Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-40296 November 21, 1984
ALLIED THREAD CO., INC., and KER & COMPANY, LTD.,
petitioners,
vs.
HON. CITY MAYOR OF MANILA, HON. CITY TREASURER OF
MANILA, HON. LORENZO RELOVA, in his capacity as Presiding
Judge, Branch II, CFI of Manila, respondents.
Antonio A. Nieva for petitioners.
Santiago F. Alidio, S.M. Artiaga, Jr. and Jose A. Perella for
respondents.

ABAD SANTOS, J.:
This is a Petition for Review challenging the decision of the then Court
of First Instance of Manila presided by then Judge, now Justice
Lorenzo Relova, which upheld the validity of Manila Ordinance No.
7516, as amended by Ordinance Nos. 7544, 7545 and 7556, and
adjudging petitioner Allied Thread Co., Inc. taxable thereunder
considering that its products are sold in Manila.
On June 12, 1974, the Municipal Board of the City of Manila enacted
Ordinance No. 7516 imposing on manufacturers, importer porters or
producers, doing business in the City of Manila, business taxes based
on gross sales on a graduated basis. The Mayor approved the said
Ordinance on June 15, 1974. In due time, the same ordinance
underwent a series of amendments, to wit: on June 19, 1974, by
Ordinance No. 7544 approved by the Mayor on the same date;
Ordinance No. 7545 enacted by the Municipal Board on June 20,
1974 and approved by the Mayor on June 27, 1974; and Ordinance
No. 7556, enacted by the Municipal Board on July 20, 1974 and
approved by the Mayor on July 29,1974. Ordinance No. 7516 as
amended, reads as follows:
Sec. 1. Business Tax. There is hereby imposed on
the following business in the City of Manila an annual
tax collectible quarterly except on those for which fixed
taxes are already provided for as follows:
A. On manufacturers, importers, or producers of any
article of commerce of whatever kind or nature,
including brewers, distilled spirits and/or wines in
accordance with the following schedule:
xxx xxx xxx
PROVIDED HOWEVER, that for purposes of collection
of this tax, manufacturers and producers maintaining or
operating branch or sales offices elsewhere shall
record the sale in the branch or sales office making the
sale and the tax thereon shall accrue to the City of
Manila if the branch of sales office is in Manila. In
cases where there is no such branch or sales office in
the city, the sale shag be duly recorded in the principal
office along with the sales made in the principal office.
Sixty percent of all sales recorded in the principal office
shall be taxable by the City of Manila if the principal
office is in Manila, while the remaining forty percent
shall be deemed as sales made in the factory and shall
he taxable by the local government where the factory is
located.
In cases where a manufacturer or producer has
factories in Manila and in different localities, the forty
per cent sales allocation mentioned in the preceding
paragraph shall be appropriated among the City of
Manila and the localities where the factories are
situated in proportion to their respective volumes of
production during the period for which the tax is due.
The records show that petitioner Allied Id Co., inc. is engaged in the
business of manufacturing sewing thread and yarn under duly
registered marks and labels. It operates its factory and maintains an
office in Pasig, Rizal. In order to sell its products in Manila and in
other parts of the Philippines, petitioner Allied Thread Co., Inc.
engaged the services of a sales broker, Ker & Company, Ltd. (co-
petitioner herein), the latter deriving commissions from every sale
made for its principal.
Having been affected by the aforementioned Ordinance, being
manufacturers and sales brokers, on July 22, 1974, Allied Thread Co.,
Inc. and Ker & Co., Ltd. filed with the defunct Court of First Instance of
Manila, a petition for Declaratory Relief, contending that Ordinance
No. 7516, as amended, is not valid nor enforceable as the same is
contrary to Section 54 of Presidential Decree No. 426, as clarified by
Local Tax Regulation No. 1-74 dated April 8, 1974 of the Department
of Finance, reading as follows:
J. GENERAL PROVISIONS
1. All existing tax ordinance of provinces, cities,
municipalities and barrios shall be deemed ipso facto
nullified on June 30, 1974.
2. The local boards or councils should enact their
respective tax ordinances pursuant to the provisions of
the Local Tax Code, as amended by P.D. 426, to take
effect not earlier than July 1, 1974.
3. Pursuant to the provisions of Section 42 of the Code,
as amended by Section 18 of the said Decree, a local
tax ordinance shall go into effect on the 15th day after
approved by the local chief executives in accordance
with Section 41 of the Code. 4. In view hereof, and
considering the provisions of Section 54 of the Code,
regarding the accrual of taxes a local tax ordinance
intended to take effect on July 1, 1974 should be
enacted by the Local Chief Executive not later than
June 15, 1974. (Emphasis supplied)
Otherwise stated, petitioners assert that due to the series of
amendments to Ordinance No. 7516, the same Ordinance fell short of
the deadline set by Sec. 54 of P.D. No. 426 that "for an ordinance
intended to take effect on July 1, 1974, it must be enacted on or
before June 15, 1974." Necessarily, so it is asserted, the said
Ordinance No. 7516 as amended, is not valid nor enforceable.
Petitioners further contend that the questioned Ordinance did not
comply with the necessary publication requirement in a newspaper of
general circulation as mandated by Sec. 43 of the Local Tax Code.
Petitioner Allied Thread Co., Inc. also claims that it should not be
subjected to the said Ordinance No. 7516 as amended, because it
does not operate or maintain a branch office in Manila and that its
principal office and factory are located in Pasig, Rizal.
We agree with the decision of the then Court of First Instance of
Manila, upholding the validity of Ordinance No. 7516 as amended,
and finding petitioner Allied Thread Co., Inc. the proper subject
thereto.
There is no dispute that Ordinance No. 7516 was enacted by the
Municipal Board of Manila on June 12, 1974 and approved by the City
Mayor on June 15, 1974. Fifteen (15) days thereafter, or on July 1,
1974, the said ordinance became effective pursuant to Sec. 42 of the
Local Tax Code. It is clear therefore that Ordinance No. 7516 has fully
conformed with P.D. No. 426 and Local Tax Regulation No. 1-74
which require that "a local tax ordinance intended to take effect on
July 1, 1974 should be enacted by the Local Chief Executive not later
than June 15, 1974 ". The subsequent amendments to the basic
ordinance did not in any way invalidate it nor move the date of its
effectivity. To hold otherwise would limit the power of the defunct
Municipal Board of Manila to amend an existing ordinance as
exigencies require.
Petitioners complain that they were not fully apprised of the
enactment of Ordinance No. 7516 for the same was not duly
published in a newspaper of general circulation. Respondents argue
however, that copies of Ordinance No. 7516 and its amendments
were posted in public buildings, government offices, and public places
in lieu of publication in newspaper of general circulation.
We are persuaded that there was substantial compliance of the law
on publication. Section 43 of the Local Tax Code provides two modes
of apprising the public of a new ordinance, either, (a) by means of
publication in a newspaper of general circulation or, (b) by means of
posting of copies thereof in the local legislative hall or premises and
two other conspicuous places within the territorial jurisdiction of the
local government. Respondents, having complied with the second
mode of notice, We are of the opinion that there is no legal infirmity to
the validity of Ordinance No. 7516 as amended.
Finally, petitioner Allied Thread Co., Inc. claims exclusion from
Ordinance No. 7515 as amended on the ground that it does not
maintain an office or branch office in the City of Manila, where the
subject Ordinance only applies. This contention is devoid of merit.
Allied Thread Co., Inc. admits that it does business in the City of
Manila through a broker or agent, Ker & Company, Ltd. Doing
business in the City of Manila is all that is required to fall within the
coverage of the Ordinance.
It should be noted that Ordinance No. 7516 as amended imposes a
business tax on manufacturers, importers or producers doing
business in the City of Manila. The tax imposition here is upon the
performance of an act, enjoyment of a privilege, or the engaging in an
occupation, and hence is in the nature of an excise tax.
The power to levy an excise upon the performance of an act or the
engaging in an occupation does not depend upon the domicile of the
person subject to the excise nor upon the physical location of the
property and in connection with the act or occupation taxed, but
depends upon the place in which the act is performed or occupation
engaged in.
Thus, the gauge for taxability under the said Ordinance No. 7516 as
amended does not depend on the location of the office, but attaches
upon the place where the respective sale transaction(s) is perfected
and consummated. (See Koppel (Phil.) vs. Yatco, 77 Phil. 496 [1946])
Since Allied Thread Co., Inc. sells its products in the City of Manila
through its broker, Ker & Company, Ltd., it cannot escape the tax
liability imposed by Ordinance No. 7516 as amended.
WHEREFORE, the petition is hereby dismissed for lack of merit.
Costs against the petitioners.
SO ORDERED.
Fernando, C.J., Makasiar, Aquino, Concepcion, Jr., Melencio-Herrera,
Plana, Escolin, Gutierrez, Jr., De la Fuente, and Cuevas, JJ., concur.
Teehankee and Relova, JJ., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 118233 December 10, 1999
ANTONIO Z. REYES, ELISEO P. OCAMPO and EDITHA ARCIAGA-
SANTOS, petitioners,
vs.
COURT OF APPEALS, HON. SECRETARY OF JUSTICE
FRANKLIN DRILON and MAYOR JINGGOY ESTRADA (JOSE
EJERCITO) OF THE MUNICIPALITY OF SAN JUAN, METRO
MANILA, respondents.
R E S O L U T I O N

QUISUMBING, J .:
For review is the decision
1
of the Court of Appeals, dated August 3,
1994 and its resolution
2
dated December 8, 1994 in CA-G.R. SP No.
32473. Said decision dismissed the prohibition case brought by the
petitioner against respondent officials of the Municipality of San Juan
to stop the enforcement of Tax Ordinance Nos. 87, 91, 95, 100 and
101.
The factual antecedents are as follows:
The Sangguniang Bayan of San Juan, Metro Manila implemented
several tax ordinances as follows:
Ordinance No. Title
87 An ordinance imposing a municipal tax of fifty percent (50%) of one
percent (1%) of the gross receipt on business of printing and
publication
91 An ordinance imposing a transfer tax equivalent to fifty percent
(50%) of one percent (1%) of the total consideration on the sale,
donation, barter or any other mode of transferring ownership or title of
real property situated in San Juan, Metro Manila, or its fair market
value, whichever is higher
95 An ordinance imposing fifty percent (50%) of one percent (1%) for
social housing tax on the assessed value of all real estate property in
San Juan, Metro Manila in excess of P50,000.00 value as provided in
the New Urban Land Reform Law, also known as R.A. 7279.
100 An ordinance imposing new rates of business taxes of the
Municipality of San Juan Metro Manila
101 An ordinance levying an annual "Ad Valorem" tax on real property
and an additional tax accruing to the special education fund (SEF)
On May 21, 1993, petitioners filed an appeal with the Department of
Justice assailing the constitutionality of these tax ordinances allegedly
because they were promulgated without previous public hearings
thereby constituting deprivation of property without due process of
law.
On June 10, 1993, respondent Secretary of Justice dismissed the
appeal for having been filed out of time. Citing Section 187, R.A. No.
7160, he said:
It appears that the tax ordinances in question took
effect on September 24, 1992, in the case of Tax
Ordinance No. 87, until October 22, 1992, in the case
of Tax Ordinance Nos. 91 and 95, and until October
29, 1992, in the case of Tax Ordinance Nos. 100 and
101, or more than thirty (30) days from the effectivity
thereof when the appeal was filed and received by this
Department on May 21, 1993 and therefore not in
accordance with the requirements provided for under
Section 187 of the Local Government Code of 1991.
WHEREFORE, the instant appeal, having been filed
out of time, is hereby DISMISSED.
3

Undaunted, petitioners filed with the Court of Appeals a petition for
certiorari and prohibition (CA-G.R. SP No. 32473). But respondent
court affirmed the decision of the Secretary. On December 8, 1994,
the motion for reconsideration filed by the petitioners was denied for
lack of merit.
Hence, the present petition for review, raising the following questions:
1. Whether or not the questioned tax ordinances are violative of the
Constitution, considering the undisputed fact that no public hearings
were ever held on the ordinances before they were passed and
approved as required by the Local Government Code of 1991, thereby
constituting as they do a deprivation of property without due process;
2. Whether or not the wording of the law under Section 187 of the
Local Government Code of 1991 that "any question on the
constitutionality . . . of tax ordinance . . . may be raised on appeal
within thirty (30) days from the effectivity thereof . . ." is a reductio as
absurdum, since if the tax ordinance is found to be unconstitutional, it
will be considered as never having become effective at all from the
very beginning, for which reason the thirty-day appeal period cannot
be reckoned and cannot be enforced;
3. Whether or not the constitutionality of a tax ordinance, or any law
for that matter, can be questioned at any time despite the prescription
of a limited period within which to question it, as in case at bar; and
4. Whether or not the constitutionality of an ordinance or a law may be
questioned even if the question of constitutionality may not have been
originally or initially raised, or is not the lis mota of the case, if it
appears that a determination of the question of constitutionality is
necessary to a decision of the case.
4

In our view, the pertinent issues for our resolution now are:
1. Whether or not the Court of Appeals erred in affirming the decision
of the Secretary of Justice who dismissed the prohibition suit, on the
ground that it was filed out of time?
2. Whether or not lack of mandatory public hearings prior to enacting
Municipal Ordinance Nos. 87, 91, 95, 100 and 101 render them void
on the ground of deprivation of property without due process?
3. Whether or not the constitutional validity of Sec. 187 of the Local
Government Code could be raised for the first time on appeal?
According to petitioners, respondent Secretary erred in declaring that
they failed to file their appeal on time. Also, they assail Municipal
Ordinance Nos. 87, 91, 95, 100 and 101, for alleged failure of the
Municipal Council of San Juan to conduct mandatory public hearings.
Because of this, they claim the ordinances are inoperative, as through
they were never passed. Consequently, no prescriptive thirty-day
period to question the validity of the ordinance could toll to bar their
appeal to the Department of Justice.
Sec. 187 of R.A. 7160, cited by respondent Secretary, provides as
follows:
Sec. 187 Procedure for Approval and Effectivity of
Tax Ordinances and Revenue Measures; Mandatory
Public Hearings. The procedure for approval of local
tax ordinances and revenue measures shall be in
accordance with the provisions of this Code: Provided,
That public hearings shall be conducted for the
purpose prior to the enactment thereof: Provided
further, That any question on the constitutionality or
legality of tax ordinances or revenue measures may be
raised on appeal within thirty (30) days from the
effectivity thereof to the Secretary of Justice who shall
render a decision within sixty (60) days from the date of
receipt of the appeal: Provided, however, That such
appeal not have the effect of suspending the effectivity
of the ordinance and the accrual and payment of the
tax, fee, or charge levied therein: Provided, finally, That
within thirty (30) days after receipt of the decision or
the lapse of the sixty-day period without the Secretary
of Justice acting upon the appeal, the aggrieved party
may file appropriate proceedings with a court of
competent jurisdiction.
Clearly, the law requires that the dissatisfied taxpayer who questions
the validity or legality of a tax ordinance must file his appeal to the
Secretary of Justice, within 30 days from effectivity thereof. In case
the Secretary decides the appeals, a period also of 30 days is allowed
for an aggrieved party to go to court. But if the Secretary does not act
thereon, after the lapse of 60 days, a party could already proceed to
seek relief in court. These three separate periods are clearly given for
compliance as a prerequisite before seeking redress in a competent
court. Such statutory periods are set to prevent delays as well as
enhance the orderly and speedy discharge of judicial functions.
5
For
this reason the courts construct these provisions of statutes as
mandatory.
6

A municipal tax ordinance empowers a local government unit to
impose taxes. The power to tax is the most effective instrument to
raise needed revenues to finance and support the myriad activities of
local government units for the delivery of basic services essential to
the promotion of the general welfare and enhancement of peace,
progress, and prosperity of the people.
7
Consequently, any delay in
implementing tax measures would be to the detriment of the public. It
is for this reason that protests over tax ordinances are required to be
done within certain time frames. In the instant case, it is our view that
the failure of petitioners to appeal to the Secretary of Justice within 30
days as required by Sec. 187 of R.A. 7160 is fatal to their cause.
On the second issue, petitioners allege that the Sangguniang Bayan
of San Juan did not comply with the prescribed procedure for enacting
an ordinance because they failed to conduct public hearings.
In Figurres vs. Court of Appeals,
8
where the municipality failed to
conduct public hearings prior to enacting the revisions on the
schedule of fair market values and assessment level of classes of real
estate properties, the Court said:
Petitioner is right in contending that public hearings are
required to be conducted prior to the enactment of an
ordinance imposing real property taxes. R.A. No. 7160,
Sec. 186, provides that an ordinance levying taxes,
fees, or charges "shall not be enacted without any prior
public hearing conducted for the purpose."
However, it is noteworthy that part from her bare
assertions, petitioner Figuerres has not presented any
evidence to show that no public hearings were
conducted prior not the enactment of the ordinances in
question. On the other hand, the Municipality of
Mandaluyong claims the public hearings were indeed
conducted before the subject ordinances were
adopted, although it likewise failed to submit any
evidence to establish this allegation. However, in
accordance with the presumption of validity in favor of
an ordinance, their constitutionality or legality should
be upheld in the absence of evidences showing that
procedure prescribed by law was not observed in their
enactment . . . .
Furthermore, the lack of a public hearings is a negative
allegation essential to petitioner's cause of action in the
present case. Hence, as petitioner is the party
asserting it, she has the burden of proof. Since
petitioner failed to rebut the presumption of validity in
favor of the subject ordinances and to discharge the
burden of proving that no public hearings were
conducted prior to the enactment thereof, we are
constrained to uphold their constitutionality or legality.
9

We find Figuerres instructive. Petitioners have not proved in the case
before us that the Sangguniang Bayan of San Juan failed to conduct
the required public hearings before the enactment of Ordinance Nos.
87, 91, 95, 100 and 101. Although the Sanggunian had the control of
records or the better means of proof regarding the facts alleged,
petitioner as not relieved from the burden of proving their averments.
10
Proof that public hearings were not held falls on petitioner'
shoulders. For failing to discharge that burden, their petition was
properly dismissed.
In any event, for the purpose of securing certainty where doubt would
be intolerable, it is a general rules that the regularity of the enactment
of an officially promulgated statute or ordinance may not be
impeached by parol evidence or oral testimony either of individual
officers and members, or of strangers who may be interested in
nullifying legislative action.
11
This rules supplements the presumption
in favor of the regularity of official conduct which we have upheld
repeatedly, absent a clear showing to the contrary.
Finally, on the validity of Section 187 of R.A. 7160, the Local
Government Code, we must stress that the constitutionality of an act
of Congress will not be passed upon by the Court unless at the first
opportunity that question is properly raised and presented in an
appropriate case, and is necessary to a determination of the case,
particularly where the issue of constitutionality is the very lis mota
presented.
12
The constitutional validity of a statutory provision should
not be entertained by the Court where it was not specifically raised
below, insisted upon, and adequately argued.
13
Moreover, given the
circumstances in this case, we find no genuine necessity to dwell on
the issue of constitutional invalidity of Section 187 in relation to issue
of valid enactment of the subject ordinances, as shown in the
foregoing discussion. Suffice it now to say that, having resolved the
first and second issues, we find no grave abuse of discretion nor
reversible error in the decision of respondent appellate court. Further
constitutional scrutiny of Section 187 is unwarranted.
WHEREFORE, the present petition is DISMISSED for lack of merit
and the assailed decision of the Court of Appeals is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Panganiban, Purisima, Pardo, Buena, Gonzaga-Reyes, Ynares-
Santiago and De Leon, Jr., JJ., concur.


