TAX ORDINANCE CASES

CASE DIGEST : Lino Vs Pano

HON. JOSE D. LINA, JR., SANGGUNIANG PANLALAWIGAN OF LAGUNA, and HON.CALIXTO CATAQUIZ,
petitioners, vs
. HON. FRANCISCO DIZON PAÑO and TONYCALVENTO,
respondents
.
G.R. No. 129093

FACTS:On December 29, 1995, respondent Tony Calvento was appointed agent by the Philippine Charity Sweepstakes Office (PCSO) to
install Terminal OM 20 for the operation of lotto. He asked Mayor Calixto Cataquiz, Mayor of San Pedro, Laguna, for a mayor’s permit to open
the lotto outlet. This was denied by Mayor Cataquiz in a letter dated February 19, 1996. The ground for said denial was an ordinance passed
by the Sangguniang Panlalawigan of Laguna entitled Kapasiyahan Blg. 508, T. 1995which was issued on September 18, 1995.As a result of
this resolution of denial, respondent Calvento filed a complaint for declaratory relief with prayer for preliminary injunction and temporary
restraining order. In the said complaint, respondent Calvento asked the Regional Trial Court of San Pedro Laguna, Branch 93, for the following
reliefs: (1) a preliminary injunction or temporary restraining order, ordering the defendants to refrain from implementing or enforcing
Kapasiyahan Blg. 508, T. 1995; (2) an order requiring Hon. Municipal Mayor Calixto R. Cataquiz to issue a business permit for the operation of
a lotto outlet; and (3) an order annulling or declaring as invalid Kapasiyahan Blg. 508, T. 1995.On February 10, 1997, the respondent judge,
Francisco Dizon Paño, promulgated his decision enjoining the petitioners from implementing or enforcing resolution or Kapasiyahan Blg. 508,
T. 1995.

ISSUE: WON Kapasiyahan Blg. 508, T. 1995 is valid

HELD: As a policy statement expressing the local government’s objection to the lotto, such resolution is valid. This is part of the local
government’s autonomy to air its views which may be contrary to that of the national government’s. However, this freedom to exercise contrary
views does not mean that local governments may actually enact ordinances that go against laws duly enacted by Congress. Given this
premise, the assailed resolution in this case could not and should not be interpreted as a measure or ordinance prohibiting the operation of
lotto.n our system of government, the power of local government units to legislate and enact ordinances and resolutions is merely a delegated
power coming from Congress. As held in Tatel vs. Virac, ordinances should not contravene an existing statute enacted by Congress. The
reasons for this is obvious, as elucidated in Magtajas v. Pryce Properties Corp

HON. JOSE D. LINA, JR., SANGGUNIANG PANLALAWIGAN OF LAGUNA, and HON.CALIXTO CATAQUIZ,
petitioners, vs
. HON. FRANCISCO DIZON PAÑO and TONYCALVENTO,
respondents
.
G.R. No. 129093

FACTS:On December 29, 1995, respondent Tony Calvento was appointed agent by the Philippine Charity Sweepstakes
Office (PCSO) to install Terminal OM 20 for the operation of lotto. He asked Mayor Calixto Cataquiz, Mayor of San
Pedro, Laguna, for a mayor’s permit to open the lotto outlet. This was denied by Mayor Cataquiz in a letter dated
February 19, 1996. The ground for said denial was an ordinance passed by the Sangguniang Panlalawigan of Laguna
entitled Kapasiyahan Blg. 508, T. 1995which was issued on September 18, 1995.As a result of this resolution of denial,
respondent Calvento filed a complaint for declaratory relief with prayer for preliminary injunction and temporary
restraining order. In the said complaint, respondent Calvento asked the Regional Trial Court of San Pedro Laguna,
Branch 93, for the following reliefs: (1) a preliminary injunction or temporary restraining order, ordering the defendants
to refrain from implementing or enforcing Kapasiyahan Blg. 508, T. 1995; (2) an order requiring Hon. Municipal Mayor
Calixto R. Cataquiz to issue a business permit for the operation of a lotto outlet; and (3) an order annulling or declaring
as invalid Kapasiyahan Blg. 508, T. 1995.On February 10, 1997, the respondent judge, Francisco Dizon Paño,
promulgated his decision enjoining the petitioners from implementing or enforcing resolution or Kapasiyahan Blg. 508,
T. 1995.

ISSUE: WON Kapasiyahan Blg. 508, T. 1995 is valid

HELD: As a policy statement expressing the local government’s objection to the lotto, such resolution is valid. This is
part of the local government’s autonomy to air its views which may be contrary to that of the national
government’s. However, this freedom to exercise contrary views does not mean that local governments may actually
enact ordinances that go against laws duly enacted by Congress. Given this premise, the assailed resolution in this
case could not and should not be interpreted as a measure or ordinance prohibiting the operation of lotto.n our system
of government, the power of local government units to legislate and enact ordinances and resolutions is merely a
delegated power coming from Congress. As held in Tatel vs. Virac, ordinances should not contravene an existing
statute enacted by Congress. The reasons for this is obvious, as elucidated in Magtajas v. Pryce Properties Corp
Lina v. Paño (G.R. No. 129093)
Facts:
Private respondent Tony Calvento, was appointed agent by PCSO to install a terminal for the operation of lotto, applied for a mayor’s
permit to operate a lotto outlet in San Pedro,Laguna. It was denied on the ground that an ordinance entitled Kapasiyahan Blg. 508,
Taon1995 of the Sangguniang Panlalawigan of Laguna prohibited gambling in the province,including the operation of lotto. With the
denial of his application, private respondent filed an action for declaratory relief with prayer for preliminary injunction and temporary
restraining order. The trial court rendered judgment in favor of private respondent enjoining petitioners from implementing or enforcing
the subject resolution.

Issue:
whether Kapasiyahan Blg. 508, T. 1995 of the Sangguniang Panlalawigan of Laguna and the denial of a mayor’s permit based thereon
are valid

Held:
No. The questioned ordinance merely states the “objection” of the council to the said game. It is but a mere policy statement on the
part of the local council, which is not self-executing. Nor could it serve as a valid ground to prohibit the operation of the lotto system
in the province of Laguna. As a policy statement expressing the local government’s objection to the lotto, such resolution is valid. This
is part of the local government’s autonomy to air its views which may be contrary to that of the national government’s.However, this
freedom to exercise contrary views does not mean that local governments may actually enact ordinances that go against laws duly
enacted by Congress. Given this premise, the assailed resolution in this case could not and should not be interpreted as a measure or
ordinance prohibiting the operation of lotto.

Moreover, ordinances should not contravene statutes as municipal governments are merely agents of the national government. The
local councils exercise only delegated legislative powers which have been conferred on them by Congress. The delegate cannot be
superior to the principal or exercise powers higher than those of the latter. This being the case, these councils, as delegates, cannot
be superior to the principal or exercise powers higher than those of the latter. The question of whether gambling should be permitted
is for Congress to determine, taking into account national and local interests. Since Congress has allowed the PCSO to operate lotteries
which PCSO seeks to conduct in Laguna, pursuant toits legislative grant of authority, the province's Sangguniang Panlalawigan cannot
nullify the exercise of said authority by preventing something already allowed by Congress.

Lopez v. City of Manila (GR No. 127139; Feb. 19, 1999)

FACTS:
Section 219 of Republic Act 7160 (R.A. 7160) or the Local Government Code of 1991 requires the conduct of the general revision of real
property.

The revision of real property assessments prescribed therein was not yet enforced in the City of Manila. Upon receipt of Memorandum
Circular No. 04-95 from the Bureau of Local Government Finance relating to the failure of most of the cities and municipalities of
Metropolitan Manila, including the City of Manila, to conduct the general revision of real property and after obtaining the necessary funds
from the City Council, the City Assessor began the process of general revision based on the updated fair market values of the real
properties.

The City Assessor’s Office submitted the proposed schedule of fair market values to the City Council for its appropriate action. The
council then enacted Manila Ordinance No. 7894 which was approved. With the implementation of the ordinance, the tax on the land
owned by the petitioner was increase hence he filed a special proceeding for the declaration of nullity of the City of Manila Ordinance
No. 7894 for being “unjust, excessive, oppressive or confiscatory.”

Manila Ordinance No. 7905 took effect thereafter, reducing by fifty percent (50%) the assessment levels (depending on the use of
property, e.g., residential, commercial) for the computation of tax due. The new ordinance amended the assessment levels provided by
Section 74, paragraph (A) of Manila Ordinance No. 7794..

Despite the amendment brought about by Manila Ordinance No. 7905, the controversy proceeded.

The trial court dismissed the case for failure of the petitioner to exhaust administrative remedies.

ISSUE: W/N the doctrine of exhaustion of administrative remedies may be dispensed with in the instant case
HELD: NO. As a general rule, where the law provides for the remedies against the action of an administrative board, body, or officer,
relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative
body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. 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.
“One of the reasons for the doctrine of exhaustion is the separation of powers which enjoins upon the judiciary a becoming policy of non-
interference with matters coming primarily within the competence of other department. x x x

There are however a number of instances when the doctrine may be dispensed with and judicial action validly resorted to
immediately. Among these exceptional cases are: (1) when the question raised is purely legal, (2) when the administrative body is in
estoppel; (3) when the act complained of is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the claim
involved is small; (6) when irreparable damage will be suffered; (7) when there is no other plain, speedy and adequate remedy; (8) when
strong public interest is involved; (9) when the subject of controversy is private land; and (10) in quo-warranto proceeding (citation
omitted).

In the court’s opinion, however, the instant petition does not fall within any of the exceptions above-mentioned.

Exhaustion of Admin Remedies

303 SCRA 448 (1999)
Lopez v City of Manila
Quisumbing J

Since 1979, real property taxes in Manila is based upon the 1979 fair market values. This was until the city assessor received a memorandum on the failure
of the cities on revising it. Ordinance 7894 was thus enacted which substantially increase the taxes on real properties. Petitioner aggrieved, filed a special
proceeding to declare it null. RTC issued TRO, city on the other hand enacted Ordinance 7905 which reduced the increases (to 50%). RTC IFO petitioner, MFR
by respondent granted (thus granting their MTD mainly due to failure to exhaust admin remedies and that complaint moot because of new ordinance).
Petitioner MFR denied thus went to SC raising that they can raise the question of constitutionality of a city ordinance either on RTC or SOJ on appeal. SC
affirmed RTC ruling that the present case does not fall any exception for dispensing with the rule on exhaustion of admin remedies.
DOCTRINE
 GR: where law provides for remedies, relief to courts can be sough only after exhausting the provided remedies. This is because the presumption
that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly and
prevent unnecessary and premature resort to courts.
 Except:
o (1) When the question raised is purely legal, (2) when the administrative body is in estoppel; (3) when the act complained of is patently
illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved is small; (6) when irreparable damage will be
suffered, (7) when there is no other plain, speedy and adequate remedy, (8) when strong public interest is involved; (9) when the subject
of controversy is private land; and (10) in quo-warranto proceeding
IMPORTANT PEOPLE
[Petitioner] Jaime C Lopez
[Respondent] City of Manila; Benjamin Vega (Presiding Judge RTC Manila Br 39)
FACTS

1. (Background law) Sec. 219 of RA 7160 (Local Government Code of 1991) requires the conduct of the general revision of real. Such took effect on Jan
1, 1992 but the revision of real property valuation was not yet enforced in Manila. The process of such however was already started by the city
assessor then.
a. In 1992, the schedule of real property values in the city was prepared and submitted to the City Council of Manila, but for unknown reason,
was not acted but continuously updated. (Such until 1995, the basis for collection of real estate taxes was the 1979 real estate market
values)
2. Lourdes Laderas (City Assessor of Manila), received Memorandum Circular No. 04-95 dated March 20, 1995, from the Bureau of Local Government
Finance of Department of Finance which relates to the failure of most of the cities and municipalities of Metropolitan Manila to conduct the general
revision of real property. Thus she had a dialogue with City Mayor and Council for the completion of the task.
3. (Revision) The City Assessor then began the process of general revision based on the updated fair market values
a. Thus in 1995, the tax value of the property as compared from the 1979 market values increased ranges from 600% to 3,330%, with general
average increase of 1,700%.
b. Laderas felt that the increase may have adverse reactions from the public, thus reducing the increase in valuation of real properties to
1,020%.
c. City Assessor submitted schedule of fair market values to the City Council for its appropriate action. Council then conducted public hearings
as required by law.
4. (Ordinance enacted) Proposed ordinance was then published in the Manila Standard and Balita. The City Council enacted Manila Ordinance No.
7894, entitled: "An Ordinance Prescribed as the Revised Schedule of Fair Market Values of Real Properties the City of Manila" and was then approved
by the City Mayor
a. Notices of the revised assessments were distributed to the real property owners of Manila pursuant to Sec. 223 of R.A. 7160.
5. (Petitioner’s grievance) Petitioner Jaime Lopez had his Tax on Land value increased by five hundred eighty percent (580%) while tax on improvement
value increased by two hundred fifty percent (250%).
6. (Filing of special proceeding) Thus he filed in 1996, a special proceeding for the declaration of nullity with Preliminary injunction and prayer for
TRO of the City of Manila Ordinance No. 7894. He alleged that said ordinance appears to be "unjust, excessive, oppressive or confiscatory."
7. (RTC Br 5 issued TRO; Ordinance repealed by another Ordinance) RTC Manila Branch 5 issued the TRO
a. Meanwhile, on the same date, Manila Ordinance No. 7905 repealed the previous ordinance thereby reducing the value for computation of
tax due by 50% [and improvements shall in no case exceed by two hundred percent (200%) of the levied thereon in calendar year 1995 and
the tax increase on commercial and industrial land, building and other structures shall not exceed by three hundred percent (300%)]
i. Thus the tax increased of petitioner's residential land was reduced to one hundred fifty-five percent (155%), while the tax increase
for residential improvement was eighty-two percent (82%).
8. (Motion for inhibition and Transfer to Br 39; Br 39 IFO petitioner) Respondent filed motion of inhibition of the judge due to “markedly indulgent
attitude”. Judge inhibited herself thus case rereffled to Br 39. It was here where the motion to dismiss by respondent for failure of the petitioner to
exhaust administrative remedies was acted upon.
a. Court IFO petitioner issuing the writ of injunction and denied MTD by the respondent because said motion was not detailed to avoid a
repetition of the situation in Branch 5 (bias daw)
9. (On MFR; RTC IFO respondent, MTD granted) Respondent: MFR on the denial of MTD raising here the enactment and approval of the City Mayor of
Manila Ordinance No. 7905.
a. RTC granted thee MTD mainly because petitioner failed to exhaust the administrative remedies and that the petition had become moot
and academic when Manila Ordinance No. 7894 was repealed by Manila Ordinance No. 7905.
10. (SC) MFR denied thus to SC via Rule 45 raising
i. That when the trial court ruled that it has jurisdiction over the case, the question of exhaustion of administrative remedies becomes
moot and academic. He claims that resort to administrative remedies on constitutionality of law merely permissive as provided by
Sec. 187 of R.A. 7160:
“. . . 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. . . .”
ii. That the question of the constitutionality of the city ordinance may be raised on appeal either to Secretary of Justice or the RTC,
both having concurrent jurisdiction accdg to BP 129.
b. Respondent: that the adjustment of the fair market values of real properties in the City of Manila was long overdue, being updated only
after fifteen (15) years (also that petitioner filed the case, merely to take advantage of the situation to gain political mileage and help
advance his mayoralty bid.)

