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GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

ASSOCIATION(OF(CUSTOMS(BROKERS(INC.(V.(MUNICIPAL(BOARD(
G.R.(No.(L74376((((((((((((((
May(22,(1953(
(
FACTS:(
The$ Municipal$ Board$ of$ Manila$ passed$ an$ ordinance$ levying$ a$ property$ tax$
on$all$motor$vehicles$operating$within$the$City$of$Manila.$$$The$ordinance$provided$
that$the$rate$of$the$tax$would$be$1%$ad$valorem$per$annum,$and$that$the$proceeds$
of$the$tax$shall$accrue$to$the$Streets$and$Bridges$Funds$of$the$City,$w/c$will$be$used$
for$the$repair,$maintenance,$and$improvement$of$its$streets$and$bridges.$
The$ Charter$ of$ Manila$ gives$ the$ municipal$ board$ the$ power$ to$ tax$ motor$
vehicles,$ but$ this$ is$ limited$ by$ the$ Motor$ Vehicles$ Law,$ which$ disallows$ the$
imposition$ of$ fees$ on$ motor$ vehicles,$ EXCEPT$ property$ taxes$ imposed$ by$ a$
municipal$corp.$$THUS,$the$law$allows$the$City$of$Manila$to$impose$a$property$tax$
on$motor$vehicles$operating$within$its$limits.$
The$ Association$ of$ Customs$ Brokers,$ Inc.,$ which$ is$ composed$ of$ all$ brokers$
and$ public$ service$ operators$ of$ motor$ vehicles$ in$ the$ City$ of$ Manila,$ and$ G.$
Manlapit,$Inc.,$a$member,$and$also$a$public$service$operator$of$trucks,$challenge$the$
validity$of$said$ordinance$on$the$ground$that$(1)$while$it$levies$a$soPcalled$property$
tax$it$is$in$reality$a$license$tax$which$is$beyond$the$power$of$the$Municipal$Board$of$
the$ City$ of$ Manila;$ (2)$ said$ ordinance$ offends$ against$ the$ rule$ of$ uniformity$ of$
taxation;$and$(3)$it$constitutes$double$taxation.$
The$respondents$contend$that$the$challenged$ordinance$imposes$a$property$
tax$ which$ is$ within$ the$ power$ of$ the$ City$ of$ Manila$ to$ impose$ under$ its$ Revised$
Charter$[Section$18$(p)$of$Republic$Act$No.$409],$and$that$the$tax$in$question$does$
not$violate$the$rule$of$uniformity$of$taxation,$nor$does$it$constitute$double$taxation.$
$
ISSUE:(
1.
WON$ordinance$is$valid$
$
HELD:(
1.
No,$it$is$void.$It$imposes$a$license$tax,$which$the$municipal$corporation$may$
not$impose,$although$it$is$made$to$appear$as$a$property$tax.$
As$ a$ rule,$ an$ ad$ valorem$ tax$ is$ a$ property$ tax.$ However,$ if$ the$ tax$ is$ really$
imposed$upon$the$performance$of$an$act,$enjoyment$of$a$privilege,$or$the$engaging$
in$an$occupation,$it$will$be$considered$an$EXCISE,$even$if$its$amount$is$determined$
in$proportion$to$the$value$of$the$property$used$in$connection$with$the$occupation,$
privilege,$or$act$which$is$taxed.$
In$this$case,$the$tax$is$fixed$ad$valorem.$BUT,$the$purpose$is$to$raise$funds$for$
the$ repair,$ maintenance,$ and$ improvement$ of$ the$ streets$ and$ bridges$ in$ the$ city.$
Thus,$it$is$actually$a$license$fee$under$the$guise$of$an$ad$valorem$tax$to$circumvent$
the$prohibition$imposed$by$the$Motor$Vehicles$Law.$$
The$ reason$ for$ the$ prohibition$ is$ that$ under$ the$ Motor$ Vehicles$ Law,$
municipal$ corporations$ already$ get$ proceeds$ for$ the$ purpose$ of$ repairing$ and$

maintaining$ their$ streets$ and$ bridges.$ The$ prohibition$ aims$ at$ preventing$ a$
duplication$in$the$imposition$of$fees$for$the$same$purpose.$
The$ ordinance$ infringes$ on$ the$ rule$ of$ uniformity$ of$ taxation$ because$ it$
exacts$the$tax$upon$ALL$motor$vehicles$operating$within$the$City$of$Manila,$without$
distinguishing$ between$ those$ for$ hire$ and$ for$ private$ use,$ those$ registered$ in$ and$
those$registered$outside$but$occasionally$come$to$Manila.$$
The$ordinance$imposes$the$tax$only$on$those$vehicles$registered$in$Manila,$
even$if$those$vehicles$which$are$registered$outside$the$city$but$which$use$its$streets$
also$contribute$equally$to$the$deterioration$of$the$roads$and$bridges.$
Under$ the$ Motor$ Vehicles$ Law,$ as$ amended,$ (Act$ No.$ 3992)$ which$ has$ a$
bearing$on$the$power$of$the$municipal$corporation$to$impose$tax$on$motor$vehicles$
operating$in$any$highway$in$the$Philippines.$provide$in$Section$70(b),$to$wit:$
No$further$fees$than$those$fixed$in$this$Act$shall$be$exacted$or$demanded$
by$ any$ public$ highway,$ bridge$ or$ ferry,$ or$ for$ the$ exercise$ of$ the$
profession$of$chauffeur,$or$for$the$operation$of$any$motor$vehicle$by$the$
owner$ thereof:$ Provided,) however,$ That$ nothing$ in$ this$ Act$ shall$ be$
construed$ to$ exempt$ any$ motor$ vehicle$ from$ the$ payment$ of$ any$ lawful$
and$equitable$insular,$local$or$municipal$property$tax$imposed$thereupon.$
.$.$.$
$
Note$that$under$the$above$section$no$fees$may$be$exacted$or$demanded$for$
the$ operation$ of$ any$ motor$ vehicle$ other$ than$ those$ therein$ provided,$ the$ only$
exception$being$that$which$refers$to$the$property$tax$which$may$be$imposed$by$a$
municipal$corporation.$This$provision$is$allPinclusive$in$that$sense$that$it$applies$to$
all$motor$vehicles.$In$this$sense,$this$provision$should$be$construed$as$limiting$the$
broad$ grant$ of$ power$ conferred$ upon$ the$ City$ of$ Manila$ by$ its$ Charter$ to$ impose$
taxes.$
$
DISPOSITIVE(PORTION:(
Wherefore,$reversing$the$decision$appealed$from,$we$hereby$declare$the$ordinance$
null$and$void.$
$
(
ESSO(STANDARD(EASTERN,(INC.(v.(CIR(
G.R.(Nos.(L72850579(
1989(July(7(
(
FACTS:(
Petitioner$ESSO$asked$for$a$refund,$as$ordinary$and$necessary$expenses,$of$
the$margin$fees$it$paid$to$the$Central$Bank$on$its$profit$remittances$to$its$New$York$
head$ office.$ The$ CIR$ granted$ a$ tax$ credit$ to$ ESSO$ for$ the$ amount$ it$ spent$ for$ the$
drilling$ and$ exploration$ of$ dry$ holes$ but$ the$ former$ disallowed$ the$ deduction$ for$
the$margin$fees$paid.$
The$CIR$assessed$ESSO$a$deficiency$income$tax$arising$from$the$disallowance$
of$ the$ margin$ fees$ (as$ deduction$ from$ the$ taxable$ income).$ ESSO$ settled$ this$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

deficiency$by$applying$the$tax$credit$previously$granted.$ESSO$claimed$a$refund$for$
the$ overpayment$ of$ its$ 1959P1960$ income$ taxes.$ It$ also$ claimed$ a$ refund$ for$ the$
overpayment$ on$ the$ interest$ on$ its$ deficiency$ income$ tax,$ arguing$ that$ the$ 18%$
interest$should$not$have$been$imposed$on$the$total$deficiency$of$P367K$but$only$on$
the$amount$of$P148k,$the$difference$between$the$total$deficiency$and$its$tax$credit.$
The$abovementioned$claims$were$denied,$with$the$CIR$holding$that$the$margin$fees$
could$not$be$considered$taxes$or$allowed$as$deductible$business$expenses.$
$
ISSUES:(
1.
W/N$the$margin$fees$were$taxes.$
2.
W/N$ the$ margin$ fees$ can$ be$ considered$ necessary$ and$ ordinary$ business$
expenses$and$therefore$deductible$from$its$gross$income.$
(
RATIO:(
1.
No,$the$margin$fees$were$imposed$by$the$State$in$the$exercise$of$its$police$
power$and$not$the$power$of$taxation.(
While$ taxes$ are$ levied$ to$ provide$ revenue$ for$ government$ operations,$ the$
proceeds$ of$ margin$ fees$ are$ applied$ to$ strengthen$ our$ countrys$ international$
reserves.$
A$ margin$ levy$ on$ foreign$ exchange$ is$ a$ form$ of$ exchange$ control$ or$
restriction$designed$to$discourage$imports$and$encourage$exports$and$to$curtail$any$
excessive$demand$upon$the$international$reserve$in$order$to$stabilize$the$currency.$
Its$ immediate$ impact$ is$ on$ the$ rate$ of$ foreign$ exchange;$ and$ in$ fact,$ its$ main$
function$is$to$control$the$exchange$rate$without$changing$the$par$value$of$the$peso$
as$fixed$in$the$Bretton$Woods$Agreements$Act$$a$member$nation$is$not$supposed$
to$alter$its$exchange$rate$at$par$value$to$correct$a$temporary$disequilibrium$in$its$
balance$of$payments.$By$its$nature,$the$margin$levy$is$part$of$the$rate$of$exchange$
as$fixed$by$the$government$
(
2.
No,$the$margin$fees$paid$by$ESSO$cannot$be$deducted$from$its$gross$income.(
There$ are$ four$ conditions$ before$ an$ expense$ can$ be$ deducted:$ a)$ the$
expense$must$be$ordinary$and$necessary;$b)$it$must$be$paid$or$incurred$within$the$
taxable$year;$c)$it$must$be$paid$or$incurred$in$carrying$on$a$trade$or$business;$and$d)$
the$ taxpayer$ must$ substantially$ prove$ by$ evidence$ or$ records$ the$ deductions$
claimed$under$the$law.$
An$ expense$ will$ be$ considered$ necessary$ where$ the$ expenditure$ is$
appropriate$and$helpful$in$the$development$of$the$taxpayers$business.$An$expense$
is$ordinary$when$it$connotes$payment$which$is$normal$in$relation$to$the$business$of$
the$ taxpayer$ and$ the$ surrounding$ circumstances.$ The$ term$ ordinary$ does$ not$
require$that$the$payments$be$habitual$or$normal.$
There$ is$ no$ hard$ and$ fast$ rule$ on$ the$ matter.$ The$ right$ to$ a$ deduction$
depends$in$each$case$on$the$particular$facts$and$the$relation$of$the$payment$to$the$
type$of$business$in$which$the$taxpayer$is$engaged.$
In$this$case,$the$margin$fees$paid$by$ESSO$are$neither$necessary$nor$ordinary$
to$ its$ business$ in$ the$ Philippines.$ The$ margin$ fees$ are$ not$ expenses$ in$ connection$
2

with$ the$ production$ or$ earning$ of$ ESSOs$ income$ in$ the$ Philippines.$ They$ were$
expenses$incurred$in$the$disposition$of$said$incomes$$expenses$for$the$remittance$
of$ funds$ after$ they$ have$ already$ been$ earned$ by$ ESSOs$ branch$ in$ the$ Philippines$
for$the$disposal$of$its$Head$Office$in$New$York,$which$is$already$a$separate$income$
taxpayer.$ESSO$has$not$shown$that$the$remittance$to$the$head$office$of$part$of$its$
profits$was$made$in$furtherance$of$its$own$trade$or$business.$
(
DISPOSITIVE(PORTION:(
WHEREFORE,$ the$ decision$ of$ the$ Court$ of$ Tax$ Appeals$ denying$ the$ petitioners$
claim$for$refund$of$P102,246.00$for$1959$and$P434,234.92$for$1960,$is$AFFIRMED,$
with$costs$against$the$petitioner.$
$
$
PROGRESSIVE(DEVELOPMENT(CORPORATION(VS.(QUEZON(CITY$
GR(No(36081(
24(April(1989(
(
FACTS:(
The$ City$ Council$ of$ Quezon$ City$ adopted$ Ordinance$ 7997$ (1969)$ where$
privately$owned$and$operated$public$markets$to$pay$10%$of$the$gross$receipts$from$
stall$ rentals$ to$ the$ City,$ as$ supervision$ fee.$ Progressive$ Development$ Corporation,$
owner$and$operator$of$a$public$market$known$as$the$"Farmers$Market$&$Shopping$
Center"$ filed$ a$ Petition$ for$ Prohibition$ with$ Preliminary$ Injunction$ against$
respondent$before$the$CFI$of$Rizal$on$the$ground$that$the$supervision$fee$or$license$
tax$imposed$by$the$abovePmentioned$ordinances$is$in$reality$a$tax$on$income$which$
respondent$may$not$impose,$the$same$being$expressly$prohibited$by$Republic$Act$
No.$2264,as$amended.$$
In$its$Supplemental$Petition,$petitioner$alleged$having$paid$under$protest$the$
five$ percent$ (5%)$ tax$ under$ Ordinance$ No.$ 9236$ for$ the$ months$ of$ June$ to$
September$ 1972.$ Lower$ court$ dismissed$ the$ petition.$ Having$ failed$ to$ obtain$
reconsideration$o,$petitioners$present$herein$Petition$for$Review$
$
ISSUE:(
1.
W/N$ the$ tax$ imposed$ by$ respondent$ on$ gross$ receipts$ of$ stall$ rentals$ is$
properly$characterized$as$partaking$of$the$nature$of$an$income$tax$or,$alternatively,$
of$a$license$fee$
$
RATIO:$
1.
No.$ The$ 5%$ tax$ imposed$ in$ Ordinance$ 9236$ does$ not$ constitute$ a$ tax$ on$
income,$ nor$ a$ city$ income$ tax$ (distinguished$ from$ the$ national$ income$ tax$ by$ the$
Tax$Code)$within$the$meaning$of$Section$2$(g)$of$the$Local$Autonomy$Act,$but$rather$
a$license$tax$or$fee$for$the$regulation$of$business$in$which$the$company$is$engaged.$$
To$be$considered$a$license$fee,$the$imposition$must$relate$to$an$occupation$
or$ activity$ that$ so$ engages$ the$ public$ interest$ in$ health,$ morals,$ safety$ and$
development$ as$ to$ require$ regulations$ for$ the$ protection$ and$ promotion$ of$ such$

