Iloilo City,believing, obviously, that with the passage of RA 2264,Local Autonomy Act,it had acquired the authority or power to enact an ordinance similar to thatpreviously declared by this Court as ultra vires , enacted Ordinance 11 (ANORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS ENGAGED INTHE BUSINESS OF OPERATING TENEMENT HOUSES).By virtue of theordinance in question, the appellant City collected from appellee Villanueva,for the years 1960-1964, the sum of P5,824.30, and from other appellees,for the same year, the sum of P1,317.00. Hence, plaintiffs-appellees filed acomplaint, against the City of Iloilo, praying that Ordinance 11 be declared"invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact, and unconstitutional for being violative of the rule as touniformity of taxation and for depriving said plaintiffs of the equalprotection clause of the Constitution," and that the City be ordered torefund the amounts collected from them under the said ordinance. Lowercourt rendered judgment declaring the ordinance illegal.

ISSUES

1. Is the City of Iloilo empowered by the Local Autonomy Act toimpose tenement taxes? YES.

2. Is Ordinance 11 of the City of Iloilo, illegal because it imposesdouble taxation? NO .

3. Is Ordinance 11 oppressive and unreasonable because it carries apenal clause? NO .

4. Does Ordinance 11 violate the rule of uniformity of taxation? NO .

RULING

1. RA 2264 confer on local governments broad taxing authority whichextends to almost "everything, excepting those which are mentionedtherein," provided that the tax so levied is "for public purposes, just anduniform," and does not transgress any constitutional provision or is notrepugnant to a controlling statute.Thus, when a tax, levied under theauthority of a city or municipal ordinance, is not within the exceptions andlimitations aforementioned, the same comes within the ambit of thegeneral rule, pursuant to the rules of expressio unius est exclusio alterius,and exceptio firmat regulum in casibus non excepti .

The appellees strongly maintain that it is a "property tax" or "real estatetax," and not a "tax on persons engaged in any occupation or business orexercising privileges," or a license tax, or a privilege tax, or an excise tax. It isour view, contrary to the appellees' contention, that the tax in question isnot a real estate tax. The tax imposed by the ordinance in question does notpossess the attributes of a real estate tax. It is not a tax on the land onwhich the tenement houses are erected, although both land and tenementhouses may belong to the same owner. The tax is not a fixed proportion of the assessed value of the tenement houses, and does not require theintervention of assessors or appraisers. It is not payable at a designatedtime or date, and is not enforceable against the tenement houses either bysale or distraint. Clearly, therefore, the tax in question is not a real estatetax. On the contrary, it is plain from the context of the ordinance that theintention is to impose a license tax on the operation of tenement houses,which is a form of business or calling. The ordinance, in both its title andbody, particularly sections 1 and 3 thereof, designates the tax imposed as a


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4. The trial court brands the ordinance as violative of the rule of uniformityof taxation because while the owners of the other buildings only pay realestate tax and income taxes, the ordinance imposes aside from these twotaxes an apartment or tenement tax. Appellees also argue that there is "lack

of uniformity" and "relative inequality," because "only the taxpayers of theCity of Iloilo are singled out to pay taxes on their tenement houses, whilecitizens of other cities, where their councils do not enact a similar taxordinance, are permitted to escape such imposition."

It is our view that both assertions are undeserving of extended attention.This Court has already ruled that tenement houses constitute a distinct classof property. It has likewise ruled that "taxes are uniform and equal whenimposed upon all property of the same class or character within the taxingauthority." The fact, therefore, that the owners of other classes of buildingsin the City of Iloilo do not pay the taxes imposed by the ordinance inquestion is no argument at all against uniformity and equality of the taximposition. Neither is the rule of equality and uniformity violated by the factthat tenement taxes are not imposed in other cities, for the same rule doesnot require that taxes for the same purpose should be imposed in differentterritorial subdivisions at the same time.So long as the burden of the taxfalls equally and impartially on all owners or operators of tenement housessimilarly classified or situated, equality and uniformity of taxation isaccomplished.

