Coca-Cola Bottlers Philippines, Inc. v. City of Manila (2006)

COCA- COLA BOTTLERS PHIL., INC. V. CITY OF MANILA

G.R. NO. 156252, JUNE 27, 2006

FACTS:

The City Mayor of Manila approved Tax Ordinance no. 7988 repealing Tax Ordinance no. 7794 entitles, “Revenue Code of the City of Manila” Tax Ordinance no. 7988 amended certain sections of Tax Ordinance no. 7794 by increasing the rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila, including herein petitioner Coca-Cola. Subject tax ordinance was published only once. Aggrieved by said tax ordinance, petitioner filed a Petition before the DOJ. On August 17, 2000, then DOJ Secretary issued a Resolution declaring the Tax Ordinance no 7988 null and void and without legal effect.

ISSUE:

Whether or not the Tax Ordinance is null and void for being published only once.

RULING:

It is undisputed from the facts of the case that Tax Ordinance No. 7988 has already been declared by the DOJ Secretary, in its Order, dated 17 August 2000, as null and void and without legal effect due to respondents' failure to satisfy the requirement that said ordinance be published for three consecutive days as required by law. Neither is there quibbling on the fact that the said Order of the DOJ was never appealed by the City of Manila, thus, it had attained finality after the lapse of the period to appeal. 

Furthermore, the RTC of Manila, Branch 21, in its Decision dated 28 November 2001, reiterated the findings of the DOJ Secretary that respondents failed to follow the procedure in the enactment of tax measures as mandated by Section 188 of the Local Government Code of 1991, in that they failed to publish Tax Ordinance No. 7988 for three consecutive days in a newspaper of local circulation. From the foregoing, it is evident that Tax Ordinance No. 7988 is null and void as said ordinance was published only for one day in the 22 May 2000 issue of the Philippine Post in contravention of the unmistakable directive of the Local Government Code of 1991.

Despite the nullity of Tax Ordinance No. 7988, the court a quo, in the assailed Order, dated 8 May 2002, went on to dismiss petitioner's case on the force of the enactment of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988. Significantly, said amending ordinance was likewise declared null and void by the DOJ Secretary in a Resolution, dated 5 July 2001, elucidating that "[I]nstead of amending Ordinance No. 7988, [herein] respondent should have enacted another tax measure which strictly complies with the requirements of law, both procedural and substantive. The passage of the assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any way, does not legally exist." Said Resolution of the DOJ Secretary had, as well, attained finality by virtue of the dismissal with finality by this Court of respondents' Petition for Review on Certiorari in G.R. No. 157490 assailing the dismissal by the RTC of Manila, Branch 17, of its appeal due to lack of jurisdiction in its Order, dated 11 August 2003.

Based on the foregoing, this Court must reverse the Order of the RTC of Manila, Branch 21, dismissing petitioner's case as there is no basis in law for such dismissal. The amending law, having been declared as null and void, in legal contemplation, therefore, does not exist. Furthermore, even if Tax Ordinance No. 8011 was not declared null and void, the trial court should not have dismissed the case on the reason that said tax ordinance had already amended Tax Ordinance No. 7988. As held by this Court in the case of People v. Lim, if an order or law sought to be amended is invalid, then it does not legally exist, there should be no occasion or need to amend it.

Publication of Tax Ordinance

POWER TO CREATE REVENUES EXERCISED THROUGH LGUS 

Each LGU has the power to: (Sec. 129, LGC) 

1.   Create its own sources of revenue; and 


2.   Levy taxes, fees, and charges subject to 
the provisions herein, consistent with the basic policy of local autonomy. 


3.   Such taxes, fees, and charges shall accrue exclusively to the LGUs 

PUBLICATION AS A MANDATORY REQUIREMENT

It is clear under Sec. 188 of R.A. No. 7160 and Art. 277 of its implementing rules that the requirement of publication is MANDATORY and leaves no choice. The use of the word "shall" in both provisions is imperative, operating to impose a duty that may be enforced (Coca- Cola Bottlers Phil., Inc. v. City of Manila, G.R. No. 156252, June 27, 2006) 

REASON FOR COMPLIANCE

Its essence is simply to inform the people and the entities who may likely be affected, of the existence of the tax measure. It bears emphasis, that, strict observance of the said procedural requirement is the only safeguard against any unjust and unreasonable exercise of the taxing powers by ensuring that the taxpayers are notified through publication of the existence of the measure, and are therefore able to voice out their views or objections to the said measure. For, after all, taxes are obligatory exactions or enforced contributions corollary to taking of property.

