No. L-12647. May 31, 1961.

AMERICAN MAIL LINE, ET AL., plaintiffs-appellees, vs. CITY

OF BASILAN, ET AL., defendants-appellants.

Municipal Corporations; Taxation; City of Basilan without blanket

power of taxation; Cannot enact ordinance to collect anchorage fees for
revenue purposes.—Under its Charter (Republic Act No. 288), the City of
Basilan may only levy and collect taxes for general and special purposes as
provided by law; in other words, it was not granted a blanket power of
taxation. Consequently, it is not authorized to enact ordinances providing for
the collection of “anchorage fees” which in the instant case is clearly for
revenue purposes, the same being even in excess of the harbor fee imposed
by the National Government.

Same; Power to regulate as an exercise of police power excludes

power to impose fees for revenue purposes; When fee is said to be
regulatory in nature.—The power to regulate as an exercise of police power
does not include the power to impose fees for revenue purposes (Cu Unjieng
vs. Patstone, 42 Phil. 188; Pacific Commercial Co. vs. Romualdez etc., et
al., 49 Phil. 917; Hercules Lumber Co. vs. Municipality of Zamboanga, 55
Phil. 653), and for fees to be purely regulatory in nature, the same “must be
no more than sufficient to cover the actual cost of inspection or examination
as nearly as the same can be estimated.” (Manila Electric Co. vs. Auditor
General, 73 Phil. 129).

APPEAL from a decision of the Court of First Instance of Manila.

The facts are stated in the opinion of the Court.

Ross, Selph & Carrascoso for plaintiffs-appellees.
Solicitor General for defendants-appellants.

DIZON, J.:

Appeal from the decision of the Court of First Instance of Manila

“declaring illegal and void Ordinance No. 180, Series of 1955, of the
City of Basilan,” and dismissing defendants’ counterclaim for lack
of merit.
On September 12, 1955 the City Council of Basilan City enacted
Ordinance No. 180, Series of 1955, (Exh. N) amending Title IV,
Ordinance No. 7, Series of 1948, (Exh. A) by adding thereto Section
1 (D) and Sections 2 (C) and (D). The first reads as follows:
“Section 1. Article IV of Ordinance-numbered seven entitled, ‘The Port
Area Ordinance’, is hereby amended to read as follows:

310

310 SUPREME COURT REPORTS ANNOTATED

American Mail Line vs. City of Basilan

“ARTICLE IV. REGULATION FOR BERTHING, MOORING,

DOCKING AND ANCHORING AT PIERS OR WHARVES AT ANY
POINT WITHIN THE CITY OF BASILAN AND FOR ANCHORING AT
ANY OPEN BAY, CHANNEL OR ANY OTHER POINT WITHIN THE
TERRITORIAL WATERS OF THE CITY OF BASILAN”
‘Sec. 2. Section 1 of Ordinance No. 7 is hereby amended and adding
thereto a new paragraph to be known as Section 1 (D), to read as follows:
“‘Section 1 (D). Any foreign vessel engaged in coastwise trade which
may anchor at any open bay, channel, or any loading point within the
territorial waters of the City of Basilan for the purpose of loading or
unloading logs or passengers and other cargoes shall pay an anchorage fee
of 1/2 centavo (P.005) per registered gross ton of the vessel for the first
twenty-four (24) hours, or part thereof, and for succeeding hours, or part
thereof, PROVIDED, that maximum charge shall not exceed, seventy-five
pesos (P75.00) per day, irrespective of the greater tonnage of the vessels.’”

Appellees are foreign shipping companies licensed to do business in

the Philippines, with offices in Manila. Their vessels call at Basilan
City and anchor in the bay or channel within its territorial waters. As
the city treasurer assessed and attempted to collect from them the
anchorage fees prescribed in the aforesaid amendatory ordinance,
they filed the present action for Declaratory Relief to have the courts
determine its validity. Upon then petition the lower court issued a
writ of preliminary injunction restraining appellants from collecting
or attempting to collect from them the fees prescribed therein.
After the denial of appellants’ motion to dismiss the complaint
on the ground of wrong venue, they filed their answer alleging
therein that the City of Basilan had authority, through its city
council, to enact the questioned ordinance in the exercise of either
its revenue-raising power or of its police power. They also filed a
counterclaim to recover alleged uncollected anchorage dues
amounting to P7,500.00, and the sum of P2,000.00 for expenses
incurred in defending the suit.
The question to be resolved is whether the City of Basilan has the
authority to enact Ordinance 180 and to collect the anchorage fees
prescribed therein.

