Title: Villanueva vs Ople

GR 165125 November 18, 2005

Ponente: Panganiban, j.:
Facts:
On December 8, 2003, Petitioners Cesar T. Villanueva, Pedro S. Santos, and Roy C. Soriano filed a Joint Affidavit-Complaint[5] before the Office of
the Ombudsman. They charged incumbent Mayor Felix V. Ople and Vice-Mayor Josefina R. Contreras of Hagonoy, Bulacan, of violation of
Section 3(e)*6+ of RA No. 3019 or the Anti-Graft and Corrupt Practices Act,*7+ in relation to Sections 305-(a),[8] 318[9] and 351[10] of the Local
Government Code (LGC).
Petitioners alleged that the annual budget for Fiscal Year (FY) 2003 of the Municipality of Hagonoy had been submitted by Mayor Ople -- through
Vice-Mayor Contreras -- to the Sangguniang Bayan of Hagonoy, only on June 11, 2003, instead of on October 16 of the preceding year, as
mandated by Section 318, paragraph 2 of Book II, Title V, Chapter III of the LGC. They added that Vice-Mayor Contreras had failed to refer the
budget to the chief legal counsel of the municipality; and that, together with the other incumbent members of the Sangguniang Bayan, she had
instead sought the approval of the alleged Illegal Annual Budget for 2003.
On the theory that no enabling resolution had been enacted authorizing expenditures of the municipality to be based on the annual budget for
the preceding year, petitioners claimed that the disbursement of public funds during the period January 1, 2003 to July 11, 2003[12] and/or
August 27, 2003[13] had been illegal. They therefore prayed that respondents be held liable for the illegal disbursements done in the discharge
of official functions, through evident bad faith and/or gross negligence that had caused undue injury to the Municipality of Hagonoy, Bulacan.
Respondents filed their respective Counter-Affidavits, both dated February 27, 2004, and practically identical in form and substance.[15] They
stated that the proposed budget had actually been submitted on June 26, 2003, and not June 11, 2003. It was submitted only on that date,
because Commission on Audit (COA) Circular No. 2002-2003, otherwise known as the New Government Accounting System, had mandated the
revision of accounting procedures.[16] In compliance with that Circular, the municipality had to review and modify almost all of its financial
transactions beginning January 1, 2002. In order to prepare a feasible budget, they allegedly had to know the localitys financial position for the
prior year, data on which had to come from the accounting department.
According to respondents, the Sangguniang Bayan of Hagonoy and the Sangguniang Panlalawigan of Bulacan eventually passed and approved
the proposed budget, whose effectivity date was January 1, 2003.[18] They averred that the Local Government Code had not required the vice-
mayor to submit the budget to the legal officer of the municipality for review.
Finally, respondents claimed that the disbursements of public funds during the absence of an approved budget were legal under Section 323[20]
of RA 7160 or the LGC.
In their Reply and Supplemental Reply, petitioners reiterated their allegations in their Joint Affidavit-Complaint, in which they stressed that
Section 323 of the LGC had required the mayor to submit the budget for the coming fiscal year not later than October 16 of the current FY.

Issue: WON the deputy ombudsman for Luzon actedca in grave abuse of his discretion in ruling that there is no probable cause against respondets?
WON petitioners instituted the wrong remedy?
Thus, petitioners committed a procedural error in resorting to a Petition for Review under Rule 45 of the Rules of Court. To challenge the dismissal of
their Complaint and to require the OMB to file an information, petitioners should have resorted to a petition for certiorari under Rule 65 of the Rules of
Court. The only ground upon which this Court may entertain a review of the OMBs resolution is grave abuse of discretion, not reversible errors.
Held:
No, deputy ombudsman did not act with GAD.
Yes, in Fabian v. Desierto held that appeals from the orders, directives, or decisions of the OMB in administrative disciplinary cases were cognizable by
the Court of Appeals.
Ratio:
A special civil action for certiorari is the proper remedy when a government officer has acted with grave abuse of discretion amounting to lack or
excess of jurisdiction; and there is no plain, speedy, and adequate remedy in the ordinary course of law.[35] But even assuming that the present Petition may be
treated as one for certiorari, the case must nevertheless be dismissed.
