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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION 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 1 amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959. 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 2 the petitioner. On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, 3 through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a 4 photostat to BIR agent Ramon Reyes, who deferred service of the warrant. 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 5 warrant of distraint and levy earlier sought to be served. Sixteen days later, on April 23, 1965, Algue filed a 6 petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals. The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal 7 may be made within thirty days after receipt of the decision or ruling challenged. It is true that as a rule the 8 warrant of distraint and levy is "proof of the finality of the assessment" and renders hopeless a request for 9 reconsideration," 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," 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 12 personal holding company income but later conformed to the decision of the respondent court rejecting this 13 assertion. 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, 14 worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it. Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation 15 purchased the PSEDC properties. For this sale, Algue received as agent a commission of P126,000.00, and it was 16 from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns 17 and paid the corresponding taxes thereon. The Court of Tax Appeals also found, after examining the evidence, 18 that no distribution of dividends was involved. 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 19 periodically and in different amounts as each payee's need arose. 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 20 of the fees received by him or her, to make up the total of P75,000.00. 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 21 commission paid by the Philippine Sugar Estate Development Co. to the private respondent was P125,000.00. 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:

11

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 22 compensation for personal services actually rendered; ... 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 23 controlling stockholders. 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.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-29059 December 15, 1987 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS, respondents.

CRUZ, J.: By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as modified on appeal by the Supreme Court on February 27, 1965, the Commissioner of Internal Revenue was ordered to refund to the Cebu Portland Cement Company the amount of P 359,408.98, representing overpayments of ad valorem taxes on cement produced and sold by it after October 1957. 1 On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and the private 2 respondent, the latter moved for a writ of execution to enforce the said judgment . The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance 3 owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. On April 22, 1968, the Court of Tax Appeals * granted the motion, holding that the alleged sales tax liability of the 4 private respondent was still being questioned and therefore could not be set-off against the refund. In his petition to review the said resolution, the Commissioner of Internal Revenue claims that the refund should be charged against the tax deficiency of the private respondent on the sales of cement under Section 186 of the Tax Code. His position is that cement is a manufactured and not a mineral product and therefore not exempt from sales taxes. He adds that enforcement of the said tax deficiency was properly effected through his power of 5 distraint of personal property under Sections 316 and 318 of the said Code and, moreover, the collection of any 6 national internal revenue tax may not be enjoined under Section 305, subject only to the exception prescribed in 7 Rep. Act No. 1125. This is not applicable to the instant case. The petitioner also denies that the sales tax

assessments have already prescribed because the prescriptive period should be counted from the filing of the sales tax returns, which had not yet been done by the private respondent. For its part, the private respondent disclaims liability for the sales taxes, on the ground that cement is not a 8 manufactured product but a mineral product. As such, it was exempted from sales taxes under Section 188 of the Tax Code after the effectivity of Rep. Act No. 1299 on June 16, 1955, in accordance with Cebu Portland Cement Co. 9 v. Collector of Internal Revenue, decided in 1968. Here Justice Eugenio Angeles declared that "before the effectivity of Rep. Act No. 1299, amending Section 246 of the National Internal Revenue Code, cement was taxable as a manufactured product under Section 186, in connection with Section 194(4) of the said Code," thereby implying that it was not considered a manufactured product afterwards. Also, the alleged sales tax deficiency could not as yet be enforced against it because the tax assessment was not yet final, the same being still under protest and still to be definitely resolved on the merits. Besides, the assessment had already prescribed, not having been made within the reglementary five-year period from the filing of the tax returns. 10 Our ruling is that the sales tax was properly imposed upon the private respondent for the reason that cement has always been considered a manufactured product and not a mineral product. This matter was extensively discussed and categorically resolved in Commissioner of Internal Revenue v. Republic Cement Corporation , 11 decided on August 10, 1983, where Justice Efren L. Plana, after an exhaustive review of the pertinent cases, declared for a unanimous Court: From all the foregoing cases, it is clear that cement qua cement was never considered as a mineral product within the meaning of Section 246 of the Tax Code, notwithstanding that at least 80% of its components are minerals, for the simple reason that cement is the product of a manufacturing process and is no longer the mineral product contemplated in the Tax Code (i.e.; minerals subjected to simple treatments) for the purpose of imposing the ad valorem tax. What has apparently encouraged the herein respondents to maintain their present posture is the case of Cebu Portland Cement Co. v. Collector of Internal Revenue, L-20563, Oct. 29, 1968 (28 SCRA 789) penned by Justice Eugenio Angeles. For some portions of that decision give the impression that Republic Act No. 1299, which amended Section 246, reclassified cement as a mineral product that was not subject to sales tax. ... xxx xxx xxx After a careful study of the foregoing, we conclude that reliance on the decision penned by Justice Angeles is misplaced. The said decision is no authority for the proposition that after the enactment of Republic Act No. 1299 in 1955 (defining mineral product as things with at least 80% mineral content), cement became a 'mineral product," as distinguished from a "manufactured product," and therefore ceased to be subject to sales tax. It was not necessary for the Court to so rule. It was enough for the Court to say in effect that even assuming Republic Act No. 1299 had reclassified cement was a mineral product, the reclassification could not be given retrospective application (so as to justify the refund of sales taxes paid before Republic Act 1299 was adopted) because laws operate prospectively only, unless the legislative intent to the contrary is manifest, which was not so in the case of Republic Act 1266. [The situation would have been different if the Court instead had ruled in favor of refund, in which case it would have been absolutely necessary (1) to make an unconditional ruling that Republic Act 1299 re-classified cement as a mineral product (not subject to sales tax), and (2) to declare the law retroactive, as a basis for granting refund of sales tax paid before Republic Act 1299.] In any event, we overrule the CEPOC decision of October 29, 1968 (G.R. No. L-20563) insofar as its pronouncements or any implication therefrom conflict with the instant decision.

The above views were reiterated in the resolution 12 denying reconsideration of the said decision, thus: The nature of cement as a "manufactured product" (rather than a "mineral product") is wellsettled. The issue has repeatedly presented itself as a threshold question for determining the basis for computing the ad valorem mining tax to be paid by cement Companies. No pronouncement was made in these cases that as a "manufactured product" cement is subject to sales tax because this was not at issue. The decision sought to be reconsidered here referred to the legislative history of Republic Act No. 1299 which introduced a definition of the terms "mineral" and "mineral products" in Sec. 246 of the Tax Code. Given the legislative intent, the holding in the CEPOC case (G.R. No. L-20563) that cement was subject to sales tax prior to the effectivity f Republic Act No. 1299 cannot be construed to mean that, after the law took effect, cement ceased to be so subject to the tax. To erase any and all misconceptions that may have been spawned by reliance on the case of Cebu Portland Cement Co. v. Collector of Internal Revenue, L-20563, October 29, 1968 (28 SCRA 789) penned by Justice Eugenio Angeles, the Court has expressly overruled it insofar as it may conflict with the decision of August 10, 1983, now subject of these motions for reconsideration. On the question of prescription, the private respondent claims that the five-year reglementary period for the assessment of its tax liability started from the time it filed its gross sales returns on June 30, 1962. Hence, the assessment for sales taxes made on January 16, 1968 and March 4, 1968, were already out of time. We disagree. This contention must fail for what CEPOC filed was not the sales returns required in Section 183(n) but the ad valorem tax returns required under Section 245 of the Tax Code. As Justice Irene R. Cortes emphasized in the aforestated resolution: In order to avail itself of the benefits of the five-year prescription period under Section 331 of the Tax Code, the taxpayer should have filed the required return for the tax involved, that is, a sales tax return. (Butuan Sawmill, Inc. v. CTA, et al., G.R. No. L-21516, April 29, 1966, 16 SCRA 277). Thus CEPOC should have filed sales tax returns of its gross sales for the subject periods. Both parties admit that returns were made for the ad valorem mining tax. CEPOC argues that said returns contain the information necessary for the assessment of the sales tax. The Commissioner does not consider such returns as compliance with the requirement for the filing of tax returns so as to start the running of the five-year prescriptive period. We agree with the Commissioner. It has been held in Butuan Sawmill Inc. v. CTA, supra, that the filing of an income tax return cannot be considered as substantial compliance with the requirement of filing sales tax returns, in the same way that an income tax return cannot be considered as a return for compensating tax for the purpose of computing the period of prescription under Sec. 331. (Citing Bisaya Land Transportation Co., Inc. v. Collector of Internal Revenue, G.R. Nos. L-12100 and L-11812, May 29, 1959). There being no sales tax returns filed by CEPOC, the statute of stations in Sec. 331 did not begin to run against the government. The assessment made by the Commissioner in 1968 on CEPOC's cement sales during the period from July 1, 1959 to December 31, 1960 is not barred by the five-year prescriptive period. Absent a return or when the return is false or fraudulent, the applicable period is ten (10) days from the discovery of the fraud, falsity or omission. The question in this case is: When was CEPOC's omission to file tha return deemed discovered by the government, so as to start the running of said period? 13 The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception already noted, the Tax Code provides:

Sec. 291. Injunction not available to restrain collection of tax. No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code. It goes without saying that this injunction is available not only when the assessment is already being questioned in a court of justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on the administrative level. There is all the more reason to apply the rule here because it appears that even after crediting of the refund against the tax deficiency, a balance of more than P 4 million is still due from the private respondent. To require the petitioner to actually refund to the private respondent the amount of the judgment debt, which he will later have the right to distrain for payment of its sales tax liability is in our view an Idle ritual. We hold that the respondent Court of Tax Appeals erred in ordering such a charade. WHEREFORE, the petition is GRANTED. The resolution dated April 22, 1968, in CTA Case No. 786 is SET ASIDE, without any pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18129 January 31, 1963

C. N. HODGES, petitioner-appellant, vs. THE MUNICIPAL BOARD OF THE CITY OF ILOILO, ET AL., respondents-appellants. Leon P. Gellada and Norberto J. Posecion for petitioner-appellant. Filemon R. Consolacion for respondents-appellants. BAUTISTA ANGELO, J.: On June 13, 1960, the Municipal Board of the City of Iloilo enacted Ordinance No. 33, series of 1960, pursuant to the provisions of Republic Act No. 2264, known as the Local Autonomy Act, requiring any person, firm, association or corporation to pay a sales tax of 1/2 of 1% of the selling price of any motor vehicle and prohibiting the registration of the sale of the motor vehicle in the Motor Vehicles Office of the City of Iloilo unless the tax has been paid. It is expressly required therein that the payment of the municipal tax shall be a requirement for registration and transfer of ownership, the tax to be paid in the office of the city treasurer, and that the tax receipt shall be made part of the documents to be presented to the Motor Vehicles Office.. C. N. Hodges, who was engaged in the business of buying and selling second-hand motor vehicles in the City of Iloilo, is one of those affected by the enactment of the ordinance, and believing that the same is invalid for having been passed in excess of the authority conferred by law upon the municipal board, he filed on June 27, 1960 a petition for declaratory judgment with the Court of First Instance of Iloilo praying that said ordinance be declared void ab initio, and that the City of Iloilo be ordered to refund to him the amounts he was required to pay thereunder without prejudice to determining its validity in an appropriate action.

The City of Iloilo, in its answer, justified the approval of the ordinance alleging that the same was approved by virtue of the power and authority granted to it by Section 2 of Republic Act No. 2264, known as the Local Autonomy Act. Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1wph1.t A copy of the petition for declaratory judgment was furnished the Solicitor General in accordance with Section 4, Rule 66, of the Rules of Court. The case having been submitted under a stipulation of facts, the court a quo rendered decision on December 8, 1960 holding that that part of the ordinance which requires the owner of a used motor vehicle to pay a sales tax of 1/2 of 1% of the selling price is valid, but the portion thereof which requires the payment of the tax as a condition precedent for the registration of the sale in the Motor Vehicles Office is invalid for being repugnant to Section 2(h) of Republic Act 2264. Both parties have appealed. Section 2 of Republic Act No. 2264, known as the Local Autonomy Act pursuant to which the ordinance in question was approved by the Municipal Board of the City of Iloilo, provides in part: SEC. 2. Taxation. 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 services 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; Provided, That municipalities and municipal districts shall, in no case, impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax, except gasoline, under the provisions of the national internal revenue code: .... It would appear that the City of Iloilo, thru its municipal board, is empowered (a) to impose municipal licenses, taxes or fees upon any person engaged in any occupation or business, or exercising any privilege, in the city; (b) to regulate and impose reasonable fees for services rendered in connection with any business, profession or occupation conducted within the city; and (c) to levy for public purposes just and uniform taxes, licenses or fees. It would also appear that municipalities and municipal districts are prohibited from imposing any percentage tax on sales or other taxes in any form on articles subject to specific tax, except gasoline, under the provisions of the National Internal Revenue Code. From the cursory analysis of the provisions above-stated we can readily draw the conclusion that the City of Iloilo has the authority and power to approve the ordinance in question for it merely imposes a percentage tax on the sale of a second-hand motor vehicle that may be carried out within the city by any person, firm, association or corporation owning or dealing with it who may come within the jurisdiction. Indeed, it cannot be disputed that a sales tax of 1/2 of 1% of the selling price of a second-hand motor vehicle comes within the category of a just tax within the provision of Section 2 of Republic Act 2264. It is true that the tax in question is in the form of a percentage tax on the proceeds of the sale of a second-hand motor vehicle which comes within the prohibition of

the section above adverted to; but the prohibition only refers to municipalities and municipal districts and does not comprehend chartered cities as the City of Iloilo. But the ordinance, besides imposing a percentage tax, also imposes an additional requirement. It provides that the payment of the tax shall be a requirement for registration and transfer of ownership and that unless the tax is paid the registration and transfer of ownership cannot be effected in the Motor Vehicles Office of the City. The Court a quo considered this portion invalid reasoning as follows: "Chartered cities are not authorized to establish any condition on the registration of Motor vehicles. To require the payment of sales tax before the registration of the sale can be made in the Motor Vehicles Office, is tantamount to imposing a tax for the registration of motor vehicles." We disagree. The court a quo undoubtedly had in mind the provisions of Section 2(h) of Republic Act No. 2264 which prohibits a chartered city from imposing a tax on the registration of motor vehicles and the issuance of all kinds of licenses or permits for the driving thereof, which is one of the exceptions constituting a restriction on the taxation power granted by said Act to a city, municipality or municipal district. But the requirement of the ordinance cannot be considered a tax in the light viewed by the court a quo for the same is merely a coercive measure to make the enforcement of the contemplated sales tax more effective. Well-settled is the principle that taxes are imposed for the support of the government in return for the general advantage and protection which the government affords to taxpayers and their property (Union Refrigerator Transit Co. v. Com., 26 S. Ct. 36, 199 I [2nd] 160). Taxes are the lifeblood of the government. It is imperative that the power to impose them to be clothed with the implied authority to devise ways and means to accomplish their collection in the most effective manner. Without this implied power the end of government may falter or fail. It is a general and undisputed proposition of law that a municipal corporation possesses and can exercise the following powers, and no others: First, those granted in express words; second, those necessarily or fairly implied in or incident to the powers expressly granted; third, those essential to the accomplishment of the declared objects and purposes of the corporation not simply convenient, but indispensable. (Dillon, Municipal Corporations, 5th Ed., Vol. I, p. 449; citing Cook Co. v. McCrea, 93 Ill. 236; Ottawa v. Carey, 108 U.S., 110) Municipal corporations may exercise all powers in the fair intent and purpose of their creation which are reasonably proper to give effect to the powers expressly granted, and in so doing they gave the choice of the means adapted to the ends and are not confined to any one mode of operation. (62 C.J.S., Section 117, citing Spahn v. Stewart, 103 S.W. 2d 651, 559, 268 Ky. 97; Riddle v. Ledbetter, 5 S.E., 2d 542, 216 N.C. 491) If the power of municipalities are to be confined to those expressly granted by the law, in many cases they will be denied even the power of self-preservation as well as of the means necessary to accomplish the essential object of their creation. Hence in giving corporations authority to carry out the powers expressly granted to them, it is understood that they are also given the power to adopt such means as may be necessary for accomplishing their ends (Sinco, Philippine Political Law, l0th ed., p 688, citing Smith v. New Bern, 16 Am. Rep. 766.) We are therefore, of the opinion that the ordinance in question is valid it being a valid exercise of the power of taxation granted to Iloilo City by Section 2 of Republic Act No. 2264. WHEREFORE, the decision appealed from is modified by declaring Ordinance No. 22 of the City of Iloilo valid even with regard to the portion which requires the payment of the tax as a condition precedent for the registration of the sale in the Motor Vehicles Office of said city. No costs.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-4376 May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants, vs. THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY MAYOR, all of the City of Manila, respondents-appellees. Teotimo A. Roja for appellants. City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees. BAUTISTA ANGELO, J.: This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal Board of the City of Manila on March 24, 1950. The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes double taxation. The respondents, represented by the city fiscal, contend on their part that the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it constitute double taxation. The issues having been joined, the Court of First Instance of Manila sustained the validity of the ordinance and dismissed the petition. Hence this appeal. The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority conferred by section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board the power "to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding." It is contended that this power is broad enough to confer upon the City of Manila the power to enact an ordinance imposing the property tax on motor vehicles operating within the city limits. In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the Motor Vehicles Law, as amended, (Act No. 3992) which has a bearing on the power of the municipal corporation to impose tax on motor vehicles operating in any highway in the Philippines. The pertinent provisions are contained in section 70 (b) which provide in part: No further fees than those fixed in this Act shall be exacted or demanded by any public highway, bridge or ferry, or for the exercise of the profession of chauffeur, or for the operation of any motor vehicle by the owner thereof: Provided, however, That nothing in this Act shall be construed to exempt any motor

vehicle from the payment of any lawful and equitable insular, local or municipal property tax imposed thereupon. . . . Note that under the above section no fees may be exacted or demanded for the operation of any motor vehicle other than those therein provided, the only exception being that which refers to the property tax which may be imposed by a municipal corporation. This provision is all-inclusive in that sense that it applies to all motor vehicles. In this sense, this provision should be construed as limiting the broad grant of power conferred upon the City of Manila by its Charter to impose taxes. When section 18 of said Charter provides that the City of Manila can impose a tax on motor vehicles operating within its limit, it can only refers to property tax as a different interpretation would make it repugnant to the Motor Vehicle Law. Coming now to the ordinance in question, we find that its title refers to it as "An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila", and that in its section 1 it provides that the tax should be 1 per cent ad valorem per annum. It also provides that the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be expended exclusively for the repair, maintenance and improvement of its streets and bridges." Considering the wording used in the ordinance in the light in the purpose for which the tax is created, can we consider the tax thus imposed as property tax, as claimed by respondents? While as a rule an ad valorem tax is a property tax, and this rule is supported by some authorities, the rule should not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. Thus, it has been held that "If a tax is in its nature an excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise." (26 R. C. L., 35-36.) It has also been held that The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on the other hand, if the tax is levied upon persons on account of their business, it will be construed as a license or occupation tax, even though it is graduated according to the property used in such business, or on the gross receipts of the business. (37 C.J., 172) The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to. It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to Manila and uses its streets and public highways. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the word "operating" used therein. The word "operating" denotes a connotation which is akin to a registration, for

under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees. There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a temporary stay or for short errands, and it cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. The fact that they are benefited by their use they should also be made to share the corresponding burden. And yet such is not the case. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution. Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. Nos. L-28508-9 July 7, 1989 ESSO STANDARD EASTERN, INC., (formerly, Standard-Vacuum Oil Company), petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE, respondent. Padilla Law Office for petitioner.

