Mactan Cebu Intl Airport (MCIAA) vs Judge Marcos

Facts: MCIAA, since the time of its creation, enjoyed the privilege of exemption from payment of realty
taxes in accordance with its charter. The Office of the Treasurer of the City of Cebu, however, demanded
from it the payment of realty taxes over several parcels of land belonging to it. Mciaa was compelled to pay
under protest, thus, it filed a petition for declaratory relief with the RTC. The latter dismissed the petition on
the ground that under Sections 193 and 234 of the Local Govt Code of 1991 (LGC), such exemption from
taxes in favor of GOCCs had been expressly cancelled/withdrawn.
Arguments:
MCIAA: Invokes Section 133 of the LGC which puts limitations on the taxing powers of LGUs on an
instrumentality of the govt performing governmental functions (i.e. carrying out government policies of
promoting and developing the Central Visayas and Mindanao regions as centers of intl trade & tourism x x
x)
Respondents: MCIAA is a GOCC whose tax exemption privilege had been withdrawn by virtue of Sections
193 & 234 of the LGC.
Issue: WON MCIAA< a GOCC, is exempted from the payment of realty taxes pursuant to Section 133 of
the LGCC>
Held: Negative. The last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the
LGC, exemptions from real property taxes granted to natural or juridical persons, including government-
owned or controlled corporations, except as provided in the said section, and the petitioner is,
undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax
granted it in Section 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can
only be justified if MCIAA can show that the parcels of land in question, which are real property, are any
one of those enumerated in Section 234, either by virtue of ownership, character, or use of the property.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency who are to pay it. Nevertheless,
effective limitations thereon may be imposed by the people through their Constitutions.

Our Constitution,
for instance, provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a
progressive system of taxation.

So potent indeed is the power that it was once opined that the power to
tax involves the power to destroy.

Verily, taxation is a destructive power which interferes with the personal
and property for the support of the government. Accordingly, tax statutes must be construed strictly against
the government and liberally in favor of the taxpayer.

But since taxes are what we pay for civilized
society,

or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes
granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of
the taxing authority. A claim of exemption from tax payment must be clearly shown and based on language
in the law too plain to be mistaken.

Elsewise stated, taxation is the rule, exemption therefrom is the
exception.

However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid
rule of construction does not apply because the practical effect of the exemption is merely to reduce the
amount of money that has to be handled by the government in the course of its operations.