Grave abuse of discretion implies a capricious and whimsical exercise of judgment tantamount to lack or excess of jurisdiction.[36] The exercise of power must
have been done in an arbitrary or a despotic manner by reason of passion or personal hostility. It must have been so patent and gross as to amount to an
evasion of positive duty or a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.[37]
In the present case, petitioners do not even allege that the OMB gravely abused its discretion in issuing its questioned Resolution. A perusal of the issues they
submitted reveals that the crux of the controversy revolves around the finding of the deputy ombudsman that there was no probable cause against respondents.
They allege that he committed legal errors in arriving at his findings and conclusions and had in fact no basis for dismissing their Complaint. The OMBs
judgment may or may not have been erroneous, but it has not been shown to be tainted with arbitrariness, despotism or capriciousness amounting to lack or
excess of jurisdiction.
In any event, the Court finds no grave abuse in the manner in which the deputy ombudsman exercised his discretion. Evidently, he had sufficient
bases for his finding that there was no probable cause.
First, the mere failure of the local government to enact a budget did not make all its disbursements illegal. Section 323 of the LGC provides for the automatic
reenactment of the budget of the preceding year, in case the Sanggunian fails to enact one within the first 90 days of the fiscal year. Hence, the contention in
the present case that money was paid out of the local treasury without any valid appropriation must necessarily fail.
Second, Section 323 states that only the annual appropriations for salaries and wages, statutory and contractual obligations, and essential operating
expenses are deemed reenacted. Petitioner failed to identify disbursements that had gone beyond this coverage.
Third, petitioners failed to substantiate their allegations that the government had suffered undue injury. They concluded that there had been undue injury
simply on the basis of their unsubstantiated claims of illegal disbursements. Having failed to prove any unlawful expenditure, the claim of undue injury must
necessarily fail.
Fourth, petitioners relied solely on Section 318 of the LGC, which allegedly exposed the mayor to criminal liability for delay in submitting a budget proposal.
The pertinent provision reads:
Sec. 318. Preparation of the Budget by the Local Chief Executive. Upon receipt of the statements of income and expenditures from the treasurer,
the budget proposals of the heads of departments and offices, and the estimates of income and budgetary ceilings from the local finance committee, the
local chief executive shall prepare the executive budget for the ensuing fiscal year in accordance with the provisions of this Title.
The local chief executive shall submit the said executive budget to the sanggunian concerned not later than the sixteenth (16th) of October of the current fiscal
year. Failure to submit such budget on the date prescribed herein shall subject the local chief executive to such criminal and administrative penalties as provided
for under this Code and other applicable laws.
Under the above LGC provision, criminal liability for delay in submitting the budget is qualified by various circumstances. For instance, the mayor must first
receive the necessary financial documents from other city officials in order to be able to prepare the budget. In addition, criminal liability must conform to the
provisions of the LGC and other applicable laws. Noteworthy is the fact that petitioners failed to present evidence that would fulfill these qualifications stated in
the law.
The determination of probable cause during a preliminary investigation is a function of the government prosecutor, who in this case is the
ombudsman.[43] As a rule, the Court does not interfere in the ombudsmans exercise of discretion in determining probable cause, unless there are compelling
reasons.
This policy is based on constitutional, statutory and practical considerations.[45] To insulate the OMB from outside pressure and improper influence, the
Constitution and RA 6770[46] (the Ombudsman Act of 1989) grant it a wide latitude of investigatory and prosecutorial powers virtually free from executive,
legislative or judicial intervention.[47] Such initiative and independence must be inherent in the ombudsman who, beholden to no one, acts as champion of the
people and preserver of the integrity of public service.



Title: Albon vs Fernando
GR 148357 June 30, 2006
Ponente: Corona, j.:
Facts:
May 1999, the City of Marikina undertook a public works project to widen, clear and repair the existing sidewalks of Marikina Greenheights
Subdivision. It was undertaken by the city government pursuant to Ordinance No. 59. Subsequently, petitioner Albon filed a taxpayers suit for
certiorari, prohibition and injunction with damages against respondents City Engineer Alfonso Espirito, Assistant City Engineer Anaki Maderal
and City Treasurer Natividad Cabalquinto.