CRUZ, J.: On appeal before us is the decision of the Court of Tax Appeals denying petitioner's claims for refund of overpaid income taxes of P102,246.00 for 1959 and P434,234.93 for 1960 in CTA Cases No. 1251 and 1558 respectively. I In CTA Case No. 1251, petitioner ESSO deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its petroleum concessions. This claim was disallowed by the respondent Commissioner of Internal Revenue on the ground that the expenses should be capitalized and might be written off as a loss only when a "dry hole" should result. ESSO then filed an amended return where it asked for the refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells. Also claimed as ordinary and necessary expenses in the same return was the amount of P340,822.04, representing margin fees it had paid to the Central Bank on its profit remittances to its New York head office. On August 5, 1964, the CIR granted a tax credit of P221,033.00 only, disallowing the claimed deduction for the margin fees paid. In CTA Case No. 1558, the CR assessed ESSO a deficiency income tax for the year 1960, in the amount of P367,994.00, plus 18% interest thereon of P66,238.92 for the period from April 18,1961 to April 18, 1964, for a
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total of P434,232.92. The deficiency arose from the disallowance of the margin fees of Pl,226,647.72 paid by ESSO to the Central Bank on its profit remittances to its New York head office. ESSO settled this deficiency assessment on August 10, 1964, by applying the tax credit of P221,033.00 representing its overpayment on its income tax for 1959 and paying under protest the additional amount of P213,201.92. On August 13, 1964, it claimed the refund of P39,787.94 as overpayment on the interest on its deficiency income tax. It argued that the 18% interest should have been imposed not on the total deficiency of P367,944.00 but only on the amount of P146,961.00, the difference between the total deficiency and its tax credit of P221,033.00. This claim was denied by the CIR, who insisted on charging the 18% interest on the entire amount of the deficiency tax. On May 4,1965, the CIR also denied the claims of ESSO for refund of the overpayment of its 1959 and 1960 income taxes, holding that the margin fees paid to the Central Bank could not be considered taxes or allowed as deductible business expenses. ESSO appealed to the CTA and sought the refund of P102,246.00 for 1959, contending that the margin fees were deductible from gross income either as a tax or as an ordinary and necessary business expense. It also claimed an overpayment of its tax by P434,232.92 in 1960, for the same reason. Additionally, ESSO argued that even if the amount paid as margin fees were not legally deductible, there was still an overpayment by P39,787.94 for 1960, representing excess interest. After trial, the CTA denied petitioner's claim for refund of P102,246.00 for 1959 and P434,234.92 for 1960 but sustained its claim for P39,787.94 as excess interest. This portion of the decision was appealed by the CIR but was affirmed by this Court in Commissioner of Internal Revenue v. ESSO, G.R. No. L-28502- 03, promulgated on April 18, 1989. ESSO for its part appealed the CTA decision denying its claims for the refund of the margin fees P102,246.00 for 1959 and P434,234.92 for 1960. That is the issue now before us. II The first question we must settle is whether R.A. 2009, entitled An Act to Authorize the Central Bank of the Philippines to Establish a Margin Over Banks' Selling Rates of Foreign Exchange, is a police measure or a revenue measure. If it is a revenue measure, the margin fees paid by the petitioner to the Central Bank on its profit remittances to its New York head office should be deductible from ESSO's gross income under Sec. 30(c) of the National Internal Revenue Code. This provides that all taxes paid or accrued during or within the taxable year and which are related to the taxpayer's trade, business or profession are deductible from gross income. The petitioner maintains that margin fees are taxes and cites the background and legislative history of the Margin Fee Law showing that R.A. 2609 was nothing less than a revival of the 17% excise tax on foreign exchange imposed by R.A. 601. This was a revenue measure formally proposed by President Carlos P. Garcia to Congress as part of, and in order to balance, the budget for 1959-1960. It was enacted by Congress as such and, significantly, properly originated in the House of Representatives. During its two and a half years of existence, the measure was one of the major sources of revenue used to finance the ordinary operating expenditures of the government. It was, moreover, payable out of the General Fund. On the claimed legislative intent, the Court of Tax Appeals, quoting established principles, pointed out that We are not unmindful of the rule that opinions expressed in debates, actual proceedings of the legislature, steps taken in the enactment of a law, or the history of the passage of the law through the legislature, may be resorted to as an aid in the interpretation of a statute which is ambiguous or of doubtful meaning. The courts may take into consideration the facts leading up to, coincident with, and in any way connected with, the passage of the act, in order that they may properly interpret the legislative intent. But it is also well-settled jurisprudence that only in extremely doubtful matters of interpretation does the legislative history of an act of Congress become important.

As a matter of fact, there may be no resort to the legislative history of the enactment of a statute, the language of which is plain and unambiguous, since such legislative history may only be resorted to for the purpose of solving doubt, not for the purpose of creating it. [50 Am. Jur. 328.] Apart from the above consideration, there are at least two cases where we have held that a margin fee is not a tax but an exaction designed to curb the excessive demands upon our international reserve. In Caltex (Phil.) Inc. v. Acting Commissioner of Customs, the Court stated through Justice Jose P. Bengzon: A margin levy on foreign exchange is a form of exchange control or restriction designed to discourage imports and encourage exports, and ultimately, 'curtail any excessive demand upon the international reserve' in order to stabilize the currency. Originally adopted to cope with balance of payment pressures, exchange restrictions have come to serve various purposes, such as limiting non-essential imports, protecting domestic industry and when combined with the use of multiple currency rates providing a source of revenue to the government, and are in many developing countries regarded as a more or less inevitable concomitant of their economic development programs. The different measures of exchange control or restriction cover different phases of foreign exchange transactions, i.e., in quantitative restriction, the control is on the amount of foreign exchange allowable. In the case of the margin levy, the immediate impact is on the rate of foreign exchange; in fact, its main function is to control the exchange rate without changing the par value of the peso as fixed in the Bretton Woods Agreement Act. For a member nation is not supposed to alter its exchange rate (at par value) to correct a merely temporary disequilibrium in its balance of payments. By its nature, the margin levy is part of the rate of exchange as fixed by the government. As to the contention that the margin levy is a tax on the purchase of foreign exchange and hence should not form part of the exchange rate, suffice it to state that We have already held the contrary for the reason that a tax is levied to provide revenue for government operations, while the proceeds of the margin fee are applied to strengthen our country's international reserves. Earlier, in Chamber of Agriculture and Natural Resources of the Philippines v. Central Bank, expressed, though in connection with a different levy, through Justice J.B.L. Reyes:
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the same idea was

Neither do we find merit in the argument that the 20% retention of exporter's foreign exchange constitutes an export tax. A tax is a levy for the purpose of providing revenue for government operations, while the proceeds of the 20% retention, as we have seen, are applied to strengthen the Central Bank's international reserve. We conclude then that the margin fee was imposed by the State in the exercise of its police power and not the power of taxation. Alternatively, ESSO prays that if margin fees are not taxes, they should nevertheless be considered necessary and ordinary business expenses and therefore still deductible from its gross income. The fees were paid for the remittance by ESSO as part of the profits to the head office in the Unites States. Such remittance was an expenditure necessary and proper for the conduct of its corporate affairs. The applicable provision is Section 30(a) of the National Internal Revenue Code reading as follows: 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; traveling expenses while away from home in the pursuit of a trade or business; and rentals or other payments required to be made as a condition to the continued use or possession, for the purpose of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity. (2) Expenses allowable to non-resident alien individuals and foreign corporations. In the case of a non-resident alien individual or a foreign corporation, the expenses deductible are the necessary expenses paid or incurred in carrying on any business or trade conducted within the Philippines exclusively. In the case of Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue , the Court laid down the rules on the deductibility of business expenses, thus: The principle is recognized that when a taxpayer claims a deduction, he must point to some specific provision of the statute in which that deduction is authorized and must be able to prove that he is entitled to the deduction which the law allows. As previously adverted to, the law allowing expenses as deduction from gross income for purposes of the income tax is Section 30(a) (1) of the National Internal Revenue which allows a deduction of 'all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.' An item of expenditure, in order to be deductible under this section of the statute, must fall squarely within its language. We come, then, to the statutory test of deductibility where it is axiomatic that to be deductible as a business expense, three conditions are imposed, namely: (1) the expense must be ordinary and necessary, (2) it must be paid or incurred within the taxable year, and (3) it must be paid or incurred in carrying on a trade or business. In addition, not only must the taxpayer meet the business test, he must substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will be disallowed. The mere allegation of the taxpayer that an item of expense is ordinary and necessary does not justify its deduction. While it is true that there is a number of decisions in the United States delving on the interpretation of the terms 'ordinary and necessary' as used in the federal tax laws, no adequate or satisfactory definition of those terms is possible. Similarly, this Court has never attempted to define with precision the terms 'ordinary and necessary.' There are however, certain guiding principles worthy of serious consideration in the proper adjudication of conflicting claims. Ordinarily, an expense will be considered 'necessary' where the expenditure is appropriate and helpful in the development of the taxpayer's business. It is 'ordinary' when it connotes a payment which is normal in relation to the business of the taxpayer and the surrounding circumstances. The term 'ordinary' does not require that the payments be habitual or normal in the sense that the same taxpayer will have to make them often; the payment may be unique or non-recurring to the particular taxpayer affected. There is thus no hard and fast rule on the matter. The right to a deduction depends in each case on the particular facts and the relation of the payment to the type of business in which the taxpayer is engaged. The intention of the taxpayer often may be the controlling fact in making the determination. Assuming that the expenditure is ordinary and necessary in the operation of the taxpayer's business, the answer to the question as to whether the expenditure is an allowable deduction as a business expense must be determined from the nature of the
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expenditure itself, which in turn depends on the extent and permanency of the work accomplished by the expenditure. In the light of the above explanation, we hold that the Court of Tax Appeals did not err when it held on this issue as follows: Considering the foregoing test of what constitutes an ordinary and necessary deductible expense, it may be asked: Were the margin fees paid by petitioner on its profit remittance to its Head Office in New York appropriate and helpful in the taxpayer's business in the Philippines? Were the margin fees incurred for purposes proper to the conduct of the affairs of petitioner's branch in the Philippines? Or were the margin fees incurred for the purpose of realizing a profit or of minimizing a loss in the Philippines? Obviously not. As stated in the Lopez case, the margin fees are not expenses in connection with the production or earning of petitioner's incomes in the Philippines. They were expenses incurred in the disposition of said incomes; expenses for the remittance of funds after they have already been earned by petitioner's branch in the Philippines for the disposal of its Head Office in New York which is already another distinct and separate income taxpayer. xxx Since the margin fees in question were incurred for the remittance of funds to petitioner's Head Office in New York, which is a separate and distinct income taxpayer from the branch in the Philippines, for its disposal abroad, it can never be said therefore that the margin fees were appropriate and helpful in the development of petitioner's business in the Philippines exclusively or were incurred for purposes proper to the conduct of the affairs of petitioner's branch in the Philippines exclusively or for the purpose of realizing a profit or of minimizing a loss in the Philippines exclusively. If at all, the margin fees were incurred for purposes proper to the conduct of the corporate affairs of Standard Vacuum Oil Company in New York, but certainly not in the Philippines. ESSO has not shown that the remittance to the head office of part of its profits was made in furtherance of its own trade or business. The petitioner merely presumed that all corporate expenses are necessary and appropriate in the absence of a showing that they are illegal or ultra vires. This is error. The public respondent is correct when it asserts that "the paramount rule is that claims for deductions are a matter of legislative grace and do not turn on mere equitable considerations ... . The taxpayer in every instance has the burden of justifying the allowance of any 5 deduction claimed." It is clear that ESSO, having assumed an expense properly attributable to its head office, cannot now claim this as an ordinary and necessary expense paid or incurred in carrying on its own trade or business. WHEREFORE, the decision of the Court of Tax Appeals denying the petitioner's claims for refund of P102,246.00 for 1959 and P434,234.92 for 1960, is AFFIRMED, with costs against the petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION 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.

Republic of the Philippines SUPREME COURT Manila EN BANC 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 privately-owned 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 feesare 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 591-593). 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.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-29646 November 10, 1978 MAYOR ANTONIO J. VILLEGAS, petitioner, vs. HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO ARCA, respondents. Angel C. Cruz, Gregorio A. Ejercito, Felix C. Chaves & Jose Laureta for petitioner. Sotero H. Laurel for respondents.

FERNANDEZ, J.: This is a petition for certiorari to review tile decision dated September 17, 1968 of respondent Judge Francisco Arca of the Court of First Instance of Manila, Branch I, in Civil Case No. 72797, the dispositive portion of winch reads. Wherefore, judgment is hereby rendered in favor of the petitioner and against the respondents, declaring Ordinance No. 6 37 of the City of Manila null and void. The preliminary injunction is made permanent. No pronouncement as to cost. SO ORDERED. Manila, Philippines, September 17, 1968. (SGD.) FRANCIS CO ARCA J u d g e
1

The controverted Ordinance No. 6537 was passed by the Municipal Board of Manila on February 22, 1968 and 2 signed by the herein petitioner Mayor Antonio J. Villegas of Manila on March 27, 1968. City Ordinance No. 6537 is entitled:

AN ORDINANCE MAKING IT UNLAWFUL FOR ANY PERSON NOT A CITIZEN OF THE PHILIPPINES TO BE EMPLOYED IN ANY PLACE OF EMPLOYMENT OR TO BE ENGAGED IN ANY KIND OF TRADE, BUSINESS OR OCCUPATION WITHIN THE CITY OF MANILA WITHOUT FIRST SECURING AN 3 EMPLOYMENT PERMIT FROM THE MAYOR OF MANILA; AND FOR OTHER PURPOSES. Section 1 of said Ordinance No. 6537 prohibits aliens from being employed or to engage or participate in any position or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00 except persons employed in the diplomatic or consular missions of foreign countries, or in the technical assistance programs of both the Philippine Government and any foreign government, and those working in their respective households, and members of religious orders or congregations, sect or denomination, who are not paid monetarily or in kind. Violations of this ordinance is punishable by an imprisonment of not less than three (3) months to six (6) months or 5 fine of not less than P100.00 but not more than P200.00 or both such fine and imprisonment, upon conviction. On May 4, 1968, private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a petition with the Court of First Instance of Manila, Branch I, denominated as Civil Case No. 72797, praying for the issuance of the writ of preliminary injunction and restraining order to stop the enforcement of Ordinance No. 6537 as well as for a 6 judgment declaring said Ordinance No. 6537 null and void. In this petition, Hiu Chiong Tsai Pao Ho assigned the following as his grounds for wanting the ordinance declared null and void: 1) As a revenue measure imposed on aliens employed in the City of Manila, Ordinance No. 6537 is discriminatory and violative of the rule of the uniformity in taxation; 2) As a police power measure, it makes no distinction between useful and non-useful occupations, imposing a fixed P50.00 employment permit, which is out of proportion to the cost of registration and that it fails to prescribe any standard to guide and/or limit the action of the Mayor, thus, violating the fundamental principle on illegal delegation of legislative powers: 3) It is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus, deprived of their rights to life, liberty and property and therefore, violates the due process and 7 equal protection clauses of the Constitution. On May 24, 1968, respondent Judge issued the writ of preliminary injunction and on September 17, 1968 rendered 8 judgment declaring Ordinance No. 6537 null and void and making permanent the writ of preliminary injunction. Contesting the aforecited decision of respondent Judge, then Mayor Antonio J. Villegas filed the present petition on March 27, 1969. Petitioner assigned the following as errors allegedly committed by respondent Judge in the 9 latter's decision of September 17,1968: I THE RESPONDENT JUDGE COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN RULING THAT ORDINANCE NO. 6537 VIOLATED THE CARDINAL RULE OF UNIFORMITY OF TAXATION. II
4

RESPONDENT JUDGE LIKEWISE COMMITTED A GRAVE AND PATENT ERROR OF LAW IN RULING THAT ORDINANCE NO. 6537 VIOLATED THE PRINCIPLE AGAINST UNDUE DESIGNATION OF LEGISLATIVE POWER. III RESPONDENT JUDGE FURTHER COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN RULING THAT ORDINANCE NO. 6537 VIOLATED THE DUE PROCESS AND EQUAL PROTECTION CLAUSES OF THE CONSTITUTION. Petitioner Mayor Villegas argues that Ordinance No. 6537 cannot be declared null and void on the ground that it violated the rule on uniformity of taxation because the rule on uniformity of taxation applies only to purely tax or revenue measures and that Ordinance No. 6537 is not a tax or revenue measure but is an exercise of the police power of the state, it being principally a regulatory measure in nature. The contention that Ordinance No. 6537 is not a purely tax or revenue measure because its principal purpose is regulatory in nature has no merit. While it is true that the first part which requires that the alien shall secure an employment permit from the Mayor involves the exercise of discretion and judgment in the processing and approval or disapproval of applications for employment permits and therefore is regulatory in character the second part which requires the payment of P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic or justification in exacting P50.00 from aliens who have been cleared for employment. It is obvious that the purpose of the ordinance is to raise money under the guise of regulation. The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. The same amount of P50.00 is being collected from every employed alien whether he is casual or permanent, part time or full time or whether he is a lowly employee or a highly paid executive Ordinance No. 6537 does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion. It has been held that where an ordinance of a municipality fails to state any policy or to set up any standard to guide or limit the mayor's action, expresses no purpose to be attained by requiring a permit, enumerates no conditions for its grant or refusal, and entirely lacks standard, thus conferring upon the Mayor arbitrary and unrestricted power to grant or deny the issuance of building permits, such ordinance is invalid, being 10 an undefined and unlimited delegation of power to allow or prevent an activity per se lawful. In Chinese Flour Importers Association vs. Price Stabilization Board , where a law granted a government agency power to determine the allocation of wheat flour among importers, the Supreme Court ruled against the interpretation of uncontrolled power as it vested in the administrative officer an arbitrary discretion to be exercised without a policy, rule, or standard from which it can be measured or controlled. It was also held in Primicias vs. Fugoso that the authority and discretion to grant and refuse permits of all classes conferred upon the Mayor of Manila by the Revised Charter of Manila is not uncontrolled discretion but legal discretion to be exercised within the limits of the law. Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the exercise of the power which has been granted to him by the ordinance. The ordinance in question violates the due process of law and equal protection rule of the Constitution.
12 11

Requiring a person before he can be employed to get a permit from the City Mayor of Manila who may withhold or refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a means of livelihood. While it is true that the Philippines as a State is not obliged to admit aliens within its territory, once an alien is admitted, he cannot be deprived of life without due process of law. This guarantee includes the means of livelihood. The shelter of protection under the due process and equal protection clause is given to all persons, 13 both aliens and citizens. The trial court did not commit the errors assigned. WHEREFORE, the decision appealed from is hereby affirmed, without pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-16619 June 29, 1963

COMPAIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee, vs. CITY OF MANILA, ET AL., defendants-appellants. Ponce Enrile, Siguion Reyna, Montecillo and Belo for plaintiff-appellee. City Fiscal Hermogenes Concepcion, Jr. and Assistant City Fiscal M. T. Reyes for defendants-appellants. DIZON, J.: Appeal from the decision of the Court of First Instance of Manila ordering the City Treasurer of Manila to refund the sum of P15,280.00 to Compania General de Tabacos de Filipinas. Appellee Compania General de Tabacos de Filipinas hereinafter referred to simply as Tabacalera filed this action in the Court of First Instance of Manila to recover from appellants, City of Manila and its Treasurer, Marcelino Sarmiento also hereinafter referred to as the City the sum of P15,280.00 allegedly overpaid by it as taxes on its wholesale and retail sales of liquor for the period from the third quarter of 1954 to the second quarter of 1957, inclusive, under Ordinances Nos. 3634, 3301, and 3816. Tabacalera, as a duly licensed first class wholesale and retail liquor dealer paid the City the fixed license fees prescribed by Ordinance No. 3358 for the years 1954 to 1957, inclusive, and, as a wholesale and retail dealer of general merchandise, it also paid the sales taxes required by Ordinances Nos. 3634, 3301, and 3816.1wph1.t In its sworn statements of wholesale, retail, and grocery sales of general merchandise from the third quarter of 1954 to the second quarter of 1957, inclusive, Tabacalera included its liquor sales of the same period, and it is not denied that of the taxes it paid on all its sales of general merchandise, the sum of P15,280.00 subject to the action represents the tax corresponding to the liquor sales aforesaid.