Thus, reading together Section 133, 232 and 234 of the LGC, we conclude that as a general rule, as laid
down in Section 133 the taxing powers of local government units cannot extend to the levy of inter alia,
"taxes, fees, and charges of any kind of the National Government, its agencies and instrumentalties, and
local government units"; however, pursuant to Section 232, provinces, cities, municipalities in the
Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by
the Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof
has been granted, for consideration or otherwise, to a taxable person", as provided in item (a) of the first
paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or
juridical persons, including governmentowned and controlled corporations, Section 193 of the LGC
prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except upon the
effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A.
No. 6938, non stock and nonprofit hospitals and educational institutions, and unless otherwise provided in
the LGC. The latter proviso could refer to Section 234, which enumerates the properties exempt from real
property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption in so far
as the real property taxes are concerned by limiting the retention only to those enumerated therein; all
others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as
the real property is owned by the Republic of the Philippines, or any of its political subdivisions covered by
item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such
property has been granted to taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC,
exemptions from real property taxes granted to natural or juridical persons, including governmentowned or
controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a
government owned corporation, it necessarily follows that its exemption from such tax granted it in Section
14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the
petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133,
as it now asserts, since, as shown above, the said section is qualified by Section 232 and 234.
Antonio Callanta vs. Ombudsman
G.R. 11525374 JAN 30, 1998
May officials and employees of the Office of the City Assessor reduce the new assessed values of real
properties upon requests of the affected property owners? To forestall the practice of initially setting
unreasonably high reassessment values only to eventually change them to unreasonably lower values
upon "requests" of property owners, the law gives no such authority to the city assessor or his subalterns.
Seemingly innocuous occasions for mischief and veiled opportunities for graft should be excised from the
public system. Builtin checks should be zealously observed so that the ingenious and shrewd cannot
circumvent them and the audacious cannot violate them with impunity.
FACTS:
It is alleged that ageneral revision of assessment was conducted by the Office of the City Assessor in
1988 and sometime thereafter. Notices of assessment together with the new tax declarations were
subsequently sent to the property owners. Thereafter, respondents, without the authority of the Local
Board of Assessment Appeals, reassessed the values of certain properties, in contravention of Sec. 30 of
P.D. 464. The said assessment resulted in the reduction of assessed values of the properties.
In several similarly worded lettercomplaints dated December 19, 1991, the City of Cebu simultaneously
filed criminal and administrative charges against the above-enumerated officers and staff of the City
Assessor's Office for "violations of Section 106 of the Real Property Tax Code[,] for gross negligence or
willful underassessment of real properties within the city's taxing jurisdiction and for violation of Sec. 3 (e)
of R.A. 3019, otherwise known as the AntiGraft and Corrupt Practices Act[,] for the act of causing undue
injury to the City Government by giving private persons unwarranted benefits, advantages or preferences
in the discharge of their official and administrative functions through manifest partiality, evident bad faith or
gross inexcusable negligence by reassessing the real properties of taxpayers without any authority
whatsoever, thereby resulting in the reduction of tax assessments to the prejudice of the city government
HELD:
Petitioners anchor the validity of their acts upon the absence of a specific provision of law expressly
prohibiting the assessor from making adjustments or corrections in the assessment of real properties, and
upon the longstanding practice of the city assessor's office in making such adjustments/corrections
believed in good faith to be sanctioned under Sec. 22, PD 464.
This is bereft of any merit. Under the procedure, the issuance of a notice of assessment by the local
assessor shall be his last action on a particular assessment. On the side of the property owner, it is this
last action which gives him [the] right to appeal to the Local Board of Assessment Appeals. The above
procedure also, does not grant the property owner the remedy of filing a motion for reconsideration before
the local assessor.
The act of herein petitioners in providing the corresponding notices of assessment the chance for the
property owners concerned to file a motion for reconsideration and for acting on the motions filed is not in
accordance with law and in excess of their authority and therefore constitutes ultra vires acts.

PHILIPPINE RURAL ELECTRIC COOPERATIVES ASSOCIATION, INC., et al. vs. THE SECRETARY
OF DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT
GR. No. 143076. June 10, 2003

Facts:
On May 23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of other electric
cooperatives organized and existing under PD 269 which are members of petitioner Philippine Rural
Electric Cooperatives Association, Inc. (PHILRECA). The other petitioners, electric cooperatives of Agusan
del Norte (ANECO), Iloilo 1 (ILECO 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric
cooperatives organized and existing under PD 269, as amended, and registered with the National
Electrification Administration (NEA).

Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment of all National
Government, local government, and municipal taxes and fee, including franchise, fling recordation, license
or permit fees or taxes and any fees, charges, or costs involved in any court or administrative proceedings
in which it may be party.

From 1971to 1978, in order to finance the electrification projects envisioned by PD 269, as amended, the
Philippine Government, acting through the National Economic council (now National Economic
Development Authority) and the NEA, entered into six loan agreements with the government of the United
States of America, through the United States Agency for International Development (USAID) with electric
cooperatives as beneficiaries. The loan agreements contain similarly worded provisions on the tax
application of the loan and any property or commodity acquired through the proceeds of the loan.
Petitioners allege that with the passage of the Local Government Code their tax exemptions have been
validly withdrawn. Particularly, petitioners assail the validity of Sec. 193 and 234 of the said code. Sec. 193
provides for the withdrawal of tax exemption privileges granted to all persons, whether natural or juridical,
except cooperatives duly registered under RA 6938, while Sec. 234 exempts the same cooperatives from
payment of real property tax.

Issue:
(1) Does the Local Government Code (under Sec. 193 and 234) violate the equal protection clause since
the provisions unduly discriminate against petitioners who are duly registered cooperatives under PD 269,
as amended, and no under RA 6938 or the Cooperatives Code of the Philippines?
(2) Is there an impairment of the obligations of contract under the loan entered into between the Philippine
and the US Governments?

Held:
(1) No. The guaranty of the equal protection clause is not violated by a law based on a reasonable
classification. Classification, to be reasonable must (a) rest on substantial classifications; (b) germane to
the purpose of the law; (c) not limited to the existing conditions only; and (d) apply equally to all members
of the same class. We hold that there is reasonable classification under the Local Government Code to
justify the different tax treatment between electric cooperatives covered by PD 269 and electric
cooperatives under RA 6938.

First, substantial distinctions exist between cooperatives under PD 269 and those under RA 6938. In the
former, the government is the one that funds those so-called electric cooperatives, while in the latter, the
members make equitable contribution as source of funds.

a. Capital Contributions by Members Nowhere in PD 269 does it require cooperatives to make equitable
contributions to capital. Petitioners themselves admit that to qualify as a member of an electric cooperative
under PD 269, only the payment of a P5.00 membership fee is required which is even refundable the
moment the member is no longer interested in getting electric service from the cooperative or will transfer
to another place outside the area covered by the cooperative. However, under the Cooperative Code, the
articles of cooperation of a cooperative applying for registration must be accompanied with the bonds of
the accountable officers and a sworn statement of the treasurer elected by the subscribers showing that at
least 25% of the authorized share capital has been subscribed and at least 25% of the total subscription
has been paid and in no case shall the paid-up share capital be less than P2,000.00.

b. Extent of Government Control over Cooperatives The extent of government control over electric
cooperatives covered by PD 269 is largely a function of the role of the NEA as a primary source of funds of
these electric cooperatives. It is crystal clear that NEA incurred loans from various sources to finance the
development and operations of these electric cooperatives. Consequently, amendments were primarily
geared to expand the powers of NEA over the electric cooperatives o ensure that loans granted to them
would be repaid to the government. In contrast, cooperatives under RA 6938 are envisioned to be self-
sufficient and independent organizations with minimal government intervention or regulation.
Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose
of the law. The Constitutional mandate that every local government unit shall enjoy local autonomy, does
not mean that the exercise of the power by the local governments is beyond the regulation of Congress.
Sec. 193 of the LGC is indicative of the legislative intent to vet broad taxing powers upon the local
government units and to limit exemptions from local taxation to entities specifically provided therein.
Finally, Sec. 193 and 234 of the LGC permit reasonable classification as these exemptions are not limited
to existing conditions and apply equally to all members of the same class.

(2) No. It is ingrained in jurisprudence that the constitutional prohibition on the impairment of the
obligations of contracts does not prohibit every change in existing laws. To fall within the prohibition, the
change must not only impair the obligation of the existing contract, but the impairment must be substantial.
Moreover, to constitute impairment, the law must affect a change in the rights of the parties with reference
to each other and not with respect to non-parties.
The quoted provision under the loan agreement does not purport to grant any tax exemption in favor of
any party to the contract, including the beneficiaries thereof. The provisions simply shift the tax burden, if
any, on the transactions under the loan agreements to the borrower and/or beneficiary of the loan. Thus,
the withdrawal by the Local Government Code under Sec. 193 and 234 of the tax exemptions previously
enjoyed by petitioners does not impair the obligation of the borrower, the lender or the beneficiary under
the loan agreements as, in fact, no tax exemption is granted therein.
PHILIPPINE PORTS AUTHORITY v. CITY OF ILOILO

The exemption of public property from taxation does not extend to improvements made thereon by
homesteaders or occupants at their own expense, it also held the taxability of the warehouse in this case,
it being a mere improvement built on an alleged property of public dominion.

Petitioner Philippine Ports Authority (PPA) is asking the court on Petition for Review on Certiorari to
set aside the ruling ordering it to pay real property and business taxes to respondent City of Iloilo.

The City of Iloilo filed an action for recovery of sum of money against PPA, seeking to collect real
property taxes as well as business taxes, computed from the last quarter of 1984 to the fourth quarter of
1988.

It was alleged that the PPA is engaged in the business of arrastre services, stevedoring services,
leasing of real estate, and a registered owner of a wharehouse which is used in the operation of its
business. From these, PPA was alleged to be obligated to pay business taxes and real property taxes.

The Regional Trial Court (RTC) of Iloilo held PPA liable for the payment of real property taxes and for
business taxes. However, it held that the City of Iloilo may not collect business taxes on PPAs arrastre
and stevedoring services, as these form part of PPAs governmental functions.

The following issues were raised on appeal:

Whether or not the RTC erred in decreeing a property of public dominion (port facility) as subject to
realty taxes just because the mentioned property is being administered by what it perceives to be a taxable
government corporation.

Whether or not the petitioner is subject to business taxes for leasing to private entities real estate
without considering that the petitioner is not engaged in business.

The City countered by stating in its Comment that PPA changed its theory of the case on appeal
citing that the allegation regarding the subject property as public dominion which was never raised during
trial nor in its memorandum filed with the lower court.

ISSUES:

1. Whether or not a party can change its theory of the case on appeal.

2. Whether or not improvements introduced by PPA on public properties are exempted from

tax.

HELD:


As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided
by the lower court will not be permitted to change theory on appeal. Points of law, theories, issues and
arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered
by a reviewing court, as these cannot be raised for the first time at such late stage. However, there is an
exception to the rule as enunciated in Lianga Lumber Co. vs. Lianga Timber Co. Inc., 76 SCRA 197, where
the court said;

In the interest of justice and within the sound discretion of the appellate court, a party may change
theory on appeal only when the factual bases thereof would not require presentation of any further
evidence by the adverse party in order to enable it to properly meet the issue raised in the new theory.

But this exception is not applicable in this case. It must be emphasized that the enumeration of
properties of public dominion under Article 420 of the New Civil Code specifically states ports constructed
by the State. Thus, in order to consider the port in this case as falling under the said classification, the fact
that the port was constructed by the State must first be established by sufficient evidence. Here, there was
no proof adduced to establish that the port was constructed by the State, hence, the court cannot just
automatically conclude that the property is of public dominion.

It is also noted that the PPA failed to raise the issue of ownership during the pre-trial. The pre-trial is
primarily intended to make certain that all issues necessary to the disposition of the case are properly
raised. Consequently, the determination of issues at a pre-trial conference bars the consideration of other
questions on appeal. In the case at bar, the fact that the issue of ownership is outside of what has been
delimited during the pre-trial further justifies the disallowance of PPAs new theory. Hence, PPA may not
be permitted to change its theory on appeal.

Granting that the petitioners present theory is allowed, the court still found its contentions untenable.
It must be stressed that what is being taxed in the present case is PPAs warehouse, which, although
located within the port is distinct from the port itself.

Considering the warehouses separable nature as an improvement upon the port, and the fact that it
is not open for use by everyone and freely accessible to the public, it is not part of the port as stated in
Article 420 of the Civil Code. In the same way that it was ruled that the exemption of public property from
taxation does not extend to improvements made thereon by homesteaders or occupants at their own
expense. Also, it was held that the taxability of the warehouse in this case, it being a mere improvement
built on an alleged property of public dominion.

As regards the second issue raised by PPA regarding the lease of its property to private persons, the
Court ruled that its own admission that it leases out to private persons for convenience and not necessarily
as part of its governmental function of administering port operations is an admission that the act was a
corporate power, which, is actually expressly stated as so in its charter. Any income or profit generated by
an entity, even of a corporation organized without any intention of realizing profit in the conduct of its
activities, is subject to tax (CIR vs. CA, 329 SCRA 237). What matters is the established fact that it leased
out its building to private entities from which it regularly earned substantial income. Thus, in the absence
of any proof of exemption therefrom, PPA is declared liable for the assessed business taxes.


CITY ASSESSOR OF CEBU VS. ASSOCIATION OF BENEVOLA DE CEBU

FACTS:
Benevola de Cebu is a non-stock non-profit organization which in 1990, a medical arts building was
constructed and in 1998 was issued with a certification classifying the building as commercial. City
assessor of Cebu assessed the building with a market value of Php 28,060,520 and on assessed
value of Php 9,821,180 at the assessment level of 35% and not 10% which is currently imposed on
private respondent herein. Petitioner claimed that the building is used as commercial clinic/spaces
for renting out to physicians and thus classified as commercial. Benevola de Cebu contended that
the building is used actually, directly and exclusively part of hospital and should have an assessment
level of 10%

ISSUE:
Whether or not the new building is liable to pay the 35% assessment level?

RULING:
We hold that the new building is an integral part of the hospital and should not be assessed as
commercial. Being a tertiary hospital, it is mandated to fully departmentalized and be equipped with
the service capabilities needed to support certified medical specialist and other licensed physicians.
The fact that they are holding office is a separate building does not take away the essence and
nature of their services vis-a-vis the overall operation of the hospital and to its patients.
Under the Local Government Code, Sec. 26: All lands, buildings and other improvements thereon
actually, directly and exclusively used for hospitals, cultural or scientific purposes and those owned
and used by local water districts shall be classified as special.
CITY GOVERNMENT OF QUEZON vs. BAYANTEL


FACTS:

Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative franchise holder under
Republic Act (Rep. Act) No. 3259 to establish and operate radio stations for domestic telecommunications,
radiophone, broadcasting and telecasting. On January 1, 1992, Rep. Act No. 7160, otherwise known as
the "Local Government Code of 1991" (LGC), took effect. Section 232 of the Code grants local government
units within the Metro Manila Area the power to levy tax on real properties. On July 20, 1992, barely few
months after the LGC took effect, Congress enacted Rep. Act No. 7633, amending Bayantels original
franchise. The amendatory law (Rep. Act No. 7633) contained the following tax provision: It is undisputed
that within the territorial boundary of Quezon City, Bayantel owned several real properties on which it
maintained various telecommunications facilities. In 1993, the government of Quezon City, pursuant to the
taxing power vested on local government units by Section 5, Article X of the 1987 Constitution, in relation
to Section 232 of the LGC, enacted City Ordinance No. SP-91, S-93, otherwise known as the Quezon City
Revenue Code (QCRC), imposing, under Section 5 thereof, a real property tax on all real properties in
Quezon City, and, reiterating in its Section 6, the withdrawal of exemption from real property tax under
Section 234 of the LGC. On March 16, 1995, Rep. Act No. 7925, otherwise known as the "Public
Telecommunications Policy Act of the Philippines," envisaged to level the playing field among
telecommunications companies, took effect. On January 7, 1999, Bayantel wrote the office of the City
Assessor seeking the exclusion of its real properties in the city from the roll of taxable real properties. With
its request having been denied, Bayantel interposed an appeal with the Local Board of Assessment
Appeals (LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay the real
property taxes assessed against it by the Quezon City government. On account thereof, the Quezon City
Treasurer sent out notices of delinquency for the total amount of P43,878,208.18, followed by the issuance
of several warrants of levy against Bayantels properties preparatory to their sale at a public auction set on
July 30, 2002. Threatened with the imminent loss of its properties, Bayantel immediately withdrew its
appeal with the LBAA and instead filed with the RTC of Quezon City a petition for prohibition with an
urgent application for a temporary restraining order (TRO) and/or writ of preliminary injunction. The trial
court ruled in favor of respondent.


ISSUES:

1. Whether or not Bayantels real properties in Quezon City are exempt from real property taxes under its
legislative franchise; and
2. Whether or not Bayantel is required to exhaust administrative remedies before seeking judicial relief with
the trial court.

HELD:

The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely be virtue of a valid delegation as before, but
pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the
exercise of the power may be subject to such guidelines and limitations as the Congress may provide
which, however, must be consistent with the basic policy of local autonomy. Clearly then, while a new slant
on the subject of local taxation now prevails in the sense that the former doctrine of local government units
delegated power to tax had been effectively modified with Article X, Section 5 of the 1987 Constitution now
in place, the basic doctrine on local taxation remains essentially the same. For as the Court stressed in
Mactan, "the power to tax is primarily vested in the Congress." Indeed, the grant of taxing powers to local
government units under the Constitution and the LGC does not affect the power of Congress to grant
exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional
grant to local governments simply means that in interpreting statutory provisions on municipal taxing
powers, doubts must be resolved in favor of municipal corporations. Petitions for prohibition are governed
by the provision of Rule 65 of the Rules of Court. With the reality that Bayantels real properties were
already levied upon on account of its nonpayment of real estate taxes thereon, the Court agrees with
Bayantel that an appeal to the LBAA is not a speedy and adequate remedy within the context of the
aforequoted Section 2 of Rule 65. This is not to mention of the auction sale of said properties already
scheduled on July 30, 2002. Moreover, one of the recognized exceptions to the exhaustion- of-
administrative remedies rule is when, as here, only legal issues are to be resolved. In fact, the Court,
cognizant of the nature of the questions presently involved, gave due course to the instant petition. As the
Court has said in Ty vs. Trampe:

xxx. Although as a rule, administrative remedies must first be exhausted before resort
to judicial action can prosper; there is a well-settled exception in cases where thecontroversy does not
involve questions of fact but only of law. xxx.

CITY OF PASIG vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT- Real Property Tax
FACTS:
MPLDC owned two parcels of land in Pasig City. In 1986, Jose Y. Campos, the registered owner of
MPLDC, voluntarily surrendered MPLDC to the government. From 2002-2005, Pasig City sent notices of
assessment to MPLDC to demand payment of real property taxes. PCGG filed with the RTCC a petition for
prohibition with a prayer for issuance of a TRO claiming ownership over the said properties.
ISSUE:
Are the properties owned by PCGG subject to real property taxes?
HELD:
Only those portions of the properties leased to taxable entities are subject to real estate taxes for the
period of such leases and may also be sold at public auctioned to satisfy the tax delinquency. While it was
established that the owner of the properties is now clearly the Republic of the Philippines given the
voluntary surrender, the Local Government Code clearly states that the exemption will not apply when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. The Court
cited several cases to support the decision such as Philippine Fisheries, GSIS, MIAA, and Lung Center.
Rural Bank of Makati vs City of Makati

Facts:
Upon the request of the municipal treasurer, in August 1990, Atty. Victor A.L. Valero, then the municipal
attorney of the Municipality of Makati, went to the Rural Bank of Makati to inquire about the banks
payments of taxes and fees to the municipality. Petitioner Magdalena V. Landicho, corporate secretary of
the bank, said that the bank was exempt from paying taxes under Republic Act No. 720, as amended.
On November 19, 1990, the municipality filed complaint with the Prosecutors Office, charging petitioners
Esteban S. Silva, president and general manager of the bank and Magdalena V. Landicho for violation of
Section 21(a), Chapter II, Article 3 in relation to Sections 105 and 169 of the Metropolitan Tax Code. On
April 5, 1991, the municipality submitted two (2) Information with the MTC against the respondent bank: 1)
for non-payment of the mayors permit fee and 2) for non-payment of annual business tax. While said
cases were pending with the municipal court, respondent municipality ordered the closure of the bank. This
prompted petitioners to pay, under protest, the mayors permit fee and the annual fixed tax in the amount
of P82,408.66.

On October 18, 1991, petitioners filed with the RTC a Complaint for Sum of Money and Damages.
Petitioners alleged that they were constrained to pay the amount of P82,408.66 because of the closure
order, issued despite the pendency of the criminal cases and the lack of any notice or assessment of the
fees to be paid. They averred that the collection of the taxes/fees was oppressive, arbitrary, unjust and
illegal. Additionally, they alleged that respondent Atty. Valero had no power to enforce laws and
ordinances, thus his action in enforcing the collection of the permit fees and business taxes was ultra vires.
Respondent municipality asserted that petitioners payment of P82,408.66 was for a legal obligation
because the payment of the mayors permit fee as well as the municipal business license was required of
all business concerns. According to respondent, said requirement was in furtherance of the police power of
the municipality to regulate businesses.

RTC rules in favor of the municipal of Makati. According to the trial court, the bank was engaged in
business as a rural bank. Hence, it should secure the necessary permit and business license, as well as
pay the corresponding charges and fees. It found that the municipality had authority to impose licenses
and permit fees on persons engaging in business, under its police power embodied under the general
welfare clause. Also, the RTC declared unmeritorious petitioners claim for exemption under Rep. Act No.
720 since said exemption had been withdrawn by Executive Order No. 93 and the Rural Bank Act of 1992.
These statutes no longer exempted rural banks from paying corporate income taxes and local taxes, fees
and charges.

The CA affirmed RTCs decision in toto. CA also brushed aside petitioners claim that the general welfare
clause is limited only to legislative action. It declared that the exercise of police power by the municipality
was mandated by the general welfare clause, which authorizes the local government units to enact
ordinances, not only to carry into effect and discharge such duties as are conferred upon them by law, but
also those for the good of the municipality and its inhabitants. This mandate includes the regulation of
useful occupations and enterprises. Hence the present complaint.

Petitioner bank claims that the closure of the bank was an improper exercise of police power because a
municipal corporation has no inherent but only delegated police power, which must be exercised not by the
municipal mayor but by the municipal council through the enactment of ordinances. It also assailed the
Court of Appeals for invoking the General Welfare Clause embodied in Section 16 of the Local
Government Code of 1991, which took effect in 1992, when the closure of the bank was actually done on
July 31, 1991.

ISSUE: Whether or not the municipalitys police power covers the power to tax and the power to order the
respondents bank closure.

HELD:

Rep. Act No. 720, as amended by Republic Act No. 4106, approved on July 19, 1964, had exempted rural
banks with net assets not exceeding one million pesos (P1,000,000) from the payment of all taxes,
charges and fees. The records show that as of December 29, 1986, petitioner banks net assets amounted
only to P745,432.29. Hence, petitioner bank could claim to be exempt from payment of all taxes, charges
and fees under the aforementioned provision. However, EO 93 was issued by then President Aquino,
withdrawing all tax and duty incentives with certain exceptions. Notably, not included among the
exceptions were those granted to rural banks under Rep. Act No. 720. With the passage of said law,
petitioner could no longer claim any exemption from payment of business taxes and permit fees.
Indeed the Local Government Code of 1991 was not yet in effect when the municipality ordered petitioner
banks closure on July 31, 1991. However, the general welfare clause invoked by the Court of Appeals is
not found on the provisions of said law alone. Even under the old Local Government Code (Batas
Pambansa Blg. 337) which was then in effect, a general welfare clause was provided for in Section 7
thereof.

Municipal corporations are agencies of the State for the promotion and maintenance of local self-
government and as such are endowed with police powers in order to effectively accomplish and carry out
the declared objects of their creation. The authority of a local government unit to exercise police power
under a general welfare clause is not a recent development. This was already provided for as early as the
Administrative Code of 1917. Thus, the closure of the bank was a valid exercise of police power pursuant
to the general welfare clause contained in and restated by B.P. Blg. 337, which was then the law
governing local government units. No reversible error arises in this instance insofar as the validity of
respondent municipalitys exercise of police power for the general welfare is concerned.

The general welfare clause has two branches. The first, known as the general legislative power, authorizes
the municipal council to enact ordinances and make regulations not repugnant to law, as may be
necessary to carry into effect and discharge the powers and duties conferred upon the municipal council
by law. The second, known as the police power proper, authorizes the municipality to enact ordinances as
may be necessary and proper for the health and safety, prosperity, morals, peace, good order, comfort,
and convenience of the municipality and its inhabitants, and for the protection of their property.
In the present case, the ordinances imposing licenses and requiring permits for any business
establishment, for purposes of regulation enacted by the municipal council of Makati, fall within the purview
of the first branch of the general welfare clause. Moreover, the ordinance of the municipality imposing the
annual business tax is part of the power of taxation vested upon local governments as provided for under
Section 8 of B.P. Blg. 337.

Consequently, the municipal mayor, as chief executive, was clothed with authority to create a Special Task
Force headed by respondent Atty. Victor A.L. Valero to enforce and implement said ordinances and
resolutions and to file appropriate charges and prosecute violators. Respondent Valero could hardly be
faulted for performing his official duties under the cited circumstances.

On the issue of the closure of the bank, we find that the bank was not engaged in any illegal or immoral
activities to warrant its outright closure. The appropriate remedies to enforce payment of delinquent taxes
or fees are provided for in Section 62 of the Local Tax Code. Said Section 62 did not provide for closure.
Moreover, the order of closure violated petitioners right to due process, considering that the records show
that the bank exercised good faith and presented what it thought was a valid and legal justification for not
paying the required taxes and fees. The violation of a municipal ordinance does not empower a municipal
mayor to avail of extrajudicial remedies. It should have observed due process before ordering the banks
closure.

WHEREFORE, the assailed Decision dated July 17, 2001, of the Court of Appeals in CA-G.R. CV No.
58214 is AFFIRMED with MODIFICATIONS, so that (1) the order denying any claim for refunds and fees
allegedly overpaid by the bank, as well as the denial of any award for damages and unrealized profits, is
hereby SUSTAINED; (2) the order decreeing the closure of petitioner bank is SET ASIDE; and (3) the
award of moral damages and attorneys fees to Atty. Victor A.L. Valero is DELETED. No pronouncement
as to costs.



Angeles City v. Angeles Electric Corporation

FACTS: On January 22, 2004, the City Treasurer issued a Notice of Assessment to Angeles Electric Corporation
(AEC) for payment of business tax, license fee and other charges for the period 1993 to 2004 in the total amount
of P94,861,194.10. Within the period prescribed by law, AEC protested the assessment. When the city Treasurer
denied the protest and ordered petitioner to settle its obligation, petitioner filed with the RTC a petition praying for the
issuance of a TRO which was granted. The city government opposed on the ground that per NIRC the collection of
taxes cannot be enjoined.

ISSUE: Whether or not the collection of local government taxes can be enjoined.

HELD: The prohibition on the issuance of a writ of injunction to enjoin the collection of taxes applies only to national
internal revenue taxes and not to local taxes.

RATIO: There is no express provision in the Local Government Code prohibiting courts from issuing injunction to
restrain local governments from collecting taxes. Furthermore, when there is no other plain, speedy and adequate
remedy available to the petitioner in the ordinary course of law except this application for a temporary restraining order
and/or writ of preliminary injunction to stop the auction sale and/or to enjoin and/or restrain respondents from levying,
annotating the levy, seizing, confiscating, garnishing, selling and disposing at public auction the properties of
petitioner, or otherwise exercising other administrative remedies against the petitioner and its properties, justifies the
move of the petitioner in seeking the injunctive reliefs sought for.