The last important issue posed by the appellees is that since the ordinancein the case at bar is a mere reproduction of Ordinance 86 of the City of Iloilowhich was declared by this Court as ultra vires , the decision in that caseshould be accorded the effect of res judicata in the present case or shouldconstitute estoppel by judgment. To dispose of this contention, it suffices tosay that there is no identity of subject-matter in that case and this casebecause the subject-matter in it was an ordinance which dealt not only withtenement houses but also warehouses, and the said ordinance was enactedpursuant to the provisions of the City charter, while the ordinance in the

case at bar was enacted pursuant to the provisions of the Local AutonomyAct.

MUNICIPALITY OF OPON vs. CALTEX

FACTS

Caltex (Philippines) Inc., is a domestic corporation engaged in the businessof importing, distributing and selling gasoline, kerosene and otherpetroleum products. For the purpose of storing its imported petroleumproducts it has an establishment called 'Caltex Opon Terminal' located inthe Municipality of Opon, Cebu. In addition, the said 'Caltex Opon Terminal'has a tin can factory whereby plaintiff-appellant manufactures 5-gallon tincans for its use in the sale and distribution of its petroleum products.

Pursuant, however, to a service agreement dated August 1, 1946 andentered into between plaintiff-appellant and Tidewater Associated OilCompany, plaintiff-appellant agreed to arrange, within its ability to do so, indrum and package factories owned and operated by it, to manufacture,supply and/or fill cans and drums for Tidewater, provided the latterreimburses herein plaintiff-appellant for all cost and expense causedthereby, plus three (3%) per cent of such cost and expense.

From 1950 to 1955, plaintiff- appellants9 tin can factory at its 'Caltex OponTerminal' manufactured 8,037,775 tin cans out of which 6,883,429 wereused for the sale and distribution of its own products and 1,154,346 tin canswere delivered to Tidewater by virtue of the service agreementabovementioned.

Ordinance No. 9, series of 1949, of defendant-appellee Municipality of Opon,Cebu, imposes a municipal license tax on tin factory on the basis of itsmaximum annual output capacity, with a schedule of graduated rates.Section 1, in part, provides: "A municipal license tax on tin factory" is


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imposed upon "(a) Tin factory with a maximum output capacity of 30,000tins P150.00"

Pursuant to this ordinance, defendants-appellees levied and collected from

plaintiff-appellant license taxes based on the production of the tin factory atits 'Caltex Opon Terminal' for the years 1950 to 1955.

Plaintiff contends that respondent company is liable for the entire output of the tin can factory because profit is the motivating factor in themanufacture thereof. Petitioners' view is that the tin cans whether for itsown use or for Tidewater upon the contract heretofore stated, are taxable.Reason therefor, so petitioners point out, is that the license tax is based onthe maximum annual output capacity of the factory.

ISSUES

1. Whether or not respondent tin can factory is taxable as a separatebusiness of respondent NO .

2. Whether or not period to claim refund has prescribed NO .

RULING

1. When a person or company is already taxed on its main business, it may not be further taxed for doing something or engaging in an activity or workwhich is merely a part of, incidental to and is necessary to its main business.In the sale and distribution of its products in liquid form respondent usescontainers. The container is a part of the product sold. By maintaining itsfactory for tin cans respondent is assured of continuous supply thereof.Therefore, the tin cans it manufactures for its ownership are not within thecoverage of petitioner municipality's taxing power under Ordinance No. 9.

The entire-output-of-factory argument advanced by petitioners needs

further articulation. For petitioners insist that respondent's factory alsoserves the needs of another entity Tidewater. To be noted here is that of the tin cans produce for the period 1950-1955, 85.63% were used byrespondent; 14.361% delivered to Tidewater. Jurisprudential support is not

wanting for the decision of the Court of Appeals establishing a dividing linebetween the tin cans manufactured for respondent's own business andthose for Tidewater.

For the tin cans produced for Tidewater license tax was correctly assessed.But for those produced by respondent for its own use, no license tax is due,because the manufacture thereof is "incidental to" and tends " to better accomplish the principal end in view " its main business.

2. A rule which has earned acceptance is that the period for prescription of action to recover municipal license taxes is six years under Article 1145 (2)of the Civil Code. The two-year prescriptive period in Section 306 of theNational Internal Revenue Code relied upon by petitioners finds noapplication. For, this codal provision, as we have said in one case, "clearlyrefers exclusively to claims for refund of `national internal revenue tax'erroneously or illegally collected" and not "to a refund of `local or municipallicense fees' illegally collected."