THE CITY OF MANILA, LIBERTY M.
TOLEDO, in her capacity as THE
TREASURER OF MANILA and
JOSEPH SANTIAGO, in his capacity
as the CHIEF OF THE LICENSE
G.R. No. 181845

DIVISION OF CITY OF MANILA,
Petitioners,


- versus -


COCA-COLA BOTTLERS
PHILIPPINES, INC.,
Respondent.

Present:






August 4, 2009



D E C I S I O N

CHICO-NAZARIO, J.:

This case is a Petition for Review on Certiorari under Rule 45
of the Revised Rules of Civil Procedure seeking to review and reverse
the Decision1[1] dated 18 January 2008 and Resolution2[2] dated 18


February 2008 of the Court of Tax Appeals en banc (CTA en banc) in
C.T.A. EB No. 307. In its assailed Decision, the CTA en banc
dismissed the Petition for Review of herein petitioners City of Manila,
Liberty M. Toledo (Toledo), and Joseph Santiago (Santiago); and
affirmed the Resolutions dated 24 May 2007,3[3] 8 June 2007,4[4]
and 26 July 2007,5[5] of the CTA First Division in C.T.A. AC No. 31,
which, in turn, dismissed the Petition for Review of petitioners in said
case for being filed out of time. In its questioned Resolution, the CTA
en banc denied the Motion for Reconsideration of petitioners.

Petitioner City of Manila is a public corporation empowered to
collect and assess business taxes, revenue fees, and permit fees,
through its officers, petitioners Toledo and Santiago, in their
capacities as City Treasurer and Chief of the Licensing Division,










respectively. On the other hand, respondent Coca-Cola Bottlers
Philippines, Inc. is a corporation engaged in the business of
manufacturing and selling beverages, and which maintains a sales
office in the City of Manila.

The case stemmed from the following facts:

Prior to 25 February 2000, respondent had been paying the
City of Manila local business tax only under Section 14 of Tax
Ordinance No. 7794,6[6] being expressly exempted from the business
tax under Section 21 of the same tax ordinance. Pertinent provisions
of Tax Ordinance No. 7794 provide:

Section 14. Tax on Manufacturers,
Assemblers and Other Processors. There is hereby
imposed a graduated tax on manufacturers,
assemblers, repackers, processors, brewers, distillers,
rectifiers, and compounders of liquors, distilled spirits,
and wines or manufacturers of any article of commerce
of whatever kind or nature, in accordance with any of
the following schedule:

x x x x




over P6,500,000.00 up to
P25,000,000.00 - - - - - - - - - - - - - - - - - - - --
P36,000.00 plus 50% of 1%
in
excess of P6,500,000.00

x x x x

Section 21. Tax on Businesses Subject to the
Excise, Value-Added or Percentage Taxes under the
NIRC. On any of the following businesses and
articles of commerce subject to excise, value-added or
percentage taxes under the National Internal Revenue
Code hereinafter referred to as NIRC, as amended, a
tax of FIFTY PERCENT (50%) of ONE PERCENT (1%)
per annum on the gross sales or receipts of the
preceding calendar year is hereby imposed:

(A) On persons who sell goods and services
in the course of trade or business; and those who
import goods whether for business or otherwise; as
provided for in Sections 100 to 103 of the NIRC as
administered and determined by the Bureau of Internal
Revenue pursuant to the pertinent provisions of the
said Code.

x x x x

(D) Excisable goods subject to VAT
(1) Distilled spirits
(2) Wines
x x x x
(8) Coal and coke
(9) Fermented liquor, brewers wholesale
price, excluding the ad valorem tax

x x x x

PROVIDED, that all registered businesses in
the City of Manila that are already paying the
aforementioned tax shall be exempted from payment
thereof.


Petitioner City of Manila subsequently approved on 25
February 2000, Tax Ordinance No. 7988,7[7] amending certain
sections of Tax Ordinance No. 7794, particularly: (1) Section 14, by
increasing the tax rates applicable to certain establishments operating
within the territorial jurisdiction of the City of Manila; and (2) Section
21, by deleting the proviso found therein, which stated that all
registered businesses in the City of Manila that are already paying the
aforementioned tax shall be exempted from payment thereof.
Petitioner City of Manila approved only after a year, on 22 February
2001, another tax ordinance, Tax Ordinance No. 8011, amending Tax
Ordinance No. 7988.

Tax Ordinances No. 7988 and No. 8011 were later declared by
the Court null and void in Coca-Cola Bottlers Philippines, Inc. v. City



of Manila8[8] (Coca-Cola case) for the following reasons: (1) Tax
Ordinance No. 7988 was enacted in contravention of the provisions of
the Local Government Code (LGC) of 1991 and its implementing rules
and regulations; and (2) Tax Ordinance No. 8011 could not cure the
defects of Tax Ordinance No. 7988, which did not legally exist.
However, before the Court could declare Tax Ordinance No.
7988 and Tax Ordinance No. 8011 null and void, petitioner City of
Manila assessed respondent on the basis of Section 21 of Tax
Ordinance No. 7794, as amended by the aforementioned tax
ordinances, for deficiency local business taxes, penalties, and
interest, in the total amount of P18,583,932.04, for the third and fourth
quarters of the year 2000. Respondent filed a protest with petitioner
Toledo on the ground that the said assessment amounted to double
taxation, as respondent was taxed twice, i.e., under Sections 14 and
21 of Tax Ordinance No. 7794, as amended by Tax Ordinances No.
7988 and No. 8011. Petitioner Toledo did not respond to the protest
of respondent.

Consequently, respondent filed with the Regional Trial Court
(RTC) of Manila, Branch 47, an action for the cancellation of the
assessment against respondent for business taxes, which was
docketed as Civil Case No. 03-107088.



On 14 July 2006, the RTC rendered a Decision9[9] dismissing
Civil Case No. 03-107088. The RTC ruled that the business taxes
imposed upon the respondent under Sections 14 and 21 of Tax
Ordinance No. 7988, as amended, were not of the same kind or
character; therefore, there was no double taxation. The RTC, though,
in an Order10[10] dated 16 November 2006, granted the Motion for
Reconsideration of respondent, decreed the cancellation and
withdrawal of the assessment against the latter, and barred petitioners
from further imposing/assessing local business taxes against
respondent under Section 21 of Tax Ordinance No. 7794, as
amended by Tax Ordinance No. 7988 and Tax Ordinance No. 8011.
The 16 November 2006 Decision of the RTC was in conformity with
the ruling of this Court in the Coca-Cola case, in which Tax Ordinance
No. 7988 and Tax Ordinance No. 8011 were declared null and void.
The Motion for Reconsideration of petitioners was denied by the RTC
in an Order11[11] dated 4 April 2007. Petitioners received a copy of
the 4 April 2007 Order of the RTC, denying their Motion for
Reconsideration of the 16 November 2006 Order of the same court,
on 20 April 2007.








On 4 May 2007, petitioners filed with the CTA a Motion for
Extension of Time to File Petition for Review, praying for a 15-day
extension or until 20 May 2007 within which to file their Petition. The
Motion for Extension of petitioners was docketed as C.T.A. AC No.
31, raffled to the CTA First Division.
Again, on 18 May 2007, petitioners filed, through registered
mail, a Second Motion for Extension of Time to File a Petition for
Review, praying for another 10-day extension, or until 30 May 2007,
within which to file their Petition.
On 24 May 2007, however, the CTA First Division already
issued a Resolution dismissing C.T.A. AC No. 31 for failure of
petitioners to timely file their Petition for Review on 20 May 2007.
Unaware of the 24 May 2007 Resolution of the CTA First
Division, petitioners filed their Petition for Review therewith on 30 May
2007 via registered mail. On 8 June 2007, the CTA First Division
issued another Resolution, reiterating the dismissal of the Petition for
Review of petitioners.
Petitioners moved for the reconsideration of the foregoing
Resolutions dated 24 May 2007 and 8 June 2007, but their motion
was denied by the CTA First Division in a Resolution dated 26 July
2007. The CTA First Division reasoned that the Petition for Review of
petitioners was not only filed out of time -- it also failed to comply with
the provisions of Section 4, Rule 5; and Sections 2 and 3, Rule 6, of
the Revised Rules of the CTA.

Petitioners thereafter filed a Petition for Review before the
CTA en banc, docketed as C.T.A. EB No. 307, arguing that the CTA
First Division erred in dismissing their Petition for Review in C.T.A. AC
No. 31 for being filed out of time, without considering the merits of
their Petition.
The CTA en banc rendered its Decision on 18 January 2008,
dismissing the Petition for Review of petitioners and affirming the
Resolutions dated 24 May 2007, 8 June 2007, and 26 July 2007 of the
CTA First Division. The CTA en banc similarly denied the Motion for
Reconsideration of petitioners in a Resolution dated 18 February 2008
Hence, the present Petition, where petitioners raise the
following issues:

I. WHETHER OR NOT PETITIONERS
SUBSTANTIALLY COMPLIED WITH
THE REGLEMENTARY PERIOD TO
TIMELY APPEAL THE CASE FOR
REVIEW BEFORE THE [CTA DIVISION].
II.

II. WHETHER OR NOT THE
RULING OF THIS COURT IN THE EARLIER
[COCA-COLA CASE] IS DOCTRINAL AND
CONTROLLING IN THE INSTANT CASE.

III. WHETHER OR NOT
PETITIONER CITY OF MANILA CAN STILL
ASSESS TAXES UNDER [SECTIONS] 14 AND
21 OF [TAX ORDINANCE NO. 7794, AS
AMENDED].

IV. WHETHER OR NOT THE
ENFORCEMENT OF [SECTION] 21 OF THE
[TAX ORDINANCE NO. 7794, AS AMENDED]
CONSTITUTES DOUBLE TAXATION.

Petitioners assert that Section 1, Rule 712[12] of the Revised
Rules of the CTA refers to certain provisions of the Rules of Court,
such as Rule 42 of the latter, and makes them applicable to the tax
court. Petitioners then cannot be faulted in relying on the provisions
of Section 1, Rule 4213[13] of the Rules of Court as regards the
period for filing a Petition for Review with the CTA in division. Section
1, Rule 42 of the Rules of Court provides for a 15-day period,
reckoned from receipt of the adverse decision of the trial court, within
which to file a Petition for Review with the Court of Appeals. The
same rule allows an additional 15-day period within which to file such
a Petition; and, only for the most compelling reasons, another
extension period not to exceed 15 days. Petitioners received on 20
April 2007 a copy of the 4 April 2007 Order of the RTC, denying their
Motion for Reconsideration of the 16 November 2006 Order of the
same court. On 4 May 2007, believing that they only had 15 days to
file a Petition for Review with the CTA in division, petitioners moved





for a 15-day extension, or until 20 May 2007, within which to file said
Petition. Prior to the lapse of their first extension period, or on 18 May
2007, petitioners again moved for a 10-day extension, or until 30 May
2007, within which to file their Petition for Review. Thus, when
petitioners filed their Petition for Review with the CTA First Division on
30 May 2007, the same was filed well within the reglementary period
for doing so.
Petitioners argue in the alternative that even assuming that
Section 3(a), Rule 814[14] of the Revised Rules of the CTA governs
the period for filing a Petition for Review with the CTA in division, still,
their Petition for Review was filed within the reglementary period.
Petitioners call attention to the fact that prior to the lapse of the 30-day
period for filing a Petition for Review under Section 3(a), Rule 8 of the
Revised Rules of the CTA, they had already moved for a 10-day
extension, or until 30 May 2007, within which to file their Petition.
Petitioners claim that there was sufficient justification in equity for the
grant of the 10-day extension they requested, as the primordial
consideration should be the substantive, and not the procedural,
aspect of the case. Moreover, Section 3(a), Rule 8 of the Revised
Rules of the CTA, is silent as to whether the 30-day period for filing a
Petition for Review with the CTA in division may be extended or not.
Petitioners also contend that the Coca-Cola case is not
determinative of the issues in the present case because the issue of



nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 is not
the lis mota herein. The Coca-Cola case is not doctrinal and cannot
be considered as the law of the case.
Petitioners further insist that notwithstanding the declaration of
nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011, Tax
Ordinance No. 7794 remains a valid piece of local legislation. The
nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 does
not effectively bar petitioners from imposing local business taxes upon
respondent under Sections 14 and 21 of Tax Ordinance No. 7794, as
they were read prior to their being amended by the foregoing null and
void tax ordinances.
Petitioners finally maintain that imposing upon respondent
local business taxes under both Sections 14 and 21 of Tax Ordinance
No. 7794 does not constitute direct double taxation. Section 143 of
the LGC gives municipal, as well as city governments, the power to
impose business taxes, to wit:
SECTION 143. Tax on Business. The
municipality may impose taxes on the following
businesses:

(a) On manufacturers, assemblers,
repackers, processors, brewers, distillers, rectifiers,
and compounders of liquors, distilled spirits, and wines
or manufacturers of any article of commerce of
whatever kind or nature, in accordance with the
following schedule:

x x x x

(b) On wholesalers, distributors, or dealers
in any article of commerce of whatever kind or nature
in accordance with the following schedule:

x x x x

(c) On exporters, and on manufacturers,
millers, producers, wholesalers, distributors, dealers or
retailers of essential commodities enumerated
hereunder at a rate not exceeding one-half (1/2) of the
rates prescribed under subsections (a), (b) and (d) of
this Section:

x x x x

Provided, however, That barangays shall have
the exclusive power to levy taxes, as provided under
Section 152 hereof, on gross sales or receipts of the
preceding calendar year of Fifty thousand pesos
(P50,000.00) or less, in the case of cities, and Thirty
thousand pesos (P30,000) or less, in the case of
municipalities.

(e) On contractors and other independent
contractors, in accordance with the following schedule:

x x x x

(f) On banks and other financial
institutions, at a rate not exceeding fifty percent (50%)
of one percent (1%) on the gross receipts of the
preceding calendar year derived from interest,
commissions and discounts from lending activities,
income from financial leasing, dividends, rentals on
property and profit from exchange or sale of property,
insurance premium.

(g) On peddlers engaged in the sale of any
merchandise or article of commerce, at a rate not
exceeding Fifty pesos (P50.00) per peddler annually.

(h) On any business, not otherwise
specified in the preceding paragraphs, which the
sanggunian concerned may deem proper to tax:
Provided, That on any business subject to the excise,
value-added or percentage tax under the National
Internal Revenue Code, as amended, the rate of tax
shall not exceed two percent (2%) of gross sales or
receipts of the preceding calendar year.

Section 14 of Tax Ordinance No. 7794 imposes local business
tax on manufacturers, etc. of liquors, distilled spirits, wines, and any
other article of commerce, pursuant to Section 143(a) of the LGC. On
the other hand, the local business tax under Section 21 of Tax
Ordinance No. 7794 is imposed upon persons selling goods and
services in the course of trade or business, and those importing goods
for business or otherwise, who, pursuant to Section 143(h) of the
LGC, are subject to excise tax, value-added tax (VAT), or percentage
tax under the National Internal Revenue Code (NIRC). Thus, there
can be no double taxation when respondent is being taxed under both
Sections 14 and 21 of Tax Ordinance No. 7794, for under the first, it is
being taxed as a manufacturer; while under the second, it is being
taxed as a person selling goods in the course of trade or business
subject to excise, VAT, or percentage tax.
The Court first addresses the issue raised by petitioners
concerning the period within which to file with the CTA a Petition for
Review from an adverse decision or ruling of the RTC.
The period to appeal the decision or ruling of the RTC to the
CTA via a Petition for Review is specifically governed by Section 11 of
Republic Act No. 9282,15[15] and Section 3(a), Rule 8 of the Revised
Rules of the CTA.
Section 11 of Republic Act No. 9282 provides:
SEC. 11. Who May Appeal; Mode of Appeal;
Effect of Appeal. Any party adversely affected by a
decision, ruling or inaction of the Commissioner of
Internal Revenue, the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and
Industry or the Secretary of Agriculture or the Central
Board of Assessment Appeals or the Regional Trial
Courts may file an Appeal with the CTA within thirty
(30) days after the receipt of such decision or ruling or
after the expiration of the period fixed by law for action
as referred to in Section 7(a)(2) herein.

Appeal shall be made by filing a petition for
review under a procedure analogous to that
provided for under Rule 42 of the 1997 Rules of
Civil Procedure with the CTA within thirty (30) days
from the receipt of the decision or ruling or in the case
of inaction as herein provided, from the expiration of
the period fixed by law to act thereon. x x x. (Emphasis
supplied.)


Section 3(a), Rule 8 of the Revised Rules of the CTA
states
SEC 3. Who may appeal; period to file petition.
(a) A party adversely affected by a decision, ruling or
the inaction of the Commissioner of Internal Revenue



on disputed assessments or claims for refund of
internal revenue taxes, or by a decision or ruling of the
Commissioner of Customs, the Secretary of Finance,
the Secretary of Trade and Industry, the Secretary of
Agriculture, or a Regional Trial Court in the exercise
of its original jurisdiction may appeal to the Court by
petition for review filed within thirty days after receipt
of a copy of such decision or ruling, or expiration of the
period fixed by law for the Commissioner of Internal
Revenue to act on the disputed assessments. x x x.
(Emphasis supplied.)


It is crystal clear from the afore-quoted provisions that to
appeal an adverse decision or ruling of the RTC to the CTA, the
taxpayer must file a Petition for Review with the CTA within 30 days
from receipt of said adverse decision or ruling of the RTC.

It is also true that the same provisions are silent as to whether
such 30-day period can be extended or not. However, Section 11 of
Republic Act No. 9282 does state that the Petition for Review shall be
filed with the CTA following the procedure analogous to Rule 42 of
the Revised Rules of Civil Procedure. Section 1, Rule 4216[16] of
the Revised Rules of Civil Procedure provides that the Petition for
Review of an adverse judgment or final order of the RTC must be filed
with the Court of Appeals within: (1) the original 15-day period from
receipt of the judgment or final order to be appealed; (2) an extended



period of 15 days from the lapse of the original period; and (3) only for
the most compelling reasons, another extended period not to
exceed 15 days from the lapse of the first extended period.

