i.

Requirements for valid local tax; questions on its validity Secs. 186188, LGC

Miscellaneous Provisions Section 186. Power To Levy Other Taxes, Fees or Charges. - Local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose. Section 187. Procedure for Approval and Effectivity of Tax, Ordinances and Revenue Measures; Mandatory Public Hearings. - The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. Section 188. Publication of Tax Ordinances and Revenue Measures. - Within ten (10) days after their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation: Provided, however, That in provinces, cities and municipalities where there are no newspapers of local circulation, the same may be posted in at least two (2) conspicuous and publicly accessible places. Section 189. Furnishing of Copies of Tax Ordinances and Revenue Measures. - Copies of all provincial, city, and municipal and barangay tax ordinances and revenue measures shall be furnished the respective local treasurers for public dissemination. Section 190. Attempt to Enfor ce Void or Suspended Tax Ordinances and revenue measures. The enforcement of any tax ordinance or revenue measure after due notice of the disapproval or suspension thereof shall be sufficient ground for administrative disciplinary action against the local officials and employees responsible therefor.

i.

LGUs authority on fixing of rates, exemptions and withdrawal of exemptions Secs. 191-193 LGC

Section 191. Authority of Local Government Units to Adjust Rates of Tax Ordinances. - Local government units shall have the authority to adjust the tax rates as prescribed herein not oftener than once every five (5) years, but in no case shall such adjustment exceed ten percent (10%) of the rates fixed under this Code. Section 192. Authority to Grant Tax Exemption Privileges. - Local government units may, through ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and conditions as they may deem necessary. Section 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. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

Cases: 1) Figuerres vs. CA, 305 SCRA 206 BELEN C. FIGUERRES, petitioner, vs. COURT OF APPEALS, CITY OF ASSESSORS OF MANDALUYONG, CITY TREASURER OF MANDALUYONG, and SANGGUNIANG BAYAN OF MANDALUYONG, respondents. DECISION MENDOZA, J.: This is a petition for review on certiorari of the decision of the Court of Appeals, dated February 8, 1995, dismissing a prohibition suit brought by petitioner against respondent officials of the Municipality, now City, of Mandaluyong to prevent them from enforcing certain ordinances revising the schedule of fair market values of the various classes of real property in that municipality and the assessment levels applicable thereto. Petitioner Belen C. Figuerres is the owner of a parcel of land, covered by Transfer Certificate of Title No. 413305, and located at Amarillo Street, Barangay Mauway, City of Mandaluyong. In 1993, she received a notice of assessment, dated October 20, 1993, from the municipal assessor of the then Municipality of Mandaluyong, containing the following specifics: TYPE AREA BASE VALUE PER SQ. M. MARKET VALUE ASSESSMENT ASSESSED LEVEL VALUE P265,000.00[1]

Residential 530 sq.m. P2,500.00

P1,325,000.00

20

The assessment, effective in the year 1994, was based on Ordinance Nos. 119 and 125, series of 1993, and Ordinance No. 135, series of 1994, of the Sangguniang Bayan

of Mandaluyong. Ordinance No. 119, series of 1993, which was promulgated on April 22, 1993, contains a schedule of fair market values of the different classes of real property in the municipality.[2] Ordinance No. 125, series of 1993, which was promulgated on November 11, 1993, on the other hand, fixes the assessment levels applicable to such classes of real property.[3] Finally, Ordinance No. 135, series of 1994, which was promulgated on February 24, 1994, amended Ordinance No. 119, 6 by providing that only one third (1/3) of the increase in the market values applicable to residential lands pursuant to the said ordinance shall be implemented in the years 1994, 1995, and 1996.[4] Petitioner brought a prohibition suit in the Court of Appeals against the Assessor, the Treasurer, and the Sangguniang Bayan to stop them from enforcing the ordinances in question on the ground that the ordinances were invalid for having been adopted allegedly without public hearings and prior publication or posting and without complying with the implementing rules yet to be issued by the Department of Finance.[5] In its decision, dated February 8, 1995,[6] the Court of Appeals threw out the petition. The appellate court said in part: Petitioners claim that Ordinance Nos. 119, 125 and 135 are null and void since they were prepared without the approval and determination of the Department of Finance is without merit. The approval and determination by the Department of Finance is not needed under the Local Government Code of 1991, since it is now the city council of Mandaluyong that is empowered to determine and approve the aforecited ordinances. Furthermore, contrary to the claim of petitioner that the Department of Finance has not promulgated the necessary rules and regulations for the classification, appraisal and assessment of real property as prescribed by the 1991 Local Government Code, Department of Finance Local Assessment Regulation No. 1-92 dated October 6, 1992, which is addressed to provincial, city, and municipal assessors and others concerned with the proper implementation of Section 219 of R.A. No. 7160, provides for the rules relative to the conduct of general revisions of real property assessments pursuant to Sections 201 and 219 of the Local Government Code of 1991. Regarding petitioners claim that there is need for municipal ordinances to be published in the Official Gazette for their effectivity, the same is also without merit. Section 511 of R.A. No. 7160 provides that .... The secretary to the Sanggunian concerned shall transmit official copies of such ordinances to the chief executive officer of the Official Gazette within seven (7) days following the approval of the said ordinances for publication purposes. The Official Gazette may publish ordinances with penal sanctions for archival and reference purposes. Thus, the posting and publication in the Official Gazette of ordinances with penal sanctions is not a prerequisite for their effectivity. This finds support in the case of Taada v. Tuvera (146 SCRA 446), wherein the Supreme Court declared that municipal ordinances are covered by the Local Government Code. Moreover, petitioner failed to exhaust the administrative remedies available to him as provided for under Section 187 of R.A. No. 7160, before filing the instant petition with this Court.

.... In fact, aside from filing an appeal to the Secretary of Justice as provided under Section 187 of R.A. No. 7160, the petitioner . . . could have appealed to the Local Board of Assessment Appeals, the decision of which is in turn appealable to the Central Board of Assessment Appeals as provided under Sections 226 and 230 of the said law. According to current jurisprudence, administrative remedies must be exhausted before seeking judicial intervention. (Gonzales v. Secretary of Education, 5 SCRA 657). If a litigant goes to court without first pursuing the available administrative remedies, his action is considered premature and not yet ripe for judicial determination (Allied Brokerage Corporation v. Commissioner of Customs, 40 SCRA 555). As the petitioner has not pursued the administrative remedies available to him, his petition for prohibition cannot prosper (Gonzales v. Provincial Auditor of Iloilo, 12 SCRA 711). WHEREFORE, the petition is hereby DENIED due course and is hereby DISMISSED.[7] Petitioner Figuerres assails the above decision. She contends that 1. THE HONORABLE COURT OF APPEALS PATENTLY ERRED IN FINDING LACK OF EXHAUSTION OF ADMINISTRATIVE REMEDIES ON THE PART OF HEREIN PETITIONER WHEN UNDER THE CIRCUMSTANCES, EXHAUSTION OF ADMINISTRATIVE REMEDIES IS NOT REQUIRED BY LAW AND WOULD HAVE BEEN A USELESS FORMALITY. 2. THE HONORABLE COURT OF APPEALS ERRED WHEN IT STATED THAT THE CITY COUNCIL OF MANDALUYONG IS EMPOWERED TO DETERMINE AND APPROVE THE AFORECITED ORDINANCES WITHOUT TAKING INTO ACCOUNT THE MANDATORY PUBLIC HEARINGS REQUIRED BY R.A. No. 7160. 3. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS PATENTLY ERRED IN STATING THAT THERE IS NO NEED FOR PUBLICATION OF TAX ORDINANCES. 4. THERE IS NON COMPLIANCE BY PUBLIC RESPONDENTS OF ASSESSMENT REGULATION No. 1-92 DATED OCTOBER 6, 1992, EVEN IF THE HONORABLE COURT OF APPEALS MENTIONED THE EXISTENCE OF THE SAID ASSESSMENT REGULATIONS.[8] On the other hand, the Municipality of Mandaluyong contends: (1) the present case does not fall within any of the exceptions to the doctrine of exhaustion of administrative remedies; (2) apart from her bare allegations, petitioner Figuerres has not presented any evidence to show that no public hearings were conducted prior to the enactment of the ordinances in question; (3) although an ordinance concerning the imposition of real property taxes is not required to be published in the Official Gazette in order to be valid, still the subject ordinances were disseminated before their effectivity in accordance with the relevant provisions of R.A. No. 7160; and

(4) the Municipality of Mandaluyong complied with the regulations of the Department of Finance in enacting the subject ordinances.