According to the petitioner it was unconstitutional and unlawful for respondents to use government equipment and property, and to disburse
public funds, of the City of Marikina for the upgrading, widening, clearing, repair and maintenance of the existing sidewalks of Marikina
Greenheights Subdivision. He alleged that the sidewalks were private property because Marikina Greenheights Subdivision was owned by V.V.
Soliven, Inc. Hence, the city government could not use public resources on them.
In undertaking the project, therefore, respondents allegedly violated the constitutional proscription against the use of public funds for private
purposes as well as Sections 335 and 336 of RA 7160 and the Anti-Graft and Corrupt Practices Act. The trial court ruled in favor of the
respondents. Ordinance No. 59is a valid enactment. The court recognized the inherent police power of the municipality and with this it is
allowed to carry out the contested works. The Court of Appeals sustained the decision of the trial court stating that sidewalks of Marikina
Greenheights Subdivision were public in nature and ownership thereof belonged to the City of Marikina or the Republic of the Philippines
following the 1991White Plains Association decision. Thus, the improvement and widening of the sidewalks pursuant to Ordinance No. 59 of
1993 was well within the LGUs powers.
Issues:
WON the trial court and court of appeals correctly applied the ruling on the 1991 White Plains decision?
WON the acts of Fernando as mayor in undertaking the repairs of the roads and specifically the sidewalks of a private subdivision using public funds is
valid?
Held: It depends; the case was remanded for further receipt of eveidences. But both the trial court and court of appeals made a mistake in applying the
decision of the white plains case.


Ratio:
The ruling in the 1991 White Plains Association decision relied on by both the trial and appellate courts was modified by this Court in 1998 in White
Plains Association v. Court of Appeals.[19] Citing Young v. City of Manila,[20] this Court held in its 1998 decision that subdivision streets belonged to the owner
until donated to the government or until expropriated upon payment of just compensation.
The word street, in its correct and ordinary usage, includes not only the roadway used for carriages and vehicular traffic generally but also the portion used for
pedestrian travel.[21] The part of the street set aside for the use of pedestrians is known as a sidewalk.[22]
Moreover, under subdivision laws,[23] lots allotted by subdivision developers as road lots include roads, sidewalks, alleys and planting strips.[24] Thus, what is
true for subdivision roads or streets applies to subdivision sidewalks as well. Ownership of the sidewalks in a private subdivision belongs to the subdivision
owner/developer until it is either transferred to the government by way of donation or acquired by the government through expropriation.
Section 335 of RA 7160 is clear and specific that no public money or property shall be appropriated or applied for private purposes. This is in consonance with
the fundamental principle in local fiscal administration that local government funds and monies shall be spent solely for public purposes.[25]
In Pascual v. Secretary of Public Works,[26] the Court laid down the test of validity of a public expenditure: it is the essential character of the direct object of the
expenditure which must determine its validity and not the magnitude of the interests to be affected nor the degree to which the general advantage of the
community, and thus the public welfare, may be ultimately benefited by their promotion.[27] Incidental advantage to the public or to the State resulting from
the promotion of private interests and the prosperity of private enterprises or business does not justify their aid by the use of public money.[28]
In Pascual, the validity of RA 920 (An Act Appropriating Funds for Public Works) which appropriated P85,000 for the construction, repair, extension and
improvement of feeder roads within a privately-owned subdivision was questioned. The Court held that where the land on which the projected feeder roads
were to be constructed belonged to a private person, an appropriation made by Congress for that purpose was null and void.[29]
In Young v. City of Manila,[30] the City of Manila undertook the filling of low-lying streets of the Antipolo Subdivision, a privately-owned subdivision. The Court
ruled that as long as the private owner retained title and ownership of the subdivision, he was under the obligation to reimburse to the city government the
expenses incurred in land-filling the streets.
