EN BANC

G.R. No. L-7859        December 22, 1955

WALTER LUTZ, as Judicial Administrator of the Intestate

Estate of the deceased Antonio Jayme Ledesma, Plaintiff-
Appellant, vs. J. ANTONIO ARANETA, as the Collector of
Internal Revenue, Defendant-Appellee.

Ernesto J. Gonzaga for appellant.

Office of the Solicitor General Ambrosio Padilla, First Assistant
Solicitor General Guillermo E. Torres and Solicitor Felicisimo R.
Rosete for appellee.

REYES, J.B L., J.:

This case was initiated in the Court of First Instance of Negros

Occidental to test the legality of the taxes imposed by
Commonwealth Act No. 567, otherwise known as the Sugar
Adjustment Act.  
chanroblesvirtualawlibrary chanrobles virtual law library

Promulgated in 1940, the law in question opens (section 1) with a

declaration of emergency, due to the threat to our industry by the
imminent imposition of export taxes upon sugar as provided in the
Tydings-McDuffe Act, and the "eventual loss of its preferential
position in the United States market"; wherefore, the national policy
was expressed "to obtain a readjustment of the benefits derived
from the sugar industry by the component elements thereof" and
"to stabilize the sugar industry so as to prepare it for the
eventuality of the loss of its preferential position in the United
States market and the imposition of the export taxes." chanrobles virtual law library

In section 2, Commonwealth Act 567 provides for an increase of the

existing tax on the manufacture of sugar, on a graduated basis, on
each picul of sugar manufactured; while section 3 levies on owners
or persons in control of lands devoted to the cultivation of sugar
cane and ceded to others for a consideration, on lease or otherwise
-
a tax equivalent to the difference between the money value of the
rental or consideration collected and the amount representing 12
per centum of the assessed value of such land.

According to section 6 of the law -

SEC. 6. All collections made under this Act shall accrue to a special
fund in the Philippine Treasury, to be known as the 'Sugar
Adjustment and Stabilization Fund,' and shall be paid out only for
any or all of the following purposes or to attain any or all of the
following objectives, as may be provided by law.   chanroblesvirtualawlibrary chanrobles virtual law library

First, to place the sugar industry in a position to maintain itself,

despite the gradual loss of the preferntial position of the Philippine
sugar in the United States market, and ultimately to insure its
continued existence notwithstanding the loss of that market and the
consequent necessity of meeting competition in the free markets of
the world;chanrobles virtual law library

Second, to readjust the benefits derived from the sugar industry by

all of the component elements thereof - the mill, the landowner, the
planter of the sugar cane, and the laborers in the factory and in the
field - so that all might continue profitably to engage therein; chanrobles virtual law library

Third, to limit the production of sugar to areas more economically

suited to the production thereof; and chanrobles virtual law library

Fourth, to afford labor employed in the industry a living wage and to

improve their living and working conditions: Provided, That the
President of the Philippines may, until the adjourment of the next
regular session of the National Assembly, make the necessary
disbursements from the fund herein created (1) for the
establishment and operation of sugar experiment station or stations
and the undertaking of researchers (a) to increase the recoveries of
the centrifugal sugar factories with the view of reducing
manufacturing costs, (b) to produce and propagate higher yielding
varieties of sugar cane more adaptable to different district
conditions in the Philippines, (c) to lower the costs of raising sugar
cane, (d) to improve the buying quality of denatured alcohol from
molasses for motor fuel, (e) to determine the possibility of utilizing
the other by-products of the industry, (f) to determine what crop or
crops are suitable for rotation and for the utilization of excess cane
lands, and (g) on other problems the solution of which would help
rehabilitate and stabilize the industry, and (2) for the improvement
of living and working conditions in sugar mills and sugar
plantations, authorizing him to organize the necessary agency or
agencies to take charge of the expenditure and allocation of said
funds to carry out the purpose hereinbefore enumerated, and,
likewise, authorizing the disbursement from the fund herein created
of the necessary amount or amounts needed for salaries, wages,
travelling expenses, equipment, and other sundry expenses of said
agency or agencies.

Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the

Intestate Estate of Antonio Jayme Ledesma, seeks to recover from
the Collector of Internal Revenue the sum of P14,666.40 paid by the
estate as taxes, under section 3 of the Act, for the crop years 1948-
1949 and 1949-1950; alleging that such tax is unconstitutional and
void, being levied for the aid and support of the sugar industry
exclusively, which in plaintiff's opinion is not a public purpose for
which a tax may be constitutioally levied. The action having been
dismissed by the Court of First Instance, the plaintifs appealed the
case directly to this Court (Judiciary Act, section 17).   chanroblesvirtualawlibrary chanrobles virtual law library

The basic defect in the plaintiff's position is his assumption that the
tax provided for in Commonwealth Act No. 567 is a pure exercise of
the taxing power. Analysis of the Act, and particularly of section 6
(heretofore quoted in full), will show that the tax is levied with a
regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the
act is primarily an exercise of the police power.  
chanroblesvirtualawlibrary chanrobles virtual law library

This Court can take judicial notice of the fact that sugar production
is one of the great industries of our nation, sugar occupying a
leading position among its export products; that it gives
employment to thousands of laborers in fields and factories; that it
is a great source of the state's wealth, is one of the important
sources of foreign exchange needed by our government, and is thus
pivotal in the plans of a regime committed to a policy of currency
stability. Its promotion, protection and advancement, therefore
redounds greatly to the general welfare. Hence it was competent for
the legislature to find that the general welfare demanded that the
sugar industry should be stabilized in turn; and in the wide field of
its police power, the lawmaking body could provide that the
distribution of benefits therefrom be readjusted among its
components to enable it to resist the added strain of the increase in
taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L.
Ed. 835; Johnson vs. State ex rel. Marey, 99 Fla. 1311, 128 So.
853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121).   chanroblesvirtualawlibrary chanrobles virtual law library

As stated in Johnson vs. State ex rel. Marey, with reference to the

citrus industry in Florida -

The protection of a large industry constituting one of the great

sources of the state's wealth and therefore directly or indirectly
affecting the welfare of so great a portion of the population of the
State is affected to such an extent by public interests as to be
within the police power of the sovereign. (128 Sp. 857).

Once it is conceded, as it must, that the protection and promotion of

the sugar industry is a matter of public concern, it follows that the
Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here,
the legislative discretion must be allowed fully play, subject only to
the test of reasonableness; and it is not contended that the means
provided in section 6 of the law (above quoted) bear no relation to
the objective pursued or are oppressive in character. If objective
and methods are alike constitutionally valid, no reason is seen why
the state may not levy taxes to raise funds for their prosecution and
attainment. Taxation may be made the implement of the state's
police power (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U. S. 412,
81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477;
M'Culloch vs. Maryland, 4 Wheat. 316, 4 L. Ed. 579).   chanroblesvirtualawlibrary chanrobles virtual law library

That the tax to be levied should burden the sugar producers

themselves can hardly be a ground of complaint; indeed, it appears
rational that the tax be obtained precisely from those who are to be
benefited from the expenditure of the funds derived from it. At any
rate, it is inherent in the power to tax that a state be free to select
the subjects of taxation, and it has been repeatedly held that
"inequalities which result from a singling out of one particular class
for taxation, or exemption infringe no constitutional limitation"
(Carmichael vs. Southern Coal & Coke Co., 301 U. S. 495, 81 L. Ed.
1245, citing numerous authorities, at p. 1251).   chanroblesvirtualawlibrary chanrobles virtual law library

From the point of view we have taken it appears of no moment that

the funds raised under the Sugar Stabilization Act, now in question,
should be exclusively spent in aid of the sugar industry, since it is
that very enterprise that is being protected. It may be that other
industries are also in need of similar protection; that the legislature
is not required by the Constitution to adhere to a policy of "all or
none." As ruled in Minnesota ex rel. Pearson vs. Probate Court, 309
U. S. 270, 84 L. Ed. 744, "if the law presumably hits the evil where
it is most felt, it is not to be overthrown because there are other
instances to which it might have been applied;" and that "the
legislative authority, exerted within its proper field, need not
embrace all the evils within its reach" (N. L. R. B. vs. Jones &
Laughlin Steel Corp. 301 U. S. 1, 81 L. Ed. 893).   chanroblesvirtualawlibrary chanrobles virtual law library

Even from the standpoint that the Act is a pure tax measure, it
cannot be said that the devotion of tax money to experimental
stations to seek increase of efficiency in sugar production, utilization
of by-products and solution of allied problems, as well as to the
improvements of living and working conditions in sugar mills or
plantations, without any part of such money being channeled
directly to private persons, constitutes expenditure of tax money for
private purposes, (compare Everson vs. Board of Education, 91 L.
Ed. 472, 168 ALR 1392, 1400).   chanroblesvirtualawlibrary chanrobles virtual law library

The decision appealed from is affirmed, with costs against appellant.

