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G.R. No. 112497, August 4, 1994
Cruz, J.
Facts:
Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures; Mandatory Public Hearings.
The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the
provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment
thereof; Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue
measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice
who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That
such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment
of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision
or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party
may file appropriate proceedings with a court of competent jurisdiction.
Held:
Yes. Section 187 authorizes the Secretary of Justice to
review only the constitutionality or legality of the tax ordinance
and, if warranted, to revoke it on either or both of these grounds.
When he alters or modifies or sets aside a tax ordinance, he is not
also permitted to substitute his own judgment for the judgment of
the local government that enacted the measure. Secretary Drilon
did set aside the Manila Revenue Code, but he did not replace it
with his own version of what the Code should be.. What he found
only was that it was illegal. All he did in reviewing the said measure
was determine if the petitioners were performing their functions in
accordance with law, that is, with the prescribed procedure for the
enactment of tax ordinances and the grant of powers to the city
government under the Local Government Code. As we see it, that
was an act not of control but of mere supervision.
An officer in control lays down the rules in the doing of an
act. If they are not followed, he may, in his discretion, order the act
undone or re-done by his subordinate or he may even decide to do
it himself. Supervision does not cover such authority. The
supervisor or superintendent merely sees to it that the rules are
followed, but he himself does not lay down such rules, nor does he
have the discretion to modify or replace them.
Significantly, a rule similar to Section 187 appeared in the
Local Autonomy Act. That section allowed the Secretary of Finance
to suspend the effectivity of a tax ordinance if, in his opinion, the
tax or fee levied was unjust, excessive, oppressive or confiscatory.
0
SUMMARY OF RATIO:
0
Ganzon is under the impression that the Constitution
has left the President mere supervisory powers, which
supposedly excludes the power of investigation, and denied
her control, which allegedly embraces disciplinary
authority. It is a mistaken impression because legally,
supervision is not incompatible with disciplinary
authority. The SC had occasion to discuss the scope and
extent of the power of supervision by the President over
local government officials in contrast to the power of
control given to him over executive officials of
our government wherein it was emphasized that the two
terms, control and supervision, are two different things
which differ one from the other in meaning and extent.
In administration law supervision means overseeing or the
power or authority of an officer to see that
subordinate officers perform their duties. If the latter fail or
neglect to fulfill them the former may take such action or
step as prescribed by law to make them perform their
duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify of set aside what a
subordinate officer had done in the performance of his
duties and to substitute the judgment of the former for that
of the latter. But from this pronouncement it cannot be
reasonably inferred that the power of supervision of the
President over local government officials does not include
the power of investigation when in his opinion the good of
the public service so requires.
1
The Secretary of Local Government, as the alter ego
of the president, in suspending Ganzon is exercising a valid
power. He however overstepped by imposing a 600 day
suspension.
1
It is the petitioners' argument that the 1987 Constitution no
longer allows the President, as the 1935 and 1973 Constitutions
did, to exercise the power of suspension and/or removal over local
officials. According to both petitioners, the Constitution is meant,
first, to strengthen self-rule by local government units and second,
by deleting the phrase as may be provided by law to strip the
President of the power of control over local governments. It is a
view, so they contend, that finds support in the debates of the
Constitutional Commission.
0
Sec. 4. The President of the Philippines shall exercise
general supervision over local governments. Provinces with respect
to component cities and municipalities, and cities and
municipalities with respect to component barangays shall ensure
that the acts of their component units are within the scope of their
prescribed powers and functions.
1
It modifies a counterpart provision appearing in the 1935
Constitution:
0
Sec. 10. The President shall have control of all the executive
departments, bureaus, or offices, exercise general supervision over
all Local governments as may be provided by law, and take care
that the laws be faithfully executed.
2
The issue, as the Court understands it, consists of three
questions: (1) Did the 1987 Constitution, in deleting the phrase "as
may be provided by law" intend to divest the President of the
power to investigate, suspend, discipline, and/or remove local
officials? (2) Has the Constitution repealed Sections 62 and 63 of
the Local Government Code? (3) What is the significance of the
change in the constitutional language?It is the considered opinion
of the Court that notwithstanding the change in the constitutional
language, the charter did not intend to divest the legislature of its
right or the President of her prerogative as conferred by existing
legislation to provide administrative sanctions against local
officials. It is our opinion that the omission (of "as may be provided
by law") signifies nothing more than to underscore local
governments' autonomy from congress and to break Congress'
"control" over local government affairs. The Constitution did not,
however, intend, for the sake of local autonomy, to deprive the
legislature of all authority over municipal corporations, in
particular, concerning discipline.