Exhaustion of administrative remedies

In Lopez v. City of Manila,[9] we recently held: . . . Therefore, where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts. . . . With regard to questions on the legality of a tax ordinance, the remedies available to the taxpayer are provided under Sections 187, 226, and 252 of R.A. 7160. Section 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality or legality of a tax ordinance on appeal within thirty (30) days from effectivity thereof, to the Secretary of Justice. The petitioner after finding that his assessment is unjust, confiscatory, or excessive, may bring the case before the Secretary of Justice for questions of legality or constitutionality of the city ordinance. Under Section 226 of R.A. 7160, an owner of real property who is not satisfied with the assessment of his property may, within sixty (60) days from notice of assessment, appeal to the Board of Assessment Appeals. Should the taxpayer question the excessiveness of the amount of tax, he must first pay the amount due, in accordance with Section 252 of R.A. No. 7160. Then, he must request the annotation of the phrase paid under protest and accordingly appeal to the Board of Assessment Appeals by filing a petition under oath together with copies of the tax declarations and affidavits or documents to support his appeal. Although cases raising purely legal questions are excepted from the rule requiring exhaustion of administrative remedies before a party may resort to the courts, in the case at bar, the legal questions raised by petitioner require, as will presently be shown, proof of facts for their resolution. Therefore, the petitioners action in the Court of Appeals was premature, and the appellate court correctly dismissed her action on the ground that she failed to exhaust available administrative remedies as above stated. Petitioner argues that resort to the Secretary of Justice is not mandatory but only directory because R.A. No. 7160, 187 provides that any question on the constitutionality or legality of tax ordinances or revenue measures may be appealed to the Secretary of Justice. Precisely, the Secretary of Justice can take cognizance of a case involving the constitutionality or legality of tax ordinances where, as in this case, there are factual issues involved. There need be no fear that compliance with the rule on exhaustion of administrative remedies will unduly delay resort to the courts to the detriment of taxpayers. Although R.A. No. 7160, 187 provides that an appeal to the Secretary of Justice shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein, it likewise requires the Secretary of Justice to render a decision within

sixty (60) days from the date of receipt of the appeal, after which the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

Public hearings on tax ordinance

Petitioner is right in contending that public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. R.A. No. 7160, 186 provides that an ordinance levying taxes, fees, or charges shall not be enacted without any prior public hearing conducted for the purpose. However, it is noteworthy that apart from her bare assertions, petitioner Figuerres has not presented any evidence to show that no public hearings were conducted prior to the enactment of the ordinances in question. On the other hand, the Municipality of Mandaluyong claims that public hearings were indeed conducted before the subject ordinances were adopted,[10] although it likewise failed to submit any evidence to establish this allegation. However, in accordance with the presumption of validity in favor of an ordinance, their constitutionality or legality should be upheld in the absence of evidence showing that the procedure prescribed by law was not observed in their enactment. In an analogous case, United States v. Cristobal,[11] it was alleged that the ordinance making it a crime for anyone to obstruct waterways had not been submitted by the provincial board as required by 2232-2233 of the Administrative Code. In rejecting this contention, the Court held: From the judgment of the Court of First Instance the defendant appealed to this court upon the theory that the ordinance in question was adopted without authority on the part of the municipality and was therefore unconstitutional. The appellant argues that there was no proof adduced during the trial of the cause showing that said ordinance had been approved by the provincial board. Considering the provisions of law that it is the duty of the provincial board to approve or disapprove ordinances adopted by the municipal councils of the different municipalities, we will assume, in the absence of proof to the contrary, that the law has been complied with. We have a right to assume that officials have done that which the law requires them to do, in the absence of positive proof to the contrary.[12] Furthermore, the lack of a public hearing is a negative allegation essential to petitioners cause of action in the present case. Hence, as petitioner is the party asserting it, she has the burden of proof.[13] Since petitioner failed to rebut the presumption of validity in favor of the subject ordinances and to discharge the burden of proving that no public hearings were conducted prior to the enactment thereof, we are constrained to uphold their constitutionality or legality.

Publication and posting of schedule of fair market values

Petitioner is also right that publication or posting of the proposed schedule of fair market values of the different classes of real property in a local government unit is required pursuant to R.A. No. 7160, 212 which in part states:

. . . . 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 places therein. In Ty v. Trampe,[14] it was held that, if the local government unit is part of Metro Manila, the abovequoted portion of 212 must be understood to refer to the schedule of fair market values of the different classes of real property in the district to which the city or municipality belongs, as prepared jointly by the local assessors concerned. In addition, an ordinance imposing real property taxes (such as Ordinance Nos. 119 and 135) must be posted or published as required by R.A. No. 7160, 188 which provides: Section 188. Publication of Tax Ordinances and Revenue Measures. Within ten (10) days after their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation: Provided, however, That in provinces, cities and municipalities where there are no newspapers of local circulation, the same may be posted in at least two (2) conspicuous and publicly accessible places. Hence, after the proposed schedule of fair market values of the different classes of real property in a local government unit within Metro Manila, as prepared jointly by the local assessors of the district to which the city or municipality belongs, has been published or posted in accordance with 212 of R.A. No. 7160 and enacted into ordinances by the sanggunians of the municipalities and cities concerned, the ordinances containing the schedule of fair market values must themselves be published or posted in the manner provided by 188 of R.A. No. 7160. With respect to ordinances which fix the assessment levels (such as Ordinance No. 125), being in the nature of a tax ordinance, 188 likewise applies. Moreover, as Ordinance No. 125, 7 provides for a penal sanction for violations thereof by means of a fine of not less than P1,000.00 nor more than P5,000.00, or imprisonment of not less than one (1) month nor more than six (6) months, or both, in the discretion of the court, not only 188 but 511(a) also must be observed: Ordinances with penal sanctions shall be posted at prominent places in the provincial capitol, city, municipal or barangay hall, as the case may be, for a minimum period of three (3) consecutive weeks. Such ordinances shall also be published in a newspaper of general circulation, where available, within the territorial jurisdiction of the local government unit concerned, except in the case of barangay ordinances. Unless otherwise provided therein, said ordinances shall take effect on the day following its publication, or at the end of the period of posting, whichever occurs later. In view of 188 and 511(a) of R.A. No. 7160, an ordinance fixing the assessment levels applicable to the different classes of real property in a local government unit and imposing penal sanctions for violations thereof (such as Ordinance No. 125) should be published in full for three (3) consecutive days in a newspaper of local circulation, where available, within ten (10) days of its approval, and posted in at least two (2) prominent places in the provincial capitol, city, municipal, or barangay hall for a minimum of three (3) consecutive weeks. Apart from her allegations, petitioner has not presented any evidence to show that the subject ordinances were not disseminated in accordance with these provisions of R.A. No.

7160. On the other hand, the Municipality of Mandaluyong presented a certificate, dated November 12, 1993, of Williard S. Wong, Sanggunian Secretary of the Municipality of Mandaluyong that Ordinance No. 125, S-1993 . . . has been posted in accordance with 59(b) of R.A. No. 7160, otherwise known as the Local Government Code of 1991.[15] Thus, considering the presumption of validity in favor of the ordinances and the failure of petitioner to rebut such presumption, we are constrained to dismiss the petition in this case.

Compliance with regulations issued by the Department of Finance

Also without merit is the contention of petitioner that Ordinance No. 119 and Ordinance No. 135 are void for not having been enacted in accordance with Local Assessment Regulation No. 1-92, dated October 6, 1992, of the Department of Finance, which provides guidelines for the preparation of proposed schedules of fair market values of the different classes of real property in a local government unit, such as time tables for obtaining information from owners of affected lands and buildings regarding the value thereof. As in the case of the procedural requirements for the enactment of tax ordinances and revenue measures, however, petitioner has not shown that the ordinances in this case were not enacted in accordance with the applicable regulations of the Department of Finance. The Municipality of Mandaluyong claims that, although the regulations are merely directory, it has complied with them. [16] Hence, in the absence of proof that the ordinances were not enacted in accordance with such regulations, said ordinances must be presumed to have been enacted in accordance with such regulations. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. SO ORDERED. Bellosillo (Chairman), Puno, Quisumbing, and Buena, JJ., concur.

2) Drilon vs. Lim, 235 SCRA 135 HON. FRANKLIN M. DRILON, in his capacity as SECRETARY OF JUSTICE, petitioner, vs. MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA, CITY TREASURER ANTHONY ACEVEDO, SANGGUNIANG PANGLUNSOD AND THE CITY OF MANILA, respondents. The City Legal Officer for petitioner. Angara, Abello, Concepcion, Regala & Cruz for Caltex (Phils.). Joseph Lopez for Sangguniang Panglunsod of Manila. L.A. Maglaya for Petron Corporation.