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GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

public$interest;$the$imposition$must$also$bear$a$reasonable$relation$to$the$probable$
expenses$ of$ the$ regulation,$ taking$ into$ account$ not$ only$ the$ costs$ of$ direct$
regulation$but$also$its$incidental$consequences$as$well.$$
While$it$is$true$that$the$amount$imposed$by$the$questioned$ordinances$may$
be$ considered$ in$ determining$ whether$ the$ exaction$ is$ really$ one$ for$ revenue$ or$
prohibition,$instead$of$one$of$regulation$under$the$police$power,$it$nevertheless$will$
be$presumed$to$be$reasonable.$Local'$governments$are$allowed$wide$discretion$in$
determining$ the$ rates$ of$ imposable$ license$ fees$ even$ in$ cases$ of$ purely$ police$
power$measures,$in$the$absence$of$proof$as$to$particular$municipal$conditions$and$
the$nature$of$the$business$being$taxed$as$well$as$other$detailed$factors$relevant$to$
the$issue$of$arbitrariness$or$unreasonableness$of$the$questioned$rates$
The$ gross$ receipts$ from$ stall$ rentals$ have$ been$ used$ only$ as$ a$ basis$ for$
computing$ the$ fees$ or$ taxes$ due$ to$ the$ city$ to$ cover$ the$ latters$ administrative$
expenses.$ The$ use$ of$ the$ gross$ amount$ of$ stall$ rentals,$ as$ basis$ for$ the$
determination$of$the$collectible$amount$of$license$tax,$does$not$by$itself$convert$or$
render$the$license$tax$into$a$prohibited$city$tax$on$income.$For$ordinarily,$the$higher$
the$ amount$ of$ stall$ rentals,$ the$ higher$ the$ aggregate$ volume$ of$ foodstuffs$ and$
related$ items$ sold$ in$ the$ privately$ owned$ market;$ and$ the$ higher$ the$ volume$ of$
goods$ sold$ in$ such$ market,$ the$ greater$ extent$ and$ frequency$ of$ inspection$ and$
supervision$that$may$be$reasonably$required$in$the$interest$of$the$buying$public.$$
$
OTHER(DOCTRINES:(
If$the$generating$of$revenue$is$the$primary$purpose$and$regulation$is$merely$
incidental,$the$imposition$is$a$tax;$but$if$regulation$is$the$primary$purpose,$the$fact$
that$incidentally$revenue$is$also$obtained$does$not$make$the$imposition$a$tax(
$
DISPOSITIVE(PORTION:$
ACCORDINGLY,$ the$ Decision$ of$ the$ then$ Court$ of$ First$ Instance$ of$ Rizal,$ Quezon$
City,$Branch$18,$is$hereby$AFFIRMED$and$the$Court$Resolved$to$DENY$the$Petition$
for$lack$of$merit.$$
SO$ORDERED.$$
(
(
PAL(v(EDU(
G.R.(No.(L741383(
AUGUST(15,(1988(
(
FACTS:(
This$ question$ has$ been$ brought$ before$ this$ Court$ in$ the$ past.$ The$ parties$
are,$in$effect,$asking$for$a$rePexamination$of$the$latest$decision$on$this$issue.$
This$appeal$was$certified$to$us$as$one$involving$a$pure$question$of$law$by$the$
Court$ of$ Appeals$ in$ a$ case$ where$ the$ then$ Court$ of$ First$ Instance$ of$ Rizal$ The$
Philippine$Airlines$(PAL)$a$corporation$engaged$in$the$air$transportation$business$
under$a$legislative$franchiseP$is$exempt$from$the$payment$of$taxes.$$

grantee$ shall$ pay$ to$ the$ National$ Government$ during$ the$ life$ of$ this$
franchise$a$tax$of$2%$of$the$gross$revenue$or$gross$earning$derived$by$the$grantee$
from$ its$ operations$ under$ this$ franchise.$ Such$ tax$ shall$ be$ due$ and$ payable$
quarterly$and$shall$be$in$lieu$of$all$taxes$of$any$kind,$nature$or$description,$levied,$
established$ or$ collected$ by$ any$ municipal,$ provincial$ or$ national$ automobiles,$
Provided,$ that$ if,$ after$ the$ audit$ of$ the$ accounts$ of$ the$ grantee$ by$ the$
Commissioner$ of$ Internal$ Revenue,$ a$ deficiency$ tax$ is$ shown$ to$ be$ due,$ the$
deficiency$ tax$ shall$ be$ payable$ within$ the$ ten$ days$ from$ the$ receipt$ of$ the$
assessment.$ The$ grantee$ shall$ pay$ the$ tax$ on$ its$ real$ property$ in$ conformity$ with$
existing$law.$
PAL$has,$since$1956,$not$been$paying$motor$vehicle$registration$fees.$
Sometime$ in$ 1971,$ appellee$ Commissioner$ Romeo$ F.$ Elevate$ issued$ a$
regulation$requiring$all$tax$exempt$entities,$among$them$PAL$to$pay$motor$vehicle$
registration$fees.$
Despite$PAL's$protestations,$the$appellee$refused$to$register$the$appellant's$
motor$ vehicles$ unless$ the$ amounts$ imposed$ were$ paid.$ The$ appellant$ thus$ paid,$
under$protest,$the$amount$of$P19,529.75$as$registration$fees$of$its$motor$vehicles.$
After$paying$under$protest,$PAL$through$counsel,$demanded$a$refund$of$the$
amounts$paid$to$Commissioner$Edu,$invoking$the$ruling$in$Calalang$v.$Lorenzo$(97$
Phil.$212$[1951])$where$it$was$held$that$motor$vehicle$registration$fees$are$in$reality$
taxes$from$the$payment$of$which$PAL$is$exempt$by$virtue$of$its$legislative$franchise.$
Appellee$Edu$denied$the$request$for$refund$basing$his$action$on$the$decision$
in$ Republic$ v.$ Philippine$ Rabbit$ Bus$ Lines,$ Inc.,$ (32$ SCRA$ 211,$ March$ 30,$ 1970)$ to$
the$effect$that$motor$vehicle$registration$fees$are$regulatory$exceptional.$and$not$
revenue$ measures$ and,$ therefore,$ do$ not$ come$ within$ the$ exemption$ granted$ to$
PAL$under$its$franchise.$Hence,$PAL$filed$the$complaint$against$Land$Transportation$
Commissioner$Romeo$F.$Edu$and$National$Treasurer$Ubaldo$Carbonell.$
$
ISSUES:(
1.$
W/N$motor$vehicle$registration$fees$are$considered$as$taxes.$
2.$
W/N$ respondent$ administrative$ agency$ be$ required$ to$ refund$ the$
amounts$stated$in$the$complaint$of$PAL?$
(
RATIO:(
1.
Yes.$ Motor$ vehicle$ registration$ fees$ as$ at$ present$ exacted$ pursuant$ to$ the$
Land$ Transportation$ and$ Traffic$ Code$ are$ actually$ taxes$ intended$ for$ additional$
revenues$ of$ government$ even$ if$ one$ fifth$ or$ less$ of$ the$ amount$ collected$ is$ set$
aside$for$the$operating$expenses$of$the$agency$administering$the$program.$
Motor$ vehicle$ registration$ fees$ are$ governed$ by$ the$ Land$ Transportation$
Code.$ Sec.$ 61.$ Disposal$ of$ Mortgage.$ CollectedMonies$ collected$ under$ the$
provisions$ of$ this$ Act$ shall$ be$ deposited$ in$ a$ special$ trust$ account$ in$ the$ National$
Treasury$ to$ constitute$ the$ Highway$ Special$ Fund..$ amount$ necessary$ to$ maintain$
and$equip$the$Land$Transportation$Commission$but$not$to$exceed$20%$of$the$total$
collection$during$one$year,$shall$be$set$aside$for$the$purpose.$$

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GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

It$ appears$ that$ the$ legislative$ intent$ and$ purpose$ behind$ the$ law$ requiring$
owners$ of$ vehicles$ to$ pay$ for$ their$ registration$ is$ mainly$ to$ raise$ funds$ for$ the$
construction$and$maintenance$of$highways$and$to$a$much$lesser$degree,$pay$for$the$
operating$expenses$of$the$administering$agency.$$
In$the$Philippine$Rabbit$case$mentions$a$presumption$arising$from$the$use$of$
the$ term$ "fees,"$ referring$ to$ taxes$ other$ than$ those$ imposed$ on$ the$ registration,$
operation$or$ownership$of$a$motor$vehicle.$Fees$may$be$properly$regarded$as$taxes$
even$ though$ they$ also$ serve$ as$ an$ instrument$ of$ regulation:$ It$ is$ possible$ for$ an$
exaction$ to$ be$ both$ tax$ arose$ regulation.$ License$ fees$ are$ changes$ looked$ to$ as$ a$
source$of$revenue$as$well$as$a$means$of$regulationfees$may$properly$be$regarded$
as$taxes$even$though$they$also$serve$as$an$instrument$of$regulation.$If$the$purpose$
is$ primarily$ revenue,$ or$ if$ revenue$ is$ at$ least$ one$ of$ the$ real$ and$ substantial$
purposes,$then$the$exaction$is$properly$called$a$tax.$
$
If$ the$ exaction$ under$ Rep.$ Act$ 4136$ were$ merely$ a$ regulatory$ fee,$ the$
imposition$ in$ Rep.$ Act$ 5448$ need$ not$ be$ an$ "additional"$ tax.$ It$ is$ quite$ apparent$
that$ vehicle$ registration$ fees$ were$ originally$ simple$ exceptional$ intended$ only$ for$
rigidly$ purposes$ in$ the$ exercise$ of$ the$ State's$ police$ powers.$ Over$ the$ years,$
however,$ as$ vehicular$ traffic$ exploded$ in$ number$ and$ motor$ vehicles$ became$
absolute$ necessities$ without$ which$ modem$ life$ as$ we$ know$ it$ would$ stand$ still,$
Congress$found$the$registration$of$vehicles$a$very$convenient$way$of$raising$much$
needed$revenues.$Without$changing$the$earlier$deputy$of$registration$payments$as$
"fees,"$their$nature$has$become$that$of$"taxes."$
$
2.
The$claim$for$refund$is$made$for$payments$given$in$1971.$It$is$not$clear$from$
the$records$as$to$what$payments$were$made$in$succeeding$years.$Section$24$of$RA$
5448$ dated$ June$ 27,$ 1968,$ repealed$ all$ earlier$ tax$ exemptions$ Of$ corporate$
taxpayers$found$in$legislative$franchises$similar$to$that$invoked$by$PAL$in$this$case.$
Sec24$ shows$ clearly$ that$ the$ law$ intended$ all$ corporate$ taxpayers$ to$ pay$ income$
tax$as$provided$by$the$statute.$There$can$be$no$doubt$as$to$the$power$of$Congress$
to$repeal$the$earlier$exemption$it$granted$(Consti).$$
Any$ registration$ fees$ collected$ between$ June$ 27,$ 1968$ and$ April$ 9,$ 1979,$ were$
correctly$imposed$because$the$tax$exemption$in$the$franchise$of$PAL$was$repealed$
during$the$period.$However,$an$amended$franchise$was$given$to$PAL$in$1979.$$
This$current$franchise$is$clear$and$specific.$It$has$removed$the$ambiguity$found$in$
the$ earlier$ law.$ PAL$ is$ now$ exempt$ from$ the$ payment$ of$ any$ tax,$ fee,$ or$ other$
charge$ on$ the$ registration$ and$ licensing$ of$ motor$ vehicles.$ Such$ payments$ are$
already$included$in$the$basic$tax$or$franchise$tax$provided$in$Subsections$(a)$and$(b)$
of$Section$13,$P.D.$1590,$and$may$no$longer$be$exacted.$
$
DISPOSITIVE(PORTION:(
WHEREFORE$ the$ petition$ is$ hereby$ partially$ GRANTED.$ The$ prayed$ for$ refund$ of$
registration$ fees$ paid$ in$ 1971$ is$ DENIED.$ The$ (LTFRB)$ is$ enjoined$ functionsPthe$
collecting$ any$ tax,$ fee,$ or$ other$ charge$ on$ the$ registration$ and$ licensing$ of$ the$

petitioner's$ motor$ vehicles$ from$ April$ 9,$ 1979$ as$ provided$ in$ Presidential$ Decree$
No.$1590.$
(
(
MAYOR( ANTONIO( J.( VILLEGAS$ vs.( HIU( CHIONG( TSAI( PAO( HO( and( JUDGE(
FRANCISCO(ARCA(
G.R.(No.(L729646(
November(10,(1978(
(
FACTS:$
The$controverted$Ordinance$No.$6537$was$passed$by$the$Municipal$Board$of$
Manila$on$February$22,$1968$and$signed$by$the$herein$petitioner$Mayor$Antonio$J.$
Villegas$ of$ Manila$ on$ March$ 27,$ 1968.$ City$ Ordinance$ No.$ 6537$ is$ entitled:$ AN$
ORDINANCE$ MAKING$ IT$ UNLAWFUL$ FOR$ ANY$ PERSON$ NOT$ A$ CITIZEN$ OF$ THE$
PHILIPPINES$TO$BE$EMPLOYED$IN$ANY$PLACE$OF$EMPLOYMENT$OR$TO$BE$ENGAGED$
IN$ANY$KIND$OF$TRADE,$BUSINESS$OR$OCCUPATION$WITHIN$THE$CITY$OF$MANILA$
WITHOUT$ FIRST$ SECURING$ AN$ EMPLOYMENT$ PERMIT$ FROM$ THE$ MAYOR$ OF$
MANILA;$AND$FOR$OTHER$PURPOSES.$
Section$1$of$said$Ordinance$No.$6537$prohibits$aliens$from$being$employed$
or$ to$ engage$ or$ participate$ in$ any$ position$ or$ occupation$ or$ business$ enumerated$
therein,$ whether$ permanent,$ temporary$ or$ casual,$ without$ first$ securing$ an$
employment$permit$from$the$Mayor$of$Manila$and$paying$the$permit$fee$of$P50.00$
except$ persons$ employed$ in$ the$ diplomatic$ or$ consular$ missions$ of$ foreign$
countries,$ or$ in$ the$ technical$ assistance$ programs$ of$ both$ the$ Philippine$
Government$ and$ any$ foreign$ government,$ and$ those$ working$ in$ their$ respective$
households,$ and$ members$ of$ religious$ orders$ or$ congregations,$ sect$ or$
denomination,$who$are$not$paid$monetarily$or$in$kind.$$
Violations$ of$ this$ ordinance$ is$ punishable$ by$ an$ imprisonment$ of$ not$ less$
than$ three$ (3)$ months$ to$ six$ (6)$ months$ or$ fine$ of$ not$ less$ than$ P100.00$ but$ not$
more$than$P200.00$or$both$such$fine$and$imprisonment,$upon$conviction.$
On$ May$ 4,$ 1968,$ private$ respondent$ Hiu$ Chiong$ Tsai$ Pao$ Ho$ who$ was$
employed$ in$ Manila,$ filed$ a$ petition$ with$ the$ Court$ of$ First$ Instance$ of$ Manila,$
Branch$I,$denominated$as$Civil$Case$No.$72797,$praying$for$the$issuance$of$the$writ$
of$ preliminary$ injunction$ and$ restraining$ order$ to$ stop$ the$ enforcement$ of$
Ordinance$ No.$ 6537$ as$ well$ as$ for$ a$ judgment$ declaring$ said$ Ordinance$ No.$ 6537$
null$and$void.$
(
ISSUES(
1. W/N$ THE$ RESPONDENT$ JUDGE$ COMMITTED$ A$ SERIOUS$ AND$ PATENT$ ERROR$
OF$LAW$IN$RULING$THAT$ORDINANCE$NO.$6537$VIOLATED$THE$CARDINAL$RULE$
OF$UNIFORMITY$OF$TAXATION.$$
2.

W/N$ RESPONDENT$ JUDGE$ LIKEWISE$ COMMITTED$ A$ GRAVE$ AND$ PATENT$


ERROR$ OF$ LAW$ IN$ RULING$ THAT$ ORDINANCE$ NO.$ 6537$ VIOLATED$ THE$
PRINCIPLE$AGAINST$UNDUE$DESIGNATION$OF$LEGISLATIVE$POWER.$$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

3.