RELATED ISSUE with HOLDING

a) RTC erred in not dispensing the rule on exhaustion of admin remedies (TOPIC)? NO

The petition does not fall under the exceptions on the rule on Exhaustion of Administrative Remedies
  GR: where law provides for remedies, relief to courts can be sough only after exhausting the provided remedies. This is because the presumption
that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly and
prevent unnecessary and premature resort to courts.
 Except: (remember yung 14 sa list ni maam? Sa case na ito 10)
o (1) When the question raised is purely legal, (2) when the administrative body is in estoppel; (3) when the act complained of is patently
illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved is small; (6) when irreparable damage will be
suffered, (7) when there is no other plain, speedy and adequate remedy, (8) when strong public interest is involved; (9) when the subject
of controversy is private land; and (10) in quo-warranto proceeding
 In this case in questions of legality of a tax ordinance, the remedies available are provided in Section 187, 226, and 252 of R.A. 7160.
“Sec. 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality or legality of 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, must have brought the
case before the Secretary of Justice for question of legality or constitutionality of the city ordinance.

Under Section 226 of R.A. 7160, an owner of real property who in 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 taxpayers question the excessiveness of the amount of tax, he must first pay the amount due, in accordance with Section 252 of R.A. 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.”

 SC hesitated in going through the case since the cause of action goes through the exercise of discretion by government agencies and the
determination whether or not the tax is excessive, oppressive or confiscatory which is thus a question of fact. SC scrutinized the records and ruled
that the trial court is correct that the petition does not fall under any of the exceptions to excuse compliance from the rule of exhaustion (see above).
SC quoted the RTC:
(1) Question raised is not of law but of fact.
(2) There is no showing that administrative bodies are in estoppel.
(3) It does not appear that Ordinance No. 7894 or the Ordinance No. 7905 are patently illegal.
(4) The matter does not need a compelling judicial intervention.
(5) The claim of the petitioner is not small.
(6) The court does not see any irreparable damage since he could always ask for a refund of the excess amount he paid under
protest or be credited thereof if the administrative bodies mentioned in the law.
(7) The court is of the opinion that administrative relief provided for in the law are plain, speedy and adequate.
(8) While the controversy involves public interest, judicial intervention as the petitioner would like this court to do should be
avoided as demonstrated herein below in the discussion of the third issue.
(9 and 10) Obviously not applicable in the instant case.

b) RTC erred in not applying sections 212 and 221 of RA 7160 – that sec 212 prohibits general revision of real property assessment before the approval
of the schedule of the fair market values. Therefore 1995 assessment illegal – NO (also technical part –daming numbers so I won’t go here na –
taxation na ito haha) SC agrees with RTC that issue became moot with the enactment of the second ordinance and petitioner failing to amend
said cause of action.

Enactment of second ordinance and failing to amend cause of action rendered this moot and academic
 The tax rates on level prescribed by Ordinance 7894 upon which the petition was anchored no longer exist because the tax rates in Ordinance No.
7894 have been amended/impliedly repealed by Ordinance No. 7905.
o RTC followed the advice of the SC in of NHA v CA (121 SCRA 777) that the case may be decided in its totality resolving all interlocking issues
in order to render justice to all concerned and end litigation once and for all.
 SC added that it is necessary to stress that Manila Ordinance No. 7905 is favorable to the taxpayers when it specifically states that the reduced
assessment levels shall be applied retroactively to January 1, 1996.
o Such ordinance is a social legislation to soften the impact of the tremendous increase in the value of the real properties subject to tax.
 Therefore, in enacting this ordinance, the due process of law was considered by the City of Manila so that the increase in realty tax will not amount
to the confiscation of the property.

DISPOSITIVE PORTION
Petition Denied
National Power Corporation vs City of Cabanatuan
G.R. No. 149110 April 9, 2003
NATIONAL POWER CORPORATION, petitioner,
vs.
CITY OF CABANATUAN, respondent.
FACTS: Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended.
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 latter’s gross receipts for the preceding year.

Petitioner refused to pay the tax assessment arguing 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
in accordance with sec. 13 of Rep. Act No. 6395, as amended.

The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due, plus surcharge. Respondent
alleged that petitioner’s exemption from local taxes has been repealed by section 193 of the LGC, 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.”
RTC upheld NPC’s tax exemption. On appeal the CA reversed the trial court’s Order on the ground that section 193, in relation to
sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the petitioner.

ISSUE: W/N the respondent city government has the authority to issue Ordinance No. 165-92 and impose an annual tax on “businesses
enjoying a franchise
HELD: YES. Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal
attribute of sovereignty, 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.
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 MERALCO’s 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 MERALCO’s
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)
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.” 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.

NPC v. Cabanatuan City

Action:
A petition for review of the Decision and the Resolution of the CA finding NPC liable to pay franchise tax to City of Cabanatuan.

Fact:
NAPOCOR, the petitioner, is a government-owned and controlled corporation created under Commonwealth Act 120. 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.”

For many years now, NAPOCOR sells electric power to the resident Cabanatuan City. Pursuant to Sec. 37 of Ordinance No. 165-92, the
respondent assessed the petitioner a franchise tax representing 75% of 1% of the former’s gross receipts for the preceding year.

Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government, refused to pay the tax assessment. It
argued that the respondent has no authority to impose tax on government entities. Petitioner also contend that as a non-profit
organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in accordance with Sec. 13 of RA 6395, as
amended.

Issue:
(1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its stocks are wholly owned by the National
Government and its charter characterized is as a ‘non-profit organization’?
(2) Is the NAPOCOR’s exemption from all forms of taxes repealed by the provisions of the Local Government Code (LGC)?

Held:
(1) NO. 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, and
can exercise all the powers of a corporation under the Corporation Code.

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.

(2) YES. 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. The legislative purpose to withdraw tax
privileges enjoyed under existing laws or charter is clearly manifested by the language used on Sec. 137 and 193 categorically
withdrawing such exemption subject only to the exceptions enumerated. Since it would be 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.
 NPC v. City of Cabanatuan
on 11:48 AM in Case Digests, Taxation
0

G.R. No. 149110, April 9, 2003

o TAXATION: The most effective means to raise revenues; LGU's Power of Taxation, exception to Non-delegation of taxing power;
Tax Exemptions, construed strongly against the claimant

Facts:

NPC, a GOCC, created under CA 120 as amended, selling electric power, was assessed by the City of Cabanatuan for franchise
tax pursuant to sec. 37 of Ordinance No. 165-92. NPC refused to pay the tax assessment on the grounds that the City of
Cabanatuan has no authority to impose tax on government entities and also that it is exempted as a non-profit organization. For
its part, the City government alleged that NPC’s exemption from local taxes has been repealed by sec. 193 of RA 7160.

Issue:

o Whether NPC is liable to pay an annual franchise tax to the City government

Held:

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.

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." It is not levied on the corporation simply for existing as a corporation, upon its property or its
income, 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. 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.

NPC fulfills both requisites. 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, and can exercise all the powers of a corporation under the Corporation Code.

We also do not find merit in the petitioner's 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. In the case at bar, the petitioner's 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."

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." 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 hereby AFFIRMED."

PLDT v. CITY OF BACOLOD, et. al.

G.R. No. 149179, 17 July 2005
GARCIA, J.:

FACTS:
PLDT is a holder of a legislative franchise under Act No. 3436 to render local and international telecommunications
services. On 24 August 1991, the terms and conditions of its franchise were consolidated under Republic Act No. 7082
(Public Telecommunications Policy Act of the Philippines), Section 12 of which embodies the so-called “in-lieu-of-all-taxes”
clause, whereunder PLDT shall pay a franchise tax equivalent to three percent (3%) of all its gross receipts, which
franchise tax shall be “in lieu of all taxes”.
In August 1995, the City of Bacolod, invoking its authority under Section 137, in relation to Section 151 and Section 193 of
the Local Government Code, made an assessment on PLDT for the payment of franchise tax due the City. Complying
therewith, PLDT began paying the City franchise tax from the year 1994 until the third quarter of 1998, at which time.
On 2 June 1998, the Department of Finance through its Bureau of Local Government Finance (BLGF), issued a ruling
to the effect that as of 16 March 1995, the effectivity date of the R.A. No. 7925, PLDT, among other telecommunication
companies, became exempt from local franchise tax. Invoking the BLGF’s ruling, PLDT then stopped paying local
franchise and business taxes to Bacolod City starting the fourth quarter of 1998.

Sometime in 1999, PLDT applied for the issuance of a Mayor’s Permit but the City of Bacolod withheld issuance thereof
pending PLDT’s payment of its franchise tax liability for the fourth quarter of 1998 and for the year 1999, in the
aggregate amount of PhP1,782,836.40, excluding surcharges and interest.

ISSUE:
WHETHER OR NOT Section 23 of R.A. No. 7925 operates to exempt petitioner PLDT from the payment of franchise
tax imposed by the respondent City of Bacolod.

RULING:

No, Section 23 does not operate to exempt PLDT from the payment of franchise tax imposed upon it by the City of
Bacolod.

According to Section 23 of R.A. No. 7925:

Equality of Treatment in the Telecommunications Industry – Any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted shall ipso facto become part of previously granted
telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such
franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications
franchises concerning territory covered by the franchise, the life span of the franchise, or the type of the service
authorized by the franchise.

In this case, Section 23 cannot be considered as having amended petitioner’s franchise so as to entitle it to exemption
from the imposition of local franchise taxes, as it does not appear that Congress intended it to operate as a blanket tax
exemption to all telecommunications entities. The ‘exemption’, used in Section 23 of R.A. No. 7925, is too general.
Even as it is a state policy to promote a level playing field in the communications industry, the term ‘exemption’ in
Section 23 does not mean tax exemption. The term refers to exemption from certain regulations and requirements
imposed by the National Telecommunications Commission (NTC).

Hence, the Supreme Court (SC) denied PLDT’s petition, in the same ruling as PLDT v. City of Davao. Inherently, tax
exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to
grant such exemption. And, even if it is granted, tax exemption is strictly construed against the taxpayer and liberally
construed in favor of the government. The SC held that that the “in-lieu-of-all-taxes” clause does not refer to “tax
exemption” but to “tax exclusion” nor ‘exemption’ in Section 23 means tax exemption. Consequently, the petitioner is
liable to pay local franchise taxes covering fourth quarter of 1998 and for the year 1999 onwards.

STATUTORY CONSTRUCTION MAXIM:

Legislative intent must be ascertained from a consideration of the statute as a whole and not merely of a particular
provision.

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. (PLDT)

vs.
CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as City Treasurer of Davao

GR. No. 143867

March 25, 2003
____________________________
TAX EXEMPTIONS vs. TAX EXCLUSION; “IN LIEU OF ALL TAXES” PROVISION
____________________________

Facts:

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid “in lieu of all taxes on
this franchise or earnings thereof” pursuant to RA 7082. The exemption from “all taxes on this franchise or earnings thereof”
was subsequently withdrawn by RA 7160 (LGC), which at the same time gave local government units the power to tax
businesses enjoying a franchise on the basis of income received or earned by them within their territorial jurisdiction. The
LGC took effect on January 1, 1992.
The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides: Notwithstanding any
exemption granted by law or other special laws, there is hereby imposed a tax on businesses enjoying a franchise, a rate of
seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the
income receipts realized within the territorial jurisdiction of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation (Globe) and Smart Information
Technologies, Inc. (Smart) franchises which contained “in leiu of all taxes” provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which provides that any
advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall
ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and
unconditionally to the grantees of such franchises. The law took effect on March 16, 1995.
In January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro exchange, it was required to pay the
local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the power of the city government to collect
the local franchise tax and demanded a refund of what had been paid as a local franchise tax for the year 1997 and for the
first to the third quarters of 1998.

Issue:

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of the local franchise
tax in view of the grant of tax exemption to Globe and Smart.

Held:

