PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC.,

                                  Petitioner

   - versus -

PROVINCE OF LAGUNA and MANUEL E. LEYCANO, JR., in his capacity as the Provincial Treasurer of the Province of Laguna,

                             Respondents.

  G.R. No. 151899

 

Present:

 

    

 

 

  D E C I S I O N 

GARCIA, J.:

 

Twice, this Court has denied the earlier plea of petitioner

Philippine Long Distance Company, Inc. (PLDT) to be adjudged

exempt from the payment of franchise tax assessed against it by local

government units. The first was in the 2001 case of PLDT vs. City of

Davao[1] and the second, in the very recent case of PLDT vs. City of

Bacolod, et al.[2]. Indeed, no less than the Court en banc, in its

Resolution of March 25, 2003[3], denied PLDT’s motion for

reconsideration in Davao.  In both cases, the Court in effect ruled that

the desired relief is not legally feasible.

No less than PLDT’s third, albeit this time involving the

Province of Laguna, the instant similar petition for review on certiorari

under Rule 45 of the Rules of Court seeks the reversal of the decision

dated 28 November 2001[4] of the Regional Trial Court at Laguna,

dismissing PLDT’s petition in its Civil Case No. SC-3953, an action for

refund of franchise tax.

Except for inconsequential factual details which

understandably vary from the first two (2) PLDT cases, the legal

landscape is practically the same:

PLDT is a holder of a legislative franchise under Act No. 3436,

as amended, to render local and international telecommunications

services.  On August 24, 1991, the terms and conditions of its

franchise were consolidated under Republic Act No. 7082,[5] Section

12 of which embodies the so-called “in-lieu-of-all taxes” clause,

whereunder PLDT shall pay a franchise tax equivalent to three

percent (3%) of all its gross receipts, which franchise tax shall be “in

lieu of all taxes”. More specifically, the provision pertinently reads:

 

SEC. 12. xxx In addition thereto, the grantee, its successors or assigns shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee, its successors or assigns, and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof: xxx  (Italics ours). 

Meanwhile, or on January 1, 1992, Republic Act No. 7160,

otherwise known as the Local Government Code, took effect. Section

137 of the Code, in relation to Section 151 thereof, grants provinces

and other local government units the power to impose local franchise

tax on businesses enjoying a franchise, thus:

SEC. 137.  Franchise Tax. –  Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction.

  

By Section 193 of the same Code, all tax exemption privileges

then enjoyed by all persons, whether natural or juridicial, save those

expressly mentioned therein, were withdrawn, necessarily including

those taxes from which PLDT is exempted under the “in-lieu-of-all

taxes” clause in its charter.  We quote Section 193:

 

SEC. 193.  Withdrawal of Tax Exemption Privileges. –  Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

  

Invoking its authority under Section 137, supra,  of the Local

Government Code, the Province of Laguna, through its local

legislative assembly, enacted Provincial Ordinance No. 01-92, made

effective January 1, 1993, imposing a franchise tax upon all

businesses enjoying a franchise, PLDT included. 

On January 28, 1998, PLDT, in compliance with the

aforementioned Ordinance, paid the Province of Laguna its local

franchise tax liability for the year 1998 in the amount of One Million

Eighty-One Thousand Two Hundred Twelve and 10/100 Pesos

(P1,081,212.10).

 

Prior thereto, Congress, aiming to level the playing field

among telecommunication companies, enacted Republic Act No.

7925, otherwise known as the Public Telecommunications Policy Act

of the Philippines, which took effect on March 16, 1995. To achieve

the legislative intent, Section 23 thereof, also known as the “most-

favored treatment” clause, provides for an equality of treatment in the

telecommunications industry, to wit:

 

SEC. 23.  Equality of Treatment in the Telecommunications Industry – 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: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the

franchise, the life span of the franchise, or the type of the service authorized by the franchise.

 

Then, on June 2, 1998, the Department of Finance, thru its

Bureau of Local Government Finance  (BLGF), issued a ruling to the

effect that as of March 16, 1995, the effectivity date of the Public

Telecommunications Policy Act of the Philippines,[6] PLDT, among

other telecommunication companies, became exempt from local

franchise tax. Pertinently, the BLGF ruling reads:

 

It appears that RA 7082 further amending Act No. 3436 which granted to PLDT a franchise to install, operate and maintain a telephone system throughout the Philippine Islands was approved on August 3, 1991. Section 12 of said franchise, likewise contains the ‘in lieu of all taxes’ proviso.

 In this connection, Section 23 of RA 7929,

quoted hereunder, which was approved on March 1, 1995 provides for the equality of treatment in the telecommunications industry:

 xxx       xxx       xxx

 On the basis of the aforequoted Section 23 of

RA 7925, PLDT as a telecommunications franchise holder becomes automatically covered by the tax exemption provisions of RA 7925, which took effect on March 16, 1995.

 Accordingly, PLDT shall be exempt from the

payment of franchise and business taxes imposable by LGUs under  Sections 137 and 143,  respectively of the LGC [Local Government Code], upon the effectivity of

RA 7925 on March 16, 1995. However, PLDT shall be liable to pay the franchise and business taxes on its gross receipts realized from January 1, 1992 up to March 15, 1995, during which period PLDT was not enjoying the ‘most favored clause’ provision of RA 7025 [sic].

  

On the basis of the aforequoted ruling, PLDT refused to pay

the Province of Laguna its local franchise tax liability for 1999.  And,

on December 22, 1999, it even filed with the Office of the Provincial

Treasurer a written claim for refund of the amount it paid as local

franchise tax for 1998.

With no refund having been made, PLDT instituted with the

Regional Trial Court at Laguna a petition therefor against the Province

and its Provincial Treasurer, which petition was thereat docketed as

Civil Case No. SC-3953.

In its decision of November 28, 2001, the trial court denied

PLDT’s petition, thus:

WHEREFORE, the petition is denied.  Petitioner PLDT is not exempt from paying local franchise and business taxes to the Respondent Province.  Refund is denied.  For failure to substantiate the claim for exemplary damages and attorneys fees, the same is likewise denied.

 

SO ORDERED.

 

Hence, this recourse by PLDT, faulting the trial court, as

follows:

 

5.01.a.  THE LOWER COURT ERRED IN NOT HOLDING THAT UNDER PETITIONER’S FRANCHISE (REPUBLIC ACT NO.7082), AS AMENDED AND EXPANDED BY SECTION 23 OF REPUBLIC ACT NO. 7925, TAKING INTO ACCOUNT THE FRANCHISES OF GLOBE TELECOM INC., (GLOBE) (REPUBLIC ACT NO. 7229) AND SMART COMMUNICATIONS, INC. (SMART) (REPUBLIC ACT NO.7294), WHICH ARE SPECIAL PROVISIONS AND WERE ENACTED SUBSEQUENT TO THE LOCAL GOVERNMENT CODE, NO FRANCHISE TAXES MAY BE IMPOSED ON PETITIONER BY RESPONDENT PROVINCE. 

 

            5.01.b.   THE LOWER COURT ERRED IN NOT HOLDING THAT SECTION 137 OF THE LOCAL GOVERNMENT CODE, WHICH ALLOWS RESPONDENT PROVINCE TO IMPOSE THE FRANCHISE TAX, AND SECTION 193 THEREOF, WHICH PROVIDES FOR WITHDRAWAL OF TAX EXEMPTION PRIVILEGES, ARE NOT APPLICABLE IN THIS CASE.

 

            5.01.c.   THE LOWER COURT ERRED IN APPLYING PRINCIPLES OF STATUTORY CONSTRUCTION THAT TAX EXEMPTIONS ARE DISFAVORED AND IN HOLDING THAT SECTION 23 OF REPUBLIC ACT NO. 7925 (PUBLIC TELECOMMUNICATIONS POLICY ACT) DOES NOT SUPPORT PETITIONER’S POSITION IN THIS CASE.

 

            5.01.d.   THE LOWER COURT ERRED IN NOT GIVING WEIGHT TO THE RULING OF THE DEPARTMENT OF FINANCE, THROUGH ITS BUREAU OF LOCAL GOVERNMENT FINANCE, THAT PETITIONER IS EXEMPT FROM THE PAYMENT OF

FRANCHISE AND BUSINESS TAXES IMPOSABLE BY LOCAL GOVERNMENT UNITS UNDER THE LOCAL GOVERNMENT CODE.

 

            5.01.e.  THE LOWER COURT ERRED IN NOT GRANTING PETITIONER’S CLAIM FOR TAX REFUND.

 

            5.01.f.    THE LOWER COURT ERRED IN DENYING THE PETITION BELOW.

We note, quite interestingly, that except for the particular local

government units involved in the earlier case of PLDT vs. City of

Davao[7] and the very recent case of PLDT vs. City of Bacolod, et al.,

[8] the arguments presently advanced by petitioner on the issues

raised herein are but a mere reiteration if not repetition of the very

same arguments it has already raised in the two (2) earlier PLDT

cases. For sure, the errors presently assigned are substantially the

same as those in Davao and in Bacolod, all of which have been

adequately addressed and passed upon by this Court in its decisions

therein as well as in its en banc Resolution in Davao.

 

In PLDT vs. City of Davao, and again in PLDT vs. City of

Bacolod, et al., this Court has interpreted Section 23 of Rep. Act No.

7925.  There, we ruled that Section 23 does not operate to exempt

PLDT from the payment of franchise tax. We quote what we have said

in Davao and reiterated in Bacolod.

