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G.R. No. 106611 July 21, 1994

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS,

CITYTRUST AN!ING CORPORATION "#$ COURT OF TA% APPEALS, respondents.

The Solicitor General for petitioner.

Palaez, Adriano & Gregorio for private respondent.

REGALA&O, J.:

The judicial proceedings over the present controversy commenced with CTA Case No. 4099,

wherein the Court of Ta Appeals ordered herein petitioner Commissioner of !nternal "evenue to

grant a refund to herein private respondent Citytrust #an$ing Corporation %Citytrust& in the

amount of '(),)(4,*0+.(4, representing its overpaid income taes for (94 and (9*, -ut denied

its claim for the alleged refunda-le amount reflected in its (9) income ta return on the ground

of prescription. 1 That judgment of the ta court was affirmed -y respondent Court of Appeals in

its judgment in CA/.". '

No. 1+)9.

2

The case was then elevated to us in the present petition for reviewon certiorari wherein the latter judgment is impugned and sought to -e nullified and2or set aside.

!t appears that in a letter dated August 1+, (9+, '()(*# +)*"-( )(+o#$(#- /o)+o)"-*o# *l($ "

/l"* o) )(u#$ *-' -'( u)("u o I#-()#"l R((#u( 3IR in the amount of '(9,93(,34*.00

)(+)((#-*#5 -'( "ll(5($ "55)(5"-( o -'( (/( o *- /"))*($7o() -o-"l 8u")-()ly +"y(#-

o() -'( "/-u"l *#/o( -" $u(, +lu /"))*($7o() *-''ol$*#5 -" +"y(#- o# 5o()#(#-

(/u)*-*( "#$ )(#-"l *#/o(, " /o+u-($ *# *- *#"l *#/o( -" )(-u)# o) -'( /"l(#$")

y(") (#$*#5 &(/(() :1, 19;<. :

Two days later, or on August 1, (9+, in order to interrupt the running of the prescriptive

period, Citytrust filed a petition with the Court of Ta Appeals, doc$eted therein as CTA Case

No. 4099, claiming the refund of its income ta overpayments for the years (9), (94 and (9*

in the total amount of '(9,93(,34*.00. 4



!n the answer filed -y the ffice of the olicitor /eneral, for and in -ehalf of therein respondent

commissioner, it was asserted that the mere averment that Citytrust incurred a net loss in (9*

does not ipso facto merit a refund5 that the amounts of '+,+((,11).00, '(,9*9,*(4.00 and

'1,1).00 claimed -y Citytrust as (9) income ta overpayment, taes withheld on proceeds of

government securities investments, as well as on rental income, respectively, are not properly

documented5 that assuming arguendo that petitioner is entitled to refund, the right to claim the

same has prescri-ed

with respect to income ta payments prior to August 1, (94, pursuant to ections 191 and 19*

of the National !nternal "evenue Code of (933, as amended, since the petition was filed only on

August 1, (9+. <

n 6e-ruary 10, (99(, the case was su-mitted for decision -ased solely on the pleadings andevidence su-mitted -y herein private respondent Citytrust. 7erein petitioner could not present

any evidence -y reason of the repeated failure of the Ta Credit2"efund 8ivision of the #!" to

transmit the records of the case, as well as the investigation report thereon, to the olicitor

/eneral. 6

7owever, on une 14, (99(, herein petitioner filed with the ta court a manifestation and motion

praying for the suspension of the proceedings in the said case on the ground that the claim of

Citytrust for ta refund in the amount of '(9,93(,34*.00 was already -eing processed -y the Ta

Credit2"efund 8ivision of the #!", and that said -ureau was only awaiting the su-mission -y

Citytrust of the re:uired confirmation receipts which would show whether or not the aforestated

amount was actually paid and remitted to the #!". =

Citytrust filed an opposition thereto, contending that since the Court of Ta Appeals already

ac:uired jurisdiction over the case, it could no longer -e divested of the same5 and, further, that

the proceedings therein could not -e suspended -y the mere fact that the claim for refund was

-eing administratively processed, especially where the case had already -een su-mitted for

decision.

!t also argued that the #!" had already conducted an audit, citing therefor ;hi-its <, <(, <1

and <) adduced in the case, which clearly showed that there was an overpayment of income

taes and for which a ta credit or refund was due to Citytrust. The 6oregoing ehi-its are



allegedly conclusive proof of and an admission -y herein petitioner that there had -een an

overpayment of income taes. ;

The ta court denied the motion to suspend proceedings on the ground that the case had already

-een su-mitted for decision since 6e-ruary 10, (99(. 9

Thereafter, said court rendered its decision in the case, the decretal portion of which declares=

>7;";6";, in view of the foregoing, +(-*-*o#() * (#-*-l($ -o " )(u#$ u-

o#ly o) -'( o()+"*$ -"( *#/u))($ *# 19;4 "#$ 19;<. T'( )(u#$"l(

"ou#- " 'o# *# *- 19;: *#/o( -" )(-u)# * '()(y $(#*($ o# -'(

5)ou#$ o +)(/)*+-*o#. R(+o#$(#- * '()(y o)$()($ -o 5)"#- " )(u#$ -o

+(-*-*o#() C*-y-)u- "#>*#5 Co)+. *# -'( "ou#- o P1:,:14,<06.14

)(+)((#-*#5 -'( o()+"*$ *#/o( -"( o) 19;4 "#$ 19;< , recomputed as

follows=

(94 !ncome ta due ' 4,3(*,*)).00

?ess= (94 @uarterly payments ' (+,1(4,*99.00

(94 Ta Credits B

>2T on int. on govt. sec. (,91(,14*.)3

>2T on rental inc. 1+,+04.)0 (,(+1,44.+3

BBBBBBB BBBBBBB

Ta verpayment %(),44+,9(*.+3&

?ess= 6C8D paya-le (*0,1*1.00

BBBBBBB

Amount refunda-le for (94 ' %(),19+,++).+3&

(9* !ncome ta due %loss& ' B 0 B

?ess= >2T on rentals )+,3(+.43

BBBBBBB

Ta verpayment %)+,3(+.43&

?ess= 6C8D paya-le (,34.00



BBBBBBB

Amount "efunda-le for (9* ' %(3,41.43&

Note=

These credits are smaller than the claimed amount -ecause only the

a-ove figures are well supported -y the various ehi-its presented

during the hearing.

No pronouncement as to costs.

"8;";8. 10

The order for refund was -ased on the following findings of the Court of Ta Appeals= %(& the

fact of withholding has -een esta-lished -y the statements and certificates of withholding taes

accomplished -y herein private respondents withholding agents, the authenticity of which were

neither disputed nor controverted -y herein petitioner5 %1& no evidence was presented which

could effectively dispute the correctness of the income ta return filed -y herein respondent

corporation and other material facts stated therein5 %)& no deficiency assessment was issued -y

herein petitioner5 and %4& there was an audit report su-mitted -y the #!" Assessment #ranch,

recommending the refund of overpaid taes for the years concerned %;hi-its < to <)&, which

enjoys the presumption of regularity in the performance of official duty. 11

A motion for the reconsideration of said decision was initially filed -y the olicitor /eneral on

the sole ground that the statements and certificates of taes allegedly withheld are not conclusive

evidence of actual payment and remittance of the taes withheld to the #!". 12 A supplemental

motion for reconsideration was thereafter filed, wherein it was contended for the first time that

herein private respondent had outstanding unpaid deficiency income taes. 'etitioner alleged that

through an interoffice memorandum of the Ta Credit2"efund 8ivision, dated August , (99(,

he came to $now only lately that Citytrust had outstanding ta lia-ilities for (94 in the amount

of '*+,*,340.9( representing deficiency income and -usiness taes covered -y

8emand2Assessment Notice No. 6A(400)19(00)19+. 1:



O++o*-*o# -o o-' -'( "*/ "#$ u++l((#-"l o-*o# o) )(/o#*$()"-*o# ()( *l($ y

+)*"-( )(+o#$(#- C*-y-)u-. 14 T'()("-(), -'( Cou)- o T" A++("l *u($ " )(olu-*o#

$(#y*#5 o-' o-*o# o) -'( )("o# -'"- S(/-*o# <2 3 o -'( T" Co$(, " *+l((#-($ y

R((#u( R(5ul"-*o# 67;<, o#ly )(8u*)( -'"- -'( /l"* o) -" /)($*- o) )(u#$ u- 'o

-'"- -'( *#/o( )(/(*($ " $(/l")($ " +")- o -'( 5)o *#/o(, "#$ -'"- -'( "/- o

*-''ol$*#5 " $uly (-"l*'($. Mo)(o(), *-' )(5")$ -o -'( ")5u(#- )"*($ *# -'(

u++l((#-"l o-*o# o) )(/o#*$()"-*o# "#(#- -'( $(*/*(#/y -" "((#- "5"*#- '()(*#

+(-*-*o#(), -'( -" /ou)- )ul($ -'"- *#/( -'"- "--() " #o- )"*($ *# -'( +l("$*#5, -'(

"( /"##o- ( /o#*$()($, *#o>*#5 -'()(o) -'( "lu-")y +u)+o( o -'( o#*u o-*o#

)ul( '*/' * -o o*"-( ul-*+l*/*-y o o-*o# "#$ -o $*/ou)"5( $*l"-o)y +l("$*#5. 1<

As indicated at the outset, a petition for review was filed -y herein petitioner with respondentCourt of Appeals which in due course promulgated its decision affirming the judgment of the

Court of Ta Appeals. 'etitioner eventually elevated the case to this Court, maintaining that said

respondent court erred in affirming the grant of the claim for refund of Citytrust, considering

that, firstly, said private respondent failed to prove and su-stantiate its claim for such refund5

and, secondly, the -ureaus findings of deficiency income and -usiness ta lia-ilities against

private respondent for the year (94 -ars such payment. 16

After a careful review of the records, we find that under the peculiar circumstances of this case,

the ends of su-stantial justice and pu-lic interest would -e -etter su-served -y the remand of this

case to the Court of Ta Appeals for further proceedings.

!t is the sense of this Court that the #!", represented herein -y petitioner Commissioner of

!nternal "evenue, was denied its day in court -y reason of the mista$es and2or negligence of its

officials and employees. !t can readily -e gleaned from the records that when it was herein

petitioners turn to present evidence, several postponements were sought -y its counsel, the

olicitor /eneral, due to the unavaila-ility of the necessary records which were not transmitted

-y the "efund Audit 8ivision of the #!" to said counsel, as well as the investigation report made

-y the #an$s26inancing and !nsurance 8ivision of the said -ureau2 despite repeated re:uests. 1= !t

was under such a predicament and in deference to the ta court that ultimately, said records -eing



still unavaila-le, herein petitioners counsel was constrained to su-mit the case for decision on

6e-ruary 10, (99( without presenting any evidence.

6or that matter, the #!" officials and2or employees concerned also failed to heed the order of the

Court of Ta Appeals to remand the records to it pursuant to ection 1, "ule 3 of the "ules of the

Court of Ta Appeals which provides that the Commissioner of !nternal "evenue and the

Commissioner of Customs shall certify and forward to the Court of Ta Appeals, within ten days

after filing his answer, all the records of the case in his possession, with the pages duly

num-ered, and if the records are in separate folders, then the folders shall also -e num-ered.

The aforestated impassE came a-out due to the fact that, despite the filing of the aforementioned

initiatory petition in CTA Case No. 4099 with the Court of Ta Appeals, the Ta "efund 8ivision

of the #!" still continued to act administratively on the claim for refund previously filed therein,

instead of forwarding the records of the case to the Court of Ta Appeals as ordered. 1;

!t is a long and firmly settled rule of law that the /overnment is not -ound -y the errors

committed -y its agents.19 !n the performance of its governmental functions, the tate cannot -e

estopped -y the neglect of its agent and officers. Although the /overnment may generally -e

estopped through the affirmative acts of pu-lic officers acting within their authority, their neglect

or omission of pu-lic duties as eemplified in this case will not and should not produce thateffect.

No'()( * -'( "o)(-"-($ )ul( o)( -)u( -'"# *# -'( *(l$ o -""-*o#. 20 I- * "*o"-*/ -'"-

-'( Go()#(#- /"##o- "#$ u- #o- ( (-o++($ +")-*/ul")ly *# "--() *#ol*#5 -"(.

T"( ")( -'( l*(loo$ o -'( #"-*o# -')ou5' '*/' -'( 5o()#(#- "5(#/*( /o#-*#u( -o

o+()"-( "#$ *-' '*/' -'( S-"-( ((/- *- u#/-*o# o) -'( (l")( o *-

/o#-*-u(#-. 21T'( ())o) o /()-"*# "$*#*-)"-*( o*/() 'oul$ #(() ( "llo($ -o

?(o+")$*@( -'( Go()#(#- *#"#/*"l +o*-*o#, 22(+(/*"lly *# -'( /"( "- ") '()( -'(

"ou#- *#ol( *ll*o# o +(o -'( /oll(/-*o# '()(o, * ?u-**($, -"#$ -o (

+)(?u$*/($ ?u- (/"u( o u)("u/)"-*/ l(-'")5y.

6urther, it is also worth nothing that the Court of Ta Appeals erred in denying petitioners

supplemental motion for reconsideration alleging -ringing to said courts attention the eistence



of the deficiency income and -usiness ta assessment against Citytrust. The fact of such

deficiency assessment is intimately related to and inetrica-ly intertwined with the right of

respondent -an$ to claim for a ta refund for the same year. To award such refund despite the

eistence of that deficiency assessment is an a-surdity and a polarity in conceptual effects.

7erein private respondent cannot -e entitled to refund and at the same time -e lia-le for a ta

deficiency assessment for the same year.