Petitioner contends that because their existing franchises contain “in lieu of all taxes” clauses, the same grant of tax
exemption must be deemed to have become ipso facto part of its previously granted telecommunications franchise. But the
rule is that tax exemptions should be granted only by a clear and unequivocal provision of law “expressed in a language too
plain to be mistaken” and assuming for the nonce that the charters of Globe and of Smart grant tax exemptions, then this
runabout way of granting tax exemption to PLDT is not a direct, “clear and unequivocal” way of communicating the
legislative intent.
Nor does the term “exemption” in Sec. 23 of RA 7925 mean tax exemption. The term refers to exemption from regulations
and requirements imposed by the National Telecommunications Commission (NTC). For instance, RA 7925, Sec. 17
provides: The Commission shall exempt any specific telecommunications service from its rate or tariff regulations if the
service has sufficient competition to ensure fair and reasonable rates of tariffs. Another exemption granted by the law in
line with its policy of deregulation is the exemption from the requirement of securing permits from the NTC every time a
telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain to be
mistaken.
Rural Bank of Makati vs City of Makati
G.R. No. 150763
Subject: Public Corporation
Doctrine: General Welfare clause (Police Power of Municipality)
Facts:
Upon the request of the municipal treasurer, in August 1990, Atty. Victor A.L. Valero, then the municipal attorney of the
Municipality of Makati, went to the Rural Bank of Makati to inquire about the bank’s payments of taxes and fees to the
municipality. Petitioner Magdalena V. Landicho, corporate secretary of the bank, said that the bank was exempt from paying taxes
under Republic Act No. 720, as amended.
On November 19, 1990, the municipality filed complaint with the Prosecutor’s Office, charging petitioners Esteban S. Silva,
president and general manager of the bank and Magdalena V. Landicho for violation of Section 21(a), Chapter II, Article 3 in
relation to Sections 105 and 169 of the Metropolitan Tax Code. On April 5, 1991, the municipality submitted two (2) Information
with the MTC against the respondent bank: 1) for non-payment of the mayor’s permit fee and 2) for non-payment of annual
business tax. While said cases were pending with the municipal court, respondent municipality ordered the closure of the bank.
This prompted petitioners to pay, under protest, the mayor’s permit fee and the annual fixed tax in the amount of P82,408.66.
On October 18, 1991, petitioners filed with the RTC a Complaint for Sum of Money and Damages. Petitioners alleged that they
were constrained to pay the amount of P82,408.66 because of the closure order, issued despite the pendency of the criminal cases
and the lack of any notice or assessment of the fees to be paid. They averred that the collection of the taxes/fees was oppressive,
arbitrary, unjust and illegal. Additionally, they alleged that respondent Atty. Valero had no power to enforce laws and ordinances,
thus his action in enforcing the collection of the permit fees and business taxes was ultra vires.
Respondent municipality asserted that petitioners’ payment of P82,408.66 was for a legal obligation because the payment of the
mayor’s permit fee as well as the municipal business license was required of all business concerns. According to respondent, said
requirement was in furtherance of the police power of the municipality to regulate businesses.
RTC rules in favor of the municipal of Makati. According to the trial court, the bank was engaged in business as a rural bank.
Hence, it should secure the necessary permit and business license, as well as pay the corresponding charges and fees. It found that
the municipality had authority to impose licenses and permit fees on persons engaging in business, under its police power embodied
under the general welfare clause. Also, the RTC declared unmeritorious petitioners’ claim for exemption under Rep. Act No. 720
since said exemption had been withdrawn by Executive Order No. 93 and the Rural Bank Act of 1992. These statutes no longer
exempted rural banks from paying corporate income taxes and local taxes, fees and charges.
The CA affirmed RTC’s decision in toto. CA also brushed aside petitioners’ claim that the general welfare clause is limited only to
legislative action. It declared that the exercise of police power by the municipality was mandated by the general welfare clause,
which authorizes the local government units to enact ordinances, not only to carry into effect and discharge such duties as are
conferred upon them by law, but also those for the good of the municipality and its inhabitants. This mandate includes the
regulation of useful occupations and enterprises. Hence the present complaint.
Petitioner bank claims that the closure of the bank was an improper exercise of police power because a municipal corporation has
no inherent but only delegated police power, which must be exercised not by the municipal mayor but by the municipal council
through the enactment of ordinances. It also assailed the Court of Appeals for invoking the General Welfare Clause embodied in
Section 16 of the Local Government Code of 1991, which took effect in 1992, when the closure of the bank was actually done on
July 31, 1991.
ISSUE: Whether or not the municipality’s police power covers the power to tax and the power to order the respondent’s bank
closure.
HELD:
Rep. Act No. 720, as amended by Republic Act No. 4106, approved on July 19, 1964, had exempted rural banks with net assets not
exceeding one million pesos (P1,000,000) from the payment of all taxes, charges and fees. The records show that as of December
29, 1986, petitioner bank’s net assets amounted only to P745,432.29. Hence, petitioner bank could claim to be exempt from
payment of all taxes, charges and fees under the aforementioned provision. However, EO 93 was issued by then President Aquino,
withdrawing all tax and duty incentives with certain exceptions. Notably, not included among the exceptions were those granted to
rural banks under Rep. Act No. 720. With the passage of said law, petitioner could no longer claim any exemption from payment of
business taxes and permit fees.
Indeed the Local Government Code of 1991 was not yet in effect when the municipality ordered petitioner bank’s closure on July
31, 1991. However, the general welfare clause invoked by the Court of Appeals is not found on the provisions of said law alone.
Even under the old Local Government Code (Batas Pambansa Blg. 337) which was then in effect, a general welfare clause was
provided for in Section 7 thereof.
Municipal corporations are agencies of the State for the promotion and maintenance of local self-government and as such are
endowed with police powers in order to effectively accomplish and carry out the declared objects of their creation. The authority of
a local government unit to exercise police power under a general welfare clause is not a recent development. This was already
provided for as early as the Administrative Code of 1917. Thus, the closure of the bank was a valid exercise of police power
pursuant to the general welfare clause contained in and restated by B.P. Blg. 337, which was then the law governing local
government units. No reversible error arises in this instance insofar as the validity of respondent municipality’s exercise of police
power for the general welfare is concerned.
The general welfare clause has two branches. The first, known as the general legislative power, authorizes the municipal council to
enact ordinances and make regulations not repugnant to law, as may be necessary to carry into effect and discharge the powers and
duties conferred upon the municipal council by law. The second, known as the police power proper, authorizes the municipality to
enact ordinances as may be necessary and proper for the health and safety, prosperity, morals, peace, good order, comfort, and
convenience of the municipality and its inhabitants, and for the protection of their property.
In the present case, the ordinances imposing licenses and requiring permits for any business establishment, for purposes of
regulation enacted by the municipal council of Makati, fall within the purview of the first branch of the general welfare clause.
Moreover, the ordinance of the municipality imposing the annual business tax is part of the power of taxation vested upon local
governments as provided for under Section 8 of B.P. Blg. 337.
Consequently, the municipal mayor, as chief executive, was clothed with authority to create a Special Task Force headed by
respondent Atty. Victor A.L. Valero to enforce and implement said ordinances and resolutions and to file appropriate charges and
prosecute violators. Respondent Valero could hardly be faulted for performing his official duties under the cited circumstances.
On the issue of the closure of the bank, we find that the bank was not engaged in any illegal or immoral activities to warrant its
outright closure. The appropriate remedies to enforce payment of delinquent taxes or fees are provided for in Section 62 of the
Local Tax Code. Said Section 62 did not provide for closure. Moreover, the order of closure violated petitioner’s right to due
process, considering that the records show that the bank exercised good faith and presented what it thought was a valid and legal
justification for not paying the required taxes and fees. The violation of a municipal ordinance does not empower a municipal
mayor to avail of extrajudicial remedies. It should have observed due process before ordering the bank’s closure.
WHEREFORE, the assailed Decision dated July 17, 2001, of the Court of Appeals in CA-G.R. CV No. 58214 is AFFIRMED with
MODIFICATIONS, so that (1) the order denying any claim for refunds and fees allegedly overpaid by the bank, as well as the
denial of any award for damages and unrealized profits, is hereby SUSTAINED; (2) the order decreeing the closure of petitioner
bank is SET ASIDE; and (3) the award of moral damages and attorney’s fees to Atty. Victor A.L. Valero is DELETED. No
pronouncement as to costs.
 ANGELES CITY vs ANGELES CITY ELECTRIC CORPORATION
AND RTC BRANCH 57
GR No. 166134, June 29, 2010
FACTS:
Angeles Electric Corporation (AEC) was granted a legislative franchise under RA 4079 to construct,
maintain and operate an electric light, heat, and power system for the purpose of generating and distributing
electric light, heat, and power for sale in Angeles City. Pursuant to Section 3-A thereof, AEC’s payment of
franchise tax for gross earnings from electric current sold was in lieu of all taxes, fees and assessments.
However, PD 551 came about and reduced the franchise tax of electric franchise holders to 2% of their
gross receipts from the sale of electric current and from transactions incident to the generation, distribution and
sale of electric current.
When RA 7160 (Local Government Code) was passed into law, it imposed tax on businesses enjoying
franchise, and in accordance, the Sangguniang Panlunsod of Angeles City enacted Tax Ordinance No. 33, S-
93, otherwise known as the Revised Revenue Code of Angeles City (RRCAC). A petition was then filed with the
Sangguniang Panlunsod by Metro Angeles Chamber of Commerce and Industry, Inc. (MACCI) of which AEC is
a member, seeking the reduction of the tax rates and a review of the provisions of the RRCAC.
The Bureau of Local Government Finance (BLGF) issued a First Indorsement to the City Treasurer of
Angeles City instructing it to make representations with the Sangguniang Panlunsod for the appropriate
amendment of the RRCAC in order to ensure compliance with the provisions of the LGC.
Thereafter, AEC paid the local franchise tax to the Office of the City Treasurer on a quarterly basis, in
addition to the national franchise tax it pays every quarter to the BIR.
The City Treasurer denied AEC’s protest that it was exempt from paying local business tax, the payment
of franchise tax on business resulted to double taxation, the assessment period has already prescribed, and the
assessment and collection of taxes under RRCAC cannot be made retroactive. The City Treasurer then levied
on the real properties of AEC prompting AEC to file with the RTC an Urgent Motion for Issuance of a TRO and/or
Writ of Preliminary Injunction.
ISSUE:
Whether or not the Local Government Code prohibits an injunction enjoining the collection of taxes.

RULING:
No. The Local Government Code does not specifically prohibit an injunction enjoining the collection of
taxes. The prohibition of a writ of injunction to enjoin the collection of taxes applies only to national internal
revenue taxes, and not to local taxes. Unlike the NIRC, the Local Tax Code does not contain any specific
provision prohibiting courts from enjoining the collection of local taxes.
Taxes, being the lifeblood of the government should be collected promptly, without necessary hindrance
or delay. The National Internal Revenue Code of 1997 (NIRC) expressly provides that no court shall have the
authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge
imposed by the code. An exception to this rule obtains only when in the opinion of the Court of Tax Appeals
(CTA), the collection thereof may jeopardize the interest of the government and/or the taxpayer.
G.R. No. 154092 July 14, 2005
MOBIL PHILIPPINES, INC. vs. THE CITY TREASURER OF MAKATI and the CHIEF OF THE LICENSE DIVISION OF
THE CITY OF MAKATI

FACTS: On August 20, 1998, Petitioner, a domestic corporation engaged in the manufacturing, importing, exporting and
wholesaling of petroleum products, filed an application with the City Treasurer of Makati for the retirement of its business
within the City of Makati as it moved its principal place of business to Pasig City. In its application, petitioner declared its
gross sales/receipts as follows: Gross Sales Receipt for Calendar Year 1997 - P453,799,493.29 and Gross Sales
Receipt for Calendar Year 1998, January to August - P267,952,766.67. Upon evaluation of petitioner’s application, then
OIC of the License Division, Ms. Jesusa E. Cuneta, issued to petitioner, a billing slip assessing the following taxes against
petitioner: P 566,468.12 For the 4th Quarter of 1998 (based on 1997 gross sales) and P 1,331,638.84 For the Gross
Sales made in 1998, with the total assessed business taxes of P 1,898,106.96. On September 11, 1998, petitioner paid
the assessed amount of P1,898,106.96 under protest. The City Treasurer issued therefor Official Receipt No. 9065025C
and approved the petitioner’s application for retirement of business from Makati to Pasig City. On July 21, 1999, petitioner
filed a claim for P1,331,638.84 refund which was denied. Subsequently, petitioner filed a petition with the RTC of Pasig
City, seeking the refund of business taxes erroneously collected by the City of Makati. In its Decision, the trial court ruled
that the assessment of the Chief of the License Division of Makati is therefore with legal basis and does not constitute
double taxation. Petitioner filed a Motion for Reconsideration which was denied and, hence this appeal.

ISSUE: Whether or not the business taxes paid by petitioner in 1998 is for its business taxes for 1997 or 1998?

HELD: Business taxes imposed in the exercise of police power for regulatory purposes are paid for the privilege of
carrying on a business in the year the tax was paid. It is paid at the beginning of the year as a fee to allow the business
to operate for the rest of the year. It is deemed a prerequisite to the conduct of business. Income tax, on the other hand,
is a tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a person’s income,
emoluments, profits and the like. It is tax on income, whether net or gross realized in one taxable year. It is due on or
before the 15th day of the 4th month following the close of the taxpayer’s taxable year and is generally regarded as an
excise tax, levied upon the right of a person or entity to receive income or profits.

Under the Makati Revenue Code, it appears that the business tax, like income tax, is computed based on the previous
year’s figures. This is the reason for the confusion. A newly-started business is already liable for business taxes (i.e.
license fees) at the start of the quarter when it commences operations. In computing the amount of tax due for the first
quarter of operations, the business’ capital investment is used as the basis. For the subsequent quarters of the first year,
the tax is based on the gross sales/receipts for the previous quarter. In the following year(s), the business is then taxed
based on the gross sales or receipts of the previous year. Thus, the business taxes paid in the year 1998 is for the
privilege of engaging in business for the same year, and not for having engaged in business for 1997.

Upon its transfer, petitioner was apparently subjected to Sec. 3A.11 par. (g) of Makati Revenue Code which provides that
on the year an establishment retires or terminates its business within the municipality, it would be required to pay the
difference in the amount if the tax collected, based on the previous year’s gross sales or receipts, is less than the actual
tax due based on the current year’s gross sales or receipts. In this case, for the year 1998, petitioner paid a total of
P2,262,122.48 to the City Treasurer of Makati as business taxes for the year 1998. The amount of tax as computed
based on petitioner’s gross sales for 1998 is only P1,331,638.84. Since the amount paid is more than the amount
computed based on petitioner’s actual gross sales for 1998, petitioner upon its retirement is not liable for additional taxes
to the City of Makati. Thus, we find that the respondent erroneously treated the assessment and collection of business
tax as if it were income tax, by rendering an additional assessment of P1,331,638.84 for the revenue generated for the
year 1998.
WHEREFORE, the assailed Decision is hereby REVERSED and respondents City Treasurer and Chief of the License
Division of Makati City are ordered to REFUND to petitioner business taxes paid in the amount of P1,331,638.84.

CASES ON BOOK I

Menzon vs Petilla
Post under Local Government , Permanent Vacancy , Political Law Case Digests

Facts:

In 1988, the DILG Secretary Luis Santos designated Vice-Governor Leopoldo E. Petilla as Acting Governor of Leyte in view of
the fact that no Governor had been proclaimed in the province of Leyte.

Subsequently, Santos also designated Aurelio D. Menzon, a senior member of the Sangguniang Panlalawigan to act as the
Vice-Governor for the province of Leyte. Menzon then took his oath of office.

In 1989, the provincial administrator inquired from DILG Undersecretary Jacinto T. Rubillar, Jr., as to the legality of the
appointment of Menzon to act as the Vice-Governor of Leyte.
Rubillar, Jr. replied that since B.P. 337 has no provision relating to succession in the Office of the Vice-Governor in case of a
temporary vacancy, the appointment of Menzon as the temporary Vice- Governor is not necessary since the Vice-Governor
who is temporarily performing the functions of the Governor, could concurrently assume the functions of both offices.

As a result of the foregoing, the Sangguniang Panlalawigan issued Resolution No. 505 where it invalidated the appointment of
Menzon as acting Vice-Governor of Leyte.

Menzon then wrote to Undersecretary Rubillar to clarify the opinion that the latter issued. Rubillar replied that Menzon was
merely designated to act as vice governor. He was not appointed to the post since there was no vacancy of the office to speak
of.

As a result of this clarificatory letter, the DILG Regional Director requested Governor Petilla that the resolution issued by the
Sanggunian be modified so that Menzon would be able receive his salary as vice governor, if he was deprived of such. However,
Petilla and the Sanggunian refused to correct Resolution 505 and correspondingly to pay the petitioner the
emoluments attached to the Office of Vice-Governor.

It was at this instance that Menzon decided to file this petition to determine whether he is entitled to the emoluments for his
services rendered as designated acting vice‐governor. During the pendency of this case, the issue on the governorship of Leyte
was settled and Adelina Larrazabal was proclaimed Governor of Leyte.

Issue: Whether or not there was a vacancy

Held: Yes. The law on Public Officers is clear on the matter. There is no vacancy whenever the office is occupied by a legally
qualified incumbent. A sensu contrario,there is a vacancy when there is no person lawfully authorized to assume andexercise at
present the duties of the office.

In this case, it can be readily seen that the office of the Vice-Governor was left vacant when the duly elected Vice-Governor
Leopoldo Petilla was appointed Acting Governor. In the eyes of the law, the office to which he was elected was left barren of a
legally qualified person to exercise the duties of the office of the Vice-Governor.

There is no showing that Leopoldo Petilla continued to simultaneously exercise the duties of the Vice-Governor. The nature of
the duties of a Provincial Governor call for a full-time occupant to discharge them. More so when the vacancy is for an extended
period. Precisely, it was Petilla's automatic assumption to the acting Governorship that resulted in the vacancy in the office of
the Vice-Governor. The fact that the Secretary of Local Government was prompted to appoint the petitioner shows the need
to fill up the position during the period it was vacant. The Department Secretary had the discretion to ascertain whether or not
the Provincial Governor should devote all his time to that particular office. Moreover, it is doubtful if the Provincial Board,
unilaterally acting, may revoke an appointment made by a higher authority.

