Cases MINE Pub Corp

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Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-28138 August 13, 1986

MATALIN COCONUT CO., INC., petitioner-appellee,vs.THE MUNICIPAL COUNCIL OF MALABANG, LANAO DEL SUR, AMIR M. BALINDONG and HADJI PANGILAMUN MANALOCON,MUNICIPAL MAYOR and MUNICIPAL TREASURER OF MALABANG, LANAO DEL SUR, respondents-appellants. PURAKANPLANTATION COMPANY, intervenor-appellee.

YAP,J.:

On August 24, 1966, the Municipal Council of Malabang, Lanao del Sur, invoking the authority of Section 2 of Republic Act No. 2264, otherwise knownas the Local Autonomy Act, enacted Municipal Ordinance No. 45-46, entitled "AN ORDINANCE IMPOSING A POLICE INSPECTION FEE OF P.30 PERSACK OF CASSAVA STARCH PRODUCED AND SHIPPED OUT OF THE MUNICIPALITY OF MALABANG AND IMPOSING PENALTIES FOR

VIOLATION S THEREOF." The ordinan ce made it unlawful for any perso n, company or group of persons "to ship out of the Mun icipal ity of Malabang,cassava starch or flour without paying to the Municipal Treasurer or his authorized representatives the corresponding fee fixed by (the) ordinance." Itimposed a "police inspection fee" of P.30 per sack of cassava starch or flour, which shall be paid by the shipper before the same is transported or shippedoutside the municipality. Any person or company or group of individuals violating the ordinance "is liable to a fine of not less than P100.00, but not morethan P1,000.00, and to pay Pl.00 for every sack of flour being illegally shipped outside the municipality, or to suffer imprisonment of 20 days, or both, in

the discretion of the court.

The validity of the ordinance was challenged by the Matalin Coconut, Inc. in a petition for declaratory relief filed with the then Court of First Instance ofLanao del Sur against the Municipal Council, the Municipal Mayor and the Municipal Treasurer of Malabang, Lanao del Sur. Alleging among others thatthe ordinance is not onlyultra vires, being violat ive of Republic Act No. 2264, but also unreaso nable, oppressive and confiscatory, the pet itioner prayedthat the ordinance be declared null and void ab initio, and that the respondent Municipal Treasurer be ordered to refund the amounts paid by petitionerunder the ordinance. The petitioner also prayed that during the pendency of the action, a preliminary injunction be issued en joining the respondentsfrom enforcing the ordinance. The application for preliminary injunction, however, was denied by the trial court; instead respondent MunicipalTreasurer was ordered to allow payment of the taxes imposed by the ordinance under protest.

Claiming that it was also adversely affected by the ordinance, Purakan Plantation Company was granted leave to intervene in the action. The intervenoralleged that while its cassava flour factory was situated in another municipality, i.e., Balabagan, Lanao del Sur, it had to transport the cassava starch andflour it produced to the seashore through the Municipality of Malabang for loading in coastwise vessels; that the effect of the enactment of Ordinance No45-46, is that intervenor had to refrain from transporting its products through the Municipality of Malabang in order to ship th em by sea to other places.

After trial, the Court a quo rendered a decision declaring the municipal ordinance in question null and void; ordering the respondent MunicipalTreasurer to refund to the petitioner the payments it made under the said ordinance from September 27, 1966 to May 2, 196 7, amounting to P 25,500.00as well as all payments made subsequently thereafter; and enjoining and prohibiting the respondents, their agents or deputies, from collecting the tax ofP.30 per bag on the cassava flour or starch belonging to intervenor, Purakan Plantation Company, ma nufactured or milled in the Municipality ofBalabagan, but shipped out through the Municipality of Malabang.

After the promulgation of the decision, the Trial Court issued a writ of preliminary mandatory injunct ion, upon motion of petitioner, requiring therespondent Municipal Treasurer to deposit with the Philippine National Bank, Iligan Branch, in the name of the Municipality o f Malabang, whateveramounts the petitioner had already paid or shall pay pursuant to the ordinance in q uestion up to and until final termination of the case; the deposit wasnot to be withdrawn from the said bank without any order from the court. On motion for reconsideration by respondents, the wr it was subsequentlymodified on July 20, 1967, to require the deposit only of a mounts paid from the effectivity of the writ up to and until the final termination of the suit.

From the decision of the trial court, the respondents appealed to th is Court.

A motion to d ismiss appeal f iled by petit ioner-appellee, was denied by this court in its resolut ion of October 31, 1967. Subsequently , respondents-

appellants filed a motion to dissolve the writ of preliminary mandatory injunction issued by the trial court on July 20, 1967. This motion was also deniedby this Court on January 10, 1968.

Of the assignments of error raised by the appellants in their Brief, only the following need be discussed: (1) that the trial court erred in adjudicating themoney claim of the petitioner in an action for declaratory relief; and (2) that the trial court erred in de claring the municipal ordinance in question nulland void.

The respondents-appellants maintain that it was error for the trial court, in an action for declaratory relief, to order the refund to petitioner-appellee ofthe amounts paid by the latter under the municipal ordinance in question. It is the contention of respondents-appellants that in an action for declaratoryrelief, all the court can do is to construe the validity of the ordinance in question and declare the rights of t hose affected thereby. The court cannotdeclare the ordinance illegal and at the same time order the refund to petitioner of the amounts paid under the ordinance, wi thout requiring petitioner tofile an ordinary action to claim the refund after the declaratory relief judgment has become final. Respondents maintain that under Rule 64 of the Rulesof Court, the court may advise the parties to file the proper pleadings and convert the hearing into an ordinary action, whic h was not done in this case.


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We find no me rit in such contention. Under Sec. 6 of Rule 64, the act ion for declaratory relief may be converted into an ordinary action and the partiesallowed to file such pleadings as may be necessary or proper, if before the final termination of the case "a breach or violation of an...ordinance, shouldtake place." In the present case, no breach or violation of the ordinance occurred. The petitioner decided to pay "under protest" the fees imposed by theordinance. Such payment did not affect the case; the declaratory relief action was still proper because t he applicability of the ordinance to futuretransactions still remained to be resolved, although the matter could also be threshed out in an ordinary suit for the recove ry of taxes paid (Shell Co. o fthe Philippines, Ltd. vs. Municipality of Sipocot, L-12680, March 20, 1959). In its petition for de claratory relief, petitioner-appellee alleged that byreason of the enforcement of the municipal ordinance by respondents it was forced to pa y under protest the fees imposed pursuant to the s aid ordinanceand accordingly, one of the reliefs prayed for by the petitioner was that the respondents be ordered to refund all the amount s it paid to respondentMunicipal Treasurer during the pendency of the c ase. The inclusion of said allegation and prayer in the petition was not objected to by the respondents intheir answer. During the trial, evidence of the payments made by the petitioner was introduced. Respondents were thus fully a ware of the petitioner'sclaim for refund and of what would h appen if the ordinance were to be declared invalid by the court.