The grant of a refund is founded on the assumption that the ta return is valid, that is, the facts

stated therein are true and correct. The deficiency assessment, although not yet final, created a

dou-t as to and constitutes a challenge against the truth and accuracy of the facts stated in said

return which, -y itself and without un:uestiona-le evidence, cannot -e the -asis for the grant of

the refund.

ection 1, Chapter !F of the National !nternal "evenue Code of (933, which was the applica-le

law when the claim of Citytrust was filed, provides that G%w&hen an assessment is made in case

of any list, statement, or return, which in the opinion of the Commissioner of !nternal "evenue

was false or fraudulent or contained any understatement or undervaluation, no ta collected

under such assessment shall -e recovered -y any suits unless it is proved that the said list,

statement, or return was not false nor fraudulent and did not contain any understatement or

undervaluation5 -ut this provision shall not apply to statements or returns made or to -e made in

good faith regarding annual depreciation of oil or gas wells and mines.G

Horeover, to grant the refund without determination of the proper assessment and the ta due

would inevita-ly result in multiplicity of proceedings or suits. !f the deficiency assessment

should su-se:uently -e upheld, the /overnment will -e forced to institute anew a proceeding for

the recovery of erroneously refunded taes which recourse must -e filed within the prescriptive

period of ten years after discovery of the falsity, fraud or omission in the false or fraudulent

return involved. 2: This would necessarily re:uire and entail additional efforts and epenses on

the part of the /overnment, impose a -urden on and a drain of government funds, and impede or

delay the collection of muchneeded revenue for governmental operations.



Thus, to avoid multiplicity of suits and unnecessary difficulties or epenses, it is -oth logically

necessary and legally appropriate that the issue of the deficiency ta assessment against Citytrust

-e resolved jointly with its claim for ta refund, to determine once and for all in a single

proceeding the true and correct amount of ta due or refunda-le.

!n fact, as the Court of Ta Appeals itself has heretofore conceded, 24 it would -e only just and

fair that the tapayer and the /overnment ali$e -e given e:ual opportunities to avail of remedies

under the law to defeat each others claim and to determine all matters of dispute -etween them

in one single case. !t is important to note that in determining whether or not petitioner is entitled

to the refund of the amount paid, it would necessary to determine how much the /overnment is

entitled to collect as taes. This would necessarily include the determination of the correct

lia-ility of the tapayer and, certainly, a determination of this case would constitute res judicataon -oth parties as to all the matters su-ject thereof or necessarily involved therein.

The Court cannot end this adjudication without o-serving that what caused the /overnment to

lose its case in the ta court may hopefully -e ascri-ed merely to the ennui or ineptitude of

officialdom, and not to syndicated intent or corruption. The evidential cul-de-sac in which the

olicitor /eneral found himself once again gives su-stance to the pu-lic perception and

suspicion that it is another prover-ial tip in the ice-erg of venality in a government -ureau which

is pejoratively rated over the years. >hat is so distressing, aside from the financial losses to the

/overnment, is the erosion of trust in a vital institution wherein the reputations of so many

honest and dedicated wor$ers are -esmirched -y the acts or omissions of a few. 7ence, the

li-eral view we have here ta$en pro hac vice, which may give some degree of assurance that this

Court will unhesitatingly react to any -ane in the government service, with a replication of such

response -eing li$ewise epected -y the people from the eecutive authorities.

>7;";6";, the judgment of respondent Court of Appeals in CA/.". ' No. 1+)9 is

here-y ;T A!8; and the case at -ar is ";HAN8;8 to the Court of Ta Appeals for further

proceedings and appropriate action, more particularly, the reception of evidence for petitioner

and the corresponding disposition of CTA Case No. 4099 not otherwise inconsistent with our

adjudgment herein.



"8;";8.

Narvasa, C.J., Padilla, Puno and endoza, JJ., concur.

G.R. No. 112024 J"#u")y 2;, 1999

PBILIPPINE AN! OF COMMUNICATIONS, petitioner, vs. COMMISSIONER OF

INTERNAL REVENUE, COURT OF TA% APPEALS "#$ COURT OF

APPEALS,respondent.

UISUMING, J.:

This petition for review assails the "esolution 1 of the Court of Appeals dated eptem-er 11,

(99) affir!ing the 8ecision 2 and a "esolution : of the Court f Ta Appeals which denied the

claims of the petitioner for ta refund and ta credits, and disposing as follows=

!N I!;> 6 A??, T7; 6";/!N/, the instant petition for review, is

8;N!;8 due course. The 8ecision of the Court of Ta Appeals dated Hay 10,

(99) and its resolution dated uly 10, (99), are here-y A66!"H;8 in toto.

"8;";8. 4

The Court of Ta Appeals earlier ruled as follows=

>7;";6";, 'etitioners claim for refund2ta credits of overpaid income ta

for (9* in the amount of '*,199,349.9* is here-y denied for having -een filed

-eyond the reglementary period. The (9+ claim for refund amounting to

'1)4,033.+9 is li$ewise denied since petitioner has opted and in all li$elihood

automatically credited the same to the succeeding year. The petition for review is

dismissed for lac$ of merit.

"8;";8. <



The facts on record show the antecedent circumstances pertinent to this case.

'etitioner, 'hilippine #an$ of Communications %'#Com&, a commercial -an$ing corporation

duly organiJed under 'hilippine laws, filed its :uarterly income ta returns for the first and

second :uarters of (9*, reported profits, and paid the total income ta of '*,0(+,9*4.00. The

taes due were settled -y applying '#Coms ta credit memos and accordingly, the #ureau of

!nternal "evenue %#!"& issued Ta 8e-it Hemo Nos. 034+* and 0343* for '),40(,30(.00

and '(,+(*,1*).00, respectively.

u-se:uently, however, '#Com suffered losses so that when it filed its Annual !ncome Ta

"eturns for the yearended 8ecem-er )(, (9+, the petitioner li$ewise reported a net loss of

'(4,(19,+01.00, and thus declared no ta paya-le for the year.

#ut during these two years, '#Com earned rental income from leased properties. The lessees

withheld and remitted to the #!" withholding credita-le taes of '11,39*.*0 in (9* and

'1)4,033.+9 in (9+.

n August 3, (93, petitioner re:uested the Commissioner of !nternal "evenue, among others,

for a ta credit of '*,0(+,9*4.00 representing the overpayment of taes in the first and second

:uarters of (9*.

Thereafter, on uly 1*, (9, petitioner filed a claim for refund of credita-le taes withheld -y

their lessees from property rentals in (9* for '11,39*.*0 and in (9+ for '1)4,033.+9.

'ending the investigation of the respondent Commissioner of !nternal "evenue, petitioner

instituted a 'etition for "eview on Novem-er (, (9 -efore the Court of Ta Appeals %CTA&.

The petition was doc$eted as CTA Case No. 4)09 entitled= G'hilippine #an$ of Communications

vs. Commissioner of !nternal "evenue.G

The losses petitioner incurred as per the summary of petitioners claims for refund and ta credit

for (9* and (9+, filed -efore the Court of Ta Appeals, are as follows=

(9* (9+



BBB BBB

Net !ncome %?oss& %'1*,)(3,1.00& %'(4,(19,+01.00&

Ta 8ue N!? N!?

@uarterly ta.

'ayments Hade *,0(+,9*4.00 B

Ta >ithheld at ource 11,39*.*0 1)4,033.+9

BBBBBBBB BBBBBBB

;cess Ta 'ayments '*,199,349.*0D '1)4,033.+9

KKKKKKKKKKKKKKK KKKKKKKKKKKKK

D CTAs decision reflects '#Coms (9* ta claim as

'*,199,349.9*. A forty five centavo difference was noted.

n Hay 10, (99), the CTA rendered a decision which, as stated on the outset, denied the re:uest

of petitioner for a ta refund or credit in the sum amount of '*,199,349.9*, on the ground that it

was filed -eyond the twoyear reglementary period provided for -y law. The petitioners claim

for refund in (9+ amounting to '1)4,033.+9 was li$ewise denied on the assumption that it was

automatically credited -y '#Com against its ta payment in the succeeding year.

n une 11, (99), petitioner filed a Hotion for "econsideration of the CTAs decision -ut the

same was denied due course for lac$ of merit. 6

Thereafter, '#Com filed a petition for review of said decision and resolution of the CTA with the

Court of Appeals. 7owever on eptem-er 11, (99), the Court of Appeals affirmed in toto the

CTAs resolution dated uly 10, (99). 7ence this petition now -efore us.

The issues raised -y the petitioner are=



!. >hether tapayer '#Com B which relied in good faith on the

formal assurances of #!" in "HC No. 3* and did not

immediately file with the CTA a petition for review as$ing for the

refund2ta credit of its (9*+ ecess :uarterly income ta

payments B can -e prejudiced -y the su-se:uent #!" rejection,

applied retroactivity, of its assurances in "HC No. 3* that the

prescriptive period for the refund2ta credit of ecess :uarterly

income ta payments is not two years -ut ten %(0&. =

!!. >hether the Court of Appeals seriously erred in affirming the

CTA decision which denied '#Coms claim for the refund of

'1)4,033.+9 income ta overpaid in (9+ on the mere speculation,without proof, that there were taes due in (93 and that '#Com

availed of tacrediting that year. ;

imply stated, the main :uestion is '(-'() o) #o- -'( Cou)- o A++("l ())($ *# $(#y*#5

-'( +l(" o) -" )(u#$ o) -" /)($*- o# -'( 5)ou#$ o +)(/)*+-*o#, $(+*-( +(-*-*o#()

)(l*"#/( o# RMC No. =7;<, /'"#5*#5 -'( +)(/)*+-*( +()*o$ o -o y(") -o -(# y(")

'etitioner argues that its claims for refund and ta credits are not yet -arred -y prescriptionrelying on the applica-ility of "evenue Hemorandum Circular No. 3* issued on April (, (9*.

The circular states that overpaid income taes are not covered -y the twoyear prescriptive

period under the ta Code and that tapayers may claim refund or ta credits for the ecess

:uarterly income ta with the #!" within ten %(0& years under Article ((44 of the Civil Code.

The pertinent portions of the circular reads=

";I;ND; H;H"AN8DH C!"CD?A" N. 3*

D#;CT= '"C;!N/ 6 ";6DN8 " TAF

C";8!T 6 ;FC; C"'"AT; !NCH;

TAF ";D?T!N/ 6"H T7; 6!?!N/ 6 T7;

6!NA? A8DTH;NT ";TD"N.



T= All !nternal "evenue fficers and thers Concerned.

ec. * And + f the National !nternal "evenue Code provide=

The foregoing provisions are implemented -y ection 3 of "evenue "egulations

Nos. (033 which provide5

!t has -een o-served, however, that -ecause of the ecess ta payments,

corporations file claims for recovery of overpaid income ta with the Court of Ta

Appeals within the twoyear period from the date of payment, in accordance with

sections 191 and 19* of the National !nternal "evenue Code. !t is o-vious that the

filing of the case in court is to preserve the judicial right of the corporation to

claim the refund or ta credit.

!t should he noted, however, that this is not a case of erroneously or illegally paid

ta under the provisions of ections 191 and 19* of the Ta Code.

!n the a-ove provision of the "egulations the corporation may re:uest for the

refund of the overpaid income ta or claim for automatic ta credit. To insure

prompt action on corporate annual income ta returns showing refunda-le

amounts arising from overpaid :uarterly income taes, this ffice has

promulgated "evenue Hemorandum rder No. )13+ dated une ((, (93+,

containing the procedure in processing said returns. Dnder these procedures, the

returns are merely preaudited which consist mainly of chec$ing mathematical

accuracy of the figures of the return. After which, the refund or ta credit is

granted, and, this procedure was adopted to facilitate immediate action on cases

li$e this.

!n this regard, therefore, there is no need to file petitions for review in the Court

of Ta Appeals in order to preserve the right to claim refund or ta credit the two



year period. As already stated, actions hereon -y the #ureau are immediate after

only a cursory preaudit of the income ta returns. Horeover, a tapayer may

recover from the #ureau of !nternal "evenue ecess income ta paid under the

provisions of ection + of the Ta Code within (0 years from the date of

payment considering that it is an o-ligation created -y law %Article ((44 of the

Civil Code&. 9 %;mphasis supplied.&

'etitioner argues that the government is -arred from asserting a position contrary to its declared

circular if it would result to injustice to tapayers. Citing A"S C"N "roadcasting Corporation

vs. Court of Ta# Appeals 10 petitioner claims that rulings or circulars promulgated -y the

Commissioner of !nternal "evenue have no retroactive effect if it would -e prejudicial to

tapayers, !n A#C#N case, the Court held that the government is precluded from adopting a position inconsistent with one previously ta$en where injustice would result therefrom or where

there has -een a misrepresentation to the tapayer.

'etitioner contends that ec. 14+ of the National !nternal "evenue Code eplicitly provides for

this rules as follows=

ec. 14+ Non-retroactivit$ of rulings% Any revocation, modification or reversal

of any of the rules and regulations promulgated in accordance with the precedingsection or any of the rulings or circulars promulgated -y the Commissioner shall

not -e given retroactive application if the revocation, modification or reversal will

-e prejudicial to the tapayers ecept in the following cases=

a&. where the tapayer deli-erately misstates or

omits material facts from his return or in any

document re:uired of him -y the #ureau of !nternal

"evenue5

-&. where the facts su-se:uently gathered -y the

#ureau of !nternal "evenue are materially different

from the facts on which the ruling is -ased5



c&. where the tapayer acted in -ad faith.

"espondent Commissioner of !nternal "evenue, through olicitor /eneral, argues that the two

year prescriptive period for filing ta cases in court concerning income ta payments of

Corporations is rec$oned from the date of filing the 6inal Adjusted !ncome Ta "eturn, which is

generally done on April (* following the close of the calendar year. As precedents, respondent

Commissioner cited cases which adhered to this principle, to wit ACCA 'nvest!ents Corp. vs.

Court of Appeals, et al., 11 and Co!!issioner of 'nternal evenue vs. T( Sales, 'nc., et

al .. 12"espondent Commissioner also states that since the 6inal Adjusted !ncome Ta "eturn of

the petitioner for the taa-le year (9* was supposed to -e filed on April (*, (9+, the latter had

only until April (*, (9 to see$ relief from the court. 6urther, respondent Commissioner stresses

that when the petitioner filed the case -efore the CTA on Novem-er (, (9, the same was filed -eyond the time fied -y law, and such failure is fatal to petitioners cause of action.