 

In sum, it does not appear that, in approving §23 of R.A. 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 favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, we hold that §23 of R.A. No. 7925 cannot be considered as having amended petitioner's franchise so as to entitle it to exemption from the imposition of local franchise taxes. Consequently, we hold that petitioner is liable to pay local franchise taxes in the amount of P3,681,985.72 for the period covering the first to the fourth quarter of 1999 and that it is not entitled to a refund of taxes paid by it for the period covering the first to the third quarter of 1998.[9]

 The Court explains further:

 

To begin with, tax exemptions are highly disfavored. The reason for this was explained by this Court in Asiatic Petroleum Co. v. Llanes, in which it was held:

 . . . Exemptions from taxation are highly

disfavored, so much so that they may almost be said to be odious to the law. He who claims an exemption must be able to point to some positive provision of law creating the right. . . As was said by the Supreme Court of Tennessee in Memphis vs. U. & P. Bank (91 Tenn., 546, 550), ‘The right of taxation is inherent in the State. It is a prerogative essential to the perpetuity of the government; and he who claims an exemption from the common burden must justify his claim by the clearest grant of organic or statute law.’  Other utterances equally or more emphatic come readily to hand from the highest authority.  In Ohio Life Ins. and Trust Co. vs. Debolt (16 Howard, 416), it was said by Chief Justice Taney, that the right of taxation will not be held to have been surrendered, ‘unless the intention to surrender is manifested by words too plain to be mistaken.’ In the case of the Delaware Railroad Tax (18 Wallace, 206, 226), the Supreme Court of the

United States said that the surrender, when claimed, must be shown by clear, unambiguous language, which will admit of no reasonable construction consistent with the reservation of the power. If a doubt arises as to the intent of the legislature, that doubt must be solved in favor of the State. In Erie Railway Company vs. Commonwealth of Pennsylvania (21 Wallace, 492, 499), Mr. Justice Hunt, speaking of exemptions, observed that a State cannot strip itself of the most essential power of taxation by doubtful words. ‘It cannot, by ambiguous language, be deprived of this highest attribute of sovereignty.’  In Tennessee vs. Whitworth (117 U.S., 129, 136), it was said: ‘In all cases of this kind the question is as to the intent of the legislature, the presumption always being against any surrender of the taxing power.’ In Farrington vs. Tennessee and County of Shelby (95 U.S., 379, 686), Mr. Justice Swayne said: ‘. . . When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported.’

 

The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.

 

xxx       xxx       xxx

 

The fact is that the term ‘exemption’ in §23 is too general. A cardinal rule in statutory construction is that legislative intent must be ascertained from a consideration of the statute as a whole and not

merely of a particular provision. For, taken in the abstract, a word or phrase might easily convey a meaning which is different from the one actually intended. A general provision may actually have a limited application if read together with other provisions.  Hence, a consideration of the law itself in its entirety and the proceedings of both Houses of Congress is in order.

 

xxx       xxx       xxx

 

R.A. No. 7925 is thus a legislative enactment designed to set the national policy on telecommunications and provide the structures to implement it to keep up with the technological advances in the industry and the needs of the public. The thrust of the law is to promote gradually the deregulation of the entry, pricing, and operations of all public telecommunications entities and thus promote a level playing field in the telecommunications industry.  There is nothing in the language of §23 nor in the proceedings of both the House of Representatives and the Senate in enacting R.A. No. 7925 which shows that it contemplates the grant of tax exemptions to all telecommunications entities, including those whose exemptions had been withdrawn by the LGC.

 

What this Court said in Asiatic Petroleum Co. v. Llanes applies mutatis mutandis to this case: ‘When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported.’ In this case, the word ‘exemption’ in §23 of R.A. No. 7925 could contemplate exemption from certain regulatory or reporting requirements, bearing in mind the policy of the law. It is noteworthy that, in holding Smart and Globe exempt from local taxes, the BLGF did not base its opinion on §23 but on the fact that the franchises granted to them after the

effectivity of the LGC exempted them from the payment of local franchise and business taxes.               

 

As before, PLDT argues that because Smart Communications,

Inc. (SMART) and Globe Telecom (GLOBE) under whose respective

franchises granted after the effectivity of the Local Government Code,

are exempt from franchise tax, it follows that petitioner is likewise

exempt from the franchise tax sought to be collected by the Province

of Laguna,  on the reasoning that the grant of tax exemption to

SMART  and GLOBE ipso facto  applies to PLDT, consistent with the

“most-favored-treatment” clause found in Section 23 of the Public

Telecommunications Policy Act of the Philippines (Rep. Act No.

7925).

 

Again, there is nothing novel in petitioner’s contention. For

sure, in Davao, this Court even adverted to PLDT’s similar argument

therein, thus:

 

Finally, it [PLDT] argues that because Smart and Globe are exempt from the franchise tax, it follows that it must likewise be exempt from the tax being collected by the City of Davao because the grant of tax exemption to Smart and Globe ipso facto extended the same exemption to it,

 

 which  argument this Court rejected in said case in the following wise:

 

The acceptance of petitioner’s theory would result in absurd consequences. To illustrate: In its franchise, Globe is required to pay a franchise tax of only one and one-half percentum (1/2% [sic] ) of all gross receipts from its transactions while Smart is required to pay a tax of three percent (3%) on all gross receipts from business transacted. Petitioner’s theory would require that, to level the playing field, any “advantage, favor, privilege, exemption, or immunity” granted  to Globe must be extended to all telecommunications companies, including Smart. If, later, Congress again grants a franchise to another telecommunications company imposing, say, one percent (1%) franchise tax, then all other telecommunications franchises will have to be adjusted to “level the playing field” so to speak.  This could not have been the intent of Congress in enacting Section 23 of Rep. Act 7925. Petitioner’s theory will leave the Government with the burden of having to keep track of all granted telecommunications franchises, lest some companies be treated unequally.  It is different if Congress enacts a law specifically granting uniform advantages, favor, privilege, exemption or immunity to all telecommunications entities.

 

On PLDT’s motion for reconsideration in Davao, the Court

added in its en banc Resolution of March 25, 2003,[10] that even as it

is a state policy to promote a level playing field in the communications

industry, Section 23 of Rep. Act No. 7925 does not refer to tax

exemption but only to exemption from certain regulations and

requirements imposed by the National Telecommunications

Commission:

 

xxx. The records of Congress are bereft of any discussion or even mention of tax exemption. To the contrary, what the Chairman of the Committee on Transportation, Rep. Jerome V. Paras, mentioned in his sponsorship of H.B. No. 14028, which became R.A. No. 7925, were ‘equal access clauses’ in

interconnection agreements, not tax exemptions. He said:

 

            There is also a need to promote a level playing field in the telecommunications industry. New entities must be granted protection against dominant carriers through the encouragement of equitable access charges and equal access clauses in interconnection agreements and the strict policing of predatory pricing by dominant carriers. Equal access should be granted to all operators connecting into the interexchange network. There should be no discrimination against any carrier in terms of priorities and/or quality of services.

           

            Nor does the term ‘exemption’ in § 23 of R.A. No. 7925 mean tax exemption. The term refers to exemption from certain regulations and requirements imposed by the National Telecommunications Commission (NTC). For instance, R.A. No. 7925, § 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 or 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.[11]

 

PLDT’s third assigned error has likewise been squarely

addressed in the same en banc Resolution, when the Court rejected

PLDT’s contention that the “in-lieu-of-all-taxes” clause does not refer

to “tax exemption” but to “tax exclusion” and hence, the strictissimi

juris rule does not apply. The en banc explains that these two terms

actually mean the same thing, such that the rule that tax exemption

should be applied in strictissimi juris against the taxpayer and liberally

in favor of the government applies equally to tax exclusions:

 

Indeed, both in their nature and in their effect there is no difference between tax exemption and tax exclusion. Exemption is an immunity or privilege; it is freedom from a charge or burden to which others are subjected.  Exclusion, on the other hand, is the removal of otherwise taxable items from the reach of taxation, e.g., exclusions from gross income and allowable deductions.  Exclusion is thus also an immunity or privilege which frees a taxpayer from a charge to which others are subjected. Consequently, the rule that tax exemption should be applied in strictissimi juris against the taxpayer and liberally in favor of the government applies equally to tax exclusions. To construe otherwise the ‘in lieu of all taxes’ provision invoked is to be inconsistent with the theory that R.A. No. 7925, § 23 grants tax exemption because of a similar grant to Globe and Smart.[12]

 

   As in Davao, PLDT presently faults the trial court for not giving

weight to the ruling of the BLGF which, to petitioner’s mind, is an

administrative agency with technical expertise and mastery over the

specialized matters assigned to it.  Again, to quote from our ruling in

Davao

To be sure, the BLGF is not an administrative agency whose findings on questions of fact are given weight and deference in the courts. The authorities cited by petitioner pertain to the Court of Tax Appeals, 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.  The question raised by petitioner is a legal question, to wit, the interpretation of §23 of R.A. No. 7925. There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to possess in their respective fields.[13]

 

With the reality that the arguments presently advanced by petitioner are but a mere reiteration if not a virtual repetition of the very same arguments it has already raised in Davao and in Bacolod, all of which arguments and submissions have been extensively addressed and adequately passed upon by this Court in its decisions in said two (2) PLDT cases, and noting that the instant recourse has not raised any new fresh issue to warrant a second look, it, too, must have to fall.

WHEREFORE, and on the basis of our consistent ruling in

PLDT vs. City of Davao and PLDT vs. City of Bacolod, et al.,  the

petition is DENIED and the assailed decision of the trial court

AFFIRMED.

 

With treble costs against petitioner.

 

Republic of the PhilippinesSUPREME COURT

SECOND DIVISION

G.R. No. 127383 August 18, 2005

THE CITY OF DAVAO, CITY TREASURER AND THE CITY ASSESSOR OF DAVAO CITY, Petitioners, vs.THE REGIONAL TRIAL COURT, BRANCH XII, DAVAO CITY AND THE GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Respondent.

D E C I S I O N

Tinga, J.:

A Davao City Regional Trial Court (RTC) upheld the tax-exempt status of the Government Service Insurance System (GSIS) for the years 1992 to 1994 in contravention of the mandate under the Local Government Code of 1992,1 the precedent set by this Court in Mactan-Cebu International Airport Authority v. Hon. Marcos,2 and the public policy on local autonomy enshrined in the Constitution.3

The matter was elevated to this Court directly from the trial court on a pure question of law.4 The facts are uncontroverted.