PROCEDURE FOR APPROVAL AND EFFECTIVITY OF TAX ORDINANCES 

1)   The procedure applicable to local government ordinances in general should be observed (Sec. 187, LGC). 

The following procedural details must be complied with: 

a.    Necessity of a quorum; 


b.   Submission for approval by the local chief 
executive; 


c.    The matter of veto and overriding the 
same; 


d.   Publication and effectivity (Secs. 54, 55, and 
59, LGC). 


2)   Public hearings are required before any local tax ordinance is enacted (Sec. 187, LGC).

3)   Within 10 days after their approval, publication in full for 3 consecutive days in a newspaper of general circulation. In the absence of such newspaper in the province, city or municipality, then the ordinance may be posted in at least two conspicuous and publicly accessible places (Sec. 188 & 189, LGC). 

WHEN AN ORDINANCE TAKES EFFECT 

In case the effectivity of any tax ordinance or revenue measure falls on any date other than the beginning of the quarter, the same shall be considered as falling at the beginning of the next ensuing quarter, and the taxes, fees, or charges due shall begin to accrue therefrom. 

TEST IN DETERMINING THE VALIDITY OF AN ORDINANCE 

1.   It must not contravene the Constitution or a statute


2.   It must not prohibit but may regulate trade


3.   It must not be discriminatory, unfair, unjust, confiscatory, unreasonable, and oppressive 

4.   It must be general and consistent with the national or public policy of the government (Ingles, 2018)

Victorias Milling Co. v. Victorias (1968)

Victorias Milling Co. vs. Municipality of Victorias 

GR L-21183, 27 September 1968

FACTS: 

Ordinance 1 (1956) was approved by the municipal council of Victorias by way of an amendment to 2 municipal ordinances separately imposing license taxes on operators of sugar centrals and sugar refineries. The changes were: (1) with respect to sugar centrals, by increasing the rates of license taxes; and (2) as to sugar refineries, by increasing the rates of license taxes as well as teh range of graduated schedule of annual output capacity. Victorias Milling questioned the validity of Ordinance 1 as it, among others, allegedly singled out Victorias Milling Co. since it is the only operator of a sugar central and a sugar refinery within the jurisdiction of the municipality. 

ISSUE: 

Whether Ordinance 1 is discriminatory. 

Whether the principle of pre-emption applies.

HELD: 

The ordinance does not single out Victorias as the only object of the ordinance but is made to apply to any sugar central or sugar refinery which may happen to operate in the municipality. The fact that Victorias Milling is actually the sole operator of a sugar central and a sugar refinery does not make the ordinance discriminatory. The ordinance is unlike that in Ormoc Sugar Company vs. Municipal Board of Ormoc City, which specifically spelled out Ormoc Sugar as the subject of the taxation, the name of the company herein was never mentioned in the ordinance. 

Upon the averment that in the Municipality of Victorias plaintiff is the only operator of a sugar central and sugar refinery, plaintiff now presses its argument that Ordinance No. 1, series of 1956, is discriminatory.  The ordinance does not single out Victorias as the only object of the ordinance.  Said ordinance is made to apply any sugar central or sugar refinery which may happen to operate in the municipality.  So it is, that the fact that plaintiff is actually the sole operator of a sugar central and a sugar refinery does not make ordinance discriminatory.  Argument along the same lines was rejected in Shell Co.of P.I., Ltd vs. Vaño, this Court holding that the circumstance "that there is no other person in the locality who exercises" the occupation designated as installation manager "does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person or firm who exercises such calling or occupation".

 And in Orrnoc Sugar Company, Inc. vs, Municipal Board of Ormoc City, declaratory relief was sought to test the validity of a municipal ordinance which provides a city tax of twenty centavos per picul of centrifugal sugar and one per centum on the gross sale of its derivatives and by-products "produced by the Ormoc Sugar Company, Incorporated, or by any other sugar mill in Ormoc City". Mr. Justice Enrique Fernando, delivering the opinion of this Court, declared that ordinance did not suffer "from a constitutional or statutory infirmity".  And yet, in Ormoc it is to be observed that Section 1 of the ordinance spelled out Ormoc Sugar Company, Incorporated specifically by name.  Not even the name of plaintiff herein was ever mentioned in the ordinance now disputed.

No discrimination exists.

Preemption in the matter of taxation simply refers to an instance where the national government elects to tax a particular area, impliedly withholding from the local government the delegated power to tax the same field. This doctrine primarily rests upon the intention of Congress. Conversely, should Congress allow municipal corporations to cover fields of taxation it already occupies, then the doctrine of preemption will not apply. 