CRUZ, J.: The principal issue in this case is the constitutionality of Section 187 of the Local Government Code reading as follows: Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures; Mandatory Public Hearings. The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof; Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. Pursuant thereto, the Secretary of Justice had, on appeal to him of four oil companies and a taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null and void for non-compliance with the prescribed procedure in the enactment of tax ordinances and for containing certain provisions contrary to law and public policy. 1 In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila revoked the Secretary's resolution and sustained the ordinance, holding inter alia that the procedural requirements had been observed. More importantly, it declared Section 187 of the Local Government Code as unconstitutional because of its vesture in the Secretary of Justice of the power of control over local governments in violation of the policy of local autonomy mandated in the Constitution and of the specific provision therein conferring on the President of the Philippines only the power of supervision over local governments. 2 The present petition would have us reverse that decision. The Secretary argues that the annulled Section 187 is constitutional and that the procedural requirements for the enactment of tax ordinances as specified in the Local Government Code had indeed not been observed. Parenthetically, this petition was originally dismissed by the Court for non-compliance with Circular 1-88, the Solicitor General having failed to submit a certified true copy of the challenged decision. 3 However, on motion for reconsideration with the required certified true copy of the decision attached, the petition was reinstated in view of the importance of the issues raised therein. We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their conformity to the fundamental law. Specifically, BP 129 vests in the regional trial courts jurisdiction over all civil cases in which the subject of the litigation is incapable of pecuniary estimation, 4even as the

accused in a criminal action has the right to question in his defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in all cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. In the exercise of this jurisdiction, lower courts are advised to act with the utmost circumspection, bearing in mind the consequences of a declaration of unconstitutionality upon the stability of laws, no less than on the doctrine of separation of powers. As the questioned act is usually the handiwork of the legislative or the executive departments, or both, it will be prudent for such courts, if only out of a becoming modesty, to defer to the higher judgment of this Court in the consideration of its validity, which is better determined after a thorough deliberation by a collegiate body and with the concurrence of the majority of those who participated in its discussion. 5 It is also emphasized that every court, including this Court, is charged with the duty of a purposeful hesitation before declaring a law unconstitutional, on the theory that the measure was first carefully studied by the executive and the legislative departments and determined by them to be in accordance with the fundamental law before it was finally approved. To doubt is to sustain. The presumption of constitutionality can be overcome only by the clearest showing that there was indeed an infraction of the Constitution, and only when such a conclusion is reached by the required majority may the Court pronounce, in the discharge of the duty it cannot escape, that the challenged act must be struck down. In the case before us, Judge Rodolfo C. Palattao declared Section 187 of the Local Government Code unconstitutional insofar as it empowered the Secretary of Justice to review tax ordinances and, inferentially, to annul them. He cited the familiar distinction between control and supervision, the first being "the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for the latter," while the second is "the power of a superior officer to see to it that lower officers perform their functions in accordance with law." 6 His conclusion was that the challenged section gave to the Secretary the power of control and not of supervision only as vested by the Constitution in the President of the Philippines. This was, in his view, a violation not only of Article X, specifically Section 4 thereof, 7and of Section 5 on the taxing powers of local governments, 8 and the policy of local autonomy in general. We do not share that view. The lower court was rather hasty in invalidating the provision. Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He did not pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did not say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in reviewing the said measure was determine if the petitioners were performing their functions in accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and the grant of powers to the city government under the Local Government Code. As we see it, that was an act not of control but of mere supervision.

An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. If the rules are not observed, he may order the work done or re-done but only to conform to the prescribed rules. He may not prescribe his own manner for the doing of the act. He has no judgment on this matter except to see to it that the rules are followed. In the opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this, and so performed an act not of control but of mere supervision. The case of Taule v. Santos 9 cited in the decision has no application here because the jurisdiction claimed by the Secretary of Local Governments over election contests in the Katipunan ng Mga Barangay was held to belong to the Commission on Elections by constitutional provision. The conflict was over jurisdiction, not supervision or control. Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, which provided in its Section 2 as follows: A tax ordinance shall go into effect on the fifteenth day after its passage, unless the ordinance shall provide otherwise: Provided, however, That the Secretary of Finance shall have authority to suspend the effectivity of any ordinance within one hundred and twenty days after receipt by him of a copy thereof, if, in his opinion, the tax or fee therein levied or imposed is unjust, excessive, oppressive, or confiscatory, or when it is contrary to declared national economy policy, and when the said Secretary exercises this authority the effectivity of such ordinance shall be suspended, either in part or as a whole, for a period of thirty days within which period the local legislative body may either modify the tax ordinance to meet the objections thereto, or file an appeal with a court of competent jurisdiction; otherwise, the tax ordinance or the part or parts thereof declared suspended, shall be considered as revoked. Thereafter, the local legislative body may not reimpose the same tax or fee until such time as the grounds for the suspension thereof shall have ceased to exist. That section allowed the Secretary of Finance to suspend the effectivity of a tax ordinance if, in his opinion, the tax or fee levied was unjust, excessive, oppressive or confiscatory. Determination of these flaws would involve the exercise of judgment or discretion and not merely an examination of whether or not the requirements or limitations of the law had been observed; hence, it would smack of control rather than mere supervision. That power was never questioned before this Court but, at any rate, the Secretary of Justice is not given the same latitude under Section 187. All he is permitted to do is ascertain the constitutionality or legality of the tax measure, without the right to declare that, in his opinion, it is unjust, excessive, oppressive or confiscatory. He has no discretion on this matter. In fact, Secretary Drilon set aside the Manila Revenue Code only on two grounds, to with, the inclusion therein of certain ultra vires provisions and non-compliance with the prescribed procedure in its enactment. These grounds affected the legality, not the wisdom or reasonableness, of the tax measure. The issue of non-compliance with the prescribed procedure in the enactment of the Manila Revenue Code is another matter.

In his resolution, Secretary Drilon declared that there were no written notices of public hearings on the proposed Manila Revenue Code that were sent to interested parties as required by Art. 276(b) of the Implementing Rules of the Local Government Code nor were copies of the proposed ordinance published in three successive issues of a newspaper of general circulation pursuant to Art. 276(a). No minutes were submitted to show that the obligatory public hearings had been held. Neither were copies of the measure as approved posted in prominent places in the city in accordance with Sec. 511(a) of the Local Government Code. Finally, the Manila Revenue Code was not translated into Pilipino or Tagalog and disseminated among the people for their information and guidance, conformably to Sec. 59(b) of the Code. Judge Palattao found otherwise. He declared that all the procedural requirements had been observed in the enactment of the Manila Revenue Code and that the City of Manila had not been able to prove such compliance before the Secretary only because he had given it only five days within which to gather and present to him all the evidence (consisting of 25 exhibits) later submitted to the trial court. To get to the bottom of this question, the Court acceded to the motion of the respondents and called for the elevation to it of the said exhibits. We have carefully examined every one of these exhibits and agree with the trial court that the procedural requirements have indeed been observed. Notices of the public hearings were sent to interested parties as evidenced by Exhibits G-1 to 17. The minutes of the hearings are found in Exhibits M, M-1, M-2, and M-3. Exhibits B and C show that the proposed ordinances were published in the Balita and the Manila Standard on April 21 and 25, 1993, respectively, and the approved ordinance was published in the July 3, 4, 5, 1993 issues of the Manila Standard and in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-2, and Q-3. The only exceptions are the posting of the ordinance as approved but this omission does not affect its validity, considering that its publication in three successive issues of a newspaper of general circulation will satisfy due process. It has also not been shown that the text of the ordinance has been translated and disseminated, but this requirement applies to the approval of local development plans and public investment programs of the local government unit and not to tax ordinances. We make no ruling on the substantive provisions of the Manila Revenue Code as their validity has not been raised in issue in the present petition. WHEREFORE, the judgment is hereby rendered REVERSING the challenged decision of the Regional Trial Court insofar as it declared Section 187 of the Local Government Code unconstitutional but AFFIRMING its finding that the procedural requirements in the enactment of the Manila Revenue Code have been observed. No pronouncement as to costs. SO ORDERED. Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.