So ordered.  
chanroblesvirtualawlibrary chanrobles virtual law library

Paras, C. J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo,

Labrador, and Concepcion, JJ., concur.
G.R. No. L-28896 February 17, 1988

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

CRUZ, J.:

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection
should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion
of the common good, may be achieved.

The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed
the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in
its income tax returns. The corollary issue is whether or not the appeal of the private respondent
from the decision of the Collector of Internal Revenue was made on time and in accordance with
law.

We deal first with the procedural question.

The record shows that on January 14, 1965, the private respondent, a domestic corporation
engaged in engineering, construction and other allied activities, received a letter from the petitioner
assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and
1959.  On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter
1

was stamp received on the same day in the office of the petitioner.   On March 12, 1965, a warrant of
2

distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto
Guevara, Jr., who refused to receive it on the ground of the pending protest.   A search of the protest 3

in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a
photostat to BIR agent Ramon Reyes, who deferred service of the warrant.   On April 7, 1965, Atty. 4

Guevara was finally informed that the BIR was not taking any action on the protest and it was only
then that he accepted the warrant of distraint and levy earlier sought to be served.  Sixteen days 5

later, on April 23, 1965, Algue filed a petition for review of the decision of the Commissioner of
Internal Revenue with the Court of Tax Appeals. 6

The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125,
the appeal may be made within thirty days after receipt of the decision or ruling challenged.  It is true 7

that as a rule the warrant of distraint and levy is "proof of the finality of the assessment"   and 8

renders hopeless a request for reconsideration,"   being "tantamount to an outright denial thereof
9

and makes the said request deemed rejected."   But there is a special circumstance in the case at
10

bar that prevents application of this accepted doctrine.

The proven fact is that four days after the private respondent received the petitioner's notice of
assessment, it filed its letter of protest. This was apparently not taken into account before the
warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the
petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all,
considered by the tax authorities. During the intervening period, the warrant was premature and
could therefore not be served.

As the Court of Tax Appeals correctly noted,"   the protest filed by private respondent was not pro
11

forma and was based on strong legal considerations. It thus had the effect of suspending on January
18, 1965, when it was filed, the reglementary period which started on the date the assessment was
received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the
private respondent was definitely informed of the implied rejection of the said protest and the warrant
was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the
reglementary period had been consumed.

Now for the substantive question.

The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because
it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had
seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the
private respondent for actual services rendered. The payment was in the form of promotional fees.
These were collected by the Payees for their work in the creation of the Vegetable Oil Investment
Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar
Estate Development Company.

Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees
to be personal holding company income   but later conformed to the decision of the respondent
12

court rejecting this assertion.  In fact, as the said court found, the amount was earned through the
13

joint efforts of the persons among whom it was distributed It has been established that the Philippine
Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell
its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr.,
Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of
the Vegetable Oil Investment Corporation, inducing other persons to invest in it.  Ultimately, after its
14

incorporation largely through the promotion of the said persons, this new corporation purchased the
PSEDC properties.  For this sale, Algue received as agent a commission of P126,000.00, and it was
15

from this commission that the P75,000.00 promotional fees were paid to the aforenamed
individuals.
16

There is no dispute that the payees duly reported their respective shares of the fees in their income
tax returns and paid the corresponding taxes thereon.  The Court of Tax Appeals also found, after
17

examining the evidence, that no distribution of dividends was involved. 18

The petitioner claims that these payments are fictitious because most of the payees are members of
the same family in control of Algue. It is argued that no indication was made as to how such
payments were made, whether by check or in cash, and there is not enough substantiation of such
payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate
assessment by involving an imaginary deduction.

We find that these suspicions were adequately met by the private respondent when its President,
Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made
in one lump sum but periodically and in different amounts as each payee's need arose.   It should be
19

remembered that this was a family corporation where strict business procedures were not applied
and immediate issuance of receipts was not required. Even so, at the end of the year, when the
books were to be closed, each payee made an accounting of all of the fees received by him or her,
to make up the total of P75,000.00.   Admittedly, everything seemed to be informal. This
20

arrangement was understandable, however, in view of the close relationship among the persons in
the family corporation.

We agree with the respondent court that the amount of the promotional fees was not excessive. The
total commission paid by the Philippine Sugar Estate Development Co. to the private respondent
was P125,000.00.   After deducting the said fees, Algue still had a balance of P50,000.00 as clear
21

profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a
reasonable proportion, considering that it was the payees who did practically everything, from the
formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar
Estate properties. This finding of the respondent court is in accord with the following provision of the
Tax Code:

SEC. 30. Deductions from gross income.--In computing net income there shall be
allowed as deductions —

(a) Expenses:

(1) In general.--All the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business, including a reasonable allowance
for salaries or other compensation for personal services actually rendered; ...  22

and Revenue Regulations No. 2, Section 70 (1), reading as follows:

SEC. 70. Compensation for personal services.--Among the ordinary and necessary

expenses paid or incurred in carrying on any trade or business may be included a
reasonable allowance for salaries or other compensation for personal services
actually rendered. The test of deductibility in the case of compensation payments is
whether they are reasonable and are, in fact, payments purely for service. This test
and deductibility in the case of compensation payments is whether they are
reasonable and are, in fact, payments purely for service. This test and its practical
application may be further stated and illustrated as follows:

Any amount paid in the form of compensation, but not in fact as the purchase price of
services, is not deductible. (a) An ostensible salary paid by a corporation may be a
distribution of a dividend on stock. This is likely to occur in the case of a corporation
having few stockholders, Practically all of whom draw salaries. If in such a case the
salaries are in excess of those ordinarily paid for similar services, and the excessive
payment correspond or bear a close relationship to the stockholdings of the officers
of employees, it would seem likely that the salaries are not paid wholly for services
rendered, but the excessive payments are a distribution of earnings upon the
stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)

It is worth noting at this point that most of the payees were not in the regular employ of Algue nor
were they its controlling stockholders. 
23

The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity
of the claimed deduction. In the present case, however, we find that the onus has been discharged
satisfactorily. The private respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and involve themselves in a new business
requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently
recompensed.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hard earned income to the taxing authorities, every person who
is able to must contribute his share in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the lives of
the people and enhance their moral and material values. This symbiotic relationship is the rationale
of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those
in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his
succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the
taxpayer can demonstrate, as it has here, that the law has not been observed.

We hold that the appeal of the private respondent from the decision of the petitioner was filed on
time with the respondent court in accordance with Rep. Act No. 1125. And we also find that the
claimed deduction by the private respondent was permitted under the Internal Revenue Code and
should therefore not have been disallowed by the petitioner.

ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without
costs.

SO ORDERED.

Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.

Footnotes

1 Rollo, pp. 28-29.

2 Ibid., pp. 29; 42.

3 Id., p. 29.

4 Respondent's Brief, p. 11.

5 Id., p. 29.

6 Id,

7 Sec. 11.

8 Phil. Planters Investment Co. Inc. v. Comm. of Internal Revenue, CTA Case No.
1266, Nov. 11, 1962; Rollo, p. 30.

9 Vicente Hilado v. Comm. of Internal Revenue, CTA Case No. 1266, Oct. 22,1962;
Rollo, p. 30.

10 Ibid.

11 Penned by Associate Judge Estanislao R. Alvarez, concurred by Presiding Judge

Ramon M. Umali and Associate Judge Ramon L. Avanceña.
12 Rollo, p. 33.

13 Ibid., pp. 7-8; Petition, pp. 2-3. 11 Id., p. 37.

15 Id.

16 Id.

17 Id.

18 Id.

19 Respondents Brief, pp. 25-32.

20 Ibid., pp. 30-32.

21 Rollo, p. 37.

22 Now Sec. 30, (a)(1)-(A.), National Internal Revenue Code.

23 Respondent's Brief, p. 35.

 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.1awphîl.nèt

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. 1awphîl.nèt

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. Vaño, 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.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Angeles, Fernando and
Capistrano, JJ., concur.

Footnotes

1
Ordinance No. 25, series of 1953, Exhibit 3.

2
Ordinance No. 18, series of 1947, Exhibit 2.

3
Exhibit 1.

Civil Case No. 5565, Court of First Instance of Negros Occidental, entitled "Victorias Milling
4

Co., Inc., Plaintiff, versus The Municipality of Victorias, Province of Negros Occidental,
Defendant". The complaint was supplemented and amended.