PHILIPPINE BASKETBALL ASSOCIATION vs. CA

FACTS

PBA received a tax assessment from the BIR for deficiency on amusementtaxes

PBA contested the said deficiency on amusement taxes with the CTAhowever was denied. The same was raised to the CA and was also denied aswell as a subsequent MR.


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PBA now raises the case to the SC

ISSUES

1. Does the National government have jurisdiction to tax PBA or is itthe local government as provided in SEC. 13 of the Local Tax code?NO

2. Is the Petitioner liable for the said amusement taxes? YES

Petitioner contends PD 231, otherwise known as the Local Tax Code of 1973,transferred the power and authority to levy and collect amusement taxesfrom the sale of admission tickets to places of amusement from the nationalgovernment to the local governments. Petitioner cited BIR MemorandumCircular No. 49-73 providing that the power to levy and collect amusementtax on admission tickets was transferred to the local governments by virtueof the Local Tax Code; and BIR Ruling No. 231-86 which held that "the jurisdiction to levy amusement tax on gross receipts from admission ticketsto places of amusement was transferred to local governments under P.D.No. 231, as amended.

RULING

Sec. 13. Amusement tax on admission. -The province shall impose a taxon admission to be collected from the proprietors, lessees, or operators

of theaters, cinematographs, concert halls, circuses and other places of amusement xxx."

The foregoing provision of law in point indicates that the province can onlyimpose a tax on admission from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. The authority to tax professional basketball games is nottherein included.

With the reference to PD 871 by PD 1456 and PD 1959, there is arecognition under the laws of this country that the amusement tax onprofessional basketball games is a national, and not a local, tax. Even up tothe present, the category of amusement taxes on professional basketball

games as a national tax remains the same. This is so provided under Section125 of the 1997 National Internal Revenue Code. Section 140 of the LocalGovernment Code of 1992 (Republic Act 7160), meanwhile, retained theareas (theaters, cinematographs, concert halls, circuses and other places of amusement) where the province may levy an amusement tax withoutincluding therein professional basketball games.

Last issue for resolution concerns the liability of petitioner for the paymentof surcharge and interest on the deficiency amount due. Petitionercontends that it is not liable, as it acted in good faith, having relied upon theissuances of the respondent Commissioner. This issue must necessarily failas the same has never been posed as an issue before the respondent court.Issues not raised in the court a quo cannot be raised for the first time onappeal. All things studiedly considered, the Court rules that the petitioner is liable topay amusement tax to the national government, and not to the localgovernment, in accordance with the rates prescribed by PD 1959.

HAGONOY MARKET VENDOR ASSOCIATION vs. MUNICIPALITY OFHAGONOY

FACTS

On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enactedan ordinance, Kautusan Blg. 28, which increased the stall rentals of themarket vendors in Hagonoy. Article 3 provided that it shall take effect uponapproval. The subject ordinance was posted from November 4-25, 1996. Inthe last week of November, 1997, the petitioners members were personallygiven copies of the approved Ordinance and were informed that it shall be


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enforced in January, 1998. On December 8, 1997, the petitioners Presidentfiled an appeal with the Secretary of Justice assailing the constitutionality of the tax ordinance. Petitioner claimed it was unaware of the posting of theordinance.

Respondent opposed the appeal. It contended that the ordinance tookeffect on October 6, 1996 and that the ordinance, as approved, was postedas required by law. Hence, it was pointed out that petitioners appeal,made over a year later, was already time-barred. The Secretary of Justicedismissed the appeal on the ground that it was filed out of time, i.e., beyondthirty (30) days from the effectivity of the Ordinance on October 1, 1996, asprescribed under Section 187 of the 1991 Local Government Code. Citingthe case of Taada vs. Tuvera, the Secretary of Justice held that the date of effectivity of the subject ordinance retroacted to the date of its approval inOctober 1996, after the required publication or posting has been compliedwith, pursuant to Section 3 of said ordinance.

ISSUE

Was the appeal by the petitioner with the Secretary of Justice time-barred?