W/N$ RESPONDENT$ JUDGE$ FURTHER$ COMMITTED$ A$ SERIOUS$ AND$ PATENT$


ERROR$ OF$ LAW$ IN$ RULING$ THAT$ ORDINANCE$ NO.$ 6537$ VIOLATED$ THE$ DUE$
PROCESS$AND$EQUAL$PROTECTION$CLAUSES$OF$THE$CONSTITUTION.$$

(
RATIO:(
1.
No,$The$contention$that$Ordinance$No.$6537$is$not$a$purely$tax$or$revenue$
measure$because$its$principal$purpose$is$regulatory$in$nature$has$no$merit.$
While$it$is$true$that$the$first$part$which$requires$that$the$alien$shall$secure$
an$ employment$ permit$ from$ the$ Mayor$ involves$ the$ exercise$ 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$which$
requires$the$payment$of$P50.00$as$employee's$fee$is$not$regulatory$but$a$revenue$
measure.$
$
2.
No,$ Ordinance$ No.$ 6537$ does$ not$ lay$ down$ any$ criterion$ or$ standard$ to$
guide$ the$ Mayor$ in$ the$ exercise$ of$ his$ discretion.$ It$ has$ been$ held$ that$ where$ an$
ordinance$ of$ a$ municipality$ fails$ to$ state$ any$ policy$ or$ to$ set$ up$ any$ standard$ to$
guide$or$limit$the$mayor's$action,$expresses$no$purpose$to$be$attained$by$requiring$
a$ permit,$ enumerates$ no$ conditions$ for$ its$ grant$ or$ refusal,$ and$ entirely$ lacks$
standard,$ thus$ conferring$ upon$ the$ Mayor$ arbitrary$ and$ unrestricted$ power$ to$
grant$or$deny$the$issuance$of$building$permits,$such$ordinance$is$invalid,$being$an$
undefined$and$unlimited$delegation$of$power$to$allow$or$prevent$an$activity$per)se$
lawful.$
$
3.
No,$ The$ P50.00$ fee$ is$ unreasonable$ not$ only$ because$ it$ is$ excessive$ but$
because$ it$ fails$ to$ consider$ valid$ substantial$ differences$ in$ situation$ among$
individual$aliens$who$are$required$to$pay$it.$
The$P50.00$fee$is$unreasonable$not$only$because$it$is$excessive$but$because$
it$fails$to$consider$valid$substantial$differences$in$situation$among$individual$aliens$
who$are$required$to$pay$it.$
Requiring$a$person$before$he$can$be$employed$to$get$a$permit$from$the$City$
Mayor$ of$ Manila$ who$ may$ withhold$ or$ refuse$ it$ at$ will$ is$ tantamount$ to$ denying$
him$ the$ basic$ right$ of$ the$ people$ in$ the$ Philippines$ to$ engage$ in$ a$ means$ of$
livelihood.$
While$it$is$true$that$the$Philippines$as$a$State$is$not$obliged$to$admit$aliens$
within$its$territory,$once$an$alien$is$admitted,$he$cannot$be$deprived$of$life$without$
due$process$of$law.$This$guarantee$includes$the$means$of$livelihood.$The$shelter$of$
protection$ under$ the$ due$ process$ and$ equal$ protection$ clause$ is$ given$ to$ all$
persons,$both$aliens$and$citizens.$
(
DISPOSITIVE( PORTION:$ WHEREFORE,$ the$ decision$ appealed$ from$ is$ hereby$
affirmed,$without$pronouncement$as$to$costs.$
5

$
(
(
COMPANIA(GENERAL(de(TABACOS(de(FILIPINAS(v.(CITY(OF(MANILA(
G.R.(No.(L716619((((((((((((($
June(29,(1963$
$
FACTS:$
Tabacalera$ filed$ this$ action$ in$ the$ CFI$ of$ Manila$ to$ recover$ from$ City$ of$
Manila$ and$ its$ Treasurer,$ Marcelino$ Sarmiento,$ the$ sum$ of$ P15,280.00$ allegedly$
overpaid$by$it$as$taxes$on$its$wholesale$and$retail$sales$of$liquor$for$the$period$from$
the$ third$ quarter$ of$ 1954$ to$ the$ second$ quarter$ of$ 1957,$ inclusive,$ under$
Ordinances$Nos.$3634,$3301,$and$3816.$
Tabacalera's$ action$ for$ refund$ is$ based$ on$ the$ theory$ that,$ in$ connection$
with$its$liquor)sales,$it$should$pay$the$license$fees$prescribed$by$Ordinance$No.$3358$
but$ not$ the$ municipal$ sales$ taxes$ imposed$ by$ Ordinances$ Nos.$ 3634,$ 3301,$ and$
3816;$and$since$it$already$paid$the$license$fees$aforesaid,$the$sales$taxes$paid$by$it$
$amounting$to$the$sum$of$P15,208.00$$under$the$three$ordinances$mentioned$
heretofore$is$an$overpayment$made$by$mistake,$and$therefore$refundable.$
The$ City,$ on$ the$ other$ hand,$ contends$ that,$ for$ the$ permit$ issued$ to$ it$
granting$proper$authority$to$"conduct$or$engage$in$the$sale$of$alcoholic$beverages,$
or$liquors"$Tabacalera$is$subject$to$pay$the$license'fees$prescribed$by$Ordinance$No.$
3358,$ aside$ from$ the$sales' taxes$imposed$ by$ Ordinances$ Nos.$ 3634,$ 3301,$ and$
3816;$ that,$ even$ assuming$ that$ Tabacalera$ is$ not$ subject$ to$ the$ payment$ of$ the$
sales$ taxes$ prescribed$ by$ the$ said$ three$ ordinances$ as$ regards$ its)liquor$sales,$ it$ is$
not$entitled$to$the$refund$demanded$for$the$following$reasons:$(a)$The$said$amount$
was$ paid$ by$ the$ plaintiff$ voluntarily$ and$ without$ protest;$ (b)$ If$ at$ all$ the$ alleged$
overpayment$ was$ made$ by$ mistake,$ such$ mistake$ was$ one$ of$ law$ and$ arose$ from$
the$plaintiff's$neglect$of$duty;$(c)$The$said$amount$had$been$added$by$the$plaintiff$
to$the$selling$price$of$the$liquor$sold$by$it$and$passed$to$the$consumers;$and$(d)$The$
said$ amount$ had$ been$ already$ expended$ by$ the$ defendant$ City$ for$ public$
improvements$and$essential$services$of$the$City$government,$the$benefits$of$which$
are$enjoyed,$and$being$enjoyed$by$the$plaintiff.$
It$appears$that$in$the$year$1954,$the$City,$through$its$treasurer,$addressed$a$
letter$to$Messrs.$Sycip,$Gorres,$Velayo$and$Co.,$an$accounting$firm,$expressing$the$
view$that$liquor$dealers$paying$the$annual$wholesale$and$retail$fixed$tax$under$City$
Ordinance$ No.$ 3358$ are$ not$ subject$ to$ the$ wholesale$ and$ retail$ dealers'$ taxes$
prescribed$ by$ City$ Ordinances$ Nos.$ 3634,$ 3301,$ and$ 3816.$ Upon$ learning$ of$ said$
opinion,$ appellee$ stopped$ including$ its$ sales$ of$ liquor$ in$ its$ quarterly$ sworn$
declarations$submitted$in$accordance$with$the$aforesaid$City$Ordinances$Nos.$3634,$
3301,$ and$ 3816,$ and$ on$ December$ 3,$ 1957,$ it$ addressed$ a$ letter$ to$ the$ City$
Treasurer$ demanding$ refund$ of$ the$ alleged$ overpayment.$ As$ the$ claim$ was$
disallowed,$the$present$action$was$instituted.$
$
ISSUE:$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

WON$ Tabacalera$ overpaid$ its$ taxes$ on$ its$ wholesale$ and$ retail$ of$ liquors$ and$
therefore$entitled$to$a$refund?$
$
RATIO:(NO((License(fees(are(different(from(sales(tax)$
Ordinance) No.) 3358) is) clearly) one) that) prescribes) municipal) license) fees) for)
the)privilege)to)engage)in)the)business)of)selling)liquor)or)alcoholic)beverages.)The$
license$ fees$ imposed$ by$ it$ are$ essentially$ for$ purposes$ of$ regulation,$ and$ are$
justified,$ considering$ that$ the$ sale$ of$ intoxicating$ liquor$ is,$ potentially$ at$ least,$
harmful$ to$ public$ health$ and$ morals,$ and$ must$ be$ subject$ to$ supervision$ or$
regulation$ by$ the$ state$ and$ by$ cities$ and$ municipalities$ authorized$ to$ act$ in$ the$
premises.$$
On) the) other) hand,) it) is) clear) that) Ordinances) Nos.) 3634,) 3301,) and) 3816)
impose) taxes) on) the) sales) of) general) merchandise,) wholesale) or) retail,) and) are)
revenue)measures$enacted$by$the$Municipal$Board$of$Manila$by$virtue$of$its$power$
to$tax$dealers$for$the$sale$of$such$merchandise.$$
Under) Ordinance) No.) 3634) the) word) "merchandise") as) employed) therein)
clearly) includes) liquor.) The) word) "merchandise") refers) to) all) subjects) of) commerce)
and)traffic;)whatever)is)usually)bought)and)sold)in)trade)or)market;)goods)or)wares)
bought) and) sold) for) gain;) commodities) or) goods) to) trade;) and) commercial)
commodities)in)general.)
That)Tabacalera)is)being)subjected)to)double)taxation)is)more)apparent)than)
real.)As)already)stated)what)is)collected)under)Ordinance)No.)3358)is)a)license)fee)
for)the)privilege)of)engaging)in)the)sale)of)liquor,)a)calling)in)which))it)is)obvious)
) not) anyone) or) anybody) may) freely) engage,) considering) that) the) sale) of) liquor)
indiscriminately)may)endanger)public)health)and)morals.)On)the)other)hand,)what)
the) three) ordinances) mentioned) heretofore) impose) is) a) tax) for) revenue) purposes)
based)on)the)sales)made)of)the)same)article)or)merchandise.)It)is)already)settled)in)
this) connection) that) both) a) license) fee) and) a) tax) may) be) imposed) on) the) same)
business)or)occupation,)or)for)selling)the)same)article,)this)not)being)in)violation)of)
the)rule)against)double)taxation.)
Regarding)the)letter)send)by)the)City)to)the)accounting)firm,)the)court)held)
that)the)government)is)not)bound)by)the)mistakes)its)officers)make.))
)
DISPOSITIVE(PORTION:(
WHEREFORE,$the$decision$appealed$from$is$reversed,$with$the$result$that$this$case$
should$be,$as$it$is$hereby$dismissed,$with$costs.$
$
OTHER(DOCTRINES:$
The$ term$ "tax"$ applies$ $ generally$ speaking$ $ to$ all$ kinds$ of$ exactions$
which$ become$ public$ funds.$ The$ term$ is$ often$ loosely$ used$ to$ include$ levies$ for$
revenue$as$well$as$levies$for$regulatory$purposes.$Thus$license$fees$are$commonly$
called$taxes.$Legally$speaking,$however,$license)fee)is$a$legal$concept$quite$distinct$
from$ tax;$ the$ former$ is$ imposed$ in$ the$ exercise$ of$ police$ power$ for$ purposes$ of$
regulation,$ while$ the$ latter$ is$ imposed$ under$ the$ taxing$ power$ for$ the$ purpose$ of$
raising$revenues.$
6

$
$
$
AMERICAN(MAIL(LINE(VS(CITY(OF(BASILAN(
G.R.(No(L712647(
MAY(31,(1961(
$
FACTS:(
In$ September$ 1955,$ the$ City$ Council$ of$ Basilan$ enacted$ Ordinance$ No.$ 180$
which$amended$Ordinance$#7$of$1948,$aka$The$Port$Area$Ordinance.$
The$amendment$consists$of$adding$a$new$provision$to$Ordinance$#7$which$
reads:$
"Section$ 1$ (D).$ Any$ foreign$ vessel$ engaged$ in$ coastwise$ trade$ which$ may$
anchor$at$any$open$bay,$channel,$or$any$loading$point$within$the$territorial$waters$
of$the$City$of$Basilan$for$the$purpose$of$loading$or$unloading$logs$or$passengers$and$
other$ cargoes$ shall$ pay$ an$ anchorage$ fee$ of$ 1/2$ centavo$ (P.005)$ per$ registered$
gross$ton$of$the$vessel$for$the$first$twentyPfour$(24)$hours,$or$part$thereof,$and$for$
succeeding$ hours,$ or$ part$ thereof,$ PROVIDED,$ that$ maximum$ charge$ shall$ not$
exceed,$seventyPfive$pesos$(P75.00)$per$day,$irrespective$of$the$greater$tonnage$of$
the$vessels."$
American$ Mail$ Line,$ et.$ al.$ are$ foreign$ shipping$ companies$ licensed$ to$ do$
business$ in$ the$ Philippines.$ Some$ of$ their$ vessels$ are$ anchored$ in$ the$ territorial$
waters$of$Basilan$City.$They$filed$an$action$for$Declaratory$Relief$to$determine$the$
validity$of$the$ordinance.$$
City$of$Basilan$says$that$it$has$the$authority$to$enact$the$ordinance$based$on$
its$Charter$(14$RA$#288):$
P$ $ (a)$ $ To$ levy$ and$ collect$ taxes$ for$ general$ and$ special$ purposes$ in$
accordance$with$law.$
P$ $ (c)$ To$ enact$ ordinances$ for$ the$ maintenance$ and$ preservation$ of$ peace$
and$good$morals.$
P$(v)$To$fix$the$charges$to$be$paid$by$all$watercraft$landing$at$or$using$public$
wharves,$docks,$levees,$or$landing$places.$
The$City$further$argues$that$the$ordinance$in$question$was$validly$enacted$in$
the$ exercise$ of$ the$ city's$ police$ power$ and$ that$ the$ fees$ imposed$ therein$ are$ for$
purely$regulatory$purposes.$
To$support$such$claim$of$regulatory$powers,$it$is$said$that$the$City$of$Basilan$
is$ an$ island$ with$ mountainous$ coasts$ and$ fringed$ by$ numerous$ coves$ and$ island$
bays$and$islets,$and$may$become$a$veritable$haven$for$smugglers$if$the$city$has$no$
funds$or$means$to$suppress$their$illegal$activities.$
$
ISSUES:(
$
1.
Whether$the$City$of$Basilan$has$the$authority$to$enact$Ordinance$180$and$to$
collect$the$anchorage$fees$prescribed$therein$based$on$its$Charter?$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