3
Autonomy does not, after all, contemplate making ministates out of local government units, as in the federal governments
of the United States of America (or Brazil or Germany), although
Jefferson is said to have compared municipal corporations
euphemistically to "small republics." Autonomy, in the
constitutional sense, is subject to the guiding star, though not
control, of the legislature, albeit the legislative responsibility under
the Constitution and as the "supervision clause" itself suggest-is to
wean local government units from over-dependence on the central
government.
4
It is noteworthy that under the Charter, "local autonomy" is
not instantly self-executing, but subject to, among other things, the
passage of a local government code, a local tax law, income
distribution legislation, and a national representation law, and
measures designed to realize autonomy at the local level. It is also
noteworthy that in spite of autonomy, the Constitution places the
local government under the general supervision of the Executive. It
is noteworthy finally, that the Charter allows Congress to include in
the local government code provisions for removal of local officials,
which suggest that Congress may exercise removal powers, and as
the existing Local Government Code has done, delegate its exercise
to the President
0
Sec. 3. The Congress shall enact a local government code
which shall provide for a more responsive and accountable local
government structure instituted through a system of
decentralization with effective mechanisms of recall, initiative, and
referendum, allocate among the different local government units
their powers, responsibilities and resources, and provide for the
qualifications, election, appointment and removal, term, salaries,
powers and functions and duties of local officials, and all other
matters relating to the organization and operation of the local
units.
5
The deletion of "as may be provided by law" was meant
to stress, sub silencio, the objective of the framers to strengthen
local autonomy by severing congressional control of its affairs, as
observed by the Court of Appeals, like the power of local
legislation. The Constitution did nothing more, however, and insofar
as existing legislation authorizes the President (through the
Secretary of Local Government) to proceed against local officials
administratively, the Constitution contains no prohibition.
6
The petitioners are under the impression that the
Constitution has left the President mere supervisory powers, which
supposedly excludes the power of investigation, and denied her
control, which allegedly embraces disciplinary authority. It is a
mistaken impression because legally, "supervision" is not
incompatible with disciplinary authority
7
"Control" has been defined as "the power of an officer to
alter or modify or nullify or set aside what a subordinate officer had
done in the performance of his duties and to substitute the
judgment of the former for test of the latter." "Supervision" on the
other hand means "overseeing or the power or authority of an
officer to see that subordinate officers perform their duties. As we
held, however, "investigating" is not inconsistent with "overseeing",
although it is a lesser power than "altering". The impression is
apparently exacerbated by the Court's pronouncements in at least
three cases, Lacson v. Roque, Hebron v. Reyes, and Mondano v.
Silvosa, and possibly, a fourth one, Pelaez v. Auditor General.
In Lacson, this Court said that the President enjoyed no control
powers but only supervision "as may be provided by law," a
rule we reiterated in Hebron, and Mondano. In Pelaez, we stated
that the President "may not . . . suspend an elective official of a
regular municipality or take any disciplinary action against him,
except on appeal from a decision of the corresponding provincial
board." However,neither Lacson nor Hebron nor Mondano ca
tegorically banned the Chief Executive from exercising acts
of disciplinary authority because she did not exercise
their acts in the sense that he can substitute their judgments with
his own.
1
Decentralization of power, on the other hand, involves an
abdication of political power in the favor of local governments units
declared to be autonomous, In that case, the autonomous
government is free to chart its own destiny and shape its future
with minimum intervention from central authorities. According to a
constitutional author, decentralization of power amounts to "selfimmolation," since in that event, the autonomous government
becomes accountable not to the central authorities but to its
constituency
1
Other issues: on Suspension of 60days
0
Held: it was NOT proper
1
Suspension is not a penalty and is not unlike preventive
imprisonment in which the accused is held to insure his presence at
the trial. In both cases, the accused (the respondent) enjoys a
presumption of innocence unless and until found guilty.
2
Suspension finally is temporary and as the Local
Government Code provides, it may be imposed for no more than
sixty days. As we held, a longer suspension is unjust and
unreasonable, and we might add, nothing less than tyranny.