Moreover, the implementing rules of PD 957, as amended by PD 1216, provide that it is the registered owner or developer of a subdivision who has the
responsibility for the maintenance, repair and improvement of road lots and open spaces of the subdivision prior to their donation to the concerned LGU. The
owner or developer shall be deemed relieved of the responsibility of maintaining the road lots and open space only upon securing a certificate of completion
and executing a deed of donation of these road lots and open spaces to the LGU.[31]
Therefore, the use of LGU funds for the widening and improvement of privately-owned sidewalks is unlawful as it directly contravenes Section 335 of RA 7160.
This conclusion finds further support from the language of Section 17 of RA 7160 which mandates LGUs to efficiently and effectively provide basic services and
facilities. The law speaks of infrastructure facilities intended primarily to service the needs of the residents of the LGU and which are funded out of municipal
funds.*32+ It particularly refers to municipal roads and bridges and similar facilities.*33+

Applying the rules of ejusdem generis, the phrase similar facilities refers to or includes infrastructure facilities like sidewalks owned by the LGU. Thus, RA 7160
contemplates that only the construction, improvement, repair and maintenance of infrastructure facilities owned by the LGU may be bankrolled with local
government funds.
Clearly, the question of ownership of the open spaces (including the sidewalks) in Marikina Greenheights Subdivision is material to the determination of the
validity of the challenged appropriation and disbursement made by the City of Marikina. Similarly significant is the character of the direct object of the
expenditure, that is, the sidewalks.
Whether V.V. Soliven, Inc. has retained ownership of the open spaces and sidewalks or has already donated them to the City of Marikina, and whether the public
has full and unimpeded access to the roads and sidewalks of Marikina Greenheights Subdivision, are factual matters. There is a need for the prior resolution of
these issues before the validity of the challenged appropriation and expenditure can be determined.

Title: Altres vs Empleo
GR 180986 December 10, 2008
Ponente: Carpio Morales, j.:
Facts:
Sometime in July 2003, Mayor Quijano sent notices of numerous vacant career positions in the city government to the CSC. The city
government and the CSC thereupon proceeded to publicly announce the existence of the vacant positions. Petitioners and other applicants
submitted their applications for the different positions where they felt qualified.
Toward the end of his term or on May 27, June 1, and June 24, 2004, Mayor Quijano issued appointments to petitioners.
In the meantime, the Sangguniang Panglungsod issued Resolution No. 04-242[3] addressed to the CSC Iligan City Field Office requesting a
suspension of action on the processing of appointments to all vacant positions in the plantilla of the city government as of March 19, 2004 until
the enactment of a new budget.
The Sangguniang Panglungsod subsequently issued Resolution No. 04-266[4] which, in view of its stated policy against midnight appointments,
directed the officers of the City Human Resource Management Office to hold in abeyance the transmission of all appointments signed or to be
signed by the incumbent mayor in order to ascertain whether these had been hurriedly prepared or carefully considered and whether the
matters of promotion and/or qualifications had been properly addressed. The same Resolution enjoined all officers of the said Office to put off
the transmission of all appointments to the CSC, therein making it clear that non-compliance therewith would be met with administrative action.
Respondent city accountant Empleo did not thus issue a certification as to availability of funds for the payment of salaries and wages of
petitioners, as required by Section 1(e)(ii), Rule V of CSC Memorandum Circular No. 40, Series of 1998 reading:
e. LGU Appointment. Appointment in local government units for submission to the Commission shall be accompanied, in addition to the
common requirements, by the following:
x x x x
ii. Certification by the Municipal/City Provincial Accountant/Budget Officer that funds are available.

And the other respondents did not sign petitioners position description forms.
The CSC Field Office for Lanao del Norte and Iligan City disapproved the appointments issued to petitioners invariably due to lack of certification
of availability of funds.
Issues:
WON in the present petition is whether it is Section 474(b)(4) or Section 344 of the Local Government Code of 1991 which applies to the requirement of
certification of availability of funds under Section 1(e)(ii), Rule V of CSC Memorandum Circular Number 40, Series of 1998?
Sub issue: If not all petitioners signed the verification and certification against forum-shopping is sufficient to dismiss the case?