311

VOL. 2, MAY 31, 1961 311

 American Mail Line vs. City of Basilan

In support of the affirmative, appellant city relies upon the following

provisions of its Charter (Republic Act 288):

“SEC. 14. General Powers and Duties of the Council.—Except as otherwise

provided by law, and subject to the conditions and limitations thereof, the
Council shall have the following legislative powers:
(a) To levy and collect taxes for general and special purposes in
accordance with law.
xxxx
(c) To enact ordinances for the maintenance and preservation of peace
and good morals.
xxxx
(v) To fix the charges to be paid by all watercraft landing at or using
public wharves, docks, levees, or landing places.”

Under paragraph (a) transcribed above, it is clear that the City of

Basilan may only levy and collect taxes for general and special
purposes in accordance with or as provided by law; in other words,
the City of Basilan was not granted a blanket power of taxation. The
use of the phrase “in accordance with law”—which, in our opinion,
means the same as “as provided by law”—clearly discloses the
legislative intent to limit the taxing power of the City.
The next point to be considered is whether the questioned
ordinance may be upheld under the provisions of Section 14(v) of
Republic Act No. 288. After a careful consideration of the language
employed therein, we have reached the conclusion that said
provision does not authorize the City of Basilan to promulgate
ordinances providing for the collection of “Anchorage” fees. This is
clearly not included in the power granted by the provision under
consideration “to fix the charges to be paid by all watercraft landing
at or using public wharves, docks, levees, or landing places.” That
this is so is shown by the need which the City of Basilan had to
enact the amendatory ordinance.
Appellants also argue that the ordinance in question was validly
enacted in the exercise of the city’s police power and that the fees
imposed therein are for purely

312

312 SUPREME COURT REPORTS ANNOTATED

American Mail Line vs. City of Basilan

regulatory purposes. In this connection it has been held that the

power to regulate as an exercise of police power does not include the
power to impose fees for revenue purposes (Cu Unjieng vs.
Patstone, 42 Phil. 818; Pacific Commercial Co. vs. Romualdez, etc.,
et al., 46 Phil. 917; Arquiza, etc. vs. Municipality of Zamboanga, 55
Phil. 653). In the Cu Unjieng case it was held that fees for purely
regulatory purposes “may only be of sufficient amount to include the
expenses of issuing the license and the cost of the necessary
inspection or police surveillance, taking into account not only the
expense of direct regulation but also incidental expenses. In Manila
Electric Co. vs. Auditor General, 73 Phil. 129-135, it was also held
that the regulatory fee “must be more than sufficient to cover the
actual cost of inspection or examination as nearly as the same can be
estimated. If it were possible to prove in advance the exact cost, that
would be the limit of the fee.”
To support the claim that the fees imposed are merely regulatory
it is said that the City of Basilan is an island with mountainous
coasts and fringed by numerous coves and inland bays and islets,
and may become a veritable haven for smugglers if the city has no
funds or means to suppress their illegal activities, but we believe
that, this notwithstanding, the fees required are intended for revenue
purposes. In the first place, being based upon the tonnage of the
vessels, the fees have no proper or reasonable relation to the cost of
issuing the permits and the cost of inspection or surveillance. In the
second place, the fee imposed on foreign vessels—1/2 centavo per
registered gross ton for the first 24 hours, and which shall not
exceed P75.00 per day—exceeds even the harbor fee imposed by the
National Government, which is only P50.00 for foreign vessels (sec.
2702 of the Tariff and Customs Code, Republic Act No. 1937, taken
from Sec. 2, Republic Act No. 1317 which was enacted by Congress
to raise revenues for the Port Works Fund). Moreover, Mariano
Mancao, Port Inspector of the City of Basilan, in his affidavit dated
February 17, 1956 (Exh. O), states that were it not for the injunction
issued by the lower court in this case,

313

VOL. 2, MAY 31, 1961 313

American Mail Line vs. City of Basilan

the city “would have collected considerable amounts from the

plaintiffs for anchorage fees”. All these circumstances point to the
conclusion that the fees were intended for revenue purposes.
Lastly, appellant city’s own contention that the questioned
ordinance was enacted in the exercise of its power of taxation,
makes it obvious that the fees imposed are not merely regulatory.
WHEREFORE, the decision appealed from is affirmed, and the
preliminary injunction issued heretofore is made final. Without
costs.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador,

Concepcion, Reyes, J.B.L., Paredes, De Leon and Natividad, JJ.,
concur.
Barrera, J., took no part.

Decision affirmed.