Tabacalera's action for refund is based on the theory that, in connection with its liquor sales, it should pay the license fees prescribed by Ordinance No. 3358 but not the municipal sales taxes imposed by Ordinances Nos. 3634, 3301, and 3816; and since it already paid the license fees aforesaid, the sales taxes paid by it amounting to the sum of P15,208.00 under the three ordinances mentioned heretofore is an overpayment made by mistake, and therefore refundable. The City, on the other hand, contends that, for the permit issued to it granting proper authority to "conduct or engage in the sale of alcoholic beverages, or liquors" Tabacalera is subject to pay the license fees prescribed by Ordinance No. 3358, aside from the sales taxes imposed by Ordinances Nos. 3634, 3301, and 3816; that, even assuming that Tabacalera is not subject to the payment of the sales taxes prescribed by the said three ordinances as regards its liquor sales, it is not entitled to the refund demanded for the following reasons:. (a) The said amount was paid by the plaintiff voluntarily and without protest; (b) If at all the alleged overpayment was made by mistake, such mistake was one of law and arose from the plaintiff's neglect of duty; . (c) The said amount had been added by the plaintiff to the selling price of the liquor sold by it and passed to the consumers; and (d) The said amount had been already expended by the defendant City for public improvements and essential services of the City government, the benefits of which are enjoyed, and being enjoyed by the plaintiff. It is admitted that as liquor dealer, Tabacalera paid annually the wholesale and retail liquor license fees under Ordinance No. 3358. In 1954, City Ordinance No. 3634, amending City Ordinance No. 3420, and City Ordinance No. 3816, amending City Ordinance No. 3301 were passed. By reason thereof, the City Treasurer issued the regulations marked Exhibit A, according to which, the term "general merchandise as used in said ordinances, includes all articles referred to in Chapter 1, Sections 123 to 148 of the National Internal Revenue Code. Of these, Sections 133-135 included liquor among the taxable articles. Pursuant to said regulations, Tabacalera included its sales of liquor in its sworn quarterly declaration submitted to the City Treasurer beginning from the third quarter of 1954 to the second quarter of 1957, with a total value of P722,501.09 and correspondingly paid a wholesaler's tax amounting to P13,688.00 and a retailer's tax amounting to P1,520.00, or a total of P15,208.00 the amount sought to be recovered. It appears that in the year 1954, the City, through its treasurer, addressed a letter to Messrs. Sycip, Gorres, Velayo and Co., an accounting firm, expressing the view that liquor dealers paying the annual wholesale and retail fixed tax under City Ordinance No. 3358 are not subject to the wholesale and retail dealers' taxes prescribed by City Ordinances Nos. 3634, 3301, and 3816. Upon learning of said opinion, appellee stopped including its sales of liquor in its quarterly sworn declarations submitted in accordance with the aforesaid City Ordinances Nos. 3634, 3301, and 3816, and on December 3, 1957, it addressed a letter to the City Treasurer demanding refund of the alleged overpayment. As the claim was disallowed, the present action was instituted. The term "tax" applies generally speaking to all kinds of exactions which become public funds. The term is often loosely used to include levies for revenue as well as levies for regulatory purposes. Thus license fees are commonly called taxes. Legally speaking, however, license fee is a legal concept quite distinct from tax; the former is imposed in the exercise of police power for purposes of regulation, while the latter is imposed under the taxing power for the purpose of raising revenues (MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 26). Ordinance No. 3358 is clearly one that prescribes municipal license fees for the privilege to engage in the business of selling liquor or alcoholic beverages, having been enacted by the Municipal Board of Manila pursuant to its

charter power to fix license fees on, and regulate, the sale of intoxicating liquors, whether imported or locally manufactured. (Section 18 [p], Republic Act 409, as amended). The license fees imposed by it are essentially for purposes of regulation, and are justified, considering that the sale of intoxicating liquor is, potentially at least, harmful to public health and morals, and must be subject to supervision or regulation by the state and by cities and municipalities authorized to act in the premises. (MacQuillin, supra, p. 445.) On the other hand, it is clear that Ordinances Nos. 3634, 3301, and 3816 impose taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila by virtue of its power to tax dealers for the sale of such merchandise. (Section 10 [o], Republic Act No. 409, as amended.). Under Ordinance No. 3634 the word "merchandise" as employed therein clearly includes liquor. Aside from this, we have held in City of Manila vs. Inter-Island Gas Service, Inc., G.R. No. L-8799, August 31, 1956, that the word "merchandise" refers to all subjects of commerce and traffic; whatever is usually bought and sold in trade or market; goods or wares bought and sold for gain; commodities or goods to trade; and commercial commodities in general. That Tabacalera is being subjected to double taxation is more apparent than real. As already stated what is collected under Ordinance No. 3358 is a license fee for the privilege of engaging in the sale of liquor, a calling in which it is obvious not anyone or anybody may freely engage, considering that the sale of liquor indiscriminately may endanger public health and morals. On the other hand, what the three ordinances mentioned heretofore impose is a tax for revenue purposes based on the sales made of the same article or merchandise. It is already settled in this connection that both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation (Bentley Gray Dry Goods Co. vs. City of Tampa, 137 Fla. 641, 188 So. 758; MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 83). This is precisely the case with the ordinances involved in the case at bar. Appellee's contention that the City is repudiating its previous view expressed by its Treasurer in a letter addressed to Messrs. Sycip, Gorres, Velayo & Co. in 1954 that a liquor dealer who pays the annual license fee under Ordinance No. 3358 is exempted from the wholesalers and retailers taxes under the other three ordinances mentioned heretofore is of no consequence. The government is not bound by the errors or mistakes committed by its officers, specially on matters of law. Having arrived at the above conclusion, we deem it unnecessary to consider the other legal points raised by the City. WHEREFORE, the decision appealed from is reversed, with the result that this case should be, as it is hereby dismissed, with costs.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-12647 May 31, 1961

AMERICAN MAIL LINE, ET AL., plaintiffs-appellees, vs. CITY OF BASILAN, ET AL., defendants-appellants. Ross, Selph and Carrascoso for plaintiffs-appellees. Office of the Solicitor General for defendants-appellants. DIZON, J.: Appeal from the decision of the Court of First Instance of Manila "declaring illegal and void Ordinance No. 180, Series of 1955, of the City of Basilan," and dismissing defendants, counterclaim for lack of merit. On September 12, 1955 the City Council of Basilan City enacted Ordinance No. 180, Series of 1955, (Exh. N) amending Title IV, Ordinance No. 7, Series of 1948, (Exh. A) by adding thereto Section 1 (D) and Sections 2 (C) and (D). The first reads as follows: Section 1. Article IV of ordinance numbered seven entitled, 'The Port Area Ordinance', is hereby amended to read as follows: ARTICLE IV. REGULATION FOR BERTHING, MOORING, DOCKING AND ANCHORING AT PIERS OR WHARVES AT ANY POINT WITHIN THE CITY OF BASILAN AND FOR ANCHORING AT ANY OPEN BAY, CHANNEL OR ANY OTHER POINT WITHIN THE TERRITORIAL WATERS OF THE CITY OF BASILAN Sec. 2. Section 1 of Ordinance No. 7 is hereby amended and adding thereto a new paragraph to be known as Section 1 (D), to read as follows: "Section 1 (D). Any foreign vessel engaged in coastwise trade which may anchor at any open bay, channel, or any loading point within the territorial waters of the City of Basilan for the purpose of loading or unloading logs or passengers and other cargoes shall pay an anchorage fee of 1/2 centavo (P.005) per registered gross ton of the vessel for the first twenty-four (24) hours, or part thereof, and for succeeding hours, or part thereof, PROVIDED, that maximum charge shall not exceed, seventy-five pesos (P75.00) per day, irrespective of the greater tonnage of the vessels." Appellees are foreign shipping companies licensed to do business in the Philippines, with offices in Manila. Their vessels call at Basilan City and anchor in the bay or channel within its territorial waters. As the city treasurer assessed and attempted to collect from them the anchorage fees prescribed in the aforesaid amendatory ordinance, they filed the present action for Declaratory Relief to have the courts determine its validity. Upon their petition the lower court issued a writ of preliminary injunction restraining appellants from collecting or attempting to collect from them the fees prescribed therein. After the denial of appellants' motion to dismiss the complaint on the ground of wrong venue, they filed their answer alleging therein that the City of Basilan had authority, through its city council, to enact the questioned ordinance in the exercise of either its revenue-raising power or of its police power. They also filed a counterclaim

to recover alleged uncollected anchorage dues amounting to P7,500.00, and the sum of P2,000.00 for expenses incurred in defending the suit. The question to be resolved is whether the City of Basilan has the authority to enact Ordinance 180 and to collect the anchorage fees prescribed therein. In support of the affirmative, appellant city relies upon the following provisions of its Charter (Republic Act 288): SEC. 14. General Powers and Duties of the Council. Except as otherwise provided by law, and subject to the conditions and limitations thereof, the Council shall have the following legislative powers: (a) To levy and collect taxes for general and special purposes in accordance with law. xxx xxx xxx

(c) To enact ordinances for the maintenance and preservation of peace and good morals. xxx xxx xxx

(v) To fix the charges to be paid by all watercraft landing at or using public wharves, docks, levees, or landing places. Under paragraph (a) transcribed above, it is clear that the City of Basilan may only levy and collect taxes for general and special purposes in accordance with or as provided by law; in other words, the city of Basilan was not granted a blanket power of taxation. The use of the phrase "in accordance with law" which, in our opinion, means the same as "provided by law" clearly discloses the legislative intent to limit the taxing power of the City. The next point to be considered whether the questioned ordinance may be upheld under the provisions of Section 14(v) of Republic Act No. 288. After a careful consideration of the language employed therein, we have reached the conclusion that said provision does not authorize the City of Basilan to promulgate ordinances providing for the collection of "Anchorage" fees. This is clearly not included in the power granted by the provision under consideration "to fix the charges to be paid by all watercraft landing at or using public wharves, docks, levees, or landing places." That this is so is shown by the need which the City of Basilan had to enact the amendatory ordinance. Appellants also argue that the ordinance in question was validly enacted in the exercise of the city's police power and that the fees imposed therein are for purely regulatory purposes. In this connection it has been held that the power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes (Cu Unijeng vs. Patstone, 42 Phil. 818; Pacific Commercial Co. vs. Romualdez etc. et al., 46 Phil. 917; Arquiza etc. vs. Municipality of Zamboanga, 55 Phil. 653). In the Cu Unjieng case it was held that fees for purely regulatory purposes "may only be of sufficient amount to include the expenses of issuing the license and the cost of the necessary inspection or police surveillance, taking into account not only the expense of direct regulation but also incidental expenses. In Manila Electric Co. vs. Auditor General, 73 Phil. 129-135, it was also held that the regulatory fee "must be more than sufficient to cover the actual cost of inspection or examination as nearly as the same can be estimated. If it were possible to prove in advance the exact cost, that would be the limit of the fee." To support the claim that the fees imposed are merely regulatory it is said that the City of Basilan is an island with mountainous coasts and fringed by numerous coves and island bays and islets, and may become a veritable haven for smugglers if the city has no funds or means to suppress their illegal activities, but we believe that, this notwithstanding, the fees required are extended for revenue purposes. In the first place, being cased upon the tonnage of the vessels, the fees have no proper or reasonable relation to the cost of issuing the permits and the

cost of inspection or surveillance. In the second place, the fee imposed on foreign vessels 1/2 centavo per registered gross ton for the first 24 hours and which shall not exceed P75.00 per day exceeds even the harbor fee imposed by the National Government, which is only P50.00 for foreign vessels (sec. 2702 of the Tariff and Customs Code, Republic Act No. 1937, taken from Sec. 2, Republic Act No. 1317 which was enacted by Congress to raise revenues for the Port Works Fund). Moreover, Mariano Mancao, Port Inspector of the City of Basilan, in his affidavit dated February 17, 1956 (Exh. O), states that were it not for the injunction issued by the lower court in this case, the city "would have collected considerable amounts from the plaintiffs for anchorage fees". All these circumstances point to the conclusion that the fees were intended for revenue purposes. Lastly, appellant city's own contention that the questioned ordinance was enacted in the exercise of its power of taxation, makes it obvious that the fees imposed are not merely regulatory. WHEREFORE, the decision appealed from is affirmed, and the preliminary injunction issued heretofore is made final. Without costs.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 99886 March 31, 1993 JOHN H. OSMEA, petitioner, vs. OSCAR ORBOS, in his capacity as Executive Secretary; JESUS ESTANISLAO, in his capacity as Secretary of Finance; WENCESLAO DELA PAZ, in his capacity as Head of the Office of Energy Affairs; REX V. TANTIONGCO, and the ENERGY REGULATORY BOARD, respondents. Nachura & Sarmiento for petitioner. The Solicitor General for public respondents.

NARVASA, C.J.: The petitioner seeks the corrective, prohibitive and coercive remedies provided by Rule 65 of the Rules of Court, 3 upon the following posited grounds, viz.:
1 2

1) the invalidity of the "TRUST ACCOUNT" in the books of account of the Ministry of Energy (now, the Office of Energy Affairs), created pursuant to 8, paragraph 1, of P.D. No. 1956, as amended, "said creation of a trust fund 4 being contrary to Section 29 (3), Article VI of the . . Constitution; 2) the unconstitutionality of 8, paragraph 1 (c) of P.D. No. 1956, as amended by Executive Order No. 137, for 5 "being an undue and invalid delegation of legislative power . . to the Energy Regulatory Board;"

3) the illegality of the reimbursements to oil companies, paid out of the Oil Price Stabilization Fund, because it contravenes 8, paragraph 2 (2) of P. D. 1956, as amended; and 4) the consequent nullity of the Order dated December 10, 1990 and the necessity of a rollback of the pump prices and petroleum products to the levels prevailing prior to the said Order. It will be recalled that on October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O. 1024, and ordered released from the National Treasury to the Ministry of Energy. The same Executive Order also authorized the investment of the fund in government securities, with the earnings from such placements accruing to the fund. President Corazon C. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on February 27, 1987, expanding the grounds for reimbursement to oil companies for possible cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products, the amount of the underrecovery being left for determination by the Ministry of Finance. Now, the petition alleges that the status of the OPSF as of March 31, 1991 showed a "Terminal Fund Balance 8 deficit" of some P12.877 billion; that to abate the worsening deficit, "the Energy Regulatory Board . . issued an Order on December 10, 1990, approving the increase in pump prices of petroleum products," and at the rate of recoupment, the OPSF deficit should have been fully covered in a span of six (6) months, but this notwithstanding, the respondents Oscar Orbos, in his capacity as Executive Secretary; Jesus Estanislao, in his capacity as Secretary of Finance; Wenceslao de la Paz, in his capacity as Head of the Office of Energy Affairs; Chairman Rex V. Tantiongco and the Energy Regulatory Board "are poised to accept, process and pay claims not authorized under P.D. 9 1956." The petition further avers that the 29(3), Article VI of the Constitution, reading as follows: creation of the trust fund violates
7

(3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purposes only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a special fund' to be used only for the purpose indicated, and 10 not channeled to another government objective." Petitioner further points out that since "a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the 11 use thereof is limited to the special purpose/objective for which it was created." He also contends that the "delegation of legislative authority" to the ERB violates 28 (2). Article VI of the Constitution, viz.: (2) The Congress may, by law, authorize the President to fix, within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas,

tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government; and, inasmuch as the delegation relates to the exercise of the power of taxation, " the limits, limitations and restrictions must be quantitative, that is, the law must not only specify how to tax, who (shall) be 12 taxed (and) what the tax is for, but also impose a specific limit on how much to tax ." The petitioner does not suggest that a "trust account" is illegal per se, but maintains that the monies collected, which form part of the OPSF, should be maintained in a special account of the general fund for the reason that the Constitution so provides, and because they are, supposedly, taxes levied for a special purpose. He assumes that the Fund is formed from a tax undoubtedly because a portion thereof is taken from collections of ad valorem taxes and the increases thereon. It thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State. The Solicitor General observes that the "argument rests on the assumption that the OPSF is a form of revenue measure 13 drawing from a special tax to be expended for a special purpose." The petitioner's perceptions are, in the Court's view, not quite correct. To address this critical misgiving in the position of the petitioner on these issues, the Court recalls its holding in 14 Valmonte v. Energy Regulatory Board, et al. The foregoing arguments suggest the presence of misconceptions about the nature and functions of the OPSF. The OPSF is a "Trust Account" which was established "for the purpose of minimizing the frequent price changes brought about by exchange rate adjustment and/or 15 changes in world market prices of crude oil and imported petroleum products." Under P.D. No. 1956, as amended by Executive Order No. 137 dated 27 February 1987, this Trust Account may be funded from any of the following sources: a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister of Finance in consultation with the Board of Energy; b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy: c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an appropriate Order that may be issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products; d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. xxx xxx xxx

The fact that the world market prices of oil, measured by the spot market in Rotterdam, vary from day to day is of judicial notice. Freight rates for hauling crude oil and petroleum products from sources of supply to the Philippines may also vary from time to time. The exchange rate of the peso vis-a-vis the U.S. dollar and other convertible foreign currencies also changes from day to day. These fluctuations in world market prices and in tanker rates and foreign exchange rates would in a completely free market translate into corresponding adjustments in domestic prices of oil and petroleum products with sympathetic frequency. But domestic prices which vary from day to day or even only from week to week would result in a chaotic market with unpredictable effects upon the country's economy in general. The OPSF was established precisely to protect local consumers from the adverse consequences that such frequent oil price adjustments may have upon the economy. Thus, the OPSF serves as a pocket, as it were, into which a portion of the purchase price of oil and petroleum products paid by consumers as well as some tax revenues are inputted and from which amounts are drawn from time to time to reimburse oil companies, when appropriate situations arise, for increases in, as well as underrecovery of, costs of crude importation. The OPSF is thus a buffer mechanism through which the domestic consumer prices of oil and petroleum products are stabilized, instead of fluctuating every so often, and oil companies are allowed to recover those portions of their costs which they would not otherwise recover given the level of domestic prices existing at any given time . To the extent that some tax revenues are also put into it, the OPSF is in effect a device through which the domestic prices of petroleum products are subsidized in part. It appears to the Court that the establishment and maintenance of the OPSF is well within that pervasive and non-waivable power and responsibility of the government to secure the physical and economic survival and well-being of the community, that comprehensive sovereign authority we designate as the police power of the State . The stabilization, and subsidy of domestic prices of petroleum products and fuel oil clearly critical in importance considering, among other things, the continuing high level of dependence of the country on imported crude oil are appropriately regarded as public purposes. Also of relevance is this Court's ruling in relation to the sugar stabilization fund the nature of which is not far 16 different from the OPSF. In Gaston v. Republic Planters Bank, this Court upheld the legality of the sugar stabilization fees and explained their nature and character, viz.: The stabilization fees collected are in the nature of a tax, which is within the power of the State to impose for the promotion of the sugar industry (Lutz v. Araneta, 98 Phil. 148). . . . The tax collected is not in a pure exercise of the taxing power . It is levied with a regulatory purpose, to provide a means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State (Lutz v. Araneta, supra). xxx xxx xxx The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of "financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market." The fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose (Lawrence v. American Surety Co. 263 Mich. 586, 249 ALR 535, cited in 42 Am Jur Sec. 2, p. 718). Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, "administered in trust" for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance if any, is to be transferred to the general funds of the Government. That is the essence of the trust intended (SEE 1987 Constitution, Article VI, Sec. 17 29(3), lifted from the 1935 Constitution, Article VI, Sec. 23(1).

The character of the Stabilization Fund as a special kind of fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury , moneys from which may be paid out only in pursuance of an appropriation made by law (1987) Constitution, Article VI, Sec. 29 (3), lifted from the 1935 Constitution, Article VI, Sec. 23(1). (Emphasis supplied). Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund." Indeed, the practice is not without precedent. With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by 18 stabilizing and subsidizing domestic pump rates, 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund. What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit on how much 19 to tax." The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation as police power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that the overriding consideration is to enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State. The interplay and constant fluctuation of the various factors involved in the determination of the price of oil and petroleum products, and the frequently shifting need to either augment or exhaust the Fund, do not conveniently permit the setting of fixed or rigid parameters in the law as proposed by the petitioner. To do so would render the ERB unable to respond effectively so as to mitigate or avoid the undesirable consequences of such fluidity. As such, the standard as it is expressed, suffices to guide the delegate in the exercise of the delegated power, taking account of the circumstances under which it is to be exercised. For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard limits of which 20 are sufficiently determinate or determinable to which the delegate must conform. . . . As pointed out in Edu v. Ericta: "To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel. A standard thus defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which the legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations. The standard may either be express or implied. If the former, the non-delegation objection is easily met. The standard though does not have to be spelled out specifically. It could be implied from the policy and 21 purpose of the act considered as a whole. It would seem that from the above-quoted ruling, the petition for prohibition should fail.

The standard, as the Court has already stated, may even be implied. In that light, there can be no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a determinable standard which guides the exercise of the power granted to the ERB. By the same token, the proper exercise of the delegated power may be tested with ease. It seems obvious that what the law intended was to permit the additional imposts for as long as there exists a need to protect the general public and the petroleum industry from the adverse consequences of pump rate fluctuations. "Where the standards set up for the guidance of an administrative officer and the action taken are in fact recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the judgment of such officer conform to the legislative standard, there is no failure in the 22 performance of the legislative functions." This Court thus finds no serious impediment to sustaining the validity of the legislation; the express purpose for which the imposts are permitted and the general objectives and purposes of the fund are readily discernible, and they constitute a sufficient standard upon which the delegation of power may be justified. In relation to the third question respecting the illegality of the reimbursements to oil companies, paid out of the 23 Oil Price Stabilization Fund, because allegedly in contravention of 8, paragraph 2 (2) of P.D. 1956, amended the Court finds for the petitioner. The petition assails the payment of certain items or accounts in favor of the petroleum companies (i.e., inventory losses, financing charges, fuel oil sales to the National Power Corporation, etc.) because not authorized by law. Petitioner contends that "these claims are not embraced in the enumeration in 8 of P.D. 1956 . . since none of 24 them was incurred 'as a result of the reduction of domestic prices of petroleum products ,'" and since these items are reimbursements for which the OPSF should not have responded, the amount of the P12.877 billion deficit 25 "should be reduced by P5,277.2 million." It is argued "that under the principle of ejusdem generis . . . the term 'other factors' (as used in 8 of P.D. 1956) . . can only include such 'other factors' which necessarily result in the 26 reduction of domestic prices of petroleum products." The Solicitor General, for his part, contends that "(t)o place said (term) within the restrictive confines of the rule of ejusdem generis would reduce (E.O. 137) to a meaningless provision." This Court, in Caltex Philippines, Inc. v. The Honorable Commissioner on Audit, et al., of ejusdem generis to paragraph 2 of 8 of P.D. 1956, viz.:
27

passed upon the application

The rule of ejusdem generis states that "[w]here words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are held to be as applying only to persons or things of the same kind or 28 class as those specifically mentioned." A reading of subparagraphs (i) and (ii) easily discloses that they do not have a common characteristic. The first relates to price reduction as directed by the Board of Energy while the second refers to reduction in internal ad valorem taxes. Therefore, subparagraph (iii) cannot be limited by the enumeration in these subparagraphs. What should be considered for purposes of determining the "other factors" in subparagraph (iii) is the first sentence of paragraph (2) of the Section which explicitly allows the cost underrecovery only if such were incurred as a result of the reduction of domestic prices of petroleum products. The Court thus holds, that the reimbursement of financing charges is not authorized by paragraph 2 of 8 of P.D. 1956, for the reason that they were not incurred as a result of the reduction of domestic prices of petroleum products. Under the same provision, however, the payment of inventory losses is upheld as valid, being clearly a result of domestic price reduction, when oil companies incur a cost underrecovery for yet unsold stocks of oil in inventory acquired at a higher price.

