G.R. No.

L-22734

September 15, 1967

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent. Office of the Solicitor General for petitioner. Manuel B. Pineda for and in his own behalf as respondent.

5 194 436.95 6 194 1,206.91 7 Add: 5% surcharge 1% monthly interest from November 30, 1953 to April 15, 1957 Compromise for late filing Compromise for late payment Total amount due

P1,779.69 88.98 720.77 80.00 40.00 P2,707.44 =========== P14.50 ===========

BENGZON, J.P., J.: On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First Instance of Manila (Case No. 71129) wherein the surviving widow was appointed administratrix. The estate was divided among and awarded to the heirs and the proceedings terminated on June 8, 1948. Manuel B. Pineda's share amounted to about P2,500.00. After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not filed. Thereupon, the representative of the Collector of Internal Revenue filed said returns for the estate on the basis of information and data obtained from the aforesaid estate proceedings and issued an assessment for the following: 1 Deficiency income tax . 194

2 Additional residence tax for 1945 . 3 Real Estate dealer's tax for the fourth . quarter of 1946 and the whole year P207.50 of 1947 =========== Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court of Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of the heirs." After hearing the parties, the Court of Tax Appeals rendered judgment reversing the decision of the Commissioner on the ground that his right to assess and collect the tax has prescribed. The Commissioner appealed and this Court affirmed the findings of the Tax Court in respect to the assessment for income tax for the year 1947 but held that the right to assess and collect the taxes for 1945 and 1946 has not prescribed. For 1945 and 1946 the returns were filed on August 24, 1953;

P135.83

assessments for both taxable years were made within five years therefrom or on October 19, 1953; and the action to collect the tax was filed within five years from the latter date, on August 7, 1957. For taxable year 1947, however, the return was filed on March 1, 1948; the assessment was made on October 19, 1953, more than five years from the date the return was filed; hence, the right to assess income tax for 1947 had prescribed. Accordingly, We remanded the case to the Tax Court for further appropriate proceedings.1 In the Tax Court, the parties submitted the case for decision without additional evidence. On November 29, 1963 the Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the payment corresponding to his share of the following taxes: Deficiency income tax 1945 1946 P13 5.83 436. 95

the estate in the total amount of P760.28 instead of only for the amount of taxes corresponding to his share in the estate.1awphl.nt Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due the estate only up to the extent of and in proportion to any share he received. He relies on Government of the Philippine Islands v. Pamintuan2 where We held that "after the partition of an estate, heirs and distributees are liable individually for the payment of all lawful outstanding claims against the estate in proportion to the amount or value of the property they have respectively received from the estate." We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed. Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he received from the inheritance.3 His liability, however, cannot exceed the amount of his share.4 As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the property in his possession. The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the inheritance, for unpaid income taxes4a for which said estate is liable, pursuant to the last paragraph of Section 315 of the Tax Code, which we quote hereunder: If any person, corporation, partnership, joint-account (cuenta en participacion), association, or insurance company

Real estate dealer's fixed tax 4th quarter of 1946 and whole year of P18 1947 7.50 The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B. Pineda liable for the payment of all the taxes found by the Tax Court to be due from

liable to pay the income tax, neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner of Internal Revenue until paid with interest, penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: . . . By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the P2,500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment, Pineda will have a right of contribution from his co-heirs,5 to achieve an adjustment of the proper share of each heir in the distributable estate. All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received. This remedy was adopted in Government of the Philippine Islands v. Pamintuan, supra. In said case, the Government filed an action against all the heirs for the collection of the tax. This action rests on the concept that hereditary property consists only of that part which remains after the settlement of all lawful claims against the estate, for the settlement of which the entire estate is first liable.6 The reason why in case suit is filed against all the heirs the tax due from the estate is levied proportionately against them is to achieve thereby two results: first, payment of the tax; and second, adjustment of the shares of each heir in the distributed estate as lessened by the tax. Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property

belonging to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due, the estate. This second remedy is the very avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and their prompt and certain availability is an imperious need.7 And as afore-stated in this case the suit seeks to achieve only one objective: payment of the tax. The adjustment of the respective shares due to the heirs from the inheritance, as lessened by the tax, is left to await the suit for contribution by the heir from whom the Government recovered said tax. WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is hereby ordered to pay to the Commissioner of Internal Revenue the sum of P760.28 as deficiency income tax for 1945 and 1946, and real estate dealer's fixed tax for the fourth quarter of 1946 and for the whole year 1947, without prejudice to his right of contribution for his co-heirs. No costs. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

Footnotes
1

Collector of Internal Revenue v. Manuel B. Pineda as one of the heirs of the deceased Atanasio Pineda, L-14522, May 31, 1961.

55 Phil. 13. Government of the Philippine Islands v. Santos, 56 Phil. 827. Art. 1311, Civil Code of the Philippines.

4a

Real estate dealer's fixed tax is subject to the same lien pursuant to the first paragraph of Sec. 355, Tax Code.
5

"Intestate Estate of Luis D. Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of Claim and for an Order of Payment of Taxes by the Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency income taxes for the years 1963 and 1964 of the decedent in the total amount of P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise penalties, and the second, dated October 7, 1969, denying the Motion for reconsideration of the Order of dismissal. The Motion for allowance of claim and for payment of taxes dated May 28, 1969 was filed on June 3, 1969 in the abovementioned special proceedings, (par. 3, Annex A, Petition, pp. 1920, Rollo). The claim represents the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in the total sum of P3,254.80 as above stated, covered by Assessment Notices Nos. 11-50-29-1-11061-21-63 and 11-50291-1 10875-64, to which motion was attached Proof of Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court (par. 4, Opposition to Motion for Allowance of Claim, pp. 23-24, Rollo). Finding the opposition well-founded, the respondent Judge, Jose F. Fernandez, dismissed the motion for allowance of claim filed by herein petitioner, Regional Director of the Bureau of Internal Revenue, in an order dated July 29, 1969 (Annex D, Petition, p. 26, Rollo). On September 18, 1969, a motion for reconsideration was filed, of the order of July 29, 1969, but was denied in an Order dated October 7, 1969. Hence, this appeal on certiorari, petitioner assigning the following errors:

Government of the Philippine Islands v. Santos, G.R. No. 34152, Dec. 15, 1931, 56 Phil. 827.
6

Lopez v. Enriquez, 16 Phil. 336. Bull v. United States, 295 U.S. 247, 15 AFTR 1069, 1073.

G.R. No. L-31364 March 30, 1979 MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional Director, Revenue Region No. 14, Bureau of Internal Revenue, petitioners, vs. HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY respondents.

DE CASTRO, J.: Appeal from two orders of the Court of First Instance of Negros Occidental, Branch V in Special Proceedings No. 7794, entitled:

1. The lower court erred in holding that the claim for taxes by the government against the estate of Luis D. Tongoy was filed beyond the period provided in Section 2, Rule 86 of the Rules of Court. 2. The lower court erred in holding that the claim for taxes of the government was already barred under Section 5, Rule 86 of the Rules of Court. which raise the sole issue of whether or not the statute of nonclaims Section 5, Rule 86 of the New Rule of Court, bars claim of the government for unpaid taxes, still within the period of limitation prescribed in Section 331 and 332 of the National Internal Revenue Code. Section 5, Rule 86, as invoked by the respondent Administrator in hid Oppositions to the Motion for Allowance of Claim, etc. of the petitioners reads as follows: All claims for money against the decedent, arising from contracts, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in they notice; otherwise they are barred forever, except that they may be set forth as counter claims in any action that the executor or administrator may bring against the claimants. Where the executor or administrator commence an action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth may answer the claims he has against the decedents, instead of presenting them independently to the court has herein provided, and mutual claims may be set off against each other in such action; and in final judgment is rendered in

favored of the decedent, the amount to determined shall be considered the true balance against the estate, as though the claim has been presented directly before the court in the administration proceedings. Claims not yet due, or contingent may be approved at their present value. A perusal of the aforequoted provisions shows that it makes no mention of claims for monetary obligation of the decedent created by law, such as taxes which is entirely of different character from the claims expressly enumerated therein, such as: "all claims for money against the decedent arising from contract, express or implied, whether the same be due, not due or contingent, all claim for funeral expenses and expenses for the last sickness of the decedent and judgment for money against the decedent." Under the familiar rule of statutory construction of expressio unius est exclusio alterius, the mention of one thing implies the exclusion of another thing not mentioned. Thus, if a statute enumerates the things upon which it is to operate, everything else must necessarily, and by implication be excluded from its operation and effect (Crawford, Statutory Construction, pp. 334-335). In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et al., G.R. No. L-23081, December 30, 1969, it was held that the assessment, collection and recovery of taxes, as well as the matter of prescription thereof are governed by the provisions of the National Internal revenue Code, particularly Sections 331 and 332 thereof, and not by other provisions of law. (See also Lim Tio, Dy Heng and Dee Jue vs. Court of Tax Appeals & Collector of Internal Revenue, G.R. No. L-10681, March 29, 1958). Even without being specifically mentioned, the provisions of Section 2 of Rule 86 of the Rules of Court may reasonably be presumed to have been also in the

mind of the Court as not affecting the aforecited Section of the National Internal Revenue Code. In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that "taxes assessed against the estate of a deceased person ... need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its control over the administrator, the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the estate." The abolition of the Committee on Claims does not alter the basic ruling laid down giving exception to the claim for taxes from being filed as the other claims mentioned in the Rule should be filed before the Court. Claims for taxes may be collected even after the distribution of the decedent's estate among his heirs who shall be liable therefor in proportion of their share in the inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil. 13). The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. (Commissioner of Internal Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own

personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. (Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and Protective Order of the Elks Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of the Philippines, L-41480, April 30,1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553; Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance Telephone Company, L18841, January 27, 1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36 SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L- 23041, July 31, 1969, 28 SCRA 119.) As already shown, taxes may be collected even after the distribution of the estate of the decedent among his heirs (Government of the Philippines vs. Pamintuan, supra; Pineda vs. CFI of Tayabas, supra Clara Diluangco Palanca vs. Commissioner of Internal Revenue, G. R. No. L16661, January 31, 1962). Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing the last paragraph of Section 315 of the Tax Code payment of income tax shall be a lien in favor of the Government of the Philippines from the time the assessment was made by the Commissioner of Internal Revenue until paid with interests, penalties, etc. By virtue of such lien, this court held that the property of the estate already in the hands of an heir or transferee may be subject to the payment of the tax due the estate. A fortiori before the inheritance has passed to the heirs, the unpaid taxes due the decedent may be collected, even without its having been presented under Section 2 of Rule 86 of the Rules of Court. It may truly be said that until the property of the estate of the decedent has vested in the heirs, the decedent,

represented by his estate, continues as if he were still alive, subject to the payment of such taxes as would be collectible from the estate even after his death. Thus in the case above cited, the income taxes sought to be collected were due from the estate, for the three years 1946, 1947 and 1948 following his death in May, 1945. Even assuming arguendo that claims for taxes have to be filed within the time prescribed in Section 2, Rule 86 of the Rules of Court, the claim in question may be filed even after the expiration of the time originally fixed therein, as may be gleaned from the italicized portion of the Rule herein cited which reads: Section 2. Time within which claims shall be filed. - In the notice provided in the preceding section, the court shall state the time for the filing of claims against the estate, which shall not be more than twelve (12) nor less than six (6) months after the date of the first publication of the notice. However, at any time before an order of distribution is entered, on application of a creditor who has failed to file his claim within the time previously limited the court may, for cause shown and on such terms as are equitable, allow such claim to be flied within a time not exceeding one (1) month. (Emphasis supplied) In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an Order of Payment of Taxes) which, though filed after the expiration of the time previously limited but before an order of the distribution is entered, should have been granted by the respondent court, in the absence of any valid ground, as none was shown, justifying denial of the motion, specially considering that it was for allowance Of claim for taxes due from the estate, which in effect represents a claim of the people at large, the only reason given for the denial that

the claim was filed out of the previously limited period, sustaining thereby private respondents' contention, erroneously as has been demonstrated. WHEREFORE, the order appealed from is reverse. Since the Tax Commissioner's assessment in the total amount of P3,254.80 with 5 % surcharge and 1 % monthly interest as provided in the Tax Code is a final one and the respondent estate's sole defense of prescription has been herein overruled, the Motion for Allowance of Claim is herein granted and respondent estate is ordered to pay and discharge the same, subject only to the limitation of the interest collectible thereon as provided by the Tax Code. No pronouncement as to costs. SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, Guerrero, and Melencio-Herrera, JJ., concur. G.R. No. L-28896 February 17, 1988 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ALGUE, INC., and THE COURT OF TAX APPEALS, respondents. CRUZ, J.: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real

purpose of taxation, which is the promotion of the common good, may be achieved. The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns. The corollary issue is whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law. We deal first with the procedural question. The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959. 1 On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp received on the same day in the office of the petitioner. 2 On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. 3 A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served. 5 Sixteen days later, on April 23, 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals. 6

The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged. 7 It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" 8 and renders hopeless a request for reconsideration," 9 being "tantamount to an outright denial thereof and makes the said request deemed rejected." 10 But there is a special circumstance in the case at bar that prevents application of this accepted doctrine. The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening period, the warrant was premature and could therefore not be served. As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was not pro forma and was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the reglementary period had been consumed. Now for the substantive question.

The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company. Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees to be personal holding company income 12 but later conformed to the decision of the respondent court rejecting this assertion. 13 In fact, as the said court found, the amount was earned through the joint efforts of the persons among whom it was distributed It has been established that the Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it. 14 Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the PSEDC properties. 15 For this sale, Algue received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. 16 There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the

corresponding taxes thereon. 17 The Court of Tax Appeals also found, after examining the evidence, that no distribution of dividends was involved. 18 The petitioner claims that these payments are fictitious because most of the payees are members of the same family in control of Algue. It is argued that no indication was made as to how such payments were made, whether by check or in cash, and there is not enough substantiation of such payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction. We find that these suspicions were adequately met by the private respondent when its President, Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made in one lump sum but periodically and in different amounts as each payee's need arose. 19 It should be remembered that this was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not required. Even so, at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of P75,000.00. 20 Admittedly, everything seemed to be informal. This arrangement was understandable, however, in view of the close relationship among the persons in the family corporation. We agree with the respondent court that the amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was P125,000.00. 21 After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total

commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. This finding of the respondent court is in accord with the following provision of the Tax Code: SEC. 30. Deductions from gross income.--In computing net income there shall be allowed as deductions (a) Expenses: (1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; ... 22 and Revenue Regulations No. 2, Section 70 (1), reading as follows: SEC. 70. Compensation for personal services.--Among the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and its practical application may be further stated and illustrated as follows: Any amount paid in the form of compensation, but not in fact as

the purchase price of services, is not deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend on stock. This is likely to occur in the case of a corporation having few stockholders, Practically all of whom draw salaries. If in such a case the salaries are in excess of those ordinarily paid for similar services, and the excessive payment correspond or bear a close relationship to the stockholdings of the officers of employees, it would seem likely that the salaries are not paid wholly for services rendered, but the excessive payments are a distribution of earnings upon the stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.) It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its controlling stockholders. 23 The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of the claimed deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed. It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The

government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed. We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the petitioner. ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without costs. SO ORDERED. Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.