RULING

YES. Section 187 of the Local Govt Code requires that an appeal of a taxordinance or revenue measure should be made to the Secretary of Justice

within thirty (30) days from effectivity of the ordinance and even during itspendency, the effectivity of the assailed ordinance shall not be suspended .In the case at bar, Municipal Ordinance No. 28 took effect in October 1996.Petitioner filed its appeal only in December 1997, more than a year after theeffectivity of the ordinance in 1996. Clearly, the Secretary of Justicecorrectly dismissed it for being time-barred. At this point, it is apropos tostate that the timeframe fixed by law for parties to avail of their legalremedies before competent courts is not a mere technicality that can be

easily brushed aside. The periods stated in Section 187 of the LocalGovernment Code are mandatory. Ordinance No. 28 is a revenue measureadopted by the municipality of Hagonoy to fix and collect public marketstall rentals. Being its lifeblood, collection of revenues by the government is

of paramount importance. The funds for the operation of its agencies andprovision of basic services to its inhabitants are largely derived from itsrevenues and collections. Thus, it is essential that the validity of revenuemeasures is not left uncertain for a considerable length of time. Hence, thelaw provided a time limit for an aggrieved party to assail the legality of revenue measures and tax ordinances.

YAMANE vs. BA LEPANTO

FACTS

Respondent BA- Lepanto Condominium Corporation (the Corporation) is aduly organized condominium corporation constituted in accordance withthe Condominium Act, which owns and holds title to the common andlimited common areas of the BA-Lepanto Condominium (theCondominium), situated in Paseo de Roxas, Makati City. Its membershipcomprises the various unit owners of the Condominium. The Corporation isauthorized, under Article V of its Amended By-Laws, to collect regularassessments from its members for operating expenses, capital expenditureson the common areas, and other special assessments as provided for in theMaster Deed with Declaration of Restrictions of the Condominium.

The Corporation received a Notice of Assessment signed by the CityTreasurer stating that the Corporation is liable to pay the correct citybusiness taxes, fees and charges, computed as totaling P1,601,013.77 forthe years 1995 to 1997. The Notice of Assessment was silent as to thestatutory basis of the business taxes assessed. The Corporation respondedwith a written tax protest addressed to the City Treasurer. It was evident in


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the protest that the Corporation was perplexed on the statutory basis of thetax assessment.

Proceeding from the premise that its tax liability arose from Section

3A.02(m) of the Makati Revenue Code, the Corporation proceeded to arguethat under both the Makati Code and the Local Government Code,business is defined as trade or commercial activity regularly engaged inas a means of livelihood or with a view to profit. It was submitted that theCorporation, as a condominium corporation, was organized not for profit,but to hold title over the common areas of the Condominium, to managethe Condominium for the unit owners, and to hold title to the parcels of land on which the Condominium was located. Neither was the Corporationauthorized, under its articles of incorporation or by-laws to engage in profit-making activities. The assessments it did collect from the unit owners werefor capital expenditures and operating expenses.

The protest was rejected by the City Treasurer, insisting that the collectionof dues from the unit owners was effected primarily to sustain andmaintain the expenses of the common areas, with the end in view of gettingfull appreciative living values for the individual condominium occupants andto command better marketable prices for those occupants who would inthe future sell t heir respective units. Thus, she concluded since the chancesof getting higher prices for well-managed common areas of anycondominium are better and more effective that condominiums with poormanaged common areas, the corporation activity is a profit venture

making .

From the denial of the protest, the Corporation filed an Appeal with the RTCwhich dismissed the apeal for lack of merit, accepting the premise laid bythe City Treasurer.

From this Decision of the RTC, the Corporation filed a Petition for Review under Rule 42 of the Rules of Civil Procedure with the Court of

Appeals. Initially, the petition was dismissed outright on the ground thatonly decisions of the RTC brought on appeal from a first level courtcould be elevated for review under the mode of review prescribedunder Rule 42. However, the Corporation pointed out in its Motion for

Reconsideration that under Section 195 of the Local Government Code,the remedy of the taxpayer on the denial of the protest filed with thelocal treasurer is to appeal the denial with the court of competent jurisdiction.

The CA reversed the RTC and declared that the Corporation was not liableto pay business taxes to the City of Makati.