Residual Taxing Power of the Local Government Units

RESIDUAL TAXING POWER DEFINED

LGUs may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the: 

1.   Local Government Code; 


2.   National Internal Revenue Code; or 


3.   Other applicable laws (Sec. 186, LGC). 


CONDITIONS IN THE EXERCISE OF THE RESIDUAL POWER OF TAXATION 

1)   The tax base or subject is not taxed under the National Internal Revenue Code or other applicable laws; 


2)   The taxes, fees, or charges are not unjust, excessive, confiscatory, oppressive, or contrary to the declare national economic policy of the government; 


3)   A public hearing has been conducted prior to the enactment of the ordinance levying taxes, fees, or charges; and 


4)   The procedures for the approval, effectivity, and publication of tax ordinance have been complied with. 


5)   The residual power is subject to the constitutional limitations on the taxing power and the common limitations on the taxing power of LGUs as prescribed in Section 133 of LGC. 


6)   Principle of Pre-emption or Exclusionary Rule (Ingles, 2018)

PRINCIPLE OF PRE-EMPTION OR EXCLUSIONARY DOCTRINE, WHEN APPLICABLE 

a.    Taxes levied under the NIRC. 


b.   Taxes imposed under the Tariff and Customs 
Code. 


c.    Taxes under special laws. (Ingles, 2018)

Preemption in the matter of taxation simply refers to an instance where the national government elects to tax a particular area, impliedly withholding from the local government the delegated power to tax the same field. This doctrine primarily rests upon the intention of Congress. Conversely, should Congress allow municipal corporations to cover fields of taxation it already occupies, then the doctrine of preemption will not apply. (Victorias Milling Co., Inc. v. The Municipality of Victorias, Negros Occidental, G.R. No. L-21183, September 27, 1968) 

THE FOLLOWING ARE THE POWERS OF TAXATION OF THE LGUS

a.    Common Revenue-Raising Powers of LGUs; 


b.   Specific Powers of LGU to Impose Taxes; 


c.    Power to Levy Community Tax; and 


d.   Powers under Miscellaneous Provisions. (Ingles, 2018)

LGUS CANNOT TAX THE NATIONAL GOVERNMENT

GR:

LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities. 

XPN:

When specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities (City Government of San Pablo, Laguna v. Reyes, G.R. No. 127708, March 25, 1999). 

Light Rail Transit Authority v. Central Board of Assessment Appeals (2000)

LIGHT RAIL TRANSIT AUTHORITY VS CENTRAL BOARD OF ASSESSMENT APPEALS

342 SCRA 692 GR NO. 127316, OCTOBER 12, 2000

FACTS: 

The LRTA is a government-owned and controlled corporation created and organized under EO 603, dated July 12, 1980 primarily responsible for the construction, operation, maintenance and/or lease of light rail transit system in the Philippines, giving due regard to the reasonable requirements of the public transportation of the country. LRTA acquired real properties, constructed structional improvements, such as buildings, carriage ways, passenger terminal stations and installed various kinds of machinery and equipment and facilities for the purpose of its operations. For an effective maintenance, operation and management, it entered into a contract of management with the MERALCO transit organization in which the latter undertook to manage, operate and maintain the light rail transit system owned by the LRTA subject to the specific stipulations contained in said agreement, including payments of a management fee and real property taxes. That it commenced its operations in 1984, and that sometime that year, respondent-appellee city of assessor of manila assessed the real properties of petitioner consisting of lands, buildings, carriage ways and passenger terminal stations machinery and equipment which he considered real property under the real property tax code, to commence with the year 1985. That petitioner paid its real property taxes on all its real property holdings, except the carriage ways and passenger terminal stations including the land where it constructed on the ground that the same are not real properties under the real property tax code, and if the same are real property, these are for public use/purpose, therefore exempt from realty taxation which claim was denied by the respondent-appellee city assessor of Manila.

ISSUE: 

Whether or not petitioner’s carriage ways and passenger terminal stations are subject to real property tax.

HELD: 

No. Under the real property tax code, real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned or controlled corporation so exempt by its charter, provided, however, that this exemption shall not apply to real property of the above named entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person. 

EO 603, the charter of petitioner, does not provide for any real estate tax exemption in its favor. Its exemption is limited to direct and indirect taxes, duties or fees in connection with the importation of equipment not locally available.

Even granting that the national government indeed owns the carriage ways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity.

Taxation is the rule and exemption is the exception. Any claim for tax exemption is strictly construed against the claimant. LRTA has not shown its eligibility for exemption; hence, it’s subject to tax.