Footnotes 1 Rollo, pp. 28-29. 2 Ibid., pp. 29; 42. 3 Id., p. 29. 4 Respondent's Brief, p. 11. 5 Id., p. 29. 6 Id, 7 Sec. 11. 8 Phil. Planters Investment Co. Inc. v. Comm. of Internal Revenue, CTA Case No. 1266, Nov. 11, 1962; Rollo, p. 30. 9 Vicente Hilado v. Comm. of Internal Revenue, CTA Case No. 1266, Oct. 22,1962; Rollo, p. 30. 10 Ibid. 11 Penned by Associate Judge Estanislao R. Alvarez, concurred by Presiding Judge Ramon M. Umali and Associate Judge Ramon L. Avancea. 12 Rollo, p. 33. 13 Ibid., pp. 7-8; Petition, pp. 2-3. 11 Id., p. 37.

15 Id. 16 Id. 17 Id. 18 Id. G.R. No. L-24265 December 28, 1979 PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION, plaintiff-appellant, vs. THE MUNICIPALITY OF JAGNA, PROVINCE OF BOHOL, defendant-appellee. Picazo, Agcaoili, Santayana, Reyes & Tayao for appellant. Joel P. Tiangco and Jesus N. Borromeo for appellee.

later became Procter & Gamble Trading Company, Philippines. It is engaged in the manufacture of soap, edible oil, margarine and other similar products, and for this purpose maintains a "bodega" in defendant Municipality where it stores copra purchased in the municipality and therefrom ships the same for its manufacturing and other operations. On December 13, 1957, the Municipal Council of Jagna enacted Municipal Ordinance No. 4, Series of 1957, quoted hereinbelow: AN ORDINANCE IMPOSING STORAGE FEES OF ALL EXPORTABLE COPRA DEPOSITED IN THE BODEGA WITHIN THE JURISDlCTI0N OF THE MUNICIPALITY OF JAGNA BOHOL. Be it ordained by the Municipal Council of Jagna Bohol, that: SECTION 1. Any person, firm or corporation having a deposit of exportable copra in the bodega, within the jurisdiction of the Municipality of Jagna Bohol, shall pay to the Municipal Treasury a storage fee of TEN (P0.10) CENTAVOS FOR EVERY HUNDRED (100) kilos; SECTION 2. All exportable copra deposited in the bodega within the Municipality of Jagna Bohol, is part of the surveillance and lookout of the Municipal Authorities; SECTION 3. Any person, firm or corporation found violating the provision of the preceding section of this Ordinance shall be punished by a fine of not less than TWO HUNDRED (P 200.00) PESOS, nor more than FOUR HUNDRED (P400.00) PESOS, or an imprisonment of hot less than ONE MONTH, nor more than THREE MONTHS, or both fines and imprisonment at the

MELENCIO-HERRERA, J.: A direct appeal by plaintiff company from the judgment of the Court of First Instance of Manila, Branch VI, upholding the validity of Ordinance No. 4, Series of 1957, enacted by defendant Municipality, which imposed "storage fees on all exportable copra deposited in the bodega within the jurisdiction of the Municipality of Jagna Bohol. Plaintiff-appellant is a domestic corporation with principal offices in Manila. lt is a consolidated corporation of Procter & Gamble Trading Company and Philippine Manufacturing Company, which

discretion of the court. SECTION 4. This Ordinance shall take effect on January 1, 1958. APPROVED December 13,1957. (Sgd.) TEODORO B. GALACAR Municipal Mayor 1 For a period of six years, from 1958 to 1963, plaintiff paid defendant Municipality, allegedly under protest, storage fees in the total sum of 1142,265.13, broken down as follows: Procter & Gamble Trading Co. Procter & Gamble Philippine Manufacturing Corp.
19

On March 3, 1964, plaintiff filed this suit in the Court of First Instance of Manila, Branch VI, wherein it prayed that 1) Ordinance No. 4 be declared inapplicable to it, or in the alter. native, that it be pronounced ultra-vires and void for being beyond the power of the Municipality to enact; and 2) that defendant Municipality be ordered to refund to it the amount of P42,265.13 which it had paid under protest; and costs. For its part, defendant Municipality upheld its power to enact the Ordinance in question; questioned the jurisdiction of the trial Court to take cognizance of the action under section 44(h) of the Judiciary Act in that it seeks to enjoin the enforcement of a Municipal Ordinance; and pleaded prescription and laches for plaintiff's failure to timely question the validity of the said Ordinance. After the parties had agreed to submit the case for judgment on the pleadings, the trial Court upheld its jurisdiction as well as defendant Municipality's power to enact the Ordinance in question under section 2238 of the Revised Administrative Code, otherwise known as the general welfare clause, and declared that plaintiff's right of action had prescribed under the 5-year period provided for by Article 1149 of the Civil Code. In this appeal, plaintiff interposes the following Assignments of Error: I THE TRIAL COURT ERRED IN HOLDING THAT ORDINANCE NO. 4, SERIES OF 1957, ENACTED BY THE DEFENDANT 2 MUNICIPALITY OF P42, 265.13 JAGNA BOHOL, IS A VALID, LEGAL AND ENFORCEABLE ORDINANCE AGAINST THE PLAINTIFF.

58

5, 072.13 7, 076.00 9, 950.00 7, 830.00 3, 648.00 ______ P33, 576.13 TOTAL CLAIM

___________ ___________ ___________ ___________ P5, 279.00 P3, 410. 00 P8, 689.00

1959 1960 1961 1962 1963

II THE TRIAL COURT ERRED IN HOLDING THAT PAYMENT OF THE TAX UNDER ORDINANCE NO. 4, SERIES OF 1957 WAS NOT DONE UNDER PROTEST. III THE TRIAL COURT ERRED IN HOLDING THAT THE ACTION OF THE PLAINTIFF TO ANNUL AND TO DECLARE ORDINANCE NO. 4, SERIES OF 1957 OF THE DEFENDANT HAS ALREADY PRESCRIBED. IV AND, FINALLY, THE TRIAL COURT ERRED IN NOT HOLDING ORDINANCE NO. 4. SERIES OF 1957 ULTRA-VIRES AND VOID AND IN NOT ORDERING THE REFUND OF TAXES PAID THEREUNDER. 3 It is plaintiff's submission that the subject Ordinance is inapplicable to it as it is not engaged in the business or trade of storing copra for others for compensation or profit and that the only copra it stores is for its exclusive use in connection with its business as manufacturer of soap, edible oil, margarine and other similar products; that the levy is intended as an "export tax" as it is collected on "exportable copra' , and, therefore, beyond the power of the Municipality to enact; and that the fee of P0.10 for every 100 kilos of copra stored in the bodega is excessive, unreasonable and oppressive and is imposed more for revenue than as a regulatory fee. The main question to determine is whether defendant

Municipality was authorized to impose and collect the storage fee provided for in the challenged Ordinance under the laws then prevailing. The validity of the Ordinance must be upheld pursuant to the broad authority conferred upon municipalities by Commonwealth Act No. 472, approved on June 16, 1939, which was the prevailing law when the Ordinance was enacted (Procter & Gamble Trading Co. vs. Municipality of Medina, 43 SCRA 130 11972]). Section 1 thereof reads: Section 1. A municipal council or municipal district council shall have the authority to impose municipal license taxes upon persons engaged in any occupation or business, or exercising privileges in the municipality or municipal district, by requiring them to secure licenses at rates fixed by the municipal council, or municipal district council, and to collect fees and charges for services rendered by the municipality or municipal district and shall otherwise have power to levy for public local purposes, and for school purposes, including teachers' salaries, just and uniform taxes other than percentage taxes and taxes on specified articles. Under the foregoing provision, a municipality is authorized to impose three kinds of licenses: (1) a license for regulation of useful occupation or enterprises; (2) license for restriction or regulation of non-useful occupations or enterprises; and (3) license for revenue. 4 It is thus unnecessary, as plaintiff would have us do, to determine whether the subject storage fee is a tax for revenue purposes or a license fee to reimburse defendant Municipality for service of supervision because defendant Municipality is authorized not only to impose a license fee but also to tax for revenue purposes.

The storage fee imposed under the question Ordinance is actually a municipal license tax or fee on persons, firms and corporations, like plaintiff, exercising the privilege of storing copra in a bodega within the Municipality's territorial jurisdiction. For the term "license tax" has not acquired a fixed meaning. It is often used indiseriminately to designate impositions exacted for the exercise of various privileges. In many instances, it refers to revenue-raising exactions on privileges or activities. 5 Not only is the imposition of the storage fee authorized by the general grant of authority under section 1 of CA No. 472. Neither is the storage fee in question prohibited nor beyond the power of the municipal councils and municipal district councils to impose, as listed in section 3 of said CA No. 472. 6 Moreover, the business of buying and selling and storing copra is property the subject of regulation within the police power granted to municipalities under section 2238 of the Revised Administrative Code or the "general welfare clause", which we quote hereunder: Section 2238. General power of council to enact ordinances and make regulations. The municipal council shall enact such ordinances and make such regulations, not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon it by law and such as shall seem necessary and proper to provide for the health and safety, promote the prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof, and for the protection of property therein. For it has been held that a warehouse used for keeping or storing copra is an establishment likely to endanger the public

safety or likely to give rise to conflagration because the oil content of the copra when ignited is difficult to put under control by water and the use of chemicals is necessary to put out the fire. 7 And as the Ordinance itself states, all exportable copra deposited within the municipality is "part of the surveillance and lookout of municipal authorities. Plaintiff's argument that the imposition of P0.10 per 100 kilos of copra stored in a bodega within defendant's territory is beyond the cost of regulation and surveillance is not well taken. As enunciated in the case of Victorias Milling Co. vs. Municipality of Victorias, supra. The cost of regulation cannot be taken as a gauge, if the municipality really intended to enact a revenue ordinance. For, 'if the charge exceeds the expense of issuance of a license and costs of regulation, it is a tax'. And if it is, and it is validly imposed, 'the rule that license fees for regulation must bear a reasonable relation to the expense of the regulation has no application'. Municipal corporations are allowed wide discretion in determining the rates of imposable license fees even in cases of purely police power measures. In the absence of proof as to municipal conditions and the nature of the business being taxed as well as other factors relevant to the issue of arbitrariness or unreasonableness of the questioned rates, Courts will go slow in writing off an Ordinance. 8 In the case at bar, appellant has not sufficiently shown that the rate imposed by the questioned Ordinance is oppressive, excessive and prohibitive. Plaintiff's averment that the Ordinance, even if presumed valid, is inapplicable to it because it is not engaged in the business or

occupation of buying or selling of copra but is only storing copra in connection with its main business of manufacturing soap and other similar products, and that to be compelled to pay the storage fees would amount to double taxation, does not inspire assent. The question of whether appellant is engaged in that business or not is irrelevant because the storage fee, as previously mentioned, is an imposition on the privilege of storing copra in a bodega within defendant municipality by persons, firms or corporations. Section 1 of the Ordinance in question does not state that said persons, firms or corporations should be engaged in the business or occupation of buying or selling copra. Moreover, by plaintiff's own admission that it is a consolidated corporation with its trading company, it will be hard to segregate the copra it uses for trading from that it utilizes for manufacturing. Thus, it can be said that plaintiff's payment of storage fees imposed by the Ordinance in question does not amount to double taxation. For double taxation to exist, the same property must be taxed twice, when it should be taxed but once. Double taxation has also been defined as taxing the same person twice by the same jurisdiction for the same thing. 9 Surely, a tax on plaintiff's products is different from a tax on the privilege of storing copra in a bodega situated within the territorial boundary of defendant municipality. Plaintiff's further contention that the storage fee imposed by the Ordinance is actually intended to be an export tax, which is expressly prohibited by section 2287 of the Revised Administrative Code, is without merit. Said provision reads as follows: Section 2287 ...

It shall not be in the power of the municipal council to impose a tax in any form whatever upon goods and merchandise carried into the municipality, or out of the same, and any attempt to impose an import or export tax upon such goods in the guise of an unreasonable charge for wharfage use of bridges or otherwise, shall be void. xxx xxx xxx We have held that only where there is a clear showing that what is being taxed is an export to any foreign country would the prohibition come into play. 10 When the Ordinance itself speaks of "exportable" copra, the meaning conveyed is not exclusively export to a foreign country but shipment out of the municipality. The storage fee impugned is not a tax on export because it is imposed not only upon copra to be exported but also upon copra sold and to be used for domestic purposes if stored in any warehouse in the Municipality and the weight thereof is 100 kilos or more. 11 Thus finding the Ordinance in question to be valid, legal and enforceable, we find it unnecessary to discuss the ascribed error that the Court a quo erred in declaring that appellant had not paid the taxes under protest. However, we find merit in plaintiff's contention that the lower Court erred in ruling that its action has prescribed under Article 1149 of the Civil Code, which provides for a period of five years for all actions whose periods are not fixed in that Code. The case of Municipality of Opon vs. Caltex Phil., 12 is authority for the view that the period for prescription of actions to recover municipal license taxes is six years under Article 1145(2) of the Civil Code. Thus, plaintiff's action brought within six years from

the time the right of action first accrued in 1958 has not yet prescribed. WHEREFORE, affirming the judgment appealed, from, we sustain the validity of Ordinance No. 4, Series of 1957, of defendant Municipality of Jagna Bohol, under the laws then prevailing. Costs against plaintiff-appellant. SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.

6 Uy Matiao & Co., Inc. vs. The City of Cebu, et al., 93 Phil. 300 (1953). 7 Uy Matiao & Co., Inc. vs. The City of Cebu, et al., supra. 8 Northern Phil. Tobacco Co. vs. Municipality of Agoo, 31 SCRA 304, (1970); Victorias Milling Co. vs. Municipality of Victorias, supra; San Miguel Brewery Inc. vs. City of Cebu. 43 SCRA 275. (1972). 9 Victorias Milling Co. vs. Municipality of Victorias, supra . 10 Procter & Gamble Trading Co. vs. Municipality of Medina, supra. 11 Uy Matiao & Co., Inc. vs. The City of Cebu, et al., supra.

#Footnotes 1 Pp. 7-8, Annex "A", Record on Appeal. 2 P. 4, Record on Appeal. 3 Pp. 3-4, Brief for Plaintiff-Appellant. 4 Victorias Milling Co., Inc. vs. The Municipality of Victorias, Province of Negros Occidental, 25 SCRA 192 (1968), citing Cu Unjieng vs. Patstone, 42 Phil. 818 (1922). 5 Victorias Milling Co., Inc. vs. Municipality of Victorias, Negros Occidental, supra.