ISSUES

1. Whether the RTC, in deciding an appeal taken from a denial of aprotest by a local treasurer under Section 195 of the LocalGovernment Code, exercises original jurisdiction or appellate jurisdiction.

2. Whether or not the City of Makati may collect business taxes oncondominium corporations.

RULING

1. Original Jurisdiction. The question assumes a measure of importance tothis petition, for the adoption of the position of the City Treasurer that the

mode of review of the decision taken by the RTC is governed by Rule 41 of the Rules of Civil Procedure means that the decision of the RTC would havelong become final and executory by reason of the failure of the Corporationto file a notice of appeal.

Labelling the said review as an exercise of appellate jurisdiction isinappropriate, since the denial of the protest is not the judgment or order of a lower court, but of a local government official.


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From these premises, it is evident that the stance of the City Treasurer iscorrect as a matter of law, and that the proper remedy of the Corporationfrom the RTC judgment is an ordinary appeal under Rule 41 to the Court of Appeals. However, we make this pronouncement subject to two important

qualifications. First, in this particular case there are nonetheless significantreasons for the Court to overlook the procedural error and ultimately upholdthe adjudication of the jurisdiction exercised by the Court of Appeals in thiscase. Second, the doctrinal weight of the pronouncement is confined tocases and controversies that emerged prior to the enactment of Republic ActNo. 9282, the law which expanded the jurisdiction of the Court of TaxAppeals (CTA).

2. No. The coverage of business taxation particular to the City of Makati isprovided by the Makati Revenue Code (Revenue Code), enacted throughMunicipal Ordinance No. 92-072. The Revenue Code remains in effect as of this writing. Article A, Chapter III of the Revenue Code governs businesstaxes in Makati, and it is quite specific as to the particular businesses whichare covered by business taxes.At no point has the City Treasurer informed the Corporation, the RTC, theCourt of Appeals, or this Court for that matter, as to what exactly is theprecise statutory basis under the Makati Revenue Code for the levying of thebusiness tax on petitioner.

The notice of assessment, which stands as the first instance the taxpayer isofficially made aware of the pending tax liability, should be sufficiently

informative to apprise the taxpayer the legal basis of the tax. Section 195 of the Local Government Code does not go as far as to expressly require thatthe notice of assessment specifically cite the provision of the ordinanceinvolved but it does require that it state the nature of the tax, fee or charge,the amount of deficiency, surcharges, interests and penalties. In this case,the notice of assessment sent to the Corporation did state that theassessment was for business taxes, as well as the amount of the assessment.There may have been prima facie compliance with the requirement under

Section 195. However in this case, the Revenue Code provides multipleprovisions on business taxes, and at varying rates. Hence, we couldappreciate the Corporations confusion, as expressed in its protest, as to theexact legal basis for the tax.

Moreover, a careful examination of the Revenue Code shows that whileSection 3A.02(m) seems designed as a catch-all provision, Section 3A.02(f),which provides for a different tax rate from that of the former provision,may be construed to be of similar import. While Section 3A.02(f) is quiteexhaustive in enumerating the class of businesses taxed under the provision,the listing, while it does not include condominium-related enterprises, endswith the abbreviation etc., or et cetera.

(m) On owners or operators of any business not specified above shall paythe tax at the rate of two percent (2%) for 1993, two and one-half percent (2%) for 1994 and 1995, and three percent (3%) for 1996 and the yearsthereafter of the gross receipts during the preceding year.We do note our discomfort with the unlimited breadth and the dangerousuncertainty which are the twin hallmarks of the words etcetera. Certainly, we cannot be disposed to uphold any tax imposition thatderives its authority from enigmatic and uncertain words such as et cetera.Yet we cannot even say with definiteness whether the tax imposed on theCorporation in this case is based on et cetera, or on Section 3A.02(m), oron any other provision of the Revenue Code. Assuming that the assessmentmade on the Corporation is on a provision other than Section 3A.02(m), the

main legal issue takes on a different complexion. For example, if it is basedon et cetera under Section 3A.02(f), we would have to examine whetherthe Corporation faces analogous comparison with the other businesses listedunder that provision.