Held:
The Court declares that it is Section 474(b)(4), not Section 344, of the Local Government Code of 1991, which applies to the requirement of certification
of availability of funds under Section 1(e)(ii), Rule V of Civil Service Commission Memorandum Circular Number 40, Series of 1998.
Case will not be dismissed, substantial compliance is invoked.
Under justifiable circumstances, we have already allowed the relaxation of the requirements of verification and certification so that the ends of justice
may be better served. Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the
imagination or a matter of speculation, and that the pleading is filed in good faith; while the purpose of the aforesaid certification is to prohibit and penalize the
evils of forum shopping.
In the present case, the signing of the verification by only 11 out of the 59 petitioners already sufficiently assures the Court that the allegations in the
pleading are true and correct and not the product of the imagination or a matter of speculation; that the pleading is filed in good faith; and that the signatories
are unquestionably real parties-in-interest who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the petition.
With respect to petitioners certification against forum shopping, the failure of the other petitioners to sign as they could no longer be contacted or are no
longer interested in pursuing the case need not merit the outright dismissal of the petition without defeating the administration of justice. The non-signing
petitioners are, however, dropped as parties to the case.

Ratio:
References:
Section 474. Qualifications, Powers and Duties.
(b) The accountant shall take charge of both the accounting and internal audit services of the local government unit concerned and shall:
(4) certify to the availability of budgetary allotment to which expenditures and obligations may be properly charged.
Sec. 344. Certification and Approval of Vouchers. No money shall be disbursed unless the local budget officer certifies to the existence of appropriation
that has been legally made for the purpose, the local accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds
for the purpose.
Petitioners propound the following distinctions between Sections 474(b)(4) and 344 of the Local Government Code of 1991:
(1) Section 474(b)(4) speaks of certification of availability of budgetary allotment, while Section 344 speaks of certification of availability of funds for
disbursement;
(2) Under Section 474(b)(4), before a certification is issued, there must be an appropriation, while under Section 344, before a certification is issued, two
requisites must concur: (a) there must be an appropriation legally made for the purpose, and (b) the local accountant has obligated said appropriation;
(3) Under Section 474(b)(4), there is no actual payment involved because the certification is for the purpose of obligating a portion of the appropriation;
while under Section 344, the certification is for the purpose of payment after the local accountant had obligated a portion of the appropriation;
(4) Under Section 474(b)(4), the certification is issued if there is an appropriation, let us say, for the salaries of appointees; while under Section 344, the
certification is issued if there is an appropriation and the same is obligated, let us say, for the payment of salaries of employees.
Respondents do not squarely address the issue in their Comment.
Section 344 speaks of actual disbursements of money from the local treasury in payment of due and demandable obligations of the local government unit.
The disbursements are to be made through the issuance, certification, and approval of vouchers. The full text of Section 344 provides:
Sec. 344. Certification and Approval of Vouchers. No money shall be disbursed unless the local budget officer certifies to the existence of appropriation
that has been legally made for the purpose, the local accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds
for the purpose. Vouchers and payrolls shall be certified to and approved by the head of the department or office who has administrative control of the fund
concerned, as to validity, propriety, and legality of the claim involved. Except in cases of disbursements involving regularly recurring administrative expenses
such as payrolls for regular or permanent employees, expenses for light, water, telephone and telegraph services, remittances to government creditor
agencies such as GSIS, SSS, LDP, DBP, National Printing Office, Procurement Service of the DBM and others, approval of the disbursement voucher by the
local chief executive himself shall be required whenever local funds are disbursed.
In cases of special or trust funds, disbursements shall be approved by the administrator of the fund.
In case of temporary absence or incapacity of the department head or chief of office, the officer next-in-rank shall automatically perform his function and he
shall be fully responsible therefor.
Voucher, in its ordinary meaning, is a document which shows that services have been performed or expenses incurred.[42] When used in connection
with disbursement of money, it implies the existence of an instrument that shows on what account or by what authority a particular payment has been made, or
that services have been performed which entitle the party to whom it is issued to payment.[43]
Section 344 of the Local Government Code of 1991 thus applies only when there is already an obligation to pay on the part of the local government unit,
precisely because vouchers are issued only when services have been performed or expenses incurred.