12 SCRA 755 (1968), citing Puyat vs. The City of Manila, 7 SCRA 970 (1963) G.R. No. L-15351 January 28, 1961

MORCOIN CO., LTD. and SUTER, INC., plaintiffs-appellees, vs. THE CITY OF MANILA, THE MAYOR OF MANILA, THE CITY TREASURER and THE CHIEF OF POLICE OF MANILA, defendants-appellants. Celestino Sabate and Valentin A. Francisco for plaintiffappellees. City Fiscal Hermogenes Concepcion, Jr. and Assistant Fiscal Artemio Cusi for defendants-appellants. GUTIERREZ DAVID, J.:

Direct appeal from a decision of the Court of First Instance of Manila, Branch IV, declaring Ordinance No. 3628 of the City of Manila null and void. Morcoin Co., Ltd., and Suter, Inc., are owners and operators of automatic phonograph machines, more popularly known as juke boxes, in the City of Manila. As such owners and operators, they paid an annual permit fee of P5 for each machine, and a similar amount whenever a juke box is transferred to a different location. In compliance with Sections 773 and 774 of Ordinance No. 3347, they also paid an additional sum of P50 per annum as license fee for the installation and use of each juke box machine. On February 2, 1954, the Mayor of the City of Manila, in order to curb the use of pinball machines which "have conduced to promote idleness among an increasing number of city residents", recommended to the Municipal Board the further amendment of Sections 773 and 774 of Ordinance No. 1600 by restricting the operation or maintenance of said machines within a specified radius from certain designated places and "by making the rate of license fees more prohibitive." Emphasizing that "pinball machines contribute to moral delinquency", the City Mayor, on February 19, 1954, sent a " 1st TRACER" to the Municipal Board urging the prompt enactment of the proposed amendment to said sections 773 and 774. Five days thereafter, the Board's Committee on Laws sharing the same views of the City Mayor about the deleterious effects" which pinball machines produce, recommended, on second indorse 312 ment,the approval of the proposed amendment. Acting upon that recommendation, the Municipal Board of the City of Manila, on March 19, 1954, enacted Ordinance No.. 3628, containing the proposed amendment, which was approved by the City Mayor on the following day. See. 773 and 774 of Ordinance No. 1600 as

amended by ordinance No. 3628 read as follows: SEC. 773. Licenses. No person, entity or corporation shall install or cause to be installed for the use of the public for compensation any mechanical contrivance or automatic apparatus which functions through the introduction of money not otherwise prohibited by the law of weights and measures and not a gambling device, for purposes of amusement or of confronting the weight of persons or things, or printing letters or numbers, or displaying features inside the apparatus or reproducing recorded music, including other kinds of machines or apparatus without having first obtained a license therefor from the City Treasurer. Such license must be posted on the apparatus concerned; Provided, that the operation or maintenance of pinball machines, not otherwise falling under the category of gambling device shall not be allowed within a radius of two hundred (200) meters from any church, hospital, institution of learning, public market, plaza, and government buildings. Sec 774. Fees. There shall be paid for every license granted for the installation and use of an apparatus provided in his chapter, an annual fee of P300.00 which is payable in advance; Provided, that person-coin operated weighing or scale machines shall pay only an annual fee of P12.00, payable in advance." The validity of the above ordinance was contested by a group of owners and operators of pinball machines who Call themselves "Recreation and Amusement Association of the Philippines" before the Court of First Instance of Manila, but that court dismissed the action, it being of the opinion that the said ordinance was valid. On September 24, 1957, Morcoin Co., Ltd., and Suter, Inc., the owners and operators, as already stated, of juke box machines in the City of Manila brought an action in the

Court of First Instance of Manila, its Mayor, Treasurer and Chief of Police, assailing the validity of Ordinance No. 628 on the ground that the license fee of P300 imposed by the said ordinance upon juke box machines is exorbitant, excessive, confiscatory and substantially disproportionate to the reasonable expenses of issuing the license for and regulating the said machines. The defendants, thru the City Fiscal, filed their answer denying the material allegations of the complaint and interposed a counter-claim for plaintiffs' failure to pay their outstanding obligations arising under Ordinance No. 3628. By way of special defenses, defendants alleged that the complaint states no cause of action, because the validity of Ordinance No. 3628 has already been upheld in the case of Recreation and Amusement Association of the Philippines vs. City of Manila, et al., (G.R. No. L.7922, February 22, 1957), and that the operation of automatic phonograph machines is a non-useful business upon which a large license fee may be imposed. After trial, the lower court rendered judgment declaring Ordinance No. 3628 null and void and enjoining the enforcement of the same in connection with plaintiffs' business. Hence this appeal. The appeal is without merit. There can be no question that Sections 773 and 774 of Ordinance No. 1600, as amended by Ordinance No. 3628, was enacted pursuant to section 18 [1] of the Revised Charter of the City of Manila (Republic Act No. 409 as amended), which provides that the Municipal Board has the legislative power "to regulate and fix the license fees for . . . slot machines . . .". The power to regulate and impose license fee for the operations of slot machines which include juke box machines, pinball

machines and other coin-operated contrivances-should not, however, be construed as including the power to impose license taxes for revenue purposes. Indeed, a cursory reading of the legislative powers of the Municipal Board enumerated in section 18 of the City's Revised Charter shows that the power to tax is given where it was intended to be exercised and is not given where it was not so designed. As the authority was withheld, it must logically result that the power granted under the abovequoted provision of the City's Charter is purely regulatory for police purposes. (Pacific Commercial Co. vs. Romualdez and Alfonso, 49 Phil. 917; Hercules Lumber vs. Municipality of Zamboanga, 55 Phil. 653.) Such being the case, the amount of license fees that may be imposed upon juke box machines and other coin-operated contrivances cannot be prohibitive, extortionate, confiscatory or in an unlawful restraint of trade, but should be approximately commensurate with and sufficient to cover all the necessary or probable expenses of issuing the license and of such inspection, regulation and supervision as may be lawful. (Cu Unjieng vs. Patstone, 42 Phil. 818; City of Iloilo vs. Villanueva, G.R. No. L.12695, March 23, 1959; 33 Am. Jur. 367; 53 C.J.S. 517; See also the cases cited therein.) Any ordinance which imposes a license fee which is substantially in excess of the reasonable expense of issuing the license and regulating the occupation to which it pertains, is invalid. (25 Am. Law and Proc. 611; 28 id. 749, 750.) In the present case, we are inclined to agree with the trial court that the amount of P300 imposed by Ordinance No. 3628 as license fee for the installation and use of juke box machines is unreasonable and far exceeds the expenses of issuing the license and of regulating their operation. It will be observed that the ordinance in question does not even provide for inspection and supervision of each machine installed. And the Committees on Laws and Finance of the Municipal Board of the City of

Manila themselves.which conducted a public hearing in connection with the petition filed during the pendency of this, case by some juke box operators found that juke box operators would not make any profit by paying the license fee of P300, and that the 'said amount of P300 is prohibitory and suppressive.1 This finding is supported by the record, for it was shown that two of plaintiffs' juke box machines, after deducting depreciation and operating expenses, but before the payment of permit and license fees, had an annual income of only about P211. In view of these circumstances, it is obvious that the amount of P300 charged as license fee is excessive and cannot be justified. In this connection, it should be stated that although the presumption is always in favor of the validity or reasonableness of the ordinance, such presumption must nevertheless be set aside when the invalidity or unreasonableness appears on the face of the ordinance itself or is established by proper evidence. It is argued that the business of operating juke box machines is a non-useful occupation and consequently the amount of license fee that may be imposed thereon may be very large without necessarily being considered unreasonable. We do not think it is correct to say that the operation of juke box machines is a nonuseful occupation. The Committees on Laws and Finance of the Municipal Board of Manila themselves, in their joint report submitted to the Board, after public hearing, stated that the operation of juke boxes is "legitimate, harmless and of some cultural value." It is gratuitous and unfair to brand juke boxes as not contributing to the economic or moral wealth of the individual or of the nation, simply because the said contrivance may be found in nightclubs and bars where dancing is indulged in. Defendants cite the case of Recreation and Amusement Association of the Philippines vs. City of Manila, et al., G. R. No.

L.7922, February 22, 1957), where this Court upheld the dismissal of the complaint, contesting the validity of Ordinance 3628. The main issue in that case, however, was the legal capacity of the plaintiff to sue, which was not registered in accordance with law. Besides, the said case involved the restriction of the use of pinball machines, which admittedly produce deleterious effects among city residents. Such machines have in fact been declared by this Court to be gambling devices which may be suppressed by ordinance. (Uy Ha vs. City of Manila, G.R. Nos. L-14149 and L-14069, May 30, 1960.) Defendants likewise cite the case of the Universal Picture Corporation vs. Romualdez (52 Phil. 576), wherein an ordinance of the City of Manila imposing the license fee of Pl,800 for first class cinematographs was held reasonable. The case cited is not in point. The ordinance there in question provided for police and fire protection as well is the inspection and supervision of wires in electrical installations, and the license fees fixed were charged only with a view of covering the expenses therefor. IN VIEW OF THE FOREGOING, the decision appealed from declaring Ordinance No. 2628 of the City of Manila invalid is hereby affirmed, with costs against appellants. Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes and Dizon, JJ., concur. Barrera, J., reserves his vote.

Footnotes

In view of this finding, the matter was referred to the City Treasurer for comment and recommendation as to what would be reasonable and commensurate with the necessary expenses of licensing and supervision. On the basis of the ocular inspection conducted by the deputies of the City Treasurer, the latter official recommended that the amount of P100 per annum would be reasonable for juke boxes in nightclubs.and other places 'where dancing is allowed and P15 for juke boxes in restaurants or places where food and drinks are served. Agreeing with the City Treasurer, the Committee on Ways and Means of the Municipal Board of the City of Manila recommended the approval of a proposed ordinance imposing a license fee of P100 on juke box machines. The proposed ordinance was enacted by the Municipal Board on September 11, 1959, but it was never approved by the City Mayor. G.R. No. L-18534 December 24, 1964

Inc., the sum of P1,190.92 paid by the latter as tax, under protest, with legal interests thereon from the filing of the complaint until fully paid, and to pay the costs. Appellee, a duly organized domestic corporation, operated a lumber mill and lumber yard in Butuan City. Pursuant to the provisions of Section 1 of Ordinance No. 5, as amended by Ordinance Nos. 9, 10, 47 and 49 of said city, appellee paid to appellants the taxes provided for therein amounting to the total sum P2,069.26. Claiming that said ordinance, as amended, was void, it later brought the present action to have it so declared; to recover the amount mentioned heretofore, and to have appellants permanently enjoined from enforcing said ordinance, as amended. After the denial of their motion to dismiss the complaint on the ground that it did not state a cause of action, appellants filed their answer in which, after making some denials and admissions, they alleged, as affirmative defenses, (a) that the tax assessed under Ordinance No. 5, as amended. is a privilege tax on business and is therefore legal under paragraph p, section 15, Article III of Republic Act No. 523, otherwise known as the Charter of the City of Butuan, and (b) that since the payments were not made under protest, appellee could not ask for their refund. As counterclaim they also alleged that appellee had incurred tax delinquencies and surcharges as of July, 1957 in the amount of P16,978.44 and additional undetermined taxes from August, 1957 up to and including January 1958 exclusive of interests under Ordinance No. 5, as amended by Ordinance No. 49, Series of 1954. In its answer to the counterclaim appellee denied the alleged unpaid taxes and interests.

GOLDEN RIBBON LUMBER COMPANY, INC., plaintiffappellee, vs. THE CITY OF BUTUAN and FRANCISCO MAGNO, in his capacity as City Treasurer of the City of Butuan, defendants-appellants. Rodegelio M. Jalandoni for plaintiff-appellee. City Attorney Jose Villanueva for defendants-appellants. DIZON, J.: Appeal taken by the City of Butuan and Francisco Magno, as City Treasurer of the City of Butuan, from the decision of the Court of First Instance of Agusan in Civil Case No. 624 declaring void Ordinance No. 5, as amended, of said City, and ordering them to refund to appellee, Golden Ribbon Lumber Company,

On March 7, 1959 the Court admitted appellants' amended answer and counterclaim in which they alleged, inter alia, that after deducting the taxes paid (P2,981.81), there still remained a balance of P33,000.74 representing appellee's tax delinquencies, surcharges and interests as of March, 1958. The latter, answering the amended counterclaim, denied such delinquencies etc., amounting to P33,000.74, and further averred that Ordinance No. 5, as amended, being null and void, it cannot be compelled to pay them. On April 25, 1959, the Court below admitted appellee's amended complaint which merely included for recovery the taxes paid by it under the same ordinance subsequent to the filing of the original complaint. On February 16, 1960, both parties submitted the following stipulation of facts: COMES NOW the plaintiff, assisted by counsel, and the defendants, through its counsel, and to this Honorable Court respectfully submit the following stipulation of facts: 1. The plaintiff is a corporation duly organized and existing under the laws of the Philippines, with principal office in the City of Butuan; that the defendant City of Butuan is public corporation created and existing under the law of the Philippines; and that the other defendant, Francisco Magno, is the City Treasurer of the City of Butuan and has been sued in that capacity only; 2. That plaintiff pursuant to the purposes for which it was organized and as a necessary incident to its business, established and operated a lumber yard and/or lumber mill situated within the territorial jurisdiction of the City of Butuan;

3. That sometime in September, 1950, the defendant City of Butuan enacted and approved, through its Municipal Board, Ordinance No. 5, copy of, which is hereto attached as Exhibit "A" and made part of this Stipulation of Facts; that said Ordinance No. 5 was subsequently amended by the following ordinances: Ordinance No. 9, Ordinance No. 10, Ordinance No. 47 and Ordinance No. 49, copies whereof are likewise hereto attached as Exhibit "B", Exhibit "C", Exhibit "D" and Exhibit "E", as integral parts hereof; that the dates of enactment or approval as well as the effectivity of each of the foregoing ordinances are indicated by the provisions thereof; 4. That defendants maintain that the aforementioned Ordinance No. 5, and all amendments thereto, were enacted by the defendant City of Butuan pursuant to and under the provisions of Republic Act No. 523, as amended, otherwise known as the Charter of the City of Butuan, more particularly Section 15, paragraph (p) thereof; 5. That the plaintiff Golden Ribbon Lumber Company, Inc., as a corporation operating a lumber mill and/or lumber yard within the territorial jurisdiction of the defendant City of Butuan, has sawn manufactured and/or produced a total of 7,310,567 board feet of sawn lumber, irrespective of class, within the period from September, 1956 to March, 1958, inclusive; 6. That plaintiff corporation has been assessed by the defendants under and pursuant to the provision of the aforesaid Ordinance No. 5, as amended, and was found delinquent in the payment of its tax liabilities including surcharges in the total sum of P36,552.84 for the period from September, 1956 to March, 1958, inclusive;