3) Hagonoy Market Vendor Association vs. Municipality of Hagonoy, Bulacan, GR No. 137621, Feb. 6, 2002 HAGONOY MARKET VENDOR ASSOCIATION, petitioner, vs. MUNICIPALITY OF HAGONOY, BULACAN, respondent. DECISION PUNO, J.: Laws are of two (2) kinds: substantive and procedural. Substantive laws, insofar as their provisions are unambiguous, are rigorously applied to resolve legal issues on the merits. In contrast, courts generally frown upon an uncompromising application of procedural laws so as not to subvert substantial justice. Nonetheless, it is not totally uncommon for courts to decide cases based on a rigid application of the so-called technical rules of procedure as these rules exist for the orderly administration of justice. Interestingly, the case at bar singularly illustrates both instances, i.e.,when procedural rules are unbendingly applied and when their rigid application may be relaxed. This is a petition for review of the Resolution[1] of the Court of Appeals, dated February 15, 1999, dismissing the appeal of petitioner Hagonoy Market Vendor Association from the Resolutions of the Secretary of Justice for being formally deficient. The facts: On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance, Kautusan Blg. 28,[2] which increased the stall rentals of the market vendors in Hagonoy. Article 3 provided that it shall take effect upon approval. The subject ordinance was posted from November 4-25, 1996.[3] In the last week of November, 1997, the petitioners members were personally given copies of the approved Ordinance and were informed that it shall be enforced in January, 1998. OnDecember 8, 1997, the petitioners President filed an appeal with the Secretary of Justice assailing the constitutionality of the tax ordinance. Petitioner claimed it was unaware of the posting of the ordinance. Respondent opposed the appeal. It contended that the ordinance took effect on October 6, 1996 and that the ordinance, as approved, was posted as required by law. Hence, it was pointed out that petitioners appeal, made over a year later, was already time-barred. The Secretary of Justice dismissed the appeal on the ground that it was filed out of time, i.e., beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996, as prescribed under Section 187 of the 1991 Local Government Code. Citing the case of Taada vs. Tuvera,[4] the Secretary of Justice held that the date of effectivity of the subject ordinance retroacted to the date of its approval in October 1996, after the required publication or posting has been complied with, pursuant to Section 3 of said ordinance.[5] After its motion for reconsideration was denied, petitioner appealed to the Court of Appeals. Petitioner did not assail the finding of the Secretary of Justice that their appeal was filed beyond the reglementary period. Instead, it urged that the Secretary of Justice should have overlooked this mere technicality and ruled on its petition on the merits. Unfortunately, its petition for review was dismissed by the Court of Appeals for being formally deficient as it was not accompanied by certified true copies of the assailed Resolutions of the Secretary of Justice.[6]

Undaunted, the petitioner moved for reconsideration but it was denied.[7] Hence, this appeal, where petitioner contends that: I THE HONORABLE COURT OF APPEALS, WITH DUE RESPECT, ERRED IN ITS STRICT, RIGID AND TECHNICAL ADHERENCE TO SECTION 6, RULE 43 OF THE 1997 RULES OF COURT AND THIS, IN EFFECT, FRUSTRATED THE VALID LEGAL ISSUES RAISED BY THE PETITIONER THAT ORDINANCE (KAUTUSAN) NO. 28 WAS NOT VALIDLY ENACTED, IS CONTRARY TO LAW AND IS UNCONSTITUTIONAL, TANTAMOUNT TO AN ILLEGAL EXACTION IF ENFORCED RETROACTIVELY FROM THE DATE OF ITS APPROVAL ON OCTOBER 1, 1996. II THE HONORABLE COURT OF APPEALS, WITH DUE RESPECT, ERRED IN DENYING THE MOTION FOR RECONSIDERATION NOTWITHSTANDING PETITIONERS EXPLANATION THAT ITS FAILURE TO SECURE THE CERTIFIED TRUE COPIES OF THE RESOLUTIONS OF THE DEPARTMENT OF JUSTICE WAS DUE TO THE INTERVENTION OF AN ACT OF GOD TYPHOON LOLENG, AND THAT THE ACTUAL COPIES RECEIVED BY THE PETITIONER MAY BE CONSIDERED AS SUBSTANTIAL COMPLIANCE WITH THE RULES. III PETITIONER WILL SUFFER IRREPARABLE DAMAGE IF ORDINANCE/KAUTUSAN NO. 28 BE NOT DECLARED NULL AND VOID AND IS ALLOWED TO BE ENFORCED RETROACTIVELY FROM OCTOBER 1, 1996, CONTRARY TO THE GENERAL RULE, ARTICLE 4 OF THE CIVIL CODE, THAT NO LAW SHALL HAVE RETROACTIVE EFFECT. The first and second assigned errors impugn the dismissal by the Court of Appeals of its petition for review for petitioners failure to attach certified true copies of the assailed Resolutions of the Secretary of Justice. The petitioner insists that it had good reasons for its failure to comply with the rule and the Court of Appeals erred in refusing to accept its explanation. We agree. In its Motion for Reconsideration before the Court of Appeals,[8] the petitioner satisfactorily explained the circumstances relative to its failure to attach to its appeal certified true copies of the assailed Resolutions of the Secretary of Justice, thus: x x x (D)uring the preparation of the petition on October 21, 1998, it was raining very hard due to (t)yphoon Loleng. When the petition was completed, copy was served on the Department of Justice at about (sic) past4:00 p.m. of October 21, 1998, with (the) instruction to have the Resolutions of the Department of Justice be stamped as certified true copies. However, due to bad weather, the person in charge (at the Department of Justice) was no longer available to certify to (sic) the Resolutions. The following day, October 22, 1998, was declared a non-working holiday because of (t)yphoon Loleng. Thus, petitioner was again unable to have the Resolutions of the Department of Justice stamped certified true copies. In the morning of October 23, 1998, due to time

constraint(s), herein counsel served a copy by personal service on (r)espondents lawyer at (sic) Malolos, Bulacan, despite the flooded roads and heavy rains. However, as the herein counsel went back to Manila, (official business in) government offices were suspended in the afternoon and the personnel of the Department of Justice tasked with issuing or stamping certified true copies of their Resolutions were no longer available. To avoid being time-barred in the filing of the (p)etition, the same was filed with the Court of Appeals as is. We find that the Court of Appeals erred in dismissing petitioners appeal on the ground that it was formally deficient. It is clear from the records that the petitioner exerted due diligence to get the copies of its appealed Resolutions certified by the Department of Justice, but failed to do so on account of typhoon Loleng. Under the circumstances, respondent appellate court should have tempered its strict application of procedural rules in view of the fortuitous event considering that litigation is not a game of technicalities.[9] Nonetheless, we hold that the petition should be dismissed as the appeal of the petitioner with the Secretary of Justice is already time-barred. The applicable law is Section 187 of the 1991 Local Government Code which provides: SEC. 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings. - The procedure for the approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and accrual and payment of the tax, fee or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings. The aforecited law requires that an appeal of a tax ordinance or revenue measure should be made to the Secretary of Justice within thirty (30) days from effectivity of the ordinance and even during its pendency, the effectivity of the assailed ordinance shall not be suspended. In the case at bar, Municipal Ordinance No. 28 took effect in October 1996. Petitioner filed its appeal only in December 1997, more than a year after the effectivity of the ordinance in 1996. Clearly, the Secretary of Justice correctly dismissed it for being time-barred. At this point, it is apropos to state that the timeframe fixed by law for parties to avail of their legal remedies before competent courts is not a mere technicality that can be easily brushed aside. The periods stated in Section 187 of the Local Government Code are mandatory.[10] Ordinance No. 28 is a revenue measure adopted by the municipality of Hagonoy to fix and collect public market stall rentals. Being its lifeblood, collection of revenues by the government is of paramount importance. The funds for the operation of its agencies and provision of basic services to its inhabitants are largely derived from its revenues and collections. Thus, it is essential that the validity of revenue measures is not left uncertain for a considerable length of time.[11] Hence, the law provided a time limit for an aggrieved party to assail the legality of revenue measures and tax ordinances.

In a last ditch effort to justify its failure to file a timely appeal with the Secretary of Justice, the petitioner contends that its period to appeal should be counted not from the time the ordinance took effect in 1996 but from the time its members were personally given copies of the approved ordinance in November 1997. It insists that it was unaware of the approval and effectivity of the subject ordinance in 1996 on two (2) grounds: first, no public hearing was conducted prior to the passage of the ordinance and, second, the approved ordinance was not posted. We do not agree. Petitioners bold assertion that there was no public hearing conducted prior to the passage of Kautusan Blg. 28 is belied by its own evidence. In petitioners two (2) communications with the Secretary of Justice,[12] it enumerated the various objections raised by its members before the passage of the ordinance in several meetings called by the Sanggunian for the purpose. These show beyond doubt that petitioner was aware of the proposed increase and in fact participated in the public hearings therefor. The respondent municipality likewise submitted the Minutes and Report of the public hearings conducted by the Sangguniang Bayans Committee on Appropriations and Market on February 6, July 15 and August 19, all in 1996, for the proposed increase in the stall rentals.[13] Petitioner cannot gripe that there was practically no public hearing conducted as its objections to the proposed measure were not considered by the Sangguniang Bayan. To be sure, public hearings are conducted by legislative bodies to allow interested parties to ventilate their views on a proposed law or ordinance. These views, however, are not binding on the legislative body and it is not compelled by law to adopt the same. Sanggunian members are elected by the people to make laws that will promote the general interest of their constituents. They are mandated to use their discretion and best judgment in serving the people. Parties who participate in public hearings to give their opinions on a proposed ordinance should not expect that their views would be patronized by their lawmakers. On the issue of publication or posting, Section 188 of the Local Government Code provides: Section 188. Publication of Tax Ordinance and Revenue Measures. Within ten (10) days after their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation; Provided, however, That in provinces, cities and municipalities where there are no newspapers of local circulation, the same may be posted in at least two (2) conspicuous and publicly accessible places. (emphasis supplied) The records is bereft of any evidence to prove petitioners negative allegation that the subject ordinance was not posted as required by law. In contrast, the respondent Sangguniang Bayan of the Municipality of Hagonoy, Bulacan, presented evidence which clearly shows that the procedure for the enactment of the assailed ordinance was complied with. Municipal Ordinance No. 28 was enacted by the Sangguniang Bayan of Hagonoy on October 1, 1996. Then Acting Municipal Mayor Maria Garcia Santos approved the Ordinance on October 7, 1996. After its approval, copies of the Ordinance were given to the Municipal Treasurer on the same day. On November 9, 1996, the Ordinance was approved by the Sangguniang Panlalawigan. The Ordinance was posted during the period from November 4 - 25, 1996 in three (3) public places, viz: in front of the municipal building, at the bulletin board of the Sta.Ana Parish Church and on the front door of the Office of the Market Master in the public market.[14] Posting was validly made in lieu of publication as there was no newspaper of local circulation in the municipality of Hagonoy. This fact was known to and admitted by petitioner.