2.
Whether$the$ordinance$was$validly$enacted$on$the$basis$of$the$Citys$police$
power?$
$
[Note:$ I$ think$ Issue$ #2$ is$ more$ relevant$ because$ it$ was$ mentioned$ it$ the$
Fundamentals$of$Taxation$book]$
$
RATIO:(
1.
No.$ $ Under$ paragraph$ (a)$ of$ 14$ of$ its$ Charter,$ it$ is$ clear$ that$ the$ City$ of$
Basilan$ may$ only$ levy$ and$ collect$ taxes$ for$ general$ and$ special$ purposes$ in$
accordance$with$or$as$provided$by$law;$in$other$words,$the$city$of$Basilan$was$not$
granted$ a$ blanket$ power$ of$ taxation.$ The$ use$ of$ the$ phrase$ "in$ accordance$ with$
law"$ $ which,$ in$ our$ opinion,$ means$ the$ same$ as$ "provided$ by$ law"$ $ clearly$
discloses$the$legislative$intent$to$limit$the$taxing$power$of$the$City.$
The$power$to$collect$Anchorage$Fees$is$not$included$in$the$power$granted$
by$ its$ charter$ "to$ fix$ the$ charges$ to$ be$ paid$ by$ all$ watercraft$ landing$ at$ or$ using$
public$ wharves,$ docks,$ levees,$ or$ landing$ places."$ That$ this$ is$ so$ is$ shown$ by$ the$
need$which$the$City$of$Basilan$had$to$enact$the$amendatory$ordinance.$
$
2.
No.$The$power$to$regulate$as$an$exercise$of$police$power$does$not$include$
the$power$to$impose$fees$for$revenue$purposes.$It$was$held$in$past$cases$that$fees$
for$ purely$ regulatory$ purposes$ may$ only$ be$ of$ sufficient$ amount$ to$ include$ the$
expenses$ of$ issuing$ the$ license$ and$ the$ cost$ of$ the$ necessary$ inspection$ or$ police$
surveillance,$taking$into$account$not$only$the$expense$of$direct$regulation$but$also$
incidental$expenses.$$
The$ circumstances$ point$ out$ that$ the$ Anchorage$ Fees$ are$ for$ revenue$
purposes$although$the$City$contends$that$the$fees$are$imposed$for$the$purpose$of$
suppressing$smuggling$and$other$illegal$activities.$
First,$the$fees$are$cased$upon$the$tonnage$of$the$vessels,$the$fees$have$no$
proper$ or$ reasonable$ relation$ to$ the$ cost$ of$ issuing$ the$ permits$ and$ the$ cost$ of$
inspection$or$surveillance.$
Second,$ the$ fee$ imposed$ on$ foreign$ vessels$ $ 1/2$ centavo$ per$ registered$
gross$ ton$ for$ the$ first$ 24$ hours$ and$ which$ shall$ not$ exceed$ P75.00$ per$ day$ $
exceeds$ even$ the$ harbor$ fee$ imposed$ by$ the$ National$ Government$ (RA$ #1317),$
which$is$only$P50.00$for$foreign$vessels.$
Third,$ it$ is$ the$ city's$ own$ contention$ that$ the$ questioned$ ordinance$ was$
enacted$in$the$exercise$of$its$power$of$taxation.$This$makes$it$obvious$that$the$fees$
imposed$are$not$merely$regulatory.$
$
DISPOSITIVE(PORTION:(
WHEREFORE,$ the$ decision$ appealed$ from$ is$ affirmed,$ and$ the$ preliminary$
injunction$issued$heretofore$is$made$final.$Without$costs.$
$
$

JOHN(H.(OSMEA(vs.$OSCAR(ORBOS$$
$
$$$$$
$
$$$$$$$$$$
G.R.(No.(99886(( (
(
(
(
(
((((((((((((((((((((((
March(31,(1993$
(
(
FACTS:(
Ferdinand$Marcos$issued$P.D.$1956$creating$a$Special$Account$in$the$General$
Fund,$designated$as$the$Oil$Price$Stabilization$Fund$(OPSF).$The$OPSF$was$designed$
to$reimburse$oil$companies$for$cost$increases$in$crude$oil$and$imported$petroleum$
products$resulting$from$exchange$rate$adjustments$and$from$increases$in$the$world$
market$prices$of$crude$oil.$
Subsequently,$ the$ OPSF$ was$ reclassified$ into$ a$ "trust$ liability$ account,"$ in$
virtue$ of$ E.O.$ 1024,$ and$ ordered$ released$ from$ the$ National$ Treasury$ to$ the$
Ministry$of$Energy.$The$same$Executive$Order$also$authorized$the$investment$of$the$
fund$in$government$securities,$with$the$earnings$from$such$placements$accruing$to$
the$fund.$
President$Corazon$C.$Aquino,$amended$P.D.$1956.$She$promulgated$EO$137,$
expanding$ the$ grounds$ for$ reimbursement$ to$ oil$ companies$ for$ possible$ cost$
underrecovery$incurred$as$a$result$of$the$reduction$of$domestic$prices$of$petroleum$
products,$ the$ amount$ of$ the$ underrecovery$ being$ left$ for$ determination$ by$ the$
Ministry$of$Finance.$
The$petition$alleges$that:$
a.$the$status$of$the$OPSF$showed$a$"Terminal$Fund$Balance$deficit"$of$some$
P12.877$billion;$$that$to$abate$the$worsening$deficit,$"the$Energy$Regulatory$Board$.$
.$ issued$ an$ Order,$ approving$ the$ increase$ in$ pump$ prices$ of$ petroleum$ products,"$
and$at$the$rate$of$recoupment,$the$OPSF$deficit$should$have$been$fully$covered$in$a$
span$of$six$(6)$months,$but$this$notwithstanding,$Obos$and$others$"are$poised$to$
accept,$process$and$pay$claims$not$authorized$under$P.D.$1956."$$
b.$ that$ the$ creation$ of$ the$ trust$ fund$ violates$ $
29(3),$Article$VI$of$the$Constitution$
c.$that$"the$monies$collected$pursuant$to$.$.$P.D.$1956,$as$amended,$must$be$
treated$as$a$'SPECIAL$FUND,'$not$as$a$'trust$account'$or$a$'trust$fund,'$and$that$"if$a$
special$ tax$ is$ collected$ for$ a$ specific$ purpose,$ the$ revenue$ generated$ therefrom$
shall$'be$treated$as$a$special$fund'$to$be$used$only$for$the$purpose$indicated,$and$
not$channeled$to$another$government$objective."$$$
d.$ since$ "a$ 'special$ fund'$ consists$ of$ monies$ collected$ through$ the$ taxing$
power$ of$ a$ State,$ such$ amounts$ belong$ to$ the$ State,$ although$ the$ use$ thereof$ is$
limited$to$the$special$purpose/objective$for$which$it$was$created."$$
e.$$"delegation$of$legislative$authority"$to$the$ERB$violates$$28$(2).$Article$VI$
of$the$Constitution$
(
ISSUE:(
WON$the$funds$collected$under$PD$1956$is$an$exercise$of$the$power$of$taxation$
(
RATIO:(

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

It$ seems$ clear$ that$ while$ the$ funds$ collected$ may$ be$ referred$ to$ as$ taxes,$
they$ are$ exacted$ in$ the$ exercise$ of$ the$ police$ power$ of$ the$ State.$ Moreover,$ that$
the$OPSF$is$a$special$fund$is$plain$from$the$special$treatment$given$it$by$E.O.$137.$It$
is$segregated$from$the$general$fund;$and$while$it$is$placed$in$what$the$law$refers$to$
as$a$"trust$liability$account,"$the$fund$nonetheless$remains$subject$to$the$scrutiny$
and$review$of$the$COA.$The$Court$is$satisfied$that$these$measures$comply$with$the$
constitutional$ description$ of$ a$ "special$ fund."$ Indeed,$ the$ practice$ is$ not$ without$
precedent.$
What$ petitioner$ would$ wish$ is$ the$ fixing$ of$ some$ definite,$ quantitative$
restriction,$ or$ "a$ specific$ limit$ on$ how$ much$ to$ tax."$ $ The$ Court$ is$ cited$ to$ this$
requirement$ by$ the$ petitioner$ on$ the$ premise$ that$ what$ is$ involved$ here$ is$ the$
power$ of$ taxation;$ but$ as$ already$ discussed,$ this$ is$ not$ the$ case.$ What$ is$ here$
involved$ is$ not$ so$ much$ the$ power$ of$ taxation$ as$ police$ power.$ Although$ the$
provision$authorizing$the$ERB$to$impose$additional$amounts$could$be$construed$to$
refer$ to$ the$ power$ of$ taxation,$ it$ cannot$ be$ overlooked$ that$ the$ overriding$
consideration$is$to$enable$the$delegate$to$act$with$expediency$in$carrying$out$the$
objectives$of$the$law$which$are$embraced$by$the$police$power$of$the$State.$
The$interplay$and$constant$fluctuation$of$the$various$factors$involved$in$the$
determination$ of$ the$ price$ of$ oil$ and$ petroleum$ products,$ and$ the$ frequently$
shifting$ need$ to$ either$ augment$ or$ exhaust$ the$ Fund,$ do$ not$ conveniently$ permit$
the$setting$of$fixed$or$rigid$parameters$in$the$law$as$proposed$by$the$petitioner.$To$
do$so$would$render$the$ERB$unable$to$respond$effectively$so$as$to$mitigate$or$avoid$
the$ undesirable$ consequences$ of$ such$ fluidity.$ As$ such,$ the$ standard$ as$ it$ is$
expressed,$ suffices$ to$ guide$ the$ delegate$ in$ the$ exercise$ of$ the$ delegated$ power,$
taking$ account$ of$ the$ circumstances$ under$ which$ it$ is$ to$ be$ exercised.$ It$ would$
seem$that$from$the$abovePquoted$ruling,$the$petition$for$prohibition$should$fail.$
(
DISPOSITIVE(PORTION:(
WHEREFORE,$the$petition$is$GRANTED$insofar$as$it$prays$for$the$nullification$of$the$
reimbursement$of$financing$charges,$paid$pursuant$to$E.O.$137,$and$DISMISSED$in$
all$other$respects.$
$
(
REPUBLIC(v.(BACOLOD7MURCIA(MILLING(CO.(
G.R.(No.(L719824,(L719825(and(19826((
July(9,(1966(
(
FACTS:(
Republic$Act$No.$632$is$the$charter$of$the$Philippine$Sugar$Institute,$Philsugin$
for$short,$a$semiPpublic$corporation.$To$realize$and$achieve$its$objectives,$Sections$
15$and$16$of$the$aforementioned$law$provide:$
Sec.$ 15.$ Capitalization.$ $ To$ raise$ the$ necessary$ funds$ to$ carry$ out$ the$
provisions$of$this$Act$and$the$purposes$of$the$corporation,$there$shall$be$levied$on$
the$annual$sugar$production$a$tax$of$TEN$CENTAVOS$[P0.10]$per$picul$of$sugar$to$be$
collected$ for$ a$ period$ of$ five$ (5)$ years$ beginning$ the$ crop$ year$ 1951P1952.$ The$
8

amount$ shall$ be$ borne$ by$ the$ sugar$ cane$ planters$ and$ the$ sugar$ centrals$ in$ the$
proportion$of$their$corresponding$milling$share,$and$said$levy$shall$constitute$a$lien$
on$their$sugar$quedans$and/or$warehouse$receipts.$
Sec.$ 16.$ Special$ Fund.$ $ The$ proceeds$ of$ the$ foregoing$ levy$ shall$ be$ set$
aside$ to$ constitute$ a$ special$ fund$ to$ be$ known$ as$ the$ "Sugar$ Research$ and$
Stabilization$ Fund,"$ which$ shall$ be$ available$ exclusively$ for$ the$ use$ of$ the$
corporation.$ All$ the$ income$ and$ receipts$ derived$ from$ the$ special$ fund$ herein$
created$shall$accrue$to,$and$form$part$of$the$said$fund$to$be$available$solely$for$the$
use$of$the$corporation.$
During$ the$ 5$ crop$ years$ mentioned$ in$ the$ law,$ namely$ 1951P1952,$ 1952P
1953,$ 1953P1954,$ 1954P1955$ and$ 1955P1956,$ defendant$ BacolodPMurcia$ Milling$
Co.,$ Inc.,$ has$ paid$ P267,468.00$ but$ left$ an$ unpaid$ balance$ of$ P216,070.50;$
defendant$ MaPao$ Sugar$ Central$ Co.,$ Inc.,$ has$ paid$ P117,613.44$ but$ left$ unpaid$
balance$ of$ P235,800.20;$ defendant$ TalisayPSilay$ Milling$ Company$ has$ paid$
P251,812.43$ but$ left$ unpaid$ balance$ of$ P208,193.74;$ and$ defendant$ Central$
Azucarera$ del$ Danao$ made$ a$ payment$ of$ P49,897.78$ but$ left$ unpaid$ balance$ of$
P48,059.77.$ There$ is$ no$ question$ regarding$ the$ correctness$ of$ the$ amounts$ paid$
and$the$amounts$that$remain$unpaid.$
On$September$3,$1951,$the$Philippine$Sugar$Institute$(PHILSUGIN)$acquired$
the$ Insular$ Sugar$ Refinery$ for$ a$ total$ consideration$ of$ P3,070,909.60$ payable,$ in$
accordance$with$the$deed$of$sale,$in$3$installments$from$the$process$of$the$sugar$
tax$ to$ be$ collected,$ under$ Republic$ Act$ 632.$ The$ operation$ of$ the$ Insular$ Sugar$
Refinery$for$the$years,$1954,$1955,$1956$and$1957$was$disastrous$in$the$sense$that$
PHILSUGIN$ incurred$ tremendous$ losses.$ It$ has$ been$ shown$ that$ the$ operation$ of$
the$Insular$Sugar$Refinery$has$consumed$70%$of$the$thinking$time$and$effort$of$the$
PHILSUGIN$management.$
Contending$that$the$purchase$of$the$Insular$Sugar$Refinery$with$money$from$
the$Philsugin$Fund$was$not$authorized$by$Republic$Act$632$and$that$the$continued$
operation$ of$ the$ said$ refinery$ was$ inimical$ to$ their$ interests,$ the$ appellants$
(BacolodPMurcia)$ refused$ to$ continue$ with$ their$ contributions$ to$ the$ said$ fund.$
They$maintained$that$their$obligation$to$contribute$or$pay$to$the$said$Fund$subsists$
only$ to$ the$ limit$ and$ extent$ that$ they$ are$ benefited$ by$ such$ contributions$ since$
Republic$Act$632$is$not$a$revenue$measure$but$an$Act$which$establishes$a$"Special$
assessments."$Adverting$to$the$finding$of$the$lower$court$that$proceeds$of$the$said$
Fund$ had$ been$ used$ or$ applied$ to$ absorb$ the$ "tremendous$ losses"$ incurred$ by$
Philsugin$in$its$"disastrous$operation"$of$the$said$refinery,$the$appellants$argue$that$
they$should$not$only$be$released$from$their$obligation$to$pay$the$said$assessment$
but$be$refunded,$besides,$of$all$that$they$might$have$previously$paid$thereunder.$
The$appellants'$thesis$is$simply$to$the$effect$that$the$"10$centavos$per$picul$
of$sugar"$authorized$to$be$collected$is$a$special$assessment.$As$such,$the$proceeds$
thereof$may$be$devoted$only$to$the$specific$purpose$for$which$the$assessment$was$
authorized,$ a$ special$ assessment$ being$ a$ levy$ upon$ property$ predicated$ on$ the$
doctrine$ that$ the$ property$ against$ which$ it$ is$ levied$ derives$ some$ special$ benefit$
from$the$improvement.$It$is$not$a$tax$measure$intended$to$raise$revenues$for$the$
Government.$Consequently,$once$it$has$been$determined$that$no$benefit$accrues$or$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