*
ANNOTATION
VALIDITY OF MUNICIPAL LICENSE FEES IMPOSED
PURSUANT TO MUNICIPAL POWER

I. Taxation vs. Regulation—

(1) Purpose is controlling.—The question arises generally in

those cases where the municipal corporation imposing the
fee is admittedly without power to impose a tax on the
subject of the regulation.

The issue centers on whether the exaction imposed by the ordinance,

whatever be its name, is truly a tax, or whether it is merely a license
fee.
In such cases, the controlling factor is the purpose of the
exaction. Such purpose is determined by a considera-

_______________

* This annotation deals with the question of validity of municipal license fees
imposed pursuant to the police power of municipal corporations. It does not deal with
impositions purporting to be “license fees” based on undoubted taxing or revenue
power with respect to the subject or subjects in connection with which the “fees” are
imposed.
The problem generally arises from the facts (a) that the same statutes provide for
both municipal taxation and municipal regulation and (b) that the ordinance imposing
the fee is not clear as to which municipal power is intended to he exercised.

314

314 SUPREME COURT REPORTS ANNOTATED

American Mail Line vs. City of Basilan

tion of the relevant factors, including the (1) amount of the

imposition and (2) the nature of the activity regulated. (City of Iloilo
v. Villanueva, L-12695, March 23, 1959; Saldaña v. City of Iloilo, L-
10470, June 26, 1958; Panaligan v. City of Tacloban, L-9319,
September 27, 1957; Morcoin v. City of Manila, L-15351, January
28, 1961; Vega v. City of Iloilo, 50 O.G. 2456; Arong v. Raffiñan &
Inclino, L-8673-74, February 18, 1956; Hercules Lumber Co. v.
Mun. of Zamboanga, 55 Phil. 653; Pacific Commercial Co. v.
Romualdez, 49 Phil. 917; Rojas & Bros. v. City of Cavite, L-10730,
May 26, 1958; Cu Unjieng v. Patstone, 42 Phil. 818; Recreation &
Amusement Association of the Philippines v. City of Manila, L-7922,
February 22, 1957; People v. Felisarta, L-15346, June 29, 1962;
Santos v. Municipal Government of Caloocan, L-15807, April 22,
1963; Cia. Gen. de Tabacos de Filipinas v. City of Manila, L-16619,
June 29, 1963; Nin Bay Mining Co. v. Mun. of Roxas, L-20125, July
20, 1965.

(2) Imposition valid.—Based on the foregoing test, the

imposition was upheld as truly a license fee in the following
cases: Recreation & Amusement Association of the
Philippines v. City of Manila, L-7922, February 22, 1957;
Physical Therapy Organization of the Philippines, Inc. v.
Mun. Board of the City of Manila, L-10448, August 30,
1957; Arquiza Luta v. Mun. of Zamboanga, 50 Phil. 748;
Gavino v. Mun. of Calapan, 71 Phil. 438; City of Manila v.
La Granja, Inc., 73 Phil. 585; Cariño v. Jamoralno, 56 Phil.
188; Cia. Gen. de Tabacos de Filipinas v. City of Manila, L-
16619, June 29, 1963; People v. Felisarta, L-15346, June
29, 1962; Nin Bay Mining Co. v. Mun. of Roxas, L-20125,
July 20, 1965.
(3) Imposition invalid.—But in the following cases, the
impositions, purporting to be license fees, were invalidated
as unauthorized taxes: Rojas & Bros. v. City of Cavite, L-
10730, May 26, 1958; Cu Unjieng v. Patstone, 42 Phil. 818;
Hercules Lumber Co. v. Mun. of Zamboanga, 55 Phil. 653;
Pacific Commercial Co. v. Romualdez, 49 Phil. 917; Smith,
Bell & Co., Ltd. v. Mun. of Zamboanga, 55 Phil. 466; City
of Iloilo v. Villanueva, L-12695, March 23, 1959; Saldaña v.
City of Iloilo, L-10470, June 26, 1958; Panaligan v. City of
Tacloban, L-9319, September 27, 1957; Arong

315

VOL. 2, MAY 31, 1961 315

American Mail Line vs. City of Basilan

v. Raffiñan & Inclino, L-8673, February 18, 1956; Young v.

Raffiñan & Zabate, L-8674, February 18, 1956; Manila
Lighter Trans. Co., Inc. v. Mun. Bd. of Cavite City, L-6884,
April 27, 1956; Morcoin v. City of Manila, L-15351,
January 28, 1961; American Mail Line v. City of Basilan, L-
12647, May 31, 1961; Lacson v. City of Bacolod, L-15892,
April 23, 1962; Santos v. Mun. Government of Caloocan, L-
15897, April 22, 1963.