Thus, petitioners ambiguous and unsupported claim that it was only sometime in November1997 that the Provincial Board approved Municipal Ordinance No. 28 and so the posting could not have been made in November 1996[15] was sufficiently disproved by the positive evidence of respondent municipality. Given the foregoing circumstances, petitioner cannot validly claim lack of knowledge of the approved ordinance. The filing of its appeal a year after the effectivity of the subject ordinance is fatal to its cause. Finally, even on the substantive points raised, the petition must fail. Section 6c.04 of the 1993 Municipal Revenue Code and Section 191 of the Local Government Code limiting the percentage of increase that can be imposed apply to tax rates, not rentals. Neither can it be said that the rates were not uniformly imposed or that the public markets included in the Ordinance were unreasonably determined or classified. To be sure, the Ordinance covered the three (3) concrete public markets: the two-storey Bagong Palengke, the burnt but reconstructed Lumang Palengke and the more recent Lumang Palengke with wet market. However, the Palengkeng Bagong Munisipyo or Gabaldon was excluded from the increase in rentals as it is only a makeshift, dilapidated place, with no doors or protection for security, intended for transient peddlers who used to sell their goods along the sidewalk.[16] IN VIEW WHEREOF, the petition is DISMISSED for lack of merit. No pronouncement as to costs. SO ORDERED.

4) Antonio Reyes, et. al. vs. CA, GR 118233, December 10, 1999 ANTONIO Z. REYES, ELISEO P. OCAMPO and EDITHA ARCIAGA-SANTOS, petitioners, vs. COURT OF APPEALS, HON. SECRETARY OF JUSTICE FRANKLIN DRILON and MAYOR JINGGOY ESTRADA (JOSE EJERCITO) OF THE MUNICIPALITY OF SAN JUAN, METRO MANILA, respondents. RESOLUTION QUISUMBING, J.: For review is the decision[1] of the Court of Appeals, dated August 3, 1994 and its resolution[2] dated December 8, 1994 in CA - G.R. SP No. 32473. Said decision dismissed the prohibition case brought by the petitioners against respondent officials of the Municipality of San Juan to stop the enforcement of Tax Ordinance Nos. 87, 91, 95, 100 and 101. The factual antecedents are as follows: The Sangguniang Bayan of San Juan, Metro Manila implemented several tax ordinances as follows: Ordinance No. 87 Title An ordinance imposing a municipal tax of fifty percent (50%) of one percent (1%) of the gross receipt on business of printing and publication

91

An ordinance imposing a transfer tax equivalent to fifty percent (50%) of one percent (1%) of the total consideration on the sale, donation, barter or any other mode of transferring ownership or title of real property situated in San Juan, Metro Manila, or its fair market value, whichever is higher An ordinance imposing fifty percent (50%) of one percent of (1%) for social housing tax on the assessed value of all real estate property in San Juan, Metro Manila in excess of P50,000.00 value as provided in the New Urban Land Reform Law, also known as R.A. 7279. An ordinance imposing new rates of business taxes of the Municipality of San Juan Metro Manila An ordinance levying an annual Ad Valorem tax on real property and an additional tax accruing to the special education fund (SEF)

95

100

101

On May 21, 1993, petitioners filed an appeal with the Department of Justice assailing the constitutionality of these tax ordinances allegedly because they were promulgated without previous public hearings thereby constituting deprivation of property without due process of law. On June 10, 1993, respondent Secretary of Justice dismissed the appeal for having been filed out of time. Citing Section 187, R.A. No. 7160, he said: It appears that the tax ordinances in question took effect on September 24, 1992, in the case of Tax Ordinance No. 87, until October 22, 1992, in the case of Tax Ordinance Nos. 91 and 95, and until October 29, 1992, in the case of Tax Ordinance Nos. 100 and 101, or more than thirty (30) days from the effectivity thereof when the appeal was filed and received by this Department on May 21, 1993 and therefore not in accordance with the requirements provided for under Section 187 of the Local Government Code of 1991. WHEREFORE, the instant appeal, having been filed out of time, is hereby DISMISSED.[3] Undaunted, petitioners filed with the Court of Appeals a petition for certiorari and prohibition (CA-G.R. SP No. 32473). But respondent court affirmed the decision of the Secretary. On December 8, 1994, the motion for reconsideration filed by the petitioners was denied for lack of merit. Hence, the present petition for review, raising the following questions: 1. Whether or not the questioned tax ordinances are violative of the Constitution, considering the undisputed fact that no public hearings were ever held on the ordinances before they were passed and approved as required by the Local Government Code of 1991, thereby constituting as they do a deprivation of property without due process; 2. Whether or not the wording of the law under Section 187 of the Local Government Code of 1991 that any question on the constitutionality x x x of tax ordinance x x x may be raised on appeal within thirty (30) days from the effectivity thereof x x x is a reductio ad absurdum, since if the tax ordinance is found to be unconstitutional, it will be considered as never having become effective at all from the very beginning,

for which reason the thirty-day appeal period cannot be reckoned and cannot be enforced; 3. Whether or not the constitutionality of a tax ordinance, or any law for that matter, can be questioned at any time despite the prescription of a limited period within which to question it, as in the case at bar; and 4. Whether or not the constitutionality of an ordinance or a law may be questioned even if the question of constitutionality may not have been originally or initially raised, or is not the lis mota of the case, if it appears that a determination of the question of constitutionality is necessary to a decision of the case.[4] In our view, the pertinent issues for our resolution now are: 1. Whether or not the Court of Appeals erred in affirming the decision of the Secretary of Justice who dismissed the prohibition suit, on the ground that it was filed out of time? 2. Whether or not lack of mandatory public hearings prior to enacting Municipal Ordinance Nos. 87, 91, 95, 100 and 101 render them void on the ground of deprivation of property without due process? 3. Whether or not the constitutional validity of Sec. 187 of the Local Government Code could be raised for the first time on appeal? According to petitioners, respondent Secretary erred in declaring that they failed to file their appeal on time. Also, they assail Municipal Ordinance Nos. 87, 91, 95, 100 and 101, for alleged failure of the Municipal Council of San Juan to conduct mandatory public hearings. Because of this, they claim the ordinances are inoperative, as though they were never passed. Consequently, no prescriptive thirty-day period to question the validity of the ordinance could toll to bar their appeal to the Department of Justice. Sec. 187 of R.A. 7160, cited by respondent Secretary, provides as follows: Sec. 187-- Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings. -- The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally , That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seek relief in court. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance the orderly and