Issue: Whether or not the Secretary of Local Government has the authority to make temporary appointments

Held: The Local Government Code is silent on the mode of succession in the event of a temporary vacancy in the Office of the
Vice-Governor. However, the silence of the law must not be understood to convey that a remedy in law is wanting.

The circumstances of the case reveal that there is indeed a necessity for the appointment of an acting Vice-Governor. For
about two years after the governatorial elections, there had been no de jure permanent Governor for the province of Leyte,
Governor Adelina Larrazabal, at that time, had not yet been proclaimed due to a pending election case before the Commission
on Elections.

The two-year interregnum which would result from the respondents' view of the law is disfavored as it would cause disruptions
and delays in the delivery of basic services to the people and in the proper management of the affairs of the local government
of Leyte. Definitely, it is incomprehensible that to leave the situation without affording any remedy was ever intended by the
Local Government Code.

Under the circumstances of this case and considering the silence of the Local Government Code, the Court rules that, in order
to obviate the dilemma resulting from an interregnum created by the vacancy, the President, acting through heralter ego, the
Secretary of Local Government, may remedy the situation. We declare valid the temporary appointment extended to the
petitioner to act as the Vice-Governor. The exigencies of public service demanded nothing less than the immediate appointment
of an acting Vice-Governor.

The records show that it was primarily for this contingency that Undersecretary Jacinto Rubillar corrected and reconsidered his
previous position and acknowledged the need for an acting Vice-Governor.

It may be noted that under Commonwealth Act No. 588 and the Revised Administrative Code of 1987, the President is
empowered to make temporary appointments in certain public offices, in case of any vacancy that may occur. Albeit both laws
deal only with the filling of vacancies in appointive positions. However, in the absence of any contrary provision in the Local
Government Code and in the best interest of public service, we see no cogent reason why the procedure thus outlined by the
two laws may not be similarly applied in the present case. The respondents contend that the provincial board is the correct
appointing power. This argument has no merit. As between the President who has supervision over local governments as
provided by law and the members of the board who are junior to the vice-governor, we have no problem ruling in favor of the
President, until the law provides otherwise.
A vacancy creates an anomalous situation and finds no approbation under the law for it deprives the constituents of their right
of representation and governance in their own local government.

In a republican form of government, the majority rules through their chosen few, and if one of them is incapacitated or absent,
etc., the management of governmental affairs to that extent, may be hampered. Necessarily, there will be a consequent delay
in the delivery of basic services to the people of Leyte if the Governor or the Vice-Governor is missing.

Whether or not the absence of a Vice-Governor would main or prejudice the province of Leyte, is for higher officials to decide
or, in proper cases, for the judiciary to adjudicate. As shown in this case where for about two years there was only an acting
Governor steering the leadership of the province of Leyte, the urgency of filling the vacancy in the Office of the Vice-Governor
to free the hands of the acting Governor to handle provincial problems and to serve as the buffer in case something might
happen to the acting Governor becomes unquestionable. We do not have to dwell ourselves into the fact that nothing happened
to acting Governor Petilla during the two-year period. The contingency of having simultaneous vacancies in both offices cannot
just be set aside. It was best for Leyte to have a full-time Governor and an acting Vice-Governor. Service to the public is the
primary concern of those in the government. It is a continuous duty unbridled by any political considerations.

The appointment of the petitioner, moreover, is in full accord with the intent behind the Local Government Code. There is no
question that Section 49 in connection with Section 52 of the Local Government Code shows clearly the intent to provide for
continuity in the performance of the duties of the Vice-Governor.

The Local Government Code provides for the mode of succession in case of a permanent vacancy, viz:

Section 49:

In case a permanent vacancy arises when a Vice-Governor assumes the Office of the Governor, . . . refuses to
assume office, fails to qualify, dies, is removed from office, voluntary resigns or is otherwise permanently
incapacitated to discharge the functions of his office the sangguniang panlalawigan member who obtained the
highest number of votes in the election immediately preceding, . . . shall assume the office for the unexpired term
of the Vice-Governor. . . .

By virtue of the surroundings circumstance of this case, the mode of succession provided for permanent vacancies may likewise
be observed in case of a temporary vacancy in the same office. In this case, there was a need to fill the vacancy. The petitioner
is himself the member of the Sangguniang Panlalawigan who obtained the highest number of votes. The Department Secretary
acted correctly in extending the temporary appointment.

Issue: Whether or not Menzon is entitled to be paid the salary attached to the Office of the Vice Governor
Held: In view of the foregoing, the petitioner's right to be paid the salary attached to the Office of the Vice Governor is
indubitable. The compensation, however, to be remunerated to the petitioner, must only be such additional compensation as,
with his existing salary, shall not exceed the salary authorized by law for the Office of the Vice-Governor.

Even granting that the President, acting through the Secretary of Local Government, possesses no power to appoint the
petitioner, at the very least, the petitioner is a de facto officer entitled to compensation.

There is no denying that the petitioner assumed the Office of the Vice-Governor under color of a known appointment. As
revealed by the records, the petitioner was appointed by no less than the alter ego of the President, the Secretary of Local
Government, after which he took his oath of office before Senator Alberto Romulo in the Office of Department of Local
Government Regional Director Res Salvatierra.

Concededly, the appointment has the color of validity. The respondents themselves acknowledged the validity of the petitioner's
appointment and dealt with him as such. It was only when the controversial Resolution No. 505 was passed by the same
persons who recognized him as the acting Vice-Governor that the validity of the appointment of the petitioner was made an
issue and the recognition withdrawn.

The petitioner, for a long period of time, exercised the duties attached to the Office of the Vice-Governor. He was acclaimed
as such by the people of Leyte. Upon theprinciple of public policy on which the de facto doctrine is based and basic
considerations of justice, it would be highly iniquitous to now deny him the salary due him for the services he actually rendered
as the acting Vice-Governor of the province of Leyte. (See Cantillo v. Arrieta, 61 SCRA 55 [1974])

(G.R. No. 90762, May 20, 1991)

MENZON VS. PETILLA

1991 (Gutierrez)

Facts:

• Because no Governor had been proclaimed in the province of Leyte, Secretary of Local
Government Luis Santos designated Vice-Governor Leopoldo Petilla as Acting Governor of Leyte.
Petitioner Aurelio Menzon, a senior member of the Sangguniang Panlalawigan, was designated
by Secretary Luis Santos to act as the Vice-Governor for the province of Leyte.
 • Provincial Administrator Tente Quintero inquired from the Undersecretary of the Department
of Local Government, Jacinto Rubillar, on the legality of the appointment of petitioner to act as
Vice-Governor. Undersecretary Rubillar stated that the appointment of petitioner as the temporary
Vice- Governor is not necessary since the Vice-Governor who is temporarily performing the
functions of the Governor, could concurrently assume the functions of both offices.

• The Sangguniang Panlalawigan in a special session issued Resolution No. 505 where it held
invalid the appointment of the petitioner as acting Vice-Governor of Leyte.

• Undersecretary Rubillar explained his opinion: “the peculiar situation in the Province of
Leyte, where the electoral controversy in the Office of the Governor has not yet been settled, calls
for the designation of the Sangguniang Member to act as vice-governor temporarily.”

• The Acting Governor and the Sangguniang Panlalawigan refused to correct Resolution No.
505 and to pay the petitioner the emoluments attached to the Office of Vice-Governor.

• The petitioner filed before the SC a petition for certiorari and mandamus and sought the
nullification of Resolution No. 505 and payment of his salary for his services as the acting Vice-
Governor of Leyte.
• Adelina Larrazabal was proclaimed the Governor of the province of Leyte.

• The provincial treasurer of Leyte allowed the payment to the petitioner of his salary as
acting Vice-Governor.

• Supreme Court dismissed the petition filed by the petitioner.

• Respondent Petilla requested Governor Larrazabal to direct the petitioner to pay back to the
province of Leyte all emoluments and compensation which he received while acting as the Vice-
Governor.

• The petitioner filed a motion for reconsideration and prayed that the Supreme Court uphold
his right to receive the salary and emoluments attached to the office of the Vice-Governor while
he was acting as such.

Issues:

1) Whether or not there was a vacancy? YES

2) Whether or not the Secretary of Local Government has the authority to make temporary
appointments? YES

Held:

1. Petilla's automatic assumption to the acting Governorship resulted in a vacancy in the office
of Vice-Governor.

• Law on Public Officers: There is no vacancy when the office is occupied by a legally qualified
incumbent. There is a vacancy when there is no person lawfully authorized to assume and
exercise the duties of the office .

• The office of the Vice-Governor was left vacant when the elected Vice-Governo Petilla was
appointed Acting Governor. The office to which he was elected was left barren of a legally
qualified person to exercise the duties of the office of the Vice-Governor.
• There is no satisfactory showing that Petilla continued to
simultaneously exercise the duties of the Vice-Governor. The
nature of the duties of a Provincial Governor calls for a full-time
occupant to discharge them. More so when the vacancy is for an
extended period.

• The fact that the Secretary of Local Government was prompted to

appoint the petitioner shows the need to fill up the position
during the period it was vacant. The Department Secretary had
the discretion to ascertain whether or not the Provincial
Governor should devote all his time to that particular office.

2. SC declared valid the temporary appointment extended to the

petitioner to act as the Vice-Governor.

• Under the circumstances of this case and the silence of the Local
Government Code, in order to obviate the dilemma resulting from an
interregnum created by the vacancy, the President, acting through
her alter ego, the Secretary of Local Government, may remedy the
situation. The exigencies of public service demanded nothing less
than the immediate appointment of an acting Vice-Governor.

• Commonwealth Act No. 588 and Revised Administrative Code of

1987: The President is empowered to make temporary
appointments in certain public offices, in case of any vacancy
that may occur. In the absence of any contrary provision in the
Local Government Code and in the best interest of public
service, the procedure in the two laws may be similarly applied
in the present case.

• Section 49, LGC: In case a permanent vacancy arises when a Vice-

Governor assumes the Office of the Governor, . . . refuses to
assume office, fails to qualify, dies, is removed from office,
voluntary resigns or is otherwise permanently incapacitated to
discharge the functions of his office the sangguniang
panlalawigan . . . member who obtained the highest number of
votes in the election immediately preceding, . . . shall assume the
office for the unexpired term of the Vice-Governor.
• The mode of succession for permanent vacancies may be
observed in a temporary vacancy in the same office. There
was a need to fill the vacancy. The petitioner is the member of
the Sangguniang Panlalawigan with the highest number of
votes. The Department Secretary acted correctly in extending
the temporary appointment.

The COURT GRANTS the motion. The additional compensation

which the petitioner has received shall be considered as
payment for actual services rendered as acting Vice-Governor
and may be retained by him.
Atienza v. Villarosa | ema
May 10, 2005
RAMON M. ATIENZA, in his capacity as VICE-GOVERNOR OF THE PROVINCE OF OCCIDENTAL MINDORO,
petitioner, vs.
JOSE T. VILLAROSA, in his capacity as GOVERNOR OF THE PROVINCE OF OCCIDENTAL MINDORO,
respondent.
Callejo, Sr., J.:

SUMMARY: Mindoro Occ. Governor Villarosa issued a memo requiring that all purchase orders for supplies,
equipment, etc. for the upkeep of the Sangguniang Panlalawigan be signed by him. Vice Governor Atienza replied that
such authority was vested in him by the LGC. In response, Villarosa ordered the dismissal of almost 60 of Atienza’s
appointees in the provincial government. Atienza asked Villarosa to reconsider both of his actions, but Villarosa refused.
Atienza thus filed a prohibition suit in the CA. CA dismissed the case and upheld Villarosa’s power to sign the purchase
orders, while ruling that the dismissal of the Atienza appointees can no longer be stopped, as Villarosa’s order had
already been implemented. Atienza appealed to the SC, which ruled in his favor. SC held that under the LGC, the Vice
Governor was given the authority to sign warrants against the provincial treasury for all expenditures appropriated for
the operation of the SP. He was also designated as the Presiding Officer of the SP. As such, it is the Vice Governor
who has the authority to sign the purchase orders, pursuant to the specific mandate of LGC 344 that vouchers and
payrolls shall be approved by the head of the department or office who has administrative control over the fund
concerned; and it is the Vice Governor who has such control with respect to the SP. Applying the doctrine of necessary
implication, SC held that the authority to sign vouchers and warrants necessarily includes the authority to sign purchase
orders, since the vouchers serve as bases for the purchase orders. Regarding the dismissal of Atienza’s appointees,
SC held that the Vice Governor has the sole power and authority to appoint officials and employees of the SP and the
Vice Governor’s Office who are paid from SP funds. Employees paid from provincial funds are under the appointing
power of the Governor. While the budget source of the dismissed employees’ salaries was not known, SC still
invalidated Villarosa’s memo ordering their dismissal, because it encroached upon the appointing power of Vice
Governor Atienza by relegating him to a mere recommendatory role. SC held that the intent of the 1991 LGC was to
separate the legislative and the executive at the LGU level, by making the vice-governor presiding officer of the SP,
and vesting him with authority to appoint its officials and disburse its monies.

DOCTRINE: While RA 7160 is silent as to the matter, the authority granted to the Vice Governor to sign all warrants
drawn on the provincial treasury for all expenditures appropriated for the operation of the Sangguniang Panlalawigan
as well as to approve disbursement vouchers relating thereto is greater and includes the authority to approve purchase
orders for the procurement of the supplies, materials and equipment necessary for the operation of the Sangguniang
Panlalawigan.
The Vice Governor’s authority to appoint the officials and employees of the SP is based on the fact that the salaries of
SP employees are derived from the SP’s appropriation. The budget source of their salaries is what sets apart SP
officials and employees from other provincial employees and officials.
The appointing power of the Vice Governor is thus limited to employees of the SP and the Office of the Vice Governor
whose salaries are paid out of the SP’s appropriated funds. An employee who is detailed or assigned in the Office of
the Vice Governor but is paid out of provincial funds is still within the Governor’s appointing authority.
With RA 7160, the union of legislative and executive powers in the office of the local chief executive under the BP 337
has been disbanded, so that either department now comprises different and non-intermingling official personalities with
the end in view of ensuring a better delivery of public service and provide a system of check and balance between the
two. The avowed intent of RA 7160 is to vest the Sangguniang Panlalawigan with independence in the exercise of its
legislative functions vis-a-vis the discharge by the Governor of the executive functions.