inures$ to$ the$ property$ owners$ paying$ the$ assessment,$ or$ that$ the$ proceeds$ from$
the$said$assessment$are$being$misapplied$to$the$prejudice$of$those$against$whom$it$
has$been$levied,$then$the$authority$to$insist$on$the$payment$of$the$said$assessment$
ceases.$
$
ISSUE:(
1.
W/N$BacolodPMurcia,$et$al.$are$liable$to$pay$their$unpaid$balance.$
(
RATIO:(
1.
Yes.$ The$ special$ assessment$ at$ bar$ may$ be$ considered$ as$ similarly$ as$ the$
above$(see$Other$Doctrines),$that$is,$that$the$levy$for$the$Philsugin$Fund$is$not$so$
much$ an$ exercise$ of$ the$ power$ of$ taxation,$ nor$ the$ imposition$ of$ a$ special$
assessment,$ but,$ the$ exercise$ of$ the$ police$ power$ for$ the$ general$ welfare$ of$ the$
entire$country.$It$is,$therefore,$an$exercise$of$a$sovereign$power$which$no$private$
citizen$may$lawfully$resist.(
(
OTHER(DOCTRINES:(
1.
Under$ Section$ 6$ of$ Commonwealth$ Act$ 567,$ all$ collections$ made$
thereunder$"shall$accrue$to$a$special$fund$in$the$Philippine$Treasury,$to$be$known$
as$the$'Sugar$Adjustment$and$Stabilization$Fund,'$and$shall$be$paid$out$only$for$any$
or$all$of$the$following$purposes$or$to$attain$any$or$all$of$the$following$objectives,$as$
may$be$provided$by$law."$
2.
Analysis$of$the$Act$(C.A.$567),$and$particularly$Section$6,$will$show$that$the$
tax$is$levied$with$a$regulatory$purpose,$to$provide$means$for$the$rehabilitation$and$
stabilization$of$the$threatened$sugar$industry.$In$other$words,$the$act$is$primarily$an$
exercise$of$the$police$power.$
3.
The$Philsugin$is$authorized$"to$conduct$research$work$for$the$sugar$industry$
in$all$its$phases,$either$agricultural$or$industrial,$for$the$purpose$of$introducing$into$
the$ sugar$ industry$ such$ practices$ or$ processes$ that$ will$ reduce$ the$ cost$ of$
production,$...,$and$achieve$greater$efficiency$in$the$industry."$This$provision,$first$
of$ all,$ more$ than$ justifies$ the$ acquisition$ of$ the$ refinery$ in$ question.$ The$ case$
dispute$ that$ the$ operation$ of$ a$ sugar$ refinery$ is$ a$ phase$ of$ sugar$ production$ and$
that$ from$ such$ operation$ may$ be$ learned$ methods$ of$ reducing$ the$ cost$ of$ sugar$
manufactured$ no$ less$ than$ it$ may$ afford$ the$ opportunity$ to$ discover$ the$ more$
effective$means$of$achieving$progress$in$the$industry.$Philsugin's$experience$alone$
of$running$a$refinery$is$a$gain$to$the$entire$industry.$That$the$operation$resulted$in$a$
financial$loss$is$by$no$means$an$index$that$the$industry$did$not$profit$therefrom,$as$
other$farms$of$a$different$nature$may$have$been$realized.$Thus,$from$its$financially$
unsuccessful$ venture,$ the$ Philsugin$ could$ very$ well$ have$ advanced$ in$ its$
appreciation$of$the$problems$of$management$faced$by$sugar$centrals.$
(
DISPOSITIVE(PORTION:(
In$ view$ of$ all$ the$ foregoing,$ the$ decision$ appealed$ from$ is$ hereby$ affirmed,$ with$
costs.$
$
9

$
VICTORIAS(MILLING(COMPANY(INC.(vs.(MUNICIPALITY(OF(VICTORIAS((
G.R.(No.(L721183((((((((((((((
September(27,(1968(
(
FACTS:(
(
The$ disputed$ Ordinance$ No.$ 1$ was$ approved$ by$ the$ municipal$ Council$ of$
Victorias$ on$ September$ 22,$ 1956$ by$ way$ of$ an$ amendment$ to$ two$ municipal$
ordinances$ separately$ imposing$ license$ taxes$ on$ operators$ of$ sugar$ centrals$ and$
sugar$refineries.$The$changes$were:$with$respect$to$sugar$centrals,$by$increasing$the$
rates$of$license$taxes;$and$as$to$sugar$refineries,$by$increasing$the$rates$of$license$
taxes$as$well$as$the$range$of$graduated$schedule$of$annual$output$capacity.$
Plaintiff$ filed$ suit$ below$ to$ ask$ for$ judgment$ declaring$ Ordinance$ No.$ 1,$
series$of$1956,$null$and$void;$ordering$the$refund$of$all$license$taxes$paid$and$to$be$
paid$ under$ protest;$ directing$ the$ officials$ of$ Victorias$ and$ the$ Province$ of$ Negros$
Occidental$to$observe,$during$the$pendency$of$the$action,$the$provisions$of$section$
357$ of$ the$ Revised$ Manual$ of$ Instructions$ to$ Treasurers$ of$ Provinces,$ Cities$ and$
Municipalities,$ 1954$ edition,$ regarding$ the$ treatment$ of$ license$ taxes$ paid$ under$
protest$by$virtue$of$a$disputed$ordinance;$and$other$reliefs.$$
The$ reasons$ put$ forth$ by$ plaintiff$ are$ that:$ (a)$ the$ ordinance$ exceeds$ the$
amounts$ fixed$ in$ Provincial$ Circular$ 12PA$ issued$ by$ the$ Finance$ Department$ on$
February$27,$1940;$(b)$it$is$discriminatory$since$it$singles$out$plaintiff$which$is$the$
only$ operator$ of$ a$ sugar$ central$ and$ a$ sugar$ refinery$ within$ the$ jurisdiction$ of$
defendant$ municipality;$ (c)$ it$ constitutes$ double$ taxation;$ Its$ reason$ is$ that$ in$
computing$the$amount$of$taxes$to$be$paid$by$the$sugar$refinery$the$cost$of$the$raw$
sugar$coming$from$the$sugar$central$is$not$deducted;$ergo,$plaintiff$is$taxed$twice$
on$ the$ raw$ sugar.$ and$ (d)$ the$ national$ government$ has$ preempted$ the$ field$ of$
taxation$with$respect$to$sugar$centrals$or$refineries.$Plaintiff$seeks$refuge$in$Section$
189$of$the$National$Internal$Revenue$Code$which$subjects$proprietors$or$operators$
of$sugar$centrals$or$sugar$refineries$to$percentage$tax.$
The$trial$court$rendered$the$ordinance$invalid$but$did$not$order$a$refund$of$
the$amount$paid.$Both$parties$appealed$the$decision.$
$
ISSUES:(
1.
Was$ Ordinance$ No.$ 1,$ series$ of$ 1956,$ passed$ by$ defendant's$ municipal$
council$as$a$regulatory$enactment$or$as$a$revenue$measure?$
2.
W/N$ the$ municipality$ is$ bereft$ of$ authority$ to$ enact$ the$ ordinance$ in$
question$ because$ the$ national$ government$ "had$ preempted$ it$ from$ entering$ the$
field$of$taxation$of$sugar$centrals$and$sugar$refineries."?$
3.
W/N$the$ordinance$is$excessive?$
4.
W/N$the$ordinance$is$discriminatory$against$Victorias$Milling?$
5.
W/N$there$is$double$taxation?$
(
RATIO:(

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

(
1.
REVENUE$ MEASURE.$ $ A$municipality$is$authorized$to$impose$three$kinds$of$
licenses:$ (1)$ license$ for$ regulation$ of$ useful$ occupations$ or$ enterprises;$ (2)$ license$
for$ restriction$ or$ regulation$ of$ nonPuseful$ occupations$ or$ enterprises;$ and$ (3)$
license$for$revenue.$The$first$two$easily$fall$within$the$broad$police$power$granted$
under$the$general$welfare$clause.(The$third$class,$however,$is$for$revenue$purposes.$
It$is$not$a$license$fee,$properly$speaking,$and$yet$it$is$generally$so$termed.$It$rests$on$
the$taxing$power.$That$taxing$power$must$be$expressly$conferred$by$statute$upon$
the$municipality.$It$is$so$granted$under$Commonwealth$Act$472.(
To$be$recalled$at$this$point$is$that$Ordinance$No.$1,$series$of$1956,$is$but$an$
amendment$ of$ Ordinance$ No.$ 18,$ series$ of$ 1947,$ in$ reference$ to$ refineries,$ and$
Ordinance$ No.$ 25,$ series$ of$ 1953,$ covering$ sugar$ centrals.$ Ordinance$ No.$ 18$
imposes$"municipal$taxes$on$persons,$firms$or$corporations$operating$refinery$mills$
in$ this$ municipality.$ Ordinance$ No.$ 25$ speaks$ of$ municipal$ taxes$ "relative$ to$
the$output$of$the$sugar$centrals."$The$ordinance$is$for$raising$money.$
Besides,$the$term$"license$tax"$has$not$acquired$a$fixed$meaning.$It$is$often$
"used$indiscriminately$to$designate$impositions$exacted$for$the$exercise$of$various$
privileges."$It$does$not$refer$solely$to$a$license$for$regulation.$In$many$instances,$it$
refers$ to$ "revenuePraising$ exactions$ on$ privileges$ or$ activities."$On$ the$ other$
hand,$license$ fees$are$ commonly$ called$ taxes.$ But,$ legally$ speaking,$ the$ latter$ are$
"for$the$purpose$of$raising$revenues,"$in$contrast$to$the$former$which$are$imposed$
"in$the$exercise$of$police$power$for$purposes$of$regulation."$
We$ accordingly$ say$ that$ the$ designation$ given$ by$ the$ municipal$ authorities$
does$ not$ decide$ whether$ the$ imposition$ is$ properly$ a$ license$ tax$ or$ a$ license$ fee.$
The$ determining$ factors$ are$ the$ purpose$ and$ effect$ of$ the$ imposition$ as$ may$ be$
apparent$ from$ the$ provisions$ of$ the$ ordinance.$ The$ present$ imposition$ must$ be$
treated$ as$ a$ levy$ for$ revenue$ purposes.$ A$ quick$ glance$ at$ the$ big$ amount$ of$
maximum$annual$tax$set$forth$in$the$ordinance,$P40,000.00$for$sugar$centrals,$and$
P40,000.00$ for$ sugar$ refineries,$ will$ readily$ convince$ one$ that$ the$ tax$ is$ really$ a$
revenue$tax.$And$then,$we$read$in$the$ordinance$nothing$which$would$as$much$as$
indicate$ that$ the$ tax$ imposed$ is$ merely$ for$ police$ inspection,$ supervision$ or$
regulation.$
(
2.
NO.$The$implausibility$of$this$position$is$at$once$apparent.$We$are$not$
dealing$here$with$percentage$tax.$Rather,$we$are$concerned$with$a$tax$specifically$
for$operators$of$sugar$centrals$and$sugar$refineries.$The$rates$imposed$are$based$on$
the$maximum$annual$output$capacity,$which$is$not$a$percentage.$Because$it$is$not$a$
share.$Nor$is$it$a$tax$based$on$the$amount$of$the$proceeds$realized$out$of$the$sale$
of$sugar,$centrifugal$or$refined.$
What$ can$ be$ said$ at$ most$ is$ that$ the$ national$ government$ has$ preempted$
the$ field$ of$ percentage$ taxation.$ Section$ 1$ of$ Commonwealth$ Act$ 472,$ while$
granting$ municipalities$ power$ to$ levy$ taxes,$ expressly$ removes$ from$ them$ the$
power$ to$ exact$ "percentage$ taxes.$ $ It$ is$ correct$ to$ say$ that$ preemption$ in$ the$
matter$ of$ taxation$ simply$ refers$ to$ an$ instance$ where$ the$ national$ government$
elects$to$tax$a$particular$area,$impliedly$withholding$from$the$local$government$the$
10

delegated$ power$ to$ tax$ the$ same$ field.$ This$ doctrine$ primarily$ rests$ upon$ the$
intention$of$Congress.$Conversely,$should$Congress$allow$municipal$corporations$to$
cover$fields$of$taxation$it$already$occupies,$then$the$doctrine$of$preemption$will$not$
apply.$
In$ the$ case$ at$ bar,$ Section$ 4(1)$ of$ Commonwealth$ Act$ 472$ clearly$ and$
specifically$ allows$ municipal$ councils$ to$ tax$ persons$ engaged$ in$ "the$ same$
businesses$ or$ occupation"$ on$ which$ "fixed$ internal$ revenue$ privilege$ taxes"$ are$
"regularly$imposed$by$the$National$Government."$With$certain$exceptions$specified$
in$ Section$ 3$ of$ the$ same$ statute.$ Our$ case$ does$ not$ fall$ within$ the$ exceptions.$ It$
would$ therefore$ be$ futile$ to$ argue$ that$ Congress$ exclusively$ reserved$ to$ the$
national$government$the$right$to$impose$the$disputed$taxes.$
(
3.
NO.$An$ordinance$carries$with$it$the$presumption$of$validity.$The$question$of$
reasonableness$though$is$open$to$judicial$inquiry.$Much$should$be$left$thus$to$the$
discretion$of$municipal$authorities.$Courts$will$go$slow$in$writing$off$an$ordinance$as$
unreasonable$ unless$ the$ amount$ is$ so$ excessive$ as$ to$ be$ prohibitive,$ arbitrary,$
unreasonable,$oppressive,$or$confiscatory.(
Plaintiff$ has$ however$ not$ sufficiently$ proven$ that,$ taking$ these$ factors$
together,$the$license$taxes$are$unreasonable.$The$presumption$of$validity$subsists.$
For,$plaintiff$has$limited$itself$to$insisting$that$the$amounts$levied$exceed$the$cost$
of$regulation$and$that$the$municipality$has$adequate$funds$for$the$alleged$purposes$
as$evidenced$by$the$municipality's$cash$surplus$for$the$fiscal$year$ending$1956.$
The$cost$of$regulation$cannot$be$taken$as$a$gauge,$if$the$municipality$really$
intended$to$enact$a$revenue$ordinance.$For,$"if$the$charge$exceeds$the$expense$of$
issuance$of$a$license$and$costs$of$regulation,$it$is$a$tax."$And$if$it$is,$and$it$is$validly$
imposed,$ as$ in$ this$ case,$ "the$ rule$ that$ license$ fees$ for$ regulation$ must$ bear$ a$
reasonable$relation$to$the$expense$of$the$regulation$has$no$application."$
A$ cash$ surplus$ alone$ cannot$ stop$ a$ municipality$ from$ enacting$ a$ revenue$
ordinance$increasing$license$taxes$in$anticipation$of$municipal$needs.$Discretion$to$
determine$ the$ amount$ of$ revenue$ required$ for$ the$ needs$ of$ the$ municipality$ is$
lodged$ with$ the$ municipal$ authorities.$ Again,$ judicial$ intervention$ steps$ in$ only$
when$there$is$a$flagrant,$oppressive$and$excessive$abuse$of$power$by$said$municipal$
authorities.$
$
4.
NO.$ The$ ordinance$ does$ not$ single$ out$ Victorias$ as$ the$ only$ object$ of$ the$
ordinance.$ Said$ ordinance$ is$ made$ to$ apply$ to$ any$ sugar$ central$ or$ sugar$ refinery$
which$may$happen$to$operate$in$the$municipality.$So$it$is,$that$the$fact$that$plaintiff$
is$actually$the$sole$operator$of$a$sugar$central$and$a$sugar$refinery$does$not$make$
the$ordinance$discriminatory.(
$(
5.
NO.$ We$ find$ no$ difficulty$ in$ saying$ that$ plaintiff's$ argument$ on$ double$
taxation$ does$ not$ inspire$ assent.$First.$ The$ two$ taxes$ cover$ two$ different$ objects.$
Section$ 1$ of$ the$ ordinance$ taxes$ a$ person$ operating$ sugar$ centrals$ or$ engaged$ in$
the$ manufacture$ of$ centrifugal$ sugar.$ While$ under$ Section$ 2,$ those$ taxed$ are$ the$
operators$of$sugar$refinery$mills.$One$occupation$or$business$is$different$from$the$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

