TAXATION 1 | B2015 CASE DIGESTS

Matalin Coconut Inc. v. Municipal Council of Malabang

August 13, 1986 Yap, J. Raeses, Roberto Miguel O.

oppressive and confiscatory. Matalin prayed for the ordinance to be declared null and void ab initio, and that the Council be ordered to refund the amounts paid by Matalin, as well as for a preliminary injunction. The trial court denied the application for preliminary injunction. Purakan Plantation, on account of the supposed adverse effects the ordinance had on their business, was allowed to intervene in the action. The court a quo, after trial, declared the ordinance null and void, and ordered the Municipal Treasurer to make the refunds, as well as to enjoin and prohibit the Council, its agents and its deputies from collecting taxes on the products belonging to intervenor Purakan. The TC subsequently issued a writ of preliminary mandatory injunction, requiring the Municipal Treasurer to deposit with the PNB whatever amounts the petitioner had already paid or shall pay pursuant to the ordinance in question up to and until final termination of the case. Upon motion for reconsideration, the writ was modified, to require the deposit only of amounts paid from the effectivity of the writ up to and until the final termination of the suit. The Municipal Council appealed to the SC. Matalins motion to dismiss was denied, as well as the Councils motion to dissolve the writ. ISSUES: 1. WON the TC erred in adjudicating the money claim of the petitioner in an action for declaratory relief 2. WON the TC erred in declaring the ordinance in question null and void RULING: 1. No, the TC may adjudicate the money claims of Matalin in an action for declaratory relief. 2. No, the tax imposed by the ordinance was indeed null and void.

SUMMARY: The Municipal Council of Malabang enacted an ordinance imposing a police inspection fee of P.30 per sack of cassava starch or flour. The said ordinance was challenged by Matalin Coconut, on account of its being ultra vires and its being unreasonable, oppressive, and confiscatory. While the SC did not agree with the TCs finding that it is a percentage tax that is beyond the scope of the power granted to the Municipal Councils to levy under the Local Autonomy Act, it agreed with the TCs finding that the tax imposed was unjust, unreasonable, excessive, and confiscatory. DOCTRINE: (Implied) The power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes. FACTS: The Municipal Council of Malabang, on the basis of the Local Autonomy Act, imposed an ordinance making it unlawful for any person, company or group of persons "to ship out of the Municipality of Malabang, cassava starch or flour without paying to the Municipal Treasurer or his authorized representatives the corresponding fee fixed by (the) ordinance." It imposed a "police inspection fee" of P.30 per sack of cassava starch or flour, which shall be paid by the shipper before the same is transported or shipped outside the municipality. The ordinance was challenged by Matalin Coconut, alleging that not was it ultra vires, being violative of the Local Autonomy Act, but also because of its being unreasonable,

TAXATION 1 | B2015 CASE DIGESTS

RATIO: 1. Sec. 6 of Rule 64 of the RoC says that an action for declaratory relief may be converted into an ordinary action and the parties are allowed to file such pleadings as may be necessary or proper if, before the termination of the case, a breach or violation of an ordinance, should take place. While no breach occurred, as the petitioner decided to pay under protest, such payment did not affect the case. The action for declaratory relief was still proper because the applicability of the ordinance to future transactions still remained to be resolved. 2. Since the enactment of the Local Autonomy Act, a liberal rule has been followed by this Court in construing municipal ordinances enacted pursuant to the taxing power granted under Section 2 of said law. The SC has construed the grant of power to tax under the mentioned provision as sufficiently plenary to cover "everything, excepting those which are mentioned" therein, subject only to the limitation that the tax so levied is for public purposes, just and uniform. While the SC agrees with the finding of the TC that the ordinance in question partakes of the nature of a tax for its purpose was to raise revenue, it does not agree with the TCs finding that it is a percentage tax on sales which is beyond the scope of the municipalitys authority to levy under the Local Autonomy Act. It was not a percentage tax for it was a fixed tax. However, the tax can be stricken down on the basis of its being unjust and unreasonable. The reasons given for the imposition of such a fee could not be given credence for (a) the police was not competent enough to determine whether the starch or flour was fit for human consumption and (b) that Matalin has

never requested for police protection as it has never been molested by undesirable elements. Furthermore, the tax is excessive and confiscatory. Matalin only realizes a marginal profit of P0.40 per bag. The imposition of a P.30 tax would, therefore, force the petitioner to close or stop its cassava flour starch milling business. DISPOSITIVE: WHEREFORE, petition is dismissed. The decision of the court a quo is hereby affirmed. No costs.