Drilon v.

Lim

Facts:

The principal issue in this case is the constitutionality of Section 187 of the Local Government
1
Code . The Secretary of Justice (on appeal to him of four oil companies and a taxpayer) declared Ordinance
No. 7794 (Manila Revenue Code) null and void for non-compliance with the procedure in the enactment
of tax ordinances and for containing certain provisions contrary to law and public policy.

The RTC revoked the Secretary’s resolution and sustained the ordinance. It declared Sec 187 of
the LGC as unconstitutional because it vests on the Secretary the power of control over LGUs in violation
of the policy of local autonomy mandated in the Constitution. The Secretary argues that the annulled
Section 187 is constitutional and that the procedural requirements for the enactment of tax ordinances
as specified in the Local Government Code had indeed not been observed. (Petition originally dismissed
by the Court due to failure to submit certified true copy of the decision, but reinstated it anyway.)

Issue:

WON Section 187 of the LGC is unconstitutional

Held:

Yes. Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality
of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or
modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the
judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila
Revenue Code, but he did not replace it with his own version of what the Code should be.. What he found
only was that it was illegal. All he did in reviewing the said measure was determine if the petitioners were
performing their functions in accordance with law, that is, with the prescribed procedure for the
enactment of tax ordinances and the grant of powers to the city government under the Local Government
Code. As we see it, that was an act not of control but of mere supervision.

An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his
discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself.
Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the
rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify
or replace them.

Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act. That section allowed the
Secretary of Finance to suspend the effectivity of a tax ordinance if, in his opinion, the tax or fee levied
was unjust, excessive, oppressive or confiscatory. Determination of these flaws would involve the exercise
of judgment or discretion and not merely an examination of whether or not the requirements or
limitations of the law had been observed; hence, it would smack of control rather than mere supervision.
That power was never questioned before this Court but, at any rate, the Secretary of Justice is not given
the same latitude under Section 187. All he is permitted to do is ascertain the constitutionality or legality
of the tax measure, without the right to declare that, in his opinion, it is unjust, excessive, oppressive or
confiscatory. He has no discretion on this matter. In fact, Secretary Drilon set aside the Manila Revenue
Code only on two grounds, to with, the inclusion therein of certain ultra vires provisions and non-
compliance with the prescribed procedure in its enactment. These grounds affected the legality, not the
wisdom or reasonableness, of the tax measure.

The issue of non-compliance with the prescribed procedure in the enactment of the Manila Revenue Code
is another matter. (allegations: No written notices of public hearing, no publication of the ordinance, no
minutes of public hearing, no posting, no translation into Tagalog)

Judge Palattao however found that all the procedural requirements had been observed in the enactment
of the Manila Revenue Code and that the City of Manila had not been able to prove such compliance
before the Secretary only because he had given it only five days within which to gather and present to
him all the evidence (consisting of 25 exhibits) later submitted to the trial court. We agree with the trial
court that the procedural requirements have indeed been observed. Notices of the public hearings were
sent to interested parties as evidenced. The minutes of the hearings are found in Exhibits M, M-1, M-2,
and M-3. Exhibits B and C show that the proposed ordinances were published in the Balita and the Manila
Standard on April 21 and 25, 1993, respectively, and the approved ordinance was published in the July 3,
4, 5, 1993 issues of the Manila Standard and in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q-
1, Q-2, and Q-3.

The only exceptions are the posting of the ordinance as approved but this omission does not affect its
validity, considering that its publication in three successive issues of a newspaper of general circulation
will satisfy due process. It has also not been shown that the text of the ordinance has been translated and
disseminated, but this requirement applies to the approval of local development plans and public
investment programs of the local government unit and not to tax ordinances.
COCA COLA BOTTLERS vs CITY OF MANILA G.R. No. 156252