other.$Second.$ The$ disputed$ taxes$ are$ imposed$ on$ occupation$ or$ business.$ Both$
taxes$ are$ not$ on$ sugar.$ The$ amount$ thereof$ depends$ on$ the$ annual$
output$capacity$of$ the$ mills$ concerned,$ regardless$ of$ the$ actual$ sugar$ milled.$
Plaintiff's$argument$perhaps$could$make$out$a$point$if$the$object$of$taxation$here$
were$thesugar$it$produces,$not$the$business$of$producing$it.(
(
OTHER(DOCTRINES:(
1.
When$ no$ police$ inspection,$ supervision,$ or$ regulation$ is$ provided,$ nor$ any$
standard$set$for$the$applicant$to$establish,$or$that$he$agrees$to$attain$or$maintain,$
but$ any$ and$ all$ persons$ engaged$ in$ the$ business$ designated,$ without$ qualification$
or$hindrance,$may$come,$and$a$license$on$payment$of$the$stipulated$sum$will$issue,$
to$do$business,$subject$to$no$prescribed$rule$of$conduct$and$under$no$guardian$eye,$
but$ according$ to$ the$ unrestrained$ judgment$ or$ fancy$ of$ the$ applicant$ and$
licensee,$the) presumption) is) strong) that) the) power) of) taxation,$ and$ not$ the$ police$
power,$is$being$exercised.$
$
2.
Double$ taxation$ has$ been$ otherwise$ described$ as$ "direct$ duplicate$
taxation."(For$ double$ taxation$ to$ exist,$ "the$ same$ property$ must$ be$ taxed$ twice,$
when$ it$ should$ be$ taxed$ but$ once."$ Double$ taxation$ has$ also$ been$ "defined$ as$
taxing$the$same$person$twice$by$the$same$jurisdiction$for$the$same$thing."$
(
DISPOSITIVE(PORTION:(
The$judgment$under$review$is$hereby$reversed;$and$$judgment$is$hereby$rendered:$
(a)$ declaring$ valid$ and$ subsisting$ Ordinance$ No.$ 1,$ series$ of$ 1956,$ of$ the$
Municipality$ of$ Victorias,$ Province$ of$ Negros$ Occidental;$ and$ (b)$ dismissing$
plaintiff's$ complaint$ as$ supplemented$ and$ amended.$ Costs$ against$ plaintiff.$ So$
ordered.(
$
$
LUTZ(VS.(ARANETA(
G.R.(No.(L77859(
December(22,(1955(
(
FACTS:(
Plaintiff,$Walter$Lutz,$in$his$capacity$as$Judicial$Administrator$of$the$Intestate$
Estate$ of$ Antonio$ Jayme$ Ledesma,$ seeks$ to$ recover$ from$ the$ Collector$ of$ Internal$
Revenue$the$sum$of$P14,666.40$paid$by$the$estate$as$taxes,$under$section$3$of$the$
Act,$ for$ the$ crop$ years$ 1948P1949$ and$ 1949P1950;$ alleging$ that$ such$ tax$ is$
unconstitutional$and$void,$being$levied$for$the$aid$and$support$of$the$sugar$industry$
exclusively,$which$in$plaintiff's$opinion$is$not$a$public$purpose$for$which$a$tax$may$
be$constitutionally$levied.$The$action$was$previously$dismissed$by$the$Court$of$First$
Instance.$
This$case$was$initiated$in$the$Court$of$First$Instance$of$Negros$Occidental$to$
test$ the$ legality$ of$ the$ taxes$ imposed$ by$ Commonwealth$ Act$ No.$ 567,$ otherwise$
known$as$the$Sugar$Adjustment$Act.$
11

$
$
$
ISSUES:(
1.
Whether$ or$ not$ Commonwealth$ Act$ 567$ or$ the$ Sugar$ Adjustment$ Act$ is$
unconstitutional$
(
RATIO:(
1.
No.$CA$567$is$a$valid$exercise$of$police$power.$(
In$section$2,$Commonwealth$Act$567$provides$for$an$increase$of$the$existing$
tax$ on$ the$ manufacture$ of$ sugar,$ on$ a$ graduated$ basis,$ on$ each$ picul$ of$ sugar$
manufactured;$ while$ section$ 3$ levies$ on$ owners$ or$ persons$ in$ control$ of$ lands$
devoted$to$the$cultivation$of$sugar$cane$and$ceded$to$others$for$a$consideration,$on$
lease$or$otherwise$$$
a$tax$equivalent$to$the$difference$between$the$money$value$of$the$rental$
or$consideration$collected$and$the$amount$representing$12$per$centum$of$
the$assessed$value$of$such$land.$
According$to$section$6$of$the$law$$$
SEC.$6.$All$collections$made$under$this$Act$shall$accrue$to$a$special$
fund$in$the$Philippine$Treasury,$to$be$known$as$the$'Sugar$Adjustment$and$
Stabilization$Fund.$$
The( basic( defect( in( the( plaintiff's( position( is( his( assumption( that( the( tax(
provided(for(in(Commonwealth(Act(No.(567(is(a(pure(exercise(of(the(taxing(power.$
Analysis$ of$ the$ Act,$ and$ particularly$ of$ section$ 6$ (heretofore$ quoted$ in$ full),$ will$
show$ that$ the( tax( is( levied( with( a( regulatory( purpose,( to( provide( means( for( the(
rehabilitation(and(stabilization(of(the(threatened(sugar(industry.(In(other(words,(
the(act(is(primarily(an(exercise(of(the(police(power.$
Sugar$production$is$one$of$the$great$industries$of$our$nation.$Its$promotion,$
protection$ and$ advancement,$ therefore$ redounds$ greatly$ to$ the$ general$ welfare.$
Hence$ it$ was$ competent$ for$ the$ legislature$ to$ find$ that$ the$ general$ welfare$
demanded$that$the$sugar$industry$should$be$stabilized$in$turn;$and$in$the$wide$field$
of$ its$ police$ power,$ the$ lawmaking$ body$ could$ provide$ that$ the$ distribution$ of$
benefits$therefrom$be$readjusted$among$its$components$to$enable$it$to$resist$the$
added$strain$of$the$increase$in$taxes$that$it$had$to$sustain.$
The$ protection$ and$ promotion$ of$ the$ sugar$ industry$ is$ a$ matter$ of$ public$
concern,$ it$ follows$ that$ the$ Legislature$ may$ determine$ within$ reasonable$ bounds$
what$ is$ necessary$ for$ its$ protection$ and$ expedient$ for$ its$ promotion.$ If$ objective$
and$methods$are$alike$constitutionally$valid,$no$reason$is$seen$why$the$state$may$
not$levy$taxes$to$raise$funds$for$their$prosecution$and$attainment.$Taxation(may(be(
made(the(implement(of(the(state's(police(power.$$
That$the$tax$to$be$levied$should$burden$the$sugar$producers$themselves$can$
hardly$ be$ a$ ground$ of$ complaint;$ indeed,$ it$ appears$ rational$ that$ the$ tax$ be$
obtained$precisely$from$those$who$are$to$be$benefited$from$the$expenditure$of$the$
funds$derived$from$it.$At$any$rate,$it(is(inherent(in(the(power(to(tax(that(a(state(be(
free( to( select( the( subjects( of( taxation,( and( it( has( been( repeatedly( held( that(

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

"inequalities(which(result(from(a(singling(out(of(one(particular(class(for(taxation,(
or(exemption(infringe(no(constitutional(limitation."$
It$is$of$no(moment(that(the(funds(raised(under(the(Sugar(Stabilization(Act,(
now(in(question,(should(be(exclusively(spent(in(aid(of(the(sugar(industry,$since$it$is$
that$very$enterprise$that$is$being$protected.$$
Even$ from$ the$ standpoint$ that$ the$ Act$ is$ a$ pure$ tax$ measure,$ it$ cannot$ be$
said$ that$ the$ devotion$ of$ tax$ money$ to$ experimental$ stations$ to$ seek$ increase$ of$
efficiency$ in$ sugar$ production,$ utilization$ of$ byPproducts$ and$ solution$ of$ allied$
problems,$as$well$as$to$the$improvements$of$living$and$working$conditions$in$sugar$
mills$ or$ plantations,$ without$ any$ part$ of$ such$ money$ being$ channeled$ directly$ to$
private$persons,$constitutes$expenditure$of$tax$money$for$private$purposes.$
(
DISPOSITIVE(PORTION:(
The$decision$appealed$from$is$affirmed,$with$costs$against$appellant.$So$ordered.$
$
$
PCGG(vs.(COJUANGCO(
GR(No.(147062764(
December(14,(2001(
$
FACTS:(
This$ case$ is$ anchored$ on$ the$ historic$ events$ that$ transpired$ during$ the$
change$of$government$in$1986.$Immediately$after$the$1986$EDSA$Revolution,$then$
President$ Corazon$ C.$ Aquino$ issued$ Executive$ Order$ Nos.$ 1,$ 2$ and$ 14.$ PCGG$ was$
created$ to$ assist$ the$ President$ in$ the$ recovery$ of$ the$ illPgotten$ wealth$ thus$
accumulated$whether$located$in$the$Philippines$or$abroad$(EO$1).$EO$2$states$that$
the$illPgotten$assets$and$properties$are$in$the$form$of$bank$accounts,$deposits,$trust$
accounts,$ shares$ of$ stocks,$ buildings,$ shopping$ centers,$ condominiums,$ mansions,$
residences,$ estates,$ and$ other$ kinds$ of$ real$ and$ personal$ properties$ in$ the$
Philippines$ and$ in$ various$ countries$ of$ the$ world.$ And$ EO$ 14$ empowered$ PCGG,$
with$ the$ assistance$ of$ the$ Office$ of$ the$ Solicitor$ General$ and$ other$ government$
agencies,$ to$ file$ and$ prosecute$ all$ cases$ investigated$ by$ it$ under$ EO$ Nos.$ 1$ and$
2.Pursuant$to$these$laws,$PCGG$issued$and$implemented$numerous$sequestrations,$
freeze$ orders$ and$ provisional$ takeovers$ of$ allegedly$ illPgotten$ companies,$ assets$
and$properties,$real$or$personal;$among$of$which$were$shares$of$stock$in$the$UCPB$
registered$ in$ the$ alleged$ 1Pmillion$ coconut$ farmers,$ the$ soPcalled$ Coconut$
Industry$ Investment$ Fund$ Companies$ (CIIF$ Companies)$ and$ Cojuangco$ Jr.$ In$
connection$ herewith,$ PCGG$ instituted$ an$ action$ for$ reconveyance,$ reversion,$
accounting,$restitution$and$damages$in$the$SB.$
On$1990,$upon$motion$of$respondent$COCOFED,$the$SB$issued$a$resolution$
lifting$the$sequestration$of$the$subject$UCPB$shares$on$the$ground$that$COCOFED$
and$ CIIF$ companies$ had$ not$ been$ impleaded,$ and$ that$ the$ Writ$ of$ Sequestration$
issued$by$the$Commission$was$automatically$lifted$for$PCGGs$failure$to$commence$
the$corresponding$judicial$action$within$6Pmonth$period.$PCGG$applied$for$and$was$
granted$ by$ SC$ Restraining$ Order$ enjoining$ the$ holding$ of$ the$ election.$
12

Subsequently,$ the$ Court$ lifted$ the$ Restraining$ Order$ and$ ordered$ the$ UCPB$ to$
proceed$ with$ the$ election$ of$ its$ board$ of$ directors.$ Furthermore,$ it$ allowed$ the$
sequestered$ shares$ to$ be$ voted$ by$ their$ registered$ owners.$ The$ victory$ of$ the$
registered$ shareholders$ was$ fleeting$ because$ the$ Court,$ acting$ on$ the$ solicitor$
general's$ Motion$ for$ Clarification/Manifestation,$ issued$ a$ Resolution$ on$ 1993,$
declaring$that$"the$right$of$COCOFED$and$Cojuangco$to$vote$stock$in$their$names$at$
the$meetings$of$the$UCPB$cannot$be$conceded$at$this$time.$That$right$still$has$to$be$
established$ by$ them$ before$ SB.$ Until$ that$ is$ done,$ they$ cannot$ be$ deemed$
legitimate$owners$of$UCPB$stock$and$cannot$be$accorded$the$right$to$vote$them.$
On$ 1995,$ the$ Court$ rendered$ its$ Final$ Decision,$ nullifying$ and$ setting$ aside$ the$
Resolution$ of$ SB,$ which$ lifted$ the$ sequestration$ of$ the$ UCPB$ shares.$ A$ month$
thereafter,$the$PCGG$subdivided$the$case$into$8$complaints.$
On$ 2001,$ COCOFED$ et$ al,$ filed$ the$ Class$ Action$ Omnibus$ Motion$ to$ Enjoin$
the$PCGG$from$voting$the$UCPB$shares$of$stock$registered$in$the$respective$names$
of$ the$ more$ than$ 1$ million$ coconut$ farmers;$ and$ to$ enjoin$ PCGG$ from$ voting$ the$
SMC$ shares$ registered$ in$ the$ names$ of$ the$ 14$ CIIF$ holding$ companies$ including$
those$registered$in$the$name$of$the$PCGG.$$
$
ISSUES:(
1.
W/N$SB$acted$with$grave$abuse$of$discretion$in$its$Order$enjoining$PCGG$
from$voting$the$sequestered$shares$of$stock$of$UCPB$
2.
W/N$SB$violated$petitioners$right$to$due$process$by$taking$cognizance$of$
the$ Class$ Action$ Omnibus$ Motion$ despite$ gross$ lack$ of$ sufficient$ notice$ and$ by$
issuing$the$writ$of$Preliminary$injunction$despite$the$obvious$fact$that$there$was$no$
actual$pressing$necessity$or$urgency$to$do$so$
$
RATIO:(
1.
SC$ held$ that$ the$ government$ should$ be$ allowed$ to$ continue$ voting$ those$
shares$inasmuch$as$they$were$purchased$with$coconut$levy$funds$$that$are$prima$
facie$ public$ in$ character$ or,$ at$ the$ very$ least,$ are$ clearly$ affected$ with$ public$
interest.$ The$ general$ rule$ is$ that$ the$ registered$ owner$ of$ the$ shares$ of$ a$
corporation$exercises$the$right$and$privilege$of$voting.$This$principle$applies$even$to$
shares$ that$ are$ sequestered$ by$ the$ government,$ over$ which$ the$ PCGG$ as$ a$ mere$
conservator$ cannot,$ as$ a$ General$ Rule,$ exercise$ acts$ of$ dominion.$ On$ the$ other$
hand,$it$is$authorized$to$vote$these$sequestered$shares$registered$in$the$names$of$
private$persons$and$acquired$with$allegedly$illPgotten$wealth,$if$it$is$able$to$satisfy$
the$twoRtiered)devised$by$the$Court:$$(1)$Is$there$prima)facie$evidence$showing$that$
the$said$shares$are$illPgotten$and$thus$belong$to$the$State?;$(2)$Is$there$an$imminent$
danger$ of$ dissipation,$ thus$ necessitating$ their$ continued$ sequestration$ and$ voting$
by$the$PCGG,$while$the$main$issue$is$pending$with$the$Sandiganbayan?$
However,$there$are$two$clear$public$character$exceptions$under$which$the$
government$ is$ granted$ the$ authority$ to$ vote$ the$ shares:$ (1)$ Where$ government$
shares$are$taken$over$by$private$persons$or$entities$who/which$registered$them$in$
their$ own$ names,$ and$ (2)$ Where$ the$ capitalization$ or$ shares$ that$ were$ acquired$
with$public$funds$somehow$landed$in$private$hands.$The$exceptions$are$based$on$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