Respondents' contention, if sustained, would in effect require a separate suit for the recovery of the fees paid by petitioner under protest. Multiplicity ofsuits should not be allowed or encouraged and, in the context of the present case, is clearly uncalled for and unnecessary.

The main issue to be resolve in this case whether not Ordinance No. 45-66 enacted by respondent Municipal Council of Malabang, Lanao del Sur, isvalid. The respo ndents-appellants contend that the municipality has the power and author ity to appro ve the ordina nce in quest ion pursuant to Section 2of the Local Autonomy Act (Republic Act No. 2264).

Since the enactment of the Local Autonomy Act, a liberal r ule has been followed by this Court in construing municipal ordinances enacted pursuant tothe taxing power granted under Section 2 of said law. This Court has construed the grant of power to tax under the a bove- mentioned provision assufficiently plenary to cover "everything, excepting those which are mentioned" therein, subject only to the limitation that the tax so levied is for public

purposes, justand uniform (Nin Bay Mining Company vs. Municipality of Roxas, Province of Palawan, 14 SCRA 661; C.N. Hod ges vs. Municipal Board,Iloilo City, et al., 19 SCRA 28).

We agree with the finding of the trial court that the amount collected under the ordinance in question partakes of the n ature of a tax, althoughdenominated as "pol ice inspection fee" since its undeniable purpose is to raise revenue. However, we cannot a gree with the trial court's finding that the

tax imposed by the ordinance is a percentage tax on sales which is beyond the scope of the municipality's authority to levy u nder Section 2 of the LocalAutonomy Act. Under the sa id provision, municipal ities and mun icipal distr icts are prohibited from impos ing" any perce ntage ta x on sales or other taxesin any form basedthereon. " The ta x imposed under the ordinance in question is not a percentage tax on s ales or any other form of tax based on sales. Itis a fixed tax of P.30 per bag of cassava starch or flour "shipped out" of the municipality. It is not based on sales.

However, the tax imposed under the ordinance can be stricken down on another ground. According to Section 2 of the abovementioned Act, the taxlevied must be "for public purposes,justand uniform" (Emphasis supplied.) As correctly held by the trial court, the so-called "police inspection fee"levied by the ordinance is "unjust and unreasonable." Said the court a quo:

... It has been proven that the o nly service rendered by the Municipality of Malabang, by way of inspection, is for the polic eman toverify from the dr iver of the trucks o f the petit ioner passing by at the pol ice checkpoint the n umber of bags loaded per trip which areto be shipped out of the municipality based on the trip tickets for the purpose of co mputing the total amount of tax to be co llect (sic)and for no other purpose. The pretention of respondents that the police, aside from counting the number of bags shipped out, is alsoinspecting the cassava flour starch contained in the bags to find out if the said cassava flour starch is fit for human consumptioncould not be given credence by the Court because, aside from the fact that said purpose is not so stated in the ordinance in question,the policemen of said municipality are not competent to determine if the cassava flour starch are fit for human consumption. The

further pretention of respondents that the trucks of the petitioner hauling the bags of cassava flour starch from the mill to thebodega at the beach of Malabang are escorted by a policeman from the po lice checkpo int to the beach for the pu rpose of protectingthe truck and its cargoes from molestation by undesirable elements could not also be g iven credence by the Court because it has beenshown, beyond doubt, that the petitioner has not asked for the said p olice protection because there has been no occasion where itstrucks have been molested, even for once, by bad e lements from the police checkpoint to the bodega at the beach, it is solely for thepurpose of verifying the correct number of bags of cassava flour starch loaded on the trucks of the petitioner as stated in t he triptickets, when unloaded at its bodega at the beach. The imposition, therefore, of a police inspection fee of P.30 per bag, imposed bysaid ordinance is unjust and unreasonable.

The Court finally finds the inspection fee of P0.30 per bag, imposed by the ordinance in question to be excessive and confiscatory. Ithas been shown by the petitioner, Matalin Coconut Company, Inc., that it is merely realizing a marginal average profit of P0. 40, per

bag, of cassava flour starch shipped out from the Municipality of Malabang because the average production is P15.60 per bag,including transportation costs, while the prevailing market price is P16.00 per bag. The further imposition, therefore, of th e tax ofP0.30 per bag, by the ordinance in question would force the petitioner to close or stop its cassava flour starch milling businessconsidering that it is maintaining a big labor force in its operation, including a force of security guards to guard its properties. Theordinance, therefore, has an adverse effect on the economic growth of the Municipality of Malabang, in particular, and of the nation,

in general, and is contrary to the economic policy of the government.

Having found the ordinance in question to be invalid, we find it unnecessary to rule on the other errors assigned by the appe llants.

WHEREFORE, petition is dismissed. The dec ision of the court a quo is here by affirmed. No costs.

SO ORDERED.

Narvasa, Melencio- Herrera, Cruz and Para s, JJ., concur.

THIRD DIVISION


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[G.R. No. 152492. October 16, 2003]

PALMA DEVELOPMENT CORPORATION,petitioner, vs. MUNICIPALITY OF MALANGAS, ZAMBOANGA DEL SUR, respondent.

D E C I S I O N

PANGANIBAN, J.:

In accordance with the Local Government Code of 1991, a municipal ordinance imposing fees on goods that pass through the issu ing municipalityterritory is null and void.

The Case

The Petition for Review[1]before us assails the August 31, 2001 Dec ision[2]and the February 6, 2002 Resolution[3]of the Court of Appeals (CA) inCA-GR CV No. 56477. The dispositiveportion of the challenged Decision reads as follows:

UPON THE VIEW WE TAKE OF THIS CASE, TH US, the assailed Decision isVACATED and SET ASIDE, and this case isordered REMANDED to the court a quo for the reception of evidence of the parties on the matter or point delineated in the final sentence above -stated.[4]

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The facts are undisputed. Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to wholesalersin Zamboanga City. It uses the municipal port ofMalangas, Zamboanga del Sur as transshipment point for its goods. The port, as well as thesurrounding roads leading to it, belong to and are maintained by the Municipality of Malangas,Zamboanga del Sur.

