G.R. No. 125948 December 29, 1998 FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs.

COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents. FACTS: Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines, originally granted in 1967 and renewed by the Energy Regulatory Board in 1992. Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code (LGC). After the City Treasurer assessed the business tax on the petitioner payable in four installments, the petitioner paid only the 1 st installment under protest. Then petitioner filed a letter-protest addressed to the respondent City Treasurer, and claimed that their Company is exempt from paying tax on gross receipts for it can be considered a transportation contractor and thus exempted from business tax under the LGC (Sec. 133). The City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under the LGC. Subsequently the petitioner filed with the RTC of Batangas City a complaint for tax refund againsts respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said code pertains to the mode or manner by which a product is delivered to its destination. RTC dismissed the complaint holding that tax exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law. CA affirmed RTCs decision. ISSUES: (1) W/N the petitioner is a common carrier or a transportation contractor and (2) W/N the exemption sought for by petitioner is not clear under the law. HELD: (1) PETITIONER IS A COMMON CARRIER - A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. Also, the definition of "common carriers" in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. (2) PETITIONER IS EXEMPTED FROM PAYMENT OF TAX - From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code. It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code.

G.R. No. 112497 August 4, 1994 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. FACTS: Filed before the Secretary of Justice are appeals of four oil companies and a taxpayer, seeking for the declaration of 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 as provided in 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. Hon. Franklin Drilon found the said ordinance violative of Sec. 187 of the LGC for the procedural requirements for the enactment of tax ordinances as specified in the LGC had indeed not been observed.. In a petition for certiorari filed by the City of Manila, the RTC 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. ISSUE: (1) W/N Section 187 of the LGC is constitutional thus making Ordinance No. 7794 null and void; (2) W/N there is compliance on the part of City of Manila in issuing Ordinance No. 7794 HELD: SECTION 187 OF THE LGC IS VALID - 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. (2) THERE IS COMPLIANCE WITH THE PROCEDURAL REQUIREMENTS FOR THE ENACTMENT OF THE ORDINANCE - 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. Posting of the ordinance as approved is may be omitted and 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.

G.R. No. L-40411

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant, vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees. FACTS: The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a sawmill in the Sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the land there appeared provisions which provides that on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any amount for said improvements and buildings. In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. The plaintiff who was also the highest bidder proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao. Petitioner claims that the property involved is a real property being mounted on cement and that a public sale must be held. ISSUE: W/N the property in question is a personal property. HELD: THE MACHINERY IS CONSIDERED A PERSONAL PROPERTY - As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by assignment from the original mortgages. Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of 1. Land, buildings, roads and constructions of all kinds adhering to the soil; x x x xxx x x x 5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade of industry. It must further be pointed out that while not conclusive, the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease. A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.

G.R. No. L-29772 September 18, 1980 CITY OF BAGUIO, plaintiff-appellee, vs. FERNANDO S. BUSUEGO, defendant-appellant. FACTS: A tax collection suit is instituted by the City of Baguio, against appellant Fernando S. Busuego, after it was established that the defendant and the Government Service Insurance System (GSIS), a government corporation, executed, by and between themselves, a "Contract to Sell" over a parcel of land although the agreed purchase price for the property has not yet been fully paid and the GSIS has up to the present time, title of the property in question but the defendant is using the same. It has also been established that under Commonwealth Act No. 186, the GSIS as well as its property are exempt from payment of all types and kinds of taxes; that the property involved in this case has been consistently assessed (amounting to P1,656) by the City of Baguio in the name of the GSIS; and that demands were made on the defendant for payment of the aforesaid taxes but said defendant refused and failed to pay the same. Also it was undisputed that defendant has paid the amount of P287.80 for realty taxes due for the year 1963 and he is demanding for refund from petitioner. The city court rendered judgment in favor of plaintiff sentencing defendant to pay the sum of P1,656.00.00 with legal interest from the filing of complaint on August 18, 1966 the same is fully paid. Upon appeal, CFI, concluding that the contract entered into by the parties was a perfected contract of sale, likewise held that defendant as owner was liable for the realty taxes on the property, and, therefore, likewise ordered defendant to pay the same amount as adjudged by the city court. Paragraph 2 of the contract entered into by the GSIS and the defendant-appellant manifests the latter's willingness at the signing thereof to pay and shoulder all taxes and assessments on the subject property and insurance thereon during the term of the said contract. However, appellants purchaser after having voluntarily paid taxes due on the property in the amount of P287.00 for the year 1963 backed out of his undertaking upon discovering that section 28(c) of Commonwealth Act 186 exempts the GSIS from the payment of taxes. His theory is that while title to the property has not passed to him, per paragraph 4 of the contract, and ownership remains with the seller, there could not be any obligation to pay taxes on the property that should be assumed by him as purchaser, since the owner-seller, in whom title remains, is exempt from taxes. ISSUE: W/N defendant-appellant, an installment purchaser of a parcel of land and its building and improvements within a housing project belonging to the Government Service Insurance System (GSIS) liable to pay realty taxes thereon from the time possession of such property was transferred to him, although pending full payment of the purchase price the seller GSIS as a government corporation exempt from the payment of taxes retains ownership and title over the property. HELD: DEFENDANT-APPELLANT IS LIABLE FOR THE PAYMENT OF REAL PROPERTY TAX - The court of first instance may have erred in pronouncing the "Contract to Sell" as a perfected contract of sale, contrary to its very terms that title remained with the seller who undertook to execute a final deed of absolute sale and deliver to the purchaser title to the property only after completion of the stipulated payments, but this is not decisive of the issue. The delivery of possession by the seller GSIS to the purchaser was clearly with the intention of passing to the latter the possession, use of and control over said property, and all the other attributes of ownership, short of the naked ownership such that it included in said transfer the incidental obligation to pay the taxes thereon, for nothing more was left to the GSIS except its right to receive full payment of the purchase price. The fact that in the contract to sell the GSIS, although aware of its own exemption from taxation stipulated and exacted from the purchaser the payment of taxes amounts to an interpretation on its part that such an immunity was not to be transmitted to a private person who becomes the beneficial owner and user of the property. Verily, this interpretative regulation by the administrative agency officially charged with the duty of administering and enforcing Commonwealth Act 186 which contains the taxexempting provision at issue carries great weight in determining the operation of said provision. The position taken by the GSIS is but in conformity with Section 40(a) of Presidential Decree No. 464 entitled The Real Property Tax Code promulgated on May 20, 1974 which reads as follows: Exemptions from Real Property Tax. The exemptions shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter; Provided, however, That this exemption shall not apply to real property of the above-named entitles the beneficial use of which has been granted, for consideration or otherwise, to a taxable person x x x. Thus under this provision, while the GSIS may be exempt from real estate tax the exemption does not cover property belonging to it "where the beneficial use thereof has been granted for consideration or otherwise to a taxable person." There can be no doubt that under the provisions of the contract in question, the purchaser to whose possession the property had been transferred was granted beneficial use thereof. It follows on the strength of the provision sec. 40(a) of PD 464 that the said property is not exempt from the real property tax. While this decree just cited was still inexistent at the time the taxes at issue were assessed on the herein appellant, indeed its above quoted provision sheds light upon the legislative intent behind the provision of Commonwealth Act 186, pertaining to exemption of the GSIS from taxes.

The end result is but in consonance with the established rule in taxation that exemptions are held strictly against the taxpayer and liberally in favor of the taxing authority.