Certainly, the City Treasurer has not been helpful in that regard, as she hasbeen silent all through out as to the exact basis for the tax imposition whichshe wishes that this Court uphold. Indeed, there is only one thing that


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prevents this Court from ruling that there has been a due process violationon account of the City Treasurers failure to disclose on paper the statutorybasis of the tax that the Corporation itself does not allege injury arising fromsuch failure on the part of the City Treasurer.

As stated earlier, local tax on businesses is authorized under Section 143 of the Local Government Code. The word business itself is defined underSection 131(d) of the Code as trade or commercial activ ity regularlyengaged in as a means of livelihood or with a view to profit. This definitionof business takes on importance, since Section 143 allows localgovernment units to impose local taxes on businesses other than thosespecified under the provision. Moreover, even those business activitiesspecifically named in Section 143 are themselves susceptible to broadinterpretation.

It is thus imperative that in order that the Corporation may be subjected tobusiness taxes, its activities must fall within the definition of business asprovided in the Local Government Code. And to hold that they do is toignore the very statutory nature of a condominium corporation.

For orderly administration over common areas which are jointly owned bythe various unit owners, the Condominium Act permits the creation of acondominium corporation, which is specially formed for the purpose of holding title to the common area, in which the holders of separate interestsshall automatically be members or shareholders, to the exclusion of others,

in proportion to the appurtenant interest of their respective units.

In line with the authority of the condominium corporation to manage thecondominium project, it may be authorized, in the deed of restrictions, tomake reasonable assessments to meet authorized expenditures, eachcondominium unit to be assessed separately for its share of such expenses inproportion (unless otherwise provided) to its owners fractional interest inany common areas . It is the collection of these assessments from unit

owners that form the basis of the City Treasurers claim t hat the Corporationis doing business.

We can elicit from the Condominium Act that a condominium corporation is

precluded by statute from engaging in corporate activities other than theholding of the common areas, the administration of the condominiumproject, and other acts necessary, incidental or convenient to theaccomplishment of such purposes. Neither the maintenance of livelihood,nor the procurement of profit, fall within the scope of permissible corporatepurposes of a condominium corporation under the Condominium Act.

The Court has examined the particular Articles of Incorporation and By-Lawsof the Corporation, and these documents unmistakably hew to thelimitations contained in the Condominium Act. Obviously, none of thesecorporate purposes are geared towards obtaining of profit. Even though theCorporation is empowered to levy assessments or dues from the unitowners, these amounts collected are not intended for the incurrence of profit by the Corporation or its members, but to shoulder the multitude of necessary expenses that arise from the maintenance of the CondominiumProject. Just as much is confirmed by Section 1, Article V of the Amended By-Laws, which enumerate the particular expenses to be defrayed by theregular assessments collected from the unit owners. These would includethe salaries of the employees of the Corporation, and the cost of maintenance and ordinary repairs of the common areas.

The City Treasurer nonetheless contends that the collection of theseassessments a nd dues are with the end view of getting full appreciativeliving values for the condominium units, and as a result, profit is obtainedonce these units are sold at higher prices. The Court cites with approval thetwo counterpoints raised by the Court of Appeals in rejecting thiscontention. First, if any profit is obtained by the sale of the units, it accruesnot to the corporation but to the unit owner. Second, if the unit owner does


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obtain profit from the sale of the corporation, the owner is already requiredto pay capital gains tax on the appreciated value of the condominium unit.

The City Treasurer also contends that the fact that the Corporation is

engaged in business is evinced by the Articles of Incorporation, whichspecifically empowers the Co rporation to acquire, own, hold, enjoy, lease,operate and maintain, and to convey, sell, transfer mortgage or otherwisedispose of real or personal property. What the City Treasurer fails to addis that every corporation organized under the Corporation Code is sospecifically empowered. Section 36(7) of the Corporation Code states thatevery corporation incorporated under the Code has the power and capacityto purchase, receive, take or grant, hold, convey, sell, lease, pledge,mortgage and otherwise deal with such real and personal property . . . as thetransaction of the lawful business of thecorporation may reasonably and necessarily require . . . . Without thispower, corporations, as juridical persons, would be deprived of the capacityto engage in most meaningful legal relations.

Again, whatever capacity the Corporation may have pursuant to its power toexercise acts of ownership over personal and real property is limited by itsstated corporate purposes, which are by themselves further limited by theCondominium Act. A condominium corporation, while enjoying such powersof ownership, is prohibited by law from transacting its properties for thepurpose of gainful profit.