On January 16, 1994, the municipality passed Municipal Revenue Code No. 09, Series of 1993, which was subsequently approved bythe Sangguniang Panlalawigan of Zamboanga del Surin Resolution No. 1330 dated August 4, 1994. Section 5G.01 of the ordinance reads:

Section 5G.01. Imposition of fees. There shall be collected service fee for its use of the municipal road[s] or streets leading to the wharf and to any pointalong the shorelines within the jurisdiction of the municipality and for police surveillance on all goods and all equipment harbored or sheltered in thepremises of the wharf and other within the jurisdiction of this municipality in the following schedule:

a) Vehicles and Equipment: rate of fee

1. Automatic per unit P10.00

2. Ford Fiera P10.00

3. Trucks P10.00

x x x x x x x x x

b) Other Goods, Construct ion Material products:

1. Bamboo craft P20.00

2. Bangus/Kilo 0.30

x x x x x x x x x

41. Rice and corn grits/sack 0.50[5]

Accordingly, the service fees imposed by Section 5G.01 of the ordinance was paid by petitioner under protest. It contended that under RepublicAct No. 7160, otherwise known as the Local Government Code of 1991, municipal g overnments did n ot have the autho rity to tax goods and vehicles thapassed through the ir jurisdictions. Thereafter, before the Regional Trial Court (RTC) ofPagadian City, petitioner f iled againsthe Municipality of Malangas on November 20, 1995, an action for declaratory relief assailing the validity of Section 5G.01 of the municipal ordinance.
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On the premise that the case involved the validity of a municipal ordinance, the RTC directed respondent to secure the opinion of the Office of theSolicitor General. The trial court likewise ordered that the opinions of the Departments of Finance and of Justice be sought. As these opinions were stilunavailable as of October 17, 1996, petitioners counsel filed, without objection from respondent, a Manifestation seeking the submission of the case fothe RTCs decision on a pure question of law.

In due time, the trial court rendered its November 13, 1996 Decision declaring the entire Municipal Revenue Code No. 09 as ultra vires and, hencenull and void.

Ruling of the Court of Appeals

The CA held that local government units already had revenue-raising powers as provided for under Sections 153 and 155 of RA No. 7160. It ruledas well that within the purview of these provisions -- and therefore valid -- is Section 5G.01, which provides for a service fee for the use of the municiparoad or streets leading to the wharf and to any po int along the shorelines within the jurisdiction of t he municipality and for police surveillance on algoods and all equipment harbored or sheltered in the premises of the wharf and other within the jurisdiction of this municipality.

However, since both parties had submitted the case to the trial court for decision on a pure question of law without a full-blown trial on the merits,the CA could not determine whether the facts of the c ase were within the ambit of the aforecited sections of RA No. 7160. The appellate court ruled thapetitioner still had to adduce evidence to substantiate its allegations that the assailed ordinance had imposed fees on the movement of goods withinthe Municipality of Malangas in the guise of a toll fee for the use of municipal roads and a service fee for police surveillance. Thus, the CA held that theabsence of such evidence necessitated the remand of the case to the trial court.

Hence, this Petition.[6]

Issues

Petitioner raises the following issues for our consideration:

1. Whether or not the Court of Appeals erred when it ordered that the extant case be remanded to the lower court for reception o f evidence.

2. Whether or not the Court of Appeals erred when it ruled that a full blown trial on the merits is necessary and that plaintiff-appellee, nowpetitioner, has to adduce evidence to substantiate its thesis that the assailed municipal ordinance, in fact, imposes fees o n the movementof goods within the jurisdiction of the defendant and that this imposition is merely in the guise of a toll fee for the use of municipal roadsand service fee for police surveillance.

3. Whether or not the Court of Appeals erred when it did not rule that the questioned municipal ordinance is contrary to the provisions ofR.A. No. 7160 or the L ocal Government Code of thePhilippines.[7]

In brief, the issues boil down to the following: 1) whether Section 5G.01 of Municipal Revenue Code No. 09 is valid; and 2) whether the remand othe case to the tr ial court is necessary.

The Courts Ruling

The Petition is meritorious.

First Issue:Validity of the Imposed Fees

Petitioner argues that while respondent has the power to tax or impose fees on vehicles using its roads, it cannot tax the goods that are transportedby the vehicles . The prov ision o f the ordinance imposing a service fee for police surveillance on goods is allegedly contrary to Se ction 133(e) of RA No7160, which reads:

Section 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the ta xingpowers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

x x x x x x x x x

e) Taxes, fees and charges and other impositions upon goods carried into and out of, or passing through, the territorial jurisdictions of local governmentunits in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods ormerchandise;

On the other hand, respondent maintains that the subject fees are intended for services rendered, the use of municipal roads and policesurveillance. The fees are supposedly not covered by the prohibited impositions under Section 133(e) of RA No. 7160 . [8] It further contends that it waempowered by the express mandate of Sections 153 and 155 of RA No. 7160 to enact Section 5G.01 of the ordinance. The pertinent provisions of thistatute read as follows:
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Section 153.Service Fees and Charg es. -- Local government units may impose and collect such reasonable fees and charges for services rendered.

x x x x x x x x x

Section 155. Toll Fees or Charges. -- The s anggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll feesor charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and cons tructed by the localgovernment unit concerned:Provided, That no such toll fees or charges sha ll be collected from officers and enlisted men of the Armed Forces of thePhilippines and members of the Philippine National Police on mission, post office personnel delivering mail, physically-handicapped, and d isabledcitizens who are sixty-five (65) years or o lder.

When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be

free and open for public use.

Respondent claims that there is no proof that the P0.50 fee for every sack of rice or corn is a fraudulent legislation enacted to subvert the limitationimposed by Section 133(e) of RA No. 7160. Moreover, it argues that allowing petitioner to use its roads without paying the P0.50 fee for every sack of ricor corn would co ntravene the principle of unjust enrichment.

By express language of Sections 153 and 155 of RA No. 7160, local government units, through their Sanggunian , may prescribe the terms andconditions for the imposition of toll fees or charges for the use of any public road, pier or wharf funded and constructed by them. A service fee imposedon vehicles using municipal roads leading to the wharf is thus valid. However, Section 133(e) of RA No. 7160 prohibits the imposition, in the guiseof wharfage, of fees -- as well as all other taxes or charges in any form whatsoever -- on goods or merchandise. It is therefore irrelevant if the feesimposed are actually for police surveillance on the goods, because any other form of imposition on goods passing through the territorial jurisdiction ofthe municipality is clearly prohibited by Section 133(e).

Under Section 131(y) of RA No. 7160, wharfage is defined as a fee assessed against the cargo of a vessel engaged in foreign or domestic trade basedon quantity, weight, or measure received and/or discharged by vessel. It is apparent that a wharfage does not lose its basic character by being labeled asa service fee for police surveillance on all goods.

Unpersuasive is the contention of respondent that petitioner would unjustly be enriched at the formers expense. Though the rules thereon applyequally well to the government,[9]for unjust enrichment to be deemed present, two conditions must generally concur: (a) a person is unjustly benefitedand (b) such benefit is derived at anothers expense or damage.[10]

In the instant case, the benefits from the use of the municipal roads and the wharf were not unjustly derived by petitioner. Those benefits resultedfrom the infrastructure that the municipality was mandated by law to provide.[11] There is no unjust enrichment where the one receiving the benefit has alegal right or entitlement thereto, or when there is no causal relation between ones enrichment and the others impoverishment. [12]

Second Issue:Remand of the Case

Petitioner asserts that the remand of the case to the trial court for further reception of evidence is unnecessary, because the facts are undisputed byboth parties . It has already been clear ly established, without need for further evidence, that pet itioner transports rice and corn on board trucks that pass

through the municipal roads leading to the wharf. Under protest, it paid the service fees, a fact that respondent has readily admitted withouqualification.