FACTS: The City Mayor of Manila approved Tax Ordinance No. 7988" repealing Tax Ordinance No. 7794
entitled, "Revenue Code of the City of Manila." Tax Ordinance No. 7988 amended certain sections of Tax
Ordinance No. 7794 by increasing the tax rates applicable to certain establishments operating within the
territorial jurisdiction of the City of Manila, including herein petitioner Coca-Cola. Subject tax ordinance
was published only once, i.e., on the May 22, 2000 issue of the Philippine Post. Aggrieved by said tax
ordinance, petitioner filed a Petition before the Department of Justice (DOJ). On 17 August 2000, then
DOJ Secretary issued a Resolution declaring Tax Ordinance No. 7988 null and void and without legal effect,
the pertinent portions of which read:

The Local Government Code of 1991 provides:

"Section 188. Publication of Tax Ordinances and Revenue Measures. – Within ten (10) days after their
approval, certified true copies of all provincial, city and municipal tax ordinances or revenue measures
shall be published in full for three (3) consecutive days in a newspaper of local circulation; Provided,
however, that in provinces, cities, and municipalities where there are no newspapers or local
circulations the same may be posted in at least two (2) conspicuous and publicly accessible places."
(R.A. No. 7160) (stress supplied)

Upon the other hand, the Rules and Regulations Implementing the Local Government Code of 1991,
insofar as pertinent, mandates:

"Art. 277. Publication of Tax Ordinances and Revenue Measures. – (a) within ten (10) days after their
approval, certified true copies of all provincial, city and municipal tax ordinances or revenue measures
shall be published in full for three (3) consecutive days in a newspaper of local circulation provided that
in provinces, cities and municipalities where there are no newspapers of local circulation, the same may
be posted in at least two (2) conspicuous and publicly accessible places. If the tax ordinances or revenue
measure contains penal provisions as authorized under Art. 279 of this Rule, the gist of such tax
ordinance or revenue measure shall be published in a newspaper of general circulation within the
province, posting of such ordinance or measure shall be made in accessible and conspicuous public
places in all municipalities and cities of the province to which the sanggunian enacting the ordinance or
revenue measure belongs.

In the case at bar, respondents, by its failure to file their comments and present documentary evidence
to show that the mandatory requirement of law on publication, among other things, has been met, may
be deemed to have waived its right to controvert or dispute the documentary evidence submitted by
petitioner which indubitably show that, therefore, herein respondents failed to satisfy the requirement
that said ordinance shall be published for three (3) consecutive days as required by law.”

Despite the Resolution of the DOJ declaring Tax Ordinance No. 7988 null and void and the directive of the
BLGF that respondents cease and desist from enforcing said tax ordinance, respondents continued to
assess petitioner business tax for the year 2001 based on the tax rates prescribed under Tax Ordinance
No. 7988. Thus, petitioner filed a Complaint with the RTC of Manila. During the pendency of the said case,
the City Mayor of Manila approved on 22 February 2001 Tax Ordinance No. 8011 entitled, "An Ordinance
Amending Certain Sections of Ordinance No. 7988." Said tax ordinance was again challenged by petitioner
before the DOJ who then issued a Resolution declaring Tax Ordinance No. 8011 null and void and legally
not existing. According to the DOJ Secretary: "If an order or law sought to be amended is invalid, then it
does not legally exist. There would be no occasion or need to amend it; x x x."

ISSUE: The case at bar revolves around the sole pivotal issue of whether or not Tax Ordinance No. 7988 is
null and void and of no legal effect.

It is undisputed from the facts of the case that Tax Ordinance No. 7988 has already been declared by the
DOJ Secretary, in its Order, dated 17 August 2000, as null and void and without legal effect due to
respondents’ failure to satisfy the requirement that said ordinance be published for three consecutive
days as required by law. Neither is there quibbling on the fact that the said Order of the DOJ was never
appealed by the City of Manila, thus, it had attained finality after the lapse of the period to appeal.
Furthermore, the RTC of Manila, Branch 21, in its Decision dated 28 November 2001, reiterated the
findings of the DOJ Secretary that respondents failed to follow the procedure in the enactment of tax
measures as mandated by Section 188 of the Local Government Code of 1991, in that they failed to publish
Tax Ordinance No. 7988 for three consecutive days in a newspaper of local circulation. From the foregoing,
it is evident that Tax Ordinance No. 7988 is null and void as said ordinance was published only for one day
in the 22 May 2000 issue of the Philippine Post in contravention of the unmistakable directive of the Local
Government Code of 1991.
Phil Match Co., Ltd., vs City of Cebu

The sales in the instant case were in the city and the matches sold were stored in the city. The fact that
the matches were delivered to customers, whose places of business were outside of the city, would not
place those sales beyond the city's taxing power. Those sales formed part of the merchandising business
being assigned on by the company in the city. In essence, they are the same as sales of matches fully
consummated in the city.