Accordingly, and with a significant degree of comfort, we hold thatcondominium corporations are generally exempt from local businesstaxation under the Local Government Code, irrespective of any localordinance that seeks to declare otherwise.

SAN JUAN vs. CASTRO

FACTSRomulo D. San Juan, registered owner of real properties in Marikina City

conveyed, by Deed of Assignment, the properties to the Saints and AngelsRealty Corporation (SARC), then under the process of incorporation, inexchange for 258,434 shares of stock therein with a total par value of P2,584,340.

Mr. San Juan then paid the transfer tax based on the consideration stated inthe Deed of Assignment. Marikina City Treasurer Ricardo L. Castro informedhim, however, that the tax due is based on the fair market value of theproperty. In turn, Mr. San Juan in writing protested the basis of the tax duebut on July 15, 2005, via a letter, Mr. Castro responded on the negative.

Mr. San Juan thus filed before RTC a Petition for mandamus and damagesagainst Mr. Castro in his capacity as Marikina City Treasurer praying that thelatter be compelled to perform a ministerial duty, that is, to accept thepayment of transfer tax based on the actual consideration of thetransfer/assignment. Mr. San Juan claims that the intention of the law inSec. 135 of the LGC is not to automatically apply the whichever is higherrule. Clearly, from reading the provision, it is only when there is a monetaryconsideration involved and the monetary consideration is not substantialthat the tax rate is based on the higher fair market value. But the RTCdismissed the case holding that *M+onetary consideration as used in

Section 135 of R.A. 7160 does not only pertain to the price or moneyinvolved but likewise, as in the case of donations or barters, this refers tothe value or monetary equivalent of what is received by the transferor. Andin this case the fair market value of the stocks which is P7M is higher thanthe consideration which is only P2.58M, hence, the former amount must beused as tax base. Moreover, The subject of this Petition is the performanceof a duty which is not ministerial in character. Assessment of tax liabilitiesor obligations and the corresponding duty to collect the same involves a


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degree of discretion. It is erroneous to assume that the City Treasurer ispowerless to ascertain if the payment of the tax obligation is proper orcorrect. Mandamus cannot lie to compel the City Treasurer to accept asfull compliance a tax payment which in his reasoning and assessment is

deficient and incorrect.

ISSUE

Did the RTC err in dismissing the petition for mandamus?

RULING

NO. For a petition for Mandamus to lie, there must be no other plain,speedy and adequate remedy in the ordinary course of law. In this case, thesaid condition was not satisfied. A taxpayer who disagrees with a taxassessment made by a local treasurer may file a written protest asprescribed by Sec. 195 of the LGC: The taxpayer shall have thirty (30) daysfrom the receipt of the denial of the protest or from the lapse of the sixty-day (60) period prescribed herein within which to appeal with the court of competent jurisdiction, otherwise the assessment becomes conclusive andunappealable.

That Mr. San Juan protested in writing against the assessment of tax dueand the basis thereof is on record as in fact it was on that account that Mr.Castro sent him the July 15, 2005 letter which operated as a denial of Mr.

San Juans written protest. Mr. San Juan should thus have, in accordancewith Sec. 195 of the LGC, either appealed the assessment before the courtof competent jurisdiction or paid the tax and then sought a refund. He didnot observe any of these remedies available to him, however. He insteadopted to file a petition for mandamus to compel Mr. Castro to acceptpayment of transfer tax as computed by him.

Mandamus lies only to compel an officer to perform a ministerial duty (onewhich is so clear and specific as to leave no room for the exercise of discretion in its performance) but not a discretionary function (one which byits nature requires the exercise of judgment). Mr. Castros argument that

*m+andamus cannot lie to compel the City Treasurer to accept as fullcompliance a tax payment which in his reasoning and assessment isdeficient and incorrect is thus persuasive.

MACTAN CEBU INTERNATIONAL AIRPORT vs. MARCOS (TO FOLLOW)

Tax+Digest+Assignment+9+(Lacks+1+Case) (1)

Documents

Transcript of Tax+Digest+Assignment+9+(Lacks+1+Case) (1)