Respondent, on the other hand, is silent on the issue of the remand of the case to the trial court. The former merely defends the validity of theordinance, arguing neither for nor against the remand.

We rule against the remand. Not only is it fro wned upon by the Rules of Court; [13]it is also unnecessary on the basis of the facts established by theadmissions of the parties. Besides, the fact sought to be esta blished with the reception of additional evidence is irrelevant to the due settlement of thecase.

The pertinent portion of the assailed CA Decision reads:

To be stressed is the fact that local government units now have the following co mmon revenue raising powers under the Local Government Code:

Section 153.Service Fees and Charg es. -- Local government units may impose and collect such reasonable fees and chargesfor services rendered.

x x x x x x x x x

Section 155. Toll Fees or Charges. -- The Sanggunian concerned may prescribe the terms and co nditions and fix the rates for the imposition of toll feesor chargesfor the use of any pu blic road, pi er or wharf, waterway, bridge, ferry or telecommunication syst em funded and construct ed by the localgovernment unit concerned: Provided, That no such toll fees or charges shall be collected from officers and enlisted men of the Armed Forces of thePhilippines and members of the Philippine National Police on mission, post office personnel delivering mail, physically-handicapped, and d isabledcitizens who are sixty-five (65) years or older.

When public safety and welfare so requires, the Sanggunian concerned may discontinue the collection of the tolls, and thereafter the said fac ility shall befree and open for public use. x x x

As we see it, the disputed municipal ordinance, which provides for aservice fee for the use of the municipal road o r streets leading to the wharf and toany point along the shorelines within the jurisdiction of the municipality and for poli ce surveillance on all goods and al l equipment harbored orsheltered in the premises of the wharf and other within the jurisdiction of this municipality, seems to fall within the compass of the above cited
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provisions of R.A. No. 7160. As elsewhere indicated, the parties in this case, nonetheless, chose to submit the issue to the Trial Court on a pure questionof law, without a full-blown trial on the merits: consequently, we are not prepared to say, at th is juncture, that the facts of the case inevitably call for theapplication, and/or that these make out a clear-cut case within the ambit and purview, of the aforecited section. The plaintiff, thus, has to adduceevidence to substantiate its thesis that the assailed municipal ordinance, in fact, imposes fees on the movement of goods within the jurisdiction of thedefendant, and that this imposition is merely in the guise of a toll fee for the use of municipal roads and service fee for po lice surveillance. Competentevidence upon this score must, thus, be presented.[14]

We note that Sect ion 5G.01 imposes two types of service fees: 1) one for the use of the municipal roads and 2) another for police surveillance on algoods and equipment sheltered in the premises of the wharf. The amountof service fees, however, is based on the type ofvehicle that passes through theroad and the type ofgoodsbeing transported.

While both parties admit that the service fees imposed are for the use of the municipal roads, petitioner maintains that the service fee for po lice

surveillance on goods harbored on the wharf is in the guise of a wharfage,[15]a prohibited imposition under Section 133(e) of RA No. 7160.

Thus, the CA held that the case should be remanded to the trial court in order to resolve this factual dispute. The appellate court noted that undeSection 155 of RA No. 7 160, municipalities apparently now have the power to impose fees for the use of municipal roads.

Nevertheless, a remand is still unnecessary even if the service fee charged against the goods are for police surveillance, because Section 133(e) ofRA No. 7160 expressly prohibits the imposition of all other taxes, fees or charges in any form whatsoever upon the merchandis e or goods that pasthrough the territorial jurisdiction of local government units. It is therefore immaterial to the instant case whether the service fee on the goods is forpolice surveillance or not, since the subject provision of the revenue ordinance is invalid. Reception of further evidence to establish this fact would nolegalize the imposition of such fee in any way.

Furthermore, neither party disputes any of the other materialfacts of the case. From their respective Briefs before the CA and their Memorandabefore this Court, they do not d ispute the fact that petitioner, from its p rincipal place of business, tran sports rice a nd corn on board trucks bound forrespondents wharf. The trucks traverse the municipal roads en route to the wharf, where the sacks of rice and corn are manually loaded into marine

vessels bound for Zamboanga City . Likewise undisputed is the fact that respondent imposed and colle cted fees under the ordinance from petitioner. Theformer admits that it has been collecting, in addition to the fees on vehicles, P0.50 for every sack of r ice or corn that the latter has been shipping throughthe wharf.[16]

The foregoing allegations are formal judicial admissions that are conclusive upon the parties making them. They require no further proof inaccordance with Section 4 of Rule 129 of the Rules of Court, which reads:

SEC. 4.Judicial admissions. An admission, verbal or written, made by a p arty in the course of the proceedings in the same case, does not requireproof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.

Judicial admissions made by parties in the pleadings, in the course of the trial, or in other proceedings in the same case are conclusive. No furtheevidence is required to prove them. Moreover, they cannot be contradicted unless it is shown that they have been made through palpable mistake, or thatthey have not been made at all. [17]

WHEREF ORE, the Petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals are herebySET ASI DE. The impositionof a service fee for police surveillance on all goods harbored or sheltered in the premises of the municipal port of Malangas under Sec. 5G.01 othe Malangas Municipal Revenue Code No. 09, series of 1993, is declaredNULL AND VOID for being violative of Republic Act No. 7160.

SO ORDERED.

Puno, (Chairman), Sandoval-Gutierrezand Carpio-Morales, JJ., concur.Corona, J., on leave.

EN BANC

[G.R. No. 144104. June 29, 2004]

LUNG CENTER OF THE PHILIPPINES,petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessorof Quezon City, respondents.

D E C I S I O N

CALLEJO, SR.,J.:

This is a petition for review on certiorariunder Rule 45 of the Rules of Court, as amended, of the Decision[1]dated July 17, 2000 of the Court oAppeals in CA -G.R. SP No. 57014 which affirmed the decision of the Central Board of Assessment A ppeals holding that the lot owned by the petitionerand its hospital building constructed thereon are subject to assessment for purposes of real property tax.

TheAntecedents

The petitioner Lung Center of the Philippines is a non-stock and non -profit entity established on January 16, 1981 by virtue of Presidential DecreeNo. 1823.[2]It is the registered owner of a parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon Avenucorner Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters and is covered by Transfer Certificate of Title (TCT)
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No. 261320 of the Registry of Deeds of Quezon City. Erected in the middle of the aforesa id lot is a hospital known as the Lung Center othe Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professionalpractitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-half of the entirearea on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon

Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise kno wn as the Elliptical Orchids and Garden Center.

The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying. Aside fromits income from paying patients, the petitioner receives annual subsidies from the government.