NATURE: Petition for review on certiorari. Original action for prohibition

FACTS:
 June 25, 2002 – Occidental Mindoro Governor Jose VILLAROSA issued a memorandum concerning the
authority to sign purchase orders of supplies, materials, equipment, and repairs needed by the Sangguniang
Panlalawigan. The memo stated that all such purchase orders must be signed by the Governor, citing as basis
DILG Opinion 148, s. 1993.
 Occidental Mindoro Vice Governor Ramon ATIENZA responded that such authority properly pertains to him
as Vice Governor, citing as bases DILG Opinion 96, s. 1995, as affirmed by COA Opinions of Jun. 28, Apr.
11, and Feb. 9, 1994. He also cited LGC 466 and 468 as bases for the separation of the legislative and
executive powers at the provincial level.
 July 1, 2002 – Villarosa responded by issuing a memorandum terminating the casual and job order employees
recommended or hired by Atienza. These employees included 28 plus clerks, 30 utility workers, and an x-ray
technician. Villarosa claims that the employees were redundant and that they bloated the bureaucracy.
  July 3, 2002 – Villarosa issued a memorandum reiterating the June 25 and July 3 memos and enjoining strict
compliance therewith.
 July 9, 2002 – In a letter to Villarosa, Atienza raised his objections to the 2 memoranda, invoking the separation
of powers at a provincial level, where the legislature is headed by the Vice Governor and the executive is
headed by the Governor.
o Villarosa insisted on the implementation of the 2 memoranda.
 Atienza thus filed a petition for prohibition before the CA, assailing the 2 memoranda as having been issued
with grave abuse of discretion. Atienza claimed that the memoranda excluded him from the use and enjoyment
of his office in violation of the pertinent provision of the LGC. He prayed that Villarosa be enjoined from
implementing the 2 memoranda.
 Nov. 28, 2003 – CA DECISION
o dismissed the petition.
o Under LGC 344, the governor has authority to approve the purchase orders on question, since the
provision states in part that "approval of the disbursement voucher by the local chief executive himself
shall be required whenever local funds are disbursed."
o LGC 466(a)(1) relied upon by Atienza is inapplicable because the approval of purchase orders is
different from the power of the Vice Governor in 466(a)(1) to sign warrants drawn against the public
treasury.
o LGC 361 on requisitioning was also held inapplicable, thus: “[R]equisitioning x x x is the act of
requiring that something be furnished. In the procurement function, it is the submission of written
requests for supplies and materials and the like. It could be inferred that, in the scheme of things,
approval of purchase requests is different from approval of purchase orders.”
o CA ruled that the question on the validity of the dismissal of the vice governor’s employees was moot,
as the act could no longer be enjoined.
 Atienza filed the present petition with the SC.
 Atienza and Villarosa’s terms have expired on June 30, 2004. Atienza did not seek re-election, while Villarosa
lost his re-election bid, so the case has become moot. SC revolved to rule on the merits to formulate controlling
principles to guide the bench, the bar, and the public.

ISSUES (HELD)
1) Who between the governor and the vice governor is authorized to approve purchase orders issued in connection
with the procurement of supplies, materials, equipment, including fuel, repairs and maintenance of the Sangguniang
Panlalawigan (VICE GOVERNOR)
2) W/N the governor has the authority to terminate or cancel the appointments of casual/job order employees of the
Sangguniang Panlalawigan Members and the Office of the Vice Governor (NO)

RATIO
MANDATE OF LGC & PRINCIPLES OF DECENTRALIZATION
 LGC was enacted to implement the constitutional mandate to “provide for a more responsive and accountable
local government structure instituted through a system of decentralization with effective mechanism 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 matters relating to the organization and operation of the local
units”.
 The provisions of the LGC are anchored on the following principles of decentralization:
o Effective allocation among the different local government units of their respective powers, functions,
responsibilities, and resources;
o Establishment in every LGU of an accountable, efficient, and dynamic organizational structure and
operating mechanism that will meet the priority needs and service requirements of its communities
o Provinces with respect to component cities and municipalities, and cities and municipalities with
respect to component barangays, shall ensure that the acts of their component units are within the
scope of their prescribed powers and functions
o Strengthening of effective mechanisms for ensuring the accountability of local government units to
their respective constituents in order to upgrade continually the quality of local leadership
1) AUTHORITY TO APPROVE PURCHASE ORDERS FOR PROCUREMENT OF SUPPLIES, MATERIALS, etc. OF
SANGGUNIANG PANLALAWIGAN IS VESTED IN THE VICE GOVERNOR
 Under the LGC, local legislative power at the provincial level is exercised by the Sangguniang Panlalawigan
(SP) and the Vice Governor is its Presiding Officer.
o The SP enacts ordinances and resolutions, and appropriates funds for the general welfare of the
province in accordance with the LGC.
  LGC 466(a)(1) provides that the Vice Governor shall be the presiding officer of the sangguniang panlalawigan
and can sign all warrants drawn on the provincial treasury for all expenditures appropriated for the operation
of the sangguniang panlalawigan
ANALYSIS OF LGC 344
 LGC 344 provides: Certification on, and Approval of, Vouchers. – No money shall be disbursed unless the
local budget officer certifies to the existence of appropriation that has been legally made for the purpose, the
local accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds
for the purpose. Vouchers and payrolls shall be certified to and approved by the head of the department or
office who has administrative control of the fund concerned, as to validity, propriety and legality of the claim
involved. Except in cases of disbursements involving regularly recurring administrative expenses such as
payrolls for regular or permanent employees, expenses for light, water, telephone and telegraph services,
remittances to government creditor agencies such as the GSIS, SSS, LBP, DBP, National Printing Office,
Procurement Service of the DBM and others, approval of the disbursement voucher by the local chief
executive himself shall be required whenever local funds are disbursed.
In cases of special or trust funds, disbursements shall be approved by the administrator of the fund.
In case of temporary absence or incapacity of the department head or chief of office, the officer next in rank
shall automatically perform his function and he shall be fully responsible therefor.
 CA’s reliance on the “approval of the disbursement voucher by the local chief executive…” clause is misplaced.
 This clause cannot prevail over the more specific clause which provides that “Vouchers and payrolls shall be
certified to and approved by the head of the department or office who has administrative control of the fund
concerned, as to validity, propriety and legality of the claim involved”.
 As presiding officer of the SP, it is the Vice Governor which has administrative control over its funds.
Accordingly, the authority to approve disbursement vouchers for expenditures appropriated for the operation
of the SP rests with the Vice Governor.
 §39 of COA’s New Manual on the Government Accounting System for LGUs even provides: x x x
Disbursement vouchers for expenditures appropriated for the operation of the Sanggunian shall be approved
by the provincial Vice Governor, the city Vice Mayor or the municipal Vice Mayor, as the case may be.
VICE GOVERNOR’S AUTHORITY TO SIGN WARRANTS & APPROVE DISURSEMENT VOUCHERS NECESSARILY
INCLUDES AUTHORITY TO APPROVE PURCHASE ORDERS COVERING SUCH VOUCHERS
 While the LGC is silent on the matter, the authority granted to the Vice Governor to sign warrants and approve
disbursement vouchers relating thereto includes the authority to approve purchase orders covering such
vouchers, applying the doctrine of necessary implication.
o Chua v. CSC: Every statute is understood, by implication, to contain all such provisions as may be
necessary to effectuate its object and purpose, or to make effective rights, powers, or privileges or
jurisdiction which it grants, including all such collateral and subsidiary consequences as may be fairly
and logically inferred from its terms. Ex necessitate legis.
 Warrant – an order directing the treasurer of the municipality to pay money out of funds in city treasury which
are or may become available for purpose specified to designated persons (Protest of St. Louis-San Francisco
Ry. Co.).
o Warrants of a municipal corporation are generally orders payable when funds are found. They are
issued for the payment of general municipal debts and expenses subject to the rule that they shall
be paid in the order of presentation (Shelley v. St. Charles County Court).
 Voucher - a document which shows that services have been performed or expenses incurred. It covers any
acquittance or receipt discharging the person or evidencing payment by him. When used in connection with
disbursement of money, it implies some instrument that shows on what account or by what authority a
particular payment has been made, or that services have been performed which entitle the party to whom it is
issued to payment (First National Bank of Chicago v. City of Elgin).
 Purchase order - an authorization by the issuing party for the recipient to provide materials or services for
which issuing party agrees to pay; it is an offer to buy which becomes binding when those things ordered have
been provided (Smyth Worldwide Movers v. Little Rock Packing).
o Contains the terms and conditions for the procurement of supplies, materials or equipment, in
particular.
o The tenor of a purchase order basically directs the supplier to deliver the articles enumerated and
subject to the terms and conditions specified therein.
 When an authorized person approves a disbursement voucher, he certifies to the correctness of the entries
therein; that the expenses were necessary and lawful, and that the supporting documents are complete and
cash is available therefor. The person who performed the service or delivered the goods becomes entitled to
payment.
 Thus, the express authority to approve disbursement vouchers in effect is also an authority to approve the
payment of money claims for supplies, materials and equipment; and from this authority, the authority to
 approve purchase orders to cause the delivery of the supplies, materials, and equipment is necessarily
implied.
 “[T]he authority granted to the Vice Governor to sign all warrants drawn on the provincial treasury for all
expenditures appropriated for the operation of the Sangguniang Panlalawigan as well as to approve
disbursement vouchers relating thereto is greater and includes the authority to approve purchase orders for
the procurement of the supplies, materials and equipment necessary for the operation of the Sangguniang
Panlalawigan.”
2) GOVERNOR HAS NO AUTHORITY TO TERMINATE OR CANCEL THE APPOINTMENT OF CASUAL OR JOB
ORDER EMPLOYEES OF THE SP OR THE VICE GOVERNOR; INTENT OF LGC ON SEPARATION OF POWERS
 Concerning the appointing power of the Governor, LGC 465(b)(v) provides: For efficient, effective and
economical governance the purpose of which is the general welfare of the province and its inhabitants
pursuant to Section 16 of this Code, the provincial governor shall appoint all officials and employees whose
salaries and wages are wholly or mainly paid out of provincial funds and whose appointments are not
otherwise provided for in this Code, as well as those he may be authorized by law to appoint.
 As for the Vice Governor, LGC 466(2) provides: Subject to civil service law, rules and regulations, appoint all
officials and employees of the sangguniang panlalawigan, except those whose manner of appointment is
specifically provided in this Code.
 Therefore, the appointing power of the Governor does not extend to officials and employees of the
Sangguniang Panlalawigan because the authority to appoint them is vested in the Vice Governor. This
includes casual and job order employees.
 The Vice Governor’s authority to appoint the officials and employees of the SP is based on the fact that the
salaries of SP employees are derived from the SP’s appropriation.
 The budget source of their salaries is what sets apart SP officials and employees from other provincial
employees and officials.
 The appointing power of the Vice Governor is thus limited to employees of the SP and the Office of the Vice
Governor whose salaries are paid out of the SP’s appropriated funds. An employee who is detailed or assigned
in the Office of the Vice Governor but is paid out of provincial funds is still within the Governor’s appointing
authority.
 CAB: The source of the appointees’ salaries is unclear. Nonetheless, the July 1 memo cannot be upheld
because it absolutely prohibited Atienza from exercising his authority to appoint SP employees, limiting him
to a recommendatory role. This is an encroachment on the Vice Governor’s appointing power.
 It must be noted that RA 7160 altered the balance of powers at the LGU level. Under BP 337 the governor
was also presiding officer of the SP, in effect uniting executive and legislative powers in the governor. RA
7160, dissolved this union and separated the legislative from the executive. According to Sen. Pimentel, this
was the intent behind making the Vice Governor and the Vice Mayor the presiding officers of their respective
Sanggunian.
 “The idea is to distribute powers among elective local officials so that the legislative, which is the Sanggunian,
can properly check the executive, which is the Governor or the Mayor and vice versa and exercise their
functions without any undue interference from one by the other. The avowed intent of RA 7160, therefore, is
to vest on the Sangguniang Panlalawigan independence in the exercise of its legislative functions vis-a-vis
the discharge by the Governor of the executive functions.”
 The 2 memoranda issued by Villarosa constituted undue interference with the SP’s functions. They therefore
run counter to the intent of the LGC and their implementation must be permanently enjoined.

DISPOSITION: Petition granted. Memoranda dated June 25, 2002 and July 1, 2002 issued by Villarosa are NULL AND
VOID.
G.R. No. 181367 April 24, 2012

LA CARLOTA CITY, NEGROS OCCIDENTAL, represented by its Mayor, HON. JEFFREY P.

FERRER,* and the SANGGUNIANG PANLUNGSOD OF LA CARLOTA CITY, NEGROS
OCCIDENTAL, represented by its Vice-Mayor, HON. DEMIE JOHN C.
HONRADO,** Petitioners,
vs.
ATTY. REX G. ROJO, Respondent.

Facts:
Vice-Mayor Rex R. Jalandoon of La Carlota City, Negros Occidental appointed Atty. Rex G.
Rojo (or Rojo) who had just tendered his resignation as member of the Sangguniang
Panlungsod the day preceding such appointment, as Sangguniang Panlungsod Secretary. The
status of the appointment was permanent. Vice-Mayor submitted Rojo’s appointment papers to
the Civil Service Commission Negros Occidental Field Office (CSCFO-Negros Occidental) for
attestation. In a Letter dated March 24, 2004, the said CSCFO wrote Jalandoon to inform him of
the infirmities the office found on the appointment documents, i.e. the Chairman of the
Personnel Selection Board and the Human Resource Management Officer did not sign the
certifications, the latter relative to the completeness of the documents as well as to the
publication requirement. In view of the failure of the appointing authority to comply with the
directive, the said CSCFO considered the appointment of Rojo permanently recalled or
withdrawn, in a subsequent Letter to Jalandoon dated April 14, 2004.

Jalandoon deemed the recall a disapproval of the appointment, hence, he brought the matter to
the CSC Regional Office No. 6 in Iloilo City, by way of an appeal. He averred that the Human
Resource Management Officer of La Carlota City refused to affix his signature on Rojo’s
appointment documents but nonetheless transmitted them to the CSCFO. Such transmittal,
according to Jalandoon, should be construed that the appointment was complete and regular
and that it complied with the pertinent requirements of a valid appointment. City of La Carlota
represented by the newly elected mayor, Hon. Jeffrey P. Ferrer and the Sangguniang
Panlungsod represented by the newly elected Vice-Mayor, Hon. Demie John C. Honrado,
collectively, the petitioners herein, intervened. They argued that Jalandoon is not the real party
in interest in the appeal but Rojo who, by his inaction, should be considered to have waived his
right to appeal from the disapproval of his appointment.

CSC Regional Office No. 6 reversed and set aside the CSCFO’s earlier ruling. The regional
office likewise ruled that Rojo’s appointment on March 18, 2004 was made outside the period of
the election ban from March 26 to May 9, 2004, and that his resignation from the Sangguniang
Panlungsod was valid having been tendered with the majority of the council members in
attendance (seven (7) out of the thirteen councilors were present). Considering that the
appointment of Rojo sufficiently complied with the publication requirement, deliberation by the
Personnel Selection Board, certification that it was issued in accordance with the limitations
provided for under Section 325 of R.A. 7160 and that appropriations or funds are available for
said position, the regional office approved the same.

Mayor Ferrer and Vice-Mayor Honrado appealed the foregoing Decision of the CSC Regional
Office No. 6 to the Civil Service Commission (or Commission). Commission dismissed said
appeal on the ground that the appellants were not the appointing authority and were therefore
improper parties to the appeal. Despite its ruling of dismissal, the Commission went on to
reiterate CSC Regional Office’s discussion on the appointing authority’s compliance with the
certification and deliberation requirements, as well as the validity of appointee’s tender of
resignation. It likewise denied the motion for reconsideration thereafter filed by the petitioners in
a Resolution dated November 8, 2005.

Petitioners filed a petition for review with the Court of Appeals. Court of Appeals denied the
petition, and affirmed Resolution Nos. 050654 and 051646 of the Civil Service Commission,
dated 17 May 2005 and 8 November 2005, respectively. Petitioners filed a Motion for
Reconsideration, which the Court of Appeals denied in its Resolution dated 18 January 2008.