On 8 April 1994, the GSIS Davao City branch office received a Notice of Public Auction scheduling the public bidding of GSIS properties located in Matina and Ulas, Davao City for non-payment of realty taxes for the years 1992 to 1994 totaling Two Hundred Ninety Five Thousand Seven Hundred Twenty One Pesos and Sixty One Centavos (P295,721.61).5 The auction was subsequently reset by virtue of a deadline extension allowed by Davao City for the payment of delinquent real property taxes.6

On 28 July 1994, the GSIS received Warrants of Levy and Notices of Levy on three parcels of land owned by the GSIS. Another Notice of

Public Auction was received by the GSIS on 29 August 1994, setting the date of auction sale for 20 September 1994.

On 13 September 1994, the GSIS filed a Petition for Certiorari, Prohibition, Mandamus And/Or Declaratory Relief with the RTC of Davao City. It also sought the issuance of a temporary restraining order. The case was raffled to Branch 12, presided by Judge Maximo Magno Libre. On 13 September 1994, the RTC issued a temporary restraining order for a period of twenty (20) days,7 effectively enjoining the auction sale scheduled seven days later. Following exchange of arguments, the RTC issued an Order dated 3 April 1995 issuing a writ of preliminary injunction effective for the duration of the suit.8

At the pre-trial, it was agreed that the sole issue for resolution was purely a question of law, that is, whether Sections 234 and 534 of the Local Government Code, which have withdrawn real property tax exemptions of government owned and controlled corporations (GOCCs), have also withdrawn from the GSIS its right to be exempted from payment of the realty taxes sought to be levied by Davao City.9 The parties submitted their respective memoranda.

On 28 May 1996, the RTC rendered the Decision10 now assailed before this Court. It concluded that notwithstanding the enactment of the Local Government Code, the GSIS retained its exemption from all taxes, including real estate taxes. The RTC cited Section 33 of Presidential Decree (P.D.) No. 1146, the Revised Government Service Insurance Act of 1977, as amended by P. D. No. 1981, which mandated such exemption.

The RTC conceded that the tax exempting statute, P.D. No. 1146, was enacted prior to the Local Government Code. However, it noted that the earlier law had prescribed two conditions in order that the tax exemption provided therein could be withdrawn by future enactments, namely: (1) that Section 33 be expressly and categorically repealed by law; and (2) that a provision be enacted to substitute the declared policy of exemption from any and all taxes as an essential factor for the solvency of the GSIS fund.11 The RTC concluded that

both conditions had not been satisfied by the Local Government Code. The RTC likewise accorded weight to Legal Opinion No. 165 of the Secretary of Justice dated 16 December 1996 concluding that Section 33 was not repealed by the Local Government Code, and a

memorandum emanating from the Office of the President dated 14 February 1995 expressing the same opinion.12

The dispositive portion of the assailed Decision reads:

Now then, in light of the foregoing observation, the court perceives, that the cause of action asseverated by petitioner in its petition has been well established by law and jurisprudence, and therefore the following relief should be granted:

a) The tax exemption privilege of petitioner should be upheld and continued and that the warrants of levy and notices of levy issued by the respondent Treasurer is hereby voided and declared of no effect;

b) Let a writ of prohibition be issued restraining the City Treasurer from proceeding with the auction sale of the subject properties, as well as the respondents Register of Deeds from annotating the warrants/notices of levy on the certificate of titles of petitioners real properties subject of this suit; and

c) Compelling the City Assessor of Davao City to include the properties of petitioner in the list of properties exempt from payment of realty tax and if the warrants and levies issued by the City Treasurer had been annotated in the memorandum of encumbrance on the certificates of title of petitioner’s properties, to cancel such annotation so that the certificates of titles of petitioners will be free from such liens and encumbrances.

SO ORDERED.13

Petitioners’ Motion for Reconsideration was denied by the RTC in an Order dated 30 October 1996, hence the present petition.

Petitioners argue that the exemption granted in Section 33 of P.D. No. 1146, as amended, was effectively withdrawn upon the enactment of the Local Government Code, particularly Sections 193 and 294 thereof. These provisions made the GSIS, along with all other GOCCs, subject to realty taxes. Petitioners point out that under Section 534(f) of the Local Government Code, even special laws, such as PD No. 1146, which are inconsistent with the Local Government Code, are repealed or modified accordingly.

On the other hand, GSIS contends, as the RTC held, that the requisites for repeal are laid down in Section 33 of P.D. No. 1146, as amended, namely that it be done expressly and categorically by law, and that a provision be enacted to substitute the declared policy of exemption from taxes as an essential factor for the solvency of the

GSIS fund. It stresses that it had been exempt from taxation as far back as 1936, when its original charter was enacted through Commonwealth Act No. 186.14 It asserts further that this Court had previously recognized the "extraordinary exemption" of GSIS in Testate Estate of Concordia T. Lim v. City of Manila,15 and such exemption has similarly been affirmed by the Secretary of Justice and the Office of the President in the aforementioned issuances also cited by the RTC.16

GSIS likewise notes that had it been the intention of the legislature to repeal Section 33 of P.D. No. 1146 through the Local Government Code, said law would have included the appropriate retraction in its repealing clause found in Section 534(f). However, said section, according to the GSIS, partakes the nature of a general repealing provision which is accorded less weight in light of the rule that implied repeals are not favored. Consequently with its position that it remains exempt from realty taxation, the GSIS argues that the Notices of Assessment, Warrants and Notices of Levy, Notices of Public Auction Sale and the Annotations of the Notice of Levy are void ab initio.

A review of the relevant statutory provisions is in order.

Presidential Decree No. 1146 was enacted in 1977 by President Marcos in the exercise of his legislative powers. Section 33, as originally enacted, read:

Sec. 33. Exemption from tax, Legal Process and Lien.- It is hereby declared to be the policy of the State that the actuarial solvency of the funds of the System shall be preserved and maintained at all times and that the contribution rates necessary to sustain the benefits under this Act shall be kept as low as possible in order not to burden the members of the system and/or their employees. . . . Accordingly, notwithstanding any laws to the contrary, the System, its assets, revenues including the accruals thereto, and benefits paid, shall be exempt from all taxes. These exemptions shall continue unless

expressly and specifically revoked and any assessment against the System as of the approval of this Act are hereby considered paid.

As it stood then, Section 33 merely provided a general rule exempting the GSIS from all taxes. However, Section 33 of P.D. No. 1146 was amended in 1985 by President Marcos, again in the exercise of his legislative powers, through P.D. No. 1981. It was through this latter decree that a second paragraph was added to Section 33 delineating the requisites for repeal of the tax exemption enjoyed by the GSIS by incorporating the following:

…

Moreover, these exemptions shall not be affected by subsequent laws to the contrary, such as the provisions of Presidential Decree No. 1931 and other similar laws that have been or will be enacted, unless this section is expressly and categorically repealed by law and a provision is enacted to substitute the declared policy of exemption from any and all taxes as an essential factor for the solvency of the fund.17

It bears noting though, and it is perhaps key to understanding the necessity of the addendum provided under P.D. No. 1981, that a presidential decree enacted a year earlier, P.D. No. 1931, effectively withdrew all tax exemption privileges granted to GOCCs.18 In fact, P.D. No. 1931 was specifically named in the afore-quoted addendum as among those laws which, despite passage, would not affect the tax exempt status of GSIS. Section 1 of P.D. No. 1931 states:

Sec. 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the payment of duties, taxes, fees, imposts and other charges heretofore granted in favor of government-owned or controlled corporations including their subsidiaries, are hereby withdrawn.

There is no doubt that the GSIS which was established way back in 1937 is a GOCC, a fact that GSIS itself admits in its petition for certiorari before the RTC.19 It thus clear that Section 1 of P.D. No. 1931 expressly withdrew those exemptions granted to the GSIS. Presidential Decree No. 1931 did allow the exemption to be restored in special cases through an application for restoration with the

Secretary of Finance, but otherwise, the exemptions granted to the GSIS prior to the enactment of P.D. No. 1931 were withdrawn.

Notably, P.D. No. 1931 was also an exercise of legislative powers then accorded to President Marcos by virtue of Amendment No. 6 to the 1973 Constitution. Whether he was aware of the effect of P.D. No. 1931 on the GSIS’s tax-exempt status or the ramifications of the decree thereon is unknown; but apparently, he immediately reconsidered the withdrawal of the exemptions on the GSIS. Thus, P.D. No. 1981 was enacted, expressly stating that the tax-exempt status of the GSIS under Section 33 of P.D. No. 1146 remained in place, notwithstanding the passage of P.D. No. 1931.

However, P.D. No. 1981 did not stop there, serving merely as it should to restore the previous exemptions on the GSIS. It also attempted to proscribe future attempts to alter the tax-exempt status of the GSIS by imposing unorthodox conditions for its future repeal. Thus, as intimated earlier, a second paragraph was added to Section 33, containing the restrictions relied upon by the RTC and presently invoked by the GSIS before this Court.

These laws have to be weighed against the Local Government Code of 1992, a landmark law which implemented the constitutional aspirations for a more extensive breadth of local autonomy. The Court, in Mactan, was asked to consider the effect of the Local Government Code on the taxability by local governments of GOCCs such as the Mactan Cebu International Airport Authority (MCIAA). Particularly, MCIAA invoked Section 133(o) of the Local Government Code as the basis for its claimed exemption, the provision reading:

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

. . . .

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units.

However, the Court, in ruling MCIAA non-exempt from realty taxes, considered that Section 133 qualified the exemption of the National Government, its agencies and instrumentalities from local taxation with the phrase "unless otherwise provided herein." The Court then considered the other relevant provisions of the Local Government Code, particularly the following:

SECTION 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemption or incentives granted to, or enjoyed by all persons, whether natural or juridical, including government-owned and controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

SECTION 232. Power to Levy Real Property Tax. – A province or city or a municipality within the Metropolitan Manila area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted.