On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by theCity Assessor of Quezon City. [3]Accordingly, Ta x Decla ration Nos. C -021-01226 (16-2518) and C-0 21-01231 (15-2518-A) were issued for the land and thehospital building, respectively.[4]On August 25, 1993, the petitioner filed a Claim for Exemption[5]from real property taxes with the City Assessorpredicated on its claim that it is a charitable institution. The petitioners request was denied, and a petition was, thereafter, filed before the Local Board

of Assessment Appeals of Quezon City (QC-LBAA, for brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged that undeSection 28, paragraph 3 of the 1987 Constitution, the property is exempt fro m real property taxes. It averred that a minimum of 60% of its hospital bedsare exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is acharitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding thepetitioner liable for real property taxes.[6]

The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of Quezon City (CBAA, for brevity)[7]whichruled that the petitioner was not a charitable institution and that its real properties were not actually, directly and exclusively used for charitablepurposes; hence, it was not entitled to real property tax exemption under the constitut ion and the law. The petitioner sought relief from the Court o

Appeals, which rendered judgment affirming the decision of the CBAA.[8]

Undaunted, the petitioner filed its petition in this Court contending that:

A. THE COURTA QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX EXEMPTIONS ON THE GROUNDTHAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY ANDEXCLUSIVELY DEVOTED FOR CHARITABLE PURPOSES.

B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS CHARTER, PD 1823, SAID EXEMPTIONMAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION.

The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the 1987 Constitution. It asserts that itscharacter as a charitable institution is not altered by the fact that it admits paying patients and renders medical services to them, leases portions of theland to private parties, and rents out portions of the hospital to private medical practitioners from which it derives income to be used for operationalexpenses. The petitioner points out that for the years 1995 to 1999, 100% of its out-patients were charity patients and of the hospitals 282 -bed capacity60% thereof, or 170 beds, is allotted to charity patients. It asserts that the fact that it receives subsidies from the government attests to its character as acharitable institution. It contends that the exclusivity required in the Constitution does not necessarily mean solely. Hence, even if a portion of itsreal estate is leased out to private individuals from whom it derives income, it does not lose its character as a charitable institution, and its exemptionfrom the payment of real estate taxes on its real property. The petitioner cited our ruling in Herrera v. QC-BAA[9]to bolster its pose. The petitionerfurther contends that even if P.D. No. 1823 does not exempt it from the payment of real estate taxes, it is not precluded fro m seeking tax exemptionunder the 1987 Constitution.

In their comment on the petition, the respondents aver that the petitioner is not a charitable entity. The petitioners real property is not exempfrom the payment of real estate taxes under P.D. No. 1823 and even under the 1987 Constitution because it failed to prove that it is a charitableinstitution and that the said property is actually, directly and exclusively used for charitable purposes. The respondents noted that in a newspaperreport, it appears that graft charges were filed with the Sandiganbayan against the director of the petitioner, its administrative officer, and ZenaidaRivera, the proprietress of the Elliptical Orchids and Garden Center, for entering into a lease contract over 7,663.13 square meters of the property in1990 for only P20,000 a month, when the monthly rental should be P357,000 a month as determined by the Commission on Audit; and that instead ofcomplying with the directive of the COA for the cancellation of the contract for being grossly prejudicial to the government, the petitioner renewed thesame on March 13, 1995 for a monthly rent al of only P24,000. They assert that the petitioner uses the subsidies granted by the government for charitypatients and uses the rest of its income from the property for the benefit of paying patients, among other purposes. They aver that the petitioner failed toadduce substantial evidence that 100% of its out-patients and 170 beds in the hospital are reserved for indigent patients. The respondents further assertthus:

13. That the claims/allegations of the Petitioner LCP do not speak well of its record of service. That before a patient is admitted for treatment in theCenter, first impression is that it is pay-patient and required to pay a certain amount as deposit. That even if a patient is living below the poverty line, heis charged with high hospital bills. And, without these bills being first settled, the poor patient cannot be allowed to leave the hospital or be discharged

without first p aying the hospital b ills or issue a promissory note guaranteed and indorsed by an influential agency o r person kno wn only to the Center;that even the remains of deceased poor patients suffered the same fate. Moreover, before a patient is admitted for treatment as free or charity patient,one must undergo a series of interviews and must submit all the requ irements needed by the Ce nter, usually accompanied by endorsement by aninfluential agency or person known only to the Center. These facts were heard and admitted by the Petitioner LCP during the hearings before theHonorable QC-BAA and Honorable CBAA. These are the reasons of indigent patients, instead of seeking treatment with the Center, they prefer to be

treated at the Quezon Institute. Can such practice by the Center be called charitable?[10]

The Issues

The issues for resolution are the following: (a) whether the petitioner is a charitable institution within the context of Pre sidential Decree No. 1823and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt fromreal property taxes.

The Courts Ruling
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The petition is partially granted.

On the first issue, we hold that the petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. To determinewhether an enterprise is a charitable institution/entity or not, the elements which should be co nsidered include the statute creating the enterprise, itcorporate purposes, its constitution and by-laws, the methods of administration, the nature of the actual work performed, the character of the servicesrendered, the indefiniteness of the beneficiaries, and the use and occupation of the properties. [11]

In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number ofpersons, either by bringing their minds and hearts under the influence of education or religion, by assisting them to establish themselves in life orotherwise lessening the burden of government.[12]It may be applied to almost anything that tend to promote the well-doing and well-being of socialman. It embraces the improvement and promotion of the happiness of man. [13]The word charitable is not restricted to relief of the po or or sick. [14]Thtest of a charity and a charitable organizat ion are in law the same. The test whether an enterprise is charitable or not is whether it exists to carry out apurpose reorganized in law as charitable or whether it is maintained for gain, profit, or p rivate advantage.

Under P.D. No. 1823, the petitioner is a n on-profit and non-stock corporation which, subject to the provisions of the decree, is to be administeredby the Office of the President of the Philippines with the Ministry of Health and the Ministry of Human Sett lements. It was organized for the welfare andbenefit of the Filipino people principally to help co mbat the high incidence of lung and pulmonary diseases in the Philippines. The raison detre for thecreation of the petitioner is stated in the de cree, viz:

Whereas, for decades, respiratory diseases have been a prior ity concern, having been the leading cause of illness and death i n the Phi lippines, co mprisingmore than 45% of the total a nnual deaths from all causes, thus, exacting a tremendous toll on human r esources, which ailments are likely to increase anddegenerate into serious lung diseases on account of unabated pollution, industrialization and unchecked cigarette smoking in the country;

Whereas, the more common lung diseases are, to a great extent , preventable, and curable with ear ly and ade quate medical care, immunization andthrough prompt and intensive prevention and health education programs;

Whereas, the re is an urgent need to consolidate and reinforce existing pro grams, strateg ies and efforts at pre venting, treat ing and reh abilitating peop leaffected by lung diseases, and to undertake research and training on the cure and prevention of lung diseases, through a Lung Center which will house

and nurture the above and related activities and provide tertiary-level care for more difficult and problematical cases;

Whereas, to a chieve this purpose, the Government intends to p rovide material and finan cial support t owards the esta blishment and maintenance ofa Lung Center for the welfare and benefit of the Filipino people.[15]

The purposes for which the pet itioner was created are spelled out in its Articles of Incorporation, thus:

SECOND: That the purposes for which such corporation is formed are as follows:

1. To construct, establish, equip, maintain, administer and conduct an integrated medical institution which shall specialize in the treatment, care,rehabilitation and/or relief of lung and allied diseases in line with the concern of the government to assist and provide material and financial support inthe establishment and maintenance of a lung center primarily to benefit the people of the Philippines and in pursuance of the policy of the State to se curethe well-being of the people by providing them specialized health and medical services and by minimizing the incidence of lung disease s in the countryand elsewhere.