Following by analogy Section 1, Rule 42 of the Revised Rules
of Civil Procedure, the 30-day original period for filing a Petition for
Review with the CTA under Section 11 of Republic Act No. 9282, as
implemented by Section 3(a), Rule 8 of the Revised Rules of the CTA,
may be extended for a period of 15 days. No further extension shall
be allowed thereafter, except only for the most compelling reasons, in
which case the extended period shall not exceed 15 days.
Even the CTA en banc, in its Decision dated 18 January 2008,
recognizes that the 30-day period within which to file the Petition for
Review with the CTA may, indeed, be extended, thus:

Being suppletory to R.A. 9282, the 1997 Rules
of Civil Procedure allow an additional period of fifteen
(15) days for the movant to file a Petition for Review,
upon Motion, and payment of the full amount of the
docket fees. A further extension of fifteen (15) days
may be granted on compelling reasons in accordance
with the provision of Section 1, Rule 42 of the 1997
Rules of Civil Procedure x x x.17[17]





In this case, the CTA First Division did indeed err in finding
that petitioners failed to file their Petition for Review in C.T.A. AC No.
31 within the reglementary period.
From 20 April 2007, the date petitioners received a copy of
the 4 April 2007 Order of the RTC, denying their Motion for
Reconsideration of the 16 November 2006 Order, petitioners had 30
days, or until 20 May 2007, within which to file their Petition for
Review with the CTA. Hence, the Motion for Extension filed by
petitioners on 4 May 2007 grounded on their belief that the
reglementary period for filing their Petition for Review with the CTA
was to expire on 5 May 2007, thus, compelling them to seek an
extension of 15 days, or until 20 May 2007, to file said Petition was
unnecessary and superfluous. Even without said Motion for
Extension, petitioners could file their Petition for Review until 20 May
2007, as it was still within the 30-day reglementary period provided for
under Section 11 of Republic Act No. 9282; and implemented by
Section 3(a), Rule 8 of the Revised Rules of the CTA.
The Motion for Extension filed by the petitioners on 18 May
2007, prior to the lapse of the 30-day reglementary period on 20 May
2007, in which they prayed for another extended period of 10 days, or
until 30 May 2007, to file their Petition for Review was, in reality, only
the first Motion for Extension of petitioners. The CTA First Division
should have granted the same, as it was sanctioned by the rules of
procedure. In fact, petitioners were only praying for a 10-day
extension, five days less than the 15-day extended period allowed by
the rules. Thus, when petitioners filed via registered mail their Petition
for Review in C.T.A. AC No. 31 on 30 May 2007, they were able to
comply with the reglementary period for filing such a petition.
Nevertheless, there were other reasons for which the CTA
First Division dismissed the Petition for Review of petitioners in C.T.A.
AC No. 31; i.e., petitioners failed to conform to Section 4 of Rule 5,
and Section 2 of Rule 6 of the Revised Rules of the CTA. The Court
sustains the CTA First Division in this regard.
Section 4, Rule 5 of the Revised Rules of the CTA requires
that:
SEC. 4. Number of copies. The parties shall
file eleven signed copies of every paper for cases
before the Court en banc and six signed copies for
cases before a Division of the Court in addition to
the signed original copy, except as otherwise
directed by the Court. Papers to be filed in more than
one case shall include one additional copy for each
additional case. (Emphasis supplied.)


Section 2, Rule 6 of the Revised Rules of the CTA further
necessitates that:

SEC. 2. Petition for review; contents. The
petition for review shall contain allegations showing the
jurisdiction of the Court, a concise statement of the
complete facts and a summary statement of the issues
involved in the case, as well as the reasons relied upon
for the review of the challenged decision. The petition
shall be verified and must contain a certification against
forum shopping as provided in Section 3, Rule 46 of
the Rules of Court. A clearly legible duplicate
original or certified true copy of the decision
appealed from shall be attached to the petition.
(Emphasis supplied.)


The aforesaid provisions should be read in conjunction with
Section 1, Rule 7 of the Revised Rules of the CTA, which provides:

SECTION 1. Applicability of the Rules of Court
on procedure in the Court of Appeals, exception. The
procedure in the Court en banc or in Divisions in
original or in appealed cases shall be the same as
those in petitions for review and appeals before the
Court of Appeals pursuant to the applicable provisions
of Rules 42, 43, 44, and 46 of the Rules of Court,
except as otherwise provided for in these Rules.
(Emphasis supplied.)


As found by the CTA First Division and affirmed by the CTA en
banc, the Petition for Review filed by petitioners via registered mail on
30 May 2007 consisted only of one copy and all the attachments
thereto, including the Decision dated 14 July 2006; and that the
assailed Orders dated 16 November 2006 and 4 April 2007 of the
RTC in Civil Case No. 03-107088 were mere machine copies.
Evidently, petitioners did not comply at all with the requirements set
forth under Section 4, Rule 5; or with Section 2, Rule 6 of the Revised
Rules of the CTA. Although the Revised Rules of the CTA do not
provide for the consequence of such non-compliance, Section 3, Rule
42 of the Rules of Court may be applied suppletorily, as allowed by
Section 1, Rule 7 of the Revised Rules of the CTA. Section 3, Rule
42 of the Rules of Court reads:

SEC. 3. Effect of failure to comply with
requirements. The failure of the petitioner to comply
with any of the foregoing requirements regarding the
payment of the docket and other lawful fees, the
deposit for costs, proof of service of the petition, and
the contents of and the documents which should
accompany the petition shall be sufficient ground for
the dismissal thereof. (Emphasis supplied.)


True, petitioners subsequently submitted certified copies of the
Decision dated 14 July 2006 and assailed Orders dated 16 November
2006 and 4 April 2007 of the RTC in Civil Case No. 03-107088, but a
closer examination of the stamp on said documents reveals that they
were prepared and certified only on 14 August 2007, about two
months and a half after the filing of the Petition for Review by
petitioners.

Petitioners never offered an explanation for their non-
compliance with Section 4 of Rule 5, and Section 2 of Rule 6 of the
Revised Rules of the CTA. Hence, although the Court had, in
previous instances, relaxed the application of rules of procedure, it
cannot do so in this case for lack of any justification.
Even assuming arguendo that the Petition for Review of
petitioners in C.T.A. AC No. 31 should have been given due course by
the CTA First Division, it is still dismissible for lack of merit.
Contrary to the assertions of petitioners, the Coca-Cola case is
indeed applicable to the instant case. The pivotal issue raised therein
was whether Tax Ordinance No. 7988 and Tax Ordinance No. 8011
were null and void, which this Court resolved in the affirmative. Tax
Ordinance No. 7988 was declared by the Secretary of the Department
of Justice (DOJ) as null and void and without legal effect due to the
failure of herein petitioner City of Manila to satisfy the requirement
under the law that said ordinance be published for three consecutive
days. Petitioner City of Manila never appealed said declaration of the
DOJ Secretary; thus, it attained finality after the lapse of the period for
appeal of the same. The passage of Tax Ordinance No. 8011,
amending Tax Ordinance No. 7988, did not cure the defects of the
latter, which, in any way, did not legally exist.
By virtue of the Coca-Cola case, Tax Ordinance No. 7988 and
Tax Ordinance No. 8011 are null and void and without any legal
effect. Therefore, respondent cannot be taxed and assessed under
the amendatory laws--Tax Ordinance No. 7988 and Tax Ordinance
No. 8011.
Petitioners insist that even with the declaration of nullity of
Tax Ordinance No. 7988 and Tax Ordinance No. 8011, respondent
could still be made liable for local business taxes under both Sections
14 and 21 of Tax Ordinance No. 7944 as they were originally read,
without the amendment by the null and void tax ordinances.
Emphasis must be given to the fact that prior to the passage of
Tax Ordinance No. 7988 and Tax Ordinance No. 8011 by petitioner
City of Manila, petitioners subjected and assessed respondent only for
the local business tax under Section 14 of Tax Ordinance No. 7794,
but never under Section 21 of the same. This was due to the clear
and unambiguous proviso in Section 21 of Tax Ordinance No. 7794,
which stated that all registered business in the City of Manila that are
already paying the aforementioned tax shall be exempted from
payment thereof. The aforementioned tax referred to in said
proviso refers to local business tax. Stated differently, Section 21 of
Tax Ordinance No. 7794 exempts from the payment of the local
business tax imposed by said section, businesses that are already
paying such tax under other sections of the same tax ordinance. The
said proviso, however, was deleted from Section 21 of Tax Ordinance
No. 7794 by Tax Ordinances No. 7988 and No. 8011. Following this
deletion, petitioners began assessing respondent for the local
business tax under Section 21 of Tax Ordinance No. 7794, as
amended.

The Court easily infers from the foregoing circumstances that
petitioners themselves believed that prior to Tax Ordinance No. 7988
and Tax Ordinance No. 8011, respondent was exempt from the local
business tax under Section 21 of Tax Ordinance No. 7794. Hence,
petitioners had to wait for the deletion of the exempting proviso in
Section 21 of Tax Ordinance No. 7794 by Tax Ordinance No. 7988
and Tax Ordinance No. 8011 before they assessed respondent for the
local business tax under said section. Yet, with the pronouncement
by this Court in the Coca-Cola case that Tax Ordinance No. 7988 and
Tax Ordinance No. 8011 were null and void and without legal effect,
then Section 21 of Tax Ordinance No. 7794, as it has been previously
worded, with its exempting proviso, is back in effect. Accordingly,
respondent should not have been subjected to the local business tax
under Section 21 of Tax Ordinance No. 7794 for the third and fourth
quarters of 2000, given its exemption therefrom since it was already
paying the local business tax under Section 14 of the same ordinance.

Petitioners obstinately ignore the exempting proviso in Section
21 of Tax Ordinance No. 7794, to their own detriment. Said
exempting proviso was precisely included in said section so as to
avoid double taxation.

Double taxation means taxing the same property twice when it
should be taxed only once; that is, taxing the same person twice by
the same jurisdiction for the same thing. It is obnoxious when the
taxpayer is taxed twice, when it should be but once. Otherwise
described as direct duplicate taxation, the two taxes must be
imposed on the same subject matter, for the same purpose, by the
same taxing authority, within the same jurisdiction, during the
same taxing period; and the taxes must be of the same kind or
character.18[18]



Using the aforementioned test, the Court finds that there is
indeed double taxation if respondent is subjected to the taxes under
both Sections 14 and 21 of Tax Ordinance No. 7794, since these are
being imposed: (1) on the same subject matter the privilege of doing
business in the City of Manila; (2) for the same purpose to make
persons conducting business within the City of Manila contribute to
city revenues; (3) by the same taxing authority petitioner City of
Manila; (4) within the same taxing jurisdiction within the territorial
jurisdiction of the City of Manila; (5) for the same taxing periods per
calendar year; and (6) of the same kind or character a local
business tax imposed on gross sales or receipts of the business.

The distinction petitioners attempt to make between the taxes
under Sections 14 and 21 of Tax Ordinance No. 7794 is specious.
The Court revisits Section 143 of the LGC, the very source of the
power of municipalities and cities to impose a local business tax, and
to which any local business tax imposed by petitioner City of Manila
must conform. It is apparent from a perusal thereof that when a
municipality or city has already imposed a business tax on
manufacturers, etc. of liquors, distilled spirits, wines, and any other
article of commerce, pursuant to Section 143(a) of the LGC, said
municipality or city may no longer subject the same manufacturers,
etc. to a business tax under Section 143(h) of the same Code.


Section 143(h) may be imposed only on businesses that are subject
to excise tax, VAT, or percentage tax under the NIRC, and that are
not otherwise specified in preceding paragraphs. In the same
way, businesses such as respondents, already subject to a local
business tax under Section 14 of Tax Ordinance No. 7794 [which is
based on Section 143(a) of the LGC], can no longer be made liable
for local business tax under Section 21 of the same Tax Ordinance
[which is based on Section 143(h) of the LGC].
WHEREFORE, premises considered, the instant Petition for
Review on Certiorari is hereby DENIED. No costs. SO ORDERED.
FIRST DIVISION
[G.R. No. 135337. October 19, 2000]
THE CITY OF OLONGAPO, petitioner, vs. THE STALLHOLDERS OF
THE EAST BAJAC-BAJAC PUBLIC MARKET OF OLONGAPO CITY,
, respondents.
D E C I S I O N
KAPUNAN, J.:
On June 30, 1993, the Olongapo City Council enacted Ordinance No.
14 (Series of 1993), fixing the monthly rental fees for the different
stalls in the new public market. Respondents questioned the validity of
said ordinance by filing an appeal to the Secretary of Justice. The
appeal was made pursuant to Section 187 of the Local Government
Code,i[1] which states:
SEC. 187. Procedure for Approval and Effectivity of Tax Ordinances
and Revenue Measures; Mandatory Public Hearings. - The procedure
for approval of local tax ordinances and revenue measures shall be in
accordance with the provisions of this Code: Provided, That public
hearings shall be conducted for the purpose prior to the enactment
thereof: Provided, further, That any question on the constitutionality or
legality of tax ordinances or revenue measures may be raised on
appeal within thirty (30) days from the effectivity thereof to the
Secretary of Justice who shall render a decision within sixty (60) days
from the date of receipt of the appeal: Provided, however, That such
appeal shall not have the effect of suspending the effectivity of the
ordinance and the accrual and payment of the tax, fee, or charge
levied therein: Provided, finally, That within thirty (30) days after
receipt of the decision or the lapse of the sixty-day period without the
Secretary of Justice acting upon the appeal, the aggrieved party may
file appropriate proceedings with a court of competent jurisdiction.
(Underscoring supplied.)
As grounds for their appeal, respondents alleged that the ordinance:
(1) violated Sections 130ii[2] and 186iii[3] of the Local Government
Code as the rates fixed therein are unjust, excessive, oppressive,
confiscatory, not equitable, not based as far as practicable on the
market vendors' ability to pay, and contrary to declared national
policy; (2) was sought to be implemented despite lack of publication;
and (3) did not comply with "the essence and spirit of the public
hearings."iv[4]
In a Resolution dated September 29, 1993, the Secretary of Justice
upheld the validity of Ordinance No. 14 (Series of 1993).
Respondents moved for a reconsideration of the Justice Secretary's
Resolution. The Secretary of Justice, however, refrained from taking
action on respondents' motion for reconsideration apparently in view
of the pendency of a casev[5] filed in this Court questioning the
validity of said Section 187. In a Letter dated November 23, 1993 and
addressed to counsel for respondents, Chief State Counsel Elmer T.
Bautista wrote:
With reference to your Motion for Reconsideration on the Resolution
of this Office dated September 29, 1993, upholding the
constitutionality and legality of Ordinance No. 14, s. 1993 of the City
of Olongapo, please be informed that in view of the adverse ruling of
the Regional Trial Court of Manila (Branch 33) dated October 26,
1993, and pending final determination by the Supreme Court on the
constitutionality of Section 187 of Republic Act No. 7160 (Local
Government Code of 1991), the Secretary of Justice deemed it
appropriate to refrain from taking action thereon in the meantime.
Per the Secretary's Memorandum dated November 5, 1993, copy
attached, you are, however, advised to file your appeal with the court
of competent jurisdiction.vi[6]
The contents of the "Secretary's Memorandum" referred to in the
above letter is reproduced below:
In view of the adverse ruling of the Regional Trial Court of Manila
(Branch 33) dated October 26, 1993, and pending final determination
by the Supreme Court of the constitutionality of Section 187 of
Republic Act No. 7160 (Local Government Code of 1991) which
empowers the Secretary of Justice to pass upon on appeal, the
legality and/or constitutionality of tax ordinances or revenue measures
adopted by local government units, you are hereby directed to refrain
from taking action on and/or accepting petitions/appeals filed in
accordance with said legal mandate, and inform the appellants thereto
to file their appeal directly with the courts.vii[7]
On December 22, 1993, respondents filed before the Regional Trial
Court (RTC) of Olongapo City an "action to declare void Olongapo
City Ordinance No. 14, s. of 1992 and for writ of prohibition."
The City of Olongapo moved for the dismissal of the petition on the
ground that it did not state a cause of action. The RTC, however, held
in abeyance the resolution of this motion until after trial on the merits
shall have been terminated, the ground relied upon by the City being
"not indubitable."viii[8]
At the pre-trial, the parties agreed to limit themselves to the following
issues: (1) whether the ordinance was void; and (2) whether the
proposed fees are equitable, justifiable and affordable.ix[9]
Thereafter, the City of Olongapo filed a Motion for Summary
Judgment. Finding there were no genuine issues as to any material
fact, the RTC granted the motion in an Order dated October 20, 1995.
On January 30, 1996, the RTC, without trial, rendered a decision
sustaining the validity of Ordinance No. 14 (Series of 1993). The
dispositive portion of the decision reads:
WHEREFORE, and the foregoing premises considered, the legality or
constitutionality of Ordinance No. 14, Series of 1993, enacted by the
City Council of Olongapo City on June 30, 1993 and which took effect
on July 7, 1993, is UPHELD.
The Complaint is DISMISSED.
SO ORDERED.x[10]
Respondents appealed to the Court of Appeals, assigning the
following errors:
(A.) THE LOWER COURT COMMITTED GRAVE AND
REVERSIBLE ERROR IN DECIDING THE CASE ON
SUMMARY JUDGMENT UNDER RULE 34 OF THE
RULES OF COURT.
(B.) THE LOWER COURT DID NOT ACCORD DUE
PROCESS TO THE APPELLANTS.
(C.) THE DECISION IS NOT JUSTIFIED BY THE
EVIDENCE.xi[11]
In its Decision dated August 31, 1998, the Court of Appeals held that
the issue of the ordinance's publication did not require any trial and
that the City had complied with the requirements of publication. It
declared:
As to the issue [of] whether or not the enactment of Ordinance No. 14,
Series of 1993 is void insofar as the procedural requirements of the
Local Government Code or R.A. 7160 on the approval of revenue
measures under Rules 187 and 188 thereof is concerned, we find that
the trial court did not err in finding that no genuine triable issue exists
that requires trial on the merits.
Exhibits "4", "4-A", "5", "6", "7", "8", "9" and "10" attached to the
Answer undisputedly show that proper publication, posting in public
places, and public hearings were complied with in accordance with
the requirements of the Local Government Code of 1991. We find no
genuine triable issue on this matter and therefore the trial court
committed no reversible error in rendering summary judgment
thereon. We agree with the RTC that the procedural requirements
have been met by the City Council of defendant Olongapo City in the
enactment of the subject ordinance. There were publications, posting
and public hearings as shown by the aforementioned exhibits of
defendants. The fact that appellants' views were not considered by
the City Council does not render the enactment of the ordinance
invalid.xii[12]
However, as regards the question of whether the market rental rates
were unjust, excessive, confiscatory and inequitable, the Court of
Appeals held that the same was a factual issue that required the
presentation of evidence. Consequently, it remanded the case to the
RTC for trial on this issue.
Aggrieved by the decision of the Court of Appeals, the City of
Olongapo brought the instant petition for review.
The nature of the proceedings conducted before the RTC is at issue
in this case.
Petitioner City of Olongapo submits that the RTC merely reviewed the
decision of the Secretary of Justice upholding the validity of
Ordinance No. 14 (Series of 1993). As such, the review by the RTC
was confined to the evidence presented in the administrative
proceedings. Petitioner, citing the cases of Santos vs.
Morenoxiii[13]and Taleon vs. Secretary of Public Works and
Communications,xiv[14] argues that evidence not presented before
the Secretary of Justice should not be admitted and considered by the
reviewing court. The RTC's function, according to petitioner, is limited
to determining whether there is evidence in the administrative record
substantial enough to support the findings therein; hence, the CA
erred in ordering the remand of the case for trial.
Respondents, on the other hand, contend that the petition filed in the
RTC was an original action. The Court of Appeals agreed with
respondents, holding that, based on the allegations of the complaint,
the case brought by respondents was an original case.
We find no error in this ruling for it is elementary that the nature of the
action is determined by the allegations of the complaint or
petition.xv[15] Respondents explicitly alleged in their petition that:
1. This is a petition to declare void the rates for market stalls at the
Pag-asa Public Market imposed under Ordinance No. 14 s. of 1992 of
the City of Olongapo for being unjust, excessive, oppressive,
confiscatory, and, contrary to declared national policy.xvi[16]
The petition alleged the same grounds for declaring the ordinance
void as those raised in the appeal to the Secretary of Justice, thus:
III. Grounds For Voiding Ordinance No. 46 s. of 1992
9. Ordinance No. 14, s. of 1993 violates Section 130, and, 186 of the
Local Government Code of 1991, because the rates therein fixed are
unjust, excessive, oppressive, confiscatory, not equitable and based
as far as practicable on the market vendors['] ability to pay, and,
contrary to declared national policy.
10. Ordinance No. 14, s. of 1993 is sought to be implemented already,
yet, as far as known to the appellants, it has not yet been published in
full for three (3) consecutive days in a newspaper of local circulation.
11. The essence and spirit of the public hearing was not complied
with.xvii[17]
Consider, too, the circumstances under which respondents sought
relief from the RTC. Perhaps doubting his jurisdiction to entertain
respondents' appeal as a result of the filing of Drilon vs. Lim, supra,
the Justice Secretary issued a Memorandum directing the Chief State
Counsel to refrain from acting on or accepting appeals filed under
Section 187 of the Local Government Code and to "inform the
appellants (herein petitioners) to file their appeal directly with the
courts." The Chief State Counsel, complying with the Memorandum,
advised in his letter to respondents to "file their appeal with the court
of competent jurisdiction," the "appeal" referring to an action to
question the validity of the subject ordinance. The Memorandum and
the accompanying letter thus amounted to an abdication by the
Secretary of Justice of his jurisdiction over the appeal, as conferred by
Section 187.
Accordingly, the action before the RTC cannot be deemed to be
anything but an original action, and the function of the trial court
cannot be limited to reviewing the evidence adduced before the
Secretary of Justice.
Nevertheless, petitioner maintains that trial is unnecessary in any
case because all the court had to do was determine whether the rates
fixed in the assailed ordinance conform to Department of Interior and
Local Government Memorandum Circular No. 93-63, specifically the
provision limiting the return of investment to 12 to 15% and that
requiring a cost recovery scheme. Presumably, this determination can
be made, as both the Secretary of Justice and the RTC did, by a mere
examination of the documents submitted by petitioner.
However, it is precisely the accuracy of these documents that
respondents are disputing. Consequently, respondents may examine
the officials who executed said documents. They may present their
own evidence, both documentary and testimonial, to prove that the
figures in the documents are inaccurate. All these require a trial so
that the parties may properly ventilate their respective causes. Thus,
the CA correctly ruled that:
The lower court based its conclusion that the market rates are just
and equitable in accordance with the Local Government Code on the
affidavits of one Loreto P. Azores, the City Treasurer of defendant and
member of the Local Finance Committee (p. 204, Original Records);
and Johnny B. Choa, City Budget Officer of defendant and the Officer
in Charge of the City Accountant's Office as well as a member of the
Local Finance Committee (p. 207, id.). In view of the complaint of
plaintiffs-appellants as to the equitableness, justifiability and
affordability of the market rates imposed, it behooved the trial court to
conduct trial on the merits which would involve, among others, the
cross-examination of said affiants so as to determine whether or not
the computation of the Local Finance Committee is based on facts or
mere estimates. Fundamental issues as to the details concerning the
issue of expenditures in constructing a public market place; the claim
of plaintiffs-appellants that the construction of the new public market
came from the Mt. Pinatubo Calamity Fund, at no cost to the City (p.
20, Brief for the Plaintiffs-Appellants); the actual cost of operations
and basis of computed revenue; the validity of the schedule of
personal services; the actual maintenance and operating expenses,
and others, that would be necessary in the determination of the
justness of the market rates, would require trial on the merits if proper
judgment is to be resolved by the court a quo.xviii[18]
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ.,
concur.

Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 154993 October 25, 2005
LUZ R. YAMANE, in her capacity as the CITY TREASURER OF
MAKATI CITY, Petitioner,
vs.
BA LEPANTO CONDOMINUM CORPORATION, Respondent.
D E C I S I O N
Tinga, J .:
Petitioner City Treasurer of Makati, Luz Yamane (City Treasurer),
presents for resolution of this Court two novel questions: one
procedural, the other substantive, yet both of obvious significance.
The first pertains to the proper mode of judicial review undertaken
from decisions of the regional trial courts resolving the denial of tax
protests made by local government treasurers, pursuant to the Local
Government Code. The second is whether a local government unit
can, under the Local Government Code, impel a condominium
corporation to pay business taxes.
1

While we agree with the City Treasurers position on the first issue,
there ultimately is sufficient justification for the Court to overlook what
is essentially a procedural error. We uphold respondents on the
second issue. Indeed, there are disturbing aspects in both procedure
and substance that attend the attempts by the City of Makati to flex its
taxing muscle. Considering that the tax imposition now in question
has utterly no basis in law, judicial relief is imperative. There are fewer
indisputable causes for the exercise of judicial review over the
exercise of the taxing power than when the tax is based on whim, and
not on law.
The facts, as culled from the record, follow.
Respondent BA-Lepanto Condominium Corporation (the
"Corporation") is a duly organized condominium corporation
constituted in accordance with the Condominium Act,
2
which owns
and holds title to the common and limited common areas of the BA-
Lepanto Condominium (the "Condominium"), situated in Paseo de
Roxas, Makati City. Its membership comprises the various unit
owners of the Condominium. The Corporation is authorized, under
Article V of its Amended By-Laws, to collect regular assessments from
its members for operating expenses, capital expenditures on the
common areas, and other special assessments as provided for in the
Master Deed with Declaration of Restrictions of the Condominium.
On 15 December 1998, the Corporation received a Notice of
Assessment dated 14 December 1998 signed by the City Treasurer.
The Notice of Assessment stated that the Corporation is "liable to pay
the correct city business taxes, fees and charges," computed as
totaling P1,601,013.77 for the years 1995 to 1997.
3
The Notice of
Assessment was silent as to the statutory basis of the business taxes
assessed.
Through counsel, the Corporation responded with a written tax protest
dated 12 February 1999, addressed to the City Treasurer. It was
evident in the protest that the Corporation was perplexed on the
statutory basis of the tax assessment.
With due respect, we submit that the Assessment has no basis as the
Corporation is not liable for business taxes and surcharges and
interest thereon, under the Makati [Revenue] Code or even under the
[Local Government] Code.
The Makati [Revenue] Code and the [Local Government] Code do not
contain any provisions on which the Assessment could be based. One
might argue that Sec. 3A.02(m) of the Makati [Revenue] Code
imposes business tax on owners or operators of any business not
specified in the said code. We submit, however, that this is not
applicable to the Corporation as the Corporation is not an owner or
operator of any business in the contemplation of the Makati [Revenue]
Code and even the [Local Government] Code.
4

Proceeding from the premise that its tax liability arose from Section
3A.02(m) of the Makati Revenue Code, the Corporation proceeded to
argue that under both the Makati Code and the Local Government
Code, "business" is defined as "trade or commercial activity regularly
engaged in as a means of livelihood or with a view to profit." It was
submitted that the Corporation, as a condominium corporation, was
organized not for profit, but to hold title over the common areas of the
Condominium, to manage the Condominium for the unit owners, and
to hold title to the parcels of land on which the Condominium was
located. Neither was the Corporation authorized, under its articles of
incorporation or by-laws to engage in profit-making activities. The
assessments it did collect from the unit owners were for capital
expenditures and operating expenses.
5

The protest was rejected by the City Treasurer in a letter dated 4
March 1999. She insisted that the collection of dues from the unit
owners was effected primarily "to sustain and maintain the expenses
of the common areas, with the end in view [sic] of getting full
appreciative living values [sic] for the individual condominium
occupants and to command better marketable [sic] prices for those
occupants" who would in the future sell their respective units.
6
Thus,
she concluded since the "chances of getting higher prices for well-
managed common areas of any condominium are better and more
effective that condominiums with poor [sic] managed common areas,"
the corporation activity "is a profit venture making [sic]".
7

From the denial of the protest, the Corporation filed an Appeal with
the Regional Trial Court (RTC) of Makati.
8
On 1 March 2000, the
Makati RTC Branch 57 rendered a Decision
9
dismissing the appeal for
lack of merit. Accepting the premise laid by the City Treasurer, the
RTC acknowledged, in sadly risible language:
Herein appellant, to defray the improvements and beautification of the
common areas, collect [sic] assessments from its members. Its end
view is to get appreciate living rules for the unit owners [sic], to give
an impression to outsides [sic] of the quality of service the
condominium offers, so as to allow present owners to command better
prices in the event of sale.
10

With this, the RTC concluded that the activities of the Corporation fell
squarely under the definition of "business" under Section 13(b) of the
Local Government Code, and thus subject to local business
taxation.
11

From this Decision of the RTC, the Corporation filed a Petition for
Review under Rule 42 of the Rules of Civil Procedure with the Court
of Appeals. Initially, the petition was dismissed outright
12
on the
ground that only decisions of the RTC brought on appeal from a first
level court could be elevated for review under the mode of review
prescribed under Rule 42.
13
However, the Corporation pointed out in
its Motion for Reconsideration that under Section 195 of the Local
Government Code, the remedy of the taxpayer on the denial of the
protest filed with the local treasurer is to appeal the denial with the
court of competent jurisdiction.
14
Persuaded by this contention, the
Court of Appeals reinstated the petition.
15

On 7 June 2002, the Court of Appeals Special Sixteenth Division
rendered the Decision
16
now assailed before this Court. The appellate
court reversed the RTC and declared that the Corporation was not
liable to pay business taxes to the City of Makati.
17
In doing so, the
Court of Appeals delved into jurisprudential definitions of profit,
18
and
concluded that the Corporation was not engaged in profit. For one, it
was held that the very statutory concept of a condominium corporation
showed that it was not a juridical entity intended to make profit, as its
sole purpose was to hold title to the common areas in the
condominium and to maintain the condominium.
19

The Court of Appeals likewise cited provisions from the Corporations
Amended Articles of Incorporation and Amended By-Laws that, to its
estimation, established that the Corporation was not engaged in
business and the assessment collected from unit owners limited to
those necessary to defray the expenses in the maintenance of the
common areas and management the condominium.
20

Upon denial of her Motion for Reconsideration,
21
the City Treasurer
elevated the present Petition for Review under Rule 45. It is argued
that the Corporation is engaged in business, for the dues collected
from the different unit owners is utilized towards the beautification and
maintenance of the Condominium, resulting in "full appreciative living
values" for the condominium units which would command better
market prices should they be sold in the future. The City Treasurer
likewise avers that the rationale for business taxes is not on the
income received or profit earned by the business, but the privilege to
engage in business. The fact that the
Corporation is empowered "to acquire, own, hold, enjoy, lease,
operate and maintain, and to convey sell, transfer or otherwise
dispose of real or personal property" allegedly qualifies "as incident to
the fact of [the Corporations] act of engaging in business.
22

The City Treasurer also claims that the Corporation had filed the
wrong mode of appeal before the Court of Appeals when the latter
filed its Petition for Review under Rule 42. It is reasoned that the
decision of the Makati RTC was rendered in the exercise of original
jurisdiction, it being the first court which took cognizance of the case.
Accordingly, with the Corporation having pursued an erroneous mode
of appeal, the RTC Decision is deemed to have become final and
executory.
First, we dispose of the procedural issue, which essentially boils down
to whether the RTC, in deciding an appeal taken from a denial of a
protest by a local treasurer under Section 195 of the Local
Government Code, exercises "original jurisdiction" or "appellate
jurisdiction." The question assumes a measure of importance to this
petition, for the adoption of the position of the City Treasurer that the
mode of review of the decision taken by the RTC is governed by Rule
41 of the Rules of Civil Procedure means that the decision of the RTC
would have long become final and executory by reason of the failure
of the Corporation to file a notice of appeal.
23

There are discernible conflicting views on the issue. The first, as
expressed by the Court of Appeals, holds that the RTC, in reviewing
denials of protests by local treasurers, exercises appellate jurisdiction.
This position is anchored on the language of Section 195 of the Local
Government Code which states that the remedy of the taxpayer
whose protest is denied by the local treasurer is "to appeal with the
court of competent jurisdiction."
24
Apparently though, the Local
Government Code does not elaborate on how such "appeal" should
be undertaken.
The other view, as maintained by the City Treasurer, is that the
jurisdiction exercised by the RTC is original in character. This is the
first time that the position has been presented to the court for
adjudication. Still, this argument does find jurisprudential mooring in
our ruling in Garcia v. De Jesus,
25
where the Court proffered the
following distinction between original jurisdiction and appellate
jurisdiction: "Original jurisdiction is the power of the Court to take
judicial cognizance of a case instituted for judicial action for the first
time under conditions provided by law. Appellate jurisdiction is the
authority of a Court higher in rank to re-examine the final order or
judgment of a lower Court which tried the case now elevated for
judicial review."
26

The quoted definitions were taken from the commentaries of the
esteemed Justice Florenz Regalado. With the definitions as beacon,
the review taken by the RTC over the denial of the protest by the local
treasurer would fall within that courts original jurisdiction. In short, the
review is the initial judicial cognizance of the matter. Moreover,
labeling the said review as an exercise of appellate jurisdiction is
inappropriate, since the denial of the protest is not the judgment or
order of a lower court, but of a local government official.
The stringent concept of original jurisdiction may seemingly be
neutered by Rule 43 of the 1997 Rules of Civil Procedure, Section 1
of which lists a slew of administrative agencies and quasi-judicial
tribunals or their officers whose decisions may be reviewed by the
Court of Appeals in the exercise of its appellate jurisdiction. However,
the basic law of jurisdiction, Batas Pambansa Blg. 129 (B.P. 129),
27

ineluctably confers appellate jurisdiction on the Court of Appeals over
final rulings of quasi-judicial agencies, instrumentalities, boards or
commission, by explicitly using the phrase "appellate jurisdiction."
28

The power to create or characterize jurisdiction of courts belongs to
the legislature. While the traditional notion of appellate jurisdiction
connotes judicial review over lower court decisions, it has to yield to
statutory redefinitions that clearly expand its breadth to encompass
even review of decisions of officers in the executive branches of
government.
Yet significantly, the Local Government Code, or any other statute for
that matter, does not expressly confer appellate jurisdiction on the
part of regional trial courts from the denial of a tax protest by a local
treasurer. On the other hand, Section 22 of B.P. 129 expressly
delineates the appellate jurisdiction of the Regional Trial Courts,
confining as it does said appellate jurisdiction to cases decided by
Metropolitan, Municipal, and Municipal Circuit Trial Courts. Unlike in
the case of the Court of Appeals, B.P. 129 does not confer appellate
jurisdiction on Regional Trial Courts over rulings made by non-judicial
entities.
From these premises, it is evident that the stance of the City
Treasurer is correct as a matter of law, and that the proper remedy of
the Corporation from the RTC judgment is an ordinary appeal under
Rule 41 to the Court of Appeals. However, we make this
pronouncement subject to two important qualifications. First, in this
particular case there are nonetheless significant reasons for the Court
to overlook the procedural error and ultimately uphold the adjudication
of the jurisdiction exercised by the Court of Appeals in this case.
Second, the doctrinal weight of the pronouncement is confined to
cases and controversies that emerged prior to the enactment of
Republic Act No. 9282, the law which expanded the jurisdiction of the
Court of Tax Appeals (CTA).
Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the
CTA exercises exclusive appellate jurisdiction to review on appeal
decisions, orders or resolutions of the Regional Trial Courts in local
tax cases original decided or resolved by them in the exercise of their
originally or appellate jurisdiction. Moreover, the provision also states
that the review is triggered "by filing a petition for review under a
procedure analogous to that provided for under Rule 42 of the 1997
Rules of Civil Procedure."
29

Republic Act No. 9282, however, would not apply to this case simply
because it arose prior to the effectivity of that law. To declare
otherwise would be to institute a jurisdictional rule derived not from
express statutory grant, but from implication. The jurisdiction of a
court to take cognizance of a case should be clearly conferred and
should not be deemed to exist on mere implications,
30
and this settled
rule would be needlessly emasculated should we declare that the
Corporations position is correct in law.
Be that as it may, characteristic of all procedural rules is adherence to
the precept that they should not be enforced blindly, especially if
mechanical application would defeat the higher ends that animates
our civil procedurethe just, speedy and inexpensive disposition of
every action and proceeding.
31
Indeed, we have repeatedly upheld
and utilized ourselvesthe discretion of courts to nonetheless take
cognizance of petitions raised on an erroneous mode of appeal and
instead treat these petitions in the manner as they should have
appropriately been filed.
32
The Court of Appeals could very well have
treated the Corporations petition for review as an ordinary appeal.
Moreover, we recognize that the Corporations error in elevating the
RTC decision for review via Rule 42 actually worked to the benefit of
the City Treasurer. There is wider latitude on the part of the Court of
Appeals to refuse cognizance over a petition for review under Rule 42
than it would have over an ordinary appeal under Rule 41. Under
Section 13, Rule 41, the stated grounds for the dismissal of an
ordinary appeal prior to the transmission of the case records are when
the appeal was taken out of time or when the docket fees were not
paid.
33
On the other hand, Section 6, Rule 42 provides that in order
that the Court of Appeals may allow due course to the petition for
review, it must first make a prima facie finding that the lower court has
committed an error that would warrant the reversal or modification of
the decision under review.
34
There is no similar requirement of a
prima facie determination of error in the case of ordinary appeal,
which is perfected upon the filing of the notice of appeal in due time.
35

Evidently, by employing the Rule 42 mode of review, the Corporation
faced a greater risk of having its petition rejected by the Court of
Appeals as compared to having filed an ordinary appeal under Rule
41. This was not an error that worked to the prejudice of the City
Treasurer.
We now proceed to the substantive issue, on whether the City of
Makati may collect business taxes on condominium corporations.
We begin with an overview of the power of a local government unit to
impose business taxes.
The power of local government units to impose taxes within its
territorial jurisdiction derives from the Constitution itself, which
recognizes the power of these units "to create its own sources of
revenue and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy."
36
These guidelines and
limitations as provided by Congress are in main contained in the Local
Government Code of 1991 (the "Code"), which provides for
comprehensive instances when and how local government units may
impose taxes. The significant limitations are enumerated primarily in
Section 133 of the Code, which include among others, a prohibition on
the imposition of income taxes except when levied on banks and other
financial institutions.
37
None of the other general limitations under
Section 133 find application to the case at bar.
The most well-known mode of local government taxation is perhaps
the real property tax, which is governed by Title II, Book II of the
Code, and which bears no application in this case. A different set of
provisions, found under Title I of Book II, governs other taxes
imposable by local government units, including business taxes. Under
Section 151 of the Code, cities such as Makati are authorized to levy
the same taxes fees and charges as provinces and municipalities. It is
in Article II, Title II, Book II of the Code, governing municipal taxes,
where the provisions on business taxation relevant to this petition may
be found.
38