II. Relevant Consideration—

(1) Designation in ordinance.—Whether the purpose is merely
regulatory or chiefly raising of revenue is usually difficult of
determination. The designation in the ordinance, as a rule, is not
controlling.
The term “license fees,” for example, has been used
indiscriminately in designating imposition in the exercise of either
the licensing or regulatory power, or the taxing power. Manila Motor
Co. v. City of Manila, 72 Phil. 336, where the Supreme Court held
that the power to impose a tax on the business of the taxpayer being
clearly granted, it is immaterial how such imposition is called. To
the same effect: Uy Matiao & Co., Inc. v. City of Cebu, 49 O.G.
1797; Medina v. City of Baguio, 38 O.G. 4769; Manila Electric Co.
v. City of Manila, L-8694, April 28, 1956.
Such designation, however, in the ordinance has been sometimes
considered as evidencing the purpose of the imposition. Thus, it has
been held that where the imposition is labelled by the ordinance
itself as a tax and the amount is substantial, the same is a tax and not
a mere fee for regulatory purposes. (Manila Lighter Trans. Co., Inc.
v. Mun. Board of Cavite, L-6848, April 27, 1956; Mun. of Cotabato
v. Santos, L-12757, May 29, 1956; Shell v. Vaño, 50 O.G. 1046;
Lacson & Palanca vs. City of Bacolod, L-15892, April 23, 1962).
(2) Amount of the impositions.—As a rule, the circumstance
usually considered as evidencing the true purpose of the imposition
is the amount thereof.
For an imposition to be considered a license fee, it must

316

316 SUPREME COURT REPORTS ANNOTATED

American Mail Line vs. City of Basilan

bear a reasonable relation to the probable expenses of regulation.

In the following cases, the amounts were deemed reasonable for
police purposes: Universal Pictures v. Romualdez & Alfonso, 52
Phil. 576; Physical Therapy Organization of the Philippines, Inc. v.
Mun. Board of Manila, L-10448, August 30, 1957; Gavino v. Mun.
of Calapan, 71 Phil. 438; City of Manila v. La Granja, Inc., 73 Phil.
585; Rojas & Bros., Inc. v. City of Cavite, L-10730, May 26, 1958;
People v. Felisarta, L-15346, June 29, 1962; Nin Bay Mining v.
Mun. of Roxas, L-20125, July 20, 1965.
In the following cases, the amounts were deemed too much for
regulatory purposes: Rojas & Bros., Inc. v. Cavite City, L-10730,
May 26, 1958; Cu Unjieng v. Patstone, 42 Phil. 818; Hercules
Lumber Co. v. Mun. of Zamboanga, 55 Phil. 653; Pacific
Commercial Co. v. Romualdez, 49 Phil. 917; Smith, Bell & Co., Ltd.
v. Mun. of Zamboanga, 55 Phil. 466; City of Iloilo v. Villanueva, L-
12695, March 23, 1959; Panaligan v. City of Tacloban, L-9319,
September 27, 1957; Morcoin v. City of Manila, L-15351, January
28, 1961; Lacson v. Bacolod City, L-15892, April 23, 1962;
American Mail Line v. City of Basilan, L-12647, May 31, 1961;
Santos v. Mun. Government of Caloocan, L-15807, April 22, 1963.
(3) Useful vs. non-useful activity.—A distinction is made in this
regard between useful or non-useful occupations or enterprises.
(Physical Therapy Organization of the Philippines, Inc. v. Mun.
Board of Manila, L-10448, August 30, 1957; Cu Unjieng v.
Patstone, 42 Phil. 818; Arquiza Luta v. Mun. of Zamboanga, 50 Phil.
748.)
Where the trade or enterprise is useful, the license fee may only
be a sufficient amount to include the expenses of issuing the license
and the cost of the necessary inspection and police surveillance,
taking into account not only the expense of direct regulation but also
incidental consequence. (Cu Unjieng v. Patstone, 42 Phil. 818). This
test was also adverted to in Saldaña v. City of Iloilo, L-10470, June
26, 1958; Panaligan v. City of Tacloban, L-9319, September 27,
1957; City of Iloilo v. Villanueva, L-12695, March 23, 1959; Manila
Lighter Trans. Co., Inc. v.

