First Philippine Industrial Corp. v.

CA
 - denied the protest contending that petitioner cannot be considered

FACTS:
First Philippine Industrial Corporation is a grantee of a
pipeline concession under RA No. 387, as amended, to contract, install
and operate oil pipelines. The original pipeline concession was granted
in 1967 and renewed by the Energy Regulatory Board in 1992. In 1995,
it applied for 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.
The city treasurer assessed FPIC for products pumped at GPS-1 for the
fiscal year 1993, and in order not to hamper its operation, the latter paid
the tax under protest.
Petitioner:
- filed its letter-protest alleging among others that is a pipeline operator
with a government concession granted under the Petroleum Act. It is
engaged in the business of transporting petroleum products from the
Batangas refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, it is exempt from paying tax on gross receipts under
Section 133 of the Local Government Code of 1991. That transportation
contractors are not included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local Government Code. Therefore,
the authority to impose tax 'on contractors and other independent
contractors' under Section 143, Paragraph (e) of the Local Government
Code does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said
section limits the imposition of fees and charges on business to such
amounts as may be commensurate to the cost of regulation, inspection,
and licensing. Hence, assuming arguendo that FPIC is liable for the
license fee, the imposition thereof based on gross receipts is in violation
of the aforecited provision
 persons or property from place to place, for compensation, offering his
City Treasurer:
 carrier" as "any person, corporation, firm or association engaged in the
engaged in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code.
Petitioner filed with the Regional Trial Court of Batangas City a
complaint for tax refund with prayer for a writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her
capacity as City Treasurer. It argued that it cannot be taxed, thus, the act
of City Treasurer was in violation of the tax exemption granted by the
Loc Gov’t of 1991.

The respondents argued that petitioner cannot
be exempt from taxes under Section 133 (j) of the Local Government
Code as said exemption applies only to "transportation contractors and
persons engaged in the transportation by hire and common carriers by
air, land and water." 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.
Rulings:

RTC: dismissed the complaint. Petitioner is either a contractor or an
independent contractor
CA: affirmed. 

ISSUE:

Whether or not petitioner is a common carrier thus should be exempt
from the payment of local tax

HELD:

YES. A common carrier may be defined, broadly, as one who holds
himself out to the public as engaged in the business of transporting
services to the public generally. Article 1732 Code defines a "common
business of carrying or transporting passengers or goods or both, by land, Petitioner is already paying three (3%) percent common carrier's tax on
water, or air, for compensation, offering their services to the public." The its gross sales/earnings under the National Internal Revenue Code.
test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation; 2. He must undertake to carry goods of the kind to
which his business is confined; 3. He must undertake to carry by the
method by which his business is conducted and over his established
roads; and 4. The transportation must be for hire.
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.
Under Section 13, paragraph (b) of the Public Service Act, 'public
service' includes: 'every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier
x x x engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system gas, electric light heat and power, water
supply and power petroleum x x x
Under the Petroleum Act of the Philippines specifically Art. 86,
petitioner is considered a common carrier. It also regards petroleum
operation as a public utility. The Bureau of Internal Revenue likewise
considers the petitioner a "common carrier." In BIR Ruling No. 069-83,
it declared petitioner is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier and
such being the case, it is not subject to withholding tax. Futhermore,
during the deliberations in the HoR on the Loc Gov’t Code it was
explained that the transportation business is excluded from the taxing
powers of LGUs is to prevent a duplication of the so-called "common
carrier's tax."