After a careful study of the records and applica-le jurisprudence on the matter, we find that,

contrary to the petitioners contention, -'( )(l""-*o# o )((#u( )(5ul"-*o# y RMC =7;< *

#o- "))"#-($ " *- $*)(5")$ -'( -o7y(") +)(/)*+-*( +()*o$ (- y l".

#asic is the principle that Gtaes are the life-lood of the nation.G The primary purpose is to

generate funds for the tate to finance the needs of the citiJenry and to advance the commonweal. 1: 8ue process of law under the Constitution does not re:uire judicial proceedings in ta

cases. This must necessarily -e so -ecause it is upon taation that the government chiefly relies

to o-tain the means to carry on its operations and it is of utmost importance that the modes

adopted to enforce the collection of taes levied should -e summary and interfered with as little

as possi-le. 14

6rom the same perspective, claims for refund or ta credit should -e eercised within the time

fied -y law -ecause the #!" -eing an administrative -ody enforced to collect taes, its

functions should not -e unduly delayed or hampered -y incidental matters.

ec. 1)0 of the National !nternal "evenue Code %N!"C& of (933 %now ec. 119, N!"C of (993&

provides for the prescriptive period for filing a court proceeding for the recovery of ta

erroneously or illegally collected, viz .=



ec. 1)0. ecover$ of ta# erroneousl$ or illegall$ collected . B No suit or

proceeding shall -e maintained in any court for the recovery of any national

internal revenue ta hereafter alleged to have -een erroneously or illegally

assessed or collected, or of any penalty claimed to have -een collected without

authority, or of any sum alleged to have -een ecessive or in any manner

wrongfully collected, until a claim for refund or credit has -een duly filed with

the Commissioner5 -ut such suit or proceeding may -e maintained, whether or not

such ta, penalty, or sum has -een paid under protest or duress.

!n any case, no such suit or proceedings shall )egun after the e#piration of t*o

$ears fro! the date of pa$!ent of the ta# or penalt$ regardless of an$

supervening cause that !a$ arise after pa$!ent 5 Provided ho*ever , That theCommissioner may, even without a written claim therefor, refund or credit any

ta, where on the face of the return upon which payment was made, such payment

appears clearly to have -een erroneously paid. %;mphasis supplied&

T'( )ul( -"-( -'"- -'( -"+"y() "y *l( " /l"* o) )(u#$ o) /)($*- *-' -'(

Co**o#() o I#-()#"l R((#u(, *-'*# -o 32 y(") "-() +"y(#- o -", (o)( "#y

u*- *# CTA * /o(#/($. T'( -o7y(") +)(/)*+-*( +()*o$ +)o*$($, 'oul$ ( /o+u-($

)o -'( -*( o *l*#5 -'( A$?u-(#- R(-u)# "#$ *#"l +"y(#- o -'( -" o) -'( y(").

!n Co!!issioner of 'nternal evenue vs. Philippine A!erican +ife 'nsurance Co., 1< this Court

eplained the application of ec. 1)0 of (933 N!"C, as follows=

Clearly, -'( +)(/)*+-*( +()*o$ o -o y(") 'oul$ /o(#/( -o )u# o#ly

)o -'( -*( -'"- -'( )(u#$ * "/()-"*#($, '*/' /"# o#ly ( $(-()*#($

"-() " *#"l "$?u-(#- )(-u)# * "//o+l*'($. !n the present case, this date is

April (+, (94, and two years from this date would -e April (+, (9+. . . . As we

have earlier said in the THF ales case, ections +. 16 +9, 1= and 30 1; on

@uarterly Corporate !ncome Ta 'ayment and ection )1( should -e considered

in conjunction with it 19



>hen the Acting Commissioner of !nternal "evenue issued "HC 3*, changing the

prescriptive period of two years to ten years on claims of ecess :uarterly income ta payments,

such circular created a clear inconsistency with the provision of ec. 1)0 of (933 N!"C. !n so

doing, the #!" did not simply interpret the law5 rather it legislated guidelines contrary to the

statute passed -y Congress.

!t -ears repeating that "evenue memorandumcirculars are considered administrative rulings %in

the sense of more specific and less general interpretations of ta laws& which are issued from

time to time -y the Commissioner of !nternal "evenue. !t is widely accepted that the

interpretation placed upon a statute -y the eecutive officers, whose duty is to enforce it, is

entitled to great respect -y the courts. Nevertheless, such interpretation is not conclusive and will

-e ignored if judicially found to -e erroneous.

20

Thus, courts will not countenance administrativeissuances that override, instead of remaining consistent and in harmony with the law they see$ to

apply and implement. 21

!n the case of People vs. +i!, 22 it was held that rules and regulations issued -y administrative

officials to implement a law cannot go -eyond the terms and provisions of the latter.

Appellant contends that ection 1 of 6A No. )3( is void -ecause it is not only

inconsistent with -ut is contrary to the provisions and spirit of Act. No 400) asamended, -ecause whereas the prohi-ition prescri-ed in said 6isheries Act was for

any single period of time not eceeding five years duration, 6A No )3( fied

no period, that is to say, it esta-lishes an a-solute -an for all time. This

discrepancy -etween Act No. 400) and 6A No. )3( was pro-a-ly due to an

oversight on the part of ecretary of Agriculture and Natural "esources. f

course, in case of discrepancy, the -asic Act prevails, for the reason that the

regulation or rule issued to implement a law cannot go -eyond the terms and

provisions of the

latter. . . . !n this connection, the attention of the technical men in the offices of

8epartment 7eads who draft rules and regulation is called to the importance and

necessity of closely following the terms and provisions of the law which they



intended to implement, this to avoid any possi-le misunderstanding or confusion

as in the present case. 2:

6urther, fundamental is the rule that the tate cannot -e put in estoppel -y the mista$es or errors

of its officials or agents. 24 As pointed out -y the respondent courts, the nullification of "HC No.

3* issued -y the Acting Commissioner of !nternal "evenue is an administrative interpretation

which is not in harmony with ec. 1)0 of (933 N!"C. for -eing contrary to the epress provision

of a statute. 7ence, his interpretation could not -e given weight for to do so would, in effect,

amend the statute.

!t is li$ewise argued that the Commissioner of !nternal "evenue, after

promulgating "HC No. 3*, is estopped -y the principle of nonretroactively of

#!" rulings. Again >e do not agree. The Hemorandum Circular, stating that a

tapayer may recover the ecess income ta paid within (0 years from date of

payment -ecause this is an o-ligation created -y law, was issued -y the Acting

Commissioner of !nternal "evenue. n the other hand, the decision, stating that

the tapayer should still file a claim for a refund or ta credit and corresponding

petition fro review within the

twoyear prescription period, and that the lengthening of the period of limitation

on refund from two to ten years would -e adverse to pu-lic policy and run counter

to the positive mandate of ec. 1)0, N!"C, was the ruling and judicial

interpretation of the Court of Ta Appeals. ;stoppel has no application in the case

at -ar -ecause it was not the Commissioner of !nternal "evenue who denied

petitioners claim of refund or ta credit. "ather, it was the Court of Ta Appeals

who denied %al-eit correctly& the claim and in effect, ruled that the "HC No. 3*

issued -y the Commissioner of !nternal "evenue is an administrative

interpretation which is out of harmony with or contrary to the epress provision of

a statute %specifically ec. 1)0, N!"C&, hence, cannot -e given weight for to do so

would in effect amend the statute. 2<

Art. of the Civil Code 26 recogniJes judicial decisions, applying or interpreting statutes as part

of the legal system of the country. #ut administrative decisions do not enjoy that level of



recognition. A memorandumcircular of a -ureau head could not operate to vest a tapayer with

shield against judicial action. 6or there are no vested rights to spea$ of respecting a wrong

construction of the law -y the administrative officials and such wrong interpretation could not

place the /overnment in estoppel to correct or overrule the same. 2= Horeover, the non

retroactivity of rulings -y the Commissioner of !nternal "evenue is not applica-le in this case

-ecause the nullity of "HC No. 3* was declared -y respondent courts and not -y the

Commissioner of !nternal "evenue. ?astly, it must -e noted that, as repeatedly held -y this

Court, a claim for refund is in the nature of a claim for eemption and should -e construed

in strictissi!i uris against the tapayer. 2;

O# -'( (/o#$ *u(, -'( +(-*-*o#() "ll(5( -'"- -'( Cou)- o A++("l ()*ouly ())($ *#

"*)*#5 CTA $(/**o# $(#y*#5 *- /l"* o) )(u#$ o P2:4,0==.69 3-" o()+"*$ *#19;6, "($ o# ()( +(/ul"-*o#, *-'ou- +)oo, -'"- PCo ""*l($ o -'( "u-o"-*/ -"

/)($*- *# 19;=.

ec. +9 of the (933 N!"C 29 %now ec. 3+ of the (993 N!"C& provides that any ecess of the

total :uarterly payments over the actual income ta computed in the adjustment or final

corporate income ta return, shall either %a& -e refunded to the corporation, or %-& may -e

credited against the estimated :uarterly income ta lia-ilities for the :uarters of the succeeding

taa-le year.

The corporation must signify in its annual corporate adjustment return %-y mar$ing the option

-o provided in the #!" form& its intention, whether to re:uest for a refund or claim for an

automatic ta credit for the succeeding taa-le year. To ease the administration of ta collection,

these remedies are in the alternative, and the choice of one precludes the other.

As stated -y respondent Court of Appeals=

6inally, as to the claimed refund of income ta overpaid in (9+ B the Court of

Ta Appeals, after eamining the adjusted final corporate annual income ta

return for taa-le year (9+, found out that petitioner opted to apply for automatic

ta credit. This was the -asis used %vis-avis the fact that the (93 annual corporate

ta return was not offered -y the petitioner as evidence& -y the CTA in concluding



that petitioner had indeed availed of and applied the automatic ta credit to the

succeeding year, hence it can no longer as$ for refund, as to L sicM the two

remedies of refund and ta credit are alternative. :0

That the petitioner opted for an automatic ta credit in accordance with ec. +9 of the (933

N!"C, as specified in its (9+ 6inal Adjusted !ncome Ta "eturn, is a finding of fact which we

must respect. Horeover, the (93 annual corporate ta return of the petitioner was not offered as

evidence to contovert said fact. Thus, we are -ound -y the findings of fact -y respondent courts,

there -eing no showing of gross error or a-use on their part to distur- our reliance thereon. :1

>7;";6";, the, petition is here-y 8;N!;8, The decision of the Court of Appeals appealed

from is A66!"H;8, with CT against the petitioner.*phi.n/t

"8;";8.

"ellosillo, Puno, endoza, and "uena, JJ., concur.

G.R. No. L72:64< O/-o() 29, 196;

ENJAMIN P. GOMEH, petitionerappellee, vs. ENRICO PALOMAR, *# '* /"+"/*-y "

Po-"-() G(#()"l, BON. RIGI&O R. VALENCIA, *# '* /"+"/*-y " S(/)(-")y o Pul*/o)> "#$ Cou#*/"-*o#, "#$ &OMINGO GOPEH, *# '* /"+"/*-y " A/-*#5

Po-"-() o S"# F()#"#$o, P"+"#5", respondentappellants.

+orenzo P. Navarro and Narvaro "elar S. Navarro for petitioner-appellee.

0ffice of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General 1rine C. 2a)allero

and Solicitor 3o!inador +. 4uiroz for respondents-appellants.

CASTRO, J.:

This appeal puts in issue the constitutionality of "epu-lic Act (+)*,( as amended -y "epu-lic

Act 1+)(,1 which provides as follows=



To help raise funds for the 'hilippine Tu-erculosis ociety, the 8irector of 'osts shall

order for the period from August nineteen to eptem-er thirty every year the printing and

issue of semipostal stamps of different denominations with face value showing the

regular postage charge plus the additional amount of five centavos for the said purpose,

and during the said period, no mail matter shall -e accepted in the mails unless it -ears

such semipostal stamps= Provided , That no such additional charge of five centavos shall

-e imposed on newspapers. The additional proceeds realiJed from the sale of the semi

postal stamps shall constitute a special fund and -e deposited with the National Treasury

to -e epended -y the 'hilippine Tu-erculosis ociety in carrying out its no-le wor$ to

prevent and eradicate tu-erculosis.

The respondent 'ostmaster /eneral, in implementation of the law, thereafter issued four %4&administrative orders num-ered ) %une 10, (9*&, 3 %August 9, (9*&, 9 %August 1, (9*&, and

(0 %uly (*, (9+0&. All these administrative orders were issued with the approval of the

respondent ecretary of 'u-lic >or$s and Communications.

The pertinent portions of Adm. rder ) read as follows=

uch semipostal stamps could not -e made availa-le during the period from August (9

to eptem-er )0, (9*3, for lac$ of time. 7owever, two denominations of such stamps,one at G* *G centavos and another at G(0 *G centavos, will soon -e released for use -y

the pu-lic on their mails to -e posted during the same period starting with the year (9*.

8uring the period from August (9 to eptem-er )0 each year starting in (9*, no mail

matter of whatever class, and whether domestic or foreign, posted at any 'hilippine 'ost

ffice and addressed for delivery in this country or a-road, shall -e accepted for mailing

unless it -ears at least one such semipostal stamp showing the additional value of five

centavos intended for the 'hilippine Tu-erculosis ociety.

!n the case of secondclass mails and mails prepaid -y means of mail permits or

impressions of postage meters, each piece of such mail shall -ear at least one such semi



postal stamp if posted during the period a-ove stated starting with the year (9*, in

addition to -eing charged the usual postage prescri-ed -y eisting regulations. !n the case

of -usiness reply envelopes and cards mailed during said period, such stamp should -e

collected from the addressees at the time of delivery. Hails entitled to fran$ing privilege

li$e those from the office of the 'resident, mem-ers of Congress, and other offices to

which such privilege has -een granted, shall each also -ear one such semipostal stamp if

posted during the said period.