Reimbursement for cost underrecovery from the sales of oil to the National Power Corporation is equally permissible, not as coming within the provisions of P.D. 1956, but in virtue of other laws and regulations as held in 29 Caltex and which have been pointed to by the Solicitor General. At any rate, doubts about the propriety of such reimbursements have been dispelled by the enactment of R.A. 6952, establishing the Petroleum Price Standby Fund, 2 of which specifically authorizes the reimbursement of "cost underrecovery incurred as a result of fuel oil sales to the National Power Corporation." Anent the overpayment refunds mentioned by the petitioner, no substantive discussion has been presented to show how this is prohibited by P.D. 1956. Nor has the Solicitor General taken any effort to defend the propriety of this refund. In fine, neither of the parties, beyond the mere mention of overpayment refunds, has at all bothered to discuss the arguments for or against the legality of the so-called overpayment refunds. To be sure, the absence of any argument for or against the validity of the refund cannot result in its disallowance by the Court. Unless the impropriety or illegality of the overpayment refund has been clearly and specifically shown, there can be no basis upon which to nullify the same. Finally, the Court finds no necessity to rule on the remaining issue, the same having been rendered moot and academic. As of date hereof, the pump rates of gasoline have been reduced to levels below even those prayed for in the petition. WHEREFORE, the petition is GRANTED insofar as it prays for the nullification of the reimbursement of financing charges, paid pursuant to E.O. 137, and DISMISSED in all other respects. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. Nos. L-19824, L-19825 and 19826 July 9, 1966

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. BACOLOD-MURCIA MILLING CO., INC., MA-AO SUGAR CENTRAL CO., INC., and TALISAY-SILAY MILLING COMPANY, defendants-appellants. Meer, Meer and Meer, Enrique M. Fernando and Emma Quisumbing-Fernando for defendants-appellants. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio Torres and Solicitor Ceferino Padua, for plaintiff-appellee. REGALA, J.: This is a joint appeal by three sugar centrals, Bacolod Murcia Milling Co., Inc., Ma-ao Sugar Central Co., Inc., and Talisay-Silay Milling Co., sister companies under one controlling ownership and management, from a decision of the Court of First Instance of Manila finding them liable for special assessments under Section 15 of Republic Act No. 632.

Republic Act No. 632 is the charter of the Philippine Sugar Institute, Philsugin for short, a semi-public corporation created for the following purposes and objectives: (a) To conduct research work for the sugar industry in all its phases, either agricultural or industrial, for the purpose of introducing into the sugar industry such practices or processes that will reduce the cost of production, increase and improve the industrialization of the by-products of sugar cane, and achieve greater efficiency in the industry; (b) To improve existing methods of raising sugar cane and of sugar manufacturing; (c) To insure a permanent, sufficient and balanced production of sugar and its by-products for local consumption and exportation; (d) To establish and maintain such balanced relation between production and consumption of sugar and its by-products, and such marketing conditions therefor, as well insure stabilized prices at a level sufficient to cover the cost of production plus a reasonable profit; (e) To promote the effective merchandising of sugar and its by-products in the domestic and foreign markets so that those engaged in the sugar industry will be placed on a basis of economic security; and (f) To improve the living and economic conditions of laborers engaged in the sugar industry by the gradual and effective correction of the inequalities existing in the industry. (Section 2, Rep. Act 632) To realize and achieve these ends, Sections 15 and 16 of the aforementioned law provide: Sec. 15. Capitalization. To raise the necessary funds to carry out the provisions of this Act and the purposes of the corporation, there shall be levied on the annual sugar production a tax of TEN CENTAVOS [P0.10] per picul of sugar to be collected for a period of five (5) years beginning the crop year 1951-1952. The amount shall be borne by the sugar cane planters and the sugar centrals in the proportion of their corresponding milling share, and said levy shall constitute a lien on their sugar quedans and/or warehouse receipts. Sec. 16. Special Fund. The proceeds of the foregoing levy shall be set aside to constitute a special fund to be known as the "Sugar Research and Stabilization Fund," which shall be available exclusively for the use of the corporation. All the income and receipts derived from the special fund herein created shall accrue to, and form part of the said fund to be available solely for the use of the corporation. The specific and general powers of the Philsugin are set forth in Section 8 of the same law, to wit: Sec. 3. Specific and General Powers. For carrying out the purposes mentioned in the preceding section, the PHILSUGIN shall have the following powers: (a) To establish, keep, maintain and operate, or help establish, keep, maintain, and operate one central experiment station and such number of regional experiment stations in any part of the Philippines as may be necessary to undertake extensive research in sugar cane culture and manufacture, including studies as to the feasibility of merchandising sugar cane farms, the control and eradication of pests, the selected and propagation of high-yielding varieties of sugar cane suited to Philippine climatic conditions, and such other pertinent studies as will be useful in adjusting the sugar industry to a position independent of existing trade preference in the American market;

(b) To purchase such machinery, materials, equipment and supplies as may be necessary to prosecute successfully such researches and experimental work; (c) To explore and expand the domestic and foreign markets for sugar and its by-products to assure mutual benefits to consumers and producers, and to promote and maintain a sufficient general production of sugar and its by-products by an efficient coordination of the component elements of the sugar industry of the country; (d) To buy, sell, assign, own, operate, rent or lease, subject to existing laws, machineries, equipment, materials, merchant vessels, rails, railroad lines, and any other means of transportation, warehouses, buildings, and any other equipment and material to the production, manufacture, handling, transportation and warehousing of sugar and its by-products; (e) To grant loans, on reasonable terms, to planters when it deems such loans advisable; (f) To enter, make and execute contracts of any kind as may be necessary or incidental to the attainment of its purposes with any person, firm, or public or private corporation, with the Government of the Philippines or of the United States, or any state, territory, or persons therefor, or with any foreign government and, in general, to do everything directly or indirectly necessary or incidental to, or in furtherance of, the purposes of the corporation; (g) To do all such other things, transact all such business and perform such functions directly or indirectly necessary, incidental or conducive to the attainment of the purposes of the corporation; and (h) Generally, to exercise all the powers of a Corporation under the Corporation Law insofar as they are not inconsistent with the provisions of this Act. The facts of this case bearing relevance to the issue under consideration, as recited by the lower court and accepted by the appellants, are the following: x x x during the 5 crop years mentioned in the law, namely 1951-1952, 1952-1953, 1953-1954, 1954-1955 and 1955-1956, defendant Bacolod-Murcia Milling Co., Inc., has paid P267,468.00 but left an unpaid balance of P216,070.50; defendant Ma-ao Sugar Central Co., Inc., has paid P117,613.44 but left unpaid balance of P235,800.20; defendant Talisay-Silay Milling Company has paid P251,812.43 but left unpaid balance of P208,193.74; and defendant Central Azucarera del Danao made a payment of P49,897.78 but left unpaid balance of P48,059.77. There is no question regarding the correctness of the amounts paid and the amounts that remain unpaid. From the evidence presented, on which there is no controversy, it was disclosed that on September 3, 1951, the Philippine Sugar Institute, known as the PHILSUGIN for short, acquired the Insular Sugar Refinery for a total consideration of P3,070,909.60 payable, in accordance with the deed of sale Exhibit A, in 3 installments from the process of the sugar tax to be collected, under Republic Act 632. The evidence further discloses that the operation of the Insular Sugar Refinery for the years, 1954, 1955, 1956 and 1957 was disastrous in the sense that PHILSUGIN incurred tremendous losses as shown by an examination of the statements of income and expenses marked Exhibits 5, 6, 7 and 8. Through the testimony of Mr. Cenon Flor Cruz, former acting general manager of PHILSUGIN and at present technical consultant of said entity, presented by the defendants as witnesses, it has been shown that the operation of the Insular Sugar Refinery has consumed 70% of the thinking time and effort of the PHILSUGIN management. x x x . Contending that the purchase of the Insular Sugar Refinery with money from the Philsugin Fund was not authorized by Republic Act 632 and that the continued operation of the said refinery was inimical to their

interests, the appellants refused to continue with their contributions to the said fund. They maintained that their obligation to contribute or pay to the said Fund subsists only to the limit and extent that they are benefited by such contributions since Republic Act 632 is not a revenue measure but an Act which establishes a "Special assessments." Adverting to the finding of the lower court that proceeds of the said Fund had been used or applied to absorb the "tremendous losses" incurred by Philsugin in its "disastrous operation" of the said refinery, the appellants herein argue that they should not only be released from their obligation to pay the said assessment but be refunded, besides, of all that they might have previously paid thereunder. The appellants' thesis is simply to the effect that the "10 centavos per picul of sugar" authorized to be collected under Sec. 15 of Republic 632 is a special assessment. As such, the proceeds thereof may be devoted only to the specific purpose for which the assessment was authorized, a special assessment being a levy upon property predicated on the doctrine that the property against which it is levied derives some special benefit from the improvement. It is not a tax measure intended to raise revenues for the Government. Consequently, once it has been determined that no benefit accrues or inures to the property owners paying the assessment, or that the proceeds from the said assessment are being misapplied to the prejudice of those against whom it has been levied, then the authority to insist on the payment of the said assessment ceases. On the other hand, the lower court adjudged the appellants herein liable under the aforementioned law, Republic Act 632, upon the following considerations: First, Subsection d) of Section 3 of Republic Act 632 authorizes Philsugin to buy and operate machineries, equipment, merchant vessels, etc., and any other equipment and material for the production, manufacture, handling, transportation and warehousing of sugar and its by-products. It was, therefore, authorized to purchase and operate a sugar refinery. Secondly, the corporate powers of the Philsugin are vested in and exercised by a board of directors composed of 5 members, 3 of whom shall be appointed upon recommendation of the National Federation of Sugar Cane Planters and 2 upon recommendation of the Philippine Sugar Association. (Sec. 4, Rep. Act 632). It has not been shown that this particular provision was not observed in this case. Therefore, the appellants herein may not rightly claim that there had been a misapplication of the Philsugin funds when the same was used to procure the Insular Sugar Refinery because the decision to purchase the said refinery was made by a board in which the applicants were fully and duly represented, the appellants being members of the Philippine Sugar Association. Thirdly, all financial transactions of the Philsugin are audited by the General Auditing Office, which must be presumed to have passed upon the legality and prudence of the disbursements of the Fund. Additionally, other offices of the Government review such transactions as reflected in the annual report obliged of the Philsugin to prepare. Among those offices are the Office of the President of the Philippines, the Administrator of Economic Coordination and the Presiding Officers of the two chambers of Congress. With all these safeguards against any imprudent or unauthorized expenditure of Philsugin Funds, the acquisition of the Insular Sugar Refinery must be upheld in its legality and propriety. Fourthly, it would be dangerous to sanction the unilateral refusal of the appellants herein to continue with their contribution to the Fund for that conduct is no different "from the case of an ordinary taxpayer who refuses to pay his taxes on the ground that the money is being misappropriated by Government officials." This is taking the law into their own hands. Against the above ruling of the trial court, the appellants contend: First. It is fallacious to argue that no mismanagement or abuse of corporate power could have been committed by Philsugin solely because its charter incorporates so many devices or safeguards to preclude such abuse. This reasoning of the lower court does not reconcile with that actually happened in this case.

Besides, the appellants contend that the issue on hand is not whether Philsugin abused or not its powers when it purchased the Insular Sugar Refinery. The issue, rather, is whether Philsugin had any power or authority at all to acquire the said refinery. The appellants deny that Philsugin is possessed of any such authority because what it is empowered to purchase is not a "sugar refinery but a central experiment station or perhaps at the most a sugar central to be used for that purpose." (Sec. 3[a], Rep. Act 632) For this distinction, the appellants cite the case of Collector vs. Ledesma, G.R. No. L-12158, May 27, 1959, in which this Court ruled that We are of the opinion that a "sugar central," as that term is used in Section 189, applies to "a large mill that makes sugar out of the cane brought from a wide surrounding territory," or a sugar mill which manufactures sugar for a number of plantations. The term "sugar central" could not have been intended by Congress to refer to all sugar mills or sugar factories as contended by respondent. If respondent's interpretation is to be followed, even sugar mills run by animal power (trapiche) would be considered sugar central. We do not think Congress ever intended to place owners of (trapiches) in the same category as operators of sugar centrals. That sugar mills are not the same as sugar centrals may also be gleaned from Commonwealth Act No. 470 (Assessment Law). In prescribing the principle governing valuation and assessment of real property. Section 4 of said Act provides "Machinery permanently used or in stalled in sugar centrals, mills, or refineries shall be assessed." This clearly indicates that "Sugar centrals" are not the same as "sugar mills" or "sugar refineries." Second. The appellants' refusal to continue paying the assessment under Republic Act 632 may not rightly be equated with a taxpayer's refusal to pay his ordinary taxes precisely because there is a substantial distinction between a "special assessment" and an ordinary tax. The purpose of the former is to finance the improvement of particular properties, with the benefits of the improvement accruing or inuring to the owners thereof who, after all, pay the assessment. The purpose of an ordinary tax, on the other hand, is to provide the Government with revenues needed for the financing of state affairs. Thus, while the refusal of a citizen to pay his ordinary taxes may not indeed be sanctioned because it would impair government functions, the same would not hold true in the case of a refusal to comply with a special assessment. Third. Upon a host of decisions of the United States Supreme Court, the imposition or collection of a special assessment upon property owners who receive no benefit from such assessment amounts to a denial of due process. Thus, in the case of Norwood vs. Baer, 172 US 269, the ruling was laid down that As already indicated, the principle underlying special assessments to meet the cost of public improvements is that the property upon which they are imposed is peculiarly benefited, and therefore, the panels do not, in fact, pay anything in excess of what they received by reason of such improvement. unless a corresponding benefit is realized by the property owner, the exaction of a special assessment would be "manifestly unfair" (Seattle vs. Kelleher 195 U.S. 351) and "palpably arbitrary or plain abuse" (Gast Realty Investment Co. vs. Schneider Granite Co., 240 U.S. 57). In other words, the assessment is violative of the due process guarantee of the constitution (Memphis vs. Charleston Ry v. Pace, 282 U.S. 241). We find for the appellee. The nature of a "special assessment" similar to the case at bar has already been discussed and explained by this Court in the case of Lutz vs. Araneta, 98 Phil. 148. For in this Lutz case, Commonwealth Act 567, otherwise known as the Sugar Adjustment Act, levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise

a tax equivalent to the difference between the money value of the rental or consideration collected and the amount representing 12 per centum of the assessed value of such land. (Sec. 3). 1wph1.t Under Section 6 of the said law, Commonwealth Act 567, all collections made thereunder "shall accrue to a special fund in the Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid out only for any or all of the following purposes or to attain any or all of the following objectives, as may be provided by law." It then proceeds to enumerate the said purposes, among which are "to place the sugar industry in a position to maintain itself; ... to readjust the benefits derived from the sugar industry ... so that all might continue profitably to engage therein; to limit the production of sugar to areas more economically suited to the production thereof; and to afford laborers employed in the industry a living wage and to improve their living and working conditions. The plaintiff in the above case, Walter Lutz, contended that the aforementioned tax or special assessment was unconstitutional because it was being "levied for the aid and support of the sugar industry exclusively," and therefore, not for a public purpose. In rejecting the theory advanced by the said plaintiff, this Court said: The basic defect in the plaintiff's position in his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly Section 6, will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power . This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation, sugar occupying a leading position among its export products; that it gives employment to thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one, of the important sources to foreign exchange needed by our government, and is thus pivotal in the plans of a regime committed to a policy of currency stability. Its promotion, protection and advancement, therefore redounds greatly to the general welfare. Hence, it was competent for the Legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the law-making body could provide that the distribution of benefits therefrom be readjusted among its components, to enable it to resist the added strain of the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U.S. 52, 59 L. Ed. 835; Johnson vs. State ex rel. Marey, 99 Fla. 1311, 128 So. 853; Marcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121) As stated in Johnson vs. State ex rel. Marcy, with reference to the citrus industry in Florida "The protection of a large industry constituting one of the great source of the state's wealth and therefore directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such an extent by public interests as to be within the police power of the sovereign." (128 So. 857). Once it is conceded, as it must that the protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Here, the legislative discretion must be allowed full play, subject only to the test of reasonableness; and it is not contended that the means provided in Section 6 of the law (above quoted) bear no relation to the objective pursued or are oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the state's police power. (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S. vs. Butler, 297 U.S. 1, 80 L. Ed. 477; M'cullock vs. Maryland, 4 Wheat. 316, 4 L. Ed. 579).

On the authority of the above case, then, We hold that the special assessment at bar may be considered as similarly as the above, that is, that the levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but, the exercise of the police power for the general welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist. Besides, under Section 2(a) of the charter, the Philsugin is authorized "to conduct research work for the sugar industry in all its phases, either agricultural or industrial, for the purpose of introducing into the sugar industry such practices or processes that will reduce the cost of production, ..., and achieve greater efficiency in the industry." This provision, first of all, more than justifies the acquisition of the refinery in question. The case dispute that the operation of a sugar refinery is a phase of sugar production and that from such operation may be learned methods of reducing the cost of sugar manufactured no less than it may afford the opportunity to discover the more effective means of achieving progress in the industry. Philsugin's experience alone of running a refinery is a gain to the entire industry. That the operation resulted in a financial loss is by no means an index that the industry did not profit therefrom, as other farms of a different nature may have been realized. Thus, from its financially unsuccessful venture, the Philsugin could very well have advanced in its appreciation of the problems of management faced by sugar centrals. It could have understood more clearly the difficulties of marketing sugar products. It could have known with better intimacy the precise area of the industry in need of the more help from the government. The view of the appellants herein, therefore, that they were not benefited by the unsuccessful operation of the refinery in question is not entirely accurate. Furthermore, Section 2(a) specifies a field of research which, indeed, would be difficult to carry out save through the actual operation of a refinery. Quite obviously, the most practical or realistic approach to the problem of what "practices or processes" might most effectively cut the cost of production is to experiment on production itself. And yet, how can such an experiment be carried out without the tools, which is all that a refinery is? In view of all the foregoing, the decision appealed from is hereby affirmed, with costs.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21183 September 27, 1968

VICTORIAS MILLING CO., INC., plaintiff-appellant, vs. THE MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS OCCIDENTAL, defendant-appellant. Hilado & Hilado for plaintiff-appellant. The Provincial Fiscal of Negros Occidental for defendant-appellant.