the$ commonPsense$ principle$ that$ legal$ fiction$ must$ yield$ to$ truth;$ that$ public$
property$registered$in$the$names$of$nonPowners$is$affected$with$trust$relations;$and$
that$the$prima$facie$beneficial$owner$should$be$given$the$privilege$of$enjoying$the$
rights$flowing$from$the$prima$facie$fact$of$ownership.$
In$ Baseco$ case,$ the$ Court$ granted$ PCGG$ the$ right$ to$ vote$ the$ sequestered$
shares$ because$ they$ appeared$ to$ be$ "assets$ belonging$ to$ the$ government$ itself."$
And$ also$ in$ case$ of$ CojuangcoPRoxas$ that$ he$ PCGG$ cannot$ perform$ acts$ of$ strict$
ownership$ of$ sequestered$ property.$ It$ is$ a$ mere$ conservator.$ It$ may$ not$ vote$ the$
shares$in$a$corporation$and$elect$the$members$of$the$board$of$directors.$The$only$
conceivable$ exception$ is$ in$ a$ case$ of$ a$ takeover$ of$ a$ business$ belonging$ to$ the$
government$or$whose$capitalization$comes$from$public$funds,$but$which$landed$in$
private$ hands$ as$ in$ BASECO."$ The$ public$ character$ test$ was$ reiterated$ most$
recently$ in$ Antiporda$ case$ that$ it$ was$ crucial$ to$ find$ out$ first$ whether$ these$ were$
purchased$ with$ public$ funds.$ In$ short,$ when$ sequestered$ shares$ registered$ in$ the$
names$of$private$individuals$or$entities$are$alleged$to$have$been$acquired$with$illP
gotten$wealth,$then$the$twoPtiered$test$is$applied.$However,$when$the$sequestered$
shares$in$the$name$of$private$individuals$or$entities$are$shown,$prima$facie,$to$have$
been$(1)$originally$government$shares,$or$(2)$purchased$with$public$funds$or$those$
affected$with$public$interest,$then$the$twoPtiered$test$does$not$apply.$Rather,$the$
public$character$exceptions$in$Baseco$and$Cojuangco$Jr.$v.$Roxas$prevail;$that$is,$the$
government$shall$vote$the$shares.$
In$the$present$case,$it$is$not$disputed$that$the$money$used$to$purchase$the$
sequestered$ UCPB$ shares$ came$ from$ the$ Coconut$ Consumer$ Stabilization$ Fund$
(CCSF),$otherwise$known$as$the$coconut$levy$funds.$It$was$conclusively$shown$that$
the$ sequestered$ UCPB$ shares$ were$ purchased$ with$ coconut$ levies,$ SC$ hold$ that$
these$ funds$ and$ shares$ are,$ at$ the$ very$ least,$ "affected$ with$ public$ interest$ and$
that$ private$ respondents$ have$ not$ demonstrated$ satisfactorily$ that$ they$ have$
legitimately$ become$ private$ funds.$ SC$ stressed$ that$ the$ assailed$ SB$ order,$ which$
allows$ the$ private$ respondents$ to$ vote$ the$ sequestered$ shares$ $ is$ not$ based$ on$
any$finding$that$the$coconut$levies$and$the$shares$have$legitimately$become$private$
funds.$ In$ the$ present$ case,$ the$ sequestered$ UCPB$ shares$ are$ confirmed$ to$ have$
been$acquired$with$coco$levies,$not$with$alleged$illPgotten$wealth.$Hence,$by$parity$
of$ reasoning,$ the$ right$ to$ vote$ them$ is$ not$ subject$ to$ the$ "twoPtiered$ test"$ but$ to$
the$public$character$of$their$acquisition,$which$the$Antiporda$case$had$cited$earlier,$
must$first$be$determined.$
It$was$further$stressed$that$to$avoid$the$misunderstanding$and$confusion$SC$
become$ more$ categorical$ and$ positive$ than$ its$ earlier$ pronouncements:$ the(
coconut( levy( funds( are( not( only( affected( with( public( interest;( they( are,( in( fact,(
prima'facie'public(funds.(Public$funds$are$those$moneys$belonging$to$the$State$or$
to$any$political$subdivision$of$the$State;$more$specifically,$taxes,$customs$duties$and$
moneys$ raised$ by$ operation$ of$ law$ for$ the$ support$ of$ the$ government$ or$ for$ the$
discharge$ of$ its$ obligations.$ Undeniably,$ coconut( levy( funds( satisfy( this( general(
definition(of(public(funds,$because$of$the$following$reasons:$(1)$Coconut$levy$funds$
are$ raised$ with$ the$ use$ of$ the$ police$ and$ taxing$ powers$ of$ the$ State;$ (2)$ They$ are$
levies$imposed$by$the$State$for$the$benefit$of$the$coconut$industry$and$its$farmers;$
13

(3)$ Respondents$ have$ judicially$ admitted$ that$ the$ sequestered$ shares$ were$
purchased$with$public$funds;$(4)$The$Commission$on$Audit$(COA)$reviews$the$use$of$
coconut$levy$funds;$(5)$The$Bureau$of$Internal$Revenue$(BIR),$with$the$acquiescence$
of$ private$ respondents,$ has$ treated$ them$ as$ public$ funds;$ (6)$ The$ very$ laws$
governing$coconut$levies$recognize$their$public$character.$
$
(DISCUSSION(WITH(REGARD(TO(TAX)(
To$show$further$its$being$as$public$in$character,$indeed,$coconut$levy$funds$
partake$ of$ the$ nature$ of$ taxes$ which,$ in$ general,$ are$ enforced$ proportional$
contributions$ from$ persons$ and$ properties,$ exacted$ by$ the$ State$ by$ virtue$ of$ its$
sovereignty$for$the$support$of$government$and$for$all$public$needs.$Based$on$this$
definition,$ a$ tax( has( three( elements,$ namely:$ a)$ it$ is$ an$ enforced$ proportional$
contribution$from$persons$and$properties;$b)$it$is$imposed$by$the$State$by$virtue$of$
its$sovereignty;$and$c)$it$is$levied$for$the$support$of$the$government.$The$coconut$
levy$funds$fall$squarely$into$these$elements$for$the$following$reasons:$(a)$They$were$
generated$ by$ virtue$ of$ statutory$ enactments$ imposed$ on$ the$ coconut$ farmers$
requiring$ the$ payment$ of$ prescribed$ amounts.$ Thus,$ PD$ No.$ 276$ created$ the$
Coconut$Consumer$Stabilization$Fund$(CCSF).$
Taxation$ is$ done$ not$ merely$ to$ raise$ revenues$ to$ support$ the$ government,$
but$ also$ to$ provide$ means$ for$ the$ rehabilitation$ and$ the$ stabilization$ of$ a$
threatened$ industry,$ which$ is$ so$ affected$ with$ public$ interest$ as$ to$ be$ within$ the$
police$power$of$the$State.$Even$if$the$money$is$allocated$for$a$special$purpose$and$
raised$ by$ special$ means,$ it$ is$ still$ public$ in$ character.$ In$ the$ case$ before$ us,$ the$
funds$were$even$used$to$organize$and$finance$State$offices.$In$Cocofed$v.$PCGG,$the$
Court$observed$that$certain$agencies$or$enterprises$"were$organized$and$financed$
with$revenues$derived$from$coconut$levies$imposed$under$a$succession$of$laws$of$
the$ late$ dictatorship$ with$ deposed$ Ferdinand$ Marcos$ and$ his$ cronies$ as$ the$
suspected$ authors$ and$ chief$ beneficiaries$ of$ the$ resulting$ coconut$ industry$
monopoly."$ It$ cannot$ be$ denied$ that$ the$ coconut$ industry$ is$ one$ of$ the$ major$
industries$supporting$the$national$economy.$It$is,$therefore,$the$State's$concern$to$
make$ it$ a$ strong$ and$ secure$ source$ not$ only$ of$ the$ livelihood$ of$ a$ significant$
segment$ of$ the$ population,$ but$ also$ of$ export$ earnings$ the$ sustained$ growth$ of$
which$is$one$of$the$imperatives$of$economic$stability.$
Just$like$the$sugar$levy$funds,$the$coconut$levy$funds$constitute$state$funds$
even$though$they$may$be$held$for$a$special$public$purpose.$The$coconut$levy$funds$
$like$the$sugar$levy$and$the$oil$stabilization$funds,$as$well$as$the$monies$generated$
by$ the$ OnPline$ Lottery$ System$ $ are$ funds$ exacted$ by$ the$ State.$ Being$ enforced$
contributions,$they$are$prima$facie$public$funds.$$
Equally$ important$ as$ the$ fact$ that$ the$ coconut$ levy$ funds$ were$ raised$
through$the$taxing$and$police$powers$of$the$State$is$respondents'$effective$judicial$
admission$that$these$levies$are$government$funds.$As$shown$by$the$attachments$to$
their$ pleadings,$ respondents$ concede$ that$ the$ Coconut$ Consumers$ Stabilization$
Fund$ (CCSF)$ and$ the$ Coconut$ Investment$ Development$ Fund$ "constitute$
government$funds$for$the$benefit$of$coconut$farmers."$

ATILANO BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO TAGRA VALLO WILWAYCO

GENERAL PRINCIPLES: CLASSIFICATIONS AND DISTINCTIONS

In$response$to$a$query$posed$by$the$administrator$of$the$Philippine$Coconut$
Authority$regarding$the$character$of$the$coconut$levy$funds,$the$Bureau$of$Internal$
Revenue$ has$ affirmed$ that$ these$ funds$ are$ public$ in$ character.$ It$ held$ as$ follows:$
"The$coconut$levy$is$not$a$public$trust$fund$for$the$benefit$of$the$coconut$farmers,$
but$ is$ in$ the$ nature$ of$ a$ tax$ and,$ therefore,$ public$ funds$ that$ are$ subject$ to$
government$ administration$ and$ disposition."$ Finally$ and$ tellingly,$ the$ very$ laws$
governing$ the$ coconut$ levies$ recognize$ their$ public$ character.$ Thus,$ the$ third$
Whereas$ clause$ of$ PD$ No.$ 276$ treats$ them$ as$ special$ funds$ for$ a$ specific$ public$
purpose.$Furthermore,$PD$No.$711$transferred$to$the$general$funds$of$the$State$all$
existing$special$and$fiduciary$funds$including$the$CCSF.$On$the$other$hand,$PD$No.$
1234$ specifically$ declared$ the$ CCSF$ as$ a$ special$ fund$ for$ a$ special$ purpose,$ which$
should$be$treated$as$a$special$account$in$the$National$Treasury.$
THUS,$having$shown$that$the$coconut$levy$funds$are$not$only$affected$with$
public$ interest,$ but$ are$ in$ fact$ prima$ facie$ public$ funds,$ SC$ believes$ that$ the$
government$should$be$allowed$to$vote$the$questioned$shares,$because$they$belong$
to$it$as$the$prima$facie$beneficial$and$true$owner.$Voting$is$an$act$of$dominion$that$
should$be$exercised$by$the$share$owner.$One$of$the$recognized$rights$of$an$owner$
is$the$right$to$vote$at$meetings$of$the$corporation.$The$right$to$vote$is$classified$as$
the$right$to$control.$Voting$rights$may$be$for$the$purpose$of,$among$others,$electing$
or$ removing$ directors,$ amending$ a$ charter,$ or$ making$ or$ amending$ by$ laws.$
Because$ the$ subject$ UCPB$ shares$ were$ acquired$ with$ government$ funds,$ the$
government$becomes$their$prima$facie$beneficial$and$true$owner.$
$
2.
SC$ hold$ that$ the$ SB$ gravely$ abused$ its$ discretion$ when$ it$ contravened$ the$
rulings$of$Sc$in$Baseco$and$CojuangcoRRoxas$$thereby$unlawfully,$capriciously$and$
arbitrarily$ depriving$ the$ government$ of$ its$ right$ to$ vote$ sequestered$ shares$
purchased$ with$ coconut$ levy$ funds$ which$ are$ prima) facie$ public$ funds.$$
Furthermore,$SC$disagrees$with$SB,$which$ruled$that$the$twoPtiered$test$should$be$
applied$in$evaluating$private$respondents$claim$of$exercising$voting$rights$over$the$
sequestered$shares$and$SB$effectively$held$that$the$subject$assets$were$private$in$
character.$ In$ sum,$ SC$ hold$ SB$ committed$ grave$ abuse$ of$ discretion$ in$ grossly$
contradicting$and$effectively$reversing$existing$jurisprudence,$and$in$depriving$the$
government$of$its$right$to$vote$the$sequestered$UCPB$shares$which$are$prima)facie$
public$in$character.$
$
DISPOSITIVE(PORTION:(
WHEREFORE,$ the$ Petition$ is$ hereby$ GRANTED$ and$ the$ assailed$ Order$ SET' ASIDE.$
The$ PCGG$ shall$ continue$ voting$ the$ sequestered$ shares$ until$ Sandiganbayan$ Civil$
Case$ Nos.$ 0033PA,$ 0033PB$ and$ 0033PF$ are$ finally$ and$ completely$ resolved.$
Furthermore,$the$Sandiganbayan$is$ORDERED$to$decide$with$finality$the$aforesaid$
civil$cases$within$a$period$of$six$(6)$months$from$notice.$It$shall$report$to$this$Court$
on$the$progress$of$the$said$cases$every$three$(3)$months,$on$pain$of$contempt.$The$
Petition$ in$ Intervention$ is$ DISMISSED$ inasmuch$ as$ the$ reliefs$ prayed$ for$ are$ not$
covered$by$the$main$issues$in$this$case.$
$
14

$
$
$
COMMISSION(OF(INTERNAL(REVENUE(V.(PLDT(
G.R.(No.(140230(
December(15,(2005(
(
FACTS:(
For$ equipment,$ machineries$ and$ spare$ parts$ it$ imported$ for$ its$ business'$
from$October$1992$to$May$1994,$PLDT$paid$the$BIR$the$amount$of$P164,510,953.00$
for:$(a)$compensating$tax$of$P126,713,037.00;$advance$sales$tax$of$P12,460,219.00$
and$ other$ internal$ revenue$ taxes$ of$ P25,337,697.00.$ For$ similar$ importations$
between$March$1994$to$May$31,$1994,$PLDT$paid$P116,041,333.00$valuePadded$tax$
(VAT).$
As$a$franchise$holder,$PLDT$was$entitled$to$a$tax$exemption$privilege$under$
RA7082$(grant$of$franchise),$which$provided$that$the$grantee$should$pay$a$franchise$
tax$equivalent$to$3%$of$all$gross$receipts,$and$that$the$said$percentage$shall$be$in$
LIEU$of$all$taxes$on$the$franchise/$its$earnings.$
PLDT$ wrote$ to$ the$ BIR$ requesting$ confirmation$ of$ its$ exemption$ privilege,$
and$ BIR$ confirmed$ this,$ saying$ that$ PLDT$ was$ liable$ for$ the$ 3%$ franchise$ tax$ and$
exempt$ from$ VAT$ on$ its$ importation$ of$ equipment.$ $ PLDT$ filed$ a$ claim$ for$ tax$
refund$of$the$VAT,$compensating$taxes,$advance$sales$taxes$and$other$taxes$it$had$
been$paying$erroneously$from$October,$1992P$December,$1994.$$
CTA$ granted$ the$ petition$ (although$ ruling$ that$ a$ portion$ from$ OctPDec16,$
1992$ had$ already$ prescribed$ and$ was$ beyond$ the$ 2Pyr$ period$ allowed$ by$ law$ for$
refunds),$ ordering$ CIR$ to$ REFUND$ or$ to$ ISSUE$ in$ favor$ of$ petitioner$ a$ Tax$ Credit$
Certificate$ in$ the$ reduced$ amount$ of$ P223,265,276.00$ representing$ erroneously$
paid$VAT$and$other$taxes$(compensating,$advance$sales,$importation)$from$1992$to$
1994.$$$
NOTE:)In)the)CTA)decision,)penned)by)then)Associate)Justice)De)Veyra,)Judge)
Saga)dissented,)who)clarified)that)the)in)lieu)of)provision)of)Sec12)refers)only)to)
DIRECT)taxes)and)not)to)indirect)taxes)such)as)VAT,)compensating)tax,)and)advance)
sales)tax.)
The$ BIR$ moved$ for$ reconsideration$ and$ the$ same$ was$ denied.$ CA$ also$
dismissed$its$appeal.$$
$
ISSUE:(
WON$PLDT$is$exempt$from$payment$of$VAT$other$taxes$by$virtue$of$the$provision$in$
its$ franchise$ that$ the$ 3%$ franchise$ tax$ on$ its$ gross$ receipts$ shall$ be$ in$ lieu$ of$ all$
taxes$on$its$franchise$/$earnings$
$
RATIO:(
NO,$PLDT$is$not$exempt$from$VAT$and$other$taxes.$
The$Court$has$always$ruled$that$TAXATION$is$the$RULE,$and$exemption$is$the$
exception.$ Thus,$ statutes$ granting$ tax$ exemptions$ must$ be$ construed$ strictly$

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against$ the$ taxpayer$ and$ liberally$ in$ favor$ of$ the$ taxing$ authority.$ Therefore,$ the$
burden$of$justifying$exemption$is$imposed$on$the$one$who$claims$a$refund.$
The$clause$in$lieu$of$all$taxes$in$Sec$12$of$RA$7082$is$immediately$followed$
by$ the$ limiting$ or$ qualifying$ clause$ on$ this$ franchise$ or$ earnings$ thereof,$
suggesting$that$the$exemption$is$limited$to$taxes$imposed$DIRECTLY$on$PLDT,$since$
taxes$pertaining$to$PLDTs$franchise$or$earnings$are$its$direct$liability.$
Thus,$ indirect$ taxes,$ not$ being$ taxes$ on$ PLDTs$ franchise$ or$ earnings,$ are$
OUTSIDE$the$purview$of$the$in$lieu$provision.$$
The$10%$VAT$on$importation$of$goods$partakes$of$an$excise$tax$levied$on$the$
privilege$ of$ importing$ articles.$ It$ is$ NOT$ a$ tax$ on$ the$ franchise$ of$ a$ business$
enterprise,$ but$ is$ imposed$ on$ all$ taxpayers$ who$ import$ goods$ whether$ or$ not$ the$
goods$ will$ eventually$ be$ sold,$ bartered,$ exchanged$ or$ utilized$ for$ personal$
consumption.$$
The) VAT) on) importation) replaces) the) advance) sales) tax) payable) by) regular)
importers) who) import) articles) for) sale) or) as) raw) materials) in) the) manufacture) of)
finished)articles)for)sale.)
$
Direct(taxes(7$impositions$for$which$a$taxpayer$is$directly$liable$on$the$transaction$
or$business$he$is$engaged$in.)
$
Indirect( taxes( P$ those$ where$ the$ liability$ for$ the$ payment$ of$ the$ tax$ falls$ on$ one$
person$but$the$burden$can$be$shifted$or$passed$on$to$another$person,$such$as$when$
the$tax$is$imposed$upon$goods$before$reaching$the$consumer$who$ultimately$pays$
for$it.$
In$this$case,$advance$sales$tax$has$the$attributes$of$an$indirect$tax$because$
the$ taxPpaying$ importer$ of$ goods$ for$ sale$ or$ of$ raw$ materials$ to$ be$
processed$into$merchandise$can$shift$the$tax$/$lay$the$economic$burden$
of$the$tax$on$the$purchaser,$by$subsequently$adding$the$tax$to$the$selling$
price$of$the$imported$article$or$finished$product$
Compensating$tax$also$partakes$of$the$nature$of$an$excise$tax$payable$by$
all$persons$who$import$articles,$whether$in$the$course$of$business$or$not.$
(Purpose:$to$place,$for$tax$purposes,$persons$purchasing$from$merchants$
in$ the$ Philippines$ on$ a$ more$ or$ less$ equal$ basis$ with$ those$ who$ buy$
directly$from$foreign$countries)$
(
DISPOSITIVE(PORTION:(
WHEREFORE,$ the$ petition$ is$ partially$ GRANTED.$ The$ Decision$ of$ the$ Court$ of$
Appeals$ in$ CAPG.R.$ No.$ 47895$ dated$ September$ 17,$ 1999$ is$ MODIFIED.$ The$
Commissioner$of$Internal$Revenue$is$ORDERED$to$issue$a$Tax$Credit$Certificate$or$
to$refund$to$PLDT$only$the$of$P94,673,422.00$advance$sales$tax$and$compensating$
tax$erroneously$collected$by$the$Bureau$of$Customs$from$October$1,$1992$to$May$
31,$1994,$less$the$VAT$which$may$have$been$due$on$the$importations$in$question,$
but$have$otherwise$remained$uncollected.$$
SO$ORDERED.$
$
15

$
(
PLANTERS(PRODUCTS,(INC.((PPI)(vs.(FERTIPHIL(CORPORATION(
G.R.(No.(166006(
2008(March(14(
(
FACTS:(
In$ 1985,$ then$ President$ Marcos,$ exercising$ his$ legislative$ powers,$ issued$
Letter$ of$ Instruction$ (LOI)$ No.$ 1465$ providing$ for$ the$ imposition$ of$ a$ capital$
recovery$component$(CRC)$of$not$less$than$P10$per$bag$on$the$domestic$sale$of$all$
grades$ of$ fertilizers$ in$ the$ Philippines.$ This$ capital$ contribution$ shall$ be$ collected$
until$adequate$capital$is$raised$to$make$PPI$viable.$
Fertiphil$ paid$ P10$ to$ the$ Fertilizer$ and$ Pesticide$ Authority$ (FPA)$ for$ every$
bag$ sold.$ FPA$ then$ remitted$ the$ amount$ collected$ to$ the$ Far$ East$ Bank$ and$ Trust$
Company$(FEBTC),$the$depositary$bank$of$PPI.$After$the$1986$EDSA$Revolution,$FPA$
voluntarily$stopped$the$imposition$of$the$P10$levy.$Fertiphil$demanded$from$PPI$a$
refund$of$the$amounts$it$ paid,$but$ PPI$refused$ the$ same.$ Fertiphil$ questioned$ the$
constitutionality$of$the$LOI$for$being$unjust,$unreasonable,$oppressive,$invalid,$and$
an$ unlawful$ imposition$ that$ amounted$ to$ a$ denial$ of$ due$ process.$ It$ also$ alleged$
that$ the$ LOI$ solely$ favored$ PPI,$ a$ privately$ owned$ corporation,$ which$ used$ the$
proceeds$to$maintain$its$monopoly$of$the$fertilizer$industry.$On$the$other$hand,$FPA$
countered$ that$ the$ issuance$ of$ the$ LOI$ was$ a$ valid$ exercise$ of$ police$ power$ in$
ensuring$the$stability$of$the$fertilizer$industry.$
The$trial$and$appellate$courts$ruled$in$favor$of$Fertiphil.$
$
ISSUES:(
1.
W/N$the$LOI$was$a$valid$exercise$of$police$power.$
2.
W/N$the$LOI$was$constitutional.$
3.
W/N$the$doctrine$of$operative$fact$is$applicable.$
(
RATIO:(
1.
No,$it$was$an$exercise$of$the$power$of$taxation.(
Police$power$is$the$power$of$the$State$to$enact$legislation$that$may$interfere$
with$personal$liberty$or$property$in$order$to$promote$the$general$welfare,$while$the$
power$ of$ taxation$ is$ the$ power$ to$ levy$ taxes$ to$ be$ used$ for$ public$ purpose.$ The$
main$ purpose$ of$ police$ power$ is$ the$ regulation$ of$ a$ behavior$ or$ conduct,$ while$
taxation$is$revenue$generation.$The$lawful$subjects$and$lawful$means$tests$are$
used$to$determine$the$validity$of$a$law$enacted$under$the$police$power$while$the$
power$of$taxation$is$circumscribed$by$inherent$and$constitutional$limitations.$
While$it$is$true$that$the$power$of$taxation$can$be$used$as$an$implement$of$
police$power,$the$primary$purpose$of$the$levy$is$revenue$generation.$If$the$purpose$
is$ primarily$ revenue,$ or$ if$ revenue$ is$ at$ least$ one$ of$ the$ real$ and$ substantial$
purposes$then$the$exaction$is$properly$called$a$tax.$
The$ P10$ levy$ under$ the$ LOI$ is$ too$ excessive$ to$ serve$ a$ mere$ regulatory$
purpose.$ The$ levy$ was$ a$ big$ burden$ on$ the$ seller$ of$ the$ ultimate$ consumer.$ It$

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increased$the$price$of$a$bag$of$fertilizer$by$as$much$as$5%.$Also,$the$LOI$expressly$
provided$ that$ the$ levy$ was$ imposed$ until$ adequate$ capital$ is$ raised$ to$ make$ PPI$
viable.$
(
2.
No,$ the$ tax$ under$ the$ LOI$ is$ unconstitutional$ since$ it$ was$ not$ levied$ for$ a$
public$purpose,$but$to$give$undue$benefit$to$PPI.(
An$ inherent$ limitation$ on$ the$ power$ of$ taxation$ is$ public$ purpose.$ Taxes$
cannot$ be$ used$ for$ purely$ private$ purposes$ or$ for$ the$ exclusive$ benefit$ of$ private$
persons$for$the$power$to$tax$exists$for$the$general$welfare.$It$would$be$a$robbery$
for$the$State$to$tax$its$citizens$and$use$the$funds$generated$for$a$private$purpose.$
As$ an$ old$ US$ case$ bluntly$ put$ it:$ To$ lay$ with$ one$ hand,$ the$ power$ of$ the$
government$ on$ the$ property$ of$ the$ citizen,$ and$ with$ the$ other$ to$ bestow$ it$ upon$
favored$ individuals$ to$ aid$ private$ enterprises$ and$ build$ up$ private$ fortunes,$ is$
nonetheless$ a$ robbery$ because$ it$ is$ done$ under$ the$ forms$ of$ law$ and$ is$ called$
taxation.$
The$term$public$purpose$is$not$defined.$Jurisprudence$states$that$it$should$
be$given$a$broad$interpretation.$It$does$not$only$pertain$to$those$purposes$which$
are$traditionally$viewed$as$essentially$government$functions,$such$as$building$roads$
and$ delivery$ of$ basic$ services,$ but$ also$ includes$ those$ purposes$ designed$ to$
promote$social$justice.$
In$ this$ case,$ the$ LOI$ expressly$ provided$ that$ the$ levy$ be$ imposed$ to$ raise$
capital$for$PPI,$a$private$company.$Such$imposition$was$conditional$and$dependent$
upon$ PPI$ becoming$ financially$ viable$ without$ fixing$ a$ maximum$ amount$ which$
makes$ the$ liability$ of$ domestic$ sellers$ of$ fertilizer$ indefinite.$ Also,$ the$ levies$ paid$
were$ directly$ remitted$ to$ FEBTC,$ the$ depositary$ bank$ of$ PPI.$ Finally,$ the$ levy$ was$
used$ to$ pay$ the$ corporate$ debts$ of$ PPI.$ A$ reading$ of$ the$ Letter$ of$ Undertaking$
signed$by$the$Prime$Minister$Virata$reveals$that$PPI$was$in$deep$financial$problem$
because$of$its$huge$corporate$debts$at$that$time.$
In$ any$ case,$ the$ LOI$ will$ still$ be$ unconstitutional$ even$ if$ enacted$ under$ the$
States$ police$ power$ because$ it$ did$ not$ promote$ public$ interest.$ The$ LOI$ failed$ to$
comply$with$the$test$of$lawful$subjects$$for$giving$PPI$alone$undue$benefits;$and$
the$ test$ of$ lawful$ means$ $ the$ method$ by$ which$ the$ LOI$ sought$ to$ achieve$ the$
continued$ supply$ and$ distribution$ of$ fertilizer$ in$ the$ country$ is$ by$ no$ means$ a$
measure$ that$ will$ promote$ the$ public$ welfare.$ The$ governments$ commitment$ to$
support$the$successful$rehabilitation$and$continued$viability$of$PPI$is$an$attempt$to$
mask$the$LOIs$impartiality.$
$
3.$
No,$PPI$must$give$the$refund.$
PPI$ argues$ that$ Fertiphil$ cannot$ seek$ a$ refund$ even$ if$ the$ LOI$ is$
unconstitutional$ in$ view$ of$ the$ doctrine$ of$ operative$ fact$ which$ provides$ that$ an$
unconstitutional$law$has$an$effect$before$being$declared$unconstitutional.$
The$general$rule$is$that$an$unconstitutional$law$is$void.$It$produces$no$rights,$
imposes$no$duties$and$affords$no$protection.$It$has$no$legal$effect$as$if$it$had$not$
been$passed.$The$LOI$being$void,$Fertiphil$had$no$obligation$to$pay$the$levy.$Hence,$

16

all$ the$ levies$ paid$ should$ be$ refunded$ in$ accordance$ with$ the$ general$ civil$ code$
principle$against$unjust$enrichment.$
The$ doctrine$ of$ operative$ fact$ is$ applicable$ only$ when$ a$ declaration$ of$
unconstitutionality$will$impose$an$undue$burden$on$those$who$have$relied$on$the$
invalid$ law.$ In$ this$ case,$ there$ is$ nothing$ iniquitous$ in$ ordering$ PPI$ to$ refund$ the$
amounts$ paid$ by$ Fertiphil.$ On$ the$ contrary,$ PPI$ unduly$ benefited$ from$ the$ levy$
hence,$it$would$be$inequitable$and$unjust$not$to$order$a$refund.$
(
DISPOSITIVE(PORTION:(
WHEREFORE,$ the$ petition$ is$ DENIED.$ The$ Court$ of$ Appeals$ Decision$ dated$
November$28,$2003$is$AFFIRMED.$
$
$
$
$
$
$

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