5
". . . Section 357 of the Revised Manual of Instructions to Treasurers of Provinces, Cities
and Municipalities, promulgated under the direction of the Auditor General, 1954 edition, ...
provides that:

'Tax ordinance under controversy. — Until declared illegal or void by a competent

court, or otherwise revoked by the council or board from which it originated or which
exercised authority over the same, a tax ordinance will be enforced in accordance
with its provisions. Collection of taxes therein prescribed will be made even if the
legality of the same should be impugned or any of its provisions be challenged or be
under controversy. All protested collections, however, provided that the fact of said
protest is made to appear on the receipt wherein payment has been acknowledged,
will be taken up in the accounts as Undistributed Income, B-3-1. Upon final
determination of the protest, a reversion entry will then be made, either by debiting
the collection to the corresponding revenue account or crediting Cash if the protest
has been considered in favor of the protestant and the amount protested is to be
returned to him.'" Record on Appeal, pp. 11-12.

6
Record on Appeal, pp. 12-14.

7
Id., p. 70.

8
Id., p. 72.
9
Id., p. 73.

10
Id.

11
Id., pp. 73-74.

12
See: Cu Unjieng vs. Patstone, 42 Phil. 818, 828-830.

13
"Sec. 2238. General power of council to enact ordinances and make regulations. — The
municipal council shall enact such ordinances and make such regulations, not repugnant to
law, as may be necessary to carry into effect and discharge the powers and duties conferred
upon it by law and such as shall seem necessary and proper to provide for the health and
safety, promote the prosperity, improve the morals, peace, good order, comfort, and
convenience of the municipality and the inhabitants thereof, and for the protection of property
therein." Revised Administrative Code.

Section 2287, Revised Administrative Code; Cu Unjieng vs. Patstone, supra, at p. 831;

14

Pacific Commercial Co. vs. Romualdez, 49 Phil. 917, 926; City of Iloilo vs. Villanueva, 105
Phil. 337, 340; People vs. Felisarta, L-15346, June 29, 1962.

15
Emphasis supplied.

16
Emphasis supplied.

17
Exhibit G.

18
Emphasis supplied.

19
McQuillin, Municipal Corporations, 3rd. ed., Vol. 9, Chapter 26, p. 62.

20
Ibid.

21
Compañia General de Tabacos de Filipinas vs. City of Manila, L-16619, June 29, 1963.

22
19 R.C.L., pp. 951-952.

23
Applicant for permit or license to do business.

24
19 R.C.L., p. 952; emphasis supplied.

25
96 Phil. 909, 911.

26
Same ruling: Municipality of Cotabato vs. Santos, 105 Phil. 963, 966.

27
L-9319, September 27, 1957; Plaintiff's Brief as Appellant, p. 22; Record on Appeal, p. 70.

28
Supra, at p. 926; Plaintiff's Brief as Appellee, p. 47.

29
L-15892, April 23, 1962; Plaintiff's Brief as Appellee, pp. 23, 26.
30
L-15807, April 22, 1963; Plaintiff's Brief as Appellee, p. 47.

31
Exhibit 6-A.

32
Exhibit 6.

33
Plaintiff's Brief as Appellant, p. 42.

34
See: Shell Co. of P.I., Ltd. vs. Vaño, 94 Phil, 389, 394-395.

35
Plaintiff's Brief as Appellant, pp. 43-44, citing Yorkley on Municipal Corporations, p. 361.

36
64 C.J.S., pp. 646-647.

37
McQuillin, op. cit., p. 65.

38
Ibid. p. 29.

39
Ibid., p. 71.

40
38 Am. Jur., p. 42.

41
Resolution 1864 dated October 26, 1956 of the Provincial Board, Exhibit 6-A.

42
At p. 36.

43
Tr. (Antenero), p. 83.

44
Exhibit 8.

45
Supra, at p. 393. See also: Cooley on Taxation, 4th ed., Vol. I, p. 747.

46
L-24322, July 21, 1967; 1967C Phild. 116, 119.

47
Plaintiff's Brief as Appellant, pp. 36-37.

48
Cooley, op. cit., p. 475.

49
Ibid., citing Attorney General vs. Supervisors of Sanilac County, 71 Mich. 16, 38 N.W. 639.

50
Ibid., citing Harvey Coal & Coke Co. vs. Dillon, 59 W. Va. 605, 53 S.E. 928.

51
72 Phil. 336, 339, citing Cooley on Taxation, Vol. I, pp. 475-479; emphasis supplied.
 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:

(a) Apartment house made of strong materials P20.00 per door p.a.

(b) Apartment house made of mixed materials P10.00 per door p.a.

II Rooming house of strong materials P10.00 per door p.a.

Rooming house of mixed materials P5.00 per door p.a.

III. Tenement house partly or wholly engaged in or dedicated to

business in the following streets: J.M. Basa, Iznart, Aldeguer,
Guanco and Ledesma from Plazoleto Gay to Valeria. St. P30.00 per door p.a.

IV. Tenement house partly or wholly engaged in or dedicated to

business in any other street P12.00 per door p.a.

V. Tenement houses at the streets surrounding the super market

as soon as said place is declared commercial P24.00 per door 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 property 14 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
City29 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..

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,Fernando and Capistrano,
JJ., concur..

Footnotes

1
 The record discloses that the delay caused in the lower court was due to the loss of the
original record while the same was in the possession of the late Judge Perfecto Querubin.
The record was later reconstituted under Judge Ramon Blanco..

 Nin Bay Mining Co. vs. Mun. of Roxas, Prov. of Palawan, L-20125, July 20, 1965, per
2

Concepcion, J.: .

"Neither the plaintiff nor the lower court maintains that the subject matter of the
ordinance in question comes under any of the foregoing exceptions. Hence, under
the rule - "expressio unius est exclusio alterius", the ordinance should be deemed to
come within the purview of the general rule. Indeed, the sponsor of the bill, which
upon its passage became Republic Act No. 2264, explicitly informed the House of
Representatives when he urged the same to approve it, that, under its provisions,
local governments would be "able to do everything, excepting those things which are
mentioned therein." ..." .

C.N. Hodges vs. The Mun. Board of the City of Iloilo, et al., L-18276, Jan. 12, 1967,
per Castro, J.: .

"... Heretofore, we have announced the doctrine that the grant of the power to tax to
chartered cities under section 2 of the Local Autonomy Act is sufficiently plenary to
cover "everything, excepting those which are mentioned therein," subject only to the
limitation that the tax so levied is for "public purposes, just and uniform" (Nin Bay
Mining Co. vs. Mun. of Roxas, Prov. of Palawan, G.R. No. L-20125, July 20, 1965).
There is no showing, and we do not believe it is possible to show, that the tax levied,
called by any name - percentage tax or sales tax - comes under any of the specific
exceptions listed in Section 2 of the Local Autonomy Act. Not being excepted, it must
be regarded as coming within the purview of the general rule. As the maxim goes,
"Exceptio firmat regulum in casibus non excepti." Since its public purpose, justness
and uniformity of application are not disputed, the tax so levied must be sustained as
 valid." (Re: Ordinance imposing a tax on sales or real estate property situated in the
City of Iloilo, of 1/2% of 1% of the contract price or consideration.).

Ormoc Sugar Co., Inc. vs. Mun. Board of Ormoc City, et al., L-24322, July 21, 1967,
per Fernando, J.: .

"In a number of decisions starting from City of Bacolod v. Gruet, L-18290, Jan. 31,
1963, to Hodges vs. Mun. Board, L-18276, Jan. 12, 1967, such broad taxing
authority has been implemented and vitalized by this Court.

"... The question before this Court is one of power. From and after June 19, 1959,
when the Local Autonomy Act was enacted, the sphere of autonomy of a chartered
city in the enactment of taxing measures has been considerably enlarged.

"... In the absence of a clear and specific showing that there was a transgression of a
constitutional provision or repugnancy to a controlling statute, an objection of such a
generalized character deserves but scant sympathy from this Court. Considering the
indubitable policy expressly set forth in the Local Autonomy Act, the invocation of
such a talismanic formula as "restraint of trade" without more no longer suffices,
assuming it ever did, to nullify a taxing ordinance, otherwise valid." [Re: Ordinance
imposing tax on all productions of centrifugal sugar (B-sugar) locally sold or sold
within the Phil., at P.20 per picul, etc.].

3
 "Taxes on property are taxes assessed on all property or on all property of a certain class
located within a certain territory on a specified date in proportion to its value, or in
accordance with some other reasonable method of apportionment, the obligation to pay
which is absolute and unavoidable and it is not based upon any voluntary action of the
person assessed. A property tax is ordinarily measured by the amount of property owned by
the taxpayer on a given day, and not on the total amount owned by him during the year. It is
ordinarily assessed at stated periods determined in advance, and collected at appointed
times, and its payment is usually enforced by sale of the property taxed, and, occassionally,
by imprisonment of the person assessed." (51 Am. Jur. 57) .