SANCHEZ, J.: This case calls into question the validity of Ordinance No. 1, series of 1956, of the Municipality of Victorias, Negros Occidental. The disputed ordinance was approved by the municipal Council of Victorias on September 22, 1956 by way of 1 an amendment to two municipal ordinances separately imposing license taxes on operators of sugar centrals and 2 sugar refineries. The changes were: with respect to sugar centrals, by increasing the rates of license taxes; and as to sugar refineries, by increasing the rates of license taxes as well as the range of graduated schedule of annual output capacity. Ordinance No. 1 is labeled "An Ordinance Amending Ordinance No. 25, Series of 1953 and Ordinance No. 18, Series of 1947 on Sugar Central by Increasing the Rates on Sugar Refinery Mill by Increasing the Range of Graduated Schedule on Capacity Annual Output Respectively". It was, as the ordinance itself states, enacted pursuant to the taxing power conferred by Commonwealth Act 472. By Section 1 of the Ordinance: "Any person, corporation or other forms of companies, operating sugar central or engage[d] in the manufacture of centrifugal sugar shall be required to pay the following annual municipal license tax, payable quarterly, to wit: . . ." Section 1 referred to prescribes a wide range of schedule. It starts with a sugar central with mill having an annual output capacity of not less than 50,000 piculs of centrifugal sugar, in which case an annual municipal license tax of P1,000.00 is provided. Depending upon the annual output capacity the schedule of taxes continues with P2,000.00 progressively upward in twelve other grades until an output capacity of 1,500,001 piculs or more shall have been reached. For this, the annual tax is P40,000.00. The tax on sugar refineries is likewise calibrated with similar rates. It also starts with P1,000.00 for a refinery with mill having an annual output capacity of not less than 25,000 bags of 100 lbs. of refined sugar. Then, it continues with the second bracket of from 25,001 bags to 75,000 bags of 100 lbs. Here, the municipal license tax is P1,500.00. Then follow the other rates in the graduated scale with the ceiling placed at a capacity of 1,750,001 bags or more. The annual municipal license tax for the last mentioned output capacity is P40,000.00. Of importance are the provisions of Section 1(m) relating to sugar centrals and Section 2(m) covering sugar refineries with specific reference to the maximum annual license tax, viz: Section No. 1 Any person, corporation or other forms of Companies, operating Sugar Central or engage[d] in the manufacture of centrifugal sugar shall be required to pay the following annual municipal license tax, payable quarterly, to wit:
3

xxx

xxx

xxx

(m) Sugar Central with mill having a capacity of producing an annual output of from 1,500,001 piculs or more shall be required to pay an annual municipal license tax of P40,000.00. Section No. 2 Any person, corporation or other forms of Companies shall be required to pay an annual municipal license tax for the operation of Sugar Refinery Mill at the following rates: xxx xxx xxx

(m) Sugar Refinery with mill having a capacity of producing an annual output of from 1,750,001 bags of 100 lbs. or more shall be required to pay an annual municipal license tax of P40,000.00. For, the production of plaintiff Victorias Milling Co., Inc. in both its sugar central and its sugar refinery located in the Municipality of Victorias comes within these items in the schedule. Plaintiff filed suit below to ask for judgment declaring Ordinance No. 1, series of 1956, null and void; ordering the refund of all license taxes paid and to be paid under protest; directing the officials of Victorias and the Province of Negros Occidental to observe, during the pendency of the action, the provisions of section 357 of the 5 Revised Manual of Instructions to Treasurers of Provinces, Cities and Municipalities, 1954 edition, regarding the 6 treatment of license taxes paid under protest by virtue of a disputed ordinance; and other reliefs. The reasons put forth by plaintiff are that: (a) the ordinance exceeds the amounts fixed in Provincial Circular 12-A issued by the Finance Department on February 27, 1940; (b) it is discriminatory since it singles out plaintiff which is the only operator of a sugar central and a sugar refinery within the jurisdiction of defendant municipality; (c) it constitutes double taxation; and (d) the national government has preempted the field of taxation with respect to sugar centrals or refineries. Upon the complaint as supplemented and amended, and the answer thereto, and following hearing on the merits, the trial court rendered its judgment. After declaring that "[t]here is no doubt that" the ordinance in question refers to license taxes or fees," and that "[i]t is settled that a license tax should be limited to the cost of 7 8 licensing, regulating and surveillance," the trial court ruled that said license taxes in dispute are unreasonable, and held that: "If the defendant has the power to tax the plaintiff for purposes of revenue, it may do so by proper 9 municipal legislation, but not in the guise of a license tax." The court added: "The Court is not, however, prepared to order the refund of all the license taxes paid by the plaintiff under protest and amounting, up to the second quarter of 1960, to P280,000.00, considering that the plaintiff appears to have agreed to the payment of the license taxes at the rates fixed prior to Ordinance No. 1, series of 1956; that the defendant had evidently not complied with the provisions of Section 357 of the Revised Manual of Instructions to Treasurers of Provinces, Cities and Municipalities, 1954 Edition, as the plaintiff herein seeks an order enjoining the defendant and its appropriate officials to carry out said provisions; that the financial position of the defendant would surely be disrupted if 10 ordered to refund, while the plaintiff may perhaps easily forego or forget what it had already parted with". It disposes of the suit in the following manner: WHEREFORE, judgment is rendered (a) declaring that Ordinance No. 1, series of 1956, of the municipality of Victorias, Negros Occidental, is invalid; (b) ordering all officials of the defendant to observe the provisions of Section 357 of the Revised Manual of Instructions to Treasurers of Provinces, Cities and Municipalities, 1954 Edition, with particular reference to any license taxes paid by the plaintiff under said Ordinance No. 1, series of 1956, after notice of this decision; and (c) ordering the defendant to refund to 11 the plaintiff any and all such license taxes paid under protest after notice of this decision.
4

Both plaintiff and defendant appealed direct to this Court. Plaintiff questions that portion of the decision denying the refund of the license taxes paid under protest in the amount of P280,000 covering the period from the first quarter of 1957 to the second quarter of 1960; and balked at the court's order limiting refund to "any and all such license taxes paid under protest after notice of this decision." Defendant, upon the other hand, challenges the correctness of the court's decision invalidating Ordinance No. 1, series of 1956. The questions raised in the appeals will be discussed in their proper sequence. 1. We first grapple with the threshold question: Was Ordinance No. 1, series of 1956, passed by defendant's municipal council as a regulatory enactment or as a revenue measure? The trial court says, and plaintiff seconds, that the amounts set forth in the ordinance in question did exceed the cost of licensing, regulating and surveillance, and that defendant cannot impose a tax for revenue in the guise of a police or a regulatory measure. Our finding, however, is the other way. 1awphl.nt The ordinance itself recites that its source of taxing power emanates from Commonwealth Act 472, Section 1 of which reads: Section 1. A municipal council or municipal district council shall have 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 statute just quoted and pertinent jurisprudence, a municipality is authorized to impose three kinds of licenses: (1) license for regulation of useful occupations or enterprises; (2) license for restriction or regulation of 12 non-useful occupations or enterprises; and (3) license for revenue. The first two easily fall within the broad 13 police power granted under the general welfare clause. The third class, however, is for revenue purposes. It is not a license fee, properly speaking, and yet it is generally so termed. It rests on the taxing power. That taxing 14 power must be expressly conferred by statute upon the municipality. It is so granted under Commonwealth Act 472. To be recalled at this point is that Ordinance No. 1, series of 1956, is but an amendment of Ordinance No. 18, series of 1947, in reference to refineries, and Ordinance No. 25, series of 1953, covering sugar centrals. Ordinance 15 No. 18 imposes "municipal taxes on persons, firms or corporations operating refinery mills in this municipality." 16 Ordinance No. 25 speaks of municipal taxes "relative to the output of the sugar centrals." What are these taxes for? Resolution No. 60 of the municipal council of Victorias, adopted also on September 22, 1956 in conjunction with Ordinance No. 1, series of 1956, furnishes a ready answer. It reads in part: WHEREAS, the Municipal Treasurer informed the Municipal Council of the revenue of the Municipality and the heavy obligations which confront it because of the implementation of Minimum Wage Law on the salaries and wages it pays to its municipal employees and laborers thus greatly draining the Municipal Treasury; WHEREAS, this local administration is committed to the plan of ameliorating the deplorable situation existing in the barrios, sitios and rural areas by giving them essential and necessary facilities calculated to improve conditions thereat thru improvements of roads and feeder roads;
17

WHEREAS, one of the causes of the municipality's financial difficulty is low rates of municipal taxes imposed by some of the ordinances enacted by the local legislative body; WHEREAS, [in] . . . the ordinances known as Ordinance No. 25, Series of 1953, dealing on the operation of Sugar Central, and Ordinance No. 18, Series of 1947, which exclusively deals with the operation of Sugar Refinery Mill, the rates so given are rates suggested and determined by the Provincial Circular No. 12-A, dated February 27, 1940 issued by the Department of Finance as regards to Sugar Centrals; WHEREAS, the Municipal Council has come to the conclusion that the rates provided for in such ordinances are no longer adequate if made in keeping with the present high cost of living; WHEREAS, the Municipal Council has also taken cognizance of the fact that the price of sugar per 18 picul today is more than twice its pre-war average price; . . . . Given the purposes just mentioned, we find no warrant in logic to give our assent to the view that the ordinance in question is solely for regulatory purpose. Plain is the meaning conveyed. The ordinance is for raising money. To say otherwise is to misread the purpose of the ordinance. 1awphl.nt We should not hang so heavy a meaning on the use of the term "municipal license tax". This does not necessarily connote the idea that the tax is imposed as the lower court would want it to mean a revenue measure in the guise of a license tax. For really, this runs counter to the declared purpose to make money. Besides, the term "license tax" has not acquired a fixed meaning. It is often "used indiscriminately to 19 designate impositions exacted for the exercise of various privileges." It does not refer solely to a license for 20 regulation. In many instances, it refers to "revenue-raising exactions on privileges or activities." On the other hand, license fees are commonly called taxes. But, legally speaking, the latter are "for the purpose of raising revenues," in contrast to the former which are imposed "in the exercise of police power for purposes of 21 regulation." We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the 22 imposition as may be apparent from the provisions of the ordinance. Thus, "[w]hen no police inspection, 23 supervision, or regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all persons engaged in the business designated, without qualification or hindrance, may come, and a license on payment of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the applicant and 24 licensee, the presumption is strong that the power of taxation , and not the police power, is being exercised." Precisely because of these considerations the present imposition must be treated as a levy for revenue purposes. A quick glance at the big amount of maximum annual tax set forth in the ordinance, P40,000.00 for sugar centrals, and P40,000.00 for sugar refineries, will readily convince one that the tax is really a revenue tax. And then, we read in the ordinance nothing which would as much as indicate that the tax imposed is merely for police inspection, supervision or regulation. Our view that the tax imposed by the ordinance is for revenue purposes finds support in judicial 25 pronouncements which have gained foothold in this jurisdiction. In Standard Vacuum vs. Antigua, this Court had occasion to pass upon a similar ordinance. In categorical terms, we there stated: "We are satisfied that the graduated license tax imposed by the ordinance in question is an occupation tax, imposed not under the police or regulatory power of the municipality but by virtue of its taxing power for purposes of revenue, and is in 26 accordance with the last part of Section 1 of Commonwealth Act No. 472. It is, therefore, valid."

The present case is not to be analogized with Panaligan vs. City of Tacloban cited in the decision below. For there, the inspection fee sought to be collected upon every head of specified animals to be transported out of the City of Tacloban (P2.00 per hog, P10.00 per cow and 20.00 per carabao) was in reality an export tax specifically withheld from municipal taxing power under Section 2287 of the Revised Administrative Code. So also do we say that the cases of Pacific Commercial Co. vs. Romualdez, Lacson vs. City of Bacolod, and 30 Santos vs. Municipal Government of Caloocan, used by plaintiff as references, are entirely inopposite. In Pacific Commercial, the tax involved on frozen meat was nullified because tax measures on cold stores were not then within the legislative grant to the City of Manila. In Lacson, the City of Bacolod taxed every admission ticket sold in the moviehouses. And justification for this imposition was moored to the general welfare clause of the city charter. This Court held the ordinance ultra vires for the reason that the authority to tax cannot be derived from the general welfare clause. In Santos, the taxes in controversy were internal organs fees, meat inspection fees and corral fees, separate from the slaughter or slaughterhouse fees. In annulling the taxes there questioned, this Court declared: "[W]hen the Council ordained the payment of internal organs fees, meat inspection fees and corral fees, aside from the slaughter or slaughterhouse fees, it overstepped the limits of its statutory grant [Sec. 1, C.A. 655]. Only one fee was allowed by that law to be charged and that was slaughter or slaughterhouse fees." In the cases cited then, the tax ordinances did not find plain and clear statutory prop. Such infirmity is not present here. We, accordingly, rule that Ordinance No. 1, series of 1956, of the Municipality of Victorias, was promulgated not in the exercise of the municipality's regulatory power but as a revenue measure a tax on occupation or business. The authority to impose such tax is backed by the express grant of power in Section 1 of Commonwealth Act 472. 2. Not that the disputed ordinance lacks the imprimatur of the Secretary of Finance required in paragraph 2, Section 4, of Commonwealth Act 472. This legal provision necessitates such approval "[w]henever the rate of fixed municipal license taxes on businesses not excepted in this Act or otherwise covered by the preceding paragraph and subject to the fixed annual tax imposed in section one hundred eighty-two of the National Internal Revenue Law, is in excess of fifty pesos per annum; . . . ." The ordinance here challenged was recommended by the Provincial Board of Negros Occidental in its 31 resolution (No. 1864) of October 26, 1956. And, the Undersecretary of Finance in his letter to the municipal council of Victorias on December 18, 1956 approved said ordinance. But considering that it is amendatory in nature, that approval was coupled with the mandate that the ordinance "should take effect at the beginning of the 32 ensuing calendar year [1957] pursuant to Section 2309 of the Revised Administrative Code." 3. Plaintiff argues that the municipality is bereft of authority to enact the ordinance in question because the national government "had preempted it from entering the field of taxation of sugar centrals and sugar refineries." 33 Plaintiff seeks refuge in Section 189 of the National Internal Revenue Code which subjects proprietors or operators of sugar centrals or sugar refineries to percentage tax. The implausibility of this position is at once apparent. We are not dealing here with percentage tax. Rather, we are concerned with a tax specifically for operators of sugar centrals and sugar refineries. The rates imposed are based on the maximum annual output capacity. Which is not a percentage. Because it is not a share. Nor is it a tax 34 based on the amount of the proceeds realized out of the sale of sugar, centrifugal or refined. What can be said at most is that the national government has preempted the field of percentage taxation. Section 1 of Commonwealth Act 472, while granting municipalities power to levy taxes, expressly removes from them the power to exact "percentage taxes".
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27

It is correct to say that preemption in the matter of taxation simply refers to an instance where the national government elects to tax a particular area, impliedly withholding from the local government the delegated power 35 to tax the same field. This doctrine primarily rests upon the intention of Congress. Conversely, should Congress allow municipal corporations to cover fields of taxation it already occupies, then the doctrine of preemption will not apply. In the case at bar, Section 4(1) of Commonwealth Act 472 clearly and specifically allows municipal councils to tax persons engaged in "the same businesses or occupation" on which "fixed internal revenue privilege taxes" are "regularly imposed by the National Government." With certain exceptions specified in Section 3 of the same statute. Our case does not fall within the exceptions. It would therefore be futile to argue that Congress exclusively reserved to the national government the right to impose the disputed taxes. We rule that there is no preemption. 4. Petitioner advances the theory that the ordinance is excessive. An 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 prohibitive, arbitrary, unreasonable, 36 oppressive, or confiscatory. A rule which has gained acceptance is that factors relevant to such an inquiry are the 37 municipal conditions as a whole and the nature of the business made subject to imposition. Plaintiff has however not sufficiently proven that, taking these factors together, the license taxes are unreasonable. The presumption of validity subsists. For, plaintiff has limited itself to insisting that the amounts levied exceed the cost of regulation and that the municipality has adequate funds for the alleged purposes as evidenced by the municipality's cash surplus for the fiscal year ending 1956. The cost of regulation cannot be taken as a gauge, if the municipality really intended to enact a revenue 38 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, as in this case, "the rule that license fees for regulation must bear a reasonable 39 relation to the expense of the regulation has no application." And then, a cash surplus alone cannot stop a municipality from enacting a revenue ordinance increasing license taxes in anticipation of municipal needs. Discretion to determine the amount of revenue required for the needs of the municipality is lodged with the municipal authorities. Again, judicial intervention steps in only when 40 there is a flagrant, oppressive and excessive abuse of power by said municipal authorities. Not that defendant municipality was without reason. On February 27, 1940, the Secretary of Finance, later President, Manuel A. Roxas, issued Provincial Circular 12-A. In that circular, the then Finance Secretary stated that his "Department has reached the conclusion that a tax on the basis of one centavo for every picul of annual output capacity of sugar centrals ... would be just and reasonable." At that time, the price of sugar was around P6.00 per picul. Sixteen years later 1956 when Ordinance No. 1 was approved, the market quotation for export sugar 41 ranged from P12.00 to P15.00 per picul. And yet, since then the rate per output capacity of a sugar central in 42 Ordinance No. 1 was merely from one centavo to two centavos. There is a statement in the municipality's brief that thereafter the price of sugar had never gone below P16.00 per picul; instead it had gone up. The reasonableness of the ordinance may not be disputed. It is not confiscatory. There was misapprehension in the decision below in its statement that the increase of rates for refineries was 2,000%. We should not overlook the fact that the original maximum rate covering refineries in Ordinance No. 18, series of 1947, was P2,000.00; but that was only for a refinery with an output capacity of 90,000 or more sacks.

Under Section 2(c) of Ordinance No. 1, series of 1956, where the refineries have an output capacity of from 75,001 bags to 100,000 bags, the tax remains at P2,000.00. From here on, the ordinance provides for ten more scales for the graduation of the tax depending upon the output capacity (P3,000.00, P4,000.00, P5,000.00, P10,000.00, P15,000.00, P20,000.00, P25,000.00, P30,000.00, P35,000.00 and P40,000.00). But it is only where a refinery has an output capacity of 1,750,001 or more bags that the present ordinance imposes a tax of P40,000.00. The happenstance that plaintiff's refinery is in the last bracket calling upon it to pay P40,000.00 per annum does not make the ordinance in question unreasonable. Neither may we tag the ordinance with excessiveness if we consider the capital invested by plaintiff in both its sugar central and sugar refinery and its annual income from both. Plaintiff's capital investment in the sugar 43 central and sugar refinery is more or less P26,000,000.00. And here are its annual net income: for the year 1956 P3,852,910; for the year 1957 P3,854,520; for the year 1958 P7,230,493; for the year 1959 P5,951,187; 44 and for the year 1960 P7,809,250. If these figures mean anything at all, they show that the ordinance in question is neither confiscatory nor unjust and unreasonable. 5. Upon the averment that in the Municipality of Victorias plaintiff is the only operator of a sugar central and sugar refinery, plaintiff now presses its argument that Ordinance No. 1, series of 1956, is discriminatory. The ordinance does not single out Victorias as the only object of the ordinance. Said ordinance is made to apply to any sugar central or sugar refinery which may happen to operate in the municipality. So it is, that the fact that plaintiff is actually the sole operator of a sugar central and a sugar refinery does not make the ordinance discriminatory. 45 Argument along the same lines was rejected in Shell Co. of P.I., Ltd. vs. Vao, this Court holding that the circumstance "that there is no other person in the locality who exercises" the occupation designated as installation manager "does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person or firm who exercises such calling or occupation." And in Ormoc Sugar Company, Inc. vs. Municipal Board of 46 Ormoc City, declaratory relief was sought to test the validity of a municipal ordinance which provides a city tax of twenty centavos per picul of centrifugal sugar and one per centum on the gross sale of its derivatives and byproducts "produced by the Ormoc Sugar Company, Incorporated, or by any other sugar mill in Ormoc City." Mr. Justice Enrique Fernando, delivering the opinion of this Court, declared that the ordinance did not suffer "from a constitutional or statutory infirmity." And yet, in Ormoc, it is to be observed that Section 1 of the ordinance spelled out Ormoc Sugar Company, Incorporated specifically by name. Not even the name of plaintiff herein was ever mentioned in the ordinance now disputed. No discrimination exists. 6. As infirm is plaintiff's stand that its business is not confined to the Municipality of Victorias. It suffices that plantiff engages in a business or occupation subject to an exaction by the municipality within the territorial boundaries of that municipality. Plaintiff's sugar central and sugar refinery are located within the Municipality of Victorias. In this central and refinery, plaintiff manufactures centrifugal sugar and refined sugar, respectively. But plaintiff insists that plaintiff's sugar milling and refining operations are not wholly performed within the territorial limits of Victorias. According to plaintiff, transportation of canes from plantation to the mill site, operation and maintenance of telephone system, inspection of crop progress and other related activities, are conducted not only in defendant's municipality but also in the municipalities of Cadiz, Manapla, Sagay and Saravia 47 as well. We fail to see the relevance of these facts. Because, if we follow plaintiff's ratiocination, neither Victorias nor any of the municipalities just adverted to would be able to impose the tax. One thing certain, of course, is that the tax is imposed upon the business of operating a sugar central and a sugar refinery. And the situs of that business is precisely the Municipality of Victorias. 7. Plaintiff finally impleads double taxation. Its reason is that in computing the amount of taxes to be paid by the sugar refinery the cost of the raw sugar coming from the sugar central is not deducted; ergo, plaintiff is taxed twice on the raw sugar.