LTO v. City of Butuan
FACTS:

The Sangguniang Panglungsod of Butuan, passed SP Ordinance
No.916-92 entitled " An Ordinance Regulating the Operation of
Tricycles-for-Hire, providing mechanism for the issuance of Franchise,
Registration and Permit, and Imposing Penalties for Violations thereof
and for other Purposes." The ordinance provided for, among other
things, the payment of franchise fees for the grant of the franchise of
tricycles-for-hire, fees for the registration of the vehicle, and fees for the
issuance of a permit for the driving thereof. Petitioner LTO explains that
one of the functions of the national government that, indeed, has been
transferred to local government units is the franchising authority over
tricycles-for-hire of the Land Transportation Franchising and Regulatory
Board ("LTFRB") but not, it asseverates, the authority of LTO to register
all motor vehicles and to issue to qualified persons of licenses to drive
such vehicles. In order to settle the variant positions of the parties, the
City of Butuan, represented by Mayor Democrito D. Plaza, filed with the
trial court a petition for prohibition, mandamus, injunction with a prayer
for preliminary restraining order ex-parte seeking the declaration of the
validity of SP Ordinance No.962-93 and the prohibition of the
registration of tricycles-for-hire and the issuance of licenses for the
driving thereof by the LTO.
 to citizens generally of common right. On the other hand, "to register"
RTC:
 means to record formally and exactly, to enroll, or to enter precisely in a
- a permanent injunctive writ be issued against the LTO prohibiting and
enjoining them from forcing or compelling Tricycles to be registered
with, and drivers to secure their licenses from respondent LTO or secure
franchise from LTFRB and from collecting fees thereon.
- it also held
that the authority to register tricycles, the grant of the corresponding
franchise, the issuance of tricycle drivers' license, and the collection of
fees therefor had all been vested in the LGUs. Accordingly, it decreed
the issuance of a permanent writ of injunction against LTO, prohibiting
and enjoining LTO, as well as its employees and other persons acting in
its behalf, from (a) registering tricycles and (b) issuing licenses to drivers
of tricycles.

CA:
-affirmed.

ISSUE:

Whether or not the power to register, tricycles in particular, as well as to
issue licenses for the driving thereof have been devolved to local
government units
HELD:

NO.
Registration and licensing functions are vested in the
LTO by virtue of Article III, Section 4 (d) (1) of R.A. No.4136
while franchising and regulatory responsibilities had been
vested in the LTFRB pursuant to E.O. No. 202.

Under the
Local Government Code, certain functions of the DOTC were
transferred to the LGUs. LGUs indubitably now have the power to
regulate the operation of tricycles-for-hire and to grant franchises for the
operation thereof. "To regulate" means to fix, establish, or control; to
adjust by rule, method, or established mode; to direct by rule or
restriction; or to subject to governing principles or laws. A franchise is
defined to be a special privilege to do certain things conferred by
government on an individual or corporation, and which does not belong
list or the like, and a "driver's license" is the certificate or license issued
by the government which authorizes a person to operate a motor vehicle.
The devolution of the functions of the DOTC, performed by the LTFRB,
to the LGUs, as so aptly observed by the Solicitor General, is aimed at
curbing the alarming increase of accidents in national highways
involving tricycles. It has been the perception that local governments are powers are separate and distinct powers. To construe the tax provisions
in good position to achieve the end desired by the law-making body of Section 133(1) indistinctively would result in the repeal to that extent
because of their proximity to the situation that can enable them to address of LTO's regulatory power which evidently has not been intended. If it
that serious concern better than the national government. were otherwise, the law could have just said so.

The power over
Nevertheless, under Article 458 (a)[3-VI] of the Local Government
tricycles granted under Section 458(a)(3)(VI) of the Local Government
Code, the power of LGUs to regulate the operation of tricycles and to
Code to LGUs is the power to regulate their operation and to grant
grant franchises for the operation thereof is still subject to the guidelines
franchises for the operation thereof. The exclusionary clause
prescribed by the DOTC. In compliance therewith, DOTC
contained in the tax provisions of Section 133(1) of the Local
issued "Guidelines to Implement the Devolution of LTFRBs Franchising
Government Code must not be held to have had the effect of withdrawing
Authority over Tricycles-For-Hire to Local Government units pursuant
the express power of LTO to cause the registration of all motor vehicles
to the Local Government Code. As can be gleaned from the guidelines,
and the issuance of licenses for the driving thereof.
the newly delegated powers pertain to the franchising and
regulatory powers theretofore exercised by the LTFRB and not to
the functions of the LTO relative to the registration of motor vehicles
and issuance of licenses for the driving thereof. Clearly unaffected by
the Local Government Code are the powers of LTO under R.A. No.4136
requiring the registration of all kinds of motor vehicles "used or operated
on or upon any public highway" in the country.