"A "real estate tax" is a tax in rem against realty without personal liability therefor on
part of owner thereof, and a judgment recovered in proceedings for enforcement of
real estate tax is one in rem against the realty without personal liability against the
owner." (36 Words and Phrases, 286, citing Land O'Lakes Dairy Co. vs. Wadena
County, 39 N. W. 2d. 164, 171, 229 Minn. 263).

4
 "The term "license tax" or "license fee" implies an imposition or exaction on the right to use
or dispose of a property, to pursue a business, occupation, or calling, or to exercise a
privilege." (33 Am. Jur. 325-v26) .

"The term "excise tax" is synonymous with "privilege tax", and the two are often used
interchangeably, and whether a tax is characterized in the statute imposing it as a
privilege tax or an excise tax is merely a choice of synonymous words, for an excise
tax is a privilege tax." (51 Am. Jur. 62, citing Bank of Commerce & T. Co. vs. Senter,
149 Tenn. 569, 260 SW 144) .

"Thus, it is said that an excise tax is a charge imposed upon the performance of an
act, the enjoyment of a privilege, or the engaging in an occupation." (51 Am. Jur.
61) .
5
 "SEC. 38. Annual tax and penalties. Extension and remission of the tax. -- An annual tax of
one per centum on the assessed value of all real estate in the city subject to taxation shall be
levied by the city treasurer..." .

6
 Commonwealth Act No. 470 -- "SECTION 1. Title of this Act. - This Act shall be known as
the Assessment Law. `.

`SEC. 2. Incidence of real property tax. -- Except in chartered cities, there shall be
levied, assessed, and collected an annual ad valorem tax on real property, including
land, buildings, machinery and other improvements not hereinafter specially
exempted.".

7
 Com. Act 158, sections 28 to 53.

8
 Com. Act 158, sec. 29.

9
 51 Am. Jur. 53: "An ad valorem property tax is invariably based upon ownership of
property, and is payable regardless of whether the property is used or not, although of
course the value may vary in accordance with such factor." .

10
 "Real estate, for purposes of taxation, includes all land within the district by which the tax is
levied, and all rights and interests in such land, and all buildings and other structures affixed
to the land, even though as between the landlord and the tenant they are the property of the
tenant and may be removed by him at the termination of the lease." (51 Am. Jur. 438) Sec.
31 of Com. Act 158 provides: "When it shall appear that there are separate owners of the
land and the improvements thereon, a separate assessment of the property of each shall be
made." .

 Sec. 38 of Com. Act 158 provides: "An annual tax of one per centum on the assessed
11

value of all real estate in the city subject to taxation shall be levied by the city treasurer." .

12
 Secs. 28 to 34, Com. Act 158.

 Sec. 38 of Com. Act 158 provides: "All taxes on real estate for any year shall be due and
13

payable on the first day of January and from this date such taxes together with all penalties
accruing thereto shall constitute a lien on the property subject to such taxation." .

 Sec. 38 of Com. Act 158 provides: "Such lien shall be superior to all other liens, mortgages
14

or incumbrances of any kind whatsoever, and shall be enforceable against the property
whether in the possession of the delinquent or any subsequent owner, and can only be
removed by the payment of the tax and penalty.".

 62 C.J.S. 845; Manila Race Horse Trainers Assn. vs. De la Fuente, L-2947, Jan. 11, 1951,
15

88 Phil. 60.

16
 51 Am. Jur. 59-60; 33 Am. Jur. 325-326..

17
 51 Am. Jur. 56, citing Eyre v. Jacob, 14 Gratt (Va.) 422; 73 Am. Dec. 367.

18
 Webster's New International Dictionary, 2nd Ed., p. 2601.
  City of Iloilo vs. Remedios Sian Villanueva, et al., L-12695, March 23, 1959: "As may be
19

seen from the definition of each establishment hereunder quoted, a tenement house is
different from hotel, lodging house, or boarding house. These are different business
enterprises. They have been established for different purposes.

20
 National Internal Revenue Code: .

"SEC. 182. Fixed taxes. -- On business ...; (3) Other fixed taxes. -- The following
fixed taxes shall be collected as follows, the amount stated being for the whole year,
when not otherwise specified: .

      XXX      XXX      XXX

"(s) Stockbrokers, dealers in securities, real estate brokers, real estate dealers,
commercial brokers, customs brokers, and immigration brokers, one hundred and
fifty pesos: Provided, however, That in the case of real estate dealers, the annual
fixed tax to be collected shall be as follows: .

"One hundred and fifty pesos, if the annual income from buying, selling, exchanging,
leasing, or renting property (whether on their own account as principals or as owners
of rental property or properties) is four thousand pesos or more but not exceeding ten
thousand pesos; .

"Three hundred pesos, if such annual income exceeds ten thousand pesos but does
not exceed thirty thousand pesos; and .

"Five hundred pesos, if such annual income exceeds thirty thousand pesos."

21
 Punsalan, et al. vs. Mun. Board of the City of Manila, et al., L-4817, May 26, 1954, 95 Phil.
46, per Reyes, J.: In this case the Supreme Court upheld the validity of Ordinance 3398 of
the City of Manila, approved on July 25, 1950, imposing a municipal occupation tax on
persons exercising various professions (lawyers, medical practitioners, public accountants,
dental surgeons, pharmacists, etc.), in the city and penalizes non-payment of the tax by a
fine of not more than P200.00 or by imprisonment of not more than 6 months, or by both
such fine and imprisonment in the discretion of the court, although section 201 [now sec.
182(B)] of the National Internal Revenue Code requires the payment of taxes on occupation
or professional taxes. Said Justice Reyes: "The argument against double taxation may not
be invoked where one tax is imposed by the state and the other is imposed by the city (1
Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing
obnoxious in the requirement thatlicense fees or taxes be exacted with respect to the same
occupation, calling or activity by both the state and the political subdivision thereof. (51 Am.
Jur., 341.)" .

A month after the promulgation of the above decision, Congress passed Rep. Act
1166, approved on June 18, 1954, providing as follows: "Any provisions of existing
laws, city charters and ordinances, executive orders and regulations, or parts thereof,
to the contrary notwithstanding, every professional legally authorized to practice his
profession, who has paid the corresponding annual privilege tax on professions
required by Sec. 182 of the NIRC, Com. Act No. 466,shall be entitled to practice the
profession for which he has been duly qualified under the law, in all parts of the
Philippines without being subject to any other tax, charge, license or fee for the
 practice of such profession; Provided, however, That they have paid to the office
concerned the registration fees required in their respective professions." .

22
 People vs. Santiago Mendaros, et al., L-6975, May 27, 1955, 97 Phil. 958-959, per
Bautista Angelo, J. Appeal from the decision of the CFI of Zambales. Defendants-appellees
were convicted by the JP Court of Palauig, Zambales, and sentenced to pay a fine of P5.00,
for failure to pay the occupation tax imposed by a municipal ordinance on owners of
fishponds on lands of private ownership. The Supreme Court, in sustaining the validity of the
ordinance, held:.

"The ground on which the trial court declared the municipal ordinance invalid would
seem to be that, since the land on which the fishpond is situated is already subject to
land tax, it would be unfair and discriminatory to levy another tax on the owner of the
fishpond because that would amount to double taxation. This view is erroneous
because it is a well-settled rule that a license tax may be levied upon a business or
occupation although the land or property used therein is subject to property tax. It
was also held that "the state may collect an ad valorem tax on property used in a
calling, and at the same time impose a license tax on the pursuit of that calling." The
imposition of this kind of tax is in no sense called a double tax." .

Veronica Sanchez vs. The Collector of Internal Revenue, L-7521, Oct. 18, 1955, 97
Phil. 687, per Reyes, J.B.L., J.

"Considering that appellant constructed her four-door "accessoria" purposely for rent
or profit; that she has been continuously leasing the same to third persons since its
construction in 1947; that she manages her property herself; and that said leased
holding appears to be her main source of livelihood, she is engaged in the leasing of
real estate, and is a real estate dealer as defined in section 194(s) [now, Sec. 182(A)
(3)(s)] of the Internal Revenue Code, as amended by Rep. Act No. 42.

"Appellant argues that she is already paying real estate taxes on her property, as
well as income tax on the income derived therefrom, so that to further subject its
rentals to the "real estate dealers" tax amounts to double taxation. This argument
has already been rejected by this Court in the case of People vs. Mendaros et al., L-
6975, promulgated May 27, 1955, wherein we held that it is a well-settled rule that
license tax may be levied upon a business or occupation although the land or
property used therein is subject to property tax, and that"the state may collect an ad
valorem tax on property used in a calling, and at the same time impose a license tax
on the pursuit of that calling", the imposition of the latter kind of tax being in no sense
a double tax." ".

23
 84 C.J.S. 131-132.