Issue:

Whether the appointment of respondent as sangguniang panlungsod secretary violated

the constitutional proscription against eligibility of an elective official for appointment during his
tenure; and Whether respondent’s appointment as sangguniang panlungsod secretary was
issued contrary to existing civil service rules and regulations

Ruling:

A quorum of the Sangguniang Panlungsod should be computed based on the total composition
of the Sangguniang Panlungsod. In this case, the Sangguniang Panlungsod of La Carlota City,
Negros Occidental is composed of the presiding officer, ten (10) regular members, and two (2)
ex-officio members, or a total of thirteen (13) members. A majority of the 13 "members" of
the Sangguniang Panlungsod, or at least seven (7) members, is needed to constitute a quorum
to transact official business. Since seven (7) members (including the presiding officer) were
present on the 17 March 2004 regular session of the Sangguniang Panlungsod, clearly there
was a quorum such that the irrevocable resignation of respondent was validly accepted.

The Perez19 case cited in the Dissenting Opinion was decided in 1969 prior to the 1987
Constitution, and prior to the enactment of RA 7160 or the Local Government Code of 1991. In
fact, the Perez case was decided even prior to the old Local Government Code which was
enacted in 1983. In ruling that the vice-mayor is not a constituent member of the municipal
board, the Court in the Perez case relied mainly on the provisions of Republic Act No. 305 (RA
305) creating the City of Naga and the amendatory provisions of Republic Act No. 225920 (RA
2259) making the vice-mayor the presiding officer of the municipal board. Under RA 2259, the
vice-mayor was the presiding officer of the City Council or Municipal Board in chartered
cities. However, RA 305 and 2259 were silent on whether as presiding officer the vice-
mayor could vote. Thus, the applicable laws in Perez are no longer the applicable laws in the
present case.

On the other hand, the 2004 case of Zamora v. Governor Caballero,21 in which the Court
interpreted Section 5322 of RA 7160 to mean that the entire membership must be taken into
account in computing the quorum of theSangguniang Panlalawigan, was decided under the
1987 Constitution and after the enactment of the Local Government Code of 1991. In stating
that there were fourteen (14) members of the Sangguniang Panlalawigan of Compostela
Valley,23 the Court in Zamora clearly included the Vice- Governor, as presiding officer, as part of
the entire membership of the Sangguniang Panlalawigan which must be taken into account in
computing the quorum.
On the issue that respondent’s appointment was issued during the effectivity of the election ban,
the Court agrees with the finding of the Court of Appeals and the Civil Service Commission that
since the respondent’s appointment was validly issued on 18 March 2004, then the appointment
did not violate the election ban period which was from 26 March to 9 May 2004. Indeed, the Civil
Service Commission found that despite the lack of signature and certification of the Human
Resource Management Officer of La Carlota City on respondent’s appointment papers,
respondent’s appointment is deemed effective as of 18 March 2004 considering that there was
substantial compliance with the appointment requirements, thus:

Records show that Atty. Rojo’s appointment was transmitted to the CSC Negros Occidental
Field Office on March 19, 2004 by the office of Gelongo without his certification and signature at
the back of the appointment. Nonetheless, records show that the position to which Atty. Rojo
was appointed was published on January 6, 2004. The qualifications of Atty. Rojo were
deliberated upon by the Personnel Selection Board on March 5, 2004, attended by Vice Mayor
Jalandoon as Chairman and Jose Leofric F. De Paola, SP member and Sonia P. Delgado,
Records Officer, as members. Records likewise show that a certification was issued by Vice
Mayor Jalandoon, as appointing authority, that the appointment was issued in accordance with
the limitations provided for under Section 325 of RA 7160 and the said appointment was
reviewed and found in order pursuant to Section 5, Rule V of the Omnibus Rules Implementing
Executive Order No. 292. Further, certifications were issued by the City Budget Officer, Acting
City Accountant, City Treasurer and City Vice Mayor that appropriations or funds are available
for said position. Apparently, all the requirements prescribed in Section 1, Rule VIII in CSC
Memorandum Circular No. 15, series of 1999, were complied with.24

Clearly, the appointment of respondent on 18 March 2004 was validly issued considering that:
(1) he was considered resigned as Sangguniang Panlungsod member effective 17 March 2004;
(2) he was fully qualified for the position of Sanggunian Secretary; and (3) there was substantial
compliance with the appointment requirements.
MALONZO VS ZAMORA – No Case Digest
MUNICIPALITY OF KANANGA, Represented by its
Mayor, Hon. GIOVANNI M. NAPARI vs. Hon.
FORTUNITO L. MADRONA
Posted on October 9, 2013 by winnieclaire

Standard
[G.R. No. 141375. April 30, 2003.]

FACTS: When a boundary dispute arose between the Municipality of Kananga and the City of Ormoc. By agreement,
the parties submitted the issue to amicable settlement. No amicable settlement was reached.
The City of Ormoc filed before the RTC of Ormoc City a complaint to settle the boundary dispute. Petitioner
municipality filed a motion to dismiss, claiming that the court has no jurisdiction over the subject matter, but the RTC
denied the same.
RTC: it had jurisdiction over the action under Batas Pambansa Blg. 129. that Section 118 of the Local Government
Code had been substantially complied with, because both parties already had the occasion to meet and thresh out
their differences. In fact, both agreed to elevate the matter to the trial court via Resolution No. 97-01. It also held that
Section 118 governed venue; hence, the parties could waive and agree upon it under Section 4(b) of Rule 4 of the
Rules of Court.

ISSUE: WON Section 118 of the LGU on boundary dispute settlement applies.
WON respondent court may exercise original jurisdiction over the settlement of a boundary dispute between a
municipality and an independent component city.

HELD: No, Section 118 does not apply. Yes, RTC has jurisdiction.

POLITICAL LAW; LOCAL GOVERNMENT CODE; SECTION 118 THEREOF; PROCEDURE FOR SETTLEMENT OF
BOUNDARY DISPUTES BETWEEN A COMPONENT CITY OR MUNICIPALITY AND A HIGHLY URBANIZED CITY;
ORMOC IS NOT A HIGHLY URBANIZED CITY IN CASE AT BAR. —
“Sec. 118.Jurisdictional Responsibility for Settlement of Boundary Disputes. — Boundary disputes between and
among local government units shall, as much as possible, be settled amicably. To this end:
“(a)Boundary disputes involving two (2) or more barangays in the same city or municipality shall be referred for
settlement to the sangguniang panlungsod or sangguniang bayan concerned.
“(b)Boundary disputes involving two (2) or more municipalities within the same province shall be referred for
settlement to the sangguniang panlalawigan concerned.
“(c) Boundary disputes involving municipalities or component cities of different provinces shall be jointly referred for
settlement to the sanggunians of the provinces concerned.
“(d) Boundary disputes involving a component city or municipality on the one hand and a highly urbanized city on the
other, or two (2) or more highly urbanized cities, shall be jointly referred for settlement to the respective sanggunians
of the parties.
“(e) In the event the sanggunian fails to effect an amicable settlement within sixty (60) days from the date the dispute
was referred thereto, it shall issue a certification to that effect. Thereafter, the dispute shall be formally tried by the
sanggunian concerned which shall decide the issue within sixty (60) days from the date of the certification referred to
above.”

Under Section 118 of the Local Government Code, the settlement of a boundary dispute between a component city or
a municipality on the one hand and a highly urbanized city on the other — or between two or more highly urbanized
cities — shall be jointly referred for settlement to the respective sanggunians of the local government units involved.
There is no question that Kananga is a municipality constituted under Republic Act No. 542. By virtue of Section
442(d) of the LGC, it continued to exist and operate as such. However, Ormoc is not a highly urbanized, but an
independent component, city created under Republic Act No. 179.
Section 118 of the LGC applies to a situation in which a component city or a municipality seeks to settle a boundary
dispute with a highly urbanized city, not with an independent component city. While Kananga is a municipality, Ormoc
is an independent component city. Clearly then, the procedure referred to in Section 118 does not apply to them.

SECTION 451 THEREOF; CITY; CLASSIFICATION; ORMOC IS DEEMED AN INDEPENDENT COMPONENT CITY
IN CASE AT BAR. — Under Section 451 of the LGC, a city may be either component or highly urbanized. Ormoc is
deemed an independent component city, because its charter prohibits its voters from voting for provincial elective
officials. It is a city independent of the province. In fact, it is considered a component, not a highly urbanized, city of
Leyte in Region VIII by both Batas Pambansa Blg. 643, which calls for a plebiscite; and the Omnibus Election Code,
which apportions representatives to the defunct Batasang Pambansa. There is neither a declaration by the President
of the Philippines nor an allegation by the parties that it is highly urbanized. On the contrary, petitioner asserted in its
Motion to Dismiss that Ormoc was an independent chartered city.
REMEDIAL LAW; B.P. BLG. 129; GENERAL JURISDICTION OF RTCs TO ADJUDICATE ALL CONTROVERSIES
EXCEPT THOSE EXPRESSLY WITHHELD FROM THEIR PLENARY POWERS; CASE AT BAR. — As previously
stated, “jurisdiction is vested by law and cannot be conferred or waived by the parties.” It must exist as a matter of
law and cannot be conferred by the consent of the parties or by estoppel. It should not be confused with venue.
Inasmuch as Section 118 of the LGC finds no application to the instant case, the general rules governing jurisdiction
should then be used. The applicable provision is found in Batas Pambansa Blg. 129, otherwise known as the
Judiciary Reorganization Act of 1980, as amended by Republic Act No. 7691. Since there is no law providing for the
exclusive jurisdiction of any court or agency over the settlement of boundary disputes between a municipality and an
independent component city of the same province, respondent court committed no grave abuse of discretion in
denying the Motion to Dismiss. RTCs have general jurisdiction to adjudicate all controversies except those expressly
withheld from their plenary powers. They have the power not only to take judicial cognizance of a case instituted for
judicial action for the first time, but also to do so to the exclusion of all other courts at that stage. Indeed, the power is
not only original, but also exclusive.
 Mayor EDGARDO G. FLORES, petitioner
vs.

SANGGUNIANG PANLALAWIGAN OF PAMPANGA, GOVERNOR MANUEL M. LAPID

OF PAMPANGA, MUNICIPAL COUNCILORS VANZALON F. TIZON, ROMULO N.
MANDAP, EDGARDO P. YAMBAO, JEROME M. TONGOL, MARCIANO L. SACDALAN,
and RICKY Y. NARCISO, respondents.
G.R. No. 159022 February 23, 2005

FACTS:
o An administrative complaint for dishonesty and gross misconduct against then Mayor Flores of
Minalin, Pampanga, was filed with the Sangguniang Panlalawigan of the same province.
o The complainants were the municipal councilors of Minalin.
o The administrative complaint against petitioner alleged that on August 1, 2001, he executed
Purchase Request No. 1 for the acquisition of a communication equipment amounting to
P293,000.00 without any Resolution or Ordinance enacted by the Sangguniang Bayan of Minalin.
o The winning bidder was one Kai Electronics.
o The communication equipment delivered by Kai Electronics was overpriced by more than 100%.
o Respondent Sangguniang Panlalawigan issued an Order recommending to Governor Manuel Lapid
of Pampanga, that petitioner be preventively suspended from office for a period of sixty (60) days.
o Without seeking a reconsideration of the Order of respondent Sangguniang Panlalawigan,
petitioner sent a letter to respondent Governor Lapid requesting him “to veto” the same.
o Also, without waiting for respondent Governor Lapid’s action on his letter, petitioner filed with the
Court of Appeals a petition for certiorari.
o The CA denied and dismissed the petition for lack of merit.
o In ruling against the petitioner, the Court of Appeals held that he failed to exhaust all
administrative remedies before going to court.
o Moreover, respondent Sangguniang Panlalawigan of Pampanga did not gravely abuse its discretion
when it issued the challenged Order considering that the allegation of overpricing is supported by
documentary evidence.
o Petitioner then filed a motion for reconsideration, but this was denied by the CA.
o Hence, petitioner filed a petition for review on certiorari to the SC.

ISSUE:
o Whether or not petitioner failed to exhaust all administrative remedies.

RULING:
o Yes.
o Section 61 (b) of R.A. No. 7160 (the LGC of 1991) partly provides: A complaint against any elective
official of a municipality shall be filed before the Sangguniang Panlalawigan whose
decision may be appealed to the Office of the President.
o After receiving the Order of respondent Sangguniang Panlalawiganpreventively suspending him
from office, petitioner should have filed a motion for reconsideration in order to give the latter the
opportunity to correct itself if there was any error on its part.
o Such motion is a condition sine qua non before filing a petition for certiorari under Rule 65 of the
1997 Rules of Civil Procedure, as amended.
o Section 1 of the same Rule requires that petitioner must not only show that respondentSangguniang
Panlalawigan, in issuing the questioned Order, “acted without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction,” but that “there is no appeal,
nor any plain, speedy, and adequate remedy in the ordinary course of law.”
o The SC have held that the “plain” and “adequate remedy” referred to in Section 1 of Rule 65 is
a motion for reconsideration of the assailed Order or Resolution.
o The SC also added that petitioner, before filing with the CA his petition for certiorari, should have
waited for respondent Governor Lapid’s action on the recommendation of respondentSangguniang
Panlalawigan.
o It is a well-settled rule that where, as here, the petitioner has available remedies within the
administrative machinery against the action of an administrative board, body, or officer, the
intervention of the courts can be resorted to by him only after having exhausted all such remedies.
o The rationale of this rule rests upon the presumption that the administrative body, if given the
chance to correct its mistake or error, may amend its decision on a given matter and decide it
properly.
o The strict application of the doctrine of exhaustion of administrative remedies will also prevent
unnecessary and premature resort to the court.
CARLOS BALACUIT ET.AL V. CFI OF AGUSAN DEL NORTE
- CASE DIGEST - CONSTITUTIONAL LAW
CARLOS BALACUIT ET.AL V. CFI OF AGUSAN DEL NORTE G.R. No. L-38429 June 30, 1988

FACTS:

the Municipal Board of the City of Butuan pass an ordinance penalizing any person, group of persons, entity, or corporation
engaged in the business of selling admission tickets to any movie or other public exhibitions, games, contests, or other
performances to require children between seven (7) and twelve (12) years of age to pay full payment for admission tickets
intended for adults but should charge only one-half of the value of the said tickets.

The Petitioners, theater owners, aggrieved by said ordinance, they file a complaint before the Court of First Instance
of Agusan del Norte and Butuan City assailing the constitutionalit of Ordinance No. 640.

The Court rendered judgment declaring Ordinance No. 640 of the City of Butuan constitutional and valid.

ISSUE:

WON Ordinance No. 640 is a valid exercise of police power

HELD:

YES. Ordinance No. 640 infringes theater owners’ right to property.

While it is true that a business may be regulated, it is equally true that such regulation must be within the bounds of
reason, that is, the regulatory ordinance must be reasonable, and its provisions cannot be oppressive amounting to
an arbitrary interference with the business or calling subject of regulation. A lawful business or calling may not,
under the guise of regulation, be unreasonably interfered with even by the exercise of police power.33 A police
measure for the regulation of the conduct, control and operation of a business should not encroach upon the
legitimate and lawful exercise by the citizens of their property rights.34 The right of the owner to fix a price at which
his property shall be sold or used is an inherent attribute of the property itself and, as such, within the protection of
the due process clause."" Hence, the proprietors of a theater have a right to manage their property in their own
way, to fix what prices of admission they think most for their own advantage, and that any person who did not
approve could stay away.