317

VOL. 2, MAY 31, 1961 317

American Mail Line vs. City of Basilan

Cavite City, L-6848, April 27, 1956; Morcoin v. City of Manila, L-

15351, January 28, 1961; Gerena v. City of Manila, L-16505,
January 28, 1961; American Mail Line v. City of Basilan, L-12647,
May 31, 1961; Lacson & Palanca v. Bacolod City, L-15892, April
23, 1962; People v. Felisarta, L-15346, June 29, 1962; Santos v.
Mun. Government of Caloocan, L-15807, April 22, 1963; Nin Bay
Mining Co. v. Mun. of Roxas, L-20125, July 20, 1965.
(4) Invalid regulation of useful activity.—On this basis, pretended
license fees have been struck down: (1) that amounting to one-half
the assessed value of the land covered by an arcade required by
ordinance of landowners with lots adjoining certain streets (Cu
Unjieng v. Patstone, 42 Phil. 818); (2) those consisting of a few
centavos for every admission ticket in places of amusements (Rojas
& Bros. v. City of Cavite, L-10730, May 26, 1958; Arong v. Raffiñan
& Inclino, L-8673, February 18, 1956, and Young v. Raffiñan &
Zabate, L-8674, February 18, 1956); that amounting to P24 per
apartment each year (City of Iloilo v. Villanueva, L-12965, March
23, 1959); inspection fees consisting of a few centavos per head of
animal shipped or transported outside the municipal corporation
(Panaligan v. City of Tacloban, L-9319, September 27, 1957;
Saldaña v. City of Iloilo, L-10470, June 26, 1958); annual fee
amounting to P400 on marine shops not operated as a business
(Manila Lighter Trans. Co., Ltd. v. Mun. Board of Cavite City, L-
6848, April 27, 1956; an annual fee of P300 on juke-boxes (Gerena
v. City of Manila, L-16505, January 28, 1961); anchorage fee on
foreign vessels at port of entry amounting to a maximum of P75 a
day (American Mail Line v. City of Basilan, L-12647, May 31, 1961;
imposition of internal organs fees, meat inspection fees and corral
fees, in addition to duly authorized slaughter or slaughterhouse fees
(Santos v. Mun. Government of Caloocan, L-15807, April 22, 1963).
(5) Valid regulation of non-useful activity.—It is otherwise with
non-useful occupations or enterprises. As to them, a municipal
corporation is allowed a wider discretion in respect to the amount of
the fee than in regard to license fees for useful occupations, and
aside from ap-

318

318 SUPREME COURT REPORTS ANNOTATED

American Mail Line vs. City of Basilan

plying the legal principle that municipal ordinances must not be

unreasonable, oppressive, or tyrannical, the courts have generally
declined to interfere with such discretion. (Cu Unjieng v. Patstone,
42 Phil. 818).
On this rule, our courts have sustained license fees in amounts
beyond the probable expenses of regulation with respect to such
enterprises as deal in the sale of liquor (Arquiza Luta v. Mun. of
Zamboanga, 50 Phil. 748); the practice of hygienic and aesthetic
massage (Physical Therapy Organization of the Philippines, Inc. v.
Mun. Board of Manila, L-10448, Aug. 30, 1957); and cockpits or
cockfights (Cariño v. Jamoralne, 56 Phil. 818; Petilla v. Roca, CA-
G.R. No. 28724-R, June 21, 1963; Calagui v. Reyes, CA-G.R. No.
28835, May 24, 1963); trade in liquor (Cia. Gen. de Tabacos de
Filipinas v. City of Manila, L-16619, June 29, 1963).
(6) Other circumstances.—In addition, other circumstances have
been considered as evidencing the true, as distinguished from the
ostensible purpose of the imposition assailed (Panaligan v. City of
Tacloban, L-9319, September 27, 1957; Arong v. Raffiñan & Inclino,
L-8673 and Young v. Raffiñan & Zabate, L-8674, February 18,
1956).
A claim in one case that the license fee was imposed for
regulatory purposes was denied, where there was no showing of any
need for such regulation and such fee appears to have been imposed
for unnecessarily on an occupation or business not inherently subject
to regulation (Panaligan v. City of Tacloban, L-9319, September 27,
1957).
In another case, the defense that the amounts imposed were
imposed for regulatory purposes could not be sustained, for the
reason that the enterprises supposed to be licensed were already
being licensed under a prior ordinance and were paying annual fees
 thereunder (Arong v. Raffiñan & Inclino, L-8673 and Young v.
Raffiñan & Zabate, L-8674, February 18, 1956).
And it has been held that where the alleged fees, besides being
substantial, are based solely on tonnage of the foreign vessels
clocking at the port of entry, said fees have

319

VOL. 2, MAY 31, 1961 319

Mercado vs. Elizalde & Co., Inc.

no reasonable relation to the expenses of regulation and surveillance

(American Mail Line v. City of Basilan, L-12647, May 31, 1961).—
PERFECTO V. FERNANDEZ.

_______________

© Copyright 2018 Central Book Supply, Inc. All rights reserved.