24
 Manufacturers' Life Insurance Co. vs. Meer, L-2910, June 29, 1951; City of Manila vs.
Interisland Gas Service, L-8799, Aug 31, 1956; Commissioner of Internal Revenue vs.
Hawaiian-Philippine Co., L-16315, May 30, 1964; Pepsi-Cola Bottling Co. of the Philippines
vs. City of Butuan, et al., L-22814, Aug. 28, 1968.

Pepsi-Cola Bottling Co. vs. City of Butuan, supra: .

"The second and last objections are manifestly devoid of merit. Indeed --
independently of whether or not the tax in question, when considered in relation to
 the sales tax prescribed by Acts of Congress, amounts to double taxation, on which
we need not and do not express any opinion -- double taxation, in general, is not
forbidden by our fundamental law. We have not adopted, as part thereof, the
injunction against double taxation found in the Constitution of the United States and
some States of the Union. Then, again, the general principle against delegation of
legislative powers, in consequence of the theory of separation of powers is subject to
one well-established exception, namely; legislative powers may be delegated to local
governments - to which said theory does not apply - in respect of matters of local
concern." .

 84 C.J.S. 133-134; "Double taxation, although not favored, is permissible in the absence of
25

express or implied constitutional prohibition.

"Double taxation should not be permitted unless the legislature has authority to
impose it. However, since the taxing power is exclusively a legislative function, and
since, except as it is limited or restrained by constitutional provisions, it is absolute
and unlimited, it is generally held that there is nothing, in the abscence of any
express or implied constitutional prohibition against double taxation, to prevent the
imposition of more than one tax on property within the jurisdiction, as the power to
tax twice is as ample as the power to tax once. In such case whether or not there
should be double taxation is a matter within the discretion of the legislature.

"In some states where double taxation is not expressly prohibited, it is held that
double taxation is permissible, or not invalid or unconstitutional, or necessarily
unlawful, provided some other constitutional requirement is not thereby violated, as a
requirement that taxes must be equal and uniform." .

The Constitution of the Philippines, Art. VI, sec. 22 (1) provides: "The rule of taxation
shall be uniform." .

26
 Art. III, sec. 1, par. 12, Constitution.

27
 51 Am. Jur. 860-861, citing Cousins v. State, 50 Ala. 113, 20 Am. Rep. 290; Rosenbloom
v. State, 64 Neb. 342, 89 NW 1053, 57 LRA 922; Voelkel v. Cincinnati, 112 Ohio St. 374,
147 NE 754, 40 ALR 73 (holding the provisions of an ordinance making the non-payment of
an excise tax levied in pursuance of such ordinance a misdemeanor punishable by fine not
in violation of the constitutional prohibition against the imprisonment of any person for "debt
in a civil action, or mesne or final process"); Ex parte Mann, 39 Tex. Crim. Rep. 491, 46 SW
828,73 Am. St. Rep. 961.

26 R.C.L. 25-26: "It is generally considered that a tax is not a debt, and that the
municipality to which the tax is payable is not a creditor of the person assessed. A
debt is a sum of money due by certain and express agreement. It originates in, and is
founded upon, contract express or implied. Taxes, on the other hand, do not rest
upon contract, express or implied. They are obligations imposed upon citizens to pay
the expenses of government. They are forced contributions, and in no way
dependent upon the will or contract, express or implied, of the persons taxed." .

 51 Am. Jur. 66-67; "Capitation or poll taxes are taxes of a fixed amount upon all persons,
28

or upon all the persons of a certain class, resident within a specified territory, without regard
to their property or the occupations in which they may be engaged. Taxes of a specified
amount upon each person performing a certain act or engaging in a certain business or
profession are not, however, poll taxes." .

29
 Com. Act No. 158 (An Act Establishing a Form of Government for the City of Iloilo), section
21: "Except as otherwise provided by law, and subject to the conditions and limitations
thereof, the Municipal Board shall have the following legislative powers: .

"(aa) ... and to fix penalties for the violation 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." .

30
 "To begin with the defendants' appeal, we find that the lower court was in error in saying
that the imposition of the penalty provided for in the ordinance was without the authority of
law. The last paragraph (kk) of the very section that authorizes the enactment of the
ordinance (section 18 of the Manila Charter) in express terms also empowers the Municipal
Board to "fix penalties for the violation of ordinances which not exceed to [sic] two hundred
pesos fine or six months' imprisonment, or both such fine and imprisonment, for a single
offense." Hence, the pronouncement below that the ordinance in question is illegal and void
because it imposes a penalty not authorized by law is clearly without legal basis." .

31
 51 Am. Jur. 203, citing Re Page, 60 Kan. 842, 59 P 478, 47 LRA 68: "Taxes are uniform
and equal when imposed upon all property of the same character within the taxing authority."
Manila Race Horse Trainers Assn., Inc. vs. De la Fuente, L-2947, Jan. 11, 1951, 88 Phil. 60:
"In the case of Eastern Theatrical Co., Inc. vs. Alfonso, [L-1104, May 31, 1949], 46 O.G.
Supp. to No. 11, p. 303, it was said that there is equality and uniformity in taxation if all
articles or kinds of property of the same class are taxed at the same rate. Thus, it was held in
that case, that "the fact that some places of amusement are not taxed while others, such as
cinematographs, theaters, vaudeville companies, theatrical shows, and boxing exhibitions
and other kinds of amusements or places of amusement are taxed, is no argument at all
against equality and uniformity of the tax imposition." Applying this criterion to the present
case, there would be discrimination if some boarding stables of the class used for the same
number of horses were not taxed or were made to pay less or more than others." Tan Kim
Kee vs. Court of Tax Appeals, et al., L-18080, April 22, 1963, per Reyes, J.B.L., J.: "The rule
of uniform taxation does not deprive Congress of the power to classify subjects of taxation,
and only demands uniformity within the particular class.".

32
 Am. Jur. 203: "153. Uniformity of Operation Throughout Tax Unit. — One requirement with
respect to taxation imposed by provisions relating to equality and uniformity, which has been
introduced into some state constitutions in express language, is that taxation must be
uniform throughout the political unit by or with respect to which the tax is levied. This means,
for example, that a tax for a state purpose must be uniform and equal throughout the state, a
tax for a county purpose must be uniform and equal throughout the county, anda tax for a
city, village, or township purpose must be uniform and equal throughout the city, village, or
township. It does not mean, however, that the taxes levied by or with respect to the various
political subdivisions or taxing districts of the state must be at the same rate, or, as one court
has graphically put it, that a man in one county shall pay the same rate of taxation for all
purposes that is paid by a man in an adjoining county. Nor does the rule require that taxes
for the same purposes shall be imposed in different territorial subdivisions at the same time.
It has also been said in this connection that the omission to tax any particular individual who
may be liable does not render the whole tax illegal or void."
  84 C.J.S. 77: "Equality in taxation is accomplished when the burden of the tax falls equally
33

and impartially on all the persons and property subject to it [State ex rel. Haggart v. Nichols,
265 N.W. 859, 66 N.D. 355], so that no higher rate or greater levy in proportion to value is
imposed on one person or species of property than on others similarly situated or of like
character."

84 C.J.S. 79: "The rule of uniformity in taxation applies to property of like kind and
character and similarly situated, and a tax, in order to be uniform, must operate alike
on all persons, things, or property, similarly situated. So the requirement is complied
with when the tax is levied equally and uniformly on all subjects of the same class
and kind and is violated if particular kinds, species or items of property are selected
to bear the whole burden of the tax, while others, which should be equally subjected
to it, are left untaxed."

 84 C.J.S. 81: "There is a presumption the at tax statutes are intended to operate uniformly
34

and equally [Alaska Consol. Canneries v. Territory of Alaska, C.C.A. Alaska, 16 F. 2d. 256],
and a liberal construction will be indulged in order to accomplish fair and equal taxation of all
property within the state."

 Medina vs. City of Baguio, L-4060, Aug. 29, 1952; Wa Wa Yu vs. City of Lipa, L-9167,
35

Sept. 27, 1956; Saldana vs. City of Iloilo, 55 O.G. 10267, and the cases cited therein.
G.R. No. L-4817             May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,

vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.

Calanog and Alafriz for plaintiffs-appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serreno for defendants-appellants.

REYES, J.:

This suit was commenced in the Court of First Instance of Manila by two lawyers, a medical
practitioner, a public accountant, a dental surgeon and a pharmacist, purportedly "in their own behalf
and in behalf of other professionals practising in the City of Manila who may desire to join it." Object
of the suit is the annulment of Ordinance No. 3398 of the City of Manila together with the provision of
the Manila charter authorizing it and the refund of taxes collected under the ordinance but paid under
protest.