7. That out of the aforestated tax liabilities and surcharges assessed against the plaintiff corporation by the defendants pursuant to the provisions of Ordinance No. 5, as amended, said plaintiff has paid to the defendant City of Butuan through its codefendant, the City Treasurer, the total sum of P2,982.11 only, broken down as follows Date of Payment Oct. 24, 1957 Nov. 25, 1957 Feb. 10, 1958 Mar. 11, 1958 May 14, 1958 Receipt Number E-0385101 E-038703 E-0394669 H-6606335 E-2941534 TOTAL thereby leaving still unpaid the amount of P33,570.73, pursuant to assessment; 8. That among the payments stated in the next preceding paragraph, only the last payment that made on May 14, 1958 in the amount of P1,190.92 was made under protest; 9. That defendants have repeatedly demanded from plaintiff payment of the aforesaid taxes, claiming that such have been long due and payable under the provisions of Ordinance No. 5, as amended, but plaintiff refused and still refuses to make

payments up to the present, except those mentioned in paragraph 7 of this Stipulation of Facts; 10. That, on the other hand, plaintiff since May 1958 has demanded that defendants cease and desist from enforcing the provisions of Ordinance No. 5, as amended, but defendants refused to comply with said plaintiff's demand; Amount Paid 11. That there is no question of fact involved in this case and that the only P1,000.00 legal question for this Court to decide and resolve is: (1) whether or not Ordinance No. 5, as amended is valid and legal and that 180.89 whether or not the plaintiff's corporation is legally bound to pay the taxes provided for in said ordinance in question; and (2) whether or not payments made without protest in case of a 110.30 decision in favor of the plaintiff is subject to reimbursement. 500.00 PRAYER

1,190.92 WHEREFORE, the parties herein respectfully pray this Honorable Court to approve the aforegoing Stipulation of Facts P2,982.11 make it the basis for a decision on the issues raised by and to the pleadings. It is further respectfully prayed that both parties be granted thirty (30) days from receipt of notice of approval of the foregoing Stipulation of Facts within which to file simultaneously their respective memoranda, and fifteen (15) days from receipt of the other party's memorandum within which to file a reply thereto, and thereafter, the case shall be deemed submitted for decision. On February 28, 1961, the lower court rendered the appealed judgment which appellants seeks to have Us reverse, claiming that the lower court erred in holding (a) that the tax imposed by

said Ordinance No. 5, as amended, is a sales tax on the sawn manufactured or produced lumber, which are forest products, and in further ruling (b) that said ordinance was ultra vires and, therefore, null and void. The principal issue to be resolved is whether Ordinance No. 5, as originally approved or as later amended, the pertinent part of which reads as follows: AN ORDINANCE IMPOSING A TAX ON LUMBER MILLS SECTION 1. Every person, association or corporation operating a lumber mill and/or lumber yard within the territory of the City of Butuan shall pay to the City a tax of two fifths (P.004) centavo for every board foot of lumber sawn manufactured and/or produced (regardless of group). The tax shall be paid within the first twenty (20), days of the following month. If the tax is not paid within the time herein prescribed, there shall be added to the unpaid amount a surcharge of ten per centum (10%) every month of fractional part thereof, but in no case shall the total surcharge exceed twenty-five per centum (25%). SECTION 2. It shall be the duty of every person, association or corporation operating a lumber mill to submit to the City Treasurer within the first fifteen (15) days of every month a sworn statement of the number of board feet sawn manufactured or produced by it during the preceding month. falls within the provisions of paragraph 5, Section 15 of Republic Act No. 523, which empowers the municipal board of the City of Butuan: To tax, fix the license fee for, regulate the business and fix the

location of, match factories, blacksmith shops, foundries, steam boilers, lumber mills and lumber yards, shipyards, the storage and sale of gunpowder, tar pitch, resin coal, oil, gasoline, benzine turpentine, hemp, cotton, nitroglycerine, petroleum, or any of the products thereof, and of all other highly combustible or explosive materials and other establishments likely to endanger the public safety or give rise to conflagrations or explosions, and subject to the rules and regulations incured by the Director of Health in accordance with law, tanneries renderies, tallow chandeleries, embalmers, and funeral parlors, bone factories and soap factories. Appellee contends that the questioned ordinance imposes a tax, not on lumber mills and lumber yards, but on the sawnmanufactured and/or produced lumber, which are forest products and not found among the taxable items enumerated in the law above quoted, thus rendering said ordinance null and void. It argues further that, even under the latest amendment Ordinance No. 49, series of 1954, which purports to impose the tax not on lumber sold but on lumber sawn manufactured and/or produced the ordinance is ultra vires because par. (p) Section 15 of the Charter of the City of Butuan (quoted above), authorizes a tax only on lumber mills and lumber yards, which obviously does not include the power to impose a tax on sawn manufactured or produced lumber. Upon the other hand, appellants maintain that the tax in question is a license or privilege tax on the business of lumber mills or lumber yards imposed by appellant city in the exercise of its police power under Section 15 of its Charter. The title given to the original ordinance in question was "An ordinance imposing a tax on the sales of lumber". Section 1

thereof made the tax collectible on "every board foot of lumber sold" by every person, association or corporation operating a lumber mill within the territory of the City of Butuan, while Section 4 expressly exempted lumber mills from the payment of the quarterly sales tax provided for in Section 3, Article 11 of Ordinance No. 47, Series of 1949. The above would seem to be sufficient to show that the tax imposed is and was really intended to be on lumber sold and not a tax on, or, license fee for the privilege of operating a lumber mill and/or a lumber yard. The amendatory ordinances did not change the nature of the tax imposed by the original. Ordinance No. 9 simply changed the title of the latter so as to make it read as an ordinance imposing a tax on the "produce of lumber mills"; Ordinance No. 10, while entitled as one imposing a tax on lumber mills made the tax collectible on "every board foot of lumber, regardless of group, sawn manufactured or produced, etc."; Ordinance No. 47, in turn, made the tax collectible on "every board foot of lumber sold and/or shipped"; Ordinance No. 49, while changing again the title of the original ordinance so as to make it read as "An ordinance imposing a tax on lumber mills", also required the tax to be paid "for every board foot of lumber sawn manufactured and/or produced, etc." The clear implication from the original as well as the amendatory ordinances is that the tax imposed is one on lumber sold, manufactured, sawn or produced by parties duly licensed to engage in said trade or business. As the lower court said and this we quote with approval. The intent of Ordinance No. 5 to tax the sale of lumber is clear

and unmistakable. The subsequent ordinances Nos. 9, 10, 47 and 49, Exhs. B, C, D, and E respectively, being all amendatory, naturally did not alter the essence or spirit of the basic ordinance. This is evident, if we consider that section 4 of the original ordinance which exempts lumber mills from the of quarterly sales tax, as provided in an earlier ordinance was never repealed and instead was carried over and continued to be in force until the latest amendment. Moreover, the tax thus levied is virtually one on "forest products" since manufactured or sawn lumber is so considered under the provisions of Section 263, National Internal Revenue Code, which is embraced in Chapter V thereof entitled "Charges on Forest Products", as construed by Section VI, Regulation No. 85, Department of Finance. Municipal corporations are prohibited from imposing charges of taxes of such nature (Commonwealth Act No. 472, Section 3; Republic Act No. 2264). Appellants' claim that the questioned tax is one on business or a privilege tax for the operation of a lumber mill or a lumber yard is without merit. The character or nature of a tax is determined not by the title of the act or ordinance imposing it but by its operation, practical results and incidents (Dawson vs. Distilleries, etc., 255 U.S. 288, 65 L. Ed. 638; Association of Customs Brokers, Inc., et al. vs. The Municipal Board, et al., G.R. No. L-4376, May 22, 1953). Neither the original ordinance in question nor the amendatory ones show that the tax provided for therein is imposed by reason of the enjoyment of the privilege to engage in a particular trade or business. Neither do they provide that payment thereof is a condition precedent to the enjoyment of such privilege or that its

non-payment would result in the cancellation of any previous license granted. The only consequence of its non-payment appears to be the imposition of a surcharge or liability to suffer the penal sanctions prescribed in Section 3 of the original ordinance. These circumstances lead Us to the conclusion that the questioned tax cannot be considered as one imposed upon a party for engaging in the business of operating a lumber mill or a lumber yard. We likewise find to be unmeritorious appellants' contention that the power of the City of Butuan to tax lumber mills and lumber yards includes the power to tax the sale, production, sawing and/or manufacture of lumber by them. The rule is well-settled that municipal corporations, unlike sovereign states, are clothed with no power of taxation; that its charter or a statute must clearly show an intent to confer that power or the municipal corporation cannot assume and exercise it, and that any such power granted must be construed strictly, any doubt or ambiguity arising out from the terms of the grant to be resolved against the municipality. (Cu Unjieng vs. Patstone 42 Phil. 818; Vega, et al. vs. Municipal Board, etc., 50 O.G. No. 6,p. 2456) Lastly, appellants' contention that appellee had no cause of action because it does not appear that the taxes sought to be recovered were paid under protest is also untenable. The present action involves only the recovery of the sum of Pl,190.92 which was paid under protest (paragraph 8, Stipulation of Facts, p. 53, Record on Appeal). IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby affirmed, with costs. Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera Regala,

Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Bautista Angelo and Paredes, JJ., took no part. G.R. No. L-36081 April 24, 1989 PROGRESSIVE DEVELOPMENT CORPORATION, petitioner , vs. QUEZON CITY, respondent. Jalandoni, Herrera, Del Castillo & Associates for petitioner.

FELICIANO, J.: On 24 December 1969, the City Council of respondent Quezon City adopted Ordinance No. 7997, Series of 1969, otherwise known as the Market Code of Quezon City, Section 3 of which provided: Sec. 3. Supervision Fee.- Privately owned and operated public markets shall submit monthly to the Treasurer's Office, a certified list of stallholders showing the amount of stall fees or rentals paid daily by each stallholder, ... and shall pay 10% of the gross receipts from stall rentals to the City, ... , as supervision fee. Failure to submit said list and to pay the corresponding amount within the period herein prescribed shall subject the operator to the penalties provided in this Code ... including revocation of permit to operate. ... .1 The Market Code was thereafter amended by Ordinance No. 9236, Series of 1972, on 23 March 1972, which reads:

SECTION 1. There is hereby imposed a five percent (5 %) tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon City. xxx xxx xxx SECTION 3. For the effective implementation of this Ordinance, owners of privately owned public markets shall submit ... a monthly certified list of stallholders of lessees of space in their markets showing ... : a. name of stallholder or lessee; b. amount of rental; c. period of lease, indicating therein whether the same is on a daily, monthly or yearly basis. xxx xxx xxx SECTION 4. ... In case of consistent failure to pay the percentage tax for the (3) consecutive months, the City shall revoke the permit of the privately-owned market to operate and/or take any other appropriate action or remedy allowed by law for the collection of the overdue percentage tax and surcharge. xxx xxx xxx 2 On 15 July 1972, petitioner Progressive Development Corporation, owner and operator of a public market known as the "Farmers Market & Shopping Center" filed a Petition for Prohibition with Preliminary Injunction against respondent before

the then Court of First Instance of Rizal on the ground that the supervision fee or license tax imposed by the above-mentioned ordinances is in reality a tax on income which respondent may not impose, the same being expressly prohibited by Republic Act No. 2264, as amended. In its Answer, respondent, through the City Fiscal, contended that it had authority to enact the questioned ordinances, maintaining that the tax on gross receipts imposed therein is not a tax on income. The Solicitor General also filed an Answer arguing that petitioner, not having paid the ten percent (10%) supervision fee prescribed by Ordinance No. 7997, had no personality to question, and was estopped from questioning, its validity; that the tax on gross receipts was not a tax on income but one imposed for the enjoyment of the privilege to engage in a particular trade or business which was within the power of respondent to impose. In its Supplemental Petition of 23 September 1972, petitioner alleged having paid under protest the five percent (5%) tax under Ordinance No. 9236 for the months of June to September 1972. Two (2) days later, on 25 September 1972, petitioner moved for judgment on the pleadings, alleging that the material facts had been admitted by the parties. On 21 October 1972, the lower court dismissed the petition, ruling 3 that the questioned imposition is not a tax on income, but rather a privilege tax or license fee which local governments, like respondent, are empowered to impose and collect. Having failed to obtain reconsideration of said decision, petitioner came to us on the present Petition for Review.

The only issue to be resolved here is whether the tax imposed by respondent on gross receipts of stall rentals is properly characterized as partaking of the nature of an income tax or, alternatively, of a license fee. We begin with the fact that Section 12, Article III of Republic Act No. 537, otherwise known as the Revised Charter of Quezon City, authorizes the City Council: xxx xxx xxx (b) To provide for the levy and collection of taxes and other city revenues and apply the same to the payment of city expenses in accordance with appropriations. (c) To tax, fix the license fee, and regulate the business of the following: ... preparation and sale of meat, poultry, fish, game, butter, cheese, lard vegetables, bread and other provisions. 4 The scope of legislative authority conferred upon the Quezon City Council in respect of businesses like that of the petitioner, is comprehensive: the grant of authority is not only" [to] regulate" and "fix the license fee," but also " to tax" 5 Moreover, Section 2 of Republic Act No. 2264, as amended, otherwise known as the Local Autonomy Act, provides that: Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising privileges

in chartered cities, municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city, the municipal council of the municipality, or the municipal district council of the municipal district; to collect fees and charges for service rendered by the city, municipality or municipal district; to regulate and impose reasonable fees for services rendered in connection with any business, profession or occupation being conducted within the city, municipality or municipal district and otherwise to levy for public purposes just and uniform taxes licenses or fees: ... 6 It is now settled that Republic Act No. 2264 confers upon local governments broad taxing authority extending to almost "everything, excepting those which are mentioned therein," provided that the tax levied is "for public purposes, just and uniform," does not transgress any constitutional provision and is not repugnant to a controlling statute. 7 Both the Local Autonomy Act and the Charter of respondent clearly show that respondent is authorized to fix the license fee collectible from and regulate the business of petitioner as operator of a privately-owned public market. Petitioner, however, insist that the "supervision fee" collected from rentals, being a return from capital invested in the construction of the Farmers Market, practically operates as a tax on income, one of those expressly excepted from respondent's taxing authority, and thus beyond the latter's competence. Petitioner cites the same Section 2 of the Local Autonomy Act which goes on to state: 8 ... Provided, however, That no city, municipality or municipal district may levy or impose any of the following:

xxx xxx xxx (g) Taxes on income of any kind whatsoever; The term "tax" frequently applies to all kinds of exactions of monies which become public funds. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues. 9 Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. 10 To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. 11 When an activity, occupation or profession is of such a character that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health, morals and safety, or the general welfare, the legislature may provide that such inspection or supervision or other form of regulation shall be carried out at the expense of the persons engaged in such occupation or performing such activity, and that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the

inspection or supervision has been paid. 12 Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. 13 In the case at bar, the "Farmers Market & Shopping Center" was built by virtue of Resolution No. 7350 passed on 30 January 1967 by respondents's local legislative body authorizing petitioner to establish and operate a market with a permit to sell fresh meat, fish, poultry and other foodstuffs. 14 The same resolution imposed upon petitioner, as a condition for continuous operation, the obligation to "abide by and comply with the ordinances, rules and regulations prescribed for the establishment, operation and maintenance of markets in Quezon City." 15 The "Farmers' Market and Shopping Center" being a public market in the' sense of a market open to and inviting the patronage of the general public, even though privately owned, petitioner's operation thereof required a license issued by the respondent City, the issuance of which, applying the standards set forth above, was done principally in the exercise of the respondent's police power. 16 The operation of a privately owned market is, as correctly noted by the Solicitor General, equivalent to or quite the same as the operation of a government-owned market; both are established for the rendition of service to the general public, which warrants close supervision and control by the respondent City, 17 for the protection of the health of the public by insuring, e.g., the maintenance of sanitary and hygienic conditions in the market, compliance of all food stuffs sold therein with applicable food and drug and related standards, for the prevention of fraud and imposition upon the buying public, and so forth.