Double taxation has been otherwise described as "direct duplicate taxation." For double taxation to exist, 49 "the same property must be taxed twice, when it should be taxed but once." Double taxation has also been 50 "defined as taxing the same person twice by the same jurisdiction for the same thing." As stated in Manila Motor 51 Company, Inc. vs. Ciudad de Manila, there is double taxation "cuando la misma propiedad se sujeta a dos impuestos por la misma entidad o Gobierno, para el mismo fin y durante el mismo periodo de tiempo." With the foregoing precepts in mind, we find no difficulty in saying that plaintiff's argument on double taxation does not inspire assent. First. The two taxes cover two different objects. Section 1 of the ordinance taxes a person operating sugar centrals or engaged in the manufacture of centrifugal sugar. While under Section 2, those taxed are the operators of sugar refinery mills. One occupation or business is different from the other. Second. The disputed taxes are imposed on occupation or business. Both taxes are not on sugar. The amount thereof depends on the annual output capacity of the mills concerned, regardless of the actual sugar milled. Plaintiff's argument perhaps could make out a point if the object of taxation here were the sugar it produces, not the business of producing it. There is no double taxation. For the reasons given The judgment under review is hereby reversed; and Judgment is hereby rendered: (a) declaring valid and subsisting Ordinance No. 1, series of 1956, of the Municipality of Victorias, Province of Negros Occidental; and (b) dismissing plaintiff's complaint as supplemented and amended. Costs against plaintiff. So ordered.

48

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-7859 December 22, 1955

WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio Jayme Ledesma, plaintiff-appellant, vs. J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee. REYES, J.B L., J.: This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act. Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to the threat to our industry by the imminent imposition of export taxes upon sugar as provided in the Tydings-McDuffe Act, and the "eventual loss of its preferential position in the United States market"; wherefore, the national policy was expressed "to obtain a readjustment of the benefits derived from the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to prepare it for the eventuality of the loss of its preferential position in the United States market and the imposition of the export taxes." In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar, on a graduated basis, on each picul of sugar manufactured; while section 3 levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise a tax equivalent to the difference between the money value of the rental or consideration collected and the amount representing 12 per centum of the assessed value of such land. According to section 6 of the law SEC. 6. All collections made under this Act shall accrue to a special fund in the Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid out only for any or all of the following purposes or to attain any or all of the following objectives, as may be provided by law. First, to place the sugar industry in a position to maintain itself, despite the gradual loss of the preferntial position of the Philippine sugar in the United States market, and ultimately to insure its continued existence notwithstanding the loss of that market and the consequent necessity of meeting competition in the free markets of the world; Second, to readjust the benefits derived from the sugar industry by all of the component elements thereof the mill, the landowner, the planter of the sugar cane, and the laborers in the factory and in the field so that all might continue profitably to engage therein;lawphi1.net Third, to limit the production of sugar to areas more economically suited to the production thereof; and Fourth, to afford labor employed in the industry a living wage and to improve their living and working conditions: Provided, That the President of the Philippines may, until the adjourment of the next regular

session of the National Assembly, make the necessary disbursements from the fund herein created (1) for the establishment and operation of sugar experiment station or stations and the undertaking of researchers (a) to increase the recoveries of the centrifugal sugar factories with the view of reducing manufacturing costs, (b) to produce and propagate higher yielding varieties of sugar cane more adaptable to different district conditions in the Philippines, (c) to lower the costs of raising sugar cane, (d) to improve the buying quality of denatured alcohol from molasses for motor fuel, (e) to determine the possibility of utilizing the other by-products of the industry, (f) to determine what crop or crops are suitable for rotation and for the utilization of excess cane lands, and (g) on other problems the solution of which would help rehabilitate and stabilize the industry, and (2) for the improvement of living and working conditions in sugar mills and sugar plantations, authorizing him to organize the necessary agency or agencies to take charge of the expenditure and allocation of said funds to carry out the purpose hereinbefore enumerated, and, likewise, authorizing the disbursement from the fund herein created of the necessary amount or amounts needed for salaries, wages, travelling expenses, equipment, and other sundry expenses of said agency or agencies. Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be constitutioally levied. The action having been dismissed by the Court of First Instance, the plaintifs appealed the case directly to this Court (Judiciary Act, section 17). The basic defect in the plaintiff's position is his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6 (heretofore quoted in full), will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation, sugar occupying a leading position among its export products; that it gives employment to thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one of the important sources of foreign exchange needed by our government, and is thus pivotal in the plans of a regime committed to a policy of currency stability. Its promotion, protection and advancement, therefore redounds greatly to the general welfare. Hence it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson vs. State ex rel. Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121). As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida The protection of a large industry constituting one of the great sources of the state's wealth and therefore directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such an extent by public interests as to be within the police power of the sovereign. (128 Sp. 857). Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Here, the legislative discretion must be allowed fully play, subject only to the test of reasonableness; and it is not contended that the means provided in section 6 of the law (above quoted) bear no relation to the objective pursued or are oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the state's police power (Great Atl. & Pac. Tea Co. vs.

Grosjean, 301 U. S. 412, 81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4 Wheat. 316, 4 L. Ed. 579). That the tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint; indeed, it appears rational that the tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. At any rate, it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation" (Carmichael vs. Southern Coal & Coke Co., 301 U. S. 495, 81 L. Ed. 1245, citing numerous authorities, at p. 1251). From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization Act, now in question, should be exclusively spent in aid of the sugar industry, since it is that very enterprise that is being protected. It may be that other industries are also in need of similar protection; that the legislature is not required by the Constitution to adhere to a policy of "all or none." As ruled in Minnesota ex rel. Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other instances to which it might have been applied;" and that "the legislative authority, exerted within its proper field, need not embrace all the evils within its reach" (N. L. R. B. vs. Jones & Laughlin Steel Corp. 301 U. S. 1, 81 L. Ed. 893). Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production, utilization of by-products and solution of allied problems, as well as to the improvements of living and working conditions in sugar mills or plantations, without any part of such money being channeled directly to private persons, constitutes expenditure of tax money for private purposes, (compare Everson vs. Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. Nos. 92319-20 October 2, 1990 EDUARDO M. COJUANGCO, JR., petitioner, vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) AND HON. FRANCISCO I. CHAVEZ in his capacity as Solicitor General, and the HON. OMBUDSMAN, respondents, MARIA CLARA L. LOBREGAT and JOSE R. ELEAZAR, JR., intervenors. GANCAYCO, J.: In these petitions the issues raised are: (1) whether or not the Presidential Commission on Good Government (PCGG) has the power to conduct a preliminary investigation of the anti-graft and corruption cases filed by the Solicitor General against Eduardo Cojuangco, Jr. and other respondents for the alleged misuse of coconut levy funds; and (2) on the assumption that it has jurisdiction to conduct such a preliminary investigation, whether or not its conduct constitutes a violation of petitioner's rights to due process and equal protection of the law. On November 28, 1989, President Corazon C. Aquino directed the Solicitor General to prosecute all persons involved in the misuse of coconut levy funds. Pursuant to the above directive the Solicitor General created a task force to conduct a thorough study of the possible involvement of all persons in the anomalous use of coconut levy funds. On January 12, 1990, the Solicitor General filed two criminal complaints with respondent PCGG docketed under I.S. 1 Nos. 74 and 75. The PCGG assigned both complaints to prosecutor Cesario del Rosario for preliminary investigation. The latter scheduled both cases for hearing. Del Rosario prepared a subpoena dated January 16, 1990 setting the preliminary investigation on January 29, 1990 at 2:00 o'clock in the afternoon as to respondents Maria Clara Lobregat, Jose Eleazar, Felix Duenas Jr., and Salvador Escudero, III, and on January 31, 1990 at 2:00 o'clock in the afternoon as to petitioner Eduardo M. Cojuangco, Jr., Rolando de la Cuesta, and Hermenegildo Zayco. At the scheduled preliminary investigation on January 31, 1990 petitioner appeared through counsel. Instead of filing a counter-affidavit, as required in the subpoena, he filed two motions addressed to the PCGG, namely; (1) a motion to disqualify/inhibit PCGG; alternatively, a motion to dismiss; and (2) motion to have the PCGG itself hear or resolve Cojuangco's motion to disqualify/inhibit PCGG alternatively, motion to dismiss. Prosecutor del Rosario denied both motions and declared the proceedings closed and the cases submitted for resolution. Thereafter, petitioner requested the PCGG to resolve directly his aforesaid motions. On February 27, 1990, the PCGG issued an order denying petitioner's motions and required him, together with all the respondents in I.S. Nos. 74 and 75 to submit counter-affidavits within five (5) days from receipt thereof. Petitioner did not submit the required counter-affidavit.

Instead, he filed in this Court on March 12, 1990 the herein petitions for prohibition with prayer for a temporary restraining order/writ of preliminary injunction. He alleges that the PCGG may not conduct a preliminary investigation of the complaints filed by the Solicitor General without violating petitioner's rights to due process and equal protection of the law, and that the PCGG has no right to conduct such preliminary investigation. It is prayed that a temporary restraining order be issued enjoining the respondents and any or all persons acting under their orders or in their behalf from continuing with the preliminary investigation of I.S. Nos. 74 and 75 and enjoining as well the PCGG from taking any further action on said cases; and after hearing on the merits, to issue a writ of preliminary injunction prohibiting respondent PCGG from conducting a preliminary investigation of said criminal complaints and to order that the records of I.S. Nos. 74 and 75 be forwarded to the Ombudsman for such action he may consider appropriate and to pay the costs of the suits. In a resolution dated March 13, 1990, this Court, without giving due course to the petition, resolved to require respondents to comment thereon within ten (10) days from notice. On the same date, the PCGG issued an order that reads as follows: Considering that none of the respondents have filed their counter-affidavits and supporting evidence, except respondent Hermenegildo Zayco, the complaints filed against them may now be considered submitted for resolution by this Commission. Since the respondents, except Hermenegildo Zayco, have not submitted counter-affidavits and controverting evidence, the evidence submitted by the complainants stands uncontradicted. And this Commission finds the findings and conclusions of fact of the investigating prosecutor, that a prima facie case has been established against all the respondents, including Hermenegildo Zayco, to warrant the filing of an information for a violation of Section 3(1) in relation to Section 3(i) thus making them liable under Section 3(a) of RA 3019, to be well-founded. Wherefore, let the corresponding information be filed.
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On March 14, 1990, two informations were filed by the PCGG with the Sandiganbayan against petitioner and all other respondents named in I.S. Nos. 74 and 75 which were docketed as Criminal Cases No. 14398 and 14399. Meanwhile, the Solicitor General filed with the PCGG several other complaints against petitioner and several others bearing on the misuse of the coconut levy funds. Two of these complaints were docketed as I.S. Nos. 79 and 82. A panel of prosecutors designated by the PCGG issued a subpoena to petitioner in order to compel him to appear in the investigation of said cases. On March 20, 1990, petitioner filed a supplemental petition informing the Court of the filing of said informations and the additional complaints aforestated. He prays that a temporary restraining order be issued enjoining respondents and other persons acting under their orders or in their behalf from continuing with the preliminary investigation of as well as taking further action in I.S. Nos. 79 and 82 and similar cases filed with the PCGG. Petitioner also prays that, after hearing, the PCGG be prohibited from continuing with the preliminary investigation of I.S. Nos. 79 and 82 and that it be ordered to forward the records of the case to the Ombudsman for appropriate action, and to pay the costs of the suit. On the same date, petitioner filed a motion reiterating the petition for the issuance of a temporary restraining order/writ of preliminary injunction and alternatively seeking that the case be set for hearing.

On March 22, 1990, the Court admitted the supplemental pleading of the petitioner; required respondents to comment thereon within a non-extendible period of ten (10) days from notice; and issued a status quo order prevailing at the time this petition was filed on March 12, 1990. On April 2, 1990, a consolidated comment was submitted by the respondents attaching as annex thereto the letters of the Executive Secretary dated February 9, 1990 and February 21, 1990, respectively, addressed to the Chairman, PCGG, conveying the instructions of the President of the Philippines that the complaints involving coconut levy funds be filed with the PCGG, to conduct the necessary investigation and if warranted to file and prosecute the cases before the Sandiganbayan; and it confirmed the earlier instructions of the President dated 4 November 28, 1989 to the same effect. On May 4, 1990 petitioner filed a reply to the consolidated comment as required by the Court. In a resolution dated June 5, 1990, the Solicitor General was required to file a rejoinder. On May 31, 1990, a motion for hearing of said cases was filed by petitioner and this was granted by the Court on June 21, 1990. It was directed that the Ombudsman be impleaded as party-respondent. The Court required the Ombudsman to comment on the petition within ten (10) days from notice. The case was set for hearing on Tuesday, July 17, 1990 at 10:00 in the morning. The Ombudsman submitted his comment on July 3, 1990 and the Court required petitioner to file a reply to the same. On July 6, 1990, Maria Clara Lobregat and Jose R. Eleazar, Jr. filed a Motion for Leave to Intervene and a Motion to Admit Petition to Intervene wherein they ask that the PCGG desist from further proceeding with the preliminary investigation of I.S. Nos. 74, 75, 77, 79, 80, 81, 82, 83, and 84 charging the intervenors and other respondents, including petitioner, with violations of the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) in connection with the, coconut levy funds. The intervenors question the authority of the PCGG to conduct a preliminary investigation of the said cases. They maintain that even assuming that the PCGG has such authority, the same cannot be delegated to a prosecutor or his assistants. On July 10, 1990, the court granted the motion for leave to intervene and admitted the petition for intervention. The PCGG was required to comment on said petition within ten (10) days from notice. On July 13, 1990, respondents filed their rejoinder to the reply of petitioner to their consolidated comments. The Ombudsman filed his comment to the petition for intervention, while petitioner filed his reply to the comment of the Ombudsman on July 16, 1990. The hearing was held as scheduled on July 17, 1990 where all the parties including the Ombudsman appeared and/or were duly represented by counsels. After the hearing, the parties were required to submit their simultaneous memoranda within fifteen (15) days from the date of the hearing. On July 21, 1990, the Solicitor General asked for an extension of time within which to file his comment to the petition for intervention. He filed said comment within the period of extension asked for on July 31, 1990. The memoranda of all the parties having been submitted, the petitions were deemed submitted for resolution. On the first issue wherein petitioner and intervenors question the authority of the PCGG to conduct a preliminary investigation of the criminal complaints filed against them by the Solicitor General, the Court finds and so holds the same to be devoid of merit. Under Section 2, Rule 112 of the 1985 Rules of Criminal Procedure the officers authorized to conduct a preliminary investigation are the following:

Sec. 2. Officers authorized to conduct preliminary investigation. The following may conduct a preliminary investigation: (a) Provincial or city fiscals and their assistants; (b) Judges of the Municipal Trial Courts and Municipal Circuit Trial Court; (c) National and Regional state prosecutors; and (d) Such other officers as may be authorized by law. Their authority to conduct preliminary investigation shall include all crimes cognizable by the proper court in their respective territorial jurisdictions. Under Section 2 likewise of Rule 112 of the Rules of Court before its present amendment, the officers authorized to conduct preliminary investigation are as follows: Sec. 2. Officers authorized to conduct preliminary examination: Every justice of the peace, municipal judge, city or provincial fiscal, shall have authority to conduct preliminary examination or investigation in accordance with these rules of all offenses alleged to have been committed within his municipality, city or province, cognizable by the Court of First Instance. The justice of the peace of the provincial capital or of the municipality in which the provincial jail is located when directed by an order of the Court of First Instance, shall have authority to conduct such preliminary examination or investigation of any offense committed anywhere within his province at the expense of the municipality wherein the same was committed. Under Section 3 thereof in case of temporary absence of the justice of the peace or his auxiliary, the municipal mayor may conduct the preliminary investigation. For complaints filed directly with the Court of First Instance, the judge of the said court may refer the case to the justice of the peace or he may himself conduct both the preliminary examination and investigation simultaneously, under Section 13 of the same rule. Upon the enactment of the Anti-Graft and Corrupt Practices Act on August 17, 1960, and Republic Act No. 1379 (covering unexplained wealth cases) on August 18, 1955, the preliminary investigation of cases involving the AntiGraft and Corrupt Practices Act and/or unexplained wealth cases was vested on the aforestated officers. However, on July 17, 1979, Presidential Decree No. 1630 was promulgated whereby the Tanodbayan was vested 6 with the "exclusive authority to conduct preliminary investigation of all cases cognizable by the Sandiganbayan." Under Presidential Decree No. 1486 which was approved on June 11, 1978, the Sandiganbayan was created and vested with exclusive jurisdiction over all offenses committed by public officers enumerated therein. This was amended by Presidential Decree No. 1606 dated December 10, 1978 and further amended by Presidential Decree No. 1861 issued on March 23, 1983 wherein the jurisdiction of the Sandiganbayan was defined as follows: Sec. 1. Section 4 of Presidential Decree No. 1606 is hereby amended to read as follows: Sec. 4. Jurisdiction The Sandiganbayan shall exercise: (a) Exclusive original jurisdiction in all cases involving:
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(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the Revised Penal Code; (2) Other offenses or felonies committed by public officers and employees in relation to their office, including those employed in government-owned or controlled corporations, whether simple or complexed with other crimes, where the penalty prescribed by law is higher than prision correccional or imprisonment for six (6) years, or a fine of P6,000.00: PROVIDED, HOWEVER, that offenses or felonies mentioned in this paragraph where the penalty prescribed by law does not exceed prision correccional or imprisonment for six (6) years or a fine of P6,000.00 shall be tried by the proper Regional Trial Court, Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit Trial Court. (b) Exclusive appellate jurisdiction: (1) On appeal, from the final judgments, resolutions or orders of the Regional Trial Courts in cases originally decided by them in their respective territorial jurisdiction. (2) By petition for review, from the final judgments, resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction. The procedure prescribed in Batas Pambansa Blg. 129, as well as the implementing rules the Supreme Court has promulgated and may hereinafter promulgate, relative to appeals/petitions for review to the Intermediate Appellate Court shall apply to appeals and petition for review filed with the Sandiganbayan. In all cases elevated to the Sandiganbayan, the Office of the Tanodbayan shall represent the People of the Philippines. In case private individuals are charged as co-principals, accomplices or accessories with the public officers or employees, including those employed in government-owned or controlled corporations, they shall be tried jointly with said public officers and employees. Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability arising from the offense charged shall at all times be simultaneously instituted with and jointly determined in the same proceeding by the Sandiganbayan or the appropriate courts, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filing of such civil action separately from the criminal action shall be recognized: PROVIDED, HOWEVER, that where the civil action had heretofore been filed separately but judgment therein has not yet been rendered, and the criminal case is hereafter filed with the Sandiganbayan or the appropriate court, said civil action shall be transferred to the Sandiganbayan or the appropriate court, as the case maybe, for consolidation and joint determination with the criminal action, otherwise the separate civil action shall be considered abandoned. Sec. 2. All cases pending in the Sandiganbayan or in the appropriate courts as of the date of the effectivity of this Decree shall remain with and be disposed of by the courts where they are pending. Sec. 3. The provisions of this Decree notwithstanding, the office of the Tanodbayan shall continue to have the exclusive authority to conduct preliminary investigation, file the necessary

information, and direct and control the prosecution of all cases enumerated in Section 4 of Presidential Decree No. 1606, whether such cases be within the exclusive original/appellate jurisdiction of the Sandiganbayan or the appropriate courts in accordance with the provisions of Presidential Decree No. 1630. (Emphasis supplied.) However, this exclusive jurisdiction of the Tanodbayan to conduct preliminary investigation of said cases was modified by Executive Order No. 1 signed by President Corazon C. Aquino on February 28, 1986 creating the PCGG and constituting its membership to assist the President in the recovery of ill gotten wealth accumulated by the former President, his relatives and cronies. Therein it is provided, among others: Sec. 2. The Commission shall be charged with the task of assisting the President in regard to the following matters: (a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including the takeover or sequestration of all business enterprises and entities owned or controlled by them, during his administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or relationship. (b) The investigation of such cases of graft and corruption as the President may assign to the Commission from time to time. (c) The adoption of safeguards to ensure that the above practices shall not be repeated in any manner under the new government, and the institution of adequate measures to prevent the occurrence of corruption. Sec. 3. The Commission shall have the power and authority: (a) To conduct investigations as may be necessary in order to accomplish and carry out the purposes of this order. (Emphasis supplied.) Under Executive Order No. 14 signed by President Aquino on May 7, 1986, it is also provided: Sec. 1. Any provision of the law to the contrary notwithstanding, the Presidential Commission on Good Government with the assistance of the Office of the Solicitor General and other government agencies, is hereby empowered to file and prosecute all cases investigated by it under Executive Order No. 1, dated February 28, 1986 and Executive Order No. 2, dated March 12, 1986, as may be warranted by its findings. Sec. 2. The Presidential Commission on Good Government shall file all such cases, whether civil or criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof . Sec. 3. Civil suits for restitution, reparation of damages, or indemnification for consequential damages, forfeiture proceedings provided for under Republic Act No. 1379, or any other civil actions under the Civil Code or other existing laws, in connection with Executive Order No.1 dated February 28, 1986 and Executive Order No. 2 dated March 12, 1986, may be filed separately from and proceed independently of any criminal proceedings and may be proved by preponderance of evidence. (Emphasis supplied.)