The ordinance in question, which was approved by the municipal board of the City of Manila on July
25, 1950, imposes a municipal occupation tax on persons exercising various professions in the city
and penalizes non-payment of the tax "by a fine of not more than two hundred pesos or by
imprisonment of not more than six months, or by both such fine and imprisonment in the discretion of
the court." Among the professions taxed were those to which plaintiffs belong. The ordinance was
enacted pursuant to paragraph (1) of section 18 of the Revised Charter of the City of Manila (as
amended by Republic Act No. 409), which empowers the Municipal Board of said city to impose a
municipal occupation tax, not to exceed P50 per annum, on persons engaged in the various
professions above referred to.

Having already paid their occupation tax under section 201 of the National Internal Revenue Code,
plaintiffs, upon being required to pay the additional tax prescribed in the ordinance, paid the same
under protest and then brought the present suit for the purpose already stated. The lower court
upheld the validity of the provision of law authorizing the enactment of the ordinance but declared
the ordinance itself illegal and void on the ground that the penalty there in provided for non-payment
of the tax was not legally authorized. From this decision both parties appealed to this Court, and the
only question they have presented for our determination is whether this ruling is correct or not, for
though the decision is silent on the refund of taxes paid plaintiffs make no assignment of error on
this point.

To begin with defendants' appeal, we find that the lower court was in error in saying that the
imposition of the penalty provided for in the ordinance was without the authority of law. The last
paragraph (kk) of the very section that authorizes the enactment of this tax ordinance (section 18 of
the Manila Charter) in express terms also empowers the Municipal Board "to fix penalties for the
violation of ordinances which shall not exceed to(sic) two hundred pesos fine or six months"
imprisonment, or both such fine and imprisonment, for a single offense." Hence, the pronouncement
below that the ordinance in question is illegal and void because it imposes a penalty not authorized
by law is clearly without basis.

As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing it
constitute class legislation, are unjust and oppressive, and authorize what amounts to double
taxation.
In raising the hue and cry of "class legislation", the burden of plaintiffs' complaint is not that the
professions to which they respectively belong have been singled out for the imposition of this
municipal occupation tax; and in any event, the Legislature may, in its discretion, select what
occupations shall be taxed, and in the exercise of that discretion it may tax all, or it may select for
taxation certain classes and leave the others untaxed. (Cooley on Taxation, Vol. 4, 4th ed., pp.
3393-3395.) Plaintiffs' complaint is that while the law has authorized the City of Manila to impose the
said tax, it has withheld that authority from other chartered cities, not to mention municipalities. We
do not think it is for the courts to judge what particular cities or municipalities should be empowered
to impose occupation taxes in addition to those imposed by the National Government. That matter is
peculiarly within the domain of the political departments and the courts would do well not to
encroach upon it. Moreover, as the seat of the National Government and with a population and
volume of trade many times that of any other Philippine city or municipality, Manila, no doubt, offers
a more lucrative field for the practice of the professions, so that it is but fair that the professionals in
Manila be made to pay a higher occupation tax than their brethren in the provinces.

Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination
within a class in that while professionals with offices in Manila have to pay the tax, outsiders who
have no offices in the city but practice their profession therein are not subject to the tax. Plaintiffs
make a distinction that is not found in the ordinance. The ordinance imposes the tax upon every
person "exercising" or "pursuing" — in the City of Manila naturally — any one of the occupations
named, but does not say that such person must have his office in Manila. What constitutes exercise
or pursuit of a profession in the city is a matter of judicial determination. The argument against
double taxation may not be invoked where one tax is imposed by the state and the other is imposed
by the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the
same occupation, calling or activity by both the state and the political subdivisions thereof. (51 Am.
Jur., 341.)

In view of the foregoing, the judgment appealed from is reversed in so far as it declares Ordinance
No. 3398 of the City of Manila illegal and void and affirmed in so far as it holds the validity of the
provision of the Manila charter authorizing it. With costs against plaintiffs-appellants.

Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.

Separate Opinions

PARAS, C.J., dissenting:

I am constrained to dissent from the decision of the majority upon the ground that the Municipal
Board of Manila cannot outlaw what Congress of the Philippines has already authorized. The
plaintiffs-appellants — two lawyers, a physician, an accountant, a dentist and a pharmacist — had
already paid the occupation tax under section 201 of the National Internal Revenue Code and are
thereby duly licensed to practice their respective professions throughout the Philippines; and yet
they had been required to pay another occupation tax under Ordinance No. 3398 for practising in the
City of Manila. This is a glaring example of contradiction — the license granted by the National
Government is in effect withdrawn by the City in case of non-payment of the tax under the
ordinance. I fit be argued that the national occupation tax is collected to allow the professional
residing in Manila to pursue his calling in other places in the Philippines, it should then be exacted
only from professionals practising simultaneously in and outside of Manila. At any rate, we are
confronted with the following situation: Whereas the professionals elsewhere pay only one
occupation tax, in the City of Manila they have to pay two, although all are on equal footing insofar
as opportunities for earning money out of their pursuits are concerned. The statement that practice
in Manila is more lucrative than in the provinces, may be true perhaps with reference only to a
limited few, but certainly not to the general mass of practitioners in any field. Again, provincial
residents who have occasional or isolated practice in Manila may have to pay the city tax. This
obvious discrimination or lack of uniformity cannot be brushed aside or justified by any trite
pronouncement that double taxation is legitimate or that legislation may validly affect certain classes.

My position is that a professional who has paid the occupation tax under the National Internal
Revenue Code should be allowed to practice in Manila even without paying the similar tax imposed
by Ordinance No. 3398. The City cannot give what said professional already has. I would not say
that this Ordinance, enacted by the Municipal Board pursuant to paragraph 1 of section 18 of the
Revised Charter of Manila, as amended by Republic Act No. 409, empowering the Board to impose
a municipal occupation tax not to exceed P50 per annum, is invalid; but that only one tax, either
under the Internal Revenue Code or under Ordinance No. 3398, should be imposed upon a
practitioner in Manila.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 99886 March 31, 1993

JOHN H. OSMEÑA, petitioner,
vs.
OSCAR ORBOS, in his capacity as Executive Secretary; JESUS ESTANISLAO, in his capacity
as Secretary of Finance; WENCESLAO DELA PAZ, in his capacity as Head of the Office of
Energy Affairs; REX V. TANTIONGCO, and the ENERGY REGULATORY BOARD, respondents.

Nachura & Sarmiento for petitioner.

The Solicitor General for public respondents.

NARVASA, C.J.:

The petitioner seeks the corrective,  prohibitive and coercive remedies provided by Rule 65 of the
1

Rules of Court,  upon the following posited grounds, viz.:

2 3

1) the invalidity of the "TRUST ACCOUNT" in the books of account of the Ministry of Energy (now,
the Office of Energy Affairs), created pursuant to § 8, paragraph 1, of P.D. No. 1956, as amended,
"said creation of a trust fund being contrary to Section 29 (3), Article VI of the . . Constitution; 4

2) the unconstitutionality of § 8, paragraph 1 (c) of P.D. No. 1956, as amended by Executive Order
No. 137, for "being an undue and invalid delegation of legislative power . .  to the Energy Regulatory Board;" 5

3) the illegality of the reimbursements to oil companies, paid out of the Oil Price Stabilization
Fund,  because it contravenes § 8, paragraph 2 (2) of
6

P. D. 1956, as amended; and

4) the consequent nullity of the Order dated December 10, 1990 and the necessity of a rollback of
the pump prices and petroleum products to the levels prevailing prior to the said Order.

It will be recalled that on October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a
Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The
OPSF was designed to reimburse oil companies for cost increases in crude oil and imported
petroleum products resulting from exchange rate adjustments and from increases in the world
market prices of crude oil.

Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O. 1024,  and 7

ordered released from the National Treasury to the Ministry of Energy. The same Executive Order
also authorized the investment of the fund in government securities, with the earnings from such
placements accruing to the fund.

President Corazon C. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on
February 27, 1987, expanding the grounds for reimbursement to oil companies for possible cost
underrecovery incurred as a result of the reduction of domestic prices of petroleum products, the
amount of the underrecovery being left for determination by the Ministry of Finance.

Now, the petition alleges that the status of the OPSF as of March 31, 1991 showed a "Terminal Fund
Balance deficit" of some P12.877 billion;  that to abate the worsening deficit, "the Energy Regulatory
8

Board . . issued an Order on December 10, 1990, approving the increase in pump prices of petroleum products," and at the rate of
recoupment, the OPSF deficit should have been fully covered in a span of six (6) months, but this notwithstanding, the respondents — Oscar
Orbos, in his capacity as Executive Secretary; Jesus Estanislao, in his capacity as Secretary of Finance; Wenceslao de la Paz, in his
capacity as Head of the Office of Energy Affairs; Chairman Rex V. Tantiongco and the Energy Regulatory Board — "are poised to accept,
process and pay claims not authorized under P.D. 1956." 9

The petition further avers that the creation of the trust fund violates §
29(3), Article VI of the Constitution, reading as follows:

(3) All money collected on any tax levied for a special purpose shall be treated as a
special fund and paid out for such purposes only. If the purpose for which a special
fund was created has been fulfilled or abandoned, the balance, if any, shall be
transferred to the general funds of the Government.