We believe and so hold that the five percent (5%) tax imposed in Ordinance No. 9236 constitutes, not a tax on income, not a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of the business in which the petitioner is engaged. While it is true that the amount imposed by the questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition, instead of one of regulation under the police power, 18 it nevertheless will be presumed to be reasonable. Local' governments are allowed wide discretion in determining the rates of imposable license fees even in cases of purely police power measures, in the absence of proof as to particular municipal conditions and the nature of the business being taxed as well as other detailed factors relevant to the issue of arbitrariness or unreasonableness of the questioned rates. 19 Thus: [A]n ordinance carries with it the presumption of validity. The question of reasonableness though is open to judicial inquiry. Much should be left thus to the discretion of municipal authorities. Courts will go slow in writing off an ordinance as unreasonable unless the amount is so excessive as to be prohibitory, arbitrary, unreasonable, oppressive, or confiscatory. A rule which has gained acceptance is that factors relevant to such an inquiry are the municipal conditions as a whole and the nature of the business made subject to imposition. 20 Petitioner has not shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly disproportionate to the costs of the regulatory service being performed by the respondent as to compel the Court to characterize the imposition as a revenue measure exclusively.

The lower court correctly held that the gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due respondent to cover the latter's administrative expenses, i.e., for regulation and supervision of the sale of foodstuffs to the public. The use of the gross amount of stall rentals as basis for determining the collectible amount of license tax, does not by itself, upon the one hand, convert or render the license tax into a prohibited city tax on income. Upon the other hand, it has not been suggested that such basis has no reasonable relationship to the probable costs of regulation and supervision of the petitioner's kind of business. For, ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related items sold in petitioner's privately owned market; and the higher the volume of goods sold in such private market, the greater the extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public. Moreover, what we started with should be recalled here: the authority conferred upon the respondent's City Council is not merely "to regulate" but also embraces the power "to tax" the petitioner's business. Finally, petitioner argues that respondent is without power to impose a gross receipts tax for revenue purposes absent an express grant from the national government. As a general rule, there must be a statutory grant for a local government unit to impose lawfully a gross receipts tax, that unit not having the inherent power of taxation. 21 The rule, however, finds no application in the instant case where what is involved is an exercise of, principally, the regulatory power of the respondent City and where that regulatory power is expressly accompanied by the taxing power. ACCORDINGLY, the Decision of the then Court of First Instance

of Rizal, Quezon City, Branch 18, is hereby AFFIRMED and the Court Resolved to DENY the Petition for lack of merit. SO ORDERED.

(1965); See also C.N. Hodges v. Municipal Board of the City of Iloilo, et. al., 19 SCRA 28 (1967); and Villanueva v. City of Iloilo, 26 SCRA 578 (1968). 8 supra, note 6; underscoring supplied.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur. 9 Compania General de Tabacos de Filipinas v. City of Manila, 118 Phil. 383; 8 SCRA 370 (1963); Pacific Commercial Co. v. Romualdez, 49 Phil, 917 (1927). Footnotes 1 Rollo, p. 102; Italics supplied. 2 Records on Appeal, pp. 14-15; Underscoring supplied. 3 Ibid, pp. 58-68. 4 46 Official Gazette 4732 (1950); Italics supplied. Certain portions of the Charter had been amended by R.A. 5541, 65 Official Gazette, p. 7126 (1968). The amendatory law, however, did not introduce any change to the portion quoted above. 5 See, in this connection, Pacific Commercial Co. v. Romualdez, et al., 49 Phil. 917 (1927). 6 Section 2 of R.A. 2264 has been amended by R.A. 4497, 62 Official Gazette, p. 8616 (1966); Underscoring supplied. R.A. 2264 was further amended by P.D. No. 145, 69 Official Gazette, p 2418 (1973), which however did not affect the abovequoted portion. 7 Nin Bay Mining Co. v. Municipality of Roxas, 14 SCRA 660 10 Manila Electric Company v. El Auditor General y La Comision de Servicios Publicos, 73 Phil. 133 (1941); Republic v. Philippine Rabbit Bus Lines, 32 SCRA 215 (1970). 11 City of Iloilo v. Villanueva, 105 Phil. 337 (1959). 12 Manila Electric Company vs. El Auditor General y la Comision de Servicios Publicos, supra, at 134-135. 13 Serafin Saldana v. City of Iloilo, 104 Phil, 28. (1958). 14 Record on Appeal, p. 10. 15 Ibid. 16 In City of Jacksonville, et al. v. Ledwith 7 So. at 892 [1890]; 26 Fla. 163, it was held that a permit to establish a market was: "from the nature of a market, a license. It is a permit to do something which could not be done before without such permit, and hence is the grant of a license. x x x [T]he power to establish

markets is within the police power, and [thus is] x x x the power to charge, as a police regulation, a fee for the permit or license for selling meats or vegetables therein, x x x. The fee, however, is not a tax for revenue, but a charge under the police power, and its amount is to be controlled by the principles governing in such cases." 17 Brief for the Respondent, pp. 6-7; Rollo, p. 172. 18 E.g., Calalang v. Lorenzo and Villar, 97 Phil. 212 (1955). 19 Procter & Gamble PMC v. Municipality of Jagna 94 SCRA 894 (1979); Northern Phil. Tobacco Co. v. Municipality of Agoo, 31 SCRA 304 (1970); and San Miguel Brewery, Inc. v. City of Cebu, 43 SCRA 275 (1972). 20 Victorias Milling Co., Inc. v. Municipality of Victorias, Negros Occidental, 25 SCRA 192 at 205 (1968), citing 9 McQuillin Municipal Corporations, 3rd ed., at 65. In Atkins v. Philips, 8 So. at 431 (1890); 26 Fla. 281, the Supreme Court of Florida held: 21 City of Ozamis v. Lumapas, 65 SCRA 33 (1975). G.R. No. L- 41383 August 15, 1988 PHILIPPINE AIRLINES, INC., plaintiff-appellant, vs. ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity as National Treasurer, defendants-appellants. Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.

GUTIERREZ, JR., J.: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees? This question has been brought before this Court in the past. The parties are, in effect, asking for a re-examination of the latest decision on this issue. This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case where the then Court of First Instance of Rizal dismissed the portion-about complaint for refund of registration fees paid under protest. The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate pursuant to Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code. The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and engaged in the air transportation business under a legislative franchise, Act No. 42739, as amended by Republic Act Nos. 25). and 269.1 Under its franchise, PAL is exempt from the payment of taxes. The pertinent provision of the franchise provides as follows: Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the National Government during the life of this franchise a tax of two per cent of the gross revenue or gross earning derived by the grantee from its operations under this franchise. Such tax shall be due and

payable quarterly and shall be in lieu of all taxes of any kind, nature or description, levied, established or collected by any municipal, provincial or national automobiles, Provided, that if, after the audit of the accounts of the grantee by the Commissioner of Internal Revenue, a deficiency tax is shown to be due, the deficiency tax shall be payable within the ten days from the receipt of the assessment. The grantee shall pay the tax on its real property in conformity with existing law. On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956, not been paying motor vehicle registration fees. Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest, the amount of P19,529.75 as registration fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner Edu demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise. Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle

registration fees are regulatory exceptional. and not revenue measures and, therefore, do not come within the exemption granted to PAL? under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed as Civil Case No. Q-15862. Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his capacity as National Treasurer, filed a motion to dismiss alleging that the complaint states no cause of action. In support of the motion to dismiss, defendants repatriation the ruling in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of the police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or earnings, it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. The resolution of the motion to dismiss was deferred by the Court until after trial on the merits. On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by the later ruling laid down by the Supreme Court in the case or Republic v. Philippine Rabbit Bus Lines, Inc., (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the case to us. Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and Commissioner Romeo F. Edu respectively, discuss the main points of contention in the case at bar.

Resolving the issue in the Philippine Rabbit case, this Court held: "The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor Vehicle Law (Republic Act No. 587 [1950]). Its heading speaks of "registration fees." The term is repeated four times in the body thereof. Equally so, mention is made of the "fee for registration." (Ibid., Subsection G) A subsection starts with a categorical statement "No fees shall be charged." (lbid., Subsection H) The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a tax but of a registration fee under the police power. Hence the incipient, of the section relied upon by defendant-appellee under the Back Pay Law, It is not held liable for a tax but for a registration fee. It therefore cannot make use of a backpay certificate to meet such an obligation. Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic Act No. 5448. ([1968]. Section 3 thereof as to the imposition of additional tax on privately-owned passenger automobiles, motorcycles and scooters was amended by Republic Act No. 5470 which is (sic) approved on May 30, 1969.) A special science fund was thereby created and its title expressly sets forth that a tax on privatelyowned passenger automobiles, motorcycles and scooters was imposed. The rates thereof were provided for in its Section 3 which clearly specifies the" Philippine tax."(Cooley to be paid as distinguished from the registration fee under the Motor Vehicle Act. There cannot be any clearer expression therefore of the legislative will, even on the assumption that the earlier legislation could by subdivision the point be susceptible of the interpretation that a tax rather than a fee was levied. What is thus most apparent is that where the legislative body relies on its authority

to tax it expressly so states, and where it is enacting a regulatory measure, it is equally exploded (at p. 22,1969 In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand, held: The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are in section 8 of that law called "fees". But the appellation is no impediment to their being considered taxes if taxes they really are. For not the name but the object of the charge determines whether it is a tax or a fee. Geveia speaking, taxes are for revenue, whereas fees are exceptional. for purposes of regulation and inspection and are for that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. Hence, a charge fixed by statute for the service to be person,-When by an officer, where the charge has no relation to the value of the services performed and where the amount collected eventually finds its way into the treasury of the branch of the government whose officer or officers collected the chauffeur, is not a fee but a tax."(Cooley on Taxation, Vol. 1, 4th ed., p. 110.) From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle Office are but a small portionabout 5 per centumof the total collections from motor vehicle registration fees. And as proof that the money collected is not intended for the expenditures of that office, the law itself provides that all such money shall accrue to the funds for the construction and maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, for their express object is to provide

revenue with which the Government is to discharge one of its principal functionsthe construction and maintenance of public highways for everybody's use. They are veritable taxes, not merely fees. As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides that "no other taxes or fees than those prescribed in this Act shall be imposed," thus implying that the charges therein imposedthough called fees are of the category of taxes. The provision is contained in section 70, of subsection (b), of the law, as amended by section 17 of Republic Act 587, which reads: Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the provisions of any city charter to the contrary notwithstanding: Provided, however, That any provincial board, city or municipal council or board, or other competent authority may exact and collect such reasonable and equitable toll fees for the use of such bridges and ferries, within their respective jurisdiction, as may be authorized and approved by the Secretary of Public Works and Communications, and also for the use of such public roads, as may be authorized by the President of the Philippines upon the recommendation of the Secretary of Public Works and Communications, but in none of these cases, shall any toll fee." be charged or collected until and unless the approved schedule of tolls shall have been posted levied, in a conspicuous place at such toll station. (at pp. 213-214) Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992 [19511) as

amended by Commonwealth Act 123 and Republic Acts Nos. 587 and 1621. Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land Transportation Code, (as amended by Rep. Acts Nos. 5715 and 64-67, P.D. Nos. 382, 843, 896, 110.) and BP Blg. 43, 74 and 398). Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained unsegregated, by Rep. Act Nos. 587 and 1603) states: Section 73. Disposal of moneys collected.Twenty per centum of the money collected under the provisions of this Act shall accrue to the road and bridge funds of the different provinces and chartered cities in proportion to the centum shall during the next previous year and the remaining eighty per centum shall be deposited in the Philippine Treasury to create a special fund for the construction and maintenance of national and provincial roads and bridges. as well as the streets and bridges in the chartered cities to be alloted by the Secretary of Public Works and Communications for projects recommended by the Director of Public Works in the different provinces and chartered cities. .... Presently, Sec. 61 of the Land Transportation and Traffic Code provides: Sec. 61. Disposal of Mortgage. CollectedMonies collected under the provisions of this Act shall be deposited in a special trust account in the National Treasury to constitute the Highway Special Fund, which shall be apportioned and expended in accordance with the provisions of the" Philippine Highway Act of 1935. "Provided, however, That the amount necessary to

maintain and equip the Land Transportation Commission but not to exceed twenty per cent of the total collection during one year, shall be set aside for the purpose. (As amended by RA 64-67, approved August 6, 1971). It appears clear from the above provisions that the legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a much lesser degree, pay for the operating expenses of the administering agency. On the other hand, the Philippine Rabbit case mentions a presumption arising from the use of the term "fees," which appears to have been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 which reads: Sec. 13. Payment of taxes upon registration.No original registration of motor vehicles subject to payment of taxes, customs s duties or other charges shall be accepted unless proof of payment of the taxes due thereon has been presented to the Commission. referring to taxes other than those imposed on the registration, operation or ownership of a motor vehicle (Sec. 59, b, Rep. Act 4136, as amended). Fees may be properly regarded as taxes even though they also serve as an instrument of regulation, As stated by a former presiding judge of the Court of Tax Appeals and writer on various aspects of taxpayers It is possible for an exaction to be both tax arose. regulation. License fees are changes. looked to as a source of revenue as

well as a means of regulation (Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees. Isabela such case, the fees may properly be regarded as taxes even though they also serve as an instrument of regulation. If the purpose is primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly called a tax. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593). Indeed, taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148). If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax (Umali, Id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision appears as Section 591-593). in the Land Transportation code. It is patent therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 591593). speaks of "taxes." or fees ... for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by

the respondents, speak of an "additional" tax," where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 41383. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees," such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 591-593). of the Code as taxes like the motor vehicle registration fee and chauffers' license fee. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of see. 61, aforequoted. It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for rigidly purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without changing the earlier deputy. of registration payments as "fees," their nature has become that of "taxes." In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues. of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program.