The requirement of certification of availability of funds from the city treasurer under Section 344 of the Local Government Code of 1991 is for the purpose of
facilitating the approval of vouchers issued for the payment of services already rendered to, and expenses incurred by, the local government unit.
The trial court thus erred in relying on Section 344 of the Local Government Code of 1991 in ruling that the ministerial function to issue a certification as to
availability of funds for the payment of the wages and salaries of petitioners pertains to the city treasurer. For at the time material to the required issuance of
the certification, the appointments issued to petitioners were not yet approved by the CSC, hence, there were yet no services performed to speak of. In other
words, there was yet no due and demandable obligation of the local government to petitioners.
Section 474, subparagraph (b)(4) of the Local Government Code of 1991, on the other hand, requires the city accountant to certify to the availability of
budgetary allotment to which expenditures and obligations may be properly charged.*44+ By necessary implication, it includes the duty to certify to the
availability of funds for the payment of salaries and wages of appointees to positions in the plantilla of the local government unit, as required under Section
1(e)(ii), Rule V of CSC Memorandum Circular Number 40, Series of 1998, a requirement before the CSC considers the approval of the appointments.
In fine, whenever a certification as to availability of funds is required for purposes other than actual payment of an obligation which requires disbursement of
money, Section 474(b)(4) of the Local Government Code of 1991 applies, and it is the ministerial duty of the city accountant to issue the certification..




Title: Pepsi-Cola vs City of Butuan
GR L-22814 August 28, 1968
Ponente: Concepcion, C.J.:
Facts:
In 1960, Ordinance No. 110 was passed in Butuan. It was later amended by Ordinance 122. This Ordinance imposes a tax on any person,
association, etc., of P0.10 per case of 24 bottles of Pepsi- Cola. Pepsi operates within Butuan and it paid under protest the amount of P4.926.63
from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961 pursuant to said ordinance. Pepsi filed a
complaint for the recovery of the total amount of P14,177.03 paid under protest and those that it may later on pay until the termination of this
case on the ground that Ordinance No. 110 as amended of the City of Butuan is illegal, that the tax imposed is excessive and that it is
unconstitutional. Pepsi averred it is unconstitutional because of the following reasons:
1. it partakes of the nature of an import tax because the tax shall be based and computed from the cargo manifest or bill of lading . . . showing
the number of cases not sold;
2. it is highly unjust and discriminatory because some dealers engaged in selling of carbonated drinks are exempt while others are covered and
such exemption is not justified in the ordinance.
Issue: WON the tax Ordinance No. 110 violate the uniformity of requirement of taxation and is thus invalid?
Held: Yes, the Ordinance No. 110 is illegal (tax imposed is excessive) and thereof and unconstitutional.
Ratio:
The Ordinance, as amended, is discriminatory since only sales by agents or consignees of outside dealers would be subject to the tax. Sales by local
dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or
consignees of producers or merchants established outside the city, would be exempt from the tax. The classification made in the exercise of the authority to tax,
to be valid must be reasonable, which would be satisfied if the classification is based upon substantial distinctions which makes real differences; these are
germane to the purpose of legislation or ordinance; the classification applies not only to present conditions but also to future conditions substantially identical
to those of the present; and the classification applies equally to all those who belong to the same class. These conditions are not fully met by the ordinance in
question.
The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as
discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside
dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the
same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed
tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the
authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this
requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the
legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present;
and (4) the classification applies equally to all those who belong to the same class.

Title: Philippine Petroleum Corporation vs Municipality of Pililla, Rizal
GR 90776 June 3, 1991
Ponente: Paras, j.:
Facts:
Philippine Petroleum Corporation (PPC for short) is a business enterprise engaged in the manufacture of lubricated oil basestock which is a
petroleum product, with its refinery plant situated at Malaya, Pililla, Rizal.