2. To promote the noble undertaking of scientific research related to the prevention of lung or pulmonary ailments and the care of lung patients,including the holding of a series of relevant congresses, conventions, seminars and conferences;

3. To stimulate and, whenever possible, underwrite scientific researches on the biological, demographic, social, economic, eugenic and physiologicalaspects of lung or pulmonary diseases and their control; and to collect and publish the f indings of such research for public consumption;

4. To facilitate the dissemination of ideas and public acceptance of information on lung consciousness or awareness, and the development of fact-finding, information and reporting facilities for and in aid of the general purposes or objects aforesaid, especially in huma n lung requirements, generalhealth and physical fitness, and other relevant or related fields;

5. To encourage the training of physicians, nurses, health officers, social workers and medical and technical personnel in the pr actical and scientificimplementation of services to lung p atients;

6. To assist universities and research institutions in their studies about lung diseases, to encourage advanced training in matters of the lung and

related fields and to support educational programs of value to general health;

7. To encourage the formation of other organizations on the national, provincial and/or city and local levels; and to coordinate their various effortsand activities for the purpose of achieving a more effective programmatic approach on the common problems relative to the objectives enumeratedherein;

8. To seek and obtain assistance in any form from both international and local foundations and organizations; and to administer grants and fundsthat may be g iven to the o rganization;

9. To extend, whenever possible and expedient, medical services to the public and, in general, to promote and protect the health of the masses of ourpeople, which has long been recognized as an economic asset and a social blessing;
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10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the people in any and all walks of life, including those whoare poor and needy, all without regard to or d iscrimination, because of race, creed, color or political belief of the persons helped; and to enable them toobtain treatment when suc h disorders occur;

11. To participate, as circumstances may warrant, in any activity designed and carried on to promote the general health of the community;

12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and supplies by purchase, donation, or otherwise and todispose of and distribute the same in such manner, and, on such basis as the Center shall, from time to time, deem proper and best, under the particularcircumstances, to serve its general and non-profit purposes and objectives;

13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of properties, whether real or personal, for purposes herein

mentioned; and

14. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the powers herein set forth and to do every other actand thing incidental thereto or connected therewith. [16]

Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks of life including those who are poorand the needy without discrimination. After all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject ocharity.[17]

As a general principle, a charitable institution does not lose its ch aracter as such and its exe mption from taxes simply because it der ives incomefrom paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received isdevoted or used altogether to the char itable object which it is intended to achieve; and no money inures to the private benef it of the persons managing oroperating the institution.[18]In Congregational Sunday School, etc. v. Board of Review,[19]the State Supreme Court of Illinois held, thus:

[A]n institution does not lose its charitable character, and consequent exemption from taxation, by reason of the fact that those recipients of its

benefits who are able to p ay are required to do so, where no p rofit is made by the in stitution and the amounts so received are appl ied in furthering itscharitable purposes, and those benefits are refused to none on account of inability to pay therefor. The fundamental ground upon which all exemptionsin favor of charitable institutions are based is the benefit conferred upon the pu blic by them, and a consequent relief, to some extent, of the burden uponthe state to care for a nd advance the interests of its citizens.[20]

As aptly stated by the State Supreme Court of South Dakota inLutheran Ho spital Association of Sout h Dakota v. Baker:[21]

[T]he fact that paying patients are taken, the profits derived from attendance upon these patients being exclusively devoted to the maintenance of thecharity, seems rather to enhance the usefulness of the institution to the poor; for it is a matter of c ommon observation amongst those who have goneabout at all amongst the suffering classes, that the deserving poor can with difficulty be persuaded to enter an asylum of an y kind confined to thereception of objects of charity; and that their ho nest pride is much less wounded by being placed in an institution in which paying p atients are alsoreceived. The fact of receiving money from some of the patients does not, we think, at all impair the character of the charity, so long as the money thusreceived is devoted altogether to the charitable object which the institution is intended to further. [22]

The money received by the petitioner becomes a part of the trust fund and must be devoted to public trust purposes and cannot be diverted to

private profit or benefit.[23]

Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its character as a charitable institution simplybecause the gift or donation is in the form of subsidies granted by the government. As held by the State Supreme Court of Utah in Yorgason v. CountyBoard of Equalization of Salt Lake C ounty :[24]

Second, the government subsidy p ayments are provided to the proje ct. Thus, those payments are like a gift or donation of any other kind except theycome from the government. In bothIntermountain Health Careand the present case, the crux is the presence or absence of material reciprocity. It isentirely irrelevant to this analysis that the government, rather than a private benefactor, chose to make up the deficit resulting from the excha nge

between St. Marks Towe r and the tena nts by making a contribution to the landlord, just as it would have been irrelevant in Intermountain HealthCareif the patients income supplements had co me from private individuals rather than the government.

Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government rather than p rivate charitable contributions doesnot dictate the denial of a charitable exemption if the facts otherwise support such an exemption, as they do here. [25]

In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the government for 1991 and 1992

for its patients and for the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its operations.

Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leasedto private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for ch aritable purposes.

The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally infavor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, aclaim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. [26]As held in Salvation Armyv. Hoehn:[27]

An intention on the part of the legis lature to grant an exemption from the taxing po wer of the state will never be implied from language which will ad mitof any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by n ecessary implicationfrom the language used, for it is a we ll settled principle that, when a special privilege or exemption is claimed under a statute, charter or act ofincorporation, it is to be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force to a claim ofexemption from taxation . [28]
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Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the petitioner shall enjoy the tax exemptions andprivileges:

SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation organized primarily to help combat the high incidence oflung and pulmonary diseases in the Philippines, all donations, contributions, endowments and equipment and supplies to be imported by authorizedentities or persons and by the Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and benefit of the Lung Center, shall beexempt from income and gift taxes, the same further deductible in full for the purpose of determining the maximum dedu ctible amount under Section30, paragraph (h), of the National Internal Revenue Code, as amended.

The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and fees imposed by the Government or any political subdivisionor instrumentality thereof with respect to equipment purchases made by, or for the Lung Center.[29]

It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption privileges for its real properties as well as thebuilding constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges underSection 2:

It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies the exclusion of all others. The rule isexpressed in the familiar maxim, expressio unius est exclusio alterius.