Ordinance No. 640 clearly invades the personal and property rights of petitioners for even if We could assume that,
on its face, the interference was reasonable, from the foregoing considerations, it has been fully shown that it is an
unwarranted and unlawful curtailment of the property and personal rights of citizens. For being unreasonable and
an undue restraint of trade, it cannot, under the guise of exercising police power, be upheld as valid.

Wherefore, the decision of the trial court in Special Civil Case No. 237 is REVERSED and SET ASIDE and a new
judgment is hereby rendered declaring Ordinance No. 640 unconstitutional and, therefore, null and void.
B. Police Power : B017 Local laws – Regulatory Ordinances
Alde, Elyzaldy B.

Balacuit et al., v. Court of First Instance of Agusan del Norte and Butuan City
G.R. No. L-38429 (E)
30 June 1988

FACTS
This involves a Petition for Review questioning the validity and constitutionality of Ordinance No.
640 passed by the Municipal Board of the City of Butuan on April 21, 1969, penalizing any person, group
of persons, entity or corporation engaged in the business of selling admission tickets to any movie or other
public exhibitions, games, contests or other performances to require children between 7 and 12 years of
age to pay full payment for tickets intended for adults but should charge only one-half of the said ticket.

Petitioners who are managers of theaters, affected by the ordinance, filed a Complaint before the
Court of First Instance of Agusan del Norte and Butuan City docketed as Special Civil No. 237 on June 30,
1969, praying that the subject ordinance be declared unconstitutional and, therefore, void and
unenforceable. The Court rendered judgment declaring Ordinance No. 640 of the City of Butuan
constitutional and valid.

ISSUE
Whether Ordinance No. 640 passed by the Municipal Board of the City of Butuan is valid and
constitutional and was the Ordinance a valid exercise of police power.

HELD
It is already settled that the operation of theaters, cinematographs and other places of public
exhibition are subject to regulation by the municipal council in the exercise of delegated police power by
the local government. However, to invoke the exercise of police power, not only must it appear that the
interest of the public generally requires an interference with private rights, but the means adopted must be
reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals.
The legislature may not, under the guise of protecting the public interest, arbitrarily interfere with private
business, or impose unusual and unnecessary restrictions upon lawful occupations. In other words, the
determination as to what is a proper exercise of its police power is not final or conclusive, but is subject to
the supervision of the courts.

The Court likewise ruled in the negative as to the question of the subject ordinance being a valid
exercise of police power. While it is true that a business may be regulated, it is equally true that such
regulation must be within the bounds of reason, that is, the regulatory ordinance must be reasonable, and
its provisions cannot be oppressive amounting to an arbitrary interference with the business or calling
subject of regulation. The proprietors of a theater have a right to manage their property in their own way,
to fix what prices of admission they think most for their own advantage, and that any person who did not
approve could stay away.

The exercise of police power by the local government is valid unless it contravenes the fundamental
law of the land, or an act of the legislature, or unless it is against public policy or is unreasonable,
oppressive, partial, discriminating or in derogation of a common right. For being unreasonable and an
undue restraint of trade, it cannot, under the guise of exercising police power, be upheld as valid.
 WHEREFORE, the decision of the trial court in Special Civil Case No. 237 is hereby REVERSED
and SET ASIDE and a new judgment is hereby rendered declaring Ordinance No. 640 unconstitutional and,
therefore, null and void. This decision is immediately executory.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. (PLDT)
vs.
CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as City Treasurer of
Davao

GR. No. 143867

March 25, 2003

____________________________
TAX EXEMPTIONS vs. TAX EXCLUSION; “IN LIEU OF ALL TAXES” PROVISION
____________________________

Facts:

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise
tax was paid “in lieu of all taxes on this franchise or earnings thereof” pursuant to RA 7082.
The exemption from “all taxes on this franchise or earnings thereof” was subsequently
withdrawn by RA 7160 (LGC), which at the same time gave local government units the
power to tax businesses enjoying a franchise on the basis of income received or earned by
them within their territorial jurisdiction. The LGC took effect on January 1, 1992.
The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part
provides: Notwithstanding any exemption granted by law or other special laws, there is
hereby imposed a tax on businesses enjoying a franchise, a rate of seventy-five percent (75%)
of one percent (1%) of the gross annual receipts for the preceding calendar year based on
the income receipts realized within the territorial jurisdiction of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation
(Globe) and Smart Information Technologies, Inc. (Smart) franchises which contained “in
leiu of all taxes” provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec.
23 of which provides that any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted, shall ipso facto become part of
previously granted telecommunications franchises and shall be accorded immediately and
unconditionally to the grantees of such franchises. The law took effect on March 16, 1995.
In January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro
exchange, it was required to pay the local franchise tax which then had amounted to
P3,681,985.72. PLDT challenged the power of the city government to collect the local
franchise tax and demanded a refund of what had been paid as a local franchise tax for the
year 1997 and for the first to the third quarters of 1998.

Issue:

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from
payment of the local franchise tax in view of the grant of tax exemption to Globe and Smart.

Held:
Petitioner contends that because their existing franchises contain “in lieu of all
taxes” clauses, the same grant of tax exemption must be deemed to have become ipso facto
part of its previously granted telecommunications franchise. But the rule is that tax
exemptions should be granted only by a clear and unequivocal provision of law “expressed
in a language too plain to be mistaken” and assuming for the nonce that the charters of
Globe and of Smart grant tax exemptions, then this runabout way of granting tax
exemption to PLDT is not a direct, “clear and unequivocal” way of communicating the
legislative intent.
Nor does the term “exemption” in Sec. 23 of RA 7925 mean tax exemption. The term refers
to exemption from regulations and requirements imposed by the National
Telecommunications Commission (NTC). For instance, RA 7925, Sec. 17 provides:
The Commission shall exempt any specific telecommunications service from its rate or
tariff regulations if the service has sufficient competition to ensure fair and reasonable
rates of tariffs. Another exemption granted by the law in line with its policy of deregulation
is the exemption from the requirement of securing permits from the NTC every time a
telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision of law on the
basis of language too plain to be mistaken.

PLDT VS. CITY OF DAVAO

GR 143867, Aug. 22, 2001

FACTS: PLDT applied for a Mayor’s Permit to operate its Davao Metro Exchange. Respondent City withheld action on the
application pending payment by PLDT of the local franchise tax for 1999. PLDT protested the assessment and requested a refund
for the franchise tax it paid for the year 1997 and first to third quarters of 1998. PLDT contends that it was exempt from the
payment of franchise tax relying on the opinion of the Bureau of Local Government Finance (BLGF) which provides that PLDT shall
only be liable to pay the franchise tax on its gross receipts realized from 1992 up to March 15, 1995, the period which PLDT was
not yet enjoying the most favored clause proviso of RA 7925 which brought back the tax exemption of the in lieu of all taxes
proviso of RA 7082, PLDT’s franchise. The City treasurer denied the protest and claim for tax refund and cited the opinion of the
City Legal officer and the Ordinance which provides that notwithstanding any exemption granted by any law or other special law,
there is hereby imposed a tax on businesses enjoying a franchise, at a rate of Seventy-five percent (75%) of one percent (1%) of
the gross annual receipts for the preceding calendar year based on the income or receipts realized within the territorial
jurisdiction of Davao City. The trial court ruled that the LGC withdrew all tax exemptions previously enjoyed by all persons and
authorized local government units to impose a tax on businesses enjoying a franchise notwithstanding the grant of tax exemption
to them. The trial court likewise denied petitioner’s claim for exemption under R.A. No. 7925 for the following reasons: (1) it is
clear from the wording of §193 of the Local Government Code that Congress did not intend to exempt any franchise holder from
the payment of local franchise and business taxes and (2) the opinion of the Executive Director of the Bureau of Local Government
Finance to the contrary is not binding on respondents.

ISSUE: (1) Whether PLDT is exempted from local franchise tax? (2) Whether the opinions of the BLGF are binding?

(1) NO. The grant of taxing powers to local government units under the Constitution and the LGC does not affect the power of
Congress to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional
grant to local governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be
resolved in favor of municipal corporations. The question, therefore, is whether, after the withdrawal of its exemption by virtue
of §137 of the LGC, PLDT has again become entitled to exemption from local franchise tax.
To begin with, tax exemptions are highly disfavored. The tax exemption must be expressed in the statute in clear language that
leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be
interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.

Here, PLDT justifies its claim of tax exemption by citing R.A. No. 7925, otherwise known as the Public Telecommunications Policy
Act of the Philippines. PLDT claims that Smart and Globe enjoy exemption from the payment of the franchise tax by virtue of their
legislative franchises per opinion of the Bureau of Local Government Finance. It argues that because Smart and Globe are exempt
from the franchise tax, it follows that it must likewise be exempt from the tax being collected by the City of Davao because the
grant of tax exemption to Smart and Globe ipso facto extended the same exemption to it. There is nothing in the language of RA
7925 nor in the proceedings of both the House of Representatives and the Senate in enacting the said law which shows that it
contemplates the grant of tax exemptions to all telecommunications entities, including those whose exemptions had been
withdrawn by the LGC. The word “exemption” in §23 of R.A. No. 7925 could contemplate exemption from certain regulatory or
reporting requirements, bearing in mind the policy of the law. It is noteworthy that, in holding Smart and Globe exempt from
local taxes, the BLGF did not base its opinion on §23 but on the fact that the franchises granted to them after the effectivity of
the LGC exempted them from the payment of local franchise and business taxes.

(2) NO. PLDT contends that courts should not set aside conclusions reached by the BLGF because its function is precisely the
study of local tax problems and it has necessarily developed an expertise on the subject. The BLGF is not an administrative agency
whose findings on questions of fact are given weight and deference in the courts. The BLGF was created merely to provide
consultative services and technical assistance to local governments and the general public on local taxation, real property
assessment, and other related matters, among others.
Bagatsing v. Ramirez
G.R. No. L-41631 (December 17, 1976)

FACTS:
The Municipal Board of Manila enacted Ordinance No. 7522, “An Ordinance Regulating the Operation
of Public Markets and Prescribing Fees for the Rentals of Stalls and Providing Penalties for Violation
thereof and for other Purposes.” Respondent were seeking the declaration of nullity of the Ordinance
for the reason that a) the publication requirement under the Revised Charter of the City of Manila has
not been complied with, b) the Market Committee was not given any participation in the enactment, c)
Sec. 3(e) of the Anti-Graft and Corrupt Practices Act has been violated, and d) the ordinance would
violate P.D. 7 prescribing the collection of fees and charges on livestock and animal products.

ISSUE:
What law shall govern the publication of tax ordinance enacted by the Municipal Board of Manila, the
Revised City Charter or the Local Tax Code.

HELD:
The fact that one is a special law and the other a general law creates the presumption that the special
law is to be considered an exception to the general. The Revised Charter of Manila speaks of
“ordinance” in general whereas the Local Tax Code relates to “ordinances levying or imposing taxes,
fees or other charges” in particular. In regard therefore, the Local Tax Code controls.

Bagatsing vs. Ramirez

BAGATSING vs. RAMIREZ
74 SCRA 306
GR No. L-41631, December 17, 1976

"The entrusting of the tax collection to private entities does not destroy the public purpose of a tax ordinance."

FACTS: Aside from the issue on publication, private respondent bewails that the market stall fees imposed in
the disputed City Ordinance No. 7522, which regulates public markets and prescribes fees for rentals of stalls,
are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees
had been let by the City of Manila to the said corporation in a "Management and Operating Contract."

ISSUE: Does the delegation of the collection of taxes to a private entity invalidates a tax ordinance and defeats
its public purpose?

HELD: No. The assumption is of course saddled on erroneous premise. The fees collected do not go direct to
the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose
of raising revenues for the city. That is the object it serves. The entrusting of the collection of the fees does not
destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the
agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate
use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person
or corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public
purpose, although it be under the direction of an individual or private corporation.
MUNICIPALITY OF LA LIBERTAD, NEGROS ORIENTAL v. JUDITH C PENAFLOR
453 SCRA 833 (2005), THIRD DIVISION (Carpio Morales, J.)

A mayor need not secure the concurrence of the Sangguniang Bayan in terminating a person’s
services who is not claimed to be a head of department in the Mayor’s office.

FACTS: Judith Penaflor (Penaflor) had been employed in the office of the Municipality of La Libertad,
Negros Oriental as a rural midwife for about twenty years. She filed an application for a fifteen day
leave of absence which was recommended for approval by her superior. Unaware if her application
for leave had been approved, Penaflor began availing of it. Subsequently by Memorandum, then
Municipal Mayor Napoleon Camero (Mayor Camero) notified Penaflor that she had been terminated.
Penaflor appealed for a reconsideration of Mayor Camero‘s notice of termination but the same was
denied prompting her to appeal to the Civil Service Commission(CSC) which set aside Mayor
Camero‘s decision to drop her from the rolls. The CSC also ordered the reinstatement of Penaflor to
her position. Mayor Camero filed a motion for reconsideration of the CSC Resolution which was denied
and on appeal, the said Resolution was affirmed by the Court of Appeals.

As Penaflor was reinstated to her former position by Mayor Limkaichong, Jr. who won the local
elections, she filed a petition to CSC to direct the municipality of La Libertad (municipality) to pay her
back salaries due her which granted her petition. A Motion for Reconsideration was filed by the
municipality but it was denied. The Court of Appeals affirmed the CSC Resolution. The municipality
insists that Mayor Camero should be liable since the Penaflor was dismissed due to the erring act of
the former Mayor as the dismissal is without authority.

ISSUE: Whether or not Mayor Camero acted without in terminating Penaflor from the service

HELD: Generally the power to appoint includes the power to remove except in instances where it does
not include the power to remove, e.g.: 1.) The Members of the Supreme Court, the Members of the
Constitutional Commissions, and the Ombudsman who are appointed by the President may be
removed from office, on impeachment for, and conviction of, culpable violation of the Constitution,
treason, bribery, graft and corruption, other high crimes, or betrayal of public trust. 2.) The Judges of
lower court are subject to discipline by the Supreme Court en banc which can order their dismissal by
a vote of a majority of the Members who actually took part in the deliberations on the issues in the
case and voted thereon.