May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL? The answer is NO. The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5448 dated June 27, 1968, repealed all earlier tax exemptions Of corporate taxpayers found in legislative franchises similar to that invoked by PAL in this case. In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R. No. 615)." July 11, 1985), this Court ruled: Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio Communications of the Philippines, Inc., was subject to both the franchise tax and income tax. In 1964, however, petitioner's franchise was amended by Republic Act No. 41-42). to the effect that its franchise tax of one and one-half percentum (1-1/2%) of all gross receipts was provided as "in lieu of any and all taxes of any kind, nature, or description levied, established, or collected by any authority whatsoever, municipal, provincial, or national from which taxes the grantee is hereby expressly exempted." The issue raised to this Court now is the validity of the respondent court's decision which ruled that the exemption under Republic Act No. 41-42). was repealed by Section 24 of Republic Act No. 5448 dated June 27, 1968 which reads: "(d) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Sections 24 (c) (1) of this Code shall pay the rates

provided in this section. All corporations, agencies, or instrumentalities owned or controlled by the government, including the Government Service Insurance System and the Social Security System but excluding educational institutions, shall pay such rate of tax upon their taxable net income as are imposed by this section upon associations or corporations engaged in a similar business or industry. " An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all corporate taxpayers to pay income tax as provided by the statute. There can be no doubt as to the power of Congress to repeal the earlier exemption it granted. Article XIV, Section 8 of the 1935 Constitution and Article XIV, Section 5 of the Constitution as amended in 1973 expressly provide that no franchise shall be granted to any individual, firm, or corporation except under the condition that it shall be subject to amendment, alteration, or repeal by the legislature when the public interest so requires. There is no question as to the public interest involved. The country needs increased revenues. The repealing clause is clear and unambiguous. There is a listing of entities entitled to tax exemption. The petitioner is not covered by the provision. Considering the foregoing, the Court Resolved to DENY the petition for lack of merit. The decision of the respondent court is affirmed. Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed because the tax exemption in the franchise of PAL was repealed during the period. However, an amended franchise was given to PAL in 1979. Section 13 of Presidential Decree No. 1590, now provides: In consideration of the franchise and rights hereby granted, the

grantee shall pay to the Philippine Government during the lifetime of this franchise whichever of subsections (a) and (b) hereunder will result in a lower taxes.) (a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the Internal Revenue Code; or (b) A franchise tax of two per cent (2%) of the gross revenues. derived by the grantees from all specific. without distinction as to transport or nontransport corporations; provided that with respect to international airtransport service, only the gross passengers, mail, and freight revenues. from its outgoing flights shall be subject to this law. The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license and other fees and charges of any kind, nature or description imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government, agency, now or in the future, including but not limited to the following: xxx xxx xxx (5) All taxes, fees and other charges on the registration, license, acquisition, and transfer of airtransport equipment, motor vehicles, and all other personal or real property of the gravitates (Pres. Decree 1590, 75 OG No. 15, 3259, April 9, 1979). PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is now exempt from the payment of any tax, fee, or other charge on the registration and

licensing of motor vehicles. Such payments are already included in the basic tax or franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer be exacted. WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees paid in 1971 is DENIED. The Land Transportation Franchising and Regulatory Board (LTFRB) is enjoined functions-the collecting any tax, fee, or other charge on the registration and licensing of the petitioner's motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590. SO ORDERED. Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Grio Aquino and Medialdea, JJ., concur. G.R. No. L-30727 July 15, 1975 THE CITY OF OZAMIZ, Represented by THE CITY MAYOR, MUNICIPAL BOARD, CITY TREASURER, and CITY AUDITOR, petitioner-appellant, vs. SERAPIO S. LUMAPAS and HONORABLE GERONIMO R. MARAVE, respondentsappellees. Assistant City Fiscal Artemio C. Engracia for petitioner-appellant. Francisco D. Boter for respondents-appellees.

Appeal by certiorari from the decision, dated March 18, 1969, of respondent Judge Geronimo R. Marave, of the Court of First Instance of Misamis Occidental, Branch II, Ozamiz City, declaring Ordinance No. 466, series of 1964, of the Municipal Board of the City of Ozamiz, null and void (Civil Case No. OZ159), and ordering petitioner to return to respondent Serapio S. Lumapas the sum of P1,243.00, representing the amount collected as parking fees, by virtue of the ordinance, without costs. The facts of this case, which are not disputed, are as follows: Respondent Serapio S. Lumapas is an operator of transportation buses for passengers and cargoes, under the name of Romar Line, with Ozamiz City and Pagadian, Zamboanga del Sur, as terminal points, by virtue of a certificate of public convenience issued to him by the Public Service Commission. On September 15, 1964, the Municipal Board of Ozamiz City enacted the following: ORDINANCE NO. 466 AN ORDINANCE IMPOSING PARKING FEES FOR EVERY MOTOR VEHICLE PARKED ON ANY PORTION OF THE EXISTING PARKING SPACE IN THE CITY OF OZAMIZ. Be it ordained by the Municipal Board of the City of Ozamiz, that: SECTION 1 There is hereby imposed parking fees for all motor vehicles parked on any portion of the duly designated parking areas in the City of Ozamiz; SECTION 2. Motor Vechicles' as used in this ordinance shall be construed to mean all vehicles run by engine whether the

ANTONIO, J.:

same is offered for passengers or for cargoes of whatever kind or nature; SECTION 3. The word "Parking" as used in this ordinance shall be construed to mean, when a motor vehicle of whatever kind is stopped on any portion of the existing parking areas for the purpose of loading and unloading passengers or cargoes; SECTION 4. For purposes of the fee hereinabove provided, the following schedule of rates collectible daily from the conductor, driver, operator and/or owner must be observed: For Passenger (a) Passenger Bus ........................................................................ P1.00 (b) Weapon Carrier, Baby Bus & others of similar nature ..... .70 (c) Pick Up, Jeepneys, PU Cars and others of similar nature ....................................................................................................... ................ .50 For Cargoes (a) Cargo Trucks .......................................................................... 1.00 (b) Pick Up, Jeeps, Jeepneys, Weapon Carriers & Others of similar nature ....................................................................................................... ............... .70

SECTION 5. That the City Treasurer or his authorized representative is hereby empowered to collect the herein parking fees using any form of official receipt he may devise, from the conductor, driver, operator and/or owner of the motor vehicles parked in said designated parking areas; SECTION 6. Any person or persons, violating any provision of this ordinance shall, upon conviction thereof, be punished by an imprisonment of not less than two (2) months nor more than six (6) months, or by a fine in the sum of not less than P100.00 but not more than P400.00 or both such fine and imprisonment at the discretion of the Court; SECTION 7. This ordinance shall take effect immediately upon its approval. Enacted, September 15, 1964, Approved, October 7, 1964. 1 After approval of the above-quoted ordinance, the City of Ozamiz began collecting the prescribed parking' fees and collected from respondent-appellee Serapio S. Lumapas, who had paid under protest, the parking fees at One Peso (P1.00) for each of his buses, from October 1964 to January 1967, or an aggregate amount of P1,259.00 2 for which official receipts were issued by petitioner. About four (4) years later, or on January 11, 1968, respondent Serapio S. Lumapas filed a complaint, dated August 3, 1967 3 against the City of Ozamiz, represented by the City Mayor, Municipal Board, City Treasurer, and City Auditor, with the Court of First instance of Misamis Occidental, Branch II (Civil Case No.

OZ-159), for recovery of parking fees, alleging, among others, that said Ordinance No. 466 is ulta vires, and praying that judgment be issued (1) nullifying Ordinance No. 466, series of 1964, and (2) ordering the Municipal Board to appropriate the amount of P1,459.00 for the reimbursement of P1,259.00 he had paid as parking fees, plus P200.00 as attorney's fees. On January 25, 1968, petitioner filed its answer, with affirmative defenses 4 to which respondent-appellee Serapio S. Lumapas filed his reply, dated January 30, 1968. 5 On January 3, 1969, the parties, through their respective counsel, filed the following: STIPULATION OF FACTS COME NOW the plaintiff and the defendants, through their respective counsel, and unto this Honorable Court respectfully submit this stipulation of facts, to wit: (1) That the area enclosed in red pencil in the sketch is a market site of the City of Ozamiz which holds the same in its proprietary character as evidenced by Tax Declaration No. 51234. This area is for public use. (2) That the Zulueta Street is now extended up to the end of the market site passing a row of tiendas up to the end marked "toilet" in the sketch plan of market site when the market building was constructed in 1969; (3) That on the right side near the row of tiendas and near the toilet and marked with series of x's and where the buses of plaintiff were parking waiting for passengers going to the south;

(4) That this space marked "rig parking" in the sketch plan marked "x" has been designated by City Ordinance No. 233 as a parking place marked Exhibit "2"; (5) That the defendant City Government has been collecting parking fees and issued corresponding official receipts to the plaintiff for each unit belonging to the plaintiff every time it left Ozamiz City from said parking place but once a day at one peso per unit; (6) That the total amount of parking fees collected from the plaintiff by the defendant is P1,243.00 as per official receipts actually counted in the presence of both parties; (7) That the plaintiff made a demand for the reimbursement of the total amount collected from 1964 to 1967 and this demand was received on September 1, 1967, by the City Treasurer and that the City Treasurer replied by first indorsement dated September 11, 1967, asking for reference and verification; and (8) That in reply to said first indorsement, the plaintiff sent a letter to the City Treasurer dated January 18, 1967, citing cases in support of the demand, and in answer to that letter, the City Treasurer in his communication dated January 11, 1968, flatly denied payment of the demand. (9) That the parties will file their respective memoranda within twenty days from today. WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered based upon this stipulation of facts after the parties shall have submitted their respective memoranda or after the lapse of twenty days from today.

Ozamiz City, December 27, 1968. 6 On the basis of the foregoing Stipulation of Facts, and of the court's finding, after an ocular inspection of the parking area designated by Ordinance No. 286, series of 1956, 7 superseding Ordinance No. 234, series of 1953, that it is a municipal street, although part of the public market, said court rendered judgment on March 18, 1969 declaring that such parking fee is in the nature of toll fees for the use of public road and made in violation of Section 59[b] of Republic Act No. 4136 (Land Transportation and Traffic Code), there being no prior approval therefor by the President of the Philippines upon recommendation of the Secretary of Public Works and Communications (now Public Works). Hence, the present appeal by certiorari. Petitioner now contends that the lower court erred: (1) in declaring Ordinance No. 466, series of 1964, of Ozamiz City, null and void; (2) in considering parking fees as road tolls under Section 59[b] of Republic Act No. 4136; (3) in declaring the parking area as a public street and not the patrimonial property of the city; and (4) in ordering the reimbursement of parking fees paid by respondent-appellee. Decisive of this controversy is whether the Municipal Board of the City of Ozamiz, herein petitioner-appellant, had the power to enact said Ordinance No. 466. Petitioner-appellant, in maintaining the affirmative view, contends: (1)that the ordinance is valid for the fees collected thereunder are in the nature of property rentals for the use of parking spaces belonging to the City in its proprietary character, as evidenced by Tax Declaration No. 51234, and are authorized by Section 2308 (f) of the Revised Administrative Code, 8(2) that

Section 15 (y) of the Charter of Ozamiz City (Republic Act No. 321) 9 also authorizes the Municipal Board to regulate the use of streets which carries with it the power to impose fees for its implementation; (3) that, pursuant to such power, the Municipal Board passed said Ordinance No. 234, the purpose of which is to minimize accidents, to avoid congestion of traffic, to enable the passengers to know the exact time of the departure of trucks and, for this purpose, the Municipal Board provided for parking areas for which the City has to have funds for the implementation of the purposes abovestated; (4) that Section 2 of the Local Autonomy Law (Republic Act No. 2264)likewise empowers the local governments to impose taxes and fees, except those that are enumerated therein, and parking fee is not among the exceptions: and (5) that the word "toll" connotes the act of passing along the road and the collection of toll fees may not be imposed unless approved by the President of the Philippines upon the recommendation of the Secretary of Public Works, pursuant to Section 59[b] of Republic Act No. 4136; whereas the word "parking" implies a stationary condition and the parking fees provided for in Ordinance No. 466 is for the privilege of using the designated parking area, which is owned by the City of Ozamiz, as its patrimonial property. On the other hand, respondent-appellee insists (1) that Ozamiz City has no power to impose parking fees on motor vehicles parked on Zulueta Street, which is property for public use and, as such, Ordinance No. 466 imposing such fees is null and void; (2) that granting arguendo that Zulueta Street is part of the City's public market site, its conversion into a street removes it from its category as patrimonial property to one for public use; 10 (3) that the use of Zulueta Street as a parking place is only incidental to the free passage of motor vehicles for, as soon as the buses are loaded with passengers, the vehicles start their journey to their respective destinations and pay the toll clerk at a station about

one hundred; (100) feet ahead along Zulueta Street before they are allowed to get out of the City and as such, the prohibition to impose taxes or fees embodied in Section 59[b] of Republic. Act No. 4136 applies to this case; (4) that Section 2308[f] of the Revised Administrative Code providing that the "proceeds on income from the ... use or management of property lawfully held by the municipality" accrue to the municipality, does not grant, either expressly or by implication, to the municipality, the power to impose such tax, (5) that Section 15[y] of the Charter of Ozamiz City (Republic Act No. 321) which authorizes the City, among others, "to regulate the use of a street," does not empower the City to impose parking fees; besides, said section contains a proviso, i.e., "except as otherwise provided by law", which, in this case, is Republic Act No. 4136; and (6) that, since the power to impose parking fees is not among those conferred by the Local Autonomy Act on local government, said City cannot, therefore, impose such parking fees. After the filing of its brief, or on December 10, 1969, the petitioner- appellant, through its counsel, First Assistant City Fiscal Artemio C. Engracia, filed the following Manifestation, dated November 27, 1969, praying that the decision of the lower court be reversed in view of the approval by the President of the Philippines upon the recommendation of the Secretary of Public Works of the ordinance in question that validates the same, to wit: 1. That the decision of the lower court, marked Annex "E" of the petition, declaring Ordinance No. 466, series of 1964, of Ozamiz City, marked Annex "G" of the petition, null and void is based on the non-compliance with the provisions of Section 59[b] of Republic Act No. 4136, otherwise known as The Land Transportation Law, which requires the approval by the

President of the Philippines upon the recommendation of the Secretary of Public Works of such kind of ordinance.. 2. That the President of the Philippines has now approved the Ordinance in question. A certified copy of said approval is hereunder quoted. xxx xxx xxx 4th Indorsement Manila, September 26, 1969 Respectfully returned to the Mayor, City of Ozamiz, hereby approving, as recommended in the 3rd indorsement hereon of the Secretary of Public Works and Communications, Ordinance No. 466, series of 1964, of that city, entitled: "AN ORDINANCE IMPOSING PARKING FEES FOR EVERY MOTOR VEHICLE PARKED ON ANY PORTION OF THE EXISTING PARKING SPACE IN THE OZAMIZ." By Authority of the President: (Sgd.) FLORES BAYOT Assistant Executive Secretary 3. That the approval by the President of the Philippines is based upon the recommendation of the Secretary of Public Works. A certified copy of said recommendation is hereunder reproduced: 3rd Indorsement June 3, 1969 Respectfully forwarded to His Excellency, the President of the Philippines, Malacaang, recommending favorable action, in view of the representations herein made, on the within letter dated March 21, 1969 of Mayor Hilarion A. Ramiro, Ozamiz City, requesting approval No. 466, series of 1964, passed by the