Basco v. PAGCOR
Facts: PAGCOR was created under PD 1869 to enable the
Government to regulate and centralize all games of chance
authorized by existing franchise or permitted by law. To attain its
objectives (centralize and integrate the right and authority to
operate and conduct games of chance, generate additional revenue
to fund infrastructure and socio-civic project, expand tourism,
minimize evils prevalent in conduct and operation of gambling
clubs) PAGCOR is given territorial jurisdiction all over the
Philippines. Under its Charter's repealing clause, all laws, decrees,
executive orders, rules and regulations, inconsistent therewith, are
accordingly repealed, amended or modified.
Issues:
0
WON PD 1869 constitutes a waiver of the right of the City of
Manila to impose taxes and legal fees. NO
0
The City of Manila, being a mere Municipal corporation
has no inherent right to impose taxes. Thus, "the Charter or
statute must plainly show an intent to confer that power or the
municipality cannot assume it." Its "power to tax" therefore must
always yield to a legislative act which is superior having been
passed upon by the state itself which has the "inherent power to
tax"
1
The Charter of the City of Manila is subject to control by
Congress. It should be stressed that "municipal corporations are
8
power of LG to "impose taxes and fees" is subject to
"limitations" which Congress may provide by law. Since PD 1869
remains an "operative" law until "amended, repealed or revoked"
(Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause"
remains as an exception to the exercise of the power of LGs to
impose taxes and fees. It cannot therefore be violative but rather is
consistent with the principle of local autonomy.
9
principle of local autonomy under the 1987 Constitution
simply means "decentralization." It does not make LGs sovereign
within the state or an "imperium in imperio."
LG: political subdivision of a nation or state which is
constituted by law and has substantial control of local
affairs. In a unitary system of government, such as the
government under the Philippine Constitution, LGs can only be an
intra sovereign subdivision of one sovereign nation, it cannot be an
imperium in imperio. LG in such a system can only mean a measure
of decentralization of the function of government.
Manila Electric Co, Inc. vs Province of Laguna
G.R. No. 131359
Subject: Public Corporation
Doctrine: Power to generate revenues
Facts:
MERALCO was granted franchise for the supply of electric light,
heat and power by certain municipalities of the Province of Laguna
including, Bian, Sta Rosa, San Pedro, Luisiana, Calauan and
Cabuyao.
On 19 January 1983, MERALCO was likewise granted a franchise by
the National Electrification Administration to operate an electric
light and power service in the Municipality of Calamba, Laguna.
On 12 September 1991, Republic Act No. 7160, otherwise known as
the Local Government Code of 1991, was enacted to take effect
on 01 January 1992 enjoining local government units to create their
own sources of revenue and to levy taxes, fees and charges,
subject to the limitations expressed therein, consistent with the
basic policy of local autonomy. Pursuant to the provisions of the
Code, respondent province enacted Laguna Provincial Ordinance
providing for franchise tax at a rate of 50% of 1% of the gross
annual receipts. Provincial Treasurer, then sent a demand letter to
MERALCO for the corresponding tax payment.
Petitioner MERALCO paid the tax, which then amounted to
P19,520,628.42, under protest. A formal claim for refund was
From the denial of the protest, the Corporation filed an Appeal with
the Regional Trial Court (RTC) of Makati which dismiss the appeal
and concluded that the activities of the Corporation fell squarely
under the definition of "business" under Section 13(b) of the Local
Government Code, and thus subject to local business taxation.
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 that only decisions of
the RTC brought on appeal from a first level court could be elevated
for review under the mode of review prescribed under 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 the local treasurer is to appeal the denial with the court of
competent jurisdiction. Persuaded by this contention, the Court of
Appeals reinstated the petition.
The appellate court reversed the RTC and declared that the
Corporation was not liable to pay business taxes to the City of
Makati.
Upon denial of her Motion for
Reconsideration,http://www.lawphil.net/judjuris/juri2005/oct20
05/gr_154993_2005.html - fnt21 the City Treasurer elevated the
present Petition for Review under Rule 45. It is argued that the
Corporation is engaged in business, for the dues collected from the
different unit owners is utilized towards the beautification and
maintenance of the Condominium, resulting in "full appreciative
living values" for the condominium units which would command
better market prices should they be sold in the future. The City
Treasurer likewise avers that the rationale for business taxes is not
on the income received or profit earned by the business, but the
privilege to engage in business.