speedy discharge of judicial functions.[5] For this reason the courts construe these provisions of statutes as mandatory.[6] A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people.[7] Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. In the instant case, it is our view that the failure of petitioners to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause. On the second issue, petitioners allege that the Sangguniang Bayan of San Juan did not comply with the prescribed procedure for enacting an ordinance because they failed to conduct public hearings. In Figuerres vs. Court of Appeals,[8] where the municipality failed to conduct public hearings prior to enacting the revisions on the schedule of fair market values and assessment level of classes of real estate properties, the Court said: Petitioner is right in contending that public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. R.A. No. 7160, Sec. 186, provides that an ordinance levying taxes, fees, or charges shall not be enacted without any prior public hearing conducted for the purpose. However, it is noteworthy that apart from her bare assertions, petitioner Figuerres has not presented any evidence to show that no public hearings were conducted prior to the enactment of the ordinances in question. On the other hand, the Municipality of Mandaluyong claims that public hearings were indeed conducted before the subject ordinances were adopted, although it likewise failed to submit any evidence to establish this allegation. However, in accordance with the presumption of validity in favor of an ordinance, their constitutionality or legality should be upheld in the absence of evidences showing that procedure prescribed by law was not observed in their enactment. x x x Furthermore, the lack of a public hearing is a negative allegation essential to petitioners cause of action in the present case. Hence, as petitioner is the party asserting it, she has the burden of proof. Since petitioner failed to rebut the presumption of validity in favor of the subject ordinances and to discharge the burden of proving that no public hearings were conducted prior to the enactment thereof, we are constrained to uphold their constitutionality or legality.[9] We find Figuerres instructive. Petitioners have not proved in the case before us that the Sangguniang Bayan of San Juan failed to conduct the required public hearings before the enactment of Ordinance Nos. 87, 91, 95, 100 and 101. Although the Sanggunian had the control of records or the better means of proof regarding the facts alleged, petitioners are not relieved from the burden of proving their averments. [10] Proof that public hearings were not held falls on petitioners shoulders. For failing to discharge that burden, their petition was properly dismissed. In any event, for the purpose of securing certainty where doubt would be intolerable, it is a general rule that the regularity of the enactment of an officially promulgated statute or ordinance may not be impeached by parol evidence or oral testimony either of individual officers and

members, or of strangers who may be interested in nullifying legislative action.[11] This rule supplements the presumption in favor of the regularity of official conduct which we have upheld repeatedly, absent a clear showing to the contrary. Finally, on the validity of Section 187 of R.A. 7160, the Local Government Code, we must stress that the constitutionality of an act of Congress will not be passed upon by the Court unless at the first opportunity that question is properly raised and presented in an appropriate case, and is necessary to a determination of the case, particularly where the issue of constitutionality is the very lis mota presented.[12] The constitutional validity of a statutory provision should not be entertained by the Court where it was not specifically raised below, insisted upon, and adequately argued.[13] Moreover, given the circumstances in this case, we find no genuine necessity to dwell on the issue of constitutional invalidity of Section 187 in relation to issue of valid enactment of the subject ordinances, as shown in the foregoing discussion. Suffice it now to say that, having resolved the first and second issues, we find no grave abuse of discretion nor reversible error in the decision of the respondent appellate court. Further constitutional scrutiny of Section 187 is unwarranted. WHEREFORE, the present petition is DISMISSED for lack of merit and the assailed decision of the Court of Appeals is AFFIRMED. No pronouncement as to costs. SO ORDERED.

5) NAPOCOR vs. Cabanatuan City, GR 149110, April 9, 2003 NATIONAL POWER CORPORATION, petitioner, vs. CITY OF CABANATUAN, respondent. DECISION PUNO, J.: This is a petition for review[1] of the Decision[2] and the Resolution[3] of the Court of Appeals dated March 12, 2001 and July 10, 2001, respectively, finding petitioner National Power Corporation (NPC) liable to pay franchise tax to respondent City of Cabanatuan. Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended.[4] It is tasked to undertake the development of hydroelectric generations of power and the production of electricity from nuclear, geothermal and other sources, as well as, the transmission of electric power on a nationwide basis. [5] Concomitant to its mandated duty, petitioner has, among others, the power to construct, operate and maintain power plants, auxiliary plants, power stations and substations for the purpose of developing hydraulic power and supplying such power to the inhabitants.[6] For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income of P107,814,187.96 in 1992.[7] Pursuant to section 37 of Ordinance No. 165-92,[8] the respondent assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latters gross receipts for the preceding year.[9] Petitioner, whose capital stock was subscribed and paid wholly by the Philippine Government,[10] refused to pay the tax assessment. It argued that the respondent has no authority to impose tax on government entities. Petitioner also contended that as a non-profit

organization, it is exempted from the payment of all forms of taxes, charges, duties or fees [11] in accordance with sec. 13 of Rep. Act No. 6395, as amended, viz: Sec.13. Non-profit Character of the Corporation; Exemption from all Taxes, Duties, Fees, Imposts and Other Charges by Government and Governmental Instrumentalities.- The Corporation shall be non-profit and shall devote all its return from its capital investment, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation is hereby exempt: (a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court or administrative proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities; (b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities; (c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods required for its operations and projects; and (d) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of electric power. [12] The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City, demanding that petitioner pay the assessed tax due, plus a surcharge equivalent to 25% of the amount of tax, and 2% monthly interest.[13] Respondent alleged that petitioners exemption from local taxes has been repealed by section 193 of Rep. Act No. 7160,[14] which reads as follows: 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. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. On January 25, 1996, the trial court issued an Order[15] dismissing the case. It ruled that the tax exemption privileges granted to petitioner subsist despite the passage of Rep. Act No. 7160 for the following reasons: (1) Rep. Act No. 6395 is a particular law and it may not be repealed by Rep. Act No. 7160 which is a general law; (2) section 193 of Rep. Act No. 7160 is in the nature of an implied repeal which is not favored; and (3) local governments have no power to tax instrumentalities of the national government. Pertinent portion of the Order reads: The question of whether a particular law has been repealed or not by a subsequent law is a matter of legislative intent. The lawmakers may expressly repeal a law by incorporating therein repealing provisions which expressly and specifically cite(s) the particular law or laws, and portions thereof, that are intended to be repealed. A declaration in a statute, usually in its repealing clause, that a particular and specific law, identified by its number or title is repealed is

an express repeal; all others are implied repeal. Sec. 193 of R.A. No. 7160 is an implied repealing clause because it fails to identify the act or acts that are intended to be repealed. It is a well-settled rule of statutory construction that repeals of statutes by implication are not favored. The presumption is against inconsistency and repugnancy for the legislative is presumed to know the existing laws on the subject and not to have enacted inconsistent or conflicting statutes. It is also a well-settled rule that, generally, general law does not repeal a special law unless it clearly appears that the legislative has intended by the latter general act to modify or repeal the earlier special law. Thus, despite the passage of R.A. No. 7160 from which the questioned Ordinance No. 165-92 was based, the tax exemption privileges of defendant NPC remain. Another point going against plaintiff in this case is the ruling of the Supreme Court in the case of Basco vs. Philippine Amusement and Gaming Corporation, 197 SCRA 52, where it was held that: Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. xxx Being an instrumentality of the government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by mere local government. Like PAGCOR, NPC, being a government owned and controlled corporation with an original charter and its shares of stocks owned by the National Government, is beyond the taxing power of the Local Government. Corollary to this, it should be noted here that in the NPC Charters declaration of Policy, Congress declared that: xxx (2) the total electrification of the Philippines through the development of power from all services to meet the needs of industrial development and dispersal and needs of rural electrification are primary objectives of the nations which shall be pursued coordinately and supported by all instrumentalities and agencies of the government, including its financial institutions. (underscoring supplied). To allow plaintiff to subject defendant to its tax-ordinance would be to impede the avowed goal of this government instrumentality. Unlike the State, a city or municipality has no inherent power of taxation. Its taxing power is limited to that which is provided for in its charter or other statute. Any grant of taxing power is to be construed strictly, with doubts resolved against its existence. From the existing law and the rulings of the Supreme Court itself, it is very clear that the plaintiff could not impose the subject tax on the defendant. [16] On appeal, the Court of Appeals reversed the trial courts Order[17] on the ground that section 193, in relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the petitioner.[18] It ordered the petitioner to pay the respondent city government the following: (a) the sum of P808,606.41 representing the franchise tax due based on gross receipts for the year 1992, (b) the tax due every year thereafter based in the gross receipts earned by NPC, (c) in all cases, to pay a surcharge of 25% of the tax due and unpaid, and (d) the sum of P 10,000.00 as litigation expense.[19] On April 4, 2001, the petitioner filed a Motion for Reconsideration on the Court of Appeals Decision. This was denied by the appellate court, viz:

The Court finds no merit in NPCs motion for reconsideration. Its arguments reiterated therein that the taxing power of the province under Art. 137 (sic) of the Local Government Code refers merely to private persons or corporations in which category it (NPC) does not belong, and that the LGC (RA 7160) which is a general law may not impliedly repeal the NPC Charter which is a special lawfinds the answer in Section 193 of the LGC to the effect that 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 xxx are hereby withdrawn. The repeal is direct and unequivocal, not implied. IN VIEW WHEREOF, the motion for reconsideration is hereby DENIED. SO ORDERED.[20] In this petition for review, petitioner raises the following issues: A. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC, A PUBLIC NONPROFIT CORPORATION, IS LIABLE TO PAY A FRANCHISE TAX AS IT FAILED TO CONSIDER THAT SECTION 137 OF THE LOCAL GOVERNMENT CODE IN RELATION TO SECTION 131 APPLIES ONLY TO PRIVATE PERSONS OR CORPORATIONS ENJOYING A FRANCHISE. B. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPCS EXEMPTION FROM ALL FORMS OF TAXES HAS BEEN REPEALED BY THE PROVISION OF THE LOCAL GOVERNMENT CODE AS THE ENACTMENT OF A LATER LEGISLATION, WHICH IS A GENERAL LAW, CANNOT BE CONSTRUED TO HAVE REPEALED A SPECIAL LAW. C. THE COURT OF APPEALS GRAVELY ERRED IN NOT CONSIDERING THAT AN EXERCISE OF POLICE POWER THROUGH TAX EXEMPTION SHOULD PREVAIL OVER THE LOCAL GOVERNMENT CODE.[21] It is beyond dispute that the respondent city government has the authority to issue Ordinance No. 165-92 and impose an annual tax on businesses enjoying a franchise, pursuant to section 151 in relation to section 137 of the LGC, viz: 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. In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. (emphasis supplied) xxx Sec. 151. Scope of Taxing Powers.- Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and

independent component cities shall accrue to them and distributed in accordance with the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes. Petitioner, however, submits that it is not liable to pay an annual franchise tax to the respondent city government. It contends that sections 137 and 151 of the LGC in relation to section 131, limit the taxing power of the respondent city government to private entities that are engaged in trade or occupation for profit.[22] Section 131 (m) of the LGC defines a franchise as a right or privilege, affected with public interest which is conferred upon private persons or corporations, under such terms and conditions as the government and its political subdivisions may impose in the interest of the public welfare, security and safety. From the phraseology of this provision, the petitioner claims that the word private modifies the terms persons and corporations. Hence, when the LGC uses the term franchise, petitioner submits that it should refer specifically to franchises granted to private natural persons and to private corporations.[23] Ergo, its charter should not be considered a franchise for the purpose of imposing the franchise tax in question. On the other hand, section 131 (d) of the LGC defines business as trade or commercial activity regularly engaged in as means of livelihood or with a view to profit. Petitioner claims that it is not engaged in an activity for profit, in as much as its charter specifically provides that it is a non-profit organization. In any case, petitioner argues that the accumulation of profit is merely incidental to its operation; all these profits are required by law to be channeled for expansion and improvement of its facilities and services.[24] Petitioner also alleges that it is an instrumentality of the National Government, [25] and as such, may not be taxed by the respondent city government. It cites the doctrine in Basco vs. Philippine Amusement and Gaming Corporation[26] where this Court held that local governments have no power to tax instrumentalities of the National Government, viz: Local governments have no power to tax instrumentalities of the National Government. PAGCOR has a dual role, to operate and regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere local government. The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579) This doctrine emanates from the supremacy of the National Government over local governments. Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or

political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even seriously burden it from accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, italics supplied) Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as a tool regulation ( U.S. v. Sanchez, 340 US 42). The power to tax which was called by Justice Marshall as the power to destroy (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.[27] Petitioner contends that section 193 of Rep. Act No. 7160, withdrawing the tax privileges of government-owned or controlled corporations, is in the nature of an implied repeal. A special law, its charter cannot be amended or modified impliedly by the local government code which is a general law. Consequently, petitioner claims that its exemption from all taxes, fees or charges under its charter subsists despite the passage of the LGC, viz: It is a well-settled rule of statutory construction that repeals of statutes by implication are not favored and as much as possible, effect must be given to all enactments of the legislature. Moreover, it has to be conceded that the charter of the NPC constitutes a special law. Republic Act No. 7160, is a general law. It is a basic rule in statutory construction that the enactment of a later legislation which is a general law cannot be construed to have repealed a special law. Where there is a conflict between a general law and a special statute, the special statute should prevail since it evinces the legislative intent more clearly than the general statute.[28] Finally, petitioner submits that the charter of the NPC, being a valid exercise of police power, should prevail over the LGC. It alleges that the power of the local government to impose franchise tax is subordinate to petitioners exemption from taxation; police power being the most pervasive, the least limitable and most demanding of all powers, including the power of taxation.[29] The petition is without merit. Taxes are the lifeblood of the government,[30] for without taxes, the government can neither exist nor endure. A principal attribute of sovereignty,[31] the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to tax emanates from necessity;[32] without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people. In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives.[33] Taxation assumes even greater significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges[34] pursuant toArticle X, section 5 of the 1987 Constitution, viz: Section 5.- Each Local Government unit shall have the power to create its own sources of revenue, to levy taxes, fees and charges subject to such guidelines and limitations as the

Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local Governments. This paradigm shift results from the realization that genuine development can be achieved only by strengthening local autonomy and promoting decentralization of governance. For a long time, the countrys highly centralized government structure has bred a culture of dependence among local government leaders upon the national leadership. It has also dampened the spirit of initiative, innovation and imaginative resilience in matters of local development on the part of local government leaders. [35] The only way to shatter this culture of dependence is to give the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate their own sources for the purpose. To achieve this goal, section 3 of Article X of the 1987 Constitution mandates Congress to enact a local government code that will, consistent with the basic policy of local autonomy, set the guidelines and limitations to this grant of taxing powers, viz: Section 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials, and all other matters relating to the organization and operation of the local units. To recall, prior to the enactment of the Rep. Act No. 7160, [36] also known as the Local Government Code of 1991 (LGC), various measures have been enacted to promote local autonomy. These include the Barrio Charter of 1959,[37] the Local Autonomy Act of 1959,[38] the Decentralization Act of 1967[39] and the Local Government Code of 1983.[40] Despite these initiatives, however, the shackles of dependence on the national government remained. Local government units were faced with the same problems that hamper their capabilities to participate effectively in the national development efforts, among which are: (a) inadequate tax base, (b) lack of fiscal control over external sources of income, (c) limited authority to prioritize and approve development projects, (d) heavy dependence on external sources of income, and (e) limited supervisory control over personnel of national line agencies.[41] Considered as the most revolutionary piece of legislation on local autonomy, [42] the LGC effectively deals with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws such as the imposition of taxes on forest products, forest concessionaires, mineral products, mining operations, and the like. The LGC likewise provides enough flexibility to impose tax rates in accordance with their needs and capabilities. It does not prescribe graduated fixed rates but merely specifies the minimum and maximum tax rates and leaves the determination of the actual rates to the respective sanggunian.[43] One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the national government from the coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities, viz:

Section 133. Common Limitations on the Taxing Powers of the 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: xxx (o) Taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, and local government units. (emphasis supplied) In view of the afore-quoted provision of the LGC, the doctrine in Basco vs. Philippine Amusement and Gaming Corporation[44] relied upon by the petitioner to support its claim no longer applies. To emphasize, the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local government units to tax instrumentalities of the National Government was in effect. However, as this Court ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos,[45] nothing prevents Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax.[46] In enacting the LGC, Congress exercised its prerogative to tax instrumentalities and agencies of government as it sees fit. Thus, after reviewing the specific provisions of the LGC, this Court held that MCIAA, although an instrumentality of the national government, was subject to real property tax, viz: 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 power of local governments 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 the item (a) of the first paragraph of section 12.[47] In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city government to impose on the petitioner the franchise tax in question. In its general signification, a franchise is a privilege conferred by government authority, which does not belong to citizens of the country generally as a matter of common right.[48] In its specific sense, a franchise may refer to a general or primary franchise, or to a special or secondary franchise. The former relates to the right to exist as a corporation, by virtue of duly approved articles of incorporation, or a charter pursuant to a special law creating the corporation.[49] The right under a primary or general franchise is vested in the individuals who compose the corporation and not in the corporation itself.[50] On the other hand, the latter refers to the right or privileges conferred upon an existing corporation such as the right to use the streets of a municipality to lay pipes of tracks, erect poles or string wires. [51] The rights under a secondary or special franchise are vested in the corporation and may ordinarily be conveyed or mortgaged under a general power granted to a corporation to dispose of its property, except such special or secondary franchises as are charged with a public use.[52] In section 131 (m) of the LGC, Congress unmistakably defined a franchise in the sense of a secondary or special franchise. This is to avoid any confusion when the word franchise is used in the context of taxation. As commonly used, a franchise tax is a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state.[53] It is not levied on the corporation simply for existing as a corporation, upon its property[54] or its