The rule ofexpressio unius est exclusio a lterius is formulated in a number of ways. One variation of the rule is principle that what is expressed puts anend to that which is implied. Expressium facit cessare tacitum. Thus, where a statute, by its terms, is expressly limited to certain matters, it may not, byinterpretation or construction, be extended to other matters.

...

The rule ofexpressio unius est exclusio alterius and its variations are canons of restrictive interpretation. They are based on the rules of logic and thenatural workings of the hu man mind. They are predicated upon ones own voluntary act and not upon that of others. They proceed from the p remisethat the legislature would not have made specified enumeration in a statute had the intention been not to restrict its meaning and confine its terms tothose expressly mentioned. [30]

The exemption must not be so enlarged by construction since the reasonable presumption is that the State has granted in express terms all itintended to grant at all, and that unless the p rivilege is limited to the very terms of the statute the favor would be intended beyond what was meant.[31]

Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:

(3) Charitable institutions, churches and p arsonages or convents appurtenant thereto, mosques, non- profit cemeteries, and all lands, buildings, andimprovements, actually, directly a nd exclusively used for religious, charitable or educational purposes shall be exempt from taxation. [32]

The tax exemption under this constitutional provision coverspropert y taxes only.[33]As Ch ief Just ice Hilar io G. Davide, Jr. , then a member of the1986 Constitutional Commission, explained: . . . what is exempted is not the institution itself . . .; those exempted from r eal estate taxes are lands

buildings a nd improvements actually, directly and exclusively used for religious, charitable or educational purposes. [34]

Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160 (otherwise known as the Local GovernmentCode of 1991) as follows:

SECTION 234.Exemptions from Real P roperty Tax. The following are exempted from payment of the real property tax:

...

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non -profit or religious cemeteries and all lands, bu ildings,and improvements actually, directly, and exclusively used for re ligious, charitable or educational purposes.[35]

We note that under the 1935 Constitution, ... all lands, buildings, and improvements used exclu sively for charita ble purposes shall beexempt from taxation.[36] However, under the 1973 and the present Constitutions, for lands, buildings, and improvements of the charitable institutionto be considered exempt, the same should not only be exclusively used for charitable purposes; it is required that such property be used actually anddirectly for such purposes.[37]

In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on our ruling in Herrera v. Quezon City Board ofAssessment Appeals which was promulgated onSeptember 30, 1961 before the 1973 and 1987 Constitutions took effect .[38]As this C ourt held inProvinceof Abra v. H ernando:[39]

Under the 1935 Constitution: Cemeteries, churches, and parsonages o r convents appurtenant thereto, and all lands, buildings, and improvementsused exclusively for religious, charitable, or educational purposes shall be exe mpt from taxation. The present Constitution added charitableinstitutions, mosques, and non-profit cemeteries and required that for the exemption of lands, build ings, and improvements, they should not o nly beexclusively but also actually and directly used for religious or ch aritable purposes. The Constitution is worded differently. The change should not

be ignored. It must be duly take n into consideration. Reliance on past decisions would have sufficed were the words actually as well as directly notadded. There must be proof therefore of the actualand directuse of t he lands, buildings, and improvements for religious or charitable purposes to beexempt from taxation.

Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clearand unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLYand EXCLUSIVELYused fo
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charitable purposes. Exclusive is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; andexclusively is defined, in a manner to exclude; as enjoying a privilege ex clusively.[40]If real property is used for one or more commercial purposesit is not exclusively used for the exempted purposes but is subject to taxation. [41] The words dominant use or principal use cannot be substituted forthe words used exclusively without doing violence to the Constitutions and the law. [42]Solely is synonymous with exclusively.[43]

What is meant by actu al, direct and exclus ive use of the property for charitable purposes is the dire ct and immediate and actua l appl ication of theproperty itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that isdeterminative of whether the property is used for tax -exempt purposes.[44]

The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitablepurposes. While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, wheth er paying or nonpaying, other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to aprivate individual for her business enterprise under the business name Elliptical Orchids and Garden Center. Indeed, the petitioners evidence shows

that it collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said lessees.

Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased t o pr ivate individuals arenot exempt from such taxes.[45]On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients,

whether pay ing or non -paying, are exempt fro m real property taxes.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City Assessor is hereby DIRECTED todetermine, after due hearing, the precise portions of the land and the area thereof which are leased to private persons, and to co mpute the real propertytaxes due thereon as provided for by law.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval -Gutierrez, Carpio, Corona, Ca rpio-Morales, Azcuna , and Tinga, JJ., concur.Vitug, J., on official leave.Ynares-Santiago, andAustria-Martinez, JJ., on leave.

EN BANC

[G.R. No. 144256. June 8, 2005]

ALTERNATIVE CENTER FOR ORGANIZA TIONAL REFORM S AND DEVELO PMENT, INC. (ACORD), BALAY MINDANAWFOUNDATION, INC. (BMFI); BARRIOS, INC.; CAMARINES SUR NGO-PO DEVELOPMENT NETWORK, INC. (CADENET)CENTER FOR PARTICIPATORY GOVERNANCE (CPAG); ENVIRONMENTAL LEGAL ASSISTANCE CENTER, INC. (ELAC);FELLOWSHIP FOR ORGANIZING ENDEAVORS (FORGE); FOUNDATION FOR LOCAL AUTONOMY AND GOODGOVERNNANCE, INC. (FLAGG); INSTITUTE OF POLITICS AND GOVERNANCE (IPG); KAISAHAN PARA SA KAUNLARANNG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN); MANGGAGAGAWANG KABABAIHANG MITHI AYPAGLAYA (MAKALAYA); NAGA CITY PEOPLES COUNCIL (NCPC); NGO-PO COUNCIL OF CAMARINES SUR FORCOMMUNITY PARTICIPATION AND EMPOWERMENT, INC. (NPCCS); PAILIG DEVELOPMENT FOUNDATION INC(PDFI); PHILIPPINE ECUMENICAL ACTION FOR COMMUNITY EMPOWERMENT FOUNDATION, INC. (PEACEFOUNDATION, INC.); PHILIPPINE PARTNERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN RURAL

AREAS (PHILDHRRA); PILIPINA, INC. (ANG KILUSAN NG KABABAIHA NG PILIPINO); SENTRO NG A LTERNATIBONGLINGAP PANLIGAL (SALIGAN); URBAN LAND REFORM TASK FORCE (ULR-TF); ADELINO C. LAVADOR; PUNONGBARANGAY ISABEL MENDEZ; PUNONG BARANGAY CAROLINA ROMANOS, petitioners, vs. HON. RONALDO ZAMORAin his capacity as Executive Secretary, HON. BENJAMIN DIOKNO, in his capacity as Secretary, Department of Budget andManagement, HON. LEONOR MAGTOLIS-BRIONES, in her capacity as National Treasurer, and the COMMISSION ON

AUDIT, respondents.