The City Treasurer also claims that the Corporation had filed the
wrong mode of appeal before the Court of Appeals when the latter
filed its Petition for Review under Rule 42. It is reasoned that the
decision of the Makati RTC was rendered in the exercise of original
jurisdiction, it being the first court which took cognizance of the
case. Accordingly, with the Corporation having pursued an
erroneous mode of appeal, the RTC Decision is deemed to have
become final and executory.
Issues and Ruling:
Procedural:
0
Procedural: Whether the RTC, in deciding an appeal
taken from a denial of a protest by a local treasurer under
Section 195 of the Local Government Code, exercises
"original jurisdiction" or "appellate jurisdiction? Original
There are 2 conflicting views on this issue:
0
Position of CA: RTC, in reviewing denials of protests by local
treasurers, exercises appellate jurisdiction. This is anchored on the
language of Sec. 195 of the LGC which states that the remedy of
the taxpayer whose protest is denied by the local treasurer is to
appeal with the court of competent jurisdiction. The LGC however
does not elaborate on how such appeal should be undertaken.
1
Position of City Treasurer: jurisdiction exercised is original in
character.
Court affirmed the position of the City Treasurer. The LGC does not
expressly confer appellate jurisdiction on the part of RTCs from the
denial of a tax protest by a local treasurer. On the other hand,
Section 22 of BP 129 expressly delineates the appellate jurisdiction
of the RTCs, confining appellate jurisdiction to cases decided by
Metropolitan, Municipal, and Municipal Circuit Trial Courts. BP 129
does not confer appellate jurisdiction on RTCs over rulings made by
non-judicial entities.
HOWEVER, this pronouncement is subject to two qualifications.
0
First, in this case there are significant reasons for the Court
to overlook the procedural error and ultimately uphold the
adjudication of the jurisdiction exercised by the CA.
1
Second, the doctrinal weight of the pronouncement is
confined to cases and controversies that emerged prior to the
enactment of RA 9282 (effective April 2004), the law which
expanded the jurisdiction of the Court of Tax Appeals (CTA). Under
RA 9282, the CTA, not CA, exercises exclusive appellate jurisdiction
to review on appeal decisions, orders or resolutions of the RTCs in
local tax cases whether originally decided or resolved by them in
the exercise of their original or appellate jurisdiction. RA 9282 thus
would not apply here because the case arose prior to the affectivity
of the law.
1
Substantive: Whether the City of Makati may collect
business taxes on condominium corporations? No
The power of local government units to impose taxes within its
territorial jurisdiction derives from the Constitution itself, which
recognizes the power of these units "to create its own sources of
for the purpose of holding title to the common area, in which the
holders of separate interests shall automatically be members or
shareholders, to the exclusion of others, in proportion to the
appurtenant interest of their respective units.
Even though the Corporation is empowered to levy assessments or
dues from the unit owners, 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 Condominium Project.
In rejecting the contention of the City Treasurer that the collection
of these assessments and dues are "with the end view of getting
full appreciative living values" for the condominium units, and as a
result, profit is obtained once these units are sold at higher prices,
it held that: First, if any profit is obtained by the sale of the units, it
accrues not to the corporation but to the unit owner. Second, if the
unit owner does obtain profit from the sale of the corporation, the
owner is already required to pay capital gains tax on the
appreciated value of the condominium unit. Whatever capacity the
Corporation may have pursuant to its power to exercise acts of
ownership over personal and real property is limited by its stated
corporate purposes, which are by themselves further limited by the
Condominium Act. A condominium corporation, while enjoying such
powers of ownership, is prohibited by law from transacting its
properties for the purpose of gainful profit.
The Court holds that condominium corporations are generally
exempt from local business taxation under the Local Government
Code, irrespective of any local ordinance that seeks to declare
otherwise. Still, the City Treasurer has not posited the claim that
the Corporation is engaged in business activities beyond the
statutory purposes of a condominium corporation. The assessment
appears to be based solely on the Corporations collection of
assessments from unit owners, such assessments being utilized to
defray the necessary expenses for the Condominium Project and
the common areas. There is no contemplation of business, no
orientation towards profit in this case. Hence, the assailed tax
assessment has no basis under the Local Government Code or the
Makati Revenue Code, and the insistence of the city in its collection
of the void tax constitutes an attempt at deprivation of property
without due process of law.