Furthermore, because the sellers place of business is in Cebu City, it cannot be sensibly argued that such
sales should be considered as transactions subject to the taxing power of the political subdivisions where
the customers resided and accepted delivery of the matches sold.
PLDT vs City of Davao

FACTS:

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid “in
lieu of all taxes on this franchise or earnings thereof” pursuant to RA 7082. The exemption from “all taxes
on this franchise or earnings thereof” was subsequently withdrawn by RA 7160 (LGC), which at the same
time gave local government units the power to tax businesses enjoying a franchise on the basis of income
received or earned by them within their territorial jurisdiction. The LGC took effect on January 1, 1992.

The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides:
Notwithstanding any exemption granted by law or other special laws, there is hereby imposed a tax on
businesses enjoying a franchise, a rate of seventy-five percent (75%) of one percent (1%) of the gross
annual receipts for the preceding calendar year based on the income receipts realized within the territorial
jurisdiction of Davao City.

Subsequently, Congress granted in favor of Globe and Smart franchises which contained “in leiu of all
taxes” provisos.

In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which
provides that any advantage, favor, privilege, exemption, or immunity granted under existing franchises,
or may hereafter be granted, shall ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to the grantees of such franchises. The
law took effect on March 16, 1995.

In January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro exchange, it was
required to pay the local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the
power of the city government to collect the local franchise tax and demanded a refund of what had been
paid as a local franchise tax for the year 1997 and for the first to the third quarters of 1998.

ISSUE:

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of
the local franchise tax in view of the grant of tax exemption to Globe and Smart.

RULING::

Petitioner contends that because their existing franchises contain “in lieu of all taxes” clauses, the same
grant of tax exemption must be deemed to have become ipso facto part of its previously granted
telecommunications franchise. But the rule is that tax exemptions should be granted only by a clear and
unequivocal provision of law “expressed in a language too plain to be mistaken” and assuming for the
nonce that the charters of Globe and of Smart grant tax exemptions, then this runabout way of granting
tax exemption to PLDT is not a direct, “clear and unequivocal” way of communicating the legislative intent.

Nor does the term “exemption” in Sec. 23 of RA 7925 mean tax exemption. The term refers to exemption
from regulations and requirements imposed by the National Telecommunications Commission (NTC). For
instance, RA 7925, Sec. 17 provides: The Commission shall exempt any specific telecommunications
service from its rate or tariff regulations if the service has sufficient competition to ensure fair and
reasonable rates of tariffs. Another exemption granted by the law in line with its policy of deregulation is
the exemption from the requirement of securing permits from the NTC every time a telecommunications
company imports equipment.

Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language
too plain to be mistaken.
Palma vs Malangas

Facts: Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to
wholesalers in Zamboanga City. It uses the municipal port of Malangas, Zamboanga del Sur as
transshipment port for its goods. The port, as well as the surrounding roads leading to it, belong to and
are maintained by the Municipality of Malangas, Zamboanga del Sur. On January 16, 1994, the
municipality passed municipal revenue code no. 09 series of 1993, which was subsequently approved by
the Sangguniang Panlalawigan of Zamboanga del Sur in resolution no. 1330 dated August 4, 1994. Section
56.01 of the ordinance reads as follows:

Sec 56.01 Imposition of Fees. There shall be collected service fee for its use of the municipal roads or streets
leading to the wharf and to any point along the shorelines within the jurisdiction of the municipality and
for police surveillance on all goods and all equipment harboured or sheltered in the premises of the wharf
and other within the jurisdiction of the municipality [xxx]

Accordingly, the service fees imposed by section 56.01 of the ordinance was paid by petitioner under
protest. It contended that under Republic Act No. 7160, otherwise known as the local government code
of 1991, municipal governments did not have authority to tax goods and vehicles that passed through
their jurisdictions. Thereafter, before the Regional Trial Court of Pagadian City, petitioner filed against the
Municipality of Malangas on November 29, 1995, an action for declaratory relief assailing the validity of
section 56.01 of the municipal ordinance.

Issue: Whether or not the imposition of service fee is proper and valid.

Held: No. By the express language of section 153 and 155 RA 7160, local government units, through their
sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the use
of any public road, pier or wharf funded and constructed by them. A service fee imposed on vehicles using
municipal roads leading to the wharf is thus valid, however, section 133 (e) of RA 7160 prohibits the
imposition, in the guise of wharfage fees — as well as other taxes or charges in any form whatsoever on
goods or merchandise. It is therefore irrelevant if the fee imposed are actually for police surveillance on
the goods, because any other form of imposition on goods passing through the territorial jurisdiction of
the municipality is clearly prohibited by section 133 (e).
PLDT VS Province of Laguna

FACTS:

PLDT is a holder of a legislative franchise to render local and international telecommunications service.
Later, RA 7160 or the Local Government Code was enacted granting province and other local government
units the power to impose local franchise under Section 137 and 193.

The Bureau of Local Government Finance under the Bureau of Finance issued a ruling that by virtue of RA
7925 of Public Telecommunication Policy Act, PLDT became exempt from local franchise tax. In view of
this, PLDT refused to pay local franchise tax and even claim for tax refund. No refund was granted and
PLDT instituted a petition before the RTC of Laguna but was denied.

ISSUE:

Whether or not PLDT is exempt from local franchise tax.

HELD:

Yes. In sum, it does not appear that in approving RA No. 7925, Congress intended it to operate as a blanket
tax exemption to all telecommunications entities. Applying the rule of strict construction of laws granting
tax exemptions and the rule that doubts should be resolved in favour of municipal corporations in
interpreting statutory provisions on municipal taxing power, we hold that RA No. 7925 cannot be
considered as having petitioner’s franchise so as to entitle it to exemptionfrom the imposition of local
franchise taxes.

The BLGF is not an administrative agency whose findings on questions of facts are given weight and
deference in the courts. The authorities cited by the petitioner pertain to the CTA, a highly specialized
court which performs judicial functions as it was created for the review of tax cases. In contrast, the BLGF
was created merely to provide consultative services and technical assistance to local governments and
the general public on local taxation, real property assessment, and other related matters, among others.
There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to
possess in their respective fields.
City of Manila, Mayor Alfredo Lim v. Maersk-Filipina, G.R. No. 120051, Dec. 10, 2014

In the case at bar, the sanggunian of the municipality or city cannot enact an ordinance imposing business
tax on the gross receipts of transportation contractors, persons engaged in the transportation of
passengers or freight by hire, and common carriers by air, land, or water, when said sanggunian was
already specifically prohibited from doing so. Any exception to the express prohibition under Section
133(j) of the LGC should be just as specific and unambiguou

Common limitations on the taxing powers of local government. – The exercise of the taxing powers of
provinces, cities, municipalities and barrios shall not extend to the imposition of the following:

(e) Taxes on the business of transportation contractors and persons engaged in the transportation of
passengers or freight by hire and common carries by air, land or water except as otherwise provided in
this Code, and taxes or fees for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof;

Consistent with the foregoing legislative intent, Republic Act No. 7716, more popularly known as the
Expanded Value-Added Tax (E-VAT) Law, which took effect after the LGC on May 28, 1994, expressly
amended the NIRC of 1977 and added to Section 115 of the latter on “Percentage tax on carriers and
keepers of garages,” the following proscription: “The gross receipts of common carriers derived from their
incoming and outgoing freight shall not be subjected to the local taxes imposed under Republic Act No.
7160, otherwise known as the Local Government Code of 1991.”