Section 143 of the Code specifically enumerates several types of
business on which municipalities and cities may impose taxes. These
include manufacturers, wholesalers, distributors, dealers of any article
of commerce of whatever nature; those engaged in the export or
commerce of essential commodities; contractors and other
independent contractors; banks and financial institutions; and
peddlers engaged in the sale of any merchandise or article of
commerce. Moreover, the local sanggunian is also authorized to
impose taxes on any other businesses not otherwise specified under
Section 143 which the sanggunian concerned may deem proper to
tax.
The coverage of business taxation particular to the City of Makati is
provided by the Makati Revenue Code ("Revenue Code"), enacted
through Municipal Ordinance No. 92-072. The Revenue Code remains
in effect as of this
writing. Article A, Chapter III of the Revenue Code governs business
taxes in Makati, and it is quite specific as to the particular businesses
which are covered by business taxes. To give a sample of the
specified businesses under the Revenue Code which are not
enumerated under the Local Government Code, we cite Section
3A.02(f) of the Code, which levies a gross receipt tax :
(f) On contractors and other independent contractors defined in Sec.
3A.01(q) of Chapter III of this Code, and on owners or operators of
business establishments rendering or offering services such as:
advertising agencies; animal hospitals; assaying laboratories; belt and
buckle shops; blacksmith shops; bookbinders; booking officers for film
exchange; booking offices for transportation on commission basis;
breeding of game cocks and other sporting animals belonging to
others; business management services; collecting agencies; escort
services; feasibility studies; consultancy services; garages; garbage
disposal contractors; gold and silversmith shops; inspection services
for incoming and outgoing cargoes; interior decorating services;
janitorial services; job placement or recruitment agencies; landscaping
contractors; lathe machine shops; management consultants not
subject to professional tax; medical and dental laboratories;
mercantile agencies; messsengerial services; operators of shoe shine
stands; painting shops; perma press establishments; rent-a-plant
services; polo players; school for and/or horse-back riding academy;
real estate appraisers; real estate brokerages; photostatic, white/blue
printing, Xerox, typing, and mimeographing services; rental of bicycles
and/or tricycles, furniture, shoes, watches, household appliances,
boats, typewriters, etc.; roasting of pigs, fowls, etc.; shipping
agencies; shipyard for repairing ships for others; shops for shearing
animals; silkscreen or T-shirt printing shops; stables; travel agencies;
vaciador shops; veterinary clinics; video rentals and/or coverage
services; dancing schools/speed reading/EDP; nursery, vocational
and other schools not regulated by the Department of Education,
Culture and Sports, (DECS), day care centers; etc.
39

Other provisions of the Revenue Code likewise subject hotel and
restaurant owners and operators
40
, real estate dealers, and lessors of
real estate
41
to business taxes.
Should the comprehensive listing not prove encompassing enough,
there is also a catch-all provision similar to that under the Local
Government Code. This is found in Section 3A.02(m) of the Revenue
Code, which provides:
(m) On owners or operators of any business not specified above shall
pay the tax at the rate of two percent (2%) for 1993, two and one-half
percent (2 %) for 1994 and 1995, and three percent (3%) for 1996
and the years thereafter of the gross receipts during the preceding
year.
42

The initial inquiry is what provision of the Makati Revenue Code does
the City Treasurer rely on to make the Corporation liable for business
taxes. Even at this point, there already stands a problem with the City
Treasurers cause of action.
Our careful examination of the record reveals a highly disconcerting
fact. At no point has the City Treasurer been candid enough to inform
the Corporation, the RTC, the Court of Appeals, or this Court for that
matter, as to what exactly is the precise statutory basis under the
Makati Revenue Code for the levying of the business tax on petitioner.
We have examined all of the pleadings submitted by the City
Treasurer in all the antecedent judicial proceedings, as well as in this
present petition, and also the communications by the City Treasurer to
the Corporation which form part of the record. Nowhere therein is
there any citation made by the City Treasurer of any provision of the
Revenue Code which would serve as the legal authority for the
collection of business taxes from condominiums in Makati.
Ostensibly, the notice of assessment, which stands as the first
instance the taxpayer is officially made aware of the pending tax
liability, should be sufficiently informative to apprise the taxpayer the
legal basis of the tax. Section 195 of the Local Government Code
does not go as far as to expressly require that the notice of
assessment specifically cite the provision of the ordinance involved
but it does require that it state the nature of the tax, fee or charge, the
amount of deficiency, surcharges, interests and penalties. In this
case, the notice of assessment sent to the Corporation did state that
the assessment was for business taxes, as well as the amount of the
assessment. There may have been prima facie compliance with the
requirement under Section 195. However in this case, the Revenue
Code provides multiple provisions on business taxes, and at varying
rates. Hence, we could appreciate the Corporations confusion, as
expressed in its protest, as to the exact legal basis for the tax.
43

Reference to the local tax ordinance is vital, for the power of local
government units to impose local taxes is exercised through the
appropriate ordinance enacted by the sanggunian, and not by the
Local Government Code alone.
44
What determines tax liability is the
tax ordinance, the Local Government Code being the enabling law for
the local legislative body.
Moreover, a careful examination of the Revenue Code shows that
while Section 3A.02(m) seems designed as a catch-all provision,
Section 3A.02(f), which provides for a different tax rate from that of
the former provision, may be construed to be of similar import. While
Section 3A.02(f) is quite exhaustive in enumerating the class of
businesses taxed under the provision, the listing, while it does not
include condominium-related enterprises, ends with the abbreviation
"etc.", or "et cetera".
We do note our discomfort with the unlimited breadth and the
dangerous uncertainty which are the twin hallmarks of the words "et
cetera." Certainly, we cannot be disposed to uphold any tax
imposition that derives its authority from enigmatic and uncertain
words such as "et cetera." Yet we cannot even say with definiteness
whether the tax imposed on the Corporation in this case is based on
"et cetera," or on Section 3A.02(m), or on any other provision of the
Revenue Code. Assuming that the assessment made on the
Corporation is on a provision other than Section 3A.02(m), the main
legal issue takes on a different complexion. For example, if it is based
on "et cetera" under Section 3A.02(f), we would have to examine
whether the Corporation faces analogous comparison with the other
businesses listed under that provision.
Certainly, the City Treasurer has not been helpful in that regard, as
she has been silent all through out as to the exact basis for the tax
imposition which she wishes that this Court uphold. Indeed, there is
only one thing that prevents this Court from ruling that there has been
a due process violation on account of the City Treasurers failure to
disclose on paper the statutory basis of the taxthat the Corporation
itself does not allege injury arising from such failure on the part of the
City Treasurer.
We do not know why the Corporation chose not to put this issue into
litigation, though we can ultimately presume that no injury was
sustained because the City Treasurer failed to cite the specific
statutory basis of the tax. What is essential though is that the local
treasurer be required to explain to the taxpayer with sufficient
particularity the basis of the tax, so as to leave no doubt in the mind of
the taxpayer as to the specific tax involved.
In this case, the Corporation seems confident enough in litigating
despite the failure of the City Treasurer to admit on what exact
provision of the Revenue Code the tax liability ensued. This is
perhaps because the Corporation has anchored its central argument
on the position that the Local Government Code itself does not
sanction the imposition of business taxes against it. This position was
sustained by the Court of Appeals, and now merits our analysis.
As stated earlier, local tax on businesses is authorized under Section
143 of the Local Government Code. The word "business" itself is
defined under Section 131(d) of the Code as "trade or commercial
activity regularly engaged in as a means of livelihood or with a view to
profit."
45
This definition of "business" takes on importance, since
Section 143 allows local government units to impose local taxes on
businesses other than those specified under the provision. Moreover,
even those business activities specifically named in Section 143 are
themselves susceptible to broad interpretation. For example, Section
143(b) authorizes the imposition of business taxes on wholesalers,
distributors, or dealers in any article of commerce of whatever kind or
nature.
It is thus imperative that in order that the Corporation may be
subjected to business taxes, its activities must fall within the definition
of business as provided in the Local Government Code. And to hold
that they do is to ignore the very statutory nature of a condominium
corporation.
The creation of the condominium corporation is sanctioned by
Republic Act No. 4726, otherwise known as the Condominium Act.
Under the law, a condominium is an interest in real property
consisting of a separate interest in a unit in a residential, industrial or
commercial building and an undivided interest in common, directly or
indirectly, in the land on which it is located and in other common areas
of the building.
46
To enable the orderly administration over these
common areas which are jointly owned by the various unit owners, the
Condominium Act permits the creation of a condominium corporation,
which is specially formed for the purpose of holding title to the
common area, in which the holders of separate interests shall
automatically be members or shareholders, to the exclusion of others,
in proportion to the appurtenant interest of their respective
units.
47
The necessity of a condominium corporation has not gained
widespread acceptance
48
, and even is merely permissible under the
Condominium Act.
49
Nonetheless, the condominium corporation has
been resorted to by many condominium projects, such as the
Corporation in this case.
In line with the authority of the condominium corporation to manage
the condominium project, it may be authorized, in the deed of
restrictions, "to make reasonable assessments to meet authorized
expenditures, each condominium unit to be assessed separately for
its share of such expenses in proportion (unless otherwise provided)
to its owners fractional interest in any common areas."
50
It is the
collection of these assessments from unit owners that form the basis
of the City Treasurers claim that the Corporation is doing business.
The Condominium Act imposes several limitations on the
condominium corporation that prove crucial to the disposition of this
case. Under Section 10 of the law, the
corporate purposes of a condominium corporation are limited to the
holding of the common areas, either in ownership or any other interest
in real property recognized by law; to the management of the project;
and to such other purposes as may be necessary, incidental or
convenient to the accomplishment of such purpose.
51
Further, the
same provision prohibits the articles of incorporation or by-laws of the
condominium corporation from containing any provisions which are
contrary to the provisions of the Condominium Act, the enabling or
master deed, or the declaration of restrictions of the condominium
project.
52

We can elicit from the Condominium Act that a condominium
corporation is precluded by statute from engaging in corporate
activities other than the holding of the common areas, the
administration of the condominium project, and other acts necessary,
incidental or convenient to the accomplishment of such purposes.
Neither the maintenance of livelihood, nor the procurement of profit,
fall within the scope of permissible corporate purposes of a
condominium corporation under the Condominium Act.
The Court has examined the particular Articles of Incorporation and
By-Laws of the Corporation, and these documents unmistakably hew
to the limitations contained in the Condominium Act. Per the Articles
of Incorporation, the Corporations corporate purposes are limited to:
(a) owning and holding title to the common and limited common areas
in the Condominium Project; (b) adopting such necessary measures
for the protection and safeguard of the unit owners and their property,
including the power to contract for security services and for insurance
coverage on the entire project; (c) making and adopting needful rules
and regulations concerning the use, enjoyment and occupancy of the
units and common areas, including the power to fix penalties and
assessments for violation of such rules; (d) to provide for the
maintenance, repair, sanitation, and cleanliness of the common and
limited common areas; (e) to provide and contract for public utilities
and other services to the common areas; (f) to contract for the
services of persons or firms to assist in the management and
operation of the Condominium Project; (g) to discharge any lien or
encumbrances upon the Condominium Project; (h) to enforce the
terms contained in the Master Deed with Declaration of Restrictions of
the Project; (i) to levy and
collect those assessments as provided in the Master Deed, in order to
defray the costs, expenses and losses of the condominium; (j) to
acquire, own, hold, enjoy, lease operate and maintain, and to convey,
sell transfer, mortgage or otherwise dispose of real or personal
property in connection with the purposes and activities of the
corporation; and (k) to exercise and perform such other powers
reasonably necessary, incidental or convenient to accomplish the
foregoing purposes.
53

Obviously, none of these stated corporate purposes are geared
towards maintaining a livelihood or the obtention of profit. Even
though the Corporation is empowered to levy assessments or dues
from the unit owners, these amounts collected are not intended for the
incurrence of profit by the Corporation or its members, but to shoulder
the multitude of necessary expenses that arise from the maintenance
of the Condominium Project. Just as much is confirmed by Section 1,
Article V of the Amended By-Laws, which enumerate the particular
expenses to be defrayed by the regular assessments collected from
the unit owners. These would include the salaries of the employees of
the Corporation, and the cost of maintenance and ordinary repairs of
the common areas.
54

The City Treasurer nonetheless contends that the collection of these
assessments and dues are "with the end view of getting full
appreciative living values" for the condominium units, and as a result,
profit is obtained once these units are sold at higher prices. The Court
cites with approval the two counterpoints raised by the Court of
Appeals in rejecting this contention. First, if any profit is obtained by
the sale of the units, it accrues not to the corporation but to the unit
owner. Second, if the unit owner does obtain profit from the sale of the
corporation, the owner is already required to pay capital gains tax on
the appreciated value of the condominium unit.
55

Moreover, the logic on this point of the City Treasurer is baffling. By
this rationale, every Makati City car owner may be considered as
being engaged in business, since the repairs or improvements on the
car may be deemed oriented towards appreciating the value of the car
upon resale. There is an evident distinction between persons who
spend on repairs and improvements on their personal and real
property for the purpose of increasing its resale value, and those who
defray such expenses for the purpose of preserving the property. The
vast majority of persons fall under the second category, and it would
be highly specious to subject these persons to local business taxes.
The profit motive in such cases is hardly the driving factor behind
such improvements, if it were contemplated at all. Any profit that
would be derived under such circumstances would merely be
incidental, if not accidental.
Besides, we shudder at the thought of upholding tax liability on the
basis of the standard of "full appreciative living values", a phrase that
defies statutory explication, commonsensical meaning, the English
language, or even definition from Google. The exercise of the power
of taxation constitutes a deprivation of property under the
due process clause,
56
and the taxpayers right to due process is
violated when arbitrary or oppressive methods are used in assessing
and collecting taxes.
57
The fact that the Corporation did not fall within
the enumerated classes of taxable businesses under either the Local
Government Code or the Makati Revenue Code already forewarns
that a clear demonstration is essential on the part of the City
Treasurer on why the Corporation should be taxed anyway. "Full
appreciative living values" is nothing but blather in search of meaning,
and to impose a tax hinged on that standard is both arbitrary and
oppressive.
The City Treasurer also contends that the fact that the Corporation is
engaged in business is evinced by the Articles of Incorporation, which
specifically empowers the Corporation "to acquire, own, hold, enjoy,
lease, operate and maintain, and to convey, sell, transfer mortgage or
otherwise dispose of real or personal property."
58
What the City
Treasurer fails to add is that every corporation
organized under the Corporation Code
59
is so specifically empowered.
Section 36(7) of the Corporation Code states that every corporation
incorporated under the Code has the power and capacity "to
purchase, receive, take or grant, hold, convey, sell, lease, pledge,
mortgage and otherwise deal with such real and personal property . . .
as the transaction of the lawful business of the corporation may
reasonably and necessarily require . . . ."
60
Without this power,
corporations, as juridical persons, would be deprived of the capacity
to engage in most meaningful legal relations.
Again, whatever capacity the Corporation may have pursuant to its
power to exercise acts of ownership over personal and real property is
limited by its stated corporate purposes, which are by themselves
further limited by the Condominium Act. A condominium corporation,
while enjoying such powers of ownership, is prohibited by law from
transacting its properties for the purpose of gainful profit.
Accordingly, and with a significant degree of comfort, we hold that
condominium corporations are generally exempt from local business
taxation under the Local Government Code, irrespective of any local
ordinance that seeks to declare otherwise.
Still, we can note a possible exception to the rule. It is not unthinkable
that the unit owners of a condominium would band together to engage
in activities for profit under the shelter of the condominium
corporation.
61
Such activity would be prohibited under the
Condominium Act, but if the fact is established, we see no reason why
the condominium corporation may be made liable by the local
government unit for business taxes. Even though such activities would
be considered as ultra vires, since they are engaged in beyond the
legal capacity of the condominium corporation
62
, the principle of
estoppel would preclude the corporation or its officers and members
from invoking the void nature of its undertakings for profit as a means
of acquitting itself of tax liability.
Still, the City Treasurer has not posited the claim that the Corporation
is engaged in business activities beyond the statutory purposes of a
condominium corporation. The assessment appears to be based
solely on the Corporations collection of assessments from unit
owners, such assessments being utilized to defray the necessary
expenses for the Condominium Project and the common areas. There
is no contemplation of business, no orientation towards profit in this
case. Hence, the assailed tax assessment has no basis under the
Local Government Code or the Makati Revenue Code, and the
insistence of the city in its collection of the void tax constitutes an
attempt at deprivation of property without due process of law.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162015 March 6, 2006
THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY
TREASURER OF QUEZON CITY, DR. VICTOR B. ENRIGA,
Petitioners,
vs.
BAYAN TELECOMMUNICATIONS, INC., Respondent.
D E C I S I O N
GARCIA,J .:
Before the Court, on pure questions of law, is this petition for review
on certiorari under Rule 45 of the Rules of Court to nullify and set
aside the following issuances of the Regional Trial Court (RTC) of
Quezon City, Branch 227, in its Civil Case No. Q-02-47292, to wit:
1) Decision
1
dated June 6, 2003, declaring respondent Bayan
Telecommunications, Inc. exempt from real estate taxation on its real
properties located in Quezon City; and
2) Order
2
dated December 30, 2003, denying petitioners motion for
reconsideration.
The facts:
Respondent Bayan Telecommunications, Inc.
3
(Bayantel) is a
legislative franchise holder under Republic Act (Rep. Act) No. 3259
4