The Commissioner
of Land Transportation and his deputies are empowered at anytime to
examine and inspect such motor vehicles to determine whether said
vehicles are registered, or are unsightly, unsafe, improperly marked or
equipped, or otherwise unfit to be operated on because of possible
excessive damage to highways, bridges and other infrastructures. The
LTO is additionally charged with being the central repository and
custodian of all records of all motor vehicles. 

The reliance made by
respondents on the broad taxing power of local government units,
specifically under Section 133 of the Local Government Code, is
tangential. 

Police power and taxation, along with eminent domain,
are inherent powers of sovereignty which the State might share with
local government units by delegation given under a constitutional or a
statutory fiat. The basic aim of police power is public good and welfare.
Taxation, in its case, focuses on the power of government to raise
revenue in order to support its existence and carry out its legitimate
objectives. Although correlative to each other in many respects, the grant
of one does not necessarily carry with it the grant of the other. The two

Philippine Fisheries Dev’t Authority v. CA

 Iloilo because it enjoys the beneficial use of the IFPC. It added, that in
FACTS:
Then Pres. Marcos, issued PD 977 creating Authority and placing it
under the direct control and supervision of the Secretary of Natural
Resources. Subsequently, EO 772 was issued renaming Authority as
Philippine Fisheries Dev’t Authority. attaching said agency to the
Ministry of Natural Resources. Upon the effectivity of the
Administrative Code (EO 292), the Authority became an attached
agency of the Department of Agriculture. The Ministry of Public Works
and Highways reclaimed from the sea a 21-hectare parcel of land in
Barangay Tanza, Iloilo City, and constructed thereon the IFPC,
consisting of breakwater, a landing quay, a refrigeration building, a
market hall, a municipal shed, an administration building, a water and
fuel oil supply system and other port related facilities and machineries.
Upon its completion, the Ministry turned over IFPC to the Authority,
pursuant to Section 11 of PD 977, which places fishing port complexes
and related facilities under the governance and operation of the
Authority. Notwithstanding said turn over, title to the land and buildings
of the IFPC remained with the Republic. The Authority thereafter leased
portions of IFPC to private firms and individuals engaged in fishing
related businesses.
The City of Iloilo assessed the entire IFPC for real property taxes. The
assessment remained unpaid until the alleged total tax delinquency of the
Authority for the fiscal years 1988 and 1989 amounted to P5,057,349.67,
inclusive of penalties and interests. To satisfy the tax delinquency, the
City of Iloilo scheduled on August 30, 1990, the sale at public auction of
the IFPC.
The Authority filed an injunction case with RTC. The parties agreed that
the Authority can file a claim for tax exemption with the Iloilo City
Assessor’s Office. The latter, however, denied the claim for exemption,
hence, the Authority elevated the case to the Department of Finance.
DOF:
- the Authority is liable to pay real property taxes to the City of
satisfying the amount of the unpaid real property taxes, the property that
is owned by the Authority shall be auctioned, and not the IFPC, which is
a property of the Republic
The Authority filed a petition before the Office of the President but was
denied hence it appealed to the CA which affirmed the President’s
decision. However, CA opined that the IFPC may be sold at public
auction to satisfy the tax delinquency of the Authority.
ISSUE:

Whether or not the Authority is liable to pay real property tax to the City
of Iloilo

Whether or not the IFPC may be sold at public auction to satisfy the tax
delinquency
HELD:

Yes, but only with respect to the portion of the property leased to
private entities. The Authority is not a GOCC but an instrumentality of
the national government which is generally exempt from payment of real
property tax. However, said exemption does not apply to the portions of
the IFPC which the Authority leased to private entities. With respect to
these properties, the Authority is liable to pay real property tax.
Nonetheless, the IFPC, being a property of public dominion cannot be
sold at public auction to satisfy the tax delinquency.
In MIAA v. CA, the Court made a distinction between a GOCC and an
instrumentality. GOCC refers to any agency organized as a stock or
non-stock corporation, vested with functions relating to public needs
whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at
least fifty-one (51) percent of its capital stock.
For an entity to be
considered as a GOCC, it must either be organized as a stock or non-
stock corporation. 2 requisites must concur before one may be classified
as a stock corporation, namely: (1) that it has capital stock divided into
shares, and (2) that it is authorized to distribute dividends and allotments
of surplus and profits to its stockholders. If only one requisite is present,
it cannot be properly classified as a stock corporation. As for non-stock
corporations, they must have members and must not distribute any part
of their income to said members. 


On the basis of the parameters, the Authority should be classified as an
instrumentality of the national government. As such, it is generally
exempt from payment of real property tax, except those portions
which have been leased to private entities. The Authority is not a
GOCC but an instrumentality of the government. The Authority has a
capital stock but it is not divided into shares of stocks. Also, it has no
stockholders or voting shares. Hence, it is not a stock corporation.
Neither it is a non-stock corporation because it has no members. 

 State for public use and/or public service falls within the term "port" in
When the law vests in a government instrumentality corporate powers,
the instrumentality does not become a corporation. Unless the
government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, the Authority which is
tasked with the special public function to carry out the government’s
policy "to promote the development of the country’s fishing industry and
improve the efficiency in handling, preserving, marketing, and
distribution of fish and other aquatic products," exercises the
governmental powers of eminent domain, and the power to levy fees and
charges. At the same time, the Authority exercises "the general corporate
powers conferred by laws upon private and government-owned or
controlled corporations.”
The Authority should be liable to pay taxes only with respect to the
portions of the property, the beneficial use of which were vested in
private entities. When local governments invoke the power to tax on
national government instrumentalities, such power is construed strictly
against local governments. The rule is that a tax is never presumed and
there must be clear language in the law imposing the tax. Any doubt
whether a person, article or activity is taxable is resolved against
taxation. This rule applies with greater force when local governments
seek to tax national government instrumentalities. Thus, the real property
tax assessments issued by the City of Iloilo should be upheld only with
respect to the portions leased to private persons.
Whether or not the IFPC may be sold at public auction to satisfy the
tax delinquency

No, the IFPC, being a property of public dominion cannot be sold at
public auction to satisfy the tax delinquency.
In case the Authority fails
to pay the real property taxes due thereon, said portions cannot be sold
at public auction to satisfy the tax delinquency. In Chavez v. Public
Estates Authority it was held that reclaimed lands are lands of the public
domain and cannot, without Congressional fiat, be subject of a sale,
public or private. The Iloilo fishing port which was constructed by the
the aforecited provision. Being a property of public dominion the same
cannot be subject to execution or foreclosure sale. In like manner, the
reclaimed land on which the IFPC is built cannot be the object of a
private or public sale without Congressional authorization. Whether
there are improvements in the fishing port complex that should not be
construed to be embraced within the term "port," involves evidentiary
matters that cannot be addressed in the present case. As for now,
considering that the Authority is a national government instrumentality,
any doubt on whether the entire IFPC may be levied upon to satisfy the
tax delinquency should be resolved against the City of Iloilo. 

In sum, the Court finds that the Authority is an instrumentality of
the national government, hence, it is liable to pay real property taxes
assessed by the City of Iloilo on the IFPC only with respect to those
portions which are leased to private entities. Notwithstanding said
tax delinquency on the leased portions of the IFPC, the latter or any
part thereof, being a property of public domain, cannot be sold at
public auction. This means that the City of Iloilo has to satisfy the
tax delinquency through means other than the sale at public auction
of the IFPC.