From the foregoing provisions of law, particularly Sections 2(b) and 3(a) of Executive Order No. 1 and Sections 1 and 2 of Executive Order No. 14, it is clear that the PCGG has the power to investigate and prosecute such illgotten wealth cases of the former President, his relatives and associates, and graft and corrupt practices cases that may be assigned by the President to the PCGG to be filed with the Sandiganbayan. No doubt, the authority to 7 investigate extended to the PCGG includes the authority to conduct a preliminary investigation. Thus, the Tanodbayan lost the exclusive authority to conduct the preliminary investigation of these types of cases by the promulgation of the said Executive Order Nos. 1 and 14 whereby the PCGG was vested concurrent jurisdiction with the Tanodbayan to conduct such preliminary investigation and to prosecute said cases before the 8 Sandiganbayan. The power of the PCGG to conduct a preliminary investigation of the aforementioned types of 9 cases has been recognized by this Court in Bataan Shipyard and Engineering Co. Inc. (BASECO) vs. PCGG. Upon the adoption of the 1987 Constitution, the Office of the Ombudsman was created under Article XI, as follows: Sec. 13. The Office of the Ombudsman shall have the following powers, functions, and duties: (1) Investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or inefficient. (2) Direct, upon complaint or at its own instance, any public official or employee of the Government, or any subdivision, agency or instrumentality thereof, as well as of any government-owned or controlled corporation with original charter, to perform and expedite any act or duty required by law, or to stop, prevent, and correct any abuse or impropriety in the performance of duties. (3) Direct the officer concerned to take appropriate action against a public official or employee at fault, and recommend his removal, suspension, demotion, fine, censure, or prosecution, and ensure compliance therewith. (4) Direct the officer concerned, in any appropriate case and subject to such limitations as may be provided by law, to furnish it with copies of documents relating to contracts or transactions entered into by his office involving the disbursement or use of public funds or properties, and report any irregularity to the Commission on Audit for appropriate action. (5) Request any government agency for assistance and information necessary in the discharge of its responsibilities, and to examine, if necessary, pertinent records and documents. (6) Publicize matters covered by its investigation when circumstances so warrant and with due prudence. (7) Determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption in the Government and make recommendations for their elimination and the observance of high standards of ethics and efficiency. (8) Promulgate its rules of procedure and exercise such other powers or perform such functions or duties as may be provided by law. (Emphasis supplied) This Court, in Zaldivar, interpreting the aforesaid provision of the Constitution, particularly Section 13(1) thereof vesting on the Ombudsman the right and the power to investigate on its own or on complaint, any act or omission
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of any public official, employee, office or agency which appears "to be illegal, unjust, improper, or inefficient", held that the general power of investigation covers the lesser power to conduct a preliminary investigation. Thus, as the power of investigation vested on the Ombudsman under the Constitution includes the power to conduct a preliminary investigation, then the special prosecutor (former Tanodbayan) may no longer conduct such a 11 preliminary investigation unless duly authorized by the Ombudsman. A reading of the foregoing provision of the Constitution does not show that the power of investigation including preliminary investigation vested on the Ombudsman is exclusive. Hence, the said provision of the Constitution did not repeal or remove the power to conduct an investigation, including the authority to conduct a preliminary investigation, vested on the PCGG by Executive Orders Nos. 1 and 14. Although under Section 26 of Article XVIII of the Constitution the authority of the PCGG to issue sequestration or freeze orders was maintained for not more than eighteen months after the ratification of the Constitution, it cannot be construed thereby that its power of investigation had thereby been revoked by the failure to reiterate said power in the Constitution. Indeed, upon the passage of Republic Act No. 6770, otherwise known as the "Ombudsman Act of 1989," it is therein specifically provided in Section 15 as follows: Sec. 15. Powers, Functions and Duties. The Office of the Ombudsman shall have the following powers, functions and duties: (1) Investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and, in the exercise of this primary jurisdiction, it may take over, at any stage, from any investigatory agency of Government, the investigation of such cases; xxx xxx xxx (11) Investigate and initiate the proper action for the recovery of ill-gotten and/or unexplained wealth amassed after February 25, 1986 and the prosecution of the parties involved therein. The Ombudsman shall give priority to complaints filed against high ranking government officials and/or those occupying supervisory positions, complaints involving grave offenses as well as complaints involving large sums of money and/or properties. Under Section 15(l) of Republic Act No. 6770 aforecited, the Ombudsman has primary jurisdiction over cases cognizable by the Sandiganbayan so that it may take over at any stage from any investigatory agency of the government, the investigation of such cases. The authority of the Ombudsman to investigate offenses involving public officers or employees is not exclusive but is concurrent with other similarly authorized agencies of the government. Such investigatory agencies referred to include the PCGG and the provincial and city prosecutors and their assistants, the state prosecutors and the judges of the municipal trial courts and municipal circuit trial courts.
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In other words, the aforestated provision of the law has opened up the authority to conduct preliminary investigation of offenses cognizable by the Sandiganbayan to all investigatory agencies of the government duly authorized to conduct a preliminary investigation under Section 2, Rule 112 of the 1985 Rules of Criminal Procedure with the only qualification that the Ombudsman may take over at any stage of such investigation in the exercise of his primary jurisdiction.

It is also noted that under Section 15(11) of the aforestated Republic Act No. 6770, among the powers vested on the Ombudsman is to investigate and to initiate the proper action for recovery of ill-gotten wealth and/or unexplained wealth amassed after February 25, 1986 and the prosecution of the parties involved therein. The Court agrees with the contention of the public respondent PCGG that this provision is a tacit recognition that the authority of the PCGG to conduct preliminary investigation of ill-gotten wealth and/or unexplained wealth amassed before February 25, 1986 is maintained. However, the Court finds and so holds that the aforesaid provision of the law cannot in any manner dilute or diminish the primary jurisdiction of the Ombudsman over all such types of cases committed by public officers or employees as provided in Section 13, Article XI of the Constitution. Thus, notwithstanding the provision of Section 15(11) of Republic Act No. 6770, the primary jurisdiction of the Ombudsman to investigate covers ill-gotten wealth and/or unexplained wealth cases that occurred even before February 25, 1986. The second issue raised that the preliminary investigation by the PCGG of the aforestated complaints violates the right of petitioner to due process and to equal protection of law is impressed with merit. Under Section 1, Rule 112 of the 1985 Rules on Criminal Procedure, preliminary investigation is defined as "an inquiry or proceeding for the purpose of determining whether there is sufficient ground to engender a wellfounded belief that a crime cognizable by the Regional Trial Court has been committed and that the respondent is probably guilty thereof, and should be held for trial." The purpose of a preliminary investigation is to secure the innocent against hasty, malicious and oppressive prosecution, and to protect him from an open and public accusation of a crime, from the trouble, expense, anxiety 13 of a public trial, and also to protect the state from useless and expensive trials. The conduct of a preliminary investigation is the initial step towards the criminal prosecution of a person. After such preliminary investigation, if the investigating officer finds that there is sufficient ground to engender a wellfounded belief that a crime has been committed and that the respondent is probably guilty thereof and should be held for trial, then the corresponding complaint or information shall be filed in the competent court. It is the filing of said complaint or information that initiates the criminal prosecution of the accused when he is brought to court for trial. Such a preliminary investigation is required for offenses cognizable by the Regional Trial Court and the 14 Sandiganbayan. It must be undertaken in accordance with the procedure provided in Section 3, Rule 112 of the 1985 Rules of Criminal Procedure. This procedure is to be observed in order to assure that a person undergoing such preliminary investigation will be afforded due process. As correctly pointed out by petitioner, an indispensable requisite of due process is that the person who presides and decides over a proceeding, including a preliminary investigation, must possess the cold neutrality of an 15 impartial judge. Although such a preliminary investigation is not a trial and is not intended to usurp the function of the trial court, it is not a casual affair. The officer conducting the same investigates or inquires into the facts concerning the commission of the crime with the end in view of determining whether or not an information may be prepared against the accused. Indeed, a preliminary investigation is in effect a realistic judicial appraisal of the merits of the case. Sufficient proof of the guilt of the accused must be adduced so that when the case is tried, the trial court may not be bound as a matter of law to order an acquittal. A preliminary investigation has then been called a judicial inquiry. It is a judicial proceeding. An act becomes judicial when there is opportunity to be heard and for, the production and weighing of evidence, and a decision is rendered thereon.

The authority of a prosecutor or investigating officer duly empowered to preside or to conduct a preliminary 16 investigation is no less than that of a municipal judge or even a regional trial court judge. While the investigating officer, strictly speaking is not a "judge," by the nature of his functions he is and must be considered to be a quasi judicial officer. Soon after the creation of the PCGG under Executive Order No. 1, the PCGG sequestered and froze all the properties of petitioner Cojuangco in accordance with the powers vested in it by law. On July 31, 1987, said petitioner was sued by the PCGG before the Sandiganbayan by way of a complaint entitled "Republic of the Philippines vs. Eduardo M. Cojuangco, Jr.," et al. docketed as Civil Case No. 0033. Among the allegations of the complaint are as follows: This is a civil action against Defendants Eduardo Cojuangco, Jr., Ferdinand E. Marcos, Imelda R. Marcos and the rest of the Defendants in the above-entitled case to recover from them ill-gotten wealth consisting of funds and other property which they, in unlawful concert with one another, had acquired and accumulated in flagrant breach of trust and of their fiduciary obligations as public officers with, grave abuse of right and power and in brazen violation of the Constitution and laws of the Republic of the Philippines, thus resulting in their unjust enrichment during Defendant Ferdinand E. Marcos' 20 years of rule from December 30, 1965 to February 25, 1986, first as President of the Philippines under the 1935 Constitution and, thereafter, as one man ruler under martial law and Dictator under the 1973 Marcos-promulgated Constitution. 2. The wrongs committed by Defendant acting singly or collectively and in unlawful concert with one another, include the misappropriation and theft of public funds, plunder of the nation's wealth, extortion, blackmail, bribery, embezzlement and other acts of corruption, betrayal of public trust and brazen abuse or power as more fully described below, all at the expense and to 17 the grave and irreparable damage of Plaintiff and the Filipino people. (Emphasis supplied.) The complaint was filed by the PCGG through its Chairman, Ramon A. Diaz, who verified the complaint, and Solicitor General Francisco I. Chavez and Assistant Solicitor General Ramon S. Desuasido. Petitioner in turn filed a counterclaim against the PCGG for the sequestration of his properties and the institution 18 of the suit. He also questioned the acts of the PCGG in several special civil actions before the court. On November 27, 1989, the first working day after petitioner Cojuangco returned to the Philippines, the PCGG filed with the Sandiganbayan an information against said petitioner for violation of Republic Act No. 3019 entitled "People of the Philippines vs. Eduardo M. Cojuangco, Jr." docketed as Criminal Case No. 14161. However, the Sandiganbayan found no probable cause for the issuance of a warrant of arrest so a petition for certiorari was filed by the Solicitor General in this Court docketed as G.R. No. 91741. On March 29, 1990 this Court denied the petition. On November 28, 1989, President Aquino directed the Solicitor General to prosecute all persons involved in the misuse of the coconut levy funds. The Solicitor General created a task force for the purpose. On January 12, 1990, the Solicitor General filed with the PCGG the first two criminal complaints for violation of the Anti-Graft and Corrupt Practices Act, bearing on the anomalous use and/or misuse of the coconut levy funds docketed as I.S. Nos. 74 and 75. Among the respondents were the petitioner and intervenors Lobregat and Eleazar. The PCGG assigned assistant prosecutor Cesario del Rosario to conduct the preliminary investigation. As hereinabove related, a subpoena was issued by the said prosecutor for the preliminary investigation on January 29, 1989 insofar as intervenors are concerned while that of petitioner, de la Cuesta and Herminigildo Zayco was

scheduled on January 31, 1990. In the same subpoena, respondents were required to submit their counteraffidavits and other supporting documents to controvert the complaint within ten (10) days from notice. On the scheduled investigation dated January 29, 1990, intervenors appeared through counsel and moved to dismiss the complaints for lack of jurisdiction of the PCGG to conduct the preliminary investigation but this was denied by said prosecutor. They were asked by the prosecutor if they will submit their counter-affidavits but intervenors' counsel replied that they were not yet ready to file the same because of their pending motion. Thus, the cases were considered closed insofar as they are concerned. The intervenors contested the prosecutor's action before the Sandiganbayan through a petition for certiorari and prohibition docketed as Criminal Case No. 0093. On March 13, 1990, the Sandiganbayan promulgated its decision wherein it declared the preliminary investigation conducted by del Rosario null and void, enjoined the PCGG from filing an information on the basis thereof and directed the PCGG to conduct another preliminary investigation of I.S. Nos. 74 and 75 as to the intervenors and to assign another investigating prosecutor. Earlier however, that is, on February 27, 1990, the PCGG, overruling prosecutor del Rosario's order, gave the intervenors in I.S. Nos. 74 and 75 another period of five (5) days from notice within which to submit their counteraffidavits and supporting evidence. Based on this action the PCGG filed a motion for reconsideration of the aforesaid decision of the Sandiganbayan which had not been resolved. As to petitioner, on the day of the preliminary investigation dated January 31, 1990, his counsel filed a motion to disqualify or inhibit the PCGG, an alternative motion to dismiss, and a motion to have the PCGG itself hear and/or resolve the motion to disqualify or inhibit itself alternatively a motion to dismiss. The preliminary investigation presided by prosecutor del Rosario started at 2:00 o'clock P.M. with eight other respondents duly represented by their counsel. The said motion was denied and the preliminary investigation was adjourned. Immediately thereafter petitioner brought the matter to Chairman Mateo A.T. Caparas of the PCGG and in several communications sought resolution of the motion by the PCGG. On February 27, 1990, the PCGG issued an order denying petitioner's motion to dismiss for lack of jurisdiction but did not resolve the motion to disqualify. Therein, the PCGG directed petitioner to submit his counter-affidavits within five (5) days from receipt of notice. On March 12, 1990, the same day this petition was filed in this Court, the petitioner, instead of filing the counteraffidavit, filed with the PCGG an urgent motion to defer proceedings in I.S. Nos. 74 and 75 for at least until March 22, 1990 within which to seek judicial relief from the order of February 27, 1990. Upon the filing of this petition, petitioner filed a supplemental urgent motion to defer proceedings with the PCGG informing it of the filing of this petition. Nevertheless, on March 14, 1990, the PCGG filed two informations corresponding to the complaints in I.S. Nos. 74 and 75 which are docketed as Criminal Cases Nos. 14398 and 14399, respectively, at the Sandiganbayan. The PCGG recommended bail as P100,000.00 for each case. Meanwhile, the Solicitor General filed two other complaints against the petitioner with the PCGG accusing the petitioner of violation of Republic Act No. 3019 and other penal laws in connection with the coconut levy funds, namely, I.S. No. 79 which concerns an alleged arbitration award in favor of Agricultural Investors Inc., and I.S. No. 82 which concerns the acquisition of coconut oil mills. Several other complaints were filed by the Solicitor General with the PCGG against petitioner for preliminary investigation petition, to wit: (a) I.S. No. 80 which concerns the acquisition of the First United Bank, now United Coconut Planters' Bank; (b) I.S. No. 81 concerning shares of the United Coconut Oil Mills Inc.; (c) I.S. No. 83 regarding the acquisition of coconut oil

mills and certain indebtedness thereof; and (d) I.S. No. 84 regarding settlement of an Anti-Graft suit in the United States. All of these complaints were for alleged violation of Republic Act No. 3019. The question that arises, therefore, is whether under the circumstances of this case, it would be fair and just for the PCGG to conduct the preliminary investigation of the said complaint instead of the Ombudsman or any other duly authorized investigating agency. Upon the creation of the PCGG under Executive Order No. 1 issued by President Aquino, the PCGG was charged with the task of assisting the President not only in the recovery of ill-gotten wealth or unexplained wealth accumulated by the former President, his immediate family, relatives, subordinates and close associates but also in the investigation of such cases of graft and corruption as the President may assign to the Commission from time and to prevent a repetition of the same in the future. Section 3 of Executive Order No. 1 provides as follows: Sec. 3. The Commission shall have the power and authority : (a) To conduct investigation as may be necesssary in order to accomplish and carry out the purposes of this order. (b) To sequester or place or cause to be placed under its control or possession any building or office wherein any ill-gotten wealth or properties may be found, and any records pertaining thereto, in order to prevent their destruction, concealment or disappearance which would frustrate or hamper the investigation or otherwise prevent the Commission from accomplishing its task. (c) To provisionally take over in the public interest or to prevent its disposal or dissipation, business enterprises and properties taken over by the government of the Marcos administration or by entities or persons close to former President Marcos, until the transactions leading to such acquisition by the latter can be disposed of by the appropriate authorities. (d) To enjoin or restrain any actual or threatened commission of acts by any person or entity that may render moot and academic, or frustrate, or otherwise make ineffectual the efforts of the Commission to carry out its tasks under this order. (e) To administer oaths, and issue subpoenas requiring the attendance and testimony of witnesses and/or the production of such books, papers, contracts, records, statement of accounts and other documents as may be material to the investigation conducted by the Commission. (f) To hold any person in direct or indirect contempt and impose the appropriate penalties, following the same procedures and penalties provided in the Rules of Court. (g) To seek and secure the assistance of any office, agency or instrumentality of the government. (h) To promulgate such rules and regulations as may be necessary to carry out the purposes of this order. From the foregoing provisions of law, it is clear that the PCGG has the following powers and authority:

1. To conduct an investigation including the preliminary investigation and prosecution of the ill-gotten wealth cases of former President Marcos, relatives and associates, and graft and corruption cases assigned by the President to it; 2. Issue sequestration orders in relation to property claimed to be ill-gotten; 3. Issue "freeze orders" prohibiting persons in possession of property alleged to be ill-gotten from transferring or otherwise disposing of the same; 4. Issue provisional takeover orders of the said property; 5. Administer oaths and issue subpoenas in the conduct of its investigation; 6. Hold any person in direct or indirect contempt and impose the appropriate penalties as provided by the rules. Considering that the PCGG, like the courts, is vested with the authority to grant provisional remedies of (1) sequestration, (2) freezing assets, and (3) provisional takeover, it is indispensable that, as in the case of attachment and receivership, there exists a prima facie factual foundation, at least, for the sequestration order, freeze order or takeover order, an adequate and fair opportunity to contest it and endeavor to cause its negation or nullification. 19 Both are assured under the foregoing executive orders and the rules and regulations promulgated by the PCGG. Thus, in Baseco, this Court held, as follows: Executive Order No. 14 enjoins that there be "due regard to the requirements of fairness and due process." Executive Order No. 2 declares that with respect to claims on allegedly "ill-gotten" assets and properties, "it is the position of the new democratic government that President Marcos . . . (and other parties affected) be afforded fair opportunity to contest these claims before appropriate Philippine authorities." Section 7 of the Commission's Rules and Regulations provides that sequestration or freeze (and takeover) orders issue upon the authority of at least two commissioners, based on the affirmation or complaint of an interested party, or motu propio when the Commission has reasonable grounds to believe that the issuance thereof is warranted. A similar requirement is now found in Section 26, Art. XVIII of the 1987 Constitution, which requires that "sequestration or freeze order shall be issued only upon showing of a prima facie 20 case." Insofar as the general power of investigation vested in the PCGG is concerned, it may be divided into two stages. The first stage of investigation which is called the criminal investigation stage is the fact-finding inquiring which is usually conducted by the law enforcement agents whereby they gather evidence and interview witnesses after which they assess the evidence and if they find sufficient basis, file the complaint for the purpose of preliminary investigation. The second stage is the preliminary investigation stage of the said complaint. It is at this stage, as above discussed, where it is ascertained if there is sufficient evidence to bring a person to trial. In the petition before this Court, it is not denied that the PCGG conducted the appropriate criminal investigation of petitioner and intervenors as a law enforcer. In the process it sequestered all the properties of the petitioner after a prima facie finding that the same amount to ill-gotten wealth and/or were acquired in relation to allegedly anomalous disposition or misuse of the coconut levy funds. The PCGG then filed on July 31, 1987 a complaint docketed as Civil Case No. 0033 against petitioner and intervenors not only for alleged ill-gotten wealth as associates of former President Marcos but for the unlawful concert with the former President and his wife to unjustly enrich themselves at the expense of the Filipino people through the alleged misuse, misappropriation and dissipation of the coconut levy funds, as enumerated in the