to establish and operate radio stations for domestic
telecommunications, radiophone, broadcasting and telecasting.
Of relevance to this controversy is the tax provision of Rep. Act No.
3259, embodied in Section 14 thereof, which reads:
SECTION 14. (a) The grantee shall be liable to pay the same taxes on
its real estate, buildings and personal property, exclusive of the
franchise, as other persons or corporations are now or hereafter may
be required by law to pay. (b) The grantee shall further pay to the
Treasurer of the Philippines each year, within ten days after the audit
and approval of the accounts as prescribed in this Act, one and one-
half per centum of all gross receipts from the business transacted
under this franchise by the said grantee (Emphasis supplied).
On January 1, 1992, Rep. Act No. 7160, otherwise known as the
"Local Government Code of 1991" (LGC), took effect. Section 232 of
the Code grants local government units within the Metro Manila Area
the power to levy tax on real properties, thus:
SEC. 232. Power to Levy Real Property Tax. A province or city or
a municipality within the Metropolitan Manila Area may levy an annual
ad valorem tax on real property such as land, building, machinery and
other improvements not hereinafter specifically exempted.
Complementing the aforequoted provision is the second paragraph of
Section 234 of the same Code which withdrew any exemption from
realty tax heretofore granted to or enjoyed by all persons, natural or
juridical, to wit:
SEC. 234 - Exemptions from Real Property Tax. The following are
exempted from payment of the real property tax:
xxx xxx xxx
Except as provided herein, any exemption from payment of real
property tax previously granted to, or enjoyed by, all persons, whether
natural or juridical, including government-owned-or-controlled
corporations is hereby withdrawn upon effectivity of this Code
(Emphasis supplied).
On July 20, 1992, barely few months after the LGC took effect,
Congress enacted Rep. Act No. 7633, amending Bayantels original
franchise. The amendatory law (Rep. Act No. 7633) contained the
following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to pay
the same taxes on their real estate, buildings and personal property,
exclusive of this franchise, as other persons or corporations are now
or hereafter may be required by law to pay. In addition thereto, the
grantee, its successors or assigns shall pay a franchise tax equivalent
to three percent (3%) of all gross receipts of the telephone or other
telecommunications businesses transacted under this franchise by the
grantee, its successors or assigns and the said percentage shall be in
lieu of all taxes on this franchise or earnings thereof. Provided, That
the grantee, its successors or assigns shall continue to be liable for
income taxes payable under Title II of the National Internal Revenue
Code . xxx. [Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon City,
Bayantel owned several real properties on which it maintained various
telecommunications facilities. These real properties, as hereunder
described, are covered by the following tax declarations:
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-096-
04072 and D-096-04073 pertaining to Bayantels Head Office
and Operations Center in Roosevelt St., San Francisco del
Monte, Quezon City allegedly the nerve center of petitioners
telecommunications franchise operations, said Operation
Center housing mainly petitioners Network Operations Group
and switching, transmission and related equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-124-
00920 and D-124-00941 covering Bayantels land, building
and equipment in Maginhawa St., Barangay East Teachers
Village, Quezon City which houses telecommunications
facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-011-
10811, and D-011-11540 referring to Bayantels Exchange
Center located in Proj. 8, Brgy. Bahay Toro, Tandang Sora,
Quezon City which houses the Network Operations Group and
cover switching, transmission and other related equipment.
In 1993, the government of Quezon City, pursuant to the taxing power
vested on local government units by Section 5, Article X of the 1987
Constitution, infra, in relation to Section 232 of the LGC, supra,
enacted City Ordinance No. SP-91, S-93, otherwise known as the
Quezon City Revenue Code (QCRC),
5
imposing, under Section 5
thereof, a real property tax on all real properties in Quezon City, and,
reiterating in its Section 6, the withdrawal of exemption from real
property tax under Section 234 of the LGC, supra. Furthermore, much
like the LGC, the QCRC, under its Section 230, withdrew tax
exemption privileges in general, as follows:
SEC. 230. Withdrawal of Tax Exemption Privileges. Unless
otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or juridical,
including government owned or controlled corporations, except local
water districts, cooperatives duly registered under RA 6938, non-stock
and non-profit hospitals and educational institutions, business
enterprises certified by the Board of Investments (BOI) as pioneer or
non-pioneer for a period of six (6) and four (4) years, respectively,
are hereby withdrawn effective upon approval of this Code (Emphasis
supplied).
Conformably with the Citys Revenue Code, new tax declarations for
Bayantels real properties in Quezon City were issued by the City
Assessor and were received by Bayantel on August 13, 1998, except
one (Tax Declaration No. 124-01013) which was received on July 14,
1999.
Meanwhile, on March 16, 1995, Rep. Act No. 7925,
6
otherwise known
as the "Public Telecommunications Policy Act of the Philippines,"
envisaged to level the playing field among telecommunications
companies, took effect. Section 23 of the Act provides:
SEC. 23. Equality of Treatment in the Telecommunications Industry.
Any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted, shall ipso
facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to
the grantees of such franchises: Provided, however, That the
foregoing shall neither apply to nor affect provisions of
telecommunications franchises concerning territory covered by the
franchise, the life span of the franchise, or the type of service
authorized by the franchise.
On January 7, 1999, Bayantel wrote the office of the City Assessor
seeking the exclusion of its real properties in the city from the roll of
taxable real properties. With its request having been denied, Bayantel
interposed an appeal with the Local Board of Assessment Appeals
(LBAA). And, evidently on its firm belief of its exempt status, Bayantel
did not pay the real property taxes assessed against it by the Quezon
City government.
On account thereof, the Quezon City Treasurer sent out notices of
delinquency for the total amount of P43,878,208.18, followed by the
issuance of several warrants of levy against Bayantels properties
preparatory to their sale at a public auction set on July 30, 2002.
Threatened with the imminent loss of its properties, Bayantel
immediately withdrew its appeal with the LBAA and instead filed with
the RTC of Quezon City a petition for prohibition with an urgent
application for a temporary restraining order (TRO) and/or writ of
preliminary injunction, thereat docketed as Civil Case No. Q-02-
47292, which was raffled to Branch 227 of the court.
On July 29, 2002, or in the eve of the public auction scheduled the
following day, the lower court issued a TRO, followed, after due
hearing, by a writ of preliminary injunction via its order of August 20,
2002.
And, having heard the parties on the merits, the same court came out
with its challenged Decision of June 6, 2003, the dispositive portion of
which reads:
WHEREFORE, premises considered, pursuant to the enabling
franchise under Section 11 of Republic Act No. 7633, the real estate
properties and buildings of petitioner [now, respondent Bayantel]
which have been admitted to be used in the operation of petitioners
franchise described in the following tax declarations are hereby
DECLARED exempt from real estate taxation:
(1) Tax Declaration No. D-096-04071
(2) Tax Declaration No. D-096-04074
(3) Tax Declaration No. D-124-01013
(4) Tax Declaration No. D-011-10810
(5) Tax Declaration No. D-011-10811
(6) Tax Declaration No. D-011-10809
(7) Tax Declaration No. D-124-00941
(8) Tax Declaration No. D-124-00940
(9) Tax Declaration No. D-124-00939
(10) Tax Declaration No. D-096-04072
(11) Tax Declaration No. D-096-04073
(12) Tax Declaration No. D-011-11540
The preliminary prohibitory injunction issued in the August 20, 2002
Order of this Court is hereby made permanent. Since this is a
resolution of a purely legal issue, there is no pronouncement as to
costs.
SO ORDERED.
Their motion for reconsideration having been denied by the court in its
Order dated December 30, 2003, petitioners elevated the case
directly to this Court on pure questions of law, ascribing to the lower
court the following errors:
I. [I]n declaring the real properties of respondent exempt from real
property taxes notwithstanding the fact that the tax exemption granted
to Bayantel in its original franchise had been withdrawn by the [LGC]
and that the said exemption was not restored by the enactment of RA
7633.
II. [In] declaring the real properties of respondent exempt from real
property taxes notwithstanding the enactment of the [QCRC] which
withdrew the tax exemption which may have been granted by RA
7633.
III. [In] declaring the real properties of respondent exempt from real
property taxes notwithstanding the vague and ambiguous grant of tax
exemption provided under Section 11 of RA 7633.
IV. [In] declaring the real properties of respondent exempt from real
property taxes notwithstanding the fact that [it] had failed to exhaust
administrative remedies in its claim for real property tax exemption.
(Words in bracket added.)
As we see it, the errors assigned may ultimately be reduced to two (2)
basic issues, namely:
1. Whether or not Bayantels real properties in Quezon City
are exempt from real property taxes under its legislative
franchise; and
2. Whether or not Bayantel is required to exhaust
administrative remedies before seeking judicial relief with the
trial court.
We shall first address the second issue, the same being procedural in
nature.
Petitioners argue that Bayantel had failed to avail itself of the
administrative remedies provided for under the LGC, adding that the
trial court erred in giving due course to Bayantels petition for
prohibition. To petitioners, the appeal mechanics under the LGC
constitute Bayantels plain and speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following provision of
Rule 65 of the Rules of Court:
SEC. 2. Petition for prohibition. When the proceedings of any
tribunal, are without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may
file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter
specified therein, or otherwise, granting such incidental reliefs as law
and justice may require.
With the reality that Bayantels real properties were already levied
upon on account of its nonpayment of real estate taxes thereon, the
Court agrees with Bayantel that an appeal to the LBAA is not a
speedy and adequate remedy within the context of the aforequoted
Section 2 of Rule 65. This is not to mention of the auction sale of said
properties already scheduled on July 30, 2002.
Moreover, one of the recognized exceptions to the exhaustion- of-
administrative remedies rule is when, as here, only legal issues are to
be resolved. In fact, the Court, cognizant of the nature of the
questions presently involved, gave due course to the instant petition.
As the Court has said in Ty vs. Trampe:
7

xxx. Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there is a well-
settled exception in cases where the controversy does not involve
questions of fact but only of law. xxx.
Lest it be overlooked, an appeal to the LBAA, to be properly
considered, required prior payment under protest of the amount of
P43,878,208.18, a figure which, in the light of the then prevailing
Asian financial crisis, may have been difficult to raise up. Given this
reality, an appeal to the LBAA may not be considered as a plain,
speedy and adequate remedy. It is thus understandable why Bayantel
opted to withdraw its earlier appeal with the LBAA and, instead, filed
its petition for prohibition with urgent application for injunctive relief in
Civil Case No. Q-02-47292. The remedy availed of by Bayantel under
Section 2, Rule 65 of the Rules of Court must be upheld.
This brings the Court to the more weighty question of whether or not
Bayantels real properties in Quezon City are, under its franchise,
exempt from real property tax.
The lower court resolved the issue in the affirmative, basically owing
to the phrase "exclusive of this franchise" found in Section 11 of
Bayantels amended franchise, Rep. Act No. 7633. To petitioners,
however, the language of Section 11 of Rep. Act No. 7633 is neither
clear nor unequivocal. The elaborate and extensive discussion
devoted by the trial court on the meaning and import of said phrase,
they add, suggests as much. It is petitioners thesis that Bayantel was
in no time given any express exemption from the payment of real
property tax under its amendatory franchise.
There seems to be no issue as to Bayantels exemption from real
estate taxes by virtue of the term "exclusive of the franchise"
qualifying the phrase "same taxes on its real estate, buildings and
personal property," found in Section 14, supra, of its franchise, Rep.
Act No. 3259, as originally granted.
The legislative intent expressed in the phrase "exclusive of this
franchise" cannot be construed other than distinguishing between two
(2) sets of properties, be they real or personal, owned by the
franchisee, namely, (a) those actually, directly and exclusively used in
its radio or telecommunications business, and (b) those properties
which are not so used. It is worthy to note that the properties subject
of the present controversy are only those which are admittedly falling
under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively
works to grant or delegate to local governments of Congress inherent
power to tax the franchisees properties belonging to the second
group of properties indicated above, that is, all properties which,
"exclusive of this franchise," are not actually and directly used in the
pursuit of its franchise. As may be recalled, the taxing power of local
governments under both the 1935 and the 1973 Constitutions solely
depended upon an enabling law. Absent such enabling law, local
government units were without authority to impose and collect taxes
on real properties within their respective territorial jurisdictions. While
Section 14 of Rep. Act No. 3259 may be validly viewed as an implied
delegation of power to tax, the delegation under that provision, as
couched, is limited to impositions over properties of the franchisee
which are not actually, directly and exclusively used in the pursuit of
its franchise. Necessarily, other properties of Bayantel directly used in
the pursuit of its business are beyond the pale of the delegated taxing
power of local governments. In a very real sense, therefore, real
properties of Bayantel, save those exclusive of its franchise, are
subject to realty taxes. Ultimately, therefore, the inevitable result was
that all realties which are actually, directly and exclusively used in the
operation of its franchise are "exempted" from any property tax.
Bayantels franchise being national in character, the "exemption" thus
granted under Section 14 of Rep. Act No. 3259 applies to all its real or
personal properties found anywhere within the Philippine archipelago.
However, with the LGCs taking effect on January 1, 1992, Bayantels
"exemption" from real estate taxes for properties of whatever kind
located within the Metro Manila area was, by force of Section 234 of
the Code, supra, expressly withdrawn. But, not long thereafter,
however, or on July 20, 1992, Congress passed Rep. Act No. 7633
amending Bayantels original franchise. Worthy of note is that Section
11 of Rep. Act No. 7633 is a virtual reenacment of the tax provision,
i.e., Section 14, supra, of Bayantels original franchise under Rep. Act
No. 3259. Stated otherwise, Section 14 of Rep. Act No. 3259 which
was deemed impliedly repealed by Section 234 of the LGC was
expressly revived under Section 14 of Rep. Act No. 7633. In concrete
terms, the realty tax exemption heretofore enjoyed by Bayantel under
its original franchise, but subsequently withdrawn by force of Section
234 of the LGC, has been restored by Section 14 of Rep. Act No.
7633.
The Court has taken stock of the fact that by virtue of Section 5,
Article X of the 1987 Constitution,
8
local governments are empowered
to levy taxes. And pursuant to this constitutional empowerment,
juxtaposed with Section 232
9
of the LGC, the Quezon City
government enacted in 1993 its local Revenue Code, imposing real
property tax on all real properties found within its territorial jurisdiction.
And as earlier stated, the Citys Revenue Code, just like the LGC,
expressly withdrew, under Section 230 thereof, supra, all tax
exemption privileges in general.
This thus raises the question of whether or not the Citys Revenue
Code pursuant to which the city treasurer of Quezon City levied real
property taxes against Bayantels real properties located within the
City effectively withdrew the tax exemption enjoyed by Bayantel under
its franchise, as amended.
Bayantel answers the poser in the negative arguing that once again it
is only "liable to pay the same taxes, as any other persons or
corporations on all its real or personal properties, exclusive of its
franchise."
Bayantels posture is well-taken. While the system of local
government taxation has changed with the onset of the 1987
Constitution, the power of local government units to tax is still limited.
As we explained in Mactan Cebu International Airport Authority:
10

The power to tax is primarily vested in the Congress; however, in our
jurisdiction, it may be exercised by local legislative bodies, no longer
merely be virtue of a valid delegation as before, but pursuant to direct
authority conferred by Section 5, Article X of the Constitution. Under
the latter, the exercise of the power may be subject to such guidelines
and limitations as the Congress may provide which, however, must be
consistent with the basic policy of local autonomy. (at p. 680;
Emphasis supplied.)
Clearly then, while a new slant on the subject of local taxation now
prevails in the sense that the former doctrine of local government
units delegated power to tax had been effectively modified with Article
X, Section 5 of the 1987 Constitution now in place, .the basic doctrine
on local taxation remains essentially the same. For as the Court
stressed in Mactan, "the power to tax is [still] primarily vested in the
Congress."
This new perspective is best articulated by Fr. Joaquin G. Bernas,
S.J., himself a Commissioner of the 1986 Constitutional Commission
which crafted the 1987 Constitution, thus:
What is the effect of Section 5 on the fiscal position of municipal
corporations? Section 5 does not change the doctrine that municipal
corporations do not possess inherent powers of taxation. What it does
is to confer municipal corporations a general power to levy taxes and
otherwise create sources of revenue. They no longer have to wait for
a statutory grant of these powers. The power of the legislative
authority relative to the fiscal powers of local governments has been
reduced to the authority to impose limitations on municipal powers.
Moreover, these limitations must be "consistent with the basic policy
of local autonomy." The important legal effect of Section 5 is thus to
reverse the principle that doubts are resolved against municipal
corporations. Henceforth, in interpreting statutory provisions on
municipal fiscal powers, doubts will be resolved in favor of municipal
corporations. It is understood, however, that taxes imposed by local
government must be for a public purpose, uniform within a locality,
must not be confiscatory, and must be within the jurisdiction of the
local unit to pass.
11
(Emphasis supplied).
In net effect, the controversy presently before the Court involves, at
bottom, a clash between the inherent taxing power of the legislature,
which necessarily includes the power to exempt, and the local
governments delegated power to tax under the aegis of the 1987
Constitution.
Now to go back to the Quezon City Revenue Code which imposed
real estate taxes on all real properties within the citys territory and
removed exemptions theretofore "previously granted to, or presently
enjoyed by all persons, whether natural or juridical .,"
12
there can
really be no dispute that the power of the Quezon City Government to
tax is limited by Section 232 of the LGC which expressly provides that
"a province or city or municipality within the Metropolitan Manila Area
may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter
specifically exempted." Under this law, the Legislature highlighted its
power to thereafter exempt certain realties from the taxing power of
local government units. An interpretation denying Congress such
power to exempt would reduce the phrase "not hereinafter specifically
exempted" as a pure jargon, without meaning whatsoever. Needless
to state, such absurd situation is unacceptable.
For sure, in Philippine Long Distance Telephone Company, Inc.
(PLDT) vs. City of Davao,
13
this Court has upheld the power of
Congress to grant exemptions over the power of local government
units to impose taxes. There, the Court wrote:
Indeed, the grant of taxing powers to local government units under the
Constitution and the LGC does not affect the power of Congress to
grant exemptions to certain persons, pursuant to a declared national
policy. The legal effect of the constitutional grant to local governments
simply means that in interpreting statutory provisions on municipal
taxing powers, doubts must be resolved in favor of municipal
corporations. (Emphasis supplied.)
As we see it, then, the issue in this case no longer dwells on whether
Congress has the power to exempt Bayantels properties from realty
taxes by its enactment of Rep. Act No. 7633 which amended
Bayantels original franchise. The more decisive question turns on
whether Congress actually did exempt Bayantels properties at all by
virtue of Section 11 of Rep. Act No. 7633.
Admittedly, Rep. Act No. 7633 was enacted subsequent to the LGC.
Perfectly aware that the LGC has already withdrawn Bayantels
former exemption from realty taxes, Congress opted to pass Rep. Act
No. 7633 using, under Section 11 thereof, exactly the same defining
phrase "exclusive of this franchise" which was the basis for Bayantels
exemption from realty taxes prior to the LGC. In plain language,
Section 11 of Rep. Act No. 7633 states that "the grantee, its
successors or assigns shall be liable to pay the same taxes on their
real estate, buildings and personal property, exclusive of this
franchise, as other persons or corporations are now or hereafter may
be required by law to pay." The Court views this subsequent piece of
legislation as an express and real intention on the part of Congress to
once again remove from the LGCs delegated taxing power, all of the
franchisees (Bayantels) properties that are actually, directly and
exclusively used in the pursuit of its franchise.
WHEREFORE, the petition is DENIED.
No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 159794 December 19, 2006
MACLARING M. LUCMAN, in his capacity as the Manager of the
LAND BANK OF THE PHILIPPINES, Marawi City, petitioner,
vs.
ALIMATAR MALAWI, ABDUL-KHAYER PANGCOGA, SALIMATAR
SARIP, LOMALA CADAR, ALIRIBA S. MACARAMBON and
ABDUL USMAN, respondents.