D E C I S I O N

CARPIO MORALES,J.:

Pursuant to Section 22, Article VII of the Constitution[1]mandating the President to submit to Congress a budget of expenditures within thirty daysbefore the opening of every re gular session, then President Joseph Ejercito Estrada su bmitted the National Expenditures Progr am for Fiscal Yea r 2000.In the said Program, the President proposed an Internal Revenue Allotment (IRA) in the amount of P121,778,000,000 following the formula provided

for in Section 284 of the Local Government Code of 1992, viz:

SECTION 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the national internal revenue taxes based on thecollection of the third fiscal year preceding the current f iscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%);

(b) On the second year, thirty-five percent (35%); and

(c) On the third year and thereafter, forty percent (40%).

x x x (Emphasis supplied)
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On February 16, 2000, the President approved House Bill No. 837 4 a bill sponsored in the Senate by then Senator John H. Osmea who was theChairman of the Committee on Finance. This bill became Republic Act No. 87 60, AN ACT APPROPRIATING FUNDS FOR T HE OPERATION OF THEGOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES FROM JANUARY ONE TO DECEMBER THIRTY -ONE, TWO THOUSAND, AND FOROTHER PURPOSES.

The act, otherwise known as the General Appropriations Act (GAA) for the Year 2000, provides under the heading ALLOCATIONS T O LOCALGOVERNMENT UNITS that the IRA for local government units shall a mount to P111,778,000,000:

XXXVII. ALLOCATIONS TO LOCALGOVERNMENT UNITS

A. INTERNAL REVENUE ALLOTMENT

For apportionment of the shares of local government units in the internal revenue taxes in accordance with the purpose indicated hereunder... P111,778,000,000

New Appropriations, by Purpose

Current Operating Expenditures

Maintenance and OtherPersonal Operating Capital

Services Expenses Outlays Total

A. PURPOSE(S)

a. Internal Revenue

Allotment P111,778,000,000 P111,778,000,000

x x x

TOTAL NEW

APPROPRIATI ONS P111,778,000,000

In another part of the GAA, under the heading UNPROGRAMMED FUND, it is provided that an amount o f P10,000,000,000 (P10 Billion)apart from the P111,778,000,000 mentioned above, shall be used to fund the IRA, which amount shall be released only when the original revenue targets

submitted by the President to Congress can be realized based on a quarterly assessment to be conducted by certain committees which the GAA specifiesnamely, the Development Budget Coordinating Committee, the Committee on Finance of the Senate, and the Committee on Appropriations of the Houseof Representatives.

LIV. UNPROGRAMMED FUND

For fund requirements in accordance with the purposes indicated hereunder P48,681,831,000

A. PURPOSE(S)

x x x x

6. AdditionalOperational

Requirementsand Projects of P14,788,764,000Agencies

x x x x

Special Provisions

1. Release of the Fund. The amounts herein appropriated shall be released only when the revenue collections exceed the original revenuetargets submitted by the President of the Philippines to Congress pursuant to Section 22, Article VII o f the Cons titution or when thecorresponding funding or receipts for the purpose have been realized except in the special cases covered by specific procedures in SpecialProvision Nos. 2, 3, 4, 5, 7 , 8, 9, 13 and 14 herein: PROVIDED, That in cases of foreign-assisted projects, the existence of a perfected loanagreement shall be sufficient compliance for the issuance of a Special Allotment Release Order covering the loan proceeds: PROVIDED,FURTHER, That no amount of the U nprogrammed Fund shall be funded out of the savings generated from programmed items in this Act.


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x x x x

4. Additional Operational Requirements and Projects of Agencies. The appropriations for Purpose 6 Additional OperationalRequirements and Projects of Agencies herein indicated shall be released only when the original revenue targets submitted by the Presidentof the Philippines to Congress pursuant to Section 22, Article VII of the Constitution can be realized based on a quarterly assessment of theDevelopment Budget Coordinating Co mmittee, the Committee on Finance of the Senate and the Committee on Appropriations of the Houseof Representatives and shall be used to fund the following:

x x x x

Internal Revenue Allotments

Maintenance andOther Operating

Expenses P10,000,000,000

--------------------

Total, IRA P10,000,000,000

x x x x

Total P14,788,764,000

x x x x (Emphasis supplied)

Thus, while the GAA appropriates P111,778,000,000 of IRA as Programmed Fund, it appropriates a separate amount of P10 Billion of IRAunder the classification ofUnprogrammed Fund, the latter amount to be released only upon the occurrence of the condition stated in the GAA.

On August 22, 2000, a number of non-governmental organizations (NGOs) and peoples organizations, along with three barangay officials filedwith this Court the petition at bar, for Certiorari, Prohibition and Mandamus With Application for Temporary Restraining Order, against respondentsthen Executive Secretary Ronaldo Zamora, then Secretary of the Department of Budget and Management Benjamin Diokno, then National TreasurerLeonor Magtolis-Briones, and the Co mmission on Audit, challenging the constitutionality of above-quoted provision of XXXVII (ALLOCATIONS TOLOCAL GOVERNMENT UNITS) referred to by petitioners as Section 1, XXXVII (A), and LIV (UNPROGRAMMED FUND) Special Provisions 1 and 4 othe GAA (the GAA provisions).

Petitioners contend that:

1. SECTION 1, XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, OF THE YEAR 2000 GAA ARE NULL AND VOID FOR BEINGUNCONSTITUTIONAL AS THEY VIOLATE THEAUTONOMY OF LOCAL GOVERNMENTS BY UNLAWFULLY REDUCING BY TEN

BILLION PESOS (P10 BILLION) THE INTERNAL REVENUE ALLOTMENTS DUE TO THE LOCAL GOVERNMENTS ANDWITHHOLDING THE RELEASE OF SUCH AMOUNT BY P LACING THE SAME UNDER UNPROGRAMMED FUNDS. THISVIOLATES TH E CONSTITUTIONAL MANDATE IN ART. X, SEC. 6, THAT T HE LOCAL G OVERNMENT UNITS JUST SHARE INTHE NATIONAL TAXES SHALL BE AUTOMATICALLY RELEASED TO THEM. IT ALSO VIOLATES THE LOCAL GOVERNMENTCODE, SPECIFICALLY, SECS. 18, 284, AND 286.

2. SECTION 1, XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, OF THE YEAR 2000 GAA ARE NULL AND VOID FOR BEINGUNCONSTITUTIONAL AS THEY VIOLATE THE AUTONOMY OF LOCAL GOVERNMENTS BY PLACING T EN BILLION PESOS (P10BILLION) OF THE INTERNAL REVENUE ALLOTMENTS DUE TO THE LOCAL GOVERNMENTS, EFFECTIVELY ANDPRACTICALLY, WITHIN THE CONTROL OF THE CENTRAL AUTHORITIES.

3. SECTION 1, XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, OF THE YEAR 2000 GAA ARE NULL AND VOID FOR BEINGUNCONSTITUTIONAL AS THE PLACING OF P10 BILLION PESOS OF THE IRA

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