The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended, must be
treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is
collected for a specific purpose, the revenue generated therefrom shall 'be treated as a special fund'
to be used only for the purpose indicated, and not channeled to another government
objective."   Petitioner further points out that since "a 'special fund' consists of monies collected
10

through the taxing power of a State, such amounts belong to the State, although the use thereof is
limited to the special purpose/objective for which it was created."  11

He also contends that the "delegation of legislative authority" to the ERB violates § 28 (2). Article VI
of the Constitution, viz.:

(2) The Congress may, by law, authorize the President to fix, within specified limits,
and subject to such limitations and restrictions as it may impose, tariff rates, import
and export quotas, tonnage and wharfage dues, and other duties or imposts within
the framework of the national development program of the Government;

and, inasmuch as the delegation relates to the exercise of the power of taxation, "the limits,
limitations and restrictions must be quantitative, that is, the law must not only specify how to
tax, who (shall) be taxed (and) what the tax is for, but also impose a specific limit on how
much to tax."  12

The petitioner does not suggest that a "trust account" is illegal per se, but maintains that the monies
collected, which form part of the OPSF, should be maintained in a special account of the general
fund for the reason that the Constitution so provides, and because they are, supposedly, taxes
levied for a special purpose. He assumes that the Fund is formed from a tax undoubtedly because a
portion thereof is taken from collections of ad valorem taxes and the increases thereon.

It thus appears that the challenge posed by the petitioner is premised primarily on the view that the
powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation
power of the State. The Solicitor General observes that the "argument rests on the assumption that
the OPSF is a form of revenue measure drawing from a special tax to be expended for a special
purpose."   The petitioner's perceptions are, in the Court's view, not quite correct.
13

To address this critical misgiving in the position of the petitioner on these issues, the Court recalls its
holding in Valmonte v. Energy Regulatory Board, et al.   —14

The foregoing arguments suggest the presence of misconceptions about the nature
and functions of the OPSF. The OPSF is a "Trust Account" which was established
"for the purpose of minimizing the frequent price changes brought about by
exchange rate adjustment and/or changes in world market prices of crude oil and
imported petroleum products."   Under P.D. No. 1956, as amended by Executive
15

Order No. 137 dated 27 February 1987, this Trust Account may be funded from any
of the following sources:

a) Any increase in the tax collection from ad valorem tax or customs

duty imposed on petroleum products subject to tax under this
Decree arising from exchange rate adjustment, as may be
determined by the Minister of Finance in consultation with the Board
of Energy;

b) Any increase in the tax collection as a result of the lifting of tax

exemptions of government corporations, as may be determined by
the Minister of Finance in consultation with the Board of Energy:

c) Any additional amount to be imposed on petroleum products to

augment the resources of the Fund through an appropriate Order that
may be issued by the Board of Energy requiring payment of persons
or companies engaged in the business of importing, manufacturing
and/or marketing petroleum products;

d) Any resulting peso cost differentials in case the actual peso costs
paid by oil companies in the importation of crude oil and petroleum
products is less than the peso costs computed using the reference
foreign exchange rate as fixed by the Board of Energy.

xxx xxx xxx

The fact that the world market prices of oil, measured by the spot market in
Rotterdam, vary from day to day is of judicial notice. Freight rates for hauling crude
oil and petroleum products from sources of supply to the Philippines may also vary
from time to time. The exchange rate of the peso vis-a-vis the U.S. dollar and other
convertible foreign currencies also changes from day to day. These fluctuations in
world market prices and in tanker rates and foreign exchange rates would in a
completely free market translate into corresponding adjustments in domestic prices
of oil and petroleum products with sympathetic frequency. But domestic prices which
vary from day to day or even only from week to week would result in a chaotic market
with unpredictable effects upon the country's economy in general. The OPSF was
established precisely to protect local consumers from the adverse consequences
that such frequent oil price adjustments may have upon the economy. Thus, the
OPSF serves as a pocket, as it were, into which a portion of the purchase price of oil
and petroleum products paid by consumers as well as some tax revenues are
 inputted and from which amounts are drawn from time to time to reimburse oil
companies, when appropriate situations arise, for increases in, as well as
underrecovery of, costs of crude importation. The OPSF is thus a buffer mechanism
through which the domestic consumer prices of oil and petroleum products are
stabilized, instead of fluctuating every so often, and oil companies are allowed to
recover those portions of their costs which they would not otherwise recover given
the level of domestic prices existing at any given time. To the extent that some tax
revenues are also put into it, the OPSF is in effect a device through which the
domestic prices of petroleum products are subsidized in part. It appears to the Court
that the establishment and maintenance of the OPSF is well within that pervasive
and non-waivable power and responsibility of the government to secure the physical
and economic survival and well-being of the community, that comprehensive
sovereign authority we designate as the police power of the State. The stabilization,
and subsidy of domestic prices of petroleum products and fuel oil — clearly critical in
importance considering, among other things, the continuing high level of dependence
of the country on imported crude oil — are appropriately regarded as public
purposes.

Also of relevance is this Court's ruling in relation to the sugar stabilization fund the nature of which is
not far different from the OPSF. In Gaston v. Republic Planters Bank,   this Court upheld the legality
16

of the sugar stabilization fees and explained their nature and character, viz.:

The stabilization fees collected are in the nature of a tax, which is within the power of
the State to impose for the promotion of the sugar industry (Lutz v. Araneta, 98 Phil.
148). . . . The tax collected is not in a pure exercise of the taxing power. It is levied
with a regulatory purpose, to provide a means for the stabilization of the sugar
industry. The levy is primarily in the exercise of the police power of the State (Lutz v.
Araneta, supra).

xxx xxx xxx

The stabilization fees in question are levied by the State upon sugar millers, planters
and producers for a special purpose — that of "financing the growth and
development of the sugar industry and all its components, stabilization of the
domestic market including the foreign market." The fact that the State has taken
possession of moneys pursuant to law is sufficient to constitute them state funds,
even though they are held for a special purpose (Lawrence v. American Surety Co.
263 Mich. 586, 249 ALR 535, cited in 42 Am Jur Sec. 2, p. 718). Having been levied
for a special purpose, the revenues collected are to be treated as a special fund, to
be, in the language of the statute, "administered in trust" for the purpose intended.
Once the purpose has been fulfilled or abandoned, the balance if any, is to be
transferred to the general funds of the Government. That is the essence of the trust
intended (SEE 1987 Constitution, Article VI, Sec. 29(3), lifted from the 1935
Constitution, Article VI, Sec. 23(1). 17

The character of the Stabilization Fund as a special kind of fund is emphasized by

the fact that the funds are deposited in the Philippine National Bank and not in the
Philippine Treasury, moneys from which may be paid out only in pursuance of an
appropriation made by law (1987) Constitution, Article VI, Sec. 29 (3), lifted from the
1935 Constitution, Article VI, Sec. 23(1). (Emphasis supplied).
Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in
the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from
the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is
placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to
the scrutiny and review of the COA. The Court is satisfied that these measures comply with the
constitutional description of a "special fund." Indeed, the practice is not without precedent.

With regard to the alleged undue delegation of legislative power, the Court finds that the provision
conferring the authority upon the ERB to impose additional amounts on petroleum products provides
a sufficient standard by which the authority must be exercised. In addition to the general policy of the
law to protect the local consumer by stabilizing and subsidizing domestic pump rates, § 8(c) of P.D.
1956   expressly authorizes the ERB to impose additional amounts to augment the resources of the
18

Fund.

What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit on
how much to tax."   The Court is cited to this requirement by the petitioner on the premise that what
19

is involved here is the power of taxation; but as already discussed, this is not the case. What is here
involved is not so much the power of taxation as police power. Although the provision authorizing the
ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be
overlooked that the overriding consideration is to enable the delegate to act with expediency in
carrying out the objectives of the law which are embraced by the police power of the State.

The interplay and constant fluctuation of the various factors involved in the determination of the price
of oil and petroleum products, and the frequently shifting need to either augment or exhaust the
Fund, do not conveniently permit the setting of fixed or rigid parameters in the law as proposed by
the petitioner. To do so would render the ERB unable to respond effectively so as to mitigate or
avoid the undesirable consequences of such fluidity. As such, the standard as it is expressed,
suffices to guide the delegate in the exercise of the delegated power, taking account of the
circumstances under which it is to be exercised.