Municipal Board, same city regarding the collection of fees for the privilege of parking vehicles in the lots privately-owned by said City. (Sgd.) ANTONIO V. RAQUIZA Secretary 4. That the action of the Secretary of Public Works is based upon the findings of the Commissioner of the Land Transportation Commission. A certified copy of the same is herein reproduced: xxx xxx xxx 2nd Indorsement May 16, 1969 Respectfully returned to the Honorable Secretary, Department of Public Works and Communications, Manila, with the statement that this Commission interposes no objection on the approval of Ordinance No. 466, series of 1964, of Ozamiz City, considering that the schedule of rate collectible from the conductor, driver, operator and/or owner as stated under Section 4 thereof appears to be reasonable. It may be stated in this connection that on the Decision of the CFI of Misamis Occidental, Branch II, dated March 18, 1969 under Civil Case No. OZ(159), the said Ordinance was declared null and void for failure to comply with the provisions of Section 59[b] of R. A. 4136, regarding the required "approval by the President of the Philippines upon recommendation of the Secretary of Public Works and Communications." (Sgd.) ROMEO F. EDU Commissioner The rule is well-settled that municipal corporations, being mere

creatures of the law, have only such powers as are expressly granted to them and those which are necessarily implied or incidental to the exercise thereof, and the power to tax is inherent upon the State and it can only be exercised by Congress, unless delegated or conferred by it to a municipal corporation. As such, said corporation has only such powers as the legislative department may have deemed fit to grant. By reason of the limited powers of local governments and the nature thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity arising out of the terms used in granting said powers must be construed against the municipality. 11 The implied powers which a municipal corporation possesses and can exercise are only those necessarily incident to the powers expressly conferred. Inasmuch as a city has no power, except by delegation from Congress, in order to enable it to impose a tax or license fee, the power must be expressly granted or be necessarily implied in, or incident to, the powers expressly conferred upon the city. Under Sec. 15[Y] of the Ozamiz City Charter (Rep. Act No. 321), the municipal board has the power "... to regulate the use of streets, avenues, alleys, sidewalks, wharves, piers, parks, cemeteries and other public places; ...", and in subsection [nn] of the same section 15, the authority "To enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of prosperity and the promotion of the morality, peace, good order, comfort, convenience, and general welfare of the city and its inhabitants, and such others as may be necessary to carry into effect and discharge the powers and duties conferred by this Charter ..." By this express legislative grant of authority, police power is delegated to the municipal corporation to be exercised as a governmental function for

municipal purposes. It is, therefore, patent that the City of Ozamiz has been clothed with full power to control and regulate its streets for the purpose of promoting the public health, safety and welfare. Indeed, municipal power to regulate the use of streets is a delegation of the police power of the national government, and in the exercise of such power, a municipal corporation can make all necessary and desirable regulations which are reasonable and manifestly in the interest of public safety and convenience. By virtue of the aforecited statutory grant of authority, the City of Ozamiz can regulate the time, place, manner of parking in the streets and public places. It is, however, insisted that the ordinance did not charge a parking fee but a toll fee for the use of the street. It is true that the term " parking" ordinarily implies "something more than a mere temporary and momentary stoppage at a curb for the purpose of loading or unloading passengers or merchandize; it involves the idea of using a portion of the street as storage space for an automobile." 12 In the case at bar, the TPU buses of respondent-appellee Sergio S. Lumapas stopped on the extended portion of Zulueta Street beside the public market (Exhibit "X-1" of Exhibit "X", Development Plan for Ozamiz Market Site),and that as soon as the buses were loaded, they proceeded to the station, about one hundred (100) feet away from the parking area, where a toll clerk of the City collected the "Parking" fee of P1.00 per bus once a day, before said buses were allowed to proceed to their destination. Section 3 of the questioned Ordinance No. 466 defines the word "'parking' to mean the stoppage of a motor vehicle of whatever

kind on any portion of the existing parking areas for the purpose of loading and unloading passengers or cargoes." 13 (Emphasis supplied.) The word "toll" when used in connection with highways has been defined as a duty imposed on goods and passengers travelling public roads. 14 The toll for use of a toll road is for its use in travelling thereon, not for its use as a parking place for vehicles.
15

It is not pretended, however, that the public utility vehicles are subject to the payment, if they pass without stopping thru the aforesaid sections of Zulueta Street. Considering that the public utility vehicles are only charged the fee when said vehicles stop on "any portion of the existing parking areas for the purpose of loading or unloading passengers or cargoes", the fees collected are actually in the nature of parking fees and not toll fees for the use of Zulueta Street. This is clear from the Stipulation of Facts which shows that fees were not exacted for mere passage thru the street but for stopping in the designated parking areas therein to unload or load passengers or cargoes. It was not, therefore a toll fee for the use of public roads, within the context of Section 59[b] of Republic Act No. 4136, which requires the authorization of the President of the Philippines. As adverted to above, the Municipal Board of Ozamiz City is expressly granted by its Charter the power to regulate the use of its streets. The ordinance in question appears to have been enacted in pursuance of this grant. The parking fee imposed is minimal in amount, the maximum being only P1.00 a day for each passenger bus and P1.00 for each cargo truck, the rates being lower for smaller types of vehicles. This indicates that its purpose is not for revenue but for regulation. Moreover, it is

undeniable that by designating a specific place wherein passenger and freight vehicles may load and unload passengers and cargoes, benefits are accorded to the city's residents in the form of increased safety and convenience arising from the decongestion of traffic. Undoubtedly the city may impose a fee sufficient in amount to include the expense of issuing the license and the cost of necessary inspection or police surveillance connected with the business or calling licensed. The fees charged in the case at bar are undeniably to cover the expenses for supervision, inspection and control, to ensure the smooth flow of traffic in the environs of the public market, and for the safety and convenience of the public. WHEREFORE, the appealed decision is hereby reversed and Ordinance No. 466, series of 1964 declared valid. No pronouncement as to costs. Fernando (Chairman), Barredo, Aquino and Concepcion Jr., JJ., concur.

P453.00; and 1967 P5.00. 3 Annex "A", Petition; Record, pp. 17-19. 4 Annex "B", Petition, Record, pp, 20-22, 70-72. 5 Annex "E", Petition; Record, pp. 26-29. 6 Annex "C". Petition; Record, pp. 23-24, 73-74. 7 Full text of Ordinance No. 286 reads: "AN ORDINANCE TRANSFERRING THE PARKING SPACE FOR TPU AND AC'S TO THE BACK OF THE PUBLIC MARKET. Be it ordained by the Municipal Board of the City of Ozamiz, that: SECTION 1. The present parking space for TPU and AC's between the public market and Zamora Street is hereby transferred at the back of the public market on such area as may be designated by the Special Committee created by the Municipal Board, to make plans to relocate certain stalls and parking space. SECTION 2. That no TPU and AC shall load or unload passengers and/or cargoes infront of the public market, but all such loading and unloading shall be done on their parking area.

Footnotes 1 Annex "G", Petition; Record, pp. 33 & 83. 2 The amount of P1,259.00 was paid by respondent Serapio S. Lumapas as follows: 1964 P213.00; 1965 P588.00; 1966

SECTION 3. Any provisions of ordinance or ordinances inconsistent herewith are deemed repealed. SECTION 4. Violation of this ordinance shall be governed by Ordinance No. 62.

8 Sec. 2308(f) of the Revised Administrative Code reads: "Miscellaneous revenue. The following species of revenue shall also accrue to the respective municipalities: xxx xxx xxx (f) Proceeds on income from the sale, use or management of any property lawfully held by the municipality." 9 Sec. 15(y) of Republic act No. 321 reads: "General powers and duties of the Municipal Board. Except as otherwise provided by law, and subject to the conditions and limitation thereof, the municipal board shall have the following powers: xxx xxx xxx (y) Subject to the provisions of subsection (f) of section 190 of the Administrative Code to provide for the laying out, construction and improvement, and to regulate the use of streets, avenue, alleys, wharves, piers, parks, cemeteries, and other public places." (Emphasis supplied.)correction, back to page 4 foot notes. 10 See Articles 423 and 424 of the Civil Code of the Philippines. 11 Heras v. City Treasurer of Quezon City, 109 Phil. 930 Santos Lumber Company, et al. v. City of Cebu, 102 Phil. 870; Vega, et al. v. Municipal Board of the City of Iloilo, 94 Phil. 949; Icard v. City of Baguio, et al., 83 Phil. 870; Batangas Transportation Co. v. Provincial Treasurer of Batangas, 52 Phil. 190; Pacific

Commercial Co. v. Romualdez, 49 Phil. 917; Cu Unjieng v. Patstone, 42 Phil. 818. 12 McQuillin, Municipal Corporation, Vol. 7, p. 689, citing Williams v. Grier, 24 S. E. 2d, 509; Andrews v. City of Marion, 47 N. E. 2d, 968; Isermann v. Tester, 191 N. E. 839 [prohibiting parking on side of street not applicable to stopping for deliveries to abutting owner]).1wph1.t 13 Under the Land Transportation and Traffic Code (Republic Act No. 4136 approved June 20, 1964), a motor vehicle is "parked" or "parking" if it has been brought to stop on the shoulder or proper edge of a highway, and remains inactive in that place or close thereto for an appreciable period of time and a motor vehicle which properly stops merely to discharge a passenger or to take in a waiting passenger, or to load or unload a small quantity of freight with reasonable dispatch shall not be considered as "parked", if the motor vehicle again moves away without delay. (Sec. 3[1], Emphasis supplied.). 14 90 C.J.S. 967. 15 Glodt v. City of Missoula, 190 P. 2d, 545, 549, 121 Mont. 178. G.R. No. 73705 August 27, 1987 VICTORIAS MILLING CO., INC., petitioner, vs. OFFICE OF THE PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS and PHILIPPINE PORTS AUTHORITY, respondents.

PARAS, J.:

This is a petition for review on certiorari of the July 27, 1984 Decision of the Office of the Presidential Assistant For Legal Affairs dismissing the appeal from the adverse ruling of the Philippine Ports Authority on the sole ground that the same was filed beyond the reglementary period. On April 28, 1981, the Iloilo Port Manager of respondent Philippine Ports Authority (PPA for short) wrote petitioner Victorias Milling Co., requiring it to have its tugboats and barges undergo harbor formalities and pay entrance/clearance fees as well as berthing fees effective May 1, 1981. PPA, likewise, requiring petitioner to secure a permit for cargo handling operations at its Da-an Banua wharf and remit 10% of its gross income for said operations as the government's share. To these demands, petitioner sent two (2) letters, both dated June 2, 1981, wherein it maintained that it is exempt from paying PPA any fee or charge because: (1) the wharf and an its facilities were built and installed in its land; (2) repair and maintenance thereof were and solely paid by it; (3) even the dredging and maintenance of the Malijao River Channel from Guimaras Strait up to said private wharf are being done by petitioner's equipment and personnel; and (4) at no time has the government ever spent a single centavo for such activities. Petitioner further added that the wharf was being used mainly to handle sugar purchased from district planters pursuant to existing milling agreements. In reply, on November 3, 1981, PPA Iloilo sent petitioner a memorandum of PPA's Executive Officer, Maximo Dumlao, which justified the PPA's demands. Further request for reconsideration was denied on January 14, 1982. On March 29, 1982, petitioner served notice to PPA that it is

appealing the case to the Court of Tax Appeals; and accordingly, on March 31, 1982, petitioner filed a Petition for Review with the said Court, entitled "Victorias Milling Co., Inc. v. Philippine Ports Authority," and docketed therein as CTA Case No. 3466. On January 10, 1984, the Court of Tax Appeals dismissed petitioner's action on the ground that it has no jurisdiction. It recommended that the appeal be addressed to the Office of the President. On January 23, 1984, petitioner filed a Petition for Review with this Court, docketed as G.R. No. 66381, but the same was denied in a Resolution dated February 29, 1984. On April 2, 1984, petitioner filed an appeal with the Office of the President, but in a Decision dated July 27, 1984 (Record, p. 22), the same was denied on the sole ground that it was filed beyond the reglementary period. A motion for Reconsideration was filed, but in an Order dated December 16, 1985, the same was denied (ibid., pp. 3-21): Hence, the instant petition. The Second Division of this Court, in a Resolution dated June 2, 1986, resolved to require the respondents to comment (ibid., p. 45); and in compliance therewith, the Solicitor General filed his Comment on June 4, 1986 (Ibid., pp. 50-59). In a Resolution of July 2, 1986, petitioner was required to file a reply (Ibid., p. 61) but before receipt of said resolution, the latter filed a motion on July 1, 1986 praying that it be granted leave to file a reply to respondents' Comment, and an extension of time up to June 30, 1986 within which to file the same. (Ibid., p. 62). On July 18, 1986, petitioner filed its reply to respondents'

Comment (Ibid., pp. 68-76). The Second Division of this Court, in a Resolution dated August 25, 1986, resolved to give due course to the petition and to require the parties to file their respective simultaneous memoranda (Ibid., p. 78). On October 8, 1986, the Solicitor General filed a Manifestation and Rejoinder, stating, among others, that respondents are adopting in toto their Comment of June 3, 1986 as their memorandum; with the clarification that the assailed PPA Administrative Order No. 13-77 was duly published in full in the nationwide circulated newspaper, "The Times Journal", on November 9,1977 (ibid., pp. 79-81). The sole legal issue raised by the petitioner is WHETHER OR NOT THE 30-DAY PERIOD FOR APPEAL UNIDER SECTION 131 OF PPA ADMINISTRATIVE ORDER NO. 13-77 WAS TOLLED BY THE PENDENCY OF THE PETITIONS FILED FIRST WITH THE COURT OF TAX APPEALS, AND THEN WITH THIS HONORABLE TRIBUNAL. The instant petition is devoid of merit. Petitioner, in holding that the recourse first to the Court of Tax Appeals and then to this Court tolled the period to appeal, submits that it was guided, in good faith, by considerations which lead to the assumption that procedural rules of appeal then enforced still hold true. It contends that when Republic Act No. 1125 (creating the Court of Tax Appeals) was passed in 1955, PPA was not yet in existence; and under the said law, the Court of Tax Appeals had exclusive appellate jurisdiction over appeals

from decisions of the Commissioner of Customs regarding, among others, customs duties, fees and other money charges imposed by the Bureau under the Tariff and Customs Code. On the other hand, neither in Presidential Decree No. 505, creating the PPA on July 11, 1974 nor in Presidential Decree No. 857, revising its charter (said decrees, among others, merely transferred to the PPA the powers of the Bureau of Customs to impose and collect customs duties, fees and other money charges concerning the use of ports and facilities thereat) is there any provision governing appeals from decisions of the PPA on such matters, so that it is but reasonable to seek recourse with the Court of Tax Appeals. Petitioner, likewise, contends that an analysis of Presidential Decree No. 857, shows that the PPA is vested merely with corporate powers and duties (Sec. 6), which do not and can not include the power to legislate on procedural matters, much less to effectively take away from the Court of Tax Appeals the latter's appellate jurisdiction. These contentions are untenable for while it is true that neither Presidential Decree No. 505 nor Presidential Decree No. 857 provides for the remedy of appeal to the Office of the President, nevertheless, Presidential Decree No. 857 empowers the PPA to promulgate such rules as would aid it in accomplishing its purpose. Section 6 of the said Decree provides Sec. 6. Corporate Powers and Duties a. The corporate duties of the Authority shall be: xxx xxx xxx (III) To prescribe rules and regulations, procedures, and guidelines governing the establishment, construction,

maintenance, and operation of all other ports, including private ports in the country. xxx xxx xxx Pursuant to the aforequoted provision, PPA enacted Administrative Order No. 13-77 precisely to govern, among others, appeals from PPA decisions. It is now finally settled that administrative rules and regulations issued in accordance with law, like PPA Administrative Order No. 13-77, have the force and effect of law (Valerio vs. Secretary of Agriculture and Natural Resources, 7 SCRA 719; Antique Sawmills, Inc. vs. Zayco, et al., 17 SCRA 316; and Macailing vs. Andrada, 31 SCRA 126), and are binding on all persons dealing with that body. As to petitioner's contention that Administrative Order No. 13-77, specifically its Section 131, only provides for appeal when the decision is adverse to the government, worth mentioning is the observation of the Solicitor General that petitioner misleads the Court. Said Section 131 provides Sec. 131. Supervisory Authority of General Manager and PPA Board. If in any case involving assessment of port charges, the Port Manager/OIC renders a decision adverse to the government, such decision shall automatically be elevated to, and reviewed by, the General Manager of the authority; and if the Port Manager's decision would be affirmed by the General Manager, such decision shall be subject to further affirmation by the PPA Board before it shall become effective; Provided, however, that if within thirty (30) days from receipt of the record of the case by the General Manager, no decision is rendered, the decision under review shall become final and executory; Provided further, that any party aggrieved by the decision of the