D E C I S I O N

TINGA, J .:
This is a petition for review challenging the decision of the trial court,
affirmed by the Court of Appeals, granting the petition for mandamus
filed by herein respondents, Barangay Chairmen (or Punong
Barangay) of several barangays in the province of Lanao del Sur.
The petition for mandamus filed by respondents before the trial court
is rooted in their claim that they were deprived of their Internal
Revenue Allotment (IRA) for the 2
nd
and 3
rd
quarters of 1997.
Respondents further alleged that these same funds were released by
petitioner as Manager of Land Bank of the Philippines (LBP), the
depositary bank, to third persons.
There were originally six (6) petitioners when the Petition for
Mandamus with Prayer for Writ of Preliminary Mandatory Injunction
was filed by now respondents before the court of origin. They were
Alimatar Malawi, Abdulkhayr Pangcoga, Salimatar Sarip, Lomala
Cadar, Aliriba S. Macarambon and Abdul Usman who were the
incumbent barangay chairmen of Bubong Ngingir (Kabasaran), Ilian,
Linindingan, Mapantao-Ingod, Paigoay and Rangiran, respectively, all
from the Municipality of Pagayawan, Lanao del Sur.
1
All of them were
the incumbent barangay chairmen of their respective barangays prior
to the 12 May 1997 barangay elections. The elections on 12 May
1997 in the aforesaid barangays resulted in a failure of elections.
Thereafter, the special elections held in these barangays likewise
resulted in a failure of elections.
2
Consequently, respondents
remained in office in a holdover capacity pursuant to the provisions of
Sec. 1 of
R.A. No. 6679
3
and Comelec Resolution No. 2888 dated February 5,
1997.
4

Beginning with the second quarter of 1997, LBP was selected as the
government depository bank for the IRAs of the abovementioned
barangays.
5
Being a new government depositary bank for the IRA
funds, the authorized public officials had to open new accounts in
behalf of their government units with the proper LBP branch from
which they could withdraw the IRAs.
6

After the failed 12 May 1997 elections, respondents attempted to
open their respective barangays' IRA bank accounts but were refused
by petitioner because respondents needed to show their individual
certifications showing their right to continue serving as Barangay
Chairmen and the requisite Municipal Accountant's Advice giving
respondents the authority to withdraw IRA deposits.
7
The requirement
for the Accountant's Advice stemmed from Commission on Audit
Circular No. 94-004.
8

Respondents were eventually allowed to open accounts for their
barangays except for Lomala Cadar and Abdul Usman of barangays
Mapantao-Ingud and Rangiran, respectively, because the accounts
for these barangays were previously opened by two persons who
presented themselves as the duly proclaimed Barangay Chairmen for
these same barangays.
9

In any event, all respondents were not allowed to withdraw the IRA
funds from the opened accounts, owing to the absence of the
requisite Accountant's Advice.
10

Then on 4 August 1997, five (5) other persons presented themselves
before petitioner as the newly proclaimed Punong Barangays of the
five barangays concerned,
11
each of them presenting a certification of
his election as Punong Barangay issued by the provincial director of
the DILG-ARMM and another Certification issued by the Local
Government Operations Officer attesting, among others, to the
revocation of the certification previously issued to respondents.
12

Without verifying the authenticity of the certifications presented by
these third persons, petitioner proceeded to release the IRA funds for
the 2
nd
and 3
rd
quarters of 1997 to them.
13

Respondents thus filed on 11 August 1997 a special civil action for
Mandamus with Application for Preliminary Mandatory Injunction
docketed as Civil Case No. 11-106, to compel petitioner to allow them
to open and maintain deposit accounts covering the IRAs of their
respective barangays and to withdraw therefrom.
14
The case was
raffled to the Regional Trial Court (RTC) of Lanao del Sur, Branch
11.
15

At the trial respondents Sarip, Cadar, Pangcoga and Usman testified
that they were duly elected chairpersons of their respective barangays
and continued as such in a holdover capacity until their re-election on
30 August 1997. They testified further that despite presenting the
corresponding documents, petitioner refused to allow the withdrawal
of the funds.
16

Respondent Macarambon testified that he was the incumbent
chairperson of Barangay Paigoay prior to the 12 May 1997 elections
and that due to the failure of elections, he continued to occupy his
position in a holdover capacity until he was succeeded by his wife
upon the latter's election to the same post. He testified on petitioner's
refusal to release the money to him despite his submission of the
Accountant's Advice.
17

For failure to appear at the scheduled hearing on 20 April 1999,
petitioner was held as in default and respondents were allowed to
present evidence ex parte. Petitioner's Motion for Reconsideration of
the Order declaring him as in default was granted.
18

After failing again to appear on the given time for him to adduce
evidence, another Order was issued wherein petitioner was deemed
to have waived his right to present evidence. The Order was lifted on
petitioner's Motion for Reconsideration. Instead of presenting
evidence, petitioner filed on 10 November 1999 a Motion to Dispense
or Waive Presentation of Evidence wherein he represented that the
prayers in the complaint had already been complied with.
19
The RTC
granted petitioner's motion through an Order dated 24 September
1999.
20

Thereafter, the RTC rendered a Decision
21
dated 8 October 1999
commanding petitioner to pay respondents, except respondent
Alimatar Malawi who failed to testify, the IRAs of their respective
barangays "even without the Accountant's Advice."
22
The dispositive
portion of the Decision reads, to wit:
WHEREFORE, premises all considered, the instant petition is
hereby granted. Accordingly, Mr. Maclaring M. Lucman,
Manager of the Land Bank of the Philippines, Marawi City
branch, is hereby ordered to pay the following:
23

1. Aliriba Macarambon, the 2
nd
Quarter IRA of Paigoay,
Pagayawan in the sum of P48,200.00;
2. Salimatar Sarip of Linindingan the
2
nd
Quarter IRA - - - P54,220.00
3
rd
Quarter IRA - - - P54,220.00
3. Lomala S. Cadar of Mapantao the
2
nd
Quarter IRA - - - P54,320.00
3
rd
Quarter IRA - - - P54,320.00
4. Abdulkhay Pangcoga of Ilian the
2
nd
Quarter IRA - - - P53, 361.00
3
rd
Quarter IRA - - - P53,361.00
5. Abdul Usman of Rangiran the
2
nd
Quarter IRA - - - P51,185.00
3
rd
Quarter IRA - - - P51,185.00
even without the Accountant's Advice and the subsequent
IRAs until their term of office shall have expired.
SO ORDERED.
24

The RTC gave no credence to petitioner's assertion of payment to the
rightful barangay officers, there having been no testimonial or
documentary evidence proferred in substantiation thereof.
25
It
considered petitioner's refusal to present evidence as a "silence" that
equates to an admission of respondents' allegations.
26
Furthermore,
the RTC relied on the testimonies and certifications adduced by
respondents in holding that they were occupying their positions in a
holdover capacity
27
and that by virtue thereof, they had "the perfect
right to continue performing the duties and functions of their positions
including the withdrawal of funds of their respective barangays."
28

The Court of Appeals
29
affirmed the RTC's Decision in toto. Hence,
this petition.
Petitioner argues that respondents have no cause of action against
him since they failed to present valid certifications showing their
respective right to continue serving as Punong Barangay as well as
the requisite Municipal Accountant's Advice. Petitioner also asserts
that the LBP Marawi Branch had already released the contested IRAs
to the Barangay Treasurers who were acting in conjunction with the
duly recognized Punong Barangays, thereby making the petition for
mandamus moot and academic.
30
These are factual issues that are
generally beyond the review of this Court.
Petitioner adds that respondents have no legal personality to institute
the petition for mandamus in their own names since the IRAs rightfully
belong to the respective barangays and not to them and that their
respective barangays already received the claimed IRAs in this instant
case.
31

For the proper adjudication of the present petition, two related core
issues have to be resolved. First, what is the cause of action alleged
in the initiatory pleading filed by respondents before the trial court?
Second, are there indispensable parties which were not impleaded?
Although the pleading filed before the lower court was denominated
as a Petition for Mandamus With Prayer For Writ of Preliminary
Injunction, the allegations thereof indicate that it is an action for
specific performance, particularly to compel petitioner to allow
withdrawal of funds from the accounts of the barangays headed by
respondents with the LBP, Marawi Branch. Thus, the Petition alleged:
"12. Despite the opening of deposit accounts for the
barangays mentioned in the preceding paragraph, respondent,
without any valid or lawful cause, failed and refused, and still
fails and refuses, to allow the withdrawal of the funds or IRA of
the said barangays as evidenced by the WITHDRAWAL
CHECKS (attached as Annexes "D" to "D-3" hereof) of said
barangays which were refused payment when presented to
the Land Bank on August 4, 1997."
32

From the records of the case, it appears that the shares of the
barangays in the IRA had already been remitted by the Department of
Budget and Management (DBM) to the LBP Marawi Branch where
they were kept in the accounts opened in the names of the
barangays.
By virtue of the deposits, there exists between the barangays as
depositors and LBP a creditor-debtor relationship. Fixed, savings, and
current deposits of money in banks and similar institutions are
governed by the provisions concerning simple loan.
33
In other words,
the barangays are the lenders while the bank is the borrower.
This Court elucidated on the matter in Guingona, Jr., et al. v. The City
Fiscal of Manila, et al.,
34
citing Serrano v. Central Bank of the
Philippines,
35
thus:
Bank deposits are in the nature of irregular deposits. They are
really loans because they earn interest. All kinds of bank
deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans
(Art. 1980, Civil Code; Gullas v. Phil. National Bank, 62 Phil.
519). Current and savings deposits are loans to a bank
because it can use the same. The petitioner here in making
time deposits that earn interest with respondent Overseas
Bank of Manila was in reality a creditor of the respondent Bank
and not a depositor. The respondent Bank was in turn a debtor
of petitioner. Failure of the respondent Bank to honor the
time deposit is failure to pay its obligation as a debtor and
not a breach of trust arising from a depository's failure to return
the subject matter of the deposit. (Emphasis supplied.)
36

The relationship being contractual in nature, mandamus is therefore
not an available remedy since mandamus does not lie to enforce the
performance of contractual obligations.
37

This brings us to the second core issue.
The IRA funds for which the bank accounts were created belong to
the barangays headed by respondents. The barangays are the only
lawful recipients of these funds. Consequently, any transaction or
claim involving these funds can be done only through the proper
authorization from the barangays as juridical entities.
The determination, therefore, of whether or not the IRA funds were
unlawfully withheld or improperly released to third persons can only
be determined if the barangays participated as parties to this action.
These questions cannot be resolved with finality without the
involvement of the barangays. After all, these controversies involve
funds rightfully belonging to the barangays. Hence, the barangays are
indispensable parties in this case.
An indispensable party is defined as parties-in-interest without whom
there can be no final determination of an action.
38
The nature of an
indispensable party was thoroughly discussed in Arcelona v. Court of
Appeals,
39
to quote:
An indispensable party is a party who has such an interest in
the controversy or subject matter that a final adjudication
cannot be made, in his absence, without injuring or affecting
that interest, a party who has not only an interest in the subject
matter of the controversy, but also has an interest of such
nature that a final decree cannot be made without affecting his
interest or leaving the controversy in such a condition that its
final determination may be wholly inconsistent with equity and
good conscience. It has also been considered that an
indispensable party is a person in whose absence there
cannot be a determination between the parties already before
the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action
before it may properly go forward.
A person is not an indispensable party, however, if his interest
in the controversy or subject matter is separable from the
interest of the other parties, so that it will not necessarily be
directly or injuriously affected by a decree which does
complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit
complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the
action. It is not a sufficient reason to declare a person to be an
indispensable party that his presence will avoid multiple
litigation.
40

In Arcelona, the Court also dwelt on the consequences of failure to
include indispensable parties in a case, categorically stating that the
presence of indispensable parties is a condition for the exercise of
juridical power
41
and when an indispensable party is not before the
court, the action should be dismissed.
42
The absence of an
indispensable party renders all subsequent actions of the court null
and void for want of authority to act, not only as to the absent parties
but even as to those present.
43

The joinder of indispensable parties is mandatory. Without the
presence of indispensable parties to the suit, the judgment of the
court cannot attain real finality. Strangers to a case are not bound by
the judgment rendered by the court.
44

Clearly, this case was not initiated by the barangays themselves.
Neither did the barangay chairmen file the suit in representation of
their respective barangays. Nothing from the records shows
otherwise. On this score alone, the case in the lower court should
have been dismissed.
Even if the barangays themselves had filed the case, still it would not
prosper. The case involves government funds and as such, any
release therefrom can only be done in accordance with the prevailing
rules and procedures.
The Government Accounting and Auditing Manual (GAAM) provides
that the local treasurers shall maintain the depositary accounts in the
name of their respective local government units with banks.
45
Under
the Local Government Code, the treasurer is given the power, among
others, to: (1) keep custody of barangay funds and properties; and (2)
disburse funds in accordance with the financial procedures provided
by the Local Government Code.
46
The same manual defines
disbursements as constituting all cash paid out during a given period
either in currency or by check.
47

Sec. 344 of the Local Government Code further provides for the
following requirements in cases of disbursements, to wit:
Sec. 344. No money shall be disbursed unless the local
budget officer certifies to the existence of appropriation that
has been legally made for the purpose, the local accountant
has obligated said appropriation, and the local treasurer
certifies to the availability of funds for the purpose. Vouchers
and payrolls shall be certified to and approved by the head of
the department or office who has administrative control of the
fund concerned, as to the validity, propriety, and legality of the
claim involved. Except in cases of disbursements involving
regularly recurring administrative expenses xxx approval of the
disbursement voucher by the local chief executive himself
shall be required whenever local funds are disbursed.
Thus, as a safeguard against unwarranted disbursements,
certifications are required from: (a) the local budget officer as to the
existence and validity of the appropriation; (b) the local accountant as
to the legal obligation incurred by the appropriation; (c) the local
treasurer as to the availability of funds; and (d) the local department
head as to the validity, propriety and legality of the claim against the
appropriation.
48

Further, the GAAM provides for the basic requirements applicable to
all classes of disbursements that shall be complied with, to wit:
a) Certificate of Availability of Fund.Existence of lawful
appropriation, the unexpended balance of which, free from
other obligations, is sufficient to cover the expenditure,
certified as available by an accounting officer or any other
official required to accomplish the certificate.
Use of moneys appropriated solely for the specific purpose for
which appropriated, and for no other, except when authorized
by law or by a corresponding appropriating body.
b) Approval of claim or expenditure by head of office or
his duly authorized representative.
c) Documents to establish validity of claim. Submission
of documents and other evidences to establish the validity and
correctness of the claim for payment.
d) Conformity of the expenditure to existing laws and
regulations.
e) Proper accounting treatment.
49

This prescribed legal framework governing the release and
disbursement of IRA funds to the respective barangays disabuses
from the notion that a barangay chairman, relying solely on his
authority as a local executive, has the right to demand physical
possession of the IRA funds allocated by the national government to
the barangay. The right to demand for the funds belongs to the local
government itself through the authorization of their Sanggunian.
50

One final note. There is no conclusive proof from the records showing
that the IRA funds for the 2
nd
and 3
rd
quarters of the barangays
concerned remitted by the DBM had already been
withdrawn from the LBP Marawi Branch. Considering the implications
of this action of possibly depriving several local government units of
their IRAs, the Court took the initiative to request the COMELEC to
issue certifications on who were the duly elected chairmen of the
barangays concerned. The COMELEC issued to this Court a list of the
elected barangay chairmen which confirmed the re-election of
respondents as barangay chairmen of their respective barangays.
51
If
withdrawals were indeed made, whether by the respondents or by
impostors, the matter deserves to be investigated since public funds
are involved. Accordingly, we refer the matter to the Department of
Interior and Local Government (DILG) for investigation and
appropriate action.
WHEREFORE, premises considered, the petition is GRANTED. The
assailed Decisions of the Court of Appeals and the Regional Trial
Court are REVERSED and SET ASIDE. The Petition for Mandamus
filed before the Regional Trial Court is ordered DISMISSED.
The alleged withdrawals of deposits representing the Internal
Revenue Allotments for the 2
nd
and 3
rd
Quarters of 1997 of the
barangays concerned from the Land Bank of the Philippines, Marawi
Branch, are referred to the DILG for investigation and appropriate
action. The DILG is hereby DIRECTED to INFORM the Court of the
result of its investigation within thirty (30) days from the completion
thereof.
No pronouncement as to costs.
SO ORDERED.
Quisumbing, J., Chairperson, Carpio, Carpio Morales, and Velasco,
Jr., JJ., concur.
THIRD DIVISION

EVELYN ONGSUCO and
ANTONIA SALAYA,
Petitioners,


- versus -

HON. MARIANO M. MALONES,
both in his private and official
capacity as Mayor of the
Municipality of Maasin, Iloilo,
Respondent.
G.R. No. 182065


Promulgated:

October 27, 2009

D E C I S I O N


CHICO-NAZARIO, J.
This is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, assailing the Decision19[1] dated 28 November 2006,
rendered by the Court of Appeals in CA-G.R. SP No. 86182, which
affirmed the Decision20[2] dated 15 July 2003, of the Regional Trial
Court (RTC), Branch 39, of Iloilo City, in Civil Case No. 25843,
dismissing the special civil action for Mandamus/Prohibition with
Prayer for Issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction, filed by petitioners Evelyn Ongsuco and
Antonia Salaya against respondent Mayor Mariano Malones of the
Municipality of Maasin, Iloilo.
Petitioners are stall holders at the Maasin Public Market, which
had just been newly renovated. In a letter21[3] dated 6 August 1998,
the Office of the Municipal Mayor informed petitioners of a meeting
scheduled on 11 August 1998 concerning the municipal public market.
Revenue measures were discussed during the said meeting, including
the increase in the rentals for the market stalls and the imposition of







goodwill fees in the amount of P20,000.00,22[4] payable every
month.
On 17 August 1998, the Sangguniang Bayan of Maasin
approved Municipal Ordinance No. 98-01, entitled The Municipal
Revised Revenue Code. The Code contained a provision for
increased rentals for the stalls and the imposition of goodwill fees in
the amount of P20,000.00 and P15,000.00 for stalls located on the
first and second floors of the municipal public market, respectively.
The same Code authorized respondent to enter into lease contracts
over the said market stalls,23[5] and incorporated a standard contract
of lease for the stall holders at the municipal public market.

Only a month later, on 18 September 1998, the Sangguniang
Bayan of Maasin approved Resolution No. 68, series of 1998,24[6]
moving to have the meeting dated 11 August 1998 declared
inoperative as a public hearing, because majority of the persons
affected by the imposition of the goodwill fee failed to agree to the







said measure. However, Resolution No. 68, series of 1998, of the
Sangguniang Bayan of Maasin was vetoed by respondent on 30
September 1998.25[7]
After Municipal Ordinance No. 98-01 was approved on 17
August 1998, another purported public hearing was held on 22
January 1999.26[8]

On 9 June 1999, respondent wrote a letter to petitioners
informing them that they were occupying stalls in the newly renovated
municipal public market without any lease contract, as a consequence
of which, the stalls were considered vacant and open for qualified and
interested applicants.27[9]
This prompted petitioners, together with other similarly situated
stall holders at the municipal public market,28[10] to file before the









RTC on 25 June 1999 a Petition for Prohibition/Mandamus, with
Prayer for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction,29[11] against respondent. The Petition was
docketed as Civil Case No. 25843.
Petitioners alleged that they were bona fide occupants of the
stalls at the municipal public market, who had been religiously paying
the monthly rentals for the stalls they occupied.
Petitioners argued that public hearing was mandatory in the
imposition of goodwill fees. Section 186 of the Local Government
Code of 1991 provides that an ordinance levying taxes, fees, or
charges shall not be enacted without any prior hearing conducted for
the purpose. Municipal Ordinance No. 98-01, imposing goodwill fees,
is invalid on the ground that the conferences held on 11 August 1998
and 22 January 1999 could not be considered public hearings.
According to Article 277(b)(3) of the Implementing Rules and
Regulations of the Local Government Code:

(3) The notice or notices shall specify the date
or dates and venue of the public hearing or hearings.
The initial public hearing shall be held not earlier than
ten (10) days from the sending out of the notice or
notices, or the last day of publication, or date of posting
thereof, whichever is later. (Emphasis ours.)





The letter from the Office of the Municipal Mayor was sent to stall
holders on 6 August 1998, informing the latter of the meeting to be
held, as was in fact held, on 11 August 1998, only five days after
notice.30[12]
Hence, petitioners prayed that respondent be enjoined from
imposing the goodwill fees pending the determination of the
reasonableness thereof, and from barring petitioners from occupying
the stalls at the municipal public market and continuing with the
operation of their businesses.
Respondent, in answer, maintained that Municipal Ordinance
No. 98-01 is valid. He reasoned that Municipal Ordinance No. 98-01
imposed goodwill fees to raise income to pay for the loan obtained by
the Municipality of Maasin for the renovation of its public market. Said
ordinance is not per se a tax or revenue measure, but involves the
operation and management of an economic enterprise of the
Municipality of Maasin as a local government unit; thus, there was no
mandatory requirement to hold a public hearing for the enactment
thereof. And, even granting that a public hearing was required,
respondent insisted that public hearings take place on 11 August
1998 and 22 January 1999.



Respondent further averred that petitioners were illegally
occupying the market stalls, and the only way petitioners could
legitimize their occupancy of said market stalls would be to execute
lease contracts with the Municipality of Maasin. While respondent
admitted that petitioners had been paying rentals for their market
stalls in the amount of P45.00 per month prior to the renovation of the
municipal public market, respondent asserted that no rentals were
paid or collected from petitioners ever since the renovation began.
Respondent sought from the RTC an award for moral
damages in the amount of not less than P500,000.00, for the social
humiliation and hurt feelings he suffered by reason of the unjustified
filing by petitioners of Civil Case No. 25843; and an order for
petitioners to vacate the renovated market stalls and pay reasonable
rentals from the date they began to occupy said stalls until they
vacate the same. 31[13]
The RTC subsequently rendered a Decision32[14] on 15 July
2003 dismissing the Petition in Civil Case No. 25843.
The RTC found that petitioners could not avail themselves of
the remedy of mandamus or prohibition. It reasoned that mandamus
would not lie in this case where petitioners failed to show a clear legal





right to the use of the market stalls without paying the goodwill fees
imposed by the municipal government. Prohibition likewise would not
apply to the present case where respondents acts, sought to be
enjoined, did not involve the exercise of judicial or quasi-judicial
functions.