For a valid delegation of power, it is essential that the law delegating the power must be (1)
complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix
a standard — limits of which
are sufficiently determinate or determinable — to which the delegate must conform.  20

. . . As pointed out in Edu v. Ericta: "To avoid the taint of unlawful delegation, there
must be a standard, which implies at the very least that the legislature itself
determines matters of principle and lays down fundamental policy. Otherwise, the
charge of complete abdication may be hard to repel. A standard thus defines
legislative policy, marks its limits, maps out its boundaries and specifies the public
agency to apply it. It indicates the circumstances under which the legislative
command is to be effected. It is the criterion by which the legislative purpose may be
carried out. Thereafter, the executive or administrative office designated may in
pursuance of the above guidelines promulgate supplemental rules and regulations.
The standard may either be express or implied. If the former, the non-delegation
objection is easily met. The standard though does not have to be spelled out
specifically. It could be implied from the policy and purpose of the act considered as
a whole.  21

It would seem that from the above-quoted ruling, the petition for prohibition should fail.
The standard, as the Court has already stated, may even be implied. In that light, there can be no
ground upon which to sustain the petition, inasmuch as the challenged law sets forth a determinable
standard which guides the exercise of the power granted to the ERB. By the same token, the proper
exercise of the delegated power may be tested with ease. It seems obvious that what the law
intended was to permit the additional imposts for as long as there exists a need to protect the
general public and the petroleum industry from the adverse consequences of pump rate fluctuations.
"Where the standards set up for the guidance of an administrative officer and the action taken are in
fact recorded in the orders of such officer, so that Congress, the courts and the public are assured
that the orders in the judgment of such officer conform to the legislative standard, there is no failure
in the performance of the legislative functions." 22

This Court thus finds no serious impediment to sustaining the validity of the legislation; the express
purpose for which the imposts are permitted and the general objectives and purposes of the fund are
readily discernible, and they constitute a sufficient standard upon which the delegation of power may
be justified.

In relation to the third question — respecting the illegality of the reimbursements to oil companies,
paid out of the Oil Price Stabilization Fund, because allegedly in contravention of § 8, paragraph 2
(2) of P.D. 1956, amended   — the Court finds for the petitioner.
23

The petition assails the payment of certain items or accounts in favor of the petroleum companies
(i.e., inventory losses, financing charges, fuel oil sales to the National Power Corporation, etc.)
because not authorized by law. Petitioner contends that "these claims are not embraced in the
enumeration in § 8 of P.D. 1956 . . since none of them was incurred 'as a result of the reduction of
domestic prices of petroleum products,'"   and since these items are reimbursements for which the
24

OPSF should not have responded, the amount of the P12.877 billion deficit "should be reduced by
P5,277.2 million."   It is argued "that under the principle of ejusdem generis . . . the term 'other
25

factors' (as used in § 8 of P.D. 1956) . . can only include such 'other factors' which necessarily result
in the reduction of domestic prices of petroleum products."  26

The Solicitor General, for his part, contends that "(t)o place said (term) within the restrictive confines
of the rule of ejusdem generis would reduce (E.O. 137) to a meaningless provision."

This Court, in Caltex Philippines, Inc. v. The Honorable Commissioner on Audit, et al.,   passed
27

upon the application of ejusdem generis to paragraph 2 of § 8 of P.D. 1956, viz.:

The rule of ejusdem generis states that "[w]here words follow an enumeration of

persons or things, by words of a particular and specific meaning, such general words
are not to be construed in their widest extent, but are held to be as applying only to
persons or things of the same kind or class as those specifically mentioned."   A 28

reading of subparagraphs (i) and (ii) easily discloses that they do not have a common
characteristic. The first relates to price reduction as directed by the Board of Energy
while the second refers to reduction in internal ad valorem taxes. Therefore,
subparagraph (iii) cannot be limited by the enumeration in these subparagraphs.
What should be considered for purposes of determining the "other factors" in
subparagraph (iii) is the first sentence of paragraph (2) of the Section which explicitly
allows the cost underrecovery only if such were incurred as a result of the reduction
of domestic prices of petroleum products.

The Court thus holds, that the reimbursement of financing charges is not authorized by paragraph 2
of § 8 of P.D. 1956, for the reason that they were not incurred as a result of the reduction of
domestic prices of petroleum products. Under the same provision, however, the payment of
inventory losses is upheld as valid, being clearly a result of domestic price reduction, when oil
companies incur a cost underrecovery for yet unsold stocks of oil in inventory acquired at a higher
price.

Reimbursement for cost underrecovery from the sales of oil to the National Power Corporation is
equally permissible, not as coming within the provisions of P.D. 1956, but in virtue of other laws and
regulations as held in Caltex   and which have been pointed to by the Solicitor General. At any rate,
29

doubts about the propriety of such reimbursements have been dispelled by the enactment of R.A.
6952, establishing the Petroleum Price Standby Fund, § 2 of which specifically authorizes the
reimbursement of "cost underrecovery incurred as a result of fuel oil sales to the National Power
Corporation."

Anent the overpayment refunds mentioned by the petitioner, no substantive discussion has been
presented to show how this is prohibited by P.D. 1956. Nor has the Solicitor General taken any effort
to defend the propriety of this refund. In fine, neither of the parties, beyond the mere mention of
overpayment refunds, has at all bothered to discuss the arguments for or against the legality of the
so-called overpayment refunds. To be sure, the absence of any argument for or against the validity
of the refund cannot result in its disallowance by the Court. Unless the impropriety or illegality of the
overpayment refund has been clearly and specifically shown, there can be no basis upon which to
nullify the same.

Finally, the Court finds no necessity to rule on the remaining issue, the same having been rendered
moot and academic. As of date hereof, the pump rates of gasoline have been reduced to levels
below even those prayed for in the petition.

WHEREFORE, the petition is GRANTED insofar as it prays for the nullification of the reimbursement
of financing charges, paid pursuant to E.O. 137, and DISMISSED in all other respects.

SO ORDERED.

Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo,
Melo, Campos, Jr., and Quiason, JJ., concur.

Gutierrez, Jr., J., is on leave.

# Footnotes

1 The writ of certiorari is, of course, available only as against tribunals, boards or

officers exercising judicial or quasi-judicial functions.

2 The petition alleges separate causes or grounds for each extraordinary writ sought.

3 Rollo, pp. 1 to 4.

4 Rollo, p. 2.

5 Id.

6 When this petition was filed, the amount involved was P5,277.4 million.
7 Issued on 9 May 1985.

8 Rollo, pp. 8-9.

9 Rollo, p. 11; emphasis supplied.

10 Id., pp. 13-4.

11 Id., p. 15.

12 Rollo, p. 17.

13 Comment of the Respondents; Rollo, p. 63.

14 G.R. Nos. L-79501-03 [23 June 1988] 162 SCRA 521; Decided jointly with
Citizen's Alliance for Consumer Protection v. Energy Regulatory Board et al., G.R.
Nos. L-78888-90, and Kilusang Mayo Uno Labor Center v. Energy Regulatory Board,
et al., G.R. Nos. L-79590-92; emphasis supplied.

15 Citing E.O. No. 137, Sec. 1 (amending § 8 of P.D. 1956).

16 158 SCRA 626, emphasis supplied.

17 "(3) All money collected on any tax levied for a special purpose shall be treated as
a special fund and paid out for such purpose only. If the purpose for which a special
fund was created has been fulfilled or abandoned, the balance, if any, shall be
transferred to the general funds of the government." (1987 Constitution, Art. VI, Sec.
28[3]).

18 Supra; see footnote 14 and related text.

19 Rollo, p. 17.

20 SEE Vigan Electric Light Co., Inc. v. Public Service Commission, G.R. No.
L-19850, 30 January 1964 and Pelaez v. Auditor General, G.R. No. L-23825, 24
December 1965; see also Gonzales, N. Administrative Law — A Text, (1979) at 29.

21 De La Llana v. Alba, 112 SCRA 294, citing Edu v. Ericta, 35 SCRA

481: Cf. Agustin v. Edu, 88 SCRA 195.

22 Hirabayashi v. U.S., 390 U.S. 99.

23 When this petition was filed, the amount involved was P5,277.4 million.

24 Rollo, p. 20.

25 Id., p. 21.

26 Id., p. 20.
27 Caltex Philippines, Inc. v. The Honorable Commissioner on Audit, et al., G.R. No.
92585, 8 May 1992, En Banc. N.B. — The Solicitor General seems to have taken a
different position in this case, with respect to the application of ejusdem generis.

28 Smith Bell and Co., Ltd. v. Register of Deeds of Davao, 96 Phil. 53

[1954], citing BLACK on Interpretation of Law, 2nd ed. at 203: see also Republic v.
Migriño 189 SCRA 289 [1990].

29 Supra at note 25; SEE also Maceda v. Hon. Catalino Macaraig, Jr., et al., G.R.
No. 88291, 197 SCRA 771 (1991).