General Manager as affirmed by the PPA Board may appeal said decision to the Office of the President within thirty (30) days from receipt of a copy thereof. (Emphasis supplied). From a cursory reading of the aforequoted provision, it is evident that the above contention has no basis. As to petitioner's allegation that to its recollection there had been no prior publication of said PPA Administrative Order No. 13-77, the Solicitor General correctly pointed out that said Administrative Order was duly published in full in the nationwide newspaper, "The Times Journal", on November 9,1977. Moreover, it must be stated that as correctly observed by the Solicitor General, the facts of this case show that petitioner's failure to appeal to the Office of the President on time stems entirely from its own negligence and not from a purported ignorance of the proper procedural steps to take. Petitioner had been aware of the rules governing PPA procedures. In fact, as embodied in the December 16, 1985 Order of the Office of the President, petitioner even assailed the PPA's rule making powers at the hearing before the Court of Tax Appeals. It is axiomatic that the right to appeal is merely a statutory privilege and may be exercised only in the manner and in accordance with the provision of law (United CMC Textile Workers Union vs. Clave, 137 SCRA 346, citing the cases of Bello vs. Fernando, 4 SCRA 138; Aguila vs. Navarro, 55 Phil. 898; and Santiago vs. Valenzuela, 78 Phil. 397). Furthermore, even if petitioner's appeal were to be given due course, the result would still be the same as it does not present a substantially meritorious case against the PPA.

Petitioner maintains and submits that there is no basis for the PPA to assess and impose the dues and charges it is collecting since the wharf is private, constructed and maintained at no expense to the government, and that it exists primarily so that its tugboats and barges may ferry the sugarcane of its Panay planters. As correctly stated by the Solicitor General, the fees and charges PPA collects are not for the use of the wharf that petitioner owns but for the privilege of navigating in public waters, of entering and leaving public harbors and berthing on public streams or waters. (Rollo, pp. 056-057). In Compaia General de Tabacos de Filipinas vs. Actg. Commissioner of Customs (23 SCRA 600), this Court laid down the rule that berthing charges against a vessel are collectible regardless of the fact that mooring or berthing is made from a private pier or wharf. This is because the government maintains bodies of water in navigable condition and it is to support its operations in this regard that dues and charges are imposed for the use of piers and wharves regardless of their ownership. As to the requirement to remit 10% of the handling charges, Section 6B-(ix) of the Presidential Decree No. 857 authorized the PPA "To levy dues, rates, or charges for the use of the premises, works, appliances, facilities, or for services provided by or belonging to the Authority, or any organization concerned with port operations." This 10% government share of earnings of arrastre and stevedoring operators is in the nature of contractual compensation to which a person desiring to operate arrastre service must agree as a condition to the grant of the permit to operate.

PREMISES CONSIDERED, the instant petition is hereby DISMISSED. SO ORDERED. Teehankee, C.J., Narvasa and Gancayco, JJ., concur. Cruz, J., concur in the result. G.R. No. 73705 August 27, 1987 VICTORIAS MILLING CO., INC., petitioner, vs. OFFICE OF THE PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS and PHILIPPINE PORTS AUTHORITY, respondents.

PARAS, J.: This is a petition for review on certiorari of the July 27, 1984 Decision of the Office of the Presidential Assistant For Legal Affairs dismissing the appeal from the adverse ruling of the Philippine Ports Authority on the sole ground that the same was filed beyond the reglementary period. On April 28, 1981, the Iloilo Port Manager of respondent Philippine Ports Authority (PPA for short) wrote petitioner Victorias Milling Co., requiring it to have its tugboats and barges undergo harbor formalities and pay entrance/clearance fees as well as berthing fees effective May 1, 1981. PPA, likewise, requiring petitioner to secure a permit for cargo handling operations at its Da-an Banua wharf and remit 10% of its gross income for said operations as the government's share.

To these demands, petitioner sent two (2) letters, both dated June 2, 1981, wherein it maintained that it is exempt from paying PPA any fee or charge because: (1) the wharf and an its facilities were built and installed in its land; (2) repair and maintenance thereof were and solely paid by it; (3) even the dredging and maintenance of the Malijao River Channel from Guimaras Strait up to said private wharf are being done by petitioner's equipment and personnel; and (4) at no time has the government ever spent a single centavo for such activities. Petitioner further added that the wharf was being used mainly to handle sugar purchased from district planters pursuant to existing milling agreements. In reply, on November 3, 1981, PPA Iloilo sent petitioner a memorandum of PPA's Executive Officer, Maximo Dumlao, which justified the PPA's demands. Further request for reconsideration was denied on January 14, 1982. On March 29, 1982, petitioner served notice to PPA that it is appealing the case to the Court of Tax Appeals; and accordingly, on March 31, 1982, petitioner filed a Petition for Review with the said Court, entitled "Victorias Milling Co., Inc. v. Philippine Ports Authority," and docketed therein as CTA Case No. 3466. On January 10, 1984, the Court of Tax Appeals dismissed petitioner's action on the ground that it has no jurisdiction. It recommended that the appeal be addressed to the Office of the President. On January 23, 1984, petitioner filed a Petition for Review with this Court, docketed as G.R. No. 66381, but the same was denied in a Resolution dated February 29, 1984. On April 2, 1984, petitioner filed an appeal with the Office of the

President, but in a Decision dated July 27, 1984 (Record, p. 22), the same was denied on the sole ground that it was filed beyond the reglementary period. A motion for Reconsideration was filed, but in an Order dated December 16, 1985, the same was denied (ibid., pp. 3-21): Hence, the instant petition. The Second Division of this Court, in a Resolution dated June 2, 1986, resolved to require the respondents to comment (ibid., p. 45); and in compliance therewith, the Solicitor General filed his Comment on June 4, 1986 (Ibid., pp. 50-59). In a Resolution of July 2, 1986, petitioner was required to file a reply (Ibid., p. 61) but before receipt of said resolution, the latter filed a motion on July 1, 1986 praying that it be granted leave to file a reply to respondents' Comment, and an extension of time up to June 30, 1986 within which to file the same. (Ibid., p. 62). On July 18, 1986, petitioner filed its reply to respondents' Comment (Ibid., pp. 68-76). The Second Division of this Court, in a Resolution dated August 25, 1986, resolved to give due course to the petition and to require the parties to file their respective simultaneous memoranda (Ibid., p. 78). On October 8, 1986, the Solicitor General filed a Manifestation and Rejoinder, stating, among others, that respondents are adopting in toto their Comment of June 3, 1986 as their memorandum; with the clarification that the assailed PPA Administrative Order No. 13-77 was duly published in full in the nationwide circulated newspaper, "The Times Journal", on November 9,1977 (ibid., pp. 79-81).

The sole legal issue raised by the petitioner is WHETHER OR NOT THE 30-DAY PERIOD FOR APPEAL UNIDER SECTION 131 OF PPA ADMINISTRATIVE ORDER NO. 13-77 WAS TOLLED BY THE PENDENCY OF THE PETITIONS FILED FIRST WITH THE COURT OF TAX APPEALS, AND THEN WITH THIS HONORABLE TRIBUNAL. The instant petition is devoid of merit. Petitioner, in holding that the recourse first to the Court of Tax Appeals and then to this Court tolled the period to appeal, submits that it was guided, in good faith, by considerations which lead to the assumption that procedural rules of appeal then enforced still hold true. It contends that when Republic Act No. 1125 (creating the Court of Tax Appeals) was passed in 1955, PPA was not yet in existence; and under the said law, the Court of Tax Appeals had exclusive appellate jurisdiction over appeals from decisions of the Commissioner of Customs regarding, among others, customs duties, fees and other money charges imposed by the Bureau under the Tariff and Customs Code. On the other hand, neither in Presidential Decree No. 505, creating the PPA on July 11, 1974 nor in Presidential Decree No. 857, revising its charter (said decrees, among others, merely transferred to the PPA the powers of the Bureau of Customs to impose and collect customs duties, fees and other money charges concerning the use of ports and facilities thereat) is there any provision governing appeals from decisions of the PPA on such matters, so that it is but reasonable to seek recourse with the Court of Tax Appeals. Petitioner, likewise, contends that an analysis of Presidential Decree No. 857, shows that the PPA is vested merely with corporate powers and duties (Sec. 6), which do not and can not include the power to legislate on

procedural matters, much less to effectively take away from the Court of Tax Appeals the latter's appellate jurisdiction. These contentions are untenable for while it is true that neither Presidential Decree No. 505 nor Presidential Decree No. 857 provides for the remedy of appeal to the Office of the President, nevertheless, Presidential Decree No. 857 empowers the PPA to promulgate such rules as would aid it in accomplishing its purpose. Section 6 of the said Decree provides Sec. 6. Corporate Powers and Duties a. The corporate duties of the Authority shall be: xxx xxx xxx (III) To prescribe rules and regulations, procedures, and guidelines governing the establishment, construction, maintenance, and operation of all other ports, including private ports in the country. xxx xxx xxx Pursuant to the aforequoted provision, PPA enacted Administrative Order No. 13-77 precisely to govern, among others, appeals from PPA decisions. It is now finally settled that administrative rules and regulations issued in accordance with law, like PPA Administrative Order No. 13-77, have the force and effect of law (Valerio vs. Secretary of Agriculture and Natural Resources, 7 SCRA 719; Antique Sawmills, Inc. vs. Zayco, et al., 17 SCRA 316; and Macailing vs. Andrada, 31 SCRA 126), and are binding on all persons dealing with that body.

As to petitioner's contention that Administrative Order No. 13-77, specifically its Section 131, only provides for appeal when the decision is adverse to the government, worth mentioning is the observation of the Solicitor General that petitioner misleads the Court. Said Section 131 provides Sec. 131. Supervisory Authority of General Manager and PPA Board. If in any case involving assessment of port charges, the Port Manager/OIC renders a decision adverse to the government, such decision shall automatically be elevated to, and reviewed by, the General Manager of the authority; and if the Port Manager's decision would be affirmed by the General Manager, such decision shall be subject to further affirmation by the PPA Board before it shall become effective; Provided, however, that if within thirty (30) days from receipt of the record of the case by the General Manager, no decision is rendered, the decision under review shall become final and executory; Provided further, that any party aggrieved by the decision of the General Manager as affirmed by the PPA Board may appeal said decision to the Office of the President within thirty (30) days from receipt of a copy thereof. (Emphasis supplied). From a cursory reading of the aforequoted provision, it is evident that the above contention has no basis. As to petitioner's allegation that to its recollection there had been no prior publication of said PPA Administrative Order No. 13-77, the Solicitor General correctly pointed out that said Administrative Order was duly published in full in the nationwide newspaper, "The Times Journal", on November 9,1977. Moreover, it must be stated that as correctly observed by the Solicitor General, the facts of this case show that petitioner's

failure to appeal to the Office of the President on time stems entirely from its own negligence and not from a purported ignorance of the proper procedural steps to take. Petitioner had been aware of the rules governing PPA procedures. In fact, as embodied in the December 16, 1985 Order of the Office of the President, petitioner even assailed the PPA's rule making powers at the hearing before the Court of Tax Appeals. It is axiomatic that the right to appeal is merely a statutory privilege and may be exercised only in the manner and in accordance with the provision of law (United CMC Textile Workers Union vs. Clave, 137 SCRA 346, citing the cases of Bello vs. Fernando, 4 SCRA 138; Aguila vs. Navarro, 55 Phil. 898; and Santiago vs. Valenzuela, 78 Phil. 397). Furthermore, even if petitioner's appeal were to be given due course, the result would still be the same as it does not present a substantially meritorious case against the PPA. Petitioner maintains and submits that there is no basis for the PPA to assess and impose the dues and charges it is collecting since the wharf is private, constructed and maintained at no expense to the government, and that it exists primarily so that its tugboats and barges may ferry the sugarcane of its Panay planters. As correctly stated by the Solicitor General, the fees and charges PPA collects are not for the use of the wharf that petitioner owns but for the privilege of navigating in public waters, of entering and leaving public harbors and berthing on public streams or waters. (Rollo, pp. 056-057). In Compaia General de Tabacos de Filipinas vs. Actg.

Commissioner of Customs (23 SCRA 600), this Court laid down the rule that berthing charges against a vessel are collectible regardless of the fact that mooring or berthing is made from a private pier or wharf. This is because the government maintains bodies of water in navigable condition and it is to support its operations in this regard that dues and charges are imposed for the use of piers and wharves regardless of their ownership. As to the requirement to remit 10% of the handling charges, Section 6B-(ix) of the Presidential Decree No. 857 authorized the PPA "To levy dues, rates, or charges for the use of the premises, works, appliances, facilities, or for services provided by or belonging to the Authority, or any organization concerned with port operations." This 10% government share of earnings of arrastre and stevedoring operators is in the nature of contractual compensation to which a person desiring to operate arrastre service must agree as a condition to the grant of the permit to operate. PREMISES CONSIDERED, the instant petition is hereby DISMISSED. SO ORDERED. Teehankee, C.J., Narvasa and Gancayco, JJ., concur. Cruz, J., concur in the result.