income,[55] but on its exercise of the rights or privileges granted to it by the government. Hence, a corporation need not pay franchise tax from the time it ceased to do business and exercise its franchise.[56] It is within this context that the phrase tax on businesses enjoying a franchise in section 137 of the LGC should be interpreted and understood. Verily, to determine whether the petitioner is covered by the franchise tax in question, the following requisites should concur: (1) that petitioner has a franchise in the sense of a secondary or special franchise; and (2) that it is exercising its rights or privileges under this franchise within the territory of the respondent city government. Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended by Rep. Act No. 7395, constitutes petitioners primary and secondary franchises. It serves as the petitioners charter, defining its composition, capitalization, the appointment and the specific duties of its corporate officers, and its corporate life span.[57] As its secondary franchise, Commonwealth Act No. 120, as amended, vests the petitioner the following powers which are not available to ordinary corporations, viz: xxx (e) To conduct investigations and surveys for the development of water power in any part of the Philippines; (f) To take water from any public stream, river, creek, lake, spring or waterfall in the Philippines, for the purposes specified in this Act; to intercept and divert the flow of waters from lands of riparian owners and from persons owning or interested in waters which are or may be necessary for said purposes, upon payment of just compensation therefor; to alter, straighten, obstruct or increase the flow of water in streams or water channels intersecting or connecting therewith or contiguous to its works or any part thereof: Provided, That just compensation shall be paid to any person or persons whose property is, directly or indirectly, adversely affected or damaged thereby; (g) To construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines, power stations and substations, and other works for the purpose of developing hydraulic power from any river, creek, lake, spring and waterfall in the Philippines and supplying such power to the inhabitants thereof; to acquire, construct, install, maintain, operate, and improve gas, oil, or steam engines, and/or other prime movers, generators and machinery in plants and/or auxiliary plants for the production of electric power; to establish, develop, operate, maintain and administer power and lighting systems for the transmission and utilization of its power generation; to sell electric power in bulk to (1) industrial enterprises, (2) city, municipal or provincial systems and other government institutions, (3) electric cooperatives, (4) franchise holders, and (5) real estate subdivisions xxx; (h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise dispose of property incident to, or necessary, convenient or proper to carry out the purposes for which the Corporation was created: Provided, That in case a right of way is necessary for its transmission lines, easement of right of way shall only be sought: Provided, however, That in case the property itself shall be acquired by purchase, the cost thereof shall be the fair market value at the time of the taking of such property; (i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of said works may require xxx;

(j) To exercise the right of eminent domain for the purpose of this Act in the manner provided by law for instituting condemnation proceedings by the national, provincial and municipal governments; xxx (m) To cooperate with, and to coordinate its operations with those of the National Electrification Administration and public service entities; (n) To exercise complete jurisdiction and control over watersheds surrounding the reservoirs of plants and/or projects constructed or proposed to be constructed by the Corporation. Upon determination by the Corporation of the areas required for watersheds for a specific project, the Bureau of Forestry, the Reforestation Administration and the Bureau of Lands shall, upon written advice by the Corporation, forthwith surrender jurisdiction to the Corporation of all areas embraced within the watersheds, subject to existing private rights, the needs of waterworks systems, and the requirements of domestic water supply; (o) In the prosecution and maintenance of its projects, the Corporation shall adopt measures to prevent environmental pollution and promote the conservation, development and maximum utilization of natural resources xxx [58] With these powers, petitioner eventually had the monopoly in the generation and distribution of electricity. This monopoly was strengthened with the issuance of Pres. Decree No. 40,[59]nationalizing the electric power industry. Although Exec. Order No. 215[60] thereafter allowed private sector participation in the generation of electricity, the transmission of electricity remains the monopoly of the petitioner. Petitioner also fulfills the second requisite. It is operating within the respondent city governments territorial jurisdiction pursuant to the powers granted to it by Commonwealth Act No. 120, as amended. From its operations in the City of Cabanatuan, petitioner realized a gross income of P107,814,187.96 in 1992. Fulfilling both requisites, petitioner is, and ought to be, subject of the franchise tax in question. Petitioner, however, insists that it is excluded from the coverage of the franchise tax simply because its stocks are wholly owned by the National Government, and its charter characterized it as a non-profit organization. These contentions must necessarily fail. To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the individual stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from the National Government. It can sue and be sued under its own name,[61] and can exercise all the powers of a corporation under the Corporation Code.[62] To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply that petitioner is not engaged in business. Section 2 of Pres. Decree No. 2029[63]classifies government-owned or controlled corporations (GOCCs) into those performing governmental functions and those performing proprietary functions, viz: A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by special law or if

organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding voting capital stock xxx. (emphases supplied) Governmental functions are those pertaining to the administration of government, and as such, are treated as absolute obligation on the part of the state to perform while proprietary functions are those that are undertaken only by way of advancing the general interest of society, and are merely optional on the government.[64] Included in the class of GOCCs performing proprietary functions are business-like entities such as the National Steel Corporation (NSC), the National Development Corporation (NDC), the Social Security System (SSS), the Government Service Insurance System (GSIS), and the National Water Sewerage Authority (NAWASA),[65] among others. Petitioner was created to undertake the development of hydroelectric generation of power and the production of electricity from nuclear, geothermal and other sources, as well as the transmission of electric power on a nationwide basis.[66] Pursuant to this mandate, petitioner generates power and sells electricity in bulk. Certainly, these activities do not partake of the sovereign functions of the government. They are purely private and commercial undertakings, albeit imbued with public interest. The public interest involved in its activities, however, does not distract from the true nature of the petitioner as a commercial enterprise, in the same league with similar public utilities like telephone and telegraph companies, railroad companies, water supply and irrigation companies, gas, coal or light companies, power plants, ice plant among others; all of which are declared by this Court as ministrant or proprietary functions of government aimed at advancing the general interest of society.[67] A closer reading of its charter reveals that even the legislature treats the character of the petitioners enterprise as a business, although it limits petitioners profits to twelve percent (12%),viz:[68] (n) When essential to the proper administration of its corporate affairs or necessary for the proper transaction of its business or to carry out the purposes for which it was organized, to contract indebtedness and issue bonds subject to approval of the President upon recommendation of the Secretary of Finance; (o) To exercise such powers and do such things as may be reasonably necessary to carry out the business and purposes for which it was organized, or which, from time to time, may be declared by the Board to be necessary, useful, incidental or auxiliary to accomplish the said purpose xxx.(emphases supplied) It is worthy to note that all other private franchise holders receiving at least sixty percent (60%) of its electricity requirement from the petitioner are likewise imposed the cap of twelve percent (12%) on profits.[69] The main difference is that the petitioner is mandated to devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion[70] while other franchise holders have the option to distribute their profits to its stockholders by declaring dividends. We do not see why this fact can be a source of difference in tax treatment. In both instances, the taxable entity is the corporation, which exercises the franchise, and not the individual stockholders. We also do not find merit in the petitioners contention that its tax exemptions under its charter subsist despite the passage of the LGC.

As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist clearly and categorically, and supported by clear legal provisions. [71] In the case at bar, the petitioners sole refuge is section 13 of Rep. Act No. 6395 exempting from, among others, all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities. However, section 193 of the LGC withdrew, subject to limited exceptions, the sweeping tax privileges previously enjoyed by private and public corporations. Contrary to the contention of petitioner, section 193 of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes.[72] It reads: 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. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. (emphases supplied) It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius.[73] Not being a local water district, a cooperative registered under R.A. No. 6938, or a non-stock and non-profit hospital or educational institution, petitioner clearly does not belong to the exception. It is therefore incumbent upon the petitioner to point to some provisions of the LGC that expressly grant it exemption from local taxes. But this would be an exercise in futility. Section 137 of the LGC clearly states that the LGUs can impose franchise tax notwithstanding any exemption granted by any law or other special law. This particular provision of the LGC does not admit any exception. In City Government of San Pablo, Laguna v. Reyes,[74] MERALCOs exemption from the payment of franchise taxes was brought as an issue before this Court. The same issue was involved in the subsequent case of Manila Electric Company v. Province of Laguna.[75] Ruling in favor of the local government in both instances, we ruled that the franchise tax in question is imposable despite any exemption enjoyed by MERALCO under special laws, viz: It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support their position that MERALCOs tax exemption has been withdrawn. The explicit language of section 137 which authorizes the province to impose franchise tax notwithstanding any exemption granted by any law or other special law is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws. Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that 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 (1) local water districts, (2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. In the absence of any provision of the Code to the contrary, and we find no other provision in point, any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn.

Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax privileges enjoyed under existing law or charter is clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more unequivocal language could have been used.[76] (emphases supplied). It is worth mentioning that section 192 of the LGC empowers the LGUs, through ordinances duly approved, to grant tax exemptions, initiatives or reliefs. [77] But in enacting section 37 of Ordinance No. 165-92 which imposes an annual franchise tax notwithstanding any exemption granted by law or other special law, the respondent city government clearly did not intend to exempt the petitioner from the coverage thereof. Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed in the Mactan case, the original reasons for the withdrawal of tax exemption privileges granted to government-owned or controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises.[78] With the added burden of devolution, it is even more imperative for government entities to share in the requirements of development, fiscal or otherwise, by paying taxes or other charges due from them. IN VIEW WHEREOF, the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals dated March 12, 2001 and July 10, 2001, respectively, are herebyAFFIRMED. SO ORDERED.