Since it is not claimed that Penaflor was a head of department or office in the office of petitioner, then
following Sec. 444(5) of the Local Government Code, under which a mayor is empowered to ―appoint
all officials whose salaries and wages are wholly or mainly paid out of municipal funds and whose
appointments are not otherwise provided for in this Code, as well as those he may be authorized by
law to appoint,‖ former Mayor Camero did not have to secure the concurrence of the Sangguniang
Bayan to terminate Penaflor‘s services.
 Velasco vs Villegas
G.R. No. L-24153 February 14, 1983
Facts: In their own behalf and in representation of the other owners of barbershops in the City
of Manila, petitioners challenge the constitutionality based on Ordinance No. 4964 of the City
of Manila, which prohibited the business of massaging customers of a barber shop. They
contend that it amounts to a deprivation of property of their means of livelihood without due
process of law.
Issue: Whether said ordinance was unconstitutional, and therefore an improper exercise of
police power
Held: No. The attack against the validity cannot succeed. As pointed out in the brief of
respondents-appellees, it is a police power measure. The objectives behind its enactment
are: “(1) To be able to impose payment of the license fee for engaging in the business of
massage clinic under Ordinance No. 3659 as amended by Ordinance 4767, an entirely
different measure than the ordinance regulating the business of barbershops and, (2) in order
to forestall possible immorality which might grow out of the construction of separate rooms
for massage of customers.”
The Court has been most liberal in sustaining ordinances based on the general welfare
clause. As far back as U.S. v. Salaveria, 4 a 1918 decision, this Court through Justice Malcolm
made clear the significance and scope of such a clause, which “delegates in statutory form
the police power to a municipality. As above stated, this clause has been given wide
application by municipal authorities and has in its relation to the particular circumstances of
the case been liberally construed by the courts. Such, it is well to really is the progressive
view of Philippine jurisprudence.”
City of Manila vs Judge Perfecto
Laguio
G.R. No. 118127 – 455 SCRA 308 – Political Law – Constitutional Law – Police
Power

On 30 Mar 1993, Mayor Lim signed into law Ord 7783 entitled AN ORDINANCE
PROHIBITING THE ESTABLISHMENT OR OPERATION OF BUSINESSES
PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT,
SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA,
PRESCRIBING PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER
PURPOSES. It basically prohibited establishments such as bars, karaoke bars, motels
and hotels from operating in the Malate District which was notoriously viewed as a
red light district harboring thrill seekers. Malate Tourist Development Corporation
avers that the ordinance is invalid as it includes hotels and motels in the enumeration
of places offering amusement or entertainment. MTDC reiterates that they do not
market such nor do they use women as tools for entertainment. MTDC also avers that
under the LGC, LGUs can only regulate motels but cannot prohibit their operation.
The City reiterates that the Ordinance is a valid exercise of Police Power as provided
as well in the LGC. The City likewise emphasized that the purpose of the law is to
promote morality in the City.

ISSUE: Whether or not Ordinance 7783 is valid.

HELD: The SC ruled that the said Ordinance is null and void. The SC noted that for
an ordinance to be valid, it must not only be within the corporate powers of the local
government unit to enact and must be passed according to the procedure prescribed by
law, it must also conform to the following substantive requirements:

(1) must not contravene the Constitution or any statute;

(2) must not be unfair or oppressive;

(3) must not be partial or discriminatory;

(4) must not prohibit but may regulate trade;

(5) must be general and consistent with public policy; and

(6) must not be unreasonable.

The police power of the City Council, however broad and far-reaching, is subordinate
to the constitutional limitations thereon; and is subject to the limitation that its
exercise must be reasonable and for the public good. In the case at bar, the enactment
of the Ordinance was an invalid exercise of delegated power as it is unconstitutional
and repugnant to general laws.

City of Manila vs. Judge Laguio (G.R. No. 118127)

Facts:
The private respondent, Malate Tourist Development Corporation (MTOC) is a corporation
engaged in the business of operating hotels, motels, hostels, and lodging houses. It built and
opened Victoria Court in Malate which was licensed as a motel although duly accredited
with the Department of Tourism as a hotel.

March 30, 1993 - City Mayor Alfredo S. Lim approved an ordinance enacted which
prohibited certain forms of amusement, entertainment, services and facilities where women
are used as tools in entertainment and which tend to disturb the community, annoy the
inhabitants, and adversely affect the social and moral welfare of the community. The
Ordinance prohibited the establishment of sauna parlors, massage parlors, karaoke bars,
beerhouses, night clubs, day clubs, cabarets, motels, inns. Owners and operators of the
enumerated establishments are given three months to wind up business operations or
transfer to any place outside Ermita-Malate or convert said businesses to other kinds
allowable within the area. The Ordinance also provided that in case of violation and
conviction, the premises of the erring establishment shall be closed and padlocked
permanently.

June 28, 1993 - MTOC filed a Petition with the lower court, praying that the Ordinance,
insofar as it included motels and inns as among its prohibited establishments, be declared
invalid and unconstitutional for several reasons but mainly because it is not a valid exercise
of police power and it constitutes a denial of equal protection under the law.

Judge Laguio ruled for the petitioners. The case was elevated to the Supreme Court.

Issue:
WON the Ordinance is constitutional.

Held:
SC held that the ordinance is unconstitutional for several reasons.
First, it did not meet the valid exercise of police power. To successfully invoke the exercise
of police power, not only must it appear that (1)the interest of the public generally, as
distinguished from those of a particular class, require an interference with private rights,
but (2)the means employed must be reasonably necessary for the accomplishment of the
purpose and not unduly oppressive. The object of the ordinance was the promotion and
protection of the social and moral values of the community. The closing down and transfer
of businesses or their conversion into businesses allowed under the ordinance have no
reasonable relation to its purpose. Otherwise stated, the prohibition of the enumerated
establishments will not per se protect and promote social and moral welfare of the
community. It will not itself eradicate prostitution, adultery, fornication nor will it arrest the
spread of sexual disease in Manila.

Second. The modality employed constitutes unlawful taking. The ordinance is unreasonable
and oppressive as it substantially divests the respondent of the beneficial use of its property.
The ordinance forbids running of the enumerated businesses in Ermita-Malate area and
instructs owners/operators to wind up their business operations or to transfer outside the
area or convert said business into allowed business. An ordinance which permanently
restricts the use of property that it cannot be used for any reasonable purpose goes beyond
regulation and must be recognized as a taking of the property without just compensation. It
is intrusive and violative of the private property rights of individuals. There are two types of
taking: A “possessory” taking and a “regulatory” taking. The latter occurs when the
government’s regulation leaves no reasonable economically viable use of the property, as in
this case.

Third. The ordinance violates the equal protection clause. Equal protection requires that all
persons or things similarly situated should be treated alike, both as to the rights conferred
and responsibilities imposed. Similar subjects, in other words, should not be treated
differently, so as to give undue favor to some. Legislative bodies are allowed to classify the
subjects of legislation provided the classification is reasonable. To be valid, it must conform
to the following requirements: (1)It must be based on substantial distinction; (2)It must be
germane to the purpose of the law; (3)It must not be limited to existing conditions only; and
(4)It must apply equally to all members of the class. In the Court’s view, there are no
substantial distinction between motels, inns, pension houses, hotels, lodging houses or other
similar establishments. By definition, all are commercial establishments providing lodging
and usually meals and other services for the public. No reason exists for prohibiting motels
and inns but not pension houses, hotels, lodging houses or other similar establishments. The
Court likewise cannot see the logic for prohibiting the business and operation of motels in
the Ermita-Malate area but not outside this area. A noxious establishment does not become
any less noxious if located outside the area.

Fourth. The ordinance is repugnant to general laws, thus it is ultra vires. The ordinance is
in contravention of the Revised Administrative Code as the Code merely empowers the local
government units to regulate, and not prohibit, the establishments enumerated. Not only
that, it likewise runs counter to the provisions of P.D. 499. The P.D. Had already converted
the residential Ermita-Malate area into a commercial area. The decree allowed the
establishment and operation of all kinds of commercial establishments.
Wherefore, the petition was DENIED and the decision of the RTC was AFFIRMED.
PALMA VS MALANGAS (413 SCRA 572)
Palma Development Corporation vs Municipality of Malangas
413 SCRA 572 [GR No. 152492 October 16, 2003]

Facts: Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to wholesalers in
Zamboanga City. It uses the municipal port of Malangas, Zamboanga del Sur as transshipment port for its goods. The
port, as well as the surrounding roads leading to it, belong to and are maintained by the Municipality of Malangas,
Zamboanga del Sur. On January 16, 1994, the municipality passed municipal revenue code no. 09 series of 1993,
which was subsequently approved by the Sangguniang Panlalawigan of Zamboanga del Sur in resolution no. 1330
dated August 4, 1994. Section 56.01 of the ordinance reads as follows:

Sec 56.01 Imposition of Fees. There shall be collected service fee for its use of the municipal roads or streets leading
to the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance
on all goods and all equipment harboured or sheltered in the premises of the wharf and other within the jurisdiction
of the municipality [xxx]

Accordingly, the service fees imposed by section 56.01 of the ordinance was paid by petitioner under protest. It
contended that under Republic Act No. 7160, otherwise known as the local government code of 1991, municipal
governments did not have authority to tax goods and vehicles that passed through their jurisdictions. Thereafter, before
the Regional Trial Court of Pagadian City, petitioner filed against the Municipality of Malangas on November 29,
1995, an action for declaratory relief assailing the validity of section 56.01 of the municipal ordinance.

Issue: Whether or not the imposition of service fee is proper and valid.

Held: No. By the express language of section 153 and 155 RA 7160, local government units, through their sanggunian,
may prescribe the terms and conditions for the imposition of toll fees or charges for the use of any public road, pier
or wharf funded and constructed by them. A service fee imposed on vehicles using municipal roads leading to the
wharf is thus valid, however, section 133 (e) of RA 7160 prohibits the imposition, in the guise of wharfage fees — as
well as other taxes or charges in any form whatsoever on goods or merchandise. It is therefore irrelevant if the fee
imposed are actually for police surveillance on the goods, because any other form of imposition on goods passing
through the territorial jurisdiction of the municipality is clearly prohibited by section 133 (e).
Albon vs. Fernando
attyrcd / March 20, 2016

ANIANO A. ALBON v. FERNANDO et al., G.R. No. 148357, June 30, 2006 (May an LGU validly use public
funds to undertake the widening, repair and improvement of the sidewalks of a privately-owned subdivision?)
Facts:
In May 1999, the City of Marikina undertook a public works project to widen, clear and repair the existing sidewalks
of Marikina Greenheights Subdivision. It was undertaken by the city government pursuant to Ordinance No. 59, s.
1993 like other infrastructure projects relating to roads, streets and sidewalks previously undertaken by the city.

On June 14, 1999, petitioner Aniano A. Albon filed with the Regional Trial Court of Marikina a taxpayer’s suit for
certiorari, prohibition and injunction with damages against respondents, City Mayor Bayani F. Fernando, et al.
Petitioner claimed that it was unconstitutional and unlawful for respondents to use government equipment and
property, and to disburse public funds, of the City of Marikina for the grading, widening, clearing, repair and
maintenance of the existing sidewalks of Marikina Greenheights Subdivision. He alleged that the sidewalks were
private property because Marikina Greenheights Subdivision was owned by V.V. Soliven, Inc. Hence, the city
government could not use public resources on them. In undertaking the project, therefore, respondents allegedly
violated the constitutional proscription against the use of public funds for private purposes as well as Sections 335 and
336 of RA 7160 and the Anti-Graft and Corrupt Practices Act. Petitioner further alleged that there was no appropriation
for the project.

Ruling:
Like all LGUs, the City of Marikina is empowered to enact ordinances for the purposes set forth in the Local
Government Code (RA 7160). It is expressly vested with police powers delegated to LGUs under the general welfare
clause of RA 7160. With this power, LGUs may prescribe reasonable regulations to protect the lives, health, and
property of their constituents and maintain peace and order within their respective territorial jurisdictions.

Cities and municipalities also have the power to exercise such powers and discharge such functions and responsibilities
as may be necessary, appropriate or incidental to efficient and effective provisions of the basic services and facilities,
including infrastructure facilities intended primarily to service the needs of their residents and which are financed by
their own funds. These infrastructure facilities include municipal or city roads and bridges and similar facilities.

There is no question about the public nature and use of the sidewalks in the Marikina Greenheights Subdivision. One
of the “whereas clauses” of PD 1216 (which amended PD 957) declares that open spaces, roads, alleys and sidewalks
in a residential subdivision are for public use and beyond the commerce of man. In conjunction herewith, PD 957, as
amended by PD 1216, mandates subdivision owners to set aside open spaces which shall be devoted exclusively for
the use of the general public.

Thus, the trial and appellate courts were correct in upholding the validity of Ordinance No. 59, s. 1993. It was enacted
in the exercise of the City of Marikina’s police powers to regulate the use of sidewalks. However, both the trial and
appellate courts erred when they invoked our 1991 decision in White Plains Association and automatically applied it
in this case.
The ruling in the 1991 White Plains Association decision relied on by both the trial and appellate courts was modified
by this Court in 1998 in White Plains Association v. Court of Appeals. Citing Young v. City of Manila, this Court held
in its 1998 decision that subdivision streets belonged to the owner until donated to the government or until expropriated
upon payment of just compensation.
The word “street,” in its correct and ordinary usage, includes not only the roadway used for carriages and vehicular
traffic generally but also the portion used for pedestrian travel. The part of the street set aside for the use of pedestrians
is known as a sidewalk. Ownership of the sidewalks in a private subdivision belongs to the subdivision
owner/developer until it is either transferred to the government by way of donation or acquired by the government
through expropriation.

Section 335 of RA 7160 is clear and specific that no public money or property shall be appropriated or applied for
private purposes. This is in consonance with the fundamental principle in local fiscal administration that local
government funds and monies shall be spent solely for public purposes.

In Pascual v. Secretary of Public Works, the Court laid down the test of validity of a public expenditure: it is the
essential character of the direct object of the expenditure which must determine its validity and not the magnitude
of the interests to be affected nor the degree to which the general advantage of the community, and thus the public
welfare, may be ultimately benefited by their promotion. Incidental advantage to the public or to the State resulting
from the promotion of private interests and the prosperity of private enterprises or business does not justify their aid
by the use of public money.
In Pascual, the validity of RA 920 (“An Act Appropriating Funds for Public Works”) which appropriated P85,000 for
the construction, repair, extension and improvement of feeder roads within a privately-owned subdivision was
questioned. The Court held that where the land on which the projected feeder roads were to be constructed belonged
to a private person, an appropriation made by Congress for that purpose was null and void.
In Young v. City of Manila, 73 Phil. 537 (1941), the City of Manila undertook the filling of low-lying streets of the
Antipolo Subdivision, a privately-owned subdivision. The Court ruled that as long as the private owner retained title
and ownership of the subdivision, he was under the obligation to reimburse to the city government the expenses
incurred in land-filling the streets.
Moreover, the implementing rules of PD 957, as amended by PD 1216, provide that it is the registered owner or
developer of a subdivision who has the responsibility for the maintenance, repair and improvement of road lots and
open spaces of the subdivision prior to their donation to the concerned LGU. The owner or developer shall be deemed
relieved of the responsibility of maintaining the road lots and open space only upon securing a certificate of completion
and executing a deed of donation of these road lots and open spaces to the LGU.

Therefore, the use of LGU funds for the widening and improvement of privately-owned sidewalks is unlawful as it
directly contravenes Section 335 of RA 7160. This conclusion finds further support from the language of Section 17
of RA 7160 which mandates LGUs to efficiently and effectively provide basic services and facilities. The law speaks
of infrastructure facilities intended primarily to service the needs of the residents of the LGU and “which are funded
out of municipal funds.” It particularly refers to “municipalroads and bridges” and “similar facilities.”
Applying the rules of ejusdem generis, the phrase “similar facilities” refers to or includes infrastructure facilities like
sidewalks owned by the LