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 an amendment to two municipal ordinances separately imposing license taxes on
operators of sugar centrals 1 and sugar refineries. 2 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 3 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:

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 4 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 Revised Manual of Instructions to Treasurers of
Provinces, Cities and Municipalities, 1954 edition, 5 regarding the treatment of license taxes paid
under protest by virtue of a disputed ordinance; and other reliefs. 6

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 licensing, regulating and surveillance," 7 the trial court
ruled that said license taxes in dispute are unreasonable, 8 and held that: "If the defendant has the
power to tax the plaintiff for purposes of revenue, it may do so by proper municipal legislation,
but not in the guise of a license tax." 9 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 ordered
to refund, while the plaintiff may perhaps easily forego or forget what it had already parted
with". 10 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
the plaintiff any and all such license taxes paid under protest after notice of this decision.
11

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 non-useful occupations or enterprises; and (3) license for revenue.
12
The first two easily fall within the broad police power granted under the general welfare clause.
13
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 power must be expressly
conferred by statute upon the municipality. 14 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 No. 18 imposes "municipal taxes on persons, firms or
corporations operating refinery mills in this municipality." 15 Ordinance No. 25 speaks of
municipal taxes "relative to the output of the sugar centrals." 16

What are these taxes for? Resolution No. 60 of the municipal council of Victorias, 17 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;

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 picul today is more than twice its pre-war average price; . . . . 18

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 designate impositions exacted for the exercise of various privileges." 19 It does
not refer solely to a license for regulation. In many instances, it refers to "revenue-raising
exactions on privileges or activities." 20 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 regulation." 21

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 imposition as may be apparent from the provisions of the ordinance. 22
Thus, "[w]hen no police inspection, supervision, or regulation is provided, nor any standard set
for the applicant 23 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 licensee, the presumption is strong that the power of taxation, and not the police
power, is being exercised." 24

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
pronouncements which have gained foothold in this jurisdiction. In Standard Vacuum vs.
Antigua, 25 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 accordance with
the last part of Section 1 of Commonwealth Act No. 472. It is, therefore, valid." 26
The present case is not to be analogized with Panaligan vs. City of Tacloban cited in the decision
below. 27 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, 28 Lacson vs. City of
Bacolod, 29 and Santos vs. Municipal Government of Caloocan, 30 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 resolution (No. 1864) of October 26, 1956. 31 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 ensuing calendar year [1957] pursuant to
Section 2309 of the Revised Administrative Code." 32

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 based on the amount of the proceeds realized
out of the sale of sugar, centrifugal or refined. 34

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".

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 to tax the same field. This doctrine primarily rests upon the
intention of Congress. 35 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, oppressive, or confiscatory. 36 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. 37

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 ordinance. For, "if the charge exceeds the expense of issuance of a license and costs of
regulation, it is a tax." 38 And if it is, and it is validly imposed, as in this case, "the rule that
license fees for regulation must bear a reasonable relation to the expense of the regulation has no
application." 39

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 there is a flagrant, oppressive and excessive
abuse of power by said municipal authorities. 40

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 ranged
from P12.00 to P15.00 per picul. 41 And yet, since then the rate per output capacity of a sugar
central in Ordinance No. 1 was merely from one centavo to two centavos. There is a statement in
the municipality's brief 42 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 central and sugar refinery is more or less P26,000,000.00. 43 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; and for the year
1960 P7,809,250. 44 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.
Argument along the same lines was rejected in Shell Co. of P.I., Ltd. vs. Vao, 45 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 Ormoc City, 46
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 by-products "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 as well. 47 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." 48 For double
taxation to exist, "the same property must be taxed twice, when it should be taxed but once." 49
Double taxation has also been "defined as taxing the same person twice by the same jurisdiction
for the same thing." 50 As stated in Manila Motor Company, Inc. vs. Ciudad de Manila, 51 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.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-26521 December 28, 1968

EUSEBIO VILLANUEVA, ET AL., plaintiff-appellee,

vs.
CITY OF ILOILO, defendants-appellants.

Pelaez, Jalandoni and Jamir for plaintiff-appellees.

Assistant City Fiscal Vicente P. Gengos for defendant-appellant.

CASTRO, J.:

Appeal by the defendant City of Iloilo from the decision of the Court of First Instance of Iloilo
declaring illegal Ordinance 11, series of 1960, entitled, "An Ordinance Imposing Municipal
License Tax On Persons Engaged In The Business Of Operating Tenement Houses," and ordering
the City to refund to the plaintiffs-appellees the sums of collected from them under the said
ordinance.
On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86, imposing
license tax fees as follows: (1) tenement house (casa de vecindad), P25.00 annually; (2) tenement
house, partly or wholly engaged in or dedicated to business in the streets of J.M. Basa, Iznart and
Aldeguer, P24.00 per apartment; (3) tenement house, partly or wholly engaged in business in any
other streets, P12.00 per apartment. The validity and constitutionality of this ordinance were
challenged by the spouses Eusebio Villanueva and Remedies Sian Villanueva, owners of four
tenement houses containing 34 apartments. This Court, in City of Iloilo vs. Remedios Sian
Villanueva and Eusebio Villanueva, L-12695, March 23, 1959, declared the ordinance ultra vires,
"it not appearing that the power to tax owners of tenement houses is one among those clearly and
expressly granted to the City of Iloilo by its Charter."

On January 15, 1960 the municipal board of Iloilo City, believing, obviously, that with the
passage of Republic Act 2264, otherwise known as the Local Autonomy Act, it had acquired the
authority or power to enact an ordinance similar to that previously declared by this Court as ultra
vires, enacted Ordinance 11, series of 1960, hereunder quoted in full:

AN ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS

ENGAGED IN THE BUSINESS OF OPERATING TENEMENT HOUSES

Be it ordained by the Municipal Board of the City of Iloilo, pursuant to the provisions of
Republic Act No. 2264, otherwise known as the Autonomy Law of Local Government,
that:

Section 1. A municipal license tax is hereby imposed on tenement houses in

accordance with the schedule of payment herein provided.

Section 2. Tenement house as contemplated in this ordinance shall mean any building
or dwelling for renting space divided into separate apartments or accessorias.

Section 3. The municipal license tax provided in Section 1 hereof shall be as follows:

I. Tenement houses:
P20.00 per door
(a) Apartment house made of strong materials p.a.
P10.00 per door
(b) Apartment house made of mixed materials p.a.

P10.00 per door

II Rooming house of strong materials p.a.
P5.00 per door
Rooming house of mixed materials p.a.
III. Tenement house partly or wholly engaged in or P30.00 per door
dedicated to business in the following streets: J.M. p.a.
Basa, Iznart, Aldeguer, Guanco and Ledesma from
 Plazoleto Gay to Valeria. St.
IV. Tenement house partly or wholly engaged in or P12.00 per door
dedicated to business in any other street p.a.
V. Tenement houses at the streets surrounding the
super market as soon as said place is declared P24.00 per door
commercial p.a.

Section 4. All ordinances or parts thereof inconsistent herewith are hereby amended.

Section 5. Any person found violating this ordinance shall be punished with a fine
note exceeding Two Hundred Pesos (P200.00) or an imprisonment of not more than six
(6) months or both at the discretion of the Court.

Section 6 This ordinance shall take effect upon approval.

ENACTED, January 15, 1960.

In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five
tenement houses, aggregately containing 43 apartments, while the other appellees and the same
Remedios S. Villanueva are owners of ten apartments. Each of the appellees' apartments has a
door leading to a street and is rented by either a Filipino or Chinese merchant. The first floor is
utilized as a store, while the second floor is used as a dwelling of the owner of the store. Eusebio
Villanueva owns, likewise, apartment buildings for rent in Bacolod, Dumaguete City, Baguio
City and Quezon City, which cities, according to him, do not impose tenement or apartment
taxes.

By virtue of the ordinance in question, the appellant City collected from spouses Eusebio
Villanueva and Remedios S. Villanueva, for the years 1960-1964, the sum of P5,824.30, and
from the appellees Pio Sian Melliza, Teresita S. Topacio, and Remedios S. Villanueva, for the
years 1960-1964, the sum of P1,317.00. Eusebio Villanueva has likewise been paying real estate
taxes on his property.

On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an amended
complaint, respectively, against the City of Iloilo, in the aforementioned court, praying that
Ordinance 11, series of 1960, be declared "invalid for being beyond the powers of the Municipal
Council of the City of Iloilo to enact, and unconstitutional for being violative of the rule as to
uniformity of taxation and for depriving said plaintiffs of the equal protection clause of the
Constitution," and that the City be ordered to refund the amounts collected from them under the
said ordinance.

On March 30, 1966,1 the lower court rendered judgment declaring the ordinance illegal on the
grounds that (a) "Republic Act 2264 does not empower cities to impose apartment taxes," (b) the
same is "oppressive and unreasonable," for the reason that it penalizes owners of tenement
houses who fail to pay the tax, (c) it constitutes not only double taxation, but treble at that and
(d) it violates the rule of uniformity of taxation.
The issues posed in this appeal are:

1. Is Ordinance 11, series of 1960, of the City of Iloilo, illegal because it imposes double
taxation?

2. Is the City of Iloilo empowered by the Local Autonomy Act to impose tenement taxes?

3. Is Ordinance 11, series of 1960, oppressive and unreasonable because it carries a penal
clause?

4. Does Ordinance 11, series of 1960, violate the rule of uniformity of taxation?

1. The pertinent provisions of the Local Autonomy Act are hereunder quoted:

SEC. 2. 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 licences 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; Provided, however, That no city,
municipality or municipal district may levy or impose any of the following:

(a) Residence tax;

(b) Documentary stamp tax;

(c) Taxes on the business of persons engaged in the printing and publication of any
newspaper, magazine, review or bulletin appearing at regular intervals and having fixed
prices for for subscription and sale, and which is not published primarily for the purpose
of publishing advertisements;

(d) Taxes on persons operating waterworks, irrigation and other public utilities except
electric light, heat and power;

(e) Taxes on forest products and forest concessions;

(f) Taxes on estates, inheritance, gifts, legacies, and other acquisitions mortis causa;
 (g) Taxes on income of any kind whatsoever;

(h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof;

(i) Customs duties registration, wharfage dues on wharves owned by the national
government, tonnage, and all other kinds of customs fees, charges and duties;

(j) Taxes of any kind on banks, insurance companies, and persons paying franchise tax;
and

(k) Taxes on premiums paid by owners of property who obtain insurance directly with
foreign insurance companies.

A tax ordinance shall go into effect on the fifteenth day after its passage, unless the
ordinance shall provide otherwise: Provided, however, That the Secretary of Finance
shall have authority to suspend the effectivity of any ordinance within one hundred and
twenty days after its passage, if, in his opinion, the tax or fee therein levied or imposed is
unjust, excessive, oppressive, or confiscatory, and when the said Secretary exercises this
authority the effectivity of such ordinance shall be suspended.

In such event, the municipal board or city council in the case of cities and the municipal
council or municipal district council in the case of municipalities or municipal districts
may appeal the decision of the Secretary of Finance to the court during the pendency of
which case the tax levied shall be considered as paid under protest.

It is now settled that the aforequoted provisions of Republic Act 2264 confer on local
governments broad taxing authority which extends to almost "everything, excepting those which
are mentioned therein," provided that the tax so levied is "for public purposes, just and uniform,"
and does not transgress any constitutional provision or is not repugnant to a controlling statute. 2
Thus, when a tax, levied under the authority of a city or municipal ordinance, is not within the
exceptions and limitations aforementioned, the same comes within the ambit of the general rule,
pursuant to the rules of expressio unius est exclusio alterius, and exceptio firmat regulum in
casibus non excepti.

Does the tax imposed by the ordinance in question fall within any of the exceptions provided for
in section 2 of the Local Autonomy Act? For this purpose, it is necessary to determine the true
nature of the tax. The appellees strongly maintain that it is a "property tax" or "real estate tax," 3
and not a "tax on persons engaged in any occupation or business or exercising privileges," or a
license tax, or a privilege tax, or an excise tax. 4 Indeed, the title of the ordinance designates it as
a "municipal license tax on persons engaged in the business of operating tenement houses,"
while section 1 thereof states that a "municipal license tax is hereby imposed on tenement
houses." It is the phraseology of section 1 on which the appellees base their contention that the
tax involved is a real estate tax which, according to them, makes the ordinance ultra vires as it
imposes a levy "in excess of the one per centum real estate tax allowable under Sec. 38 of the
Iloilo City Charter, Com. Act 158."5.
It is our view, contrary to the appellees' contention, that the tax in question is not a real estate tax.
Obviously, the appellees confuse the tax with the real estate tax within the meaning of the
Assessment Law,6 which, although not applicable to the City of Iloilo, has counterpart provisions
in the Iloilo City Charter.7 A real estate tax is a direct tax on the ownership of lands and buildings
or other improvements thereon, not specially exempted, 8 and is payable regardless of whether the
property is used or not, although the value may vary in accordance with such factor.9 The tax is
usually single or indivisible, although the land and building or improvements erected thereon are
assessed separately, except when the land and building or improvements belong to separate
owners.10 It is a fixed proportion11 of the assessed value of the property taxed, and requires,
therefore, the intervention of assessors.12 It is collected or payable at appointed times, 13 and it
constitutes a superior lien on and is enforceable against the property14 subject to such taxation,
and not by imprisonment of the owner.

The tax imposed by the ordinance in question does not possess the aforestated attributes. It is not
a tax on the land on which the tenement houses are erected, although both land and tenement
houses may belong to the same owner. The tax is not a fixed proportion of the assessed value of
the tenement houses, and does not require the intervention of assessors or appraisers. It is not
payable at a designated time or date, and is not enforceable against the tenement houses either by
sale or distraint. Clearly, therefore, the tax in question is not a real estate tax.

"The spirit, rather than the letter, or an ordinance determines the construction thereof, and the
court looks less to its words and more to the context, subject-matter, consequence and effect.
Accordingly, what is within the spirit is within the ordinance although it is not within the letter
thereof, while that which is in the letter, although not within the spirit, is not within the
ordinance."15 It is within neither the letter nor the spirit of the ordinance that an additional real
estate tax is being imposed, otherwise the subject-matter would have been not merely tenement
houses. On the contrary, it is plain from the context of the ordinance that the intention is to
impose a license tax on the operation of tenement houses, which is a form of business or calling.
The ordinance, in both its title and body, particularly sections 1 and 3 thereof, designates the tax
imposed as a "municipal license tax" which, by itself, means an "imposition or exaction on the
right to use or dispose of property, to pursue a business, occupation, or calling, or to exercise a
privilege."16.

"The character of a tax is not to be fixed by any isolated words that may beemployed in
the statute creating it, but such words must be taken in the connection in which they are
used and the true character is to be deduced from the nature and essence of the subject." 17
The subject-matter of the ordinance is tenement houses whose nature and essence are
expressly set forth in section 2 which defines a tenement house as "any building or
dwelling for renting space divided into separate apartments or accessorias." The Supreme
Court, in City of Iloilo vs. Remedios Sian Villanueva, et al., L-12695, March 23, 1959,
adopted the definition of a tenement house18 as "any house or building, or portion thereof,
which is rented, leased, or hired out to be occupied, or is occupied, as the home or
residence of three families or more living independently of each other and doing their
cooking in the premises or by more than two families upon any floor, so living and
cooking, but having a common right in the halls, stairways, yards, water-closets, or
privies, or some of them." Tenement houses, being necessarily offered for rent or lease by
 their very nature and essence, therefore constitute a distinct form of business or calling,
similar to the hotel or motel business, or the operation of lodging houses or boarding
houses. This is precisely one of the reasons why this Court, in the said case of City of
Iloilo vs. Remedios Sian Villanueva, et al., supra, declared Ordinance 86 ultra vires,
because, although the municipal board of Iloilo City is empowered, under sec. 21, par. j
of its Charter, "to tax, fix the license fee for, and regulate hotels, restaurants, refreshment
parlors, cafes, lodging houses, boarding houses, livery garages, public warehouses,
pawnshops, theaters, cinematographs," tenement houses, which constitute a different
business enterprise,19 are not mentioned in the aforestated section of the City Charter of
Iloilo. Thus, in the aforesaid case, this Court explicitly said:.

"And it not appearing that the power to tax owners of tenement houses is one among
those clearly and expressly granted to the City of Iloilo by its Charter, the exercise of
such power cannot be assumed and hence the ordinance in question is ultra vires insofar
as it taxes a tenement house such as those belonging to defendants." .

The lower court has interchangeably denominated the tax in question as a tenement tax or an
apartment tax. Called by either name, it is not among the exceptions listed in section 2 of the
Local Autonomy Act. On the other hand, the imposition by the ordinance of a license tax on
persons engaged in the business of operating tenement houses finds authority in section 2 of the
Local Autonomy Act which provides that chartered cities have the authority to impose municipal
license taxes or fees upon persons engaged in any occupation or business, or exercising
privileges within their respective territories, and "otherwise to levy for public purposes, just and
uniform taxes, licenses, or fees." .

2. The trial court condemned the ordinance as constituting "not only double taxation but treble at
that," because "buildings pay real estate taxes and also income taxes as provided for in Sec. 182
(A) (3) (s) of the National Internal Revenue Code, besides the tenement tax under the said
ordinance." Obviously, what the trial court refers to as "income taxes" are the fixed taxes on
business and occupation provided for in section 182, Title V, of the National Internal Revenue
Code, by virtue of which persons engaged in "leasing or renting property, whether on their
account as principals or as owners of rental property or properties," are considered "real estate
dealers" and are taxed according to the amount of their annual income.20.

While it is true that the plaintiffs-appellees are taxable under the aforesaid provisions of the
National Internal Revenue Code as real estate dealers, and still taxable under the ordinance in
question, the argument against double taxation may not be invoked. The same tax may be
imposed by the national government as well as by the local government. There is nothing
inherently obnoxious in the exaction of license fees or taxes with respect to the same occupation,
calling or activity by both the State and a political subdivision thereof.21.

The contention that the plaintiffs-appellees are doubly taxed because they are paying the real
estate taxes and the tenement tax imposed by the ordinance in question, is also devoid of merit. It
is a well-settled rule that a license tax may be levied upon a business or occupation although the
land or property used in connection therewith is subject to property tax. The State may collect an
ad valorem tax on property used in a calling, and at the same time impose a license tax on that
calling, the imposition of the latter kind of tax being in no sensea double tax.22.

"In order to constitute double taxation in the objectionable or prohibited sense the same
property must be taxed twice when it should be taxed but once; both taxes must be
imposed on the same property or subject-matter, for the same purpose, by the same State,
Government, or taxing authority, within the same jurisdiction or taxing district, during the
same taxing period, and they must be the same kind or character of tax." 23 It has been
shown that a real estate tax and the tenement tax imposed by the ordinance, although
imposed by the sametaxing authority, are not of the same kind or character.

At all events, there is no constitutional prohibition against double taxation in the Philippines. 24 It
is something not favored, but is permissible, provided some other constitutional requirement is
not thereby violated, such as the requirement that taxes must be uniform."25.

3. The appellant City takes exception to the conclusion of the lower court that the ordinance is
not only oppressive because it "carries a penal clause of a fine of P200.00 or imprisonment of 6
months or both, if the owner or owners of the tenement buildings divided into apartments do not
pay the tenement or apartment tax fixed in said ordinance," but also unconstitutional as it
subjects the owners of tenement houses to criminal prosecution for non-payment of an obligation
which is purely sum of money." The lower court apparently had in mind, when it made the above
ruling, the provision of the Constitution that "no person shall be imprisoned for a debt or non-
payment of a poll tax."26 It is elementary, however, that "a tax is not a debt in the sense of an
obligation incurred by contract, express or implied, and therefore is not within the meaning of
constitutional or statutory provisions abolishing or prohibiting imprisonment for debt, and a
statute or ordinance which punishes the non-payment thereof by fine or imprisonment is not, in
conflict with that prohibition."27 Nor is the tax in question a poll tax, for the latter is a tax of a
fixed amount upon all persons, or upon all persons of a certain class, resident within a specified
territory, without regard to their property or the occupations in which they may be engaged. 28
Therefore, the tax in question is not oppressive in the manner the lower court puts it. On the
other hand, the charter of Iloilo City 29 empowers its municipal board to "fix penalties for
violations of ordinances, which shall not exceed a fine of two hundred pesos or six months'
imprisonment, or both such fine and imprisonment for each offense." In Punsalan, et al. vs. Mun.
Board of Manila, supra, this Court overruled the pronouncement of the lower court declaring
illegal and void an ordinance imposing an occupation tax on persons exercising various
professions in the City of Manilabecause it imposed a penalty of fine and imprisonment for its
violation.30.

4. The trial court brands the ordinance as violative of the rule of uniformity of taxation.

"... because while the owners of the other buildings only pay real estate tax and income
taxes the ordinance imposes aside from these two taxes an apartment or tenement tax. It
should be noted that in the assessment of real estate tax all parts of the building or
buildings are included so that the corresponding real estate tax could be properly
imposed. If aside from the real estate tax the owner or owners of the tenement buildings
 should pay apartment taxes as required in the ordinance then it will violate the rule of
uniformity of taxation.".

Complementing the above ruling of the lower court, the appellees argue that there is "lack of
uniformity" and "relative inequality," because "only the taxpayers of the City of Iloilo are singled
out to pay taxes on their tenement houses, while citizens of other cities, where their councils do
not enact a similar tax ordinance, are permitted to escape such imposition." .

It is our view that both assertions are undeserving of extended attention. This Court has already
ruled that tenement houses constitute a distinct class of property. It has likewise ruled that "taxes
are uniform and equal when imposed upon all property of the same class or character within the
taxing authority."31 The fact, therefore, that the owners of other classes of buildings in the City of
Iloilo do not pay the taxes imposed by the ordinance in question is no argument at all against
uniformity and equality of the tax imposition. Neither is the rule of equality and uniformity
violated by the fact that tenement taxesare not imposed in other cities, for the same rule does not
require that taxes for the same purpose should be imposed in different territorial subdivisions at
the same time.32 So long as the burden of the tax falls equally and impartially on all owners or
operators of tenement houses similarly classified or situated, equality and uniformity of taxation
is accomplished.33 The plaintiffs-appellees, as owners of tenement houses in the City of Iloilo,
have not shown that the tax burden is not equally or uniformly distributed among them, to
overthrow the presumption that tax statutes are intended to operate uniformly and equally.34.

5. The last important issue posed by the appellees is that since the ordinance in the case at bar is
a mere reproduction of Ordinance 86 of the City of Iloilo which was declared by this Court in L-
12695, supra, as ultra vires, the decision in that case should be accorded the effect of res
judicata in the present case or should constitute estoppel by judgment. To dispose of this
contention, it suffices to say that there is no identity of subject-matter in that case andthis case
because the subject-matter in L-12695 was an ordinance which dealt not only with tenement
houses but also warehouses, and the said ordinance was enacted pursuant to the provisions of the
City charter, while the ordinance in the case at bar was enacted pursuant to the provisions of the
Local Autonomy Act. There is likewise no identity of cause of action in the two cases because
the main issue in L-12695 was whether the City of Iloilo had the power under its charter to
impose the tax levied by Ordinance 11, series of 1960, under the Local Autonomy Act which
took effect on June 19, 1959, and therefore was not available for consideration in the decision in
L-12695 which was promulgated on March 23, 1959. Moreover, under the provisions of section
2 of the Local Autonomy Act, local governments may now tax any taxable subject-matter or
object not included in the enumeration of matters removed from the taxing power of local
governments.Prior to the enactment of the Local Autonomy Act the taxes that could be legally
levied by local governments were only those specifically authorized by law, and their power to
tax was construed in strictissimi juris. 35.

ACCORDINGLY, the judgment a quo is reversed, and, the ordinance in questionbeing valid, the
complaint is hereby dismissed. No pronouncement as to costs..