Testate Estate of Corcordia T. Lim v. City of Manila (1990)

TESTATE ESTATE OF CONCORDIA T. LIM VS. CITY OF MANILA, JESUS I. CALLEJA, IN HIS CAPACITY AS CITY TREASURER OF MANILA, NICOLAS CATIIL, IN HIS CAPACITY AS CITY ASSESSOR OF MANILA, AND/OR GOVERNMENT SERVICE INSURANCE SYSTEM

G.R. NO. 90639, FEBRUARY 21, 1990

FACTS:

The late Concordia Lim obtained a real estate loan from GSIS, secured by a mortgage constituted on 2 parcels of land. For failure to pay the loan, the GSIS being the highest bidder in a foreclosure sale obtained the properties. This led to the consolidation of Titles in favor of GSIS in 1977. 

However, the Board of trustees issued Resolution no. 188, wherein the estate of Lim was allowed to repurchase the properties. The City Treasurer of Manila required the petitioner to pay the real estate taxes due on 1977, 1978, and on the first quarter of 1979, before the titles could be transferred. The petitioner paid but under protest. A demand for refund was sent against the GSIS. GSIS refused to pay. A demand for refund was also sent to the City Treasurer, which was also denied. A case was thereafter filed before the RTC but dismissed the cases for lack of jurisdiction. It ruled that the case involves a protested action of the City Assessor which should have been filed before the Local Board of Assessment.

ISSUE:

Whether or not the plaintiff was entitled to a refund.

RULING:

The Court rules that the plaintiff-appellant correctly filed the action for refund/reimbursement with the lower court as it is the courts which have jurisdiction to try cases involving the right to recover sums of money.

The records show that the subject properties were leased to other persons during the time when GSIS held their titles, as was the case during the ownership of the late Concordia Lim. 

However, the real estate taxes later assessed on the said properties for the years 1977, 1978 and the first quarter of 1979 were charged against the plaintiff-appellant even if the latter was not the beneficial user of the parcels of land. 

In real estate taxation, the unpaid tax attaches to the property and is chargeable against the taxable person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. (Sections 3(a) and 19 of P.D. No. 464; Province of Nueva Ecija v. Imperial Mining Co., Inc., 118 SCRA 632 [1982]). Raising doubts on the validity of the imposition and collection of the real property tax for the designated periods before the title to the properties may be transferred, the plaintiff-appellant paid under protest. 

To impose the real property tax on the estate which was neither the owner nor the beneficial user of the property during the designated periods would not only be contrary to law but also unjust. If plaintiff-appellant intended to assume the liability for realty taxes for the prior periods, the contract should have specifically stated "real estate taxes" due for the years 1977,1978 and first quarter of 1979. The payments made by the plaintiff-appellant cannot be construed to be an admission of a tax liability since they were paid under protest and were done only in compliance with one of the requirements for the consummation of the sale as directed by the City Treasurer of Manila. 

Hence, the tax assessed and collected from the plaintiff-appellants is not valid and a refund by the City government is in order.

Test of Exemption from Real Property Taxes

EXEMPTION FROM REAL PROPERTY TAXES IN SECTION 234 OF THE LOCAL GOVERNMENT CODE

1.   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. 
NOTE: This exemption shall not apply to real properties the beneficial use of which has been granted, for consideration or otherwise, to a taxable person (Testate Estate of C.T. Lim v. City of Manila, G.R. No. 90639, February 21, 1990). 


2.   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. 
NOTE: The tax exemption herein rests on the premise that they are actually, directly and exclusively used by said entities or institutions for their stated purposes and not necessarily because they are owned by religious, charitable or educational institutions. 


3.   All machineries and equipment that are actually, directly and exclusively used by local Water utilities and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power. 


4.   All real property owned by duly registered Cooperatives as provided for under RA 6938. 


5.   Machinery and equipment used for Pollution control and environmental protection (Sec. 234, LGC). 


BENEFICIAL USE

Even as the real property is 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 taxable person for consideration or otherwise. (MIAA vs. Marcos, G.R. No. 120082)

This exemption shall not apply to real properties the beneficial use of which has been granted, for consideration or otherwise, to a taxable person (Testate Estate of C.T. Lim v. City of Manila, G.R. No. 90639, February 21, 1990). 


Even granting that the national government indeed owns the carriage ways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity. Taxation is the rule and exemption is the exception. Any claim for tax exemption is strictly construed against the claimant. LRTA has not shown its eligibility for exemption; hence, it’s subject to tax. (LRTA vs CBAA, 342 SCRA 692)