Hails posted during the said period starting in (9*, which are found in street or post

office mail -oes without the re:uired semipostal stamp, shall -e returned to the sender,

if $nown, with a notation calling for the affiing of such stamp. !f the sender is un$nown,

the mail matter shall -e treated as nonmaila-le and forwarded to the 8ead ?etter fficefor proper disposition.

Adm. rder 3, amending the fifth paragraph of Adm. rder ), reads as follows=

!n the case of the following categories of mail matter and mails entitled to fran$ing

privilege which are not eempted from the payment of the five centavos intended for the

'hilippine Tu-erculosis ociety, such etra charge may -e collected in cash, for which

official receipt %/eneral 6orm No. (), A& shall -e issued, instead of affiing the semi postal stamp in the manner hereinafter indicated=

(. Second-class !ail . B Aside from the postage at the secondclass rate, the etra charge

of five centavos for the 'hilippine Tu-erculosis ociety shall -e collected on each

separatelyaddressed piece of secondclass mail matter, and the total sum thus collected

shall -e entered in the same official receipt to -e issued for the postage at the second

class rate. !n ma$ing such entry, the total num-er of pieces of secondclass mail posted

shall -e stated, thus= GTotal charge for T# 6und on (00 pieces . .. '*.00.G The etra

charge shall -e entered separate from the postage in -oth of the official receipt and the

"ecord of Collections.

1. 1irst-class and third-class !ail per!its. B Hails to -e posted without postage affied

under permits issued -y this #ureau shall each -e charged the usual postage, in addition



to the fivecentavo etra charge intended for said society. The total etra charge thus

received shall -e entered in the same official receipt to -e issued for the postage

collected, as in su-paragraph (.

). etered !ail . B 6or each piece of mail matter impressed -y postage meter under

metered mail permit issued -y this #ureau, the etra charge of five centavos for said

society shall -e collected in cash and an official receipt issued for the total sum thus

received, in the manner indicated in su-paragraph (.

4. "usiness repl$ cards and envelopes. B Dpon delivery of -usiness reply cards and

envelopes to holders of -usiness reply permits, the fivecentavo charge intended for said

society shall -e collected in cash on each reply card or envelope delivered, in addition to

the re:uired postage which may also -e paid in cash. An official receipt shall -e issued

for the total postage and total etra charge received, in the manner shown in su-paragraph

(.

*. ails entitled to fran5ing privilege. B /overnment agencies, officials, and other

persons entitled to the fran$ing privilege under eisting laws may pay in cash such etra

charge intended for said society, instead of affiing the semipostal stamps to their mails,

provided that such mails are presented at the postoffice window, where the fivecentavoetra charge for said society shall -e collected on each piece of such mail matter. !n such

case, an official receipt shall -e issued for the total sum thus collected, in the manner

stated in su-paragraph (.

Hail under permits, metered mails and fran$ed mails not presented at the postoffice

window shall -e affied with the necessary semipostal stamps. !f found in mail -oes

without such stamps, they shall -e treated in the same way as herein provided for other

mails.

Adm. rder 9, amending Adm. rder ), as amended, eempts G/overnment and its Agencies and

!nstrumentalities 'erforming /overnmental 6unctions.G Adm. rder (0, amending Adm. rder

), as amended, eempts Gcopies of periodical pu-lications received for mailing under any class

of mail matter, including newspapers and magaJines admitted as secondclass mail.G



The FACTS . n eptem-er l*, (9+) the petitioner #enjamin '. /omeJ mailed a letter at the post

office in an 6ernando, 'ampanga. #ecause this letter, addressed to a certain Agustin A:uino of

(0(4 8agohoy treet, ingalong, Hanila did not -ear the special antiT# stamp re:uired -y the

statute, it was returned to the petitioner.

!n view of this development, the petitioner -rough suit for declaratory relief in the Court of 6irst

!nstance of 'ampanga, to test the constitutionality of the statute, as well as the implementing

administrative orders issued, contending that it violates the e:ual protection clause of the

Constitution as well as the rule of uniformity and e:uality of taation. The lower court declared

the statute and the orders unconstitutional5 hence this appeal -y the respondent postal authorities.

6or the reasons set out in this opinion, the judgment appealed from must -e reversed.

I.

#efore reaching the merits, we deem it necessary to dispose of the respondents contention that

declaratory relief is unavailing -ecause this suit was filed after the petitioner had committed a

-reach of the statute. >hile conceding that the mailing -y the petitioner of a letter without the

additional antiT# stamp was a violation of "epu-lic Act (+)*, as amended, the trial court

nevertheless refused to dismiss the action on the ground that under section + of "ule +4 of the

"ules of Court, G!f -efore the final termination of the case a -reach or violation of ... a statute ...

should ta$e place, the action may thereupon -e converted into an ordinary action.G

The prime specification of an action for declaratory relief is that it must -e -rought G-efore

-reach or violationG of the statute has -een committed. "ule +4, section ( so provides. ection +

of the same rule, which allows the court to treat an action for declaratory relief as an ordinary

action, applies only if the -reach or violation occurs after the filing of the action -ut -efore the

termination thereof.)

7ence, if, as the trial court itself admitted, there had -een a -reach of the statute -efore the firing

of this action, then indeed the remedy of declaratory relief cannot -e availed of, much less can

the suit -e converted into an ordinary action.



Nor is there merit in the petitioners argument that the mailing of the letter in :uestion did not

constitute a -reach of the statute -ecause the statute appears to -e addressed only to postal

authorities. The statute, it is true, in terms provides that Gno mail matter shall -e accepted in the

mails unless it -ears such semipostal stamps.G !t does not follow, however, that only postal

authorities can -e guilty of violating it -y accepting mails without the payment of the antiT#

stamp. !t is o-vious that they can -e guilty of violating the statute only if there are people who

use the mails without paying for the additional antiT# stamp. ust as in -ri-ery the mere offer

constitutes a -reach of the law, so in the matter of the antiT# stamp the mere attempt to use the

mails without the stamp constitutes a violation of the statute. !t is not re:uired that the mail -e

accepted -y postal authorities. That re:uirement is relevant only for the purpose of fiing the

lia-ility of postal officials.

Nevertheless, we are of the view that the petitioners choice of remedy is correct -ecause this suit

was filed not only with respect to the letter which he mailed on eptem-er (*, (9+), -ut also

with regard to any other mail that he might send in the future. Thus, in his complaint, the

petitioner prayed that due course -e given to Gother mails without the semipostal stamps which

he may deliver for mailing ... if any, during the period covered -y "epu-lic Act (+)*, as

amended, as well as other mails hereafter to -e sent -y or to other mailers which -ear the

re:uired postage, without collection of additional charge of five centavos prescri-ed -y the same

"epu-lic Act.G As one whose mail was returned, the petitioner is certainly interested in a ruling

on the validity of the statute re:uiring the use of additional stamps.

II.

>e now consider the constitutional o-jections raised against the statute and the implementing

orders.

(. !t is said that the statute is violative of the e:ual protection clause of the Constitution. Hore

specifically the claim is made that it constitutes mail users into a class for the purpose of the ta

while leaving untaed the rest of the population and that even among postal patrons the statute

discriminatorily grants eemption to newspapers while Administrative rder 9 of the respondent

'ostmaster /eneral grants a similar eemption to offices performing governmental functions. .



The five centavo charge levied -y "epu-lic Act (+)*, as amended, is in the nature of an ecise

ta, laid upon the eercise of a privilege, namely, the privilege of using the mails. As such the

o-jections levelled against it must -e viewed in the light of applica-le principles of taation.

To -egin with, it is settled that the legislature has the inherent power to select the su-jects of

taation and to grant eemptions.4 This power has aptly -een descri-ed as Gof wide range and

flei-ility.G* !ndeed, it is said that in the field of taation, more than in other areas, the legislature

possesses the greatest freedom in classification.+ The reason for this is that traditionally,

classification has -een a device for fitting ta programs to local needs and usages in order to

achieve an e:uita-le distri-ution of the ta -urden.3

That legislative classifications must -e reasona-le is of course undenied. #ut what the petitioner

asserts is that statutory classification of mail users must -ear some reasona-le relationship to the

end sought to -e attained, and that a-sent such relationship the selection of mail users is

constitutionally impermissi-le. This is altogether a different proposition. As eplained

in Co!!on*ealth v. +ife Assurance Co.=

>hile the principle that there must -e a reasona-le relationship -etween classification

made -y the legislation and its purpose is undou-tedly true in some contets, it has no

application to a measure whose sole purpose is to raise revenue ... o long as theclassification imposed is -ased upon some standard capa-le of reasona-le

comprehension, -e that standard -ased upon a-ility to produce revenue or some other

legitimate distinction, e:ual protection of the law has -een afforded. ee Allied tores of

hio, !nc. v. #owers, supra, )* D.. at *13, 39 . Ct. at 44(5 #rown 6orman Co. v.

Commonwealth of Oentuc$y, 1d D.. *+, *3), 0 . Ct. *3, *0 %(9(0&.

( ")( #o- o#- -o *#"l*$"-( l(5*l"-*o# o# (8u"l +)o-(/-*o# 5)ou#$ (/(+- y -'( /l(")(-

$(o#-)"-*o# -'"- *- "#/-*o# *#*$*ou $*/)**#"-*o#, '*/' * "ll -'"- -'( Co#-*-u-*o#

o)*$. T'( )(($y o) u#*( l(5*l"-*o# u- ( ou5'- *# -'( l(5*l"-u)(. No, -'(

/l"**/"-*o# o "*l u() * #o- *-'ou- "#y )("o#. I- * "($ o# "*l*-y -o +"y, l(- "lo#(

-'( (#?oy(#- o " +)**l(5(, "#$ o# "$*#*-)"-*( /o#*#*(#/(. I# -'( "llo/"-*o# o -'( -"



u)$(#, Co#5)( u- '"( /o#/lu$($ -'"- -'( /o#-)*u-*o# -o -'( "#-*7T u#$ /"# (

"u)($ y -'o( 'o( 'o /"# "o)$ -'( u( o -'( "*l.

T'( /l"**/"-*o# * l*>(*( "($ o# /o#*$()"-*o# o "$*#*-)"-*( /o#(#*(#/(. Fo) *-

* #o " (--l($ +)*#/*+l( o l" -'"- /o#*$()"-*o# o +)"/-*/"l "$*#*-)"-*( /o#(#*(#/(

"#$ /o- *# -'( "$*#*-)"-*o# o -" l" "o)$ "$(8u"-( 5)ou#$ o) *+o*#5 " -" o# "

(ll )(/o5#*@($ "#$ $(*#($ /l".9 I# -'( /"( o -'( "#-*7T -"+, u#$ou-($ly, -'(

*#5l( o- *+o)-"#- "#$ *#lu(#-*"l /o#*$()"-*o# -'"- l($ -'( l(5*l"-u)( -o (l(/- "*l

u() " u?(/- o -'( -" * -'( )(l"-*( ("( "#$ /o#(#*(#/(o /oll(/-*#5 -'( -" -')ou5'

-'( +o- o*/(. T'( "ll "ou#- o *( /(#-"o $o( #o- ?u-*y -'( 5)("- (+(#( "#$

*#/o#(#*(#/( o /oll(/-*#5 -')ou5' -'( )(5ul") ("# o /oll(/-*o#. O# -'( o-'() '"#$, y

+l"/*#5 -'( $u-y o /oll(/-*o# o# +o-"l "u-'o)*-*( -'( -" " "$( "lo- (l7(#o)/*#5,*-' " l*--l( /o- "#$ " l*--l( *#/o#(#*(#/( " +o*l(.

And then of course it is not accurate to say that the statute constituted mail users into a class.

Hail users were already a class -y themselves even -efore the enactment of the statue and all

that the legislature did was merely to select their class. ?egislation is essentially empiric and

"epu-lic Act (+)*, as amended, no more than reflects a distinction that eists in fact. As Hr.

ustice 6ran$furter said, Gto recogniJe differences that eist in fact is living law5 to disregard

LthemM and concentrate on some a-stract identities is lifeless logic.G(0

G)"#-($ -'( +o() -o (l(/- -'( u?(/- o -""-*o#, -'( S-"-( +o() -o 5)"#- ((+-*o#

u- l*>(*( ( /o#/($($ " " #(/(")y /o)oll")y. T" ((+-*o# ")( -oo /oo# *# -'(

l" -'(y '"( #(() ((# -'ou5'- o " )"**#5 *u( u#$() -'( (8u"l +)o-(/-*o# /l"u(.

!t is thus erroneous for the trial court to hold that -ecause certain mail users are eempted from

the levy the law and administrative officials have sanctioned an invidious discrimination

offensive to the Constitution. The application of the lower courts theory would re:uire all mail

users to -e taed, a conclusion that is hardly tena-le in the light of differences in status of mail

users. The Constitution does not re:uire this $ind of e:uality.

As the Dnited tates upreme Court has said, the legislature may withhold the -urden of the ta

in order to foster what it conceives to -e a -eneficent enterprise. (( This is the case of newspapers



which, under the amendment introduced -y "epu-lic Act 1+)(, are eempt from the payment of

the additional stamp.

A o) -'( Go()#(#- "#$ *- *#-)u(#-"l*-*(, -'(*) ((+-*o# )(- o# -'( S-"-(

o()(*5# *u#*-y )o -""-*o#. T'( S-"-( /"##o- ( -"($ *-'ou- *- /o#(#- "#$ u/'

/o#(#-, (*#5 *# $()o5"-*o# o *- o()(*5#-y, * -o ( -)*/-ly /o#-)u($.12 A$*#*-)"-*(

O)$() 9 o -'( )(+o#$(#- Po-"-() G(#()"l, '*/' l*- -'( ")*ou o*/( "#$

*#-)u(#-"l*-*( o -'( Go()#(#- ((+- )o -'( +"y(#- o -'( "#-*7T -"+, * u-

" )(-"-((#- o -'* (ll7>#o# +)*#/*+l( o /o#-*-u-*o#"l l".