Secretary of Finance issued Provincial Circular No. 26-73 dated December 27, 1973, directed to all provincial, city and municipal treasurers to
refrain from collecting any local tax imposed in old or new tax ordinances in the business of manufacturing, wholesaling, retailing, or dealing in
petroleum products subject to the specific tax under the National Internal Revenue
Respondent Municipality of Pililla, Rizal, through Municipal Council Resolution No. 25, S-1974 enacted Municipal Tax Ordinance No. 1, S-1974
otherwise known as "The Pililla Tax Code of 1974". Sections 9 and 10 of the said ordinance imposed a tax on business, except for those for which
fixed taxes are provided in the Local Tax Code.
The questioned Municipal Tax Ordinance No. 1 was reviewed and approved by the Provincial Treasurer of Rizal (but was not implemented
and/or enforced by the Municipality of Pililla because of its having been suspended up to now in view of Provincial Circular Nos. 26-73 and 26 A-
73.
P.D. 1158 otherwise known as the National Internal Revenue Code of 1977 was enacted, Section 153 of which specifically imposes specific tax on
refined and manufactured mineral oils and motor fuels.
Enforcing the provisions of the above-mentioned ordinance, the respondent filed a complaint against PPC for the collection of the business tax
from 1979 to 1986
the trial court rendered a decision against the petitioner
PPC moved for reconsideration of the decision, but this was denied by the lower court, hence, the instant petition.
Petitioner PPC contends that: (a) Provincial Circular No. 26-73 declared as contrary to national economic policy the imposition of local taxes on
the manufacture of petroleum products as they are already subject to specific tax under the National Internal Revenue Code; (b) the above
declaration covers not only old tax ordinances but new ones, as well as those which may be enacted in the future; (c) both Provincial Circulars
(PC) 26-73 and 26 A-73 are still effective, hence, unless and until revoked, any effort on the part of the respondent to collect the suspended tax
on business from the petitioner would be illegal and unauthorized; and (d) Section 2 of P.D. 436 prohibits the imposition of local taxes on
petroleum products.
Issue:
WON petitioner PPC whose oil products are subject to specific tax under the NIRC, is still liable to pay (a) tax on business and (b) storage fees,
considering Provincial Circular No. 6-77; and mayor's permit and sanitary inspection fee unto the respondent Municipality of Pililla, Rizal, based on Municipal
Ordinance No. 1.
Held:
PREMISES CONSIDERED, with the MODIFICATION that business taxes accruing PRIOR to 1976 are not to be paid by PPC (because the same have
prescribed) and that storage fees are not also to be paid by PPC (for the storage tanks are owned by PPC and not by the municipality, and therefore cannot be a
charge for service by the municipality).
Ratio:
The exercise by local governments of the power to tax is ordained by the present Constitution. To allow the continuous effectivity of the prohibition set
forth in PC No. 26-73 (1) would be tantamount to restricting their power to tax by mere administrative issuances. Under Section 5, Article X of the 1987
Constitution, only guidelines and limitations that may be established by Congress can define and limit such power of local governments.
As to the authority of the mayor to waive payment of the mayor's permit and sanitary inspection fees, the trial court did not err in holding that "since the power
to tax includes the power to exempt thereof which is essentially a legislative prerogative, it follows that a municipal mayor who is an executive officer may not
unilaterally withdraw such an expression of a policy thru the enactment of a tax." The waiver partakes of the nature of an exemption. It is an ancient rule that
exemptions from taxation are construed instrictissimi juris against the taxpayer and liberally in favor of the taxing authority. Tax exemptions are looked upon
with disfavor.
Thus, in the absence of a clear and express exemption from the payment of said fees, the waiver cannot be recognized. As already stated, it is the law-making
body, and not an executive like the mayor, who can make an exemption. Under Section 36 of the Code, a permit fee like the mayor's permit, shall be required
before any individual or juridical entity shall engage in any business or occupation under the provisions of the Code.
However, since the Local Tax Code does not provide the prescriptive period for collection of local taxes, Article 1143 of the Civil Code applies. Said law provides
that an action upon an obligation created by law prescribes within ten (10) years from the time the right of action accrues. The Municipality of Pililla can
therefore enforce the collection of the tax on business of petitioner PPC due from 1976 to 1986, and NOT the tax that had accrued prior to 1976.