The RTC also dismissed the Petition in Civil Case No. 25843
on the ground of non-exhaustion of administrative remedies.
Petitioners failure to question the legality of Municipal Ordinance No.
98-01 before the Secretary of Justice, as provided under Section 187
of the Local Government Code,33[15] rendered the Petition raising
the very same issue before the RTC premature.
The dispositive part of the RTC Decision dated 15 July 2003
reads:
WHEREFORE, in view of all the foregoing, and
finding the petition without merit, the same is, as it is
hereby ordered, dismissed. 34[16]







On 12 August 2003, petitioners and their co-plaintiffs filed a
Motion for Reconsideration.35[17] The RTC denied petitioners
Motion for Reconsideration in a Resolution dated 18 June 2004.36[18]
While Civil Case No. 25843 was pending, respondent filed
before the 12
th
Municipal Circuit Trial Court (MCTC) of Cabatuan-
Maasin, Iloilo City a case in behalf of the Municipality of Maasin
against petitioner Evelyn Ongsuco, entitled Municipality of Maasin v.
Ongsuco, a Complaint for Unlawful Detainer with Damages, docketed
as MCTC Civil Case No. 257. On 18 June 2002, the MCTC decided
in favor of the Municipality of Maasin and ordered petitioner Ongsuco
to vacate the market stalls she occupied, Stall No. 1-03 and Stall No.
1-04, and to pay monthly rentals in the amount of P350.00 for each
stall from October 2001 until she vacates the said market stalls.37[19]
On appeal, Branch 36 of the RTC of Maasin, Iloilo City, promulgated a
Decision, dated 29 April 2003, in a case docketed as Civil Case No.
02-27229 affirming the decision of the MCTC. A Writ of Execution
was issued by the MCTC on 8 December 2003.38[20]








Petitioners, in their appeal before the Court of Appeals,
docketed as CA-G.R. SP No. 86182, challenged the dismissal of their
Petition for Prohibition/Mandamus docketed as Civil Case No. 25843
by the RTC. Petitioners explained that they did appeal the enactment
of Municipal Ordinance No. 98-01 before the Department of Justice,
but their appeal was not acted upon because of their failure to attach
a copy of said municipal ordinance. Petitioners claimed that one of
their fellow stall holders, Ritchelle Mondejar, wrote a letter to the
Officer-in-Charge (OIC), Municipal Treasurer of Maasin, requesting a
copy of Municipal Ordinance No. 98-01, but received no reply.39[21]

In its Decision dated 28 November 2006 in CA-G.R. SP No.
86182, the Court of Appeals again ruled in respondents favor.
The Court of Appeals declared that the goodwill fee was a
form of revenue measure, which the Municipality of Maasin was
empowered to impose under Section 186 of the Local Government
Code. Petitioners failed to establish any grave abuse of discretion
committed by respondent in enforcing goodwill fees.
The Court of Appeals additionally held that even if respondent
acted in grave abuse of discretion, petitioners resort to a petition for
prohibition was improper, since respondents acts in question herein




did not involve the exercise of judicial, quasi-judicial, or ministerial
functions, as required under Section 2, Rule 65 of the Rules of Court.
Also, the filing by petitioners of the Petition for Prohibition/Mandamus
before the RTC was premature, as they failed to exhaust
administrative remedies prior thereto. The appellate court did not give
any weight to petitioners assertion that they filed an appeal
challenging the legality of Municipal Ordinance No. 98-01 before the
Secretary of Justice, as no proof was presented to support the same.

In the end, the Court of Appeals decreed:
WHEREFORE, in view of the foregoing, this
Court finds the instant appeal bereft of merit. The
assailed decision dated July 15, 2003 as well as the
subsequent resolution dated 18 June 2004 are hereby
AFFIRMED and the instant appeal is hereby
DISMISSED. 40[22]

Petitioners filed a Motion for Reconsideration41[23] of the
foregoing Decision, but it was denied by the Court of Appeals in a
Resolution42[24] dated 8 February 2008.






Hence, the present Petition, where petitioners raise the
following issues:
I
WHETHER OR NOT THE PETITIONERS HAVE
EXHAUSTED ADMINISTRATIVE REMEDIES
BEFORE FILING THE INSTANT CASE IN COURT;
II
WHETHER OR NOT EXHAUSTION OF
ADMINISTRATIVE REMEDIES IS APPLICABLE IN
THIS CASE; AND
III
WHETHER OR NOT THE APPELLEE MARIANO
MALONES WHO WAS THEN THE MUNICIPAL
MAYOR OF MAASIN, ILOILO HAS COMMITTED
GRAVE ABUSE OF DISCRETION.43[25]

After a close scrutiny of the circumstances that gave rise to
this case, the Court determines that there is no need for petitioners to
exhaust administrative remedies before resorting to the courts.






The findings of both the RTC and the Court of Appeals that
petitioners Petition for Prohibition/Mandamus in Civil Case No. 25843
was premature is anchored on Section 187 of the Local Government
Code, which reads:

Section 187. Procedure for Approval and
Effectivity of Tax Ordinances and Revenue Measures;
Mandatory Public Hearings.The procedure for
approval of local tax ordinances and revenue
measures shall be in accordance with the provisions of
this Code: Provided, That public hearings shall be
conducted for the purpose prior to the enactment
thereof: Provided, further, That any question on the
constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within
thirty (30) days from the effectivity thereof to the
Secretary of Justice who shall render a decision
within sixty (60) days from the date of receipt of the
appeal: Provided, however, That such appeal shall
not have the effect of suspending the effectivity of the
ordinance and the accrual and payment of the tax, fee,
or charge levied therein: Provided, finally, That within
thirty (30) days after receipt of the decision or the lapse
of the sixty-day period without the Secretary of Justice
acting upon the appeal, the aggrieved party may file
appropriate proceedings with a court of competent
jurisdiction. (Emphasis ours.)


It is true that the general rule is that before a party is allowed
to seek the intervention of the court, he or she should have availed
himself or herself of all the means of administrative processes
afforded him or her. Hence, if resort to a remedy within the
administrative machinery can still be made by giving the
administrative officer concerned every opportunity to decide on a
matter that comes within his or her jurisdiction, then such remedy
should be exhausted first before the courts judicial power can be
sought. The premature invocation of the intervention of the court is
fatal to ones cause of action. The doctrine of exhaustion of
administrative remedies is based on practical and legal reasons. The
availment of administrative remedy entails lesser expenses and
provides for a speedier disposition of controversies. Furthermore, the
courts of justice, for reasons of comity and convenience, will shy away
from a dispute until the system of administrative redress has been
completed and complied with, so as to give the administrative agency
concerned every opportunity to correct its error and dispose of the
case. However, there are several exceptions to this rule. 44[26]
The rule on the exhaustion of administrative remedies is
intended to preclude a court from arrogating unto itself the authority to
resolve a controversy, the jurisdiction over which is initially lodged
with an administrative body of special competence. Thus, a case
where the issue raised is a purely legal question, well within the
competence; and the jurisdiction of the court and not the



administrative agency, would clearly constitute an exception.45[27]
Resolving questions of law, which involve the interpretation and
application of laws, constitutes essentially an exercise of judicial
power that is exclusively allocated to the Supreme Court and such
lower courts the Legislature may establish. 46[28]

In this case, the parties are not disputing any factual matter on
which they still need to present evidence. The sole issue petitioners
raised before the RTC in Civil Case No. 25843 was whether Municipal
Ordinance No. 98-01 was valid and enforceable despite the absence,
prior to its enactment, of a public hearing held in accordance with
Article 276 of the Implementing Rules and Regulations of the Local
Government Code. This is undoubtedly a pure question of law, within
the competence and jurisdiction of the RTC to resolve.
Paragraph 2(a) of Section 5, Article VIII of the Constitution,
expressly establishes the appellate jurisdiction of this Court, and
impliedly recognizes the original jurisdiction of lower courts over cases
involving the constitutionality or validity of an ordinance:






Section 5. The Supreme Court shall have the
following powers:

x x x x

(2) Review, revise, reverse, modify or affirm on
appeal or certiorari, as the law or the Rules of Court
may provide, final judgments and orders of lower
courts in:

(a) All cases in which the constitutionality or
validity of any treaty, international or executive
agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation is in
question. (Emphases ours.)

In J.M. Tuason and Co., Inc. v. Court of Appeals,47[29] Ynot v.
Intermediate Appellate Court,48[30] and Commissioner of Internal
Revenue v. Santos,49[31] the Court has affirmed the jurisdiction of







the RTC to resolve questions of constitutionality and validity of laws
(deemed to include local ordinances) in the first instance, without
deciding questions which pertain to legislative policy.

Although not raised in the Petition at bar, the Court is
compelled to discuss another procedural issue, specifically, the
declaration by the RTC, and affirmed by the Court of Appeals, that
petitioners availed themselves of the wrong remedy in filing a Petition
for Prohibition/Mandamus before the RTC.
Sections 2 and 3, Rule 65 of the Rules of the Rules of Court
lay down under what circumstances petitions for prohibition and
mandamus may be filed, to wit:

SEC. 2. Petition for prohibition. When the
proceedings of any tribunal, corporation, board, officer
or person, whether exercising judicial, quasi-judicial
or ministerial functions, are without or in excess of its
or his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is
no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and
praying that judgment be rendered commanding the
respondent to desist from further proceedings in the
action or matter specified therein, or otherwise granting
such incidental reliefs as law and justice may require.

SEC. 3. Petition for mandamus. When any
tribunal, corporation, board, officer or person unlawfully
neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office,
trust, or station, or unlawfully excludes another from
the use and enjoyment of a right or office to which
such other is entitled, and there is no other plain,
speedy and adequate remedy in the ordinary course of
law, the person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered
commanding the respondent, immediately or at some
other time to be specified by the court, to do the act
required to be done to protect the rights of the
petitioner, and to pay the damages sustained by the
petitioner by reason of the wrongful acts of the
respondent. (Emphases ours.)

In a petition for prohibition against any tribunal, corporation,
board, or person -- whether exercising judicial, quasi-judicial, or
ministerial functions -- who has acted without or in excess of
jurisdiction or with grave abuse of discretion, the petitioner prays that
judgment be rendered, commanding the respondent to desist from
further proceeding in the action or matter specified in the
petition.50[32] On the other hand, the remedy of mandamus lies to



compel performance of a ministerial duty.51[33] The petitioner for
such a writ should have a well-defined, clear and certain legal right to
the performance of the act, and it must be the clear and imperative
duty of respondent to do the act required to be done.52[34]
In this case, petitioners primary intention is to prevent
respondent from implementing Municipal Ordinance No. 98-01, i.e., by
collecting the goodwill fees from petitioners and barring them from
occupying the stalls at the municipal public market. Obviously, the
writ petitioners seek is more in the nature of prohibition (commanding
desistance), rather than mandamus (compelling performance).
For a writ of prohibition, the requisites are: (1) the impugned
act must be that of a tribunal, corporation, board, officer, or person,
whether exercising judicial, quasi-judicial or ministerial functions; and
(2) there is no plain, speedy, and adequate remedy in the ordinary
course of law.53[35]
The exercise of judicial function consists of the power to
determine what the law is and what the legal rights of the parties are,







and then to adjudicate upon the rights of the parties. The term quasi-
judicial function applies to the action and discretion of public
administrative officers or bodies that are required to investigate facts
or ascertain the existence of facts, hold hearings, and draw
conclusions from them as a basis for their official action and to
exercise discretion of a judicial nature. In implementing Municipal
Ordinance No. 98-01, respondent is not called upon to adjudicate the
rights of contending parties or to exercise, in any manner, discretion
of a judicial nature.
A ministerial function is one that an officer or tribunal performs in
the context of a given set of facts, in a prescribed manner and
without regard for the exercise of his or its own judgment, upon
the propriety or impropriety of the act done.54[36]

The Court holds that respondent herein is performing a ministerial
function.

It bears to emphasize that Municipal Ordinance No. 98-01 enjoys
the presumption of validity, unless declared otherwise.
Respondent has the duty to carry out the provisions of the
ordinance under Section 444 of the Local Government Code:

Section 444. The Chief Executive: Powers, Duties,
Functions and Compensation. (a) The Municipal
mayor, as the chief executive of the municipal
government, shall exercise such powers and perform



such duties and functions as provided by this Code and
other laws.

(b) For efficient, effective and economical governance
the purpose of which is the general welfare of the
municipality and its inhabitants pursuant to Section 16
of this Code, the Municipal mayor shall:

x x x x

(2) Enforce all laws and ordinances relative to the
governance of the municipality and the exercise of its
corporate powers provided for under Section 22 of this
Code, implement all approved policies, programs,
projects, services and activities of the municipality x x
x.

x x x x

(3) Initiate and maximize the generation of resources
and revenues, and apply the same to the
implementation of development plans, program
objectives sand priorities as provided for under Section
18 of this Code, particularly those resources and
revenues programmed for agro-industrial development
and country-wide growth and progress, and relative
thereto, shall:

x x x x

(iii) Ensure that all taxes and other revenues of the
municipality are collected, and that municipal funds
are applied in accordance with law or ordinance to the
payment of expenses and settlement of obligations of
the municipality; x x x. (Emphasis ours.)


Municipal Ordinance No. 98-01 imposes increased rentals and
goodwill fees on stall holders at the renovated municipal public
market, leaving respondent, or the municipal treasurer acting as
his alter ego, no discretion on whether or not to collect the said
rentals and fees from the stall holders, or whether or to collect the
same in the amounts fixed by the ordinance.

The Court further notes that respondent already deemed
petitioners stalls at the municipal public market vacated. Without
such stalls, petitioners would be unable to conduct their businesses,
thus, depriving them of their means of livelihood. It is imperative on
petitioners part to have the implementation of Municipal Ordinance
No. 98-01 by respondent stopped the soonest. As this Court has
established in its previous discussion, there is no more need for
petitioners to exhaust administrative remedies, considering that the
fundamental issue between them and respondent is one of law, over
which the courts have competence and jurisdiction. There is no other
plain, speedy, and adequate remedy for petitioners in the ordinary
course of law, except to seek from the courts the issuance of a writ of
prohibition commanding respondent to desist from continuing to
implement what is allegedly an invalid ordinance.
This brings the Court to the substantive issue in this Petition
on the validity of Municipal Ordinance N. 98-01.
Respondent maintains that the imposition of goodwill fees
upon stall holders at the municipal public market is not a revenue
measure that requires a prior public hearing. Rentals and other
consideration for occupancy of the stalls at the municipal public
market are not matters of taxation.

Respondents argument is specious.
Article 219 of the Local Government Code provides that a local
government unit exercising its power to impose taxes, fees and
charges should comply with the requirements set in Rule XXX,
entitled Local Government Taxation:

Article 219. Power to Create Sources of
Revenue.Consistent with the basic policy of local
autonomy, each LGU shall exercise its power to
create its own sources of revenue and to levy taxes,
fees, or charges, subject to the provisions of this Rule.
Such taxes, fees, or charges shall accrue exclusively to
the LGU. (Emphasis ours.)

Article 221(g) of the Local Government Code of 1991 defines
charges as:

Article 221. Definition of Terms.

x x x x

(g) Charges refer to pecuniary liability, as rents
or fees against persons or property. (Emphasis ours.)


Evidently, the revenues of a local government unit do not
consist of taxes alone, but also other fees and charges. And rentals
and goodwill fees, imposed by Municipal Ordinance No. 98-01 for the
occupancy of the stalls at the municipal public market, fall under the
definition of charges.
For the valid enactment of ordinances imposing charges,
certain legal requisites must be met. Section 186 of the Local
Government Code identifies such requisites as follows:

Section 186. Power to Levy Other Taxes, Fees
or Charges.Local government units may exercise the
power to levy taxes, fees or charges on any base or
subject not otherwise specifically enumerated herein or
taxed under the provisions of the National Internal
Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees or charges shall not be
unjust, excessive, oppressive, confiscatory or contrary
to declared national policy: Provided, further, That the
ordinance levying such taxes, fees or charges shall
not be enacted without any prior public hearing
conducted for the purpose. (Emphasis ours.)

Section 277 of the Implementing Rules and
Regulations of the Local Government Code establishes
in detail the procedure for the enactment of such an
ordinance, relevant provisions of which are reproduced
below
Section 277. Publication of Tax Ordinance and
Revenue Measures.x x x.

x x x x

(b) The conduct of public hearings shall be
governed by the following procedure:

x x x x

(2) In addition to the requirement for publication
or posting, the sanggunian concerned shall cause the
sending of written notices of the proposed ordinance,
enclosing a copy thereof, to the interested or affected
parties operating or doing business within the territorial
jurisdiction of the LGU concerned.

(3) The notice or notices shall specify the date
or dates and venue of the public hearing or hearings.
The initial public hearing shall be held not earlier
than ten (10) days from the sending out of the notice
or notices, or the last day of publication, or date of
posting thereof, whichever is later;

x x x x

(c) No tax ordinance or revenue measure
shall be enacted or approved in the absence of a
public hearing duly conducted in the manner
provided under this Article. (Emphases ours.)

It is categorical, therefore, that a public hearing be held prior to
the enactment of an ordinance levying taxes, fees, or charges; and
that such public hearing be conducted as provided under Section 277
of the Implementing Rules and Regulations of the Local Government
Code.

There is no dispute herein that the notices sent to petitioners
and other stall holders at the municipal public market were sent out on
6 August 1998, informing them of the supposed public hearing to be
held on 11 August 1998. Even assuming that petitioners received
their notice also on 6 August 1998, the public hearing was already
scheduled, and actually conducted, only five days later, on 11 August
1998. This contravenes Article 277(b)(3) of the Implementing Rules
and Regulations of the Local Government Code which requires that
the public hearing be held no less than ten days from the time the
notices were sent out, posted, or published.

When the Sangguniang Bayan of Maasin sought to correct this
procedural defect through Resolution No. 68, series of 1998, dated 18
September 1998, respondent vetoed the said resolution. Although the
Sangguniang Bayan may have had the power to override
respondents veto,55[37] it no longer did so.

The defect in the enactment of Municipal Ordinance No. 98
was not cured when another public hearing was held on 22 January
1999, after the questioned ordinance was passed by the
Sangguniang Bayan and approved by respondent on 17 August 1998.
Section 186 of the Local Government Code prescribes that the public
hearing be held prior to the enactment by a local government unit of
an ordinance levying taxes, fees, and charges.

Since no public hearing had been duly conducted prior to the
enactment of Municipal Ordinance No. 98-01, said ordinance is void
and cannot be given any effect. Consequently, a void and ineffective
ordinance could not have conferred upon respondent the jurisdiction
to order petitioners stalls at the municipal public market vacant.




IN VIEW OF THE FOREGOING, the instant Petition is
GRANTED. The assailed Decision dated 28 November 2006 of the
Court of Appeals in CA-G.R. SP No. 86182 is REVERSED and SET
ASIDE. Municipal Ordinance No. 98-01 is DECLARED void and
ineffective, and a writ of prohibition is ISSUED commanding the
Mayor of the Municipality of Maasin, Iloilo, to permanently desist from
enforcing the said ordinance. Petitioners are also DECLARED as
lawful occupants of the market stalls they occupied at the time they
filed the Petition for Mandamus/Prohibition docketed as Civil Case No.
25843. In the event that they were deprived of possession of the said
market stalls, petitioners are entitled to recover possession of these
stalls.