complaint. This complaint was verified and filed by the then Chairman of the PCGG and also signed by the Solicitor General and the Assistant Solicitor General. Among the allegations in the civil complaint, are the very transactions now subject of the criminal complaints filed by the Solicitor General against petitioner to wit: 13. Defendant Eduardo Cojuangco, Jr., taking undue advantage of his association, influence and connection, acting in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, embarked upon devices, schemes and stratagems to unjustly enrich themselves at the expense of Plaintiff and the Filipino people, such as, when he 13(a) manipulated, beginning the year 1975, with the active collaboration of Defendants Juan Ponce Enrile, Maria Clara Lobregat Danilo Ursua, Jose R. Eleazar, Jr. and Herminigildo C. Zayco, the purchase by Philippine Coconut Authority (PCA) of 72.2% of the outstanding capital stock of the First (sic) (FUB)which was subsequently converted into a universal bank named United Coconut Planters Bank (UCPB) through the use of the Coconut Consumers Stabilization-Fund (CCSF) levy initially in the amount of P85,773,100.00 in a manner contrary to law and to the specific purposes for which said coconut levy funds were imposed and collected under P .D. 276, and under anomalous and sinister designs and circumstances, to wit: xxx xxx xxx At pp. 22 to 22-A, Expanded Complaint, Civil Case No.0033) [I.S. No. 080] (c) misappropriated, misused and dissipated P840 million of the Coconut Industry Development Fund (CIDF) levy funds deposited with the National Investment Development Corporation (NIDC) as administrator-trustee of said funds and later with UCPB, of which Defendant Eduardo Cojuangco, Jr. was the Chief Executive Officer in connection with the (i) development, improvement, operation and maintenance of the Bugsuk Island Seed Garden ("BUGSUK") by Agricultural Investors, Inc. ("AII") as developer (both Bugsuk and AII are beneficially held and controlled by Defendant Eduardo Cojuangco, Jr.) pursuant to a highly oppressive, anomalous and one-sided memorandum agreement, dated November 20, 1974, (ii) sale by AII to PCA of the seed nuts produced at Bugsuk Seed Garden at exorbitant prices pursuant to a very onerous, oppressive and disadvantageous agreement, dated August 2, 1985 and (iii) payment of liquidated damages in the amount of P640,856,879.67 and arbitration fee of P150,000.00 pursuant to a decision rendered by a Board of Arbitrators against UCPB for alleged breach of contract.; xxx xxx xxx (At pp. 26-27) [I.S. No. 079] (d) established and caused to be funded with coconut levy funds, with the active collaboration of Defendant Ferdinand E. Marcos through the issuance of LOI 926, and of defendants, Juan Ponce Enrile, Jose R. Eleazar, Jr., Maria Clara Lobregat, Jose C. Concepcion, Inaki Mendezona, Douglas Lu Ym, Teodoro D. Regala, Emmanuel Almeda, Eduardo Escueta, Leo Palma, and Rolando de la Cuesta, the United Coconut Oil Mills, Inc. (UNICOM) a corporation beneficially held and controlled by Defendant Eduardo Cojuangco, Jr. and bought sixteen (16) competing and/or non-

operating oil mills at exorbitant prices in the total amount of P184,935 million, then mothballed them in order to control the prices of copra and other coconut products, and assumed and paid the outstanding loan obligations of seven (7) of those purchased oil mills in the total amount of P805,984 million with the express consent and approval of Defendant Ferdinand E. Marcos, thereby establishing a coconut monopoly for their own benefit and unjust enrichment and to the grave damage of Plaintiff and the Filipino people; (e) manipulated with the active collaboration of Defendants Mohammad Ali Dimaporo and Teodoro D. Regala, the sale of the Mindanao Coconut Oil Mills (MINCOCO) to UNICOM through the issuance of LOI 926 by Defendant Ferdinand E. Marcos, in violation of the Guaranty Agreement dated July 23, 1976, which prohibited the sale, among others, of the MINCOCO assets/properties without the prior written consent of NIDC, under terms and conditions grossly disadvantageous to Plaintiff and the Filipino people; (f) drew up a scheme of payment to settle the accounts of MINCOCO and other UNICOMacquired mills with their respective creditors: namely the National Investment Development Corporation (NIDC), Deveploment Bank of the Philippines (DBP), Philippine Veterans Bank (PVB), under terms grossly disadvantageous to Plaintiff; xxx xxx xxx (At pp. 27-28) [I.S. Nos. 81, 82 and 83] (g) misappropriated and dissipated the coconut levy funds by withdrawing therefrom tens of millions of pesos in order to pay damages adjudged against UNICOM, headed and controlled by Defendant Eduardo Cojuangco, Jr., in an anti-trust suit in California, U.S.A.; xxx xxx xxx (At p. 29) [I.S. No. 84] (h) misused, dissipated and unlawfully disbursed coconut levy funds with the active collaboration and participation of defendants Maria Clara Lobregat, Juan Ponce Enrile, Jose Eleazar, Jr., Rolando de la Cuesta and Herminigildo Zayco as members of the PCA governing board for projects and purposes completely alien to those for which the fund was collected and donations made by PCA such as . . . P6 million to COCOFED; and other similar unlawful disbursements, which all remain unaccounted for to date; xxx xxx xxx (At pp 28 to 28-A Emphasis supplied) [I.S. No. 74 and 75] Thereafter, as aforestated, the Solicitor General filed the first two complaints against petitioner and intervenors among others, under I.S. Nos. 74 and 75 for alleged violation of the Anti Graft and Corrupt Practices Act for donations allegedly made out of coconut levy funds to the Philippine Coconut Producers Federation (COCOFED).

Petitioner and intervenors questioned not only the authority of the PCGG to conduct the preliminary investigation but asserted a denial of due process and equal protection of the law. There is cogent basis for their plea. The PCGG, as a law enforcer, gathered evidence as to the alleged ill-gotten wealth of petitioner and intervenors and, after satisfying itself that there is a prima facie case, sequestered and issued a freeze order for all the properties of petitioner. Based also on the said finding of a prima facie case, the PCGG filed a civil complaint docketed as Civil Case No. 0033 against petitioner and intervenors for alleged ill-gotten wealth including the alleged misuse, misappropriation, and diversion of coconut levy funds. As hereinabove discussed the criminal complaints under I.S. Nos. 74, 79, 80, 81, 82, 83 and 84 filed by the Solicitor General all for alleged violation of Republic Act No. 3019, are covered and alleged in the aforesaid civil complaint docketed as Civil Case No. 0033. The PCGG conducted the preliminary investigation of I.S. Nos. 74 and 75 and is poised to conduct the preliminary investigation of the other aforementioned complaints for the same alleged violations of law subject of the civil complaint. The Court cannot close its eyes to the glaring fact that in earlier instances, the PCGG had already found a prima facie case against the petitioner and intervenors when, acting like a judge, it caused the sequestration of the properties and the issuance of the freeze order of the properties of petitioner. Thereafter, acting as a law enforcer, in collaboration with the Solicitor General, the PCGG gathered the evidence and upon finding cogent basis therefor filed the aforestated civil complaint. Consequently the Solicitor General filed a series of criminal complaints. It is difficult to imagine how in the conduct of such preliminary investigation the PCGG could even make a turn about and take a position contradictory to its earlier findings of a prima facie case against petitioner and intervenors. This was demonstrated in the undue haste with which I.S. Nos. 74 and 75 was investigated and the informations were filed in court even as the petitioner and intervenors questioned its authority, invoked the denial of due process and promptly informed the PCGG of the filing of this petition. In our criminal justice system, the law enforcer who conducted the criminal investigation, gathered the evidence and thereafter filed the complaint for the purpose of preliminary investigation cannot be allowed to conduct the preliminary investigation of his own complaint. It is to say the least arbitrary and unjust. It is in such instances that We say one cannot be "a prosecutor and judge at the same time." Having gathered the evidence and filed the complaint as a law enforcer, he cannot be expected to handle with impartiality the preliminary investigation of his own complaint, this time as a public prosecutor. The circumstances of the instant petition are even worse. To repeat, the PCGG and the Solicitor General finding a prima facie basis filed a civil complaint against petitioner and intervenors alleging substantially the same illegal or criminal acts subject of the subsequent criminal complaints the Solicitor General filed with the PCGG for preliminary investigation. While ostensibly, it is only the Solicitor General who is the complainant in the criminal cases filed with the PCGG, in reality the PCGG is an unidentified co-complainant. Moreover, when the PCGG issued the sequestration and freeze orders against petitioner's properties, it was on the basis of a prima facie finding that the same were ill-gotten and/or were acquired in relation to the illegal disposition of coconut levy funds. Thus, the Court finds that the PCGG cannot possibly conduct the preliminary investigation of said criminal complaints with the "cold neutrality of an impartial judge," as it has prejudged the matter. Add to this the fact that there are many suits filed by petitioner and the intervenors against the PCGG and vice versa. For lesser grounds this Court had disqualified a fiscal or a judge from handling a case.

A fiscal was disqualified from conducting a preliminary investigation because he had appeared for the prosecution 21 when said case was pending in the municipal court. In a case filed before the Commission on Elections this Court held Commissioner Opinion should not have participated in the case since he was the former lawyer of Arturo 22 23 Pacificador. A judge was required to inhibit himself in a case where he was a witness for the complainant. A judge before whom the extrajudicial statement of one of the accused was subscribed was disqualified from 24 hearing the case. A judge who told the complainant is case was weak and it would be to his advantage to settle 25 the case was disqualified. A judge against whom an administrative complaint was filed by one of the parties was 26 also disqualified. In a case where the motion for inhibition was found to be groundless, this Court held that the 27 judge should inhibit himself considering the seriousness of the charges. A judge was asked to inhibit himself 28 from trying a malversation case against the accused since he previously convicted the latter of arson. In another 29 case, the judge was ordered to inhibit himself because of strained relationship with the defendant. There are numerous other cases wherein the judges and fiscals were disqualified on similar grounds as those 30 aforementioned. Where the circumstances do not inspire confidence in the objectivity and impartiality of the judge, such judge should inhibit voluntarily or if he refuses, he should be prohibited from handling the case. Judge must not only be 31 impartial but must also appear impartial as an assurance to the parties that his decision will be just. His 32 actuation must inspire that belief. This is an instance when appearance is as important as reality. The same rule of thumb should apply to an investigating officer conducting a preliminary investigation. This is the reason why under Section 1679 of the former Revised Administrative Code, the Secretary of Justice, who has supervision over the prosecution arm of the government, is given ample power to designate another prosecutor to handle the investigation and prosecution of a case when the prosecutor handling the same is otherwise disqualified by personal interest, or is unable or fails to perform his duty. The Court finds that under the circumstances of the case, the PCGG cannot inspire belief that it could be impartial in the conduct of the preliminary investigation of the aforesaid complaints against petitioner and intervenors. It cannot possibly preside in the said preliminary investigation with an even hand. The Court holds that a just and fair administration of justice can be promoted if the PCGG would be prohibited from conducting the preliminary investigation of the complaints subject of this petition and the petition for intervention and that the records of the same should be forwarded to the Ombudsman, who as an independent constitutional officer has primary jurisdiction over cases of this nature, to conduct such preliminary investigation and take appropriate action. All violators of the law must be brought before the bar of justice. However, they must be afforded due process and equal protection of the law, whoever they may be. WHEREFORE, the petitions of Eduardo M. Cojuangco, Jr. and intervenors Maria Clara Lobregat, and Jose Eleazar, Jr. are hereby GRANTED. The PCGG is directed to transmit the complaints and records thereof under I.S. Nos. 74, 75, 79, 80, 81, 82, 83 and 84 to the Ombudsman for appropriate action. All proceedings of the preliminary investigation conducted by the PCGG of said complaints are hereby declared null and void including the informations which it filed in the Sandiganbayan against petitioner and intervenors docketed as Criminal Cases Nos. 14398 and 14399. The status quo order which this Court issued on March 12, 1990 is hereby made permanent and the PCGG is permanently prohibited from further conducting the preliminary investigation of the aforestated complaints. The Court makes no pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 156278 March 29, 2004

PLANTERS PRODUCTS, INC., petitioner, vs. FERTIPHIL CORPORATION, respondent. DECISION PUNO, J.: Before us is a petition for review under Rule 45 assailing the Decision dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 67434, and its Resolution dated December 4, 2002 denying petitioners motion for reconsideration. Petitioner Planters Products, Inc. ("PPI") and respondent Fertiphil Corporation ("Fertiphil") are domestic corporations engaged in the importation and distribution of fertilizers, pesticides and agricultural chemicals. On the strength of Letter of Instruction No. 1465 issued by then President Ferdinand E. Marcos on June 3, 1985, Fertiphil and other domestic corporations engaged in the fertilizer business paid P10.00 for every bag of fertilizer sold in the country to the Fertilizer and Pesticide Authority (FPA), the government agency governing the fertilizer industry. FPA in turn remitted the amount to PPI for its rehabilitation, according to the express mandate of LOI No. 2 1465. After the EDSA I revolution in 1986, the imposition of P10.00 by the FPA on every bag of fertilizer sold was voluntarily stopped. Fertiphil demanded from PPI the refund of P6,698,144.00 which it paid under LOI No. 1465. PPI refused. Hence, on September 14, 1987, Fertiphil filed a collection and damage suit against FPA and PPI before the Regional Trial Court of Makati City docketed as Civil Case No. 17835 demanding refund of the P6,698,144.00. Fertiphil contended that LOI No. 1465 was void and unconstitutional for being a glaring example of crony capitalism as it favored PPI only. PPI filed its answer but for failure to attend the pre-trial conference, it was declared in default and Fertiphil was allowed to present evidence ex-parte. On November 20, 1991, the RTC of Makati City, Branch 147, decided in favor of Fertiphil declaring LOI No. 1465 void and unconstitutional. It ordered PPI to return the amount which Fertiphil paid thereunder, with twelve percent (12%) interest from the time of judicial demand. PPIs motion for reconsideration was denied in an Order dated February 13, 1992. Hence, it filed notice of appeal on February 20, 1992. At the same time, Fertiphil moved for execution of the decision pending appeal. The trial court granted the motion and a writ of execution pending appeal was issued upon the posting of a surety bond by Fertiphil in the amount of P6,698,000.00. PPI assailed the propriety of the execution pending appeal before the Court of Appeals and, thereafter, to this Court. We resolved 3 the case in its favor in our Decision dated October 22, 1999 in G.R. No. 106052. Fertiphil was ordered to return all the properties of PPI taken in the course of execution pending appeal or the value thereof, if return is no longer possible. After the decision became final and executory, PPI moved for execution before the trial court and Fertiphils bank deposits were accordingly garnished. On January 5, 2001, Fertiphil moved to dismiss PPIs appeal from the trial courts Decision dated November 20, 1991 citing as grounds the non-payment of the appellate docket fee and alleged failure of PPI to prosecute the appeal within a reasonable time. The trial court denied the motion in an Order dated April 3, 2001 ruling that the
1

payment of the appellate docket fee within the period for taking an appeal is a new requirement under the 1997 Rules of Civil Procedure which was not yet applicable when PPI filed its appeal in 1992. Moreover, the court found that PPI did not fail to prosecute the appeal within a reasonable time. On April 5, 2001, the court issued another order, upon PPIs motion, directing Fertiphils banks to deliver to the Deputy Sheriff the garnished deposits maintained with them and for the levying upon of the surety bond posted by Fertiphil. Fertiphil moved to reconsider the Orders dated April 3 and 5, 2001, to no avail. Hence, on October 30, 2001, it filed a special civil action for certiorari with the Court of Appeals imputing grave abuse of discretion on the part of the 4 trial court in issuing the two orders. The Court of Appeals partially granted the petition and set aside the Order dated April 3, 2001. It ruled that although PPI filed its appeal in 1992, the 1997 Rules of Civil Procedure should nevertheless be followed since it applies to actions pending and undetermined at the time of its passage. Due to PPIs failure to pay the appellate docket fee for three (3) years from the time the 1997 Rules of Civil Procedure took effect on July 1, 1997 until Fertiphil moved to dismiss the appeal in 2001, the trial courts decision became final and executory. The Court of Appeals thus disposed of the petition, viz: WHEREFORE, the instant petition is PARTIALLY GRANTED and the Order of 03 April 2001 of the Regional Trial Court of Makati City, Branch 147, is SET ASIDE. The decision of 20 November 1991 of the said court is hereby declared final and executory. The Clerk of Court is directed to return to the Regional Trial Court of Makati City, Branch 147, the record of Civil Case No. 17385 (sic) entitled "Fertiphil Corporation vs. Planters Product(s) Inc., and Fertilizer and Pesticide Authority," for the computation of the amount due the petitioner Fertiphil Corporation pursuant to the 20 November 1991 decision. SO ORDERED.
5

Hence, this petition by PPI. As a general rule, rules of procedure apply to actions pending and undetermined at the time of their passage, hence, retrospective in nature. However, the general rule is not without an exception. Retrospective application is 6 7 allowed if no vested rights are impaired. Thus, in Land Bank of the Philippines v. de Leon our ruling that the appropriate mode of review from decisions of Special Agrarian Courts is a petition for review under Sec. 60 of R.A. No. 6657 and not an ordinary appeal as Sec. 61 thereof seems to imply, was not given retroactive application. We held that to give our ruling a retrospective application would prejudice petitioners pending appeals brought under said Sec. 61 before the Court of Appeals at a time when there was yet no clear pronouncement as to the proper interpretation of the seemingly conflicting Secs. 60 and 61. In fine, to apply the Courts ruling retroactively would prejudice LBPs right to appeal because its pending appeals would then be dismissed outright on a mere technicality thereby sacrificing the substantial merits of the cases. In the instant case, at the time PPI filed its appeal in 1992, all that the rules required for the perfection of its appeal was the filing of a notice of appeal with the court which rendered the judgment or order appealed from, within 8 fifteen (15) days from notice thereof. PPI complied with this requirement when it filed a notice of appeal on February 20, 1992 with the RTC of Makati City, Branch 147, after receiving copy of its Order dated February 13, 1992 denying its motion for reconsideration of the adverse Decision dated November 20, 1991 rendered in Civil Case No. 17835. PPIs appeal was therefore already perfected at that time. Thus, the 1997 Rules of Civil Procedure which took effect on July 1, 1997 and which required that appellate docket 9 and other lawful fees should be paid within the same period for taking an appeal, can not affect PPIs appeal which was already perfected in 1992. Much less could it be considered a ground for dismissal thereof since PPIs

period for taking an appeal, likewise the period for payment of the appellate docket fee as now required by the rules, has long lapsed in 1992. While the right to appeal is statutory, the mode or manner by which this right may be exercised is a question of procedure which may be altered and modified only when vested rights are not 10 impaired. Thus, failure to pay the appellate docket fee when the 1997 Rules of Procedure took effect cannot operate to deprive PPI of its right, already perfected in 1992, to have its case reviewed on appeal. In fact the Court of Appeals recognized such fact when it gave PPI a fresh period to pay the appellate docket fee in an Order dated 11 April 9, 2002 issued in UDK-CV-No. 0304 directing it to pay the fee within fifteen (15) days from receipt thereof. This is not all. We have also previously ruled that failure to pay the appellate docket fee does not automatically 12 result in the dismissal of an appeal, dismissal being discretionary on the part of the appellate court. And in determining whether or not to dismiss an appeal on such ground, courts have always been guided by the peculiar 13 legal and equitable circumstances attendant to each case. Thus, in Pedrosa v. Hill and Gegare v. Court of 14 Appeals, the appeals were dismissed because appellants failed to pay the appellate docket fees despite timely notice given them by the Court of Appeals and despite its admonitions that the appeals would be dismissed in case 15 of non-compliance. On the other hand, the appeal in Mactan Cebu International Airport Authority v. Mangubat was not dismissed because we took into account the fact that the 1997 Rules of Civil Procedure had only been in effect for fourteen (14) days when the Office of the Solicitor General appealed from the decision of the RTC of Lapu-Lapu City on July 14, 1997 without paying the appellate court docket fees as required by the new rules. Considering the recency of the changes and appellants immediate paymen t of the fees when required to do so, the appeal was not dismissed. We can do no less in the instant case where PPI was not even required under the rules in 1992 to pay the appellate docket fees at the time it filed its appeal. We note moreover that PPI, like the appellant in Mactan, promptly paid the fees when required to do so for the first time by the RTC of Makati in its Order dated April 3, 2001, and informed the Court of Appeals of such compliance when it in turn notified PPI that the fees were due, in an Order dated April 9, 2002. The remedy of appeal being an essential part of our judicial system, caution must always be observed so that every party-litigant is not deprived of its right to appeal, but rather, given amplest opportunity for the proper and just disposition of his cause, freed from the constraints of 16 technicalities. Having so ruled, we shall refrain from delving into the merits of petitioners other contentions, discussion of one 17 being the proper subject of the appeal before the Court of Appeals, and the other, being premature at this 18 point. IN VIEW WHEREOF, the petition is GRANTED. The questioned Decision dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 67434 and its Resolution dated December 4, 2002 denying petitioner s motion for reconsideration are SET ASIDE. The Order dated April 3, 2001 of the Regional Trial Court of Makati City, Branch 147, in Civil Case No. 17835 is reinstated, and the Court of Appeals is ordered to proceed with the resolution of petitioners app eal docketed as CA-G.R. CV No. 75501 entitled "Fertiphil Corporation v. Planters Products, Inc." SO ORDERED.

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