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

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned and controlled corporations engaged in the distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied.)

Evidently, Section 133 was not intended to be so absolute a prohibition on the power of LGUs to tax the National Government, its agencies and instrumentalities, as evidenced by these cited provisions which "otherwise provided." But what was the extent of the limitation under Section 133? This is how the Court, in a discussion of far-reaching consequence, defined the parameters in Mactan:

The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of exceptions or provisos in these sections, as shown by the following clauses:

(1) "unless otherwise provided herein" in the opening paragraph of Section 133;

(2) "Unless otherwise provided in this Code" in Section 193;

(3) "not hereafter specifically exempted" in Section 232; and

(4) "Except as provided herein" in the last paragraph of Section 234

initially hampers a ready understanding of the sections. Note, too, that the aforementioned clause in Section 133 seems to be inaccurately worded. Instead of the clause "unless otherwise provided herein," with the "herein" to mean, of course, the section, it should have used the clause "unless otherwise provided in this Code." The former results in absurdity since the section itself enumerates what are beyond the taxing powers of local government units and, where exceptions were intended, the exceptions are explicitly indicated in the next. For instance, in item (a) which excepts income taxes "when levied on banks and other financial institutions"; item (d) which excepts

"wharfage on wharves constructed and maintained by the local government unit concerned"; and item (1) which excepts taxes, fees and charges for the registration and issuance of licenses or permits for the driving of "tricycles." It may also be observed that within the body itself of the section, there are exceptions which can be found only in other parts of the LGC, but the section interchangeably uses therein the clause, "except as otherwise provided herein" as in items (c) and (i), or the clause "except as provided in this Code" in item (j). These clauses would be obviously unnecessary or mere surplusages if the opening clause of the section were "Unless otherwise provided in this Code" instead of "Unless otherwise provided herein." In

any event, even if the latter is used, since under Section 232 local government units have the power to levy real property tax, except those exempted therefrom under Section 234, then Section 232 must be deemed to qualify Section 133.

Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person," as provided in item (a) of the first paragraph of Section 234.

As to tax exemptions or incentives granted to or presently enjoyed by natural or judicial persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to

those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234.20 (Emphasis supplied.)

This Court, in Mactan, acknowledged that under Section 133, instrumentalities were generally exempt from all forms of local government taxation, unless otherwise provided in the Code. On the other hand, Section 232 "otherwise provides" insofar as it allowed local government units to levy an ad valorem real property tax, irrespective of who owned the property. At the same time, the imposition of real property taxes under Section 232 is in turn qualified by the phrase "not hereinafter specifically exempted." The exemptions from real property taxes are enumerated in Section 234, which specifically states that only real properties owned "by the Republic of the Philippines or any of its political subdivisions" are exempted from the payment of the tax. Clearly, instrumentalities or GOCCs do not fall within the exceptions under Section 234.

Worth reckoning, however, is an essential difference between the situation of the MCIAA (and most other GOCCs, for that matter) and that of the GSIS. Unlike most other GOCCs, there is a statutory provision— Section 33 of P.D. No. 1146, as amended—which imposes conditions on the subsequent withdrawal of the GSIS’s tax exemptions. The RTC justified the affirmance of the tax exemptions based on the non-compliance by the Local Government Code with

these conditionalities, and not by reason of a general proposition that GOCCs or instrumentalities remain exempt from local government taxation.

Absent Section 33 of P.D. No. 1146, as amended, there would be no impediment in squarely applying the express provisions of Sections 193, 232 and 234 of the Local Government Code, as the Court did in Mactan and recently in Philippine Rural Electric Cooperatives Association, Inc. et al. v. Secretary of Interior And Local Government, et al. 21 and in ruling that the tax exemptions of GSIS were withdrawn by the Code. Thus, the crucial proposition is whether the GSIS tax exemptions can be deemed as withdrawn by the Local Government Code notwithstanding Section 33 of P.D. No. 1146 as amended.

Concededly, it does not appear that at the very least, the second conditionality of Section 33 has been met. No provision has been enacted "to substitute the declared policy of exemption from any and all taxes as an essential factor for the solvency of the fund."22 Yet the Court is averse to employing this framework, in the first place as utilized by the RTC, for we recognize a fundamental flaw in Section 33, particularly the amendatory second paragraph introduced by P.D. No. 1981.

The second paragraph of Section 33 of P.D. No. 1146, as amended, effectively imposes restrictions on the competency of the Congress to enact future legislation on the taxability of the GSIS. This places an undue restraint on the plenary power of the legislature to amend or repeal laws, especially considering that it is a lawmaker’s act that imposes such burden. Only the Constitution may operate to preclude or place restrictions on the amendment or repeal of laws. Constitutional dicta is of higher order than legislative statutes, and the latter should always yield to the former in cases of irreconcilable conflict.

It is a basic precept that among the implied substantive limitations on the legislative powers is the prohibition against the passage of irrepealable laws.23 Irrepealable laws deprive succeeding legislatures of the fundamental best senses carte blanche in crafting laws appropriate to the operative milieu. Their allowance promotes an unhealthy stasis in the legislative front and dissuades dynamic democratic impetus that may be responsive to the times. As Senior Associate Justice Reynato S. Puno once observed, "[t]o be sure,

there are no irrepealable laws just as there are no irrepealable Constitutions. Change is the predicate of progress and we should not fear change."24

Moreover, it would be noxious anathema to democratic principles for a legislative body to have the ability to bind the actions of future legislative body, considering that both assemblies are regarded with equal footing, exercising as they do the same plenary powers. Perpetual infallibility is not one of the attributes desired in a legislative body, and a legislature which attempts to forestall future amendments or repeals of its enactments labors under delusions of omniscience.

It might be argued that Section 33 of P.D. No. 1146, as amended, does not preclude the repeal of the tax-exempt status of GSIS, but merely imposes conditions for such to validly occur. Yet these conditions, if honored, have the precise effect of limiting the powers of Congress. Thus, the same rationale for prohibiting irrepealable laws applies in prohibiting restraints on future amendatory laws. President Marcos, who exercised his legislative powers in amending P.D. No. 1146, could not have demanded obeisance from future legislators by imposing restrictions on their ability to legislate amendments or repeals. The concerns that may have militated his enactment of these restrictions need not necessarily be shared by subsequent Congresses.

We do not mean to trivialize the need to ensure the solvency of the GSIS fund, a concern that has seen legislative expression, even with the most recently enacted Government Service Insurance System Act of 1997.25 Yet at the same time, we recognize that Congress has the putative authority, through valid legislation, to diminish such fund, or even abolish the GSIS itself if it so desires. The GSIS may provide vital services and security to employees of the civil service, yet it is not a sacred cow that is beyond abolition by Congress if, for example, more innovative methods are devised to ensure stable pension funds for government employees. If Congress has the inherent power to abrogate the GSIS itself, then it necessarily has the ability to inflict less detrimental burdens, such as abolishing its tax-exempt status. If there could be legal authority proscribing the Congress from enacting such legislation, such should be sourced from the Constitution itself, and not from antecedent statutes which were themselves enacted by legislative power.

The Court’s position is aligned with entrenched norms of statutory construction. In Duarte v. Dade,26 the Court cited with approval Lewis’ Southerland on Statutory Construction, which states:

A state legislature has a plenary law-making power over all subjects, whether pertaining to persons or things, within its territorial jurisdiction, either to introduce new laws or repeal the old, unless prohibited expressly or by implication by the federal constitution or limited or restrained by its own. It cannot bind itself or its successors by enacting irrepealable laws except when so restrained. Every legislative body may modify or abolish the acts passed by itself or its predecessors. This power of repeal may be exercised at the same session at which the original act was passed; and even while a bill is in its progress and before it becomes a law. This legislature cannot bind a future legislature to a particular mode of repeal. It cannot declare in advance the intent of subsequent legislatures or the effect of subsequent legislation upon existing statutes. (Emphasis supplied.)27

The citation is particularly apropos to our present task, since the question for resolution is primarily one of statutory construction, i.e., whether or not Section 33 of P.D. No. 1146 has been repealed by the Local Government Code. It is evident that we cannot render effective the amendatory second paragraph of Section 33

as the RTC did, for by doing so, we would be giving sanction to a disingenuous means employed through legislative power to bind subsequent legislators to a particular mode of repeal.

Thus, the two conditionalities of Section 33 cannot bear relevance on whether the Local Government Code removed the tax-exempt status of the GSIS. The express withdrawal of all tax exemptions accorded to all persons, natural or juridical, as stated in Section 193 of the Local Government Code, applies without impediment to the present case. Such position is bolstered by the other cited provisions of the Local Government Code, and by the Mactan ruling.

There are other reasons that guide us to construe the Local Government Code in favor of the City of Davao’s position. Section 5 of the Local Government Code provides the guidelines on how to construe the Code’s provisions in cases of doubt, and they are self-explanatory, thus:

Section 5. Rules of Interpretation. – In the interpretation of the provisions of this Code, the following rules shall apply:

(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local government unit concerned;

(b) In case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer. Any tax exemption, incentive or relief granted by any local government unit pursuant to the provisions of this Code shall be construed strictly against the person claiming it; (Emphasis supplied.)

Also worthy of note is that the Constitution itself promotes the principles of local autonomy as embodied in the Local Government Code. The State is mandated to ensure the autonomy of local governments,28 and local governments are empowered to levy taxes, fees and charges that accrue exclusively to them, subject to congressional guidelines and limitations.29 The principle of local autonomy is no mere passing dalliance but a constitutionally enshrined precept that deserves respect and appropriate enforcement by this Court.