The trial court li$ewise held the law invalid on the ground that it singles out tu-erculosis to the

eclusion of other diseases which, it is said, are e:ually a menace to pu-lic health. #ut it is never

a re:uirement of e:ual protection that all evils of the same genus -e eradicated or none at

all.() As this Court has had occasion to say, Gif the law presuma-ly hits the evil where it is most

felt, it is not to -e overthrown -ecause there are other instances to which it might have -een

applied.G(4

1. The petitioner further argues that the ta in :uestion is invalid, first, -ecause it is not levied for

a pu-lic purpose as no special -enefits accrue to mail users as tapayers, and second, -ecause it

violates the rule of uniformity in taation.

The eradication of a dreaded disease is a pu-lic purpose, -ut if -y pu-lic purpose the petitioner

means -enefit to a tapayer as a return for what he pays, then it is sufficient answer to say that

the only -enefit to which the tapayer is constitutionally entitled is that derived from his

enjoyment of the privileges of living in an organiJed society, esta-lished and safeguarded -y the

devotion of taes to pu-lic purposes. Any other view would preclude the levying of taes ecept

as they are used to compensate for the -urden on those who pay them and would involve the

a-andonment of the most fundamental principle of government B that it eists primarily to

provide for the common good.(*

Nor is the rule of uniformity and e:uality of taation infringed -y the imposition of a flat rate

rather than a graduated ta. A ta need not -e measured -y the weight of the mail or the etent of

the service rendered. >e have said that considerations of administrative convenience and cost



afford an ade:uate ground for classification. The same considerations may induce the legislature

to impose a flat ta which in effect is a charge for the transaction, operating e:ually on all

persons within the class regardless of the amount involved.(+ As Hr. ustice 7olmes said in

sustaining the validity of a stamp act which imposed a flat rate of two cents on every P(00 face

value of stoc$ transferred=

ne of the stoc$s was worth P)0.3* a share of the face value of P(00, the other P(31. The

ine:uality of the ta, so far as actual values are concerned, is manifest. #ut, here again

e:uality in this sense has to yield to practical considerations and usage. There must -e a

fied and indisputa-le mode of ascertaining a stamp ta. !n another sense, moreover,

there is e:uality. >hen the taes on two sales are e:ual, the same num-er of shares is

sold in each case5 that is to say, the same privilege is used to the same etent. Ialuation isnot the only thing to -e considered. As was pointed out -y the court of appeals, the

familiar stamp ta of 1 cents on chec$s, irrespective of income or earning capacity, and

many others, illustrate the necessity and practice of sometimes su-stituting count for

weight ...(3

A//o)$*#5 -o -'( -)*"l /ou)-, -'( o#(y )"*($ )o -'( "l( o -'( "#-*7T -"+ * +(#-

o) -'( (#(*- o -'( P'*l*++*#( Tu()/ulo* So/*(-y, " +)*"-( o)5"#*@"-*o#, *-'ou-

"++)o+)*"-*o# y l". u- " -'( Sol*/*-o) G(#()"l +o*#- ou-, -'( So/*(-y * #o- )("lly -'(

(#(*/*")y u- o#ly -'( "5(#/y -')ou5' '*/' -'( S-"-( "/- *# /"))y*#5 ou- '"- *

((#-*"lly " +ul*/ u#/-*o#. T'( o#(y * -)("-($ " " +(/*"l u#$ "#$ " u/' #(($ #o- (

"++)o+)*"-($ y l".1;

). 6inally, the claim is made that the statute is so -roadly drawn that to eecute it the respondents

had to issue administrative orders far -eyond their powers. !ndeed, this is one of the grounds on

which the lower court invalidated "epu-lic Act (+)(, as amended, namely, that it constitutes an

undue delegation of legislative power.

Administrative rder ), as amended -y Administrative rders 3 and (0, provides that for certain

classes of mail matters %such as mail permits, metered mails, -usiness reply cards, etc.&, the five

centavo charge may -e paid in cash instead of the purchase of the antiT# stamp. !t further states



that mails deposited during the period August (9 to eptem-er )0 of each year in mail -oes

without the stamp should -e returned to the sender, if $nown, otherwise they should -e treated as

nonmaila-le.

!t is true that the law does not epressly authoriJe the collection of five centavos ecept through

the sale of antiT# stamps, -ut such authority may -e implied in so far as it may -e necessary to

prevent a failure of the underta$ing. The authority given to the 'ostmaster /eneral to raise funds

through the mails must -e li-erally construed, consistent with the principle that where the end is

re:uired the appropriate means are given.(9

The antiT# stamp is a distinctive stamp which shows on its face not only the amount of the

additional charge -ut also that of the regular postage. !n the case of -usiness reply cards, for

instance, it is o-vious that to re:uire mailers to affi the antiT# stamp on their cards would -e to

ma$e them pay much more -ecause the cards li$ewise -ear the amount of the regular postage.

!t is li$ewise true that the statute does not provide for the disposition of mails which do not -ear

the antiT# stamp, -ut a declaration therein that Gno mail matter shall -e accepted in the mails

unless it -ears such semipostal stampG is a declaration that such mail matter is nonmaila-le

within the meaning of section (9*1 of the Administrative Code. Administrative rder 3 of the

'ostmaster /eneral is -ut a restatement of the law for the guidance of postal officials andemployees. As for Administrative rder 9, we have already said that in listing the offices and

entities of the /overnment eempt from the payment of the stamp, the respondent 'ostmaster

/eneral merely o-served an esta-lished principle, namely, that the /overnment is eempt from

taation.

ACC"8!N/?<, the judgment a 6uo is reversed, and the complaint is dismissed, without

pronouncement as to costs.

Concepcion, C.J., e$es, J.".+., 3izon, a5alintal, Sanchez, Angeles and Capistrano,

JJ., concur.

2aldivar, J., is on leave.



G.R. No. L7416:1 &(/(() 1=, 19=6

BON. RAMON &. AGATSING, " M"yo) o -'( C*-y o M"#*l" ROMAN G.

GARGANTIEL, " S(/)(-")y -o -'( M"yo) TBE MAR!ET A&MINISTRATOR "#$

TBE MUNICIPAL OAR& OF MANILA, petitioners, vs. BON. PE&RO A. RAMIREH, *#

'* /"+"/*-y " P)(*$*#5 Ju$5( o -'( Cou)- o F*)- I#-"#/( o M"#*l", )"#/' %%% "#$

-'( FE&ERATION OF MANILA MAR!ET VEN&ORS, INC., respondents.

Santiago 1. Alidio and estituto . 7illanueva for petitioners.

Antonio 8. A)ad, Jr. for private respondent.

1ederico A. "la$ for petitioner for intervention.

MARTIN, J.:

The chief :uestion to -e decided in this case is what law shall govern the pu-lication of a ta

ordinance enacted -y the Hunicipal #oard of Hanila, the "evised City Charter %".A. 409, as

amended&, which re:uires pu-lication of the ordinance -efore its enactment and after its

approval, or the ?ocal Ta Code %'.8. No. 1)(&, which only demands pu-lication after approval.

n une (1, (934, the Hunicipal #oard of Hanila enacted rdinance No. 3*11, GAN

"8!NANC; ";/D?AT!N/ T7; ';"AT!N 6 'D#?!C HA"O;T AN8

'";C"!#!N/ 6;; 6" T7; ";NTA? 6 TA?? AN8 '"I!8!N/ ';NA?T!;

6" I!?AT!N T7;";6 AN8 6" T7;" 'D"';.G The petitioner City Hayor,

"amon 8. #agatsing, approved the ordinance on une (*, (934.

n 6e-ruary (3, (93*, respondent 6ederation of Hanila Har$et Iendors, !nc. commenced Civil

Case 9+33 -efore the Court of 6irst !nstance of Hanila presided over -y respondent udge,

see$ing the declaration of nullity of rdinance No. 3*11 for the reason that %a& the pu-lication

re:uirement under the "evised Charter of the City of Hanila has not -een complied with5 %-& the

Har$et Committee was not given any participation in the enactment of the ordinance, as



envisioned -y "epu-lic Act +0)95 %c& ection ) %e& of the Anti/raft and Corrupt 'ractices Act

has -een violated5 and %d& the ordinance would violate 'residential 8ecree No. 3 of eptem-er

)0, (931 prescri-ing the collection of fees and charges on livestoc$ and animal products.

"esolving the accompanying prayer for the issuance of a writ of preliminary injunction,

respondent udge issued an order on Harch ((, (93*, denying the plea for failure of the

respondent 6ederation of Hanila Har$et Iendors, !nc. to ehaust the administrative remedies

outlined in the ?ocal Ta Code.

After due hearing on the merits, respondent udge rendered its decision on August 19, (93*,

declaring the nullity of rdinance No. 3*11 of the City of Hanila on the primary ground of non

compliance with the re:uirement of pu-lication under the "evised City Charter. "espondent

udge ruled=

There is, therefore, no :uestion that the ordinance in :uestion was not pu-lished

at all in two daily newspapers of general circulation in the City of Hanila -efore

its enactment. Neither was it pu-lished in the same manner after approval,

although it was posted in the legislative hall and in all city pu-lic mar$ets and city

pu-lic li-raries. There -eing no compliance with the mandatory re:uirement of

pu-lication -efore and after approval, the ordinance in :uestion is invalid and,therefore, null and void.

'etitioners moved for reconsideration of the adverse decision, stressing that %a& only a post

pu-lication is re:uired -y the ?ocal Ta Code5 and %-& private respondent failed to ehaust all

administrative remedies -efore instituting an action in court.

n eptem-er 1+, (93*, respondent udge denied the motion.

6orthwith, petitioners -rought the matter to Ds through the present petition for review on

certiorari.

>e find the petition impressed with merits.



(. The ne#us of the present controversy is the apparent conflict -etween the "evised Charter of

the City of Hanila and the ?ocal Ta Code on the manner of pu-lishing a ta ordinance enacted

-y the Hunicipal #oard of Hanila. 6or, while ection (3 of the "evised Charter provides=

9ach proposed ordinance shall -e pu-lished in two daily newspapers of general

circulation in the city, and shall not -e discussed or enacted -y the #oard until

after the third day following such pu-lication. 9ach approved ordinance

shall -e pu-lished in two daily newspapers of general circulation in the city,

within ten days after its approval5 and shall ta$e effect and -e in force on and after

the twentieth day following its pu-lication, if no date is fied in the ordinance.

ection 4) of the ?ocal Ta Code directs=

>ithin ten days after their approval , certified true copies of all provincial, city,

municipal and -arrioordinances lev$ing or i!posing ta#es, fees or other

charges shall -e pu-lished for three consecutive days in a newspaper or

pu-lication widely circulated within the jurisdiction of the local government, or

posted in the local legislative hall or premises and in two other conspicuous

places within the territorial jurisdiction of the local government. !n either case,

copies of all provincial, city, municipal and -arrio ordinances shall -e furnishedthe treasurers of the respective component and mother units of a local government

for dissemination.

!n other words, while the "evised Charter of the City of Hanila re:uires pu-lication )efore the

enactment of the ordinance and after the approval thereof in two daily newspapers of general

circulation in the city, the ?ocal Ta Code only prescri-es for pu-lication after the approval of

Gordinances lev$ing or i!posing ta#es, fees or other chargesG either in a newspaper or

pu-lication widely circulated within the jurisdiction of the local government or -y posting the

ordinance in the local legislative hall or premises and in two other conspicuous places within the

territorial jurisdiction of the local government. 'etitioners compliance with the ?ocal Ta Code

rather than with the "evised Charter of the City spawned this litigation.



There is no :uestion that the "evised Charter of the City of Hanila is a special act since it relates

only to the City of Hanila, whereas the ?ocal Ta Code is a general law -ecause it applies

universally to all local governments. #lac$stone defines general law as a universal rule affecting

the entire community and special law as one relating to particular persons or things of a

class. 1 And the rule commonly said is that a prior special law is not ordinarily repealed -y a

su-se:uent general law. The fact that one is special and the other general creates a presumption

that the special is to -e considered as remaining an eception of the general, one as a general law

of the land, the other as the law of a particular case. 2 7owever, the rule readily yields to a

situation where the special statute refers to a su-ject in general, which the general statute treats

in particular . The eactly is the circumstance o-taining in the case at -ar. ection (3 of the

"evised Charter of the City of Hanila spea$s of GordinanceG in general, i.e., irrespective of the

nature and scope thereof,*hereas, ection 4) of the ?ocal Ta Code relates to Gordinances

levying or imposing taes, fees or other chargesG in particular. !n regard, therefore, to ordinances

in general, the "evised Charter of the City of Hanila is dou-tless dominant, -ut, that dominant

force loses its continuity when it approaches the realm of Gordinances levying or imposing taes,

fees or other chargesG in particular. There, the ?ocal Ta Code controls. 7ere, as always, a

general provision must give way to a particular provision. : pecial provision governs. 4 This is

especially true where the law containing the particular provision was enacted later than the one

containing the general provision. The City Charter of Hanila was promulgated on une (, (949

as against the ?ocal Ta Code which was decreed on une (, (93). The lawma$ing power

cannot -e said to have intended the esta-lishment of conflicting and hostile systems upon the

same su-ject, or to leave in force provisions of a prior law -y which the new will of the

legislating power may -e thwarted and overthrown. uch a result would render legislation a

useless and !dle ceremony, and su-ject the law to the reproach of uncertainty and

unintelligi-ility. <

The case of Cit$ of anila v. Teotico 6 is opposite. !n that case, Teotico sued the City of Hanila

for damages arising from the injuries he suffered when he fell inside an uncovered and unlighted

catch-asin or manhole on '. #urgos Avenue. The City of Hanila denied lia-ility on the -asis of

the City Charter %".A. 409& eempting the City of Hanila from any lia-ility for damages or

injury to persons or property arising from the failure of the city officers to enforce the provisions



of the charter or any other law or ordinance, or from negligence of the City Hayor, Hunicipal

#oard, or other officers while enforcing or attempting to enforce the provisions of the charter or

of any other law or ordinance. Dpon the other hand, Article 1(9 of the Civil Code ma$es cities

lia-le for damages for the death of, or injury suffered -y any persons -y reason of the defective

condition of roads, streets, -ridges, pu-lic -uildings, and other pu-lic wor$s under their control

or supervision. n review, the Court held the Civil Code controlling. !t is true that, insofar as its

territorial application is concerned, the "evised City Charter is a special law and the su-ject

matter of the two laws, the "evised City Charter esta-lishes a general rule of lia-ility arising

from negligence in general, regardless of the o-ject thereof, whereas the Civil Code constitutes a

particular prescription for lia-ility due to defective streets in particular. !n the same manner, the

"evised Charter of the City prescri-es a rule for the pu-lication of GordinanceG in general , while

the ?ocal Ta Code esta-lishes a rule for the pu-lication of Gordinance levying or imposing taes

fees or other charges in particular .

!n fact, there is no rule which prohi-its the repeal even -y implication of a special or specific act

-y a general or -road one. = A charter provision may -e impliedly modified or superseded -y a

later statute, and where a statute is controlling, it must -e read into the charter notwithstanding

any particular charter provision. ; A su-se:uent general law similarly applica-le to all cities

prevails over any conflicting charter provision, for the reason that a charter must not -e

inconsistent with the general laws and pu-lic policy of the state. 9 A chartered city is not an

independent sovereignty. The state remains supreme in all matters not purely local. therwise

stated, a charter must yield to the constitution and general laws of the state, it is to have read into

it that general law which governs the municipal corporation and which the corporation cannot set

aside -ut to which it must yield. >hen a city adopts a charter, it in effect adopts as part of its

charter general law of such character. 10

1. The principle of ehaustion of administrative remedies is strongly asserted -y petitioners as

having -een violated -y private respondent in -ringing a direct suit in court. This is -ecause

ection 43 of the ?ocal Ta Code provides that any :uestion or issue raised against the legality

of any ta ordinance, or portion thereof, shall -e referred for opinion to the city fiscal in the case

of ta ordinance of a city. The opinion of the city fiscal is appeala-le to the ecretary of ustice,

whose decision shall -e final and eecutory unless contested -efore a competent court within



thirty %)0& days. #ut, the petition -elow plainly shows that the controversy -etween the parties is

deeply rooted in a pure :uestion of law= whether it is the "evised Charter of the City of Hanila

or the ?ocal Ta Code that should govern the pu-lication of the ta ordinance. !n other words,

the dispute is sharply focused on the applica-ility of the "evised City Charter or the ?ocal Ta

Code on the point at issue, and not on the legality of the imposition of the ta. ;haustion of

administrative remedies -efore resort to judicial -odies is not an a-solute rule. !t admits of

eceptions. >here the :uestion litigated upon is purely a legal one, the rule does not

apply. 11 The principle may also -e disregarded when it does not provide a plain, speedy and

ade:uate remedy. !t may and should -e relaed when its application may cause great and

irrepara-le damage. 12

). !t is maintained -y private respondent that the su-ject ordinance is not a Gta ordinance,G -ecause the imposition of rentals, permit fees, tolls and other fees is not strictly a taing power

-ut a revenueraising function, so that the procedure for pu-lication under the ?ocal Ta Code

finds no application. The pretense -ears its own mar$s of fallacy. 'recisely, the raising of

revenues is the principal o-ject of taation. Dnder ection *, Article F! of the New Constitution,

G;ach local government unit shall have the power to create its own sources of revenue and to

levy taes, su-ject to such provisions as may -e provided -y law.G 1: And one of those sources of

revenue is what the ?ocal Ta Code points to in particular= G?ocal governments may collect fees

or rentals for the occupancy or use of pu-lic mar$ets and premises .G 14 They can provide for

and regulate mar$et stands, stalls and privileges, and, also, the sale, lease or occupancy thereof.

They can license, or permit the use of, lease, sell or otherwise dispose of stands, stalls or

mar$eting privileges. 1<

!t is a fee-le attempt to argue that the ordinance violates 'residential 8ecree No. 3, dated

eptem-er )0, (931, insofar as it affects livestoc$ and animal products, -ecause the said decree

prescri-es the collection of other fees and charges thereon Gwith the eception of antemortem

and postmortem inspection fees, as well as the delivery, stoc$yard and slaughter fees as may -e

authoriJed -y the ecretary of Agriculture and Natural "esources.G 16Clearly, even the eception

clause of the decree itself permits the collection of the proper fees for livestoc$. And the ?ocal

Ta Code %'.8. 1)(, uly (, (93)& authoriJes in its ection )(= G?ocal governments may collect

fees for the slaughter of animals and the use of corrals G



4. The nonparticipation of the Har$et Committee in the enactment of rdinance No. 3*11

supposedly in accordance with "epu-lic Act No. +0)9, an amendment to the City Charter of

Hanila, providing that Gthe mar$et committee shall formulate, recommend and adopt, su)ect to

the ratification of the !unicipal )oard, and approval of the !a$or , policies and rules or

regulation repealing or maneding eisting provisions of the mar$et codeG does not infect the

ordinance with any germ of invalidity. 1= The function of the committee is purely

recommendatory as the underscored phrase suggests, its recommendation is without -inding

effect on the Hunicipal #oard and the City Hayor. !ts prior ac:uiescence of an intended or

proposed city ordinance is not a condition sine :ua non -efore the Hunicipal #oard could enact

such ordinance. The native power of the Hunicipal #oard to legislate remains undistur-ed even

in the slightest degree. !t can move in its own initiative and the Har$et Committee cannot demur.

At most, the Har$et Committee may serve as a legislative aide of the Hunicipal #oard in the

enactment of city ordinances affecting the city mar$ets or, in plain words, in the gathering of the

necessary data, studies and the collection of consensus for the proposal of ordinances regarding

city mar$ets. Huch less could it -e said that "epu-lic Act +0)9 intended to delegate to the

Har$et Committee the adoption of regulatory measures for the operation and administration of

the city mar$ets. Potestas delegata non delegare potest .

*. P)*"-( )(+o#$(#- ("*l -'"- -'( ")>(- -"ll (( *+o($ *# -'( $*+u-($ o)$*#"#/(

")( $*()-($ -o -'( (/lu*( +)*"-( u( o -'( A*"-*/ I#-(5)"-($ Co)+o)"-*o# *#/( -'(

/oll(/-*o# o "*$ (( '"$ ((# l(- y -'( C*-y o M"#*l" -o -'( "*$ /o)+o)"-*o# *# "

M"#"5((#- "#$ O+()"-*#5 Co#-)"/-. T'( "u+-*o# * o /ou)( "$$l($ o# ())o#(ou

+)(*(. T'( (( /oll(/-($ $o #o- 5o $*)(/- -o -'( +)*"-( /o() o -'( /o)+o)"-*o#.

O)$*#"#/( No. =<22 " #o- "$( o) -'( /o)+o)"-*o# u- o) -'( +u)+o( o )"**#5

)((#u( o) -'( /*-y. T'"- * -'( o?(/- *- ()(. T'( (#-)u-*#5 o -'( /oll(/-*o# o -'( ((

$o( #o- $(-)oy -'( +ul*/ +u)+o( o -'( o)$*#"#/(. So lo#5 " -'( +u)+o( * +ul*/, *-

$o( #o- "--() '(-'() -'( "5(#/y -')ou5' '*/' -'( o#(y * $*+(#($ * +ul*/ o)

+)*"-(. T'( )*5'- -o -" $(+(#$ u+o# -'( ul-*"-( u(, +u)+o( "#$ o?(/- o) '*/' -'(

u#$ * )"*($. I- * #o- $(+(#$(#- o# -'( #"-u)( o) /'")"/-() o -'( +()o# o) /o)+o)"-*o#

'o( *#-()($*"-( "5(#/y * -o ( u($ *# "++ly*#5 *-. T'( +(o+l( "y ( -"($ o) "



+ul*/ +u)+o(, "l-'ou5' *- ( u#$() -'( $*)(/-*o# o "# *#$**$u"l o) +)*"-(

/o)+o)"-*o#. 1;

Nor can the ordinance -e stric$en down as violative of ection )%e& of the Anti/raft and Corrupt

'ractices Act -ecause the increased rates of mar$et stall fees as levied -y the ordinance will

necessarily inure to the unwarranted -enefit and advantage of the corporation. 19 >e are

concerned only with the issue whether the ordinance in :uestion is intra vires. nce determined

in the affirmative, the measure may not -e invalidated -ecause of conse:uences that may arise

from its enforcement. 20

ACC"8!N/?<, the decision of the court -elow is here-y reversed and set aside. rdinance

No. 3*11 of the City of Hanila, dated une (*, (93*, is here-y held to have -een validly enacted.

No. costs.

"8;";8.

Castro, C.J., "arredo, a5asiar, Antonio, u:oz Pal!a, A6uino and Concepcion, Jr., JJ.,

concur.

Teehan5ee, J., reserves his vote.

G.R. No. L729646 No(() 10, 19=;

MAYOR ANTONIO J. VILLEGAS, petitioner, vs. BIU CBIONG TSAI PAO BO "#$

JU&GE FRANCISCO ARCA, respondents.

Angel C. Cruz, Gregorio A. 9ercito, 1eli# C. Chaves & Jose +aureta for petitioner.

Sotero 8. +aurel for respondents.

FERNAN&EH, J.:



This is a petition for certiorari to review tile decision dated eptem-er (3, (9+ of respondent

udge 6rancisco Arca of the Court of 6irst !nstance of Hanila, #ranch !, in Civil Case No.

31393, the dispositive portion of winch reads.

>herefore, judgment is here-y rendered in favor of the petitioner and against the

respondents, declaring rdinance No. + )3 of the City of Hanila null and void.

The preliminary injunction is made permanent. No pronouncement as to cost.

"8;";8.

Hanila, 'hilippines, eptem-er (3, (9+.

gd. Arca, udge

The controverted rdinance No. +*)3 was passed -y the Hunicipal #oard of Hanila on

6e-ruary 11, (9+ and signed -y the herein petitioner Hayor Antonio . Iillegas of Hanila on

Harch 13, (9+. 2

City rdinance No. +*)3 is entitled=

AN "8!NANC; HAO!N/ !T DN?A>6D? 6" AN< ';"N NT A

C!T!Q;N 6 T7; '7!?!''!N; T #; ;H'?<;8 !N AN< '?AC; 6

;H'?<H;NT " T #; ;N/A/;8 !N AN< O!N8 6 T"A8;,

#D!N; " CCD'AT!N >!T7!N T7; C!T< 6 HAN!?A >!T7DT

6!"T ;CD"!N/ AN ;H'?<H;NT ';"H!T 6"H T7; HA<" 6

HAN!?A5 AN8 6" T7;" 'D"';. :

ection ( of said rdinance No. +*)3 4 prohi-its aliens from -eing employed or to engage or

participate in any position or occupation or -usiness enumerated therein, whether permanent,temporary or casual, without first securing an employment permit from the Hayor of Hanila and

paying the permit fee of '*0.00 ecept persons employed in the diplomatic or consular missions

of foreign countries, or in the technical assistance programs of -oth the 'hilippine /overnment

and any foreign government, and those wor$ing in their respective households, and mem-ers of

religious orders or congregations, sect or denomination, who are not paid monetarily or in $ind.



Iiolations of this ordinance is punisha-le -y an imprisonment of not less than three %)& months

to si %+& months or fine of not less than '(00.00 -ut not more than '100.00 or -oth such fine

and imprisonment, upon conviction.<

n Hay 4, (9+, private respondent 7iu Chiong Tsai 'ao 7o who was employed in Hanila, filed

a petition with the Court of 6irst !nstance of Hanila, #ranch !, denominated as Civil Case No.

31393, praying for the issuance of the writ of preliminary injunction and restraining order to stop

the enforcement of rdinance No. +*)3 as well as for a judgment declaring said rdinance No.

+*)3 null and void. 6

!n this petition, 7iu Chiong Tsai 'ao 7o assigned the following as his grounds for wanting the

ordinance declared null and void=

(& As a revenue measure imposed on aliens employed in the City of Hanila,

rdinance No. +*)3 is discriminatory and violative of the rule of the uniformity

in taation5

1& As a police power measure, it ma$es no distinction -etween useful and non

useful occupations, imposing a fied '*0.00 employment permit, which is out of

proportion to the cost of registration and that it fails to prescri-e any standard to

guide and2or limit the action of the Hayor, thus, violating the fundamental

principle on illegal delegation of legislative powers=

)& !t is ar-itrary, oppressive and unreasona-le, -eing applied only to aliens who

are thus, deprived of their rights to life, li-erty and property and therefore,

violates the due process and e:ual protection clauses of the Constitution. =

n Hay 14, (9+, respondent udge issued the writ of preliminary injunction and on eptem-er

(3, (9+ rendered judgment declaring rdinance No. +*)3 null and void and ma$ing permanent

the writ of preliminary injunction. ;



Contesting the aforecited decision of respondent udge, then Hayor Antonio . Iillegas filed the

present petition on Harch 13, (9+9. 'etitioner assigned the following as errors allegedly

committed -y respondent udge in the latters decision of eptem-er (3,(9+= 9

!

T7; ";'N8;NT D8/; CHH!TT;8 A ;"!D AN8 'AT;NT

;""" 6 ?A> !N "D?!N/ T7AT "8!NANC; N. +*)3 I!?AT;8

T7; CA"8!NA? "D?; 6 DN!6"H!T< 6 TAFAT!N.

!!

";'N8;NT D8/; ?!O;>!; CHH!TT;8 A /"AI; AN8 'AT;NT;""" 6 ?A> !N "D?!N/ T7AT "8!NANC; N. +*)3 I!?AT;8

T7; '"!NC!'?; A/A!NT DN8D; 8;!/NAT!N 6 ?;/!?AT!I;

'>;".

!!!

";'N8;NT D8/; 6D"T7;" CHH!TT;8 A ;"!D AN8 'AT;NT

;""" 6 ?A> !N "D?!N/ T7AT "8!NANC; N. +*)3 I!?AT;8T7; 8D; '"C; AN8 ;@DA? '"T;CT!N C?AD; 6 T7;

CNT!TDT!N.

'etitioner Hayor Iillegas argues that rdinance No. +*)3 cannot -e declared null and void on

the ground that it violated the rule on uniformity of taation -ecause the rule on uniformity of

taation applies only to purely ta or revenue measures and that rdinance No. +*)3 is not a ta

or revenue measure -ut is an eercise of the police power of the state, it -eing principally a

regulatory measure in nature.

The contention that rdinance No. +*)3 is not a purely ta or revenue measure -ecause its

principal purpose is regulatory in nature has no merit. >hile it is true that the first part which

re:uires that the alien shall secure an employment permit from the Hayor involves the eercise

of discretion and judgment in the processing and approval or disapproval of applications for



employment permits and therefore is regulatory in character the second part which re:uires the

payment of '*0.00 as employees fee is not regulatory -ut a revenue measure. There is no logic

or justification in eacting '*0.00 from aliens who have -een cleared for employment. !t is

o-vious that the purpose of the ordinance is to raise money under the guise of regulation.

The '*0.00 fee is unreasona-le not only -ecause it is ecessive -ut -ecause it fails to consider

valid su-stantial differences in situation among individual aliens who are re:uired to pay it.

Although the e:ual protection clause of the Constitution does not for-id classification, it is

imperative that the classification should -e -ased on real and su-stantial differences having a

reasona-le relation to the su-ject of the particular legislation. The same amount of '*0.00 is

-eing collected from every employed alien whether he is casual or permanent, part time or full

time or whether he is a lowly employee or a highly paid eecutive

rdinance No. +*)3 does not lay down any criterion or standard to guide the Hayor in the

eercise of his discretion. !t has -een held that where an ordinance of a municipality fails to state

any policy or to set up any standard to guide or limit the mayors action, epresses no purpose to

-e attained -y re:uiring a permit, enumerates no conditions for its grant or refusal, and entirely

lac$s standard, thus conferring upon the Hayor ar-itrary and unrestricted power to grant or deny

the issuance of -uilding permits, such ordinance is invalid, -eing an undefined and unlimited

delegation of power to allow or prevent an activity per se lawful. 10

!n Chinese 1lour '!porters Association vs. Price Sta)ilization "oard , 11 where a law granted a

government agency power to determine the allocation of wheat flour among importers, the

upreme Court ruled against the interpretation of uncontrolled power as it vested in the

administrative officer an ar-itrary discretion to -e eercised without a policy, rule, or standard

from which it can -e measured or controlled.

!t was also held in Pri!icias vs. 1ugoso 12 that the authority and discretion to grant and refuse

permits of all classes conferred upon the Hayor of Hanila -y the "evised Charter of Hanila is

not uncontrolled discretion -ut legal discretion to -e eercised within the limits of the law.

rdinance No. +*)3 is void -ecause it does not contain or suggest any standard or criterion to

guide the mayor in the eercise of the power which has -een granted to him -y the ordinance.



The ordinance in :uestion violates the due process of law and e:ual protection rule of the

Constitution.

"e:uiring a person -efore he can -e employed to get a permit from the City Hayor of Hanila

who may withhold or refuse it at will is tantamount to denying him the -asic right of the people

in the 'hilippines to engage in a means of livelihood. >hile it is true that the 'hilippines as a

tate is not o-liged to admit aliens within its territory, once an alien is admitted, he cannot -e

deprived of life without due process of law. This guarantee includes the means of livelihood. The

shelter of protection under the due process and e:ual protection clause is given to all persons,

-oth aliens and citiJens. 1:

The trial court did not commit the errors assigned.

>7;";6";, the decision appealed from is here-y affirmed, without pronouncement as to

costs.

"8;";8.

"arredo, a5asiar, u:oz Pal!a, Santos and Guerrero, JJ., concur.

Castro, C.J., Antonio and A6uino, 1ernando, JJ., concur in the result.

Concepcion, Jr., J., too5 no part.

G.R. No. <1<9: No(() <, 1992

NATIONAL &EVELOPMENT COMPANY, plaintiffappellee, vs. CEU CITY "#$

AUGUSTO PACIS " T)("u)() o C(u C*-y, defendantappellants.

ELLOSILLO, J.:



!s a pu-lic land reserved -y the 'resident for warehousing purposes in favor of a government

owned or controlled corporation, 1 as well as the warehouse su-se:uently erected thereon,

eempt from real property taR

'etitioner National 8evelopment Company %N8C&, a governmentowned or controlled

corporation %/CC& eisting -y virtue of C.A. (1 2 and ;.. )99, : is authoriJed to engage in

commercial, industrial, mining, agricultural and other enterprises necessary or contri-utory to

economic development or important to pu-lic interest. !t also operates, in furtherance of its

o-jectives, su-sidiary corporations one of which is the now defucnt National >arehousing

Corporation %N>C&. 4

n August (0, (9)9, the 'resident issued 'roclamation No. 4)0 < reserving #loc$ no. 4,

"eclamation Area No. 4, of Ce-u City, consisting of 4,*99 s:uare meters, for warehousing

purposes under the administration of N>C. 6 u-se:uently, in (940, a warehouse with a floor

area of (,940 s:uare meters more or less, was constructed thereon. =

n cto-er 4, (943, ;.. 9) dissolved N>C ; with N8C ta$ing over its assets and functions. 9

Commencing (94, Ce-u City %C;#D& assessed and collected from N8C real estate taes on the

land and the warehouse thereon. 10 #y the first :uarter of (930, a total of '(00,)(+.)( was paid

-y N8C 11 of which only '),9*.0+ was under protest. 12

n 10 Harch (930, N8C wrote the City Assessor demanding full refund of the real estate taes

paid to C;#D claiming that the land and the warehouse standing thereon -elonged to the

"epu-lic and therefore eempt from taation. 1: C;#D did not ac:uiesce in the demand, hence,

the present suit filed 1* cto-er (931 in the Court of 6irst !nstance of Hanila.

n 19 Hay (93), the Court of 6irst !nstance of Hanila, #ranch FF!!, promulgated a

decision 14 the dispositive portion of which reads B

>7;";6";, judgment is here-y rendered sentencing the City of Ce-u, thru

the Treasurer of said City, to refund to the plaintiff, National 8evelopment

Company, the real estate taes paid -y it for the parcel of land covered -y



'residential 'roclamation No. 4)0 of August (0, (9)9, and the warehouse erected

thereon from and after cto-er 1*, (9++, with interests thereon at the legal rate

from the date of the filing of the complaint and the costs of the suit.

The defendants appealed to the Court of Appeals which however certified the case to Ds as one

involving pure :uestions of law, pursuant to ec. (3, ".A. 19+.

!n this appeal, C;#D assigns five %*& errors 1< imputed to the trial court which may -e

synopsiJed into whether N8C is eempted from payment of the real estate taes on the land

reserved -y the 'resident for warehousing purposes as well as the warehouse constructed

thereon, and in the affirmative, whether N8C may recover in refund unprotested real estate taes

it paid from (94 to (930.

n the first :uestion, C;#D insists on taa-ility of the su-ject properties, claiming that no law

grants N8C eemption from real estate taes, and that N8C, as recipient of the land reserved -y

the 'resident pursuant to ec. ) of the 'u-lic ?and Act, 16 is lia-le for payment or ordinary %real

estate& taes under ec. ((* therefore. C;#D contends that the properties have ceased to -e ta

eempt under the Assessment ?aw. 1= when the government disposed of them in favor of N8C,

and even assuming that title to the land remains with the government %ownership -eing the -asis

for real estate taa-ility under the Assessment ?aw&, the upreme Court rulings esta-lishincreasing rather than GownershipG as -asis for real estate ta lia-ility.

n the other hand, N8C maintains the ec. ) of the Assessment ?aw, which eempts properties

owned -y the "epu-lic from real estate ta, includes su-ject properties in the eemption. !t

invo$es the ruling in "oard of Assess!ent Appeals vs. CTA & N;SA 1; which held that properties

of N>A, a /CC, were eempt from real estate ta -ecause ec. ) of the Assessment ?aw

applied to all government properties whether held in governmental or proprietary capacity. N8C

rejects the applica-ility of ec. ((* of the 'u-lic ?and Act to the su-ject land, claiming that

provision contemplates dispositions of pu-lic land with eventual transfer of title. !n addition,

N8C -elieves that it is neither a grantee of a pu-lic land nor an applicant within the purview of

the same provision.



As already adverted to, one of the principal issues -efore Ds is the interpretation of a provision

of the Assessment ?aw, the precursor of the then "eal 'roperty Ta Code and the ?ocal

/overnment Code, where GownershipG of the property and not GuseG is the test of ta lia-ility. 19

ection, ) par. %a&, of the Assessment ?aw, on which N8C claims real estate ta eemption,

provides B

ection ). Propert$ e#e!pt fro! ta#. B The eemptions shall -e as follows= %a&

'roperty owned -y the Dnited tates of America, the Commonwealth of the

'hilippines, any province, city, municipality at municipal district . . .

The same opinion of N8C was passed upon in National 3evelop!ent Co. v. Province of Nueva

9cia 20 where >e held that its properties were not comprehended in ec. ), par %a&, of the

Assessment ?aw. !n part, >e stated=

(. Commonwealth Act No. (1 which created N8C contains no provision

eempting it from the payment of real estate ta on properties it may ac:uire . . .

There is justification in the contention of plaintiffappellee that . . . L!Mt is

undenia-le that to any municipality the principal source of revenue with which it

would defray its operation will came from real property taes. !f the National

8evelopment Company would -e eempt from paying real property taes over

these properties, the town of /a-aldon will -ee deprived of much needed

revenues with which it will maintain itself and finance the compelling needs of its

inha-itants %p. +, #rief of 'laintiffAppellee&.

1. 8efendantappellant N8C does not come under classification of municipal or

pu-lic corporation in the sense that it may sue and -e sued in the same manner as

any other private corporations, and in this sense, it is an entity different from the

government, defendant corporation may -e sued without its consent, and is

su-ject to taation. !n the case N8C vs. ose <ulo To-ias, 3 C"A +91, it was

held that . . . plaintiff is neither the /overnment of the "epu-lic nor a -ranch or

su-division thereof, -ut a government owned and controlled corporation which

cannot -e said to eercise a sovereign function %Association Cooperativa de



Credito Agricola de Hiagao vs. Honteclaro, 34 'hil. 1(&. it is a -usiness

corporation, and as such, its causes of action are su-ject to the statute of

limitations. . . . That plaintiff herein does not eercise sovereign powers B and,

hence, cannot invo$e the eemptions thereof SS -ut is an agency for the

performance of purely corporate, proprietary or -usiness functions, is apparent

from its rganic Act %Commonwealth Act (1, as amended -y Commonwealth

Act )((& pursuant to ection ) of which it Gshall -e su-ject to the provisions of

the Corporation ?aw insofar as they are not inconsistentG with the provisions of

said Commonwealth Act, Gand shall have the general powers mentioned in saidG

Corporation ?aw, and, hence, Gmay engage in commercial, industrial, mining,

agricultural, and other enterprises which may -e necessary or contri-utory to the

economic development of the country, or important in the pu-lic interest,G as well

as Gac:uire, hold, mortgage and alienate personal and real property in the

'hilippines or elsewhere5 . . . ma$e contracts of any $ind and descriptionG, and

Gperform any and all acts which a corporation or natural persons is authoriJed to

perform under the laws now eisting or which may -e enacted hereafter.G

>e find no compelling reason why the foregoing ruling, although referring to lands which would

eventually -e transferred to private individuals, should not apply e:ually to this case.

N8C cites "oard of Assess!ent Appeals, Province of +aguna v. Court of Ta# Appeal and

National ;ater*or5s and Se*erage Authorit$ <N;SA=. !n that case, >e held that properties of

N>A, a /CC, were eempt from real estate ta -ecause ec. ), par %c&, of ".A. 430 did not

distinguish -etween those possessed -y the government in sovereign2governmental2political

capacity and those in private2proprietary2patrimonial character.

The conflict -etween N3C v. Nueva 9cia, supra, and "AA v. CTA and N;SA, supra, is more

superficial than real. The N3C decision spea$s of properties owned -y N8C, while

the "AA ruling concerns properties -elonging to the "epu-lic. The latter case appears to -e

eceptional -ecause the parties therein stipulated B



(. That the petitioner National >aterwor$s and ewerage Authority %NA>AA&

is a pu-lic corporation created -y virtue of "epu-lic Act. No. ()), and that it is

o*ned )$ the Govern!ent of the Philippines as *ell as all propert$ co!prising

*ater*or5s and se*erage s$ste!s placed under it %;mphasis supplied&.

There, the Court o-served= G!t is conceded, in the stipulation of facts, that the property involved

in this case Gis owned -y the /overnment of the 'hilippines.G 7ence, it -elongs to the "epu-lic

of the 'hilippines and falls s:uarely within letter of the a-ove provision.G

I# -'( /"( "- "), #o **l") -"-((#- "++(") *# -'( -*+ul"-*o# o "/-, '(#/(, o#()'*+

o u?(/- +)o+()-*( 'oul$ *)- ( (-"l*'($. Fo), '*l( *- "y ( -"-($ -'"- -'(

R(+ul*/ o# N&C, *- $o( #o- #(/(")y ollo -'"- +)o+()-*( o#($ y N&C, ")( "lo

o#($ y R(+ul*/ K *# -'( "( "y -'"- -o/>'ol$() ")( #o- ipso facto o#() o -'(

+)o+()-*( o -'(*) /o)+o)"-*o#.

T'( R(+ul*/, l*>( "#y *#$**$u"l, "y o) " /o)+o)"-*o# *-' +()o#"l*-y "#$ (*-(#/(

$*-*#/- )o *- o#. T'( (+")"-( +()o#"l*-y "llo " GOCC -o 'ol$ "#$ +o(

+)o+()-*( *# *- o# #"( "#$, -'u, +()*- 5)("-() *#$(+(#$(#/( "#$ l(**l*-y *# *-

o+()"-*o#. I- "y, -'()(o)(, ( -"-($ -'"- -" ((+-*o# o +)o+()-y o#($ y -'(

R(+ul*/ o -'( P'*l*++*#( )(() -o +)o+()-*( o#($ y -'( Go()#(#- "#$ y *-"5(#/*( '*/' $o #o- '"( (+")"-( "#$ $*-*#/- +()o#"l*-*( 3u#*#/o)+o)"-($ (#-*-*(.

>e find the separate opinion of ustice #autistaAngelo in Gonzales v. 8echanova, et

al ., 21 appropriate and enlightening B

. . . The /overnment of the "epu-lic of the 'hilippines under the "evised

Administrative Code refers to that entity through which the functions of

government are eercised, including the various arms through which political

authority is made effective whether they -e provincial, municipal or other form of

local government, whereas a government instrumentality refers to corporations

owned or controlled -y the government to promote certain aspects of the

economic life of our people. A government agency therefore, must necessarily

after refer to the government itself to the "epu-lic, as distinguished from any



government instrumentality which has a personality distinct and separate from it

%ection 1&.

The foregoing discussion does not mean that -ecause N8C, li$e most /CCs engages in

commercial enterprises all properties of the government and its unincorporated agencies

possessed in propriety character are taa-le. imilarly, in the case at -ar, N8C proceeded on the

premise that the "AA ruling declared all properties owed -y /CCs as properties in the name of

the "epu-lic, hence, eempt under ec. ) of the Assessment ?aw.22

To come within the am-it of the eemption provided in Art. ), par. %a&, of the Assessment ?aw, it

is important to esta-lish that the property is owned -y the government or its unincorporated

agency, and once government ownership is determined, the nature of the use of the property,

whether for proprietary or sovereign purposes, -ecomes immaterial. >hat appears to have -een

ceded to N>C %later transferred to N8C&, in the case -efore Ds, is merely the administration of

the property while the government retains ownership of what has -een declared reserved for

warehousing purposes under 'roclamation No. 4)0.

!ncidentally, the parties never raised the issued the issue of ownership from the court a 6uo to

this Court.

A reserved land is defined as a GLpMu-lic land that has -een withheld or $ept -ac$ from sale or

disposition.G 2: The land remains Ga-solute property of the government.G 24 The government

Gdoes not part with its title -y reserving them %lands&, -ut simply gives notice to all the world that

it desires them for a certain purpose.G 2< A-solute disposition of land is not implied from

reservation5 26 it merely means Ga withdrawal of a specified portion of the pu-lic domain from

disposal under the land laws and the appropriation thereof, for the time -eing, to some particular

use or purpose of the general government.G 2= As its title remains with the "epu-lic, the reserved

land is clearly recovered -y the ta eemption provision.

C;#D nevertheless contends that the reservation of the property in favor of N>C or N8C is a

form of disposition of pu-lic land which, su-jects the recipient %N8C & to real estate taation

under ec. ((* of the 'u-lic ?and Act. as amended -y ".A. 4)+, 2; which estate=



ec ((*. All lands granted -y virtue of this Act, including homesteads upon which

final proof has not -een made or approved shall, even though and while the title

remains in the tate, -e su-ject to the ordinary taes, which shall -e paid -y the

grantee or the applicant, -eginning with the year net following the one in which

the homestead application has -een filed, or the concession has -een approved, or

the contract has -een signed, as the case may -e, on the -asis of the value fied in

such filing, approval or signing of the application, concession or contract.

The essential :uestion then * '(-'() l"#$ )(()($ +u)u"#- -o S(/. ;: ")( /o+)('(#$($

*# S(/. 11< "#$, -'()(o)(, -""l(.

ection ((* of the 'u-lic ?and Act should -e treated as an eception to Art. ), par. %a&, of the

Assessment ?aw. >hile ordinary pu-lic lands are ta eempt -ecause title thereto -elongs to the

"epu-lic, ec. ((* su-jects them to real estate ta even -efore ownership thereto is transferred in

the name of the -eneficiaries. ec. ((* comprehends three %)& modes of disposition of ?ands

under the 'u-lic ?and Act, to wit= homestead, concession, and contract.

?ia-ility to real property taes under ec. ((* is predicated on %a& filing of homestead

application, %-& approval of concession and, %c& signing of contract. ignificantly, without these

words, the date of the accrual of the real estate ta would -e indeterminate. ince N8C is not ahomesteader and no GcontractG %-ilateral agreement& was signed, it would appear, then, that

reservation under ec. ), -eing a unilateral act of the 'resident, falls under GconcessionG.

GConcessionG as a technical term under the 'u-lic ?and Act is synonymous with GalienationG and

GdispositionG, and is defined in ec. (0 as Gany of the methods authoriJed -y this Act for the

ac:uisition, lease, use, or -enefit of the lands of the pu-lic domain other than tim-er or mineral

lands.G ?ogically, where ec. ((* contemplates authoriJed methods for ac:uisition, lease, use, or

-enefit under the Act, the taa-ility of the land would depend on whether reservation under ec.

) is one such method of ac:uisition, etc. Tersely put, is reservation synonymous with

alienationR r, are the two terms antithetical and mutually eclusiveR !ndeed, reservation

connotes retention, while concession %alienation& signifies cession.



ection and of the 'u-lic ?and Act provide that reserved lands are ecluded from that may

-e su-ject of disposition, to wit SB

ec. . nly those lands shall -e declared open to disposition or concession which

have -een officially delimited and classified and, when practica-le, surveyed,

and *hich have not )een reserved for pu-lic or :uasipu-lic uses, nor appropriated

-y the /overnment, nor in any manner -ecome private property , nor those on

which a private right authoriJed and recogniJed -y this Act or any valid law may

-e claimed, or *hich, having )een reserved or appropriated, have ceased to )e so.

ec. . The tract or tracts of land reserved under the provisions of section eighty

three shall -e non-aliena)le and shall not )e su)ect to occupation, entr$, sale,

lease, or other disposition until again declared aliena)le under the provisions of

this Act or -y proclamation of the 'resident %;mphasis supplied&

As >e view it, -'( ((/- o )(()"-*o# u#$() S(/. ;: * -o (5)(5"-( " +*(/( o +ul*/ l"#$

"#$ -)"#o) *- *#-o #o#7"l*(#"l( o) #o#7$*+o"l( u#$() -'( Pul*/ L"#$ A/-. S(/-*o#

11<, o# -'( o-'() '"#$, "++l*( -o $*+o"l( +ul*/ l"#$. Cl(")ly, -'()(o)(, S(/. 11< $o(

#o- "++ly -o l"#$ )(()($ u#$() S(/. ;:. Co#(8u(#-ly, -'( u?(/- )(()($ +ul*/ l"#$

)("*# -" ((+-.

Bo((), " )(5")$ -'( ")('ou( /o#-)u/-($ o# " +ul*/ )(()"-*o#, " $*()(#- )ul(

'oul$ "++ly (/"u( -'( ((+-*o# o +ul*/ +)o+()-y )o -""-*o# $o( #o- (-(#$ -o

*+)o((#- o# -'( +ul*/ l"#$ "$( y +)(7(+-*o#(), 'o(-("$() "#$ o-'()

/l"*"#-, o) o//u+"#-, "- -'(*) o# (+(#(, "#$ -'(( ")( -""l( y -'(

-"-( . . . 29 Co#(8u(#-ly, -'( ")('ou( /o#-)u/-($ o# -'( )(()($ l"#$ y NC 3#o

u#$() "$*#*-)"-*o# y N&C, *#$(($, 'oul$ +)o+()ly ( "(($ )("l (-"-( -" " u/'

*+)o((#- $o( #o- "++(") -o (lo#5 -o -'( R(+ul*/.

S*#/( -'( )(()"-*o# * ((+- )o )("l-y -", -'( ())o#(ou -" +"y(#- /oll(/-($ y

CEU 'oul$ ( )(u#$($ -o N&C. T'* * *# /o#o#"#/( *-' S(/. 40, +"). 3" o -'(

o)() R("l P)o+()-y T" Co$( '*/' ((+-($ )o -""-*o# )("l +)o+()-y o#($ y -'(



R(+ul*/ o -'( P'*l*++*#( o) "#y o *- +ol*-*/"l u$***o#, " (ll " "#y GOCC o

((+- y *- /'")-(). :0

As regards the re:uirement of paying under protest -efore judicial recourse, C;#D argues that in

any case N8C is not entitled to refund -ecause ec. 3* of ".A. )*3, the "evised Charter of the

City of Ce-u, :1 re:uires payment under protest -efore resorting to judicial action for ta refund5

that it could not have acted on the first demand letter of N8C of 10 Hay (930 -ecause it was

sent to the City Assessor and not to the City Treasurer5 that, conse:uently, there having -een no

appropriate prior demand, resort to judicial remedy is premature5 and, that even on the premise

that there was proper demand, N8C has yet to ehaust administrative remedies -y way of appeal

to the 8epartment of 6inance and2or Auditor /eneral -efore ta$ing judicial action.

N8C does not agree. !t disputes the applica-ility of the pa$!ent-under-protest re:uirement is

ec. 3* of the "evised Ce-u City Charter -ecause the issue is not the validity of ta assessment

-ut recovery of erroneous payments under Arts. 1(*4 and 1(** of the Civil Code. :2 !t cites the

case of 9ast Asiatic Co. , +td . v. Cit$ of 3avao:: which held that where the ta is unauthoriJed, Git

is not a ta assessed under the charter of the appellant City of 8avao and for that reason no

protest is necessary for a claim or demand for its refund.G !n a!ie Te#tiles, 'nc. vs. atha$,

Sr . , :4;e held %

. . . 'rotest is not a re:uirement in order that a tapayer who paid under a

mista$en -elief that it is re:uired -y law, may claim for a refund. ection *4 :< of

Commonwealth Act No. 430 does not apply to petitioner which could conceiva-ly

not have -een epected to protest a payment it honestly -elieved to -e due. The

same refers only to the case where the tapayer, despite his $nowledge of the

erroneous or illegal assessment, still pays and fails to ma$e the proper protest, for

in such case, he should manifest an unwillingness to pay, and failing so, the

tapayer is deemed to have waved his right to claim a refund.

!n the case at -ar, petitioner, therefore, cannot -e said to have waived his right. 7e

had no $nowledge of the fact that it was eempted from payment of the realty ta

under Commonwealth Act No. 430. 'ayment was made through error or mista$e,



in the honest -elief that petitioner was lia-le, and therefore could not have -een

made under protest, -ut with complete voluntariness. !n any case, a tapayer

should not -e held to suffer loss -y his good intention to comply with what he

-elieves is his legal o-ligation, where such o-ligation does not really eist . . . The

fact that petitioner paid thru error or mista$e, and the government accepted the

payment, gave rise to the application of the principle of solutio inde)iti under

Article 1(*4 of the New Civil Code, which provides that Gif something is received

when there is no right to demand it, and it was unduly delivered through mista$e,

the o-ligation to return it arises.G There is, therefore, created a tie or juridical

relation in the nature of solutio inde)iti, epressly classified as :uasicontract

under ection 1, Chapter ! of Title FI!! of the New Civil code.

The :uasicontract of solutio inde)iti is one of the concrete manifestations of the

ancient principle that no one shall enrich himself unjustly at the epense of

another . . . 7ence, it would seem unedifying for the government, that $nowing it

has no right at all to collect or to receive money for alleged taes paid -y mista$e,

it would -e reluctant to return the same . . . 'etitioner is not unsatisfied in the

assessment of its property. Assessment having -een made, it paid the real estate

taes without $nowing that it is eempt.

As regards the claim for refund of ta payments spanning more than twenty %10& years, >e also

said in a!ie Te#tiles that B

Solutio inde)iti is a :uasicontract, and the instant case -eing in the nature

of solutio inde)iti, the claim for refund must -e commenced within si %+& years

from date of payment pursuant to Article ((4* %1& of the New Civil Code :6 . . .

>e sustain the appellate court to the etent that its decision covers improperly collected taes on

the reserved land under 'roclamation No. 4)0, thus B

The defense of prescription invo$ed -y the defendant which counsel for the

plaintiff, however, did not answer in its memorandum, is partly wellta$en.



Actions for refund of taes illegally collected must -e commenced within si %+&

years from the date of collection. . . . .

The stipulation of facts and the pleadings filed -y the parties do not contain data

specifying when and how much were paid -y the year, of the taes sought to -e

refunded. Accordingly, the Court has no other alternative -ut to order the refund

of an undetermined amount -ased, however, on the date of payment counted si

%+& years -ac$ward from cto-er 1*, (931, when the complaint in this case was

filed. :=

As regards ehaustion of administrative remedies, >e agree with the trial court that the case

constitutes an eception to the rule, as it involves purely :uestion of law. :; pecifically, on the

re:uirement of appeal to the ecretary of 6inance, >e further held in the same a!ie

Te#tiles that GL;M:ually not applica-le is ection (3 of Commonwealth Act No. 430 :9 cited -y

respondent in relation to the right of a, property owner to contest the validity of assessment . . .G

"espondent C;#D li$ewise invites ur attention to the availa-ility of appeal to the /overnment

Auditing ffice although no authority is cited to Ds. >e do not find any either to sustain the

procedure.

>7;";6";, finding that National 8evelopment Company %N8C& is eempt from real estate

ta on the reserved land -ut lia-le for the warehouse erected thereon, the decision appealed from

is accordingly 03'1'93. Conse:uently, let this case -e remanded to the court of origin, now

the "egional Trial Court of Hanila, to determine the proper lia-ility of N8C, particularly on its

warehouse, and effect the corresponding refund, payment or setoff, as the case may -e,

conforma-ly with this decision. No costs.

"8;";8.

Cruz, Padilla and Gri:o-A6uino, JJ., concur.

Documents

Tax Caban for Digesting Due June 30