We are aware that this stance runs contrary to that which was adopted by the Secretary of Justice in his Opinion dated 22 July 1993, as well as the memorandum from the Office of the President dated 14 February 1995, expressing the same opinion. However, statutory interpretations of these executive bodies do not hold decisive sway upon the judiciary but are merely persuasive. These issuances cannot derogate from the binding precept that one legislature cannot enact irrepealable legislation or limit or restrict its own power or the power of its successors as to the repeal of statutes.30 The act of one legislature is not binding upon and does not tie the hands of future legislatures.31

The GSIS’s tax-exempt status, in sum, was withdrawn in 1992 by the Local Government Code but restored by the Government Service Insurance System

Act of 1997, the operative provision of which is Section

39.32 The subject real property taxes for the years 1992 to 1994 were assessed against GSIS while the Local Government Code provisions prevailed and, thus, may be collected by the City of Davao.

WHEREFORE, premises considered, the Petition for Review is hereby GRANTED. The appealed Decision of the Regional Trial Court of Davao City, Branch 12 is REVERSED and SET ASIDE.

Costs de oficio.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-30159 March 31, 1987

MUNICIPALITY OF SAN FERNANDO, LA UNION represented by Mayor LORENZO L. DACANAY, plaintiff-appellee, (respondent) vs.MAYOR TIMOTEO STA. ROMANA, MUNICIPAL TREASURER and their authorized Agents of Luna, La Union and the MUNICIPALITY OF LUNA, LA UNION, defendants-appellants (petitioners).

 

PARAS, J.:

This is a petition for review on certiorari of the November 11, 1968 Order of the Court of First Instance of La Union, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the preliminary injunction already issued is made permanent and the defendants are enjoined not to

prevent the plaintiff from getting sand and gravel from barrio Nalvo Norte.

The undisputed facts of this case are as follows:

The Municipality of San Fernando, La Union which was undertaking a cement road construction around its Supermarket and other municipal projects, needed sufficient gravel and sand from their source, the Municipality of Luna but its trucks sent to the latter municipality to haul said road construction materials were allegedly charged unreasonable fees per truck load.

On March 18, 1968, the Municipality of San Fernando represented by its incumbent Municipal Mayor Lorenzo L. Dacanay filed a complaint for Injunction with Writ of Preliminary Injunction at the Court of First Instance of La Union against the Municipality of Luna and its officials and authorized agents, praying that the defendants be immediately enjoined from preventing plaintiff's truck obtaining road construction materials from Luna, La Union and from levying unreasonable fees, and after trial to make the injunction permanent (Complaint "Annex A, "Rollo, p. 13).

On the same day the complaint was filed, the Court of First Instance of La Union (Branch 11) issued an Order granting the Writ of Preliminary Injunction ex parte (Petition, Rollo, p. 7, "Annex B," Rollo, p. 18). On March 26, 1968, the defendants filed their Answer wherein they averred that the license fees collected from the hauling of sand and gravel excavated from the municipality of Luna, La Union are by virtue of an ordinance duly approved by the Municipal Council of defendant municipality in consonance with its power to tax, and that the fees collected are reasonable, fair and legal. The Answer further pointed out that the remedy of Injunction availed of is not the proper remedy. On May 21, 1968, after the issues were joined, the lower court issued an Order requiring the parties to submit their respective memoranda since the issue raised was purely a question of law. On November 11, 1968, the lower court issued an Order making permanent the writ of preliminary injunction issued and further ordered the defendants not to prevent the plaintiff from getting sand and gravel from Barrio Nalvo Norte, a barrio of Luna, La Union.

Hence, this petition.

The main issue in this case is whether or not the Municipality of Luna has the authority to pass Ordinance No. 1 and impose the license fees in question.

Aforesaid Ordinance reads:

ORDINANCE NO. 1

Section 1. There shall be collected from any person, partnership or corporation engaged in any business, occupation or calling or enjoying any privilege hereunder enumerated the following municipal license and/or fees at the rate set opposite each:

xxx xxx xxx

14. Dealer and/or hauler of sand, gravel and/or stones for every truck load or fraction thereof:

Sand.......................................................P1. 50

Gravel........................................................8.00

Course sand...........................................10.00

Selected stones or pea size..................15.00

The Municipality of Luna insists on the validity of its Ordinance No. 1 imposing the license fees in question on the basis of its authority to exercise police power under Section 2238 of the Revised Administrative Code, otherwise known as the General Welfare Clause and its power to levy licenses and fees for public purposes under Republic Act 2264 (Petition, Rollo, p. 10) and justifies the inclusion of the Municipality of San Fernando thereunder, among the persons, partnership or corporation engaged in any business, occupation or calling to be charged for hauling sand and gravel from its seashore, claiming that respondent municipality in hauling sand and gravel for the improvement of its roads is engaged in a proprietary function as it can later exact higher license fees from those in the business center. Thus, for eventually obtaining profit by the improvement of its roads,

the Municipality of San Fernando should allegedly pay license fees to the Municipality of Luna (Brief for Petitioner, pp. 5 and 6).

On the other hand, respondent Municipality alleges that the license fee embodied in Ordinance No. I is beyond the authority of the Municipality of Luna, La Union to impose, as the sand and gravel deposits in the seashore of Nalvo Norte are classified as minerals under the Mining Laws of the Philippines and as such belong to the State, and fall under the administration and control of the Bureau of Mines and not of the Municipality of Luna. For this purpose, respondent Municipality obtained on March 18, 1968, a gratuitous Revocable Permit from the Bureau of Mines (Answer, Rollo, pp. 55-56; Brief for Respondent, pp. 3 and 4). Even granting arguendo that the disposition of sand and gravel belongs to petitioner, nevertheless, the Municipality of San Fernando does not fall under Ordinance No. 1 because the gravel and sand extracted by said municipality are used for the improvement of its streets which function is governmental.

This issue in the case at bar is now governed by Presidential Decree No. 231, enacting a Local Tax Code (for Provinces, Cities, Municipalities and Barrios which took effect on July 1, 1973. The Code provides:

SEC. 10. Sand and gravel fee. — The province may levy and collect a fee of not exceeding seventy-five centavos per cubic meter of ordinary stones, sand, gravel earth and other materials extracted from lakes, rivers, streams, creeks, and other public waters within the jurisdiction of the province.

SEC. 22. Specific limitations on power. — Except as otherwise provided in this Code, the municipality shall not levy the following:

(a) Taxes, fees, and charges that the province or city is authorized to levy in this Code;

(b) Taxes on articles, subject to specific tax under the provisions of the National Internal Revenue Code; and

(c) Taxes and other impositions enumerated in Section 5, Chapter I of this Code.

Section 10 of aforesaid decree was later amended by Presidential Decree No. 426, dated March 30, 1974, and now reads:

Sec. 10. Sand and gravel tax. — The province may levy and collect a tax of not exceeding seventy-five centavos per cubic meter of ordinary stones, sand, gravel earth and other materials extracted from public and private lands of the government or from the beds of seas, lakes, rivers, streams, creeks and other public waters within the jurisdiction of the province. The municipality where the materials are extracted shall share in the proceeds of the tax herein authorized at a rate of not less than thirty per cent thereof as may be determined by the Provincial Board.

The permit to extract the materials shall be issued by the Director of Mines or his duly authorized representative and the extraction thereof shag be governed by regulations issued by the Director of Mines. (As amended by Presidential Decree No. 426).

Under the above-quoted provisions of the Local Tax Code, there is no question that the authority to impose the license fees in dispute, properly belongs to the province concerned and not to the Municipality of Luna which is specifically prohibited under Section 22 of the same Code "from levying taxes, fees and charges that the province or city is authorized to levy in this Code. " On the other hand, the Municipality of San Fernando cannot extract sand and gravel from the Municipality of Luna without paying the corresponding taxes or fees that may be imposed by the province of La Union.

PREMISES CONSIDERED, the Court RESOLVED to DISMISS this petition and to AFFIRM assailed Order of the trial court.

Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortes, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-16619             June 29, 1963

COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee, vs.CITY OF MANILA, ET AL., defendants-appellants.

Ponce Enrile, Siguion Reyna, Montecillo and Belo for plaintiff-appellee.City Fiscal Hermogenes Concepcion, Jr. and Assistant City Fiscal M. T. Reyes for defendants-appellants.

DIZON, J.:

Appeal from the decision of the Court of First Instance of Manila ordering the City Treasurer of Manila to refund the sum of P15,280.00 to Compania General de Tabacos de Filipinas.

Appellee Compania General de Tabacos de Filipinas — hereinafter referred to simply as Tabacalera — filed this action in the Court of First Instance of Manila to recover from appellants, City of Manila and its Treasurer, Marcelino Sarmiento — also hereinafter referred to as the City — 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, as a duly licensed first class wholesale and retail liquor dealer paid the City the fixed license fees prescribed by Ordinance No. 3358 for the years 1954 to 1957, inclusive, and, as a wholesale and retail dealer of general merchandise, it also paid the sales taxes required by Ordinances Nos. 3634, 3301, and 3816.1äwphï1.ñët

In its sworn statements of wholesale, retail, and grocery sales of general merchandise from the third quarter of 1954 to the second

quarter of 1957, inclusive, Tabacalera included its liquor sales of the same period, and it is not denied that of the taxes it paid on all its sales of general merchandise, the sum of P15,280.00 subject to the action represents the tax corresponding to the liquor sales aforesaid.

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 is admitted that as liquor dealer, Tabacalera paid annually the wholesale and retail liquor license fees under Ordinance No. 3358. In 1954, City Ordinance No. 3634, amending City Ordinance No. 3420, and City Ordinance No. 3816, amending City Ordinance No. 3301 were passed. By reason thereof, the City Treasurer issued the regulations marked Exhibit A, according to which, the term "general merchandise as used in said ordinances, includes all articles referred to in Chapter 1, Sections 123 to 148 of the National Internal Revenue Code. Of these, Sections 133-135 included liquor among the taxable articles. Pursuant to said regulations, Tabacalera included its sales of liquor in its sworn quarterly declaration submitted to the City Treasurer beginning from the third quarter of 1954 to the second quarter of 1957, with a total value of P722,501.09 and correspondingly paid a wholesaler's tax amounting to P13,688.00 and a retailer's tax amounting to P1,520.00, or a total of P15,208.00 — the amount sought to be recovered.

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.

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 (MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 26).

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, having been enacted by the Municipal Board of Manila pursuant to its charter power to fix license fees on, and regulate, the sale of intoxicating liquors, whether imported or locally manufactured. (Section 18 [p], Republic Act 409, as amended). 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. (MacQuillin, supra, p. 445.)

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. (Section 10 [o], Republic Act No. 409, as amended.).

Under Ordinance No. 3634 the word "merchandise" as employed therein clearly includes liquor. Aside from this, we have held in City of Manila vs. Inter-Island Gas Service, Inc., G.R. No. L-8799, August 31, 1956, that 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 (Bentley Gray Dry Goods Co. vs. City of Tampa, 137 Fla. 641, 188 So. 758; MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 83). This is precisely the case with the ordinances involved in the case at bar.

Appellee's contention that the City is repudiating its previous view — expressed by its Treasurer in a letter addressed to Messrs. Sycip, Gorres, Velayo & Co. in 1954 — that a liquor dealer who pays the annual license fee under Ordinance No. 3358 is exempted from the wholesalers and retailers taxes under the other three ordinances mentioned heretofore is of no consequence. The government is not bound by the errors or mistakes committed by its officers, specially on matters of law.

Having arrived at the above conclusion, we deem it unnecessary to consider the other legal points raised by the City.

WHEREFORE, the decision appealed from is reversed, with the result that this case should be, as it is hereby dismissed, with costs.

Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes, Regala and Makalintal, JJ., concur.Bengzon, C.J. and Concepcion, J., took no part.

 

G.R. No. 117577 December 1, 1995

ALEJANDRO B. TY AND MVR PICTURE TUBE, INC., petitioners, vs.THE HON. AURELIO C. TRAMPE, in his capacity as Judge of the Regional Trial Court of Pasig, Metro Manila, THE HON. SECRETARY OF FINANCE, THE MUNICIPAL ASSESSOR OF PASIG AND THE MUNICIPAL TREASURER OF PASIG, respondents.

 

PANGANIBAN, J.:

ARE THE INCREASED REAL ESTATE TAXES imposed by and being collected in the Municipality (now City) of Pasig, effective from the year 1994, valid an legal? This is the question brought before this Court for resolution.

The Parties

Petitioner Alejandro B. Ty is a resident of and registered owner of lands and buildings in the Municipality (now City) of Pasig, while petitioner MVR Picture Tube, Inc. is a corporation duly organized and existing under Philippine laws and is likewise a registered owner of lands and buildings in said Municipality 1 .

Respondent Aurelio C. Trampe is being sued in his capacity as presiding judge of Branch 163. Regional Trial Court of the National Capital Judicial Region, sitting in Pasig, whose Decision dated 14 July 1994 and Order dated 30 September 1994 in Special Civil Action No. 629 (entitled "Alejandro B. Ty and MVR Picture Tube, Inc. vs. The Hon. Secretary of Finance. et al.") are sought to be set aside. Respondent Secretary of Finance is impleaded as the government officer who approved the Schedule of Market Values used as basis for the new tax assessments being enforced by respondents Municipal Assessor and Municipal Treasurer of Pasig and the legality of which is being questioned in this petition 2 .

The Antecedent Facts

On 06 January 1994, respondent Assessor sent a notice of assessment respecting certain real properties of petitioners located in Pasig, Metro Manila. In a letter dated 18 March 1994, petitioners through counsel "request(ed) the Municipal Assessor to reconsider the subject assessments" 3 .

Not satisfied, petitioners on 29 March 1994 filed with the Regional Trial Court of the National Capital Judicial Region, Branch 163, presided over by respondent Judge, a Petition for Prohibition with prayer for a restraining order and/or writ of preliminary injunction to declare null and void the new tax assessments and to enjoin the collection of real estate taxes based on said assessments. In a Decision 4 dated 14 July 1994, respondent Judge denied the petition "for lack of merit" in the following disposition.

WHEREFORE, foregoing premises considered, petitioners' prayer to declare unconstitutional the schedule of market values as prepared by the Municipal Assessor of Pasig, Metro Manila, and to enjoin permanently the Municipal Treasurer of Pasig, Metro Manila, from collecting the real property taxes

based thereof (sic) is hereby DENIED for lack of merit. Cost (sic) de oficio.

Subsequently, petitioners' Motion for Reconsideration was also denied by respondent Judge in an Order 5 dated 30 September 1994.

Rebuffed by said Decision and Order, petitioners filed this present Petition for Review directly before this Court, raising pure questions of law and assigning the following errors:

The Court a quo gravely erred in holding that Presidential Decree No. 921 was expressly repealed by R.A. 7160 and that said presidential decree including its Implementing Rules (P.D. 464) went down to the statutes' graveyard together with the other decision(s) of the Supreme Court affecting the same.

The Court a quo while holding that the new tax assessments have tremendously increased ranging from 418.8% to 570%, gravely erred in blaming petitioners for their failure to exhaust administrative remedies provided for by law.

The Court a quo blatantly erred in not declaring the confiscatory and oppressive nature of the assessments as illegal. void ab initio and unconstitutional constituting a deprivation of property without due process of law. 6

In a resolution dated 21 November 1994, this Court, without giving due course to the petition, required respondents to comment thereon. Respondents Municipal Treasurer and Municipal Assessor, through counsel, filed their Comment on 19 December 1994, and respondent Secretary of Finance, through the Solicitor General, submitted his on 11 May 1995. Petitioners filed their Reply to the Comment of respondent Assessor and Treasurer 06 January 1995, and their Reply to that of the respondent Secretary on 18 May 1995. After careful deliberation on the above pleadings, the Court resolved to give due course to the petition, and, inasmuch as the issues are relatively simple, the Court dispensed with requiring the parties to submit further memoranda and instead decided to consider the respondents' respective Comments as their answers and memoranda. Thus the case is now considered submitted for resolution.

The Issues

The issues brought by the parties for decision by this Court are:

1. Whether Republic Act No. 7160, otherwise known as the Local Government Code of 1991, repealed the provisions of Presidential Decree No. 921;

2. Whether petitioners are required to exhaust administrative remedies prior to seeking judicial relief; and

3. Whether the new tax assessments are oppressive and confiscatory, and therefore unconstitutional.

In disposing of the above issues against petitioners, the court a quo ruled that the schedule of market values and the assessments based thereon prepared solely by respondent assessor are valid and legal, they having been prepared in accordance with the provisions of the Local Government Code of 1991 (R.A. 7160). It held also that said Code had effectively repealed the previous law on the matter, P.D. 921, which required, in the preparation of said schedule, joint action by all the city and municipal assessors in the Metropolitan Manila area. The lower court also faulted petitioners with failure to exhaust administrative remedies provided under Sections 226 and 252 of R.A. 7160. Finally, it found the questioned assessments consistent with the "tremendously increased . . . price of real estate anywhere in the country." 7

Stated the court:

This Court is inclined to agree with the view of defendants that R.A. 7160 in its repealing clause provide (sic) that Presidential Decree Nos. . . . 464 . . . are hereby repealed and rendered of no force and effect. Hence said presidential decrees including their implementing rules went down to the statutes' graveyard together with the decisions of the Supreme Court on cases effecting (sic) the same.

This Court is also in accord with respondents (sic) view that petitioners failed to avail of either Section 226 of R.A. 7160, that is by appealing the assessment of their properties to the Board of Assessment Appeal within sixty 160) days from the date of receipt of the written Notice of Assessment, and if it is true that petitioner (sic) as alleged in their pleadings was not afforded the opportunity to appeal to the board of assessment appeal, then they could have availed of the provisions of Section 252, of the same R.A. 7160 by paying the real estate tax under protest. Because of petitioners (sic) failure to avail of either Sections 226 or 252 of R.A. 7160, they failed to exhaust administratives (sic) remedies provided for by law before bringing the case to Court. (Buayan Cattle Co., Inc. vs. Quintillan, 128 SCRA 276). Therefore the filing of this case before this Court is premature, the same not falling under the exception because the issue involved is not a question of law but of fact (Valmonte vs. Belmonte, Jr., 170 SCRA 256).

Petitioners also alleged that the New Tax Assessments are not only oppressive and confiscatory but also destructive in view of the tremendous increase in its valuation, from P855,360.00 to P4,121,280.00 a marked increase of 418.8% of one of its properties, while the other, from P857,600.00 to P4,374,410.00, an increased (sic) of 510%. This Court agree (sic) with petitioners (sic) observation, but the reality (sic) the price of real property anywhere in the country tremendously increased. This is shown in the Real Estate Monitor of Economic Incorporated (copy attached with the memorandum of respondents). For example real properties in Pasig in 1991 located at the Ortigas Commercial Complex command (sic) a price of P42,000.00 per square meter which price is supported by a case filed before this Court (civil case no. 64506, Jesus Fajardo, et al. vs. Ortigas and Co.) for Recovery (sic) of agents (sic) commission. The property subject of the sale which was also located at the Ortigas Commercial Complex at Pasig, Metro Manila was sold to a Taiwanese at P42,000.00 per square meter. It is

therefore not surprising that the assessment of real properties in Pasig has increased tremendously. Had petitioners first exhausted administrative remedies they would have realized the fact that prices of real estate has (sic) tremendously increased and would have known the reason/reasons why. 8

In its Order dated 30 September 1994 denying the Motion for Reconsideration, the court a quo ruled:

This Court despite petitioners' exhaustive and thorough research and discussion of the point in issue, is still inclined to sustain the view that P.D. 921 was impliedly repealed by R.A. 7160. P.D. 921 to the mind of this Court is an implementing law of P.D. 464, Sections 3, 6, 9, 12 and 13 of said P.D. provide how certain provisions of P.D. 464 shall be implemented. Since P.D. 464 was expressly repealed by R.A. 7160. P.D. 921 must necessarily be considered repealed, otherwise, what should Sections 3, 6, 9, 12 and 13 of P.D. 921 implement? And, had the law makers intended to have said P.D. 921 remain valid and enforceable they would have provided so in R.A. 7160. Since there is none, P.D. 921 must be considered repealed. 9

Re: The First Issue:

Repeal of P.D. 921?

To resolve the first issue, it is necessary to revisit the following provisions of law:

1. Section 15 of P.D. No. 464, promulgated on 20 May 1974, otherwise known as the Peal Property Tax Code:

Sec. 15. Preparation of Schedule of Values. — Before any general revision of property assessments is made, as provided in this Code, there shall be prepared for the province or city a Schedule of Market Value for the different classes of real property therein situated in

such form and detail as shall be prescribed by the Secretary of Finance.

Said schedule, together with an abstract of the data (on) which it is based, shall be submitted to the Secretary of Finance for review not later than the thirty-first day of December immediately preceding the calendar year the general revision of assessments shall be undertaken. The Secretary of Finance shall have ninety days from the date of receipt within which to review said schedule to determine whether it conforms with the provisions of this Code.

2. Subsequently, on 12 April 1976, P.D. 921 was promulgated, which in Section 9 thereof, states:

Sec. 9. Preparation of Schedule of Values for Real Property within the Metropolitan Area. — The Schedule of Values that will serve as the basis for the appraisal and assessment for taxation purposes of real properties located within the Metropolitan Area shall be prepared jointly by the City Assessors of the Districts created under Section one hereof, with the City Assessor of Manila acting as Chairman, in accordance with the pertinent provisions of Presidential Decree No. 464, as amended, otherwise known as the Real Property Tax Code, and the implementing rules and regulations thereof issued by the Secretary of Finance.

3. Section One of P.D. 921, referred to above, provides:

Sec. 1. Division of Metropolitan Manila into Local Treasury and Assessment Districts. — For purposes of effective fiscal management, Metropolitan Manila is hereby divided into the following Local Treasury and Assessment Districts:

First District — Manila

Second District — Quezon City, Pasig, Marikina,Mandaluyong and San Juan

Third District — Caloocan City, Malabon,Navotas and Valenzuela

Fourth District — Pasay City, Makati, Paranaque,Muntinlupa, Las Piñas, Pateros andTaguig

Manila, Quezon City, Caloocan City and Pasay City shall be the respective Centers of the aforesaid Treasury and Assessment Districts.

4. On 01 January 1992, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, took effect. Section 212 of said law is quoted as follows:

Sec. 212. Preparation of Schedule of Fair Market Values. — Before any general revision of property assessment is made pursuant to the provisions of this Title, there shall be prepared a schedule of fair market values by the provincial, city and the municipal assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in their respective local government units for enactment by ordinance of the sanggunian concerned. The schedule of fair market values shall be published in a newspaper of general circulation in the province, city or municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or municipal hall and in two other conspicuous public place therein.

5. The repealing clause of R.A. 7160 found in the Section 534 thereof is hereby reproduced as follows:

Sec. 534. Repealing Clause. —

(a) . . .

(b) . . .

(c) . . . ; and Presidential Decree Nos. 381, 436, 464, 477, 626, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.

xxx xxx xxx

(f) All general and special laws, acts, city charter, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. (emphasis supplied)

It is obvious from the above provisions of R.A 7160, specifically Sec. 534, that P.D. 921 was NOT EXPRESSLY repealed by said statute. Thus, the question is: Was P.D. 921 IMPLIEDLY repealed by R.A. 7160?

Petitioners contend that, contrary to the aforequoted Decision of the lower court, "whether the assessment is made before or after the effectivity of R.A. 7160, the observance of, and compliance with, the explicit requirement of P.D. 921 is strict and mandatory either" because P.D. 921 was not impliedly repealed by R.A. 7160 and is therefore still the applicable statute, or because the Supreme Court, in three related cases 10 promulgated on 16 December 1993 — after the Local Government Code of 1991 already took effect — ruled that a schedule of market values and the corresponding assessments based thereon "prepared solely by the city assessor . . . failed to comply with the explicit requirement (of collegial and joint action by all the assessors in the Metropolitan Manila area under P.D. 921) . . . and are on that account illegal and void."

On the other hand, respondents aver that Section 9 of P.D. 921 and Section 212 of R.A. 7160 are clearly and unequivocally incompatible because they dwell on the same subject matter, namely, the preparation of a schedule of values for real property within the Metropolitan Manila Area. Under P.D. 921, the schedule shall be

prepared jointly by the city assessors of the District, while, under R.A. 7160, such schedule shall be prepared "by the provincial, city and municipal assessors of the municipalities within the Metropolitan Manila area . . . ". Furthermore, they claim that "Section 9 (of P.D. 921) merely supplement(ed) Section 15 of P.D. 464 in so far as the preparation of the schedule of values in Metro Manila (is concerned)." Thus, "with the express repeal of P.D. 464 . . . P.D. 921 . . .can not therefore exist independently on its own." They also argue that although the aforecited Supreme Court decision was promulgated after R.A. 7160 took effect, "the assessment of the Municipal Assessors in those three (3) cited cases were assessed in 1990 prior to the effectivity of the Code." Hence, the doctrine in said cases cannot be applied to those prepared in 1994 under R.A. 7160.

We rule for petitioners.

R.A. 7160 has a repealing provision (Section 534) and, if the intention of the legislature was to abrogate P.D. 921, it would have included it in such repealing clause, as it did in expressly rendering of no force and effect several other presidential decrees. Hence, any repeal or modification of P.D. 921 can only be possible under par. (f) of said Section 534, as follows:

(f) All general and special laws, acts, city charter, decrees, executive orders, proclamations and administrative regulations, part or parts thereof which are inconsistent with any of the provisions of the Code are hereby repealed or modified accordingly.

The foregoing partakes of the nature of a general repealing provision. It is a basic rule of statutory construction that repeals by implication are not favored. An implied repeal will not be allowed unless it is convincingly and unambiguously demonstrated that the two laws are so clearly repugnant and patently inconsistent that they cannot co-exist. This is based on the rationale that the will of the legislature cannot be overturned by the judicial function of construction and interpretation. Courts cannot take the place of Congress in repealing statutes. Their function is to try to harmonize, as much as possible, seeming conflicts in the laws and resolve doubts in favor of their validity and co-existence.

In Villegas v. Subido, 11 the issue raised before the Court was whether the Decentralization Act had the effect of repealing what was specifically ordained in the Charter of the City of Manila. Under the Charter, it was provided in its Section 22 that "The President of the Philippines with the consent of the Commission on Appointments shall appoint . . . the City Treasurer and his Assistant." Under the Decentralization Act, it was provided that "All other employees, except teachers paid out of provincial, city or municipal general funds and other local funds shall . . . be appointed by the provincial governor, city or municipal mayor upon recommendation of the head of office concerned."

The Court, in holding that there was no implied repeal in thiscase 12 , said:

. . . It has been the constant holding of this Court that repeals by implication are not favored and will not be so declared unless it be manifest that the legislature so intended. Such a doctrine goes as far back as United States v. Reyes, a 1908 decision (10 Phil. 423, Cf. U.S. v. Academia, 10 Phil. 431 [1908]). It is necessary then before such a repeal is deemed to exist that it be shown that the statutes or statutory provisions deal with the same subject matter and that the latter be inconsistent with the former. (Cf. Calderon v. Provincia del Santisimo Rosario, 28 Phil. 164 [1914]). There must be a showing of repugnancy clear and convincing in character. The language used in the latter statute must be such as to render it irreconcilable with what has been formerly enacted. An inconsistency that falls short of that standard does not suffice. What is needed is a manifest indication of the legislative purpose to repeal. [Citing numerous cases]

More specifically, a subsequent statute, general in character as to its terms and application, is not to be construed as repealing a special or specific enactment, unless the legislative purpose to do so is manifest. This is so even if the provisions of the latter are sufficiently comprehensive to include what was set forth in the special act. This principle has likewise been consistently applied in decisions of the Court from

Manila Railroad Co. v. Rafferty (40 Phil 224), decided as far back as 1919. A citation from an opinion of Justice Tuason is illuminating. Thus: "From another angle the presumption against repeal is stronger. A special law is not regarded as having been amended or repealed by a general law unless the intent to repeal or alter is manifest. Generalia specialibus non derogant. An this is true although the terms of the general act are broad enough to include the matter in the special statute. . . . At any rate, in the event harmony between provisions of this type in the same law or in two laws is impossible, the specific provision controls unless the statute, considered in its entirety, indicates a contrary intention upon the part of the legislature. . . . A general law is one which embraces a class of subjects or places and does not omit any subject or place naturally belonging to such class, while a special act is one which relates to particular persons or things of a class." (citing Valera v. Tuason, 80 Phil. 823, 827-828 [1948].)

In the relatively recent case of Mecano vs. Commission on Audit 13 , the Court en banc had occasion to reiterate and to reinforce the rule against implied repeals, as follows:

Repeal by implication proceeds on the premise that where a statute of later date clearly reveals an intention on the part of the legislature to abrogate a prior act on the subject, that intention must be given effect. Hence, before there can be a repeal, there must be a clear showing on the part of the law maker that the intent in enacting the new law was to abrogate the old one. The intention to repeal must be clear and manifest; otherwise, at least, as a general rule, the later act is to be construed as a continuation of, and not a substitute for, the first act and will continue so far as the two acts are the same from the time of the first enactment.

There are two categories of repeal by implication. The first is where provisions in the two acts on the same subject matter are in an irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one. The second is if the later act

covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate to repeal the earlier law.

Implied repeal by irreconcilable inconsistency take place when the two statutes cover the same subject matter; they are so clearly inconsistent and incompatible with each other that they cannot be reconciled or harmonized; and both cannot be given effect, that is that one law cannot be enforced without nullifying the other.

In the same vein, but in different words, this Court ruled in Gordon vs. Veridiano 14 :

Courts of justice, when confronted with apparently conflicting statutes, should endeavor to reconcile the same instead of declaring outright the invalidity of one as against the other. Such alacrity should be avoided. The wise policy is for the judge to harmonize them if this is possible, bearing in mind that they are equally the handiwork of the same legislature, and so give effect to both while at the same time also according due respect to a coordinate department of the government. It is this policy the Court will apply in arriving at the interpretation of the laws above-cited and the conclusions that should follow therefrom.

In the instant case, and using the Courts' standard for implied repeal in Mecano, we compared the two laws.

Presidential Decree No. 921 was promulgated on 12 April 1976, with the aim of, inter alia, evolving "a progressive revenue raising program that will not unduly burden the tax payers . . . " 15 in Metropolitan Manila. Hence, it provided for the "administration of local financial services in Metropolitan Manila" only, and for this purpose, divided the area into four Local Treasury and Assessment Districts, regulated the duties and functions of the treasurers and assessors in the cities and municipalities in said area and spelled out the process of assessing, imposing and distributing the proceeds of real estate taxes therein.

Upon the other hand, Republic Act No. 7160, otherwise "known and cited as the Local 'Government Code of 1991'" 16 took effect on 01 January 1992 17. It declared "genuine and meaningful local autonomy" as a policy of the state. Such policy was meant to decentralize government "powers, authority, responsibilities and resources" from the national government to the local government units "to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals." 18 In the formulation and implementation of policies and measures on local autonomy, ''(l)ocal government units may group themselves, consolidate or coordinate their efforts, services and resources for purposes commonly beneficial to them." 19

From the above, it is clear that the two laws are not co-extensive and mutually inclusive in their scope and purpose. While R.A. 7160 covers almost all governmental functions delegated to local government units all over the country, P.D. 921 embraces only the Metropolitan Manila area and is limited to the administration of financial services therein, especially the assessment and collection of real estate (and some other local) taxes.

Coming down to specifics, Sec. 9 of P.D. 921 requires that the schedule of values of real properties in the Metropolitan Manila area shall be prepared jointly by the city assessors in the districts created therein: while Sec. 212 of R.A. 7160 states that the schedule shall be prepared "by the provincial, city and municipal assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in their respective local government units for enactment by ordinance of the sanggunian concerned. . . ."

It is obvious that harmony in these provisions is not only possible, but in fact desirable, necessary and consistent with the legislative intent and policy. By reading together and harmonizing these two provisions, we arrive at the following steps in the preparation of the said schedule, as follows:

1. The assessor in each municipality or city in the Metropolitan Manila area shall prepare his/her proposed schedule of values, in accordance with Sec. 212, R.A. 7160.

2. Then, the Local Treasury and Assessment District shall meet, per Sec. 9, P.D. 921. In the instant case, that district shall be composed of the assessors in Quezon City, Pasig, Marikina, Mandaluyong and San Juan, pursuant to Sec. 1 of said P.D. In this meeting, the different assessors shall compare their individual assessments, discuss and thereafter jointly agree and produce a schedule of values for their district, taking into account the preamble of said P.D. that they should evolve "a progressive revenue raising program that will not unduly burden the taxpayers".

3. The schedule jointly agreed upon by the assessors shall then be published in a newspaper of general circulation and submitted to the sanggunian concerned for enactment by ordinance, per Sec. 212, R.A. 7160.

By this harmonization, both the preamble of P.D. 921 decreeing that the real estate taxes shall "not unduly burden the taxpayer" and the "operative principle of decentralization" provided under Sec. 3, R.A. 7160 encouraging local government units to "consolidate or coordinate their efforts, services and resources" shall be fulfilled. Indeed the essence of joint local action for common good so cherished in the Local Government Code finds concrete expression in this harmonization.

How about respondents' claim that, with the express repeal of P.D. 464, P.D. 921 — being merely a "supplement" of said P.D. — cannot "exist independently on its own"? Quite the contrary is true. By harmonizing P.D. 921 with R.A. 7160, we have just demonstrated that it can exist outside of P.D. 464, as a support, supplement and extension of R.A. 7160, which for this purpose, has replaced P.D. 464.

Since it is now clear that P.D. 921 is still good law, it is equally clear that this Court's ruling in the Mathay/Javier/Puyat-Reyes cases (supra) is still the prevailing and applicable doctrine. And, applying the said ruling in the present case, it is likewise clear that the schedule of values prepared solely by the respondent municipal assessor is illegal and void.

Re: The Second Issue:

Exhaustion of Administrative Remedies

We now come to the second issue. The provisions of Sections 226 and 252 of R.A. 7160 being material to this issue, are set forth below:

Sec. 226. Local Board of Assessment Appeals. — Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.

Sec. 252. Payment under Protest. — (a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words "paid under protest". The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.

(b) The tax or a portion thereof paid under protest shall be held in trust by the treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax liability.

(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, Book II of this Code.

Respondents argue that this case is premature because petitioners neither appealed the questioned assessments on their properties to the Board of Assessment Appeal, pursuant to Sec. 226, nor paid the taxes under protest, per Sec. 252.

We do not agree. Although as a rule, administrative remedies must first be exhausted before resort to judicial action can prosper, there is a well-settled exception in cases where the controversy does not involve questions of fact but only of law. 20 In the present case, the parties, even during the proceedings in the lower court on 11 April 1994, already agreed "that the issues in the petition are legal" 21 , and thus, no evidence was presented in said court.

In laying down the powers of the Local Board of Assessment Appeals, R.A. 7160 provides in Sec. 229 (b) that "(t)he proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts . . . ." It follows that appeals to this Board may be fruitful only where questions of fact are involved. Again, the protest contemplated under Sec. 252 of R.A. 7160 is needed where there is a question as to the reasonableness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench however, the petitioners are questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase.

Finally, it will be noted that in the consolidated cases of Mathay/Javier/Puyat-Reyes cited earlier, the Supreme Court referred the petitions (which similarly questioned the schedules of market values prepared solely by the respective assessors in the local government units concerned) to the Board of Assessment Appeal, not for the latter, to exercise its appellate jurisdiction, but rather to act only as a fact-finding commission. Said theCourt 22 thru Chief Justice Andres R. Narvasa:

On November 5, 1991, the Court issued a Resolution clarifying its earlier one of May 16, 1991. It pointed out that the authority of the Central Board of Assessment Appeals "to take cognizance of the factual issues

raised in these two cases by virtue of the referral by this Court in the exercise of its extraordinary or certiorari jurisdiction should not be confused with its appellate jurisdiction over appealed assessment cases under Section 36 of P.D. 464 otherwise known as the Real Property Tax Code. The Board is not acting in its appellate jurisdiction in the instant cases but rather, it is acting as a Court-appointed fact-finding commission to assist the Court in resolving the factual issues raised in G.R. Nos. 97618 and 97760."

In other words, the Court gave due course to the petitions therein in spite of the fact that the petitioners had not, a priori, exhausted administrative remedies by filing an appeal before said Board. Because there were factual issues raised in the Mathay, et al. cases, the Supreme Court constituted the Central Board of Assessment Appeals as a fact-finding body to assist the Court in resolving said factual issues. But in the instant proceedings, there are no such factual issues. Therefore, there is no reason to require petitioners to exhaust the administrative remedies provided in R.A. 7160, nor to mandate a referral by this Court to said Board.

Re: The Third Issue:

Constitutionality of the Assessments

Having already definitively disposed of the case through the resolution of the foregoing two issues, we find no more need to pass upon the third. It is axiomatic that the constitutionality of a law, regulation, ordinance or act will not be resolved by courts if the controversy can be, as in this case it has been, settled on other grounds. In the recent case of Macasiano vs. National Housing Authority 23 , this Court declared:

It is a rule firmly entrenched in our jurisprudence that the constitutionality of an act of the legislature will not be determined by the courts unless that question is properly raised and presented in appropriate cases and is necessary to a determination of the case, i.e., the issue of constitutionality must be the very lis mota presented. To reiterate, the essential requisites for a successful judicial inquiry into the constitutionality of a

law are: (a) the existence of an actual case or controversy involving a conflict of legal rights susceptible of judicial determination, (b) the constitutional question must be raised by a proper party, (c) the constitutional question must be raised at the earliest opportunity, and (d) the resolution of the constitutional question must be necessary to the decision of the case. (emphasis supplied)

The aforequoted decision in Macasiano merely reiterated the ruling in Laurel vs. Garcia 24, where this Court held:

The Court does not ordinarily pass upon constitutional questions unless these questions are properly raised in appropriate cases and their resolution is necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly presented by the record if the case can be disposed of on some other ground such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]). 25 (emphasis supplied)

In view of the foregoing ruling, the question may be asked: what happens to real estate tax payments already made prior to its promulgation and finality? Under the law 26 , "the taxpayer may file a written claim for refund or credit for taxes and interests . . . ."

Finally, this Tribunal would be remiss in its duty as guardian of the judicial branch if we let pass unnoticed the ease by which the respondent Judge consigned "to the statutes' graveyard" a legislative enactment "together with the (three) decisions of the Supreme Court" promulgated jointly and unanimously en banc. An elementary regard for the sacredness of laws and the stability of judicial doctrines laid down by superior authority should have constrained him to be more circumspect in rendering his decision and to spell out carefully and precisely the reasons for his decision to invalidate such acts, instead of imperiously decreeing an implied repeal. He knows or should have known the legal precedents against implied repeals. Respondent Judge, in his decision, did not even make an attempt to try to reconcile or harmonize the laws involved. Instead, he just

unceremoniously swept them and this Court's decisions into the dustbin of "judicial history." In his future acts and decisions, he is admonished to be more judicious in setting aside established laws, doctrines and precedents.

WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the questioned Decision and Order of respondent Judge, DECLARING as null and void the questioned Schedule of Market Values for properties in Pasig City prepared by respondent Assessor, as well as the corresponding assessments and real estate tax increases based thereon; and ENJOINING the respondent Treasurer from collecting the real estate tax increases made on the basis of said Schedule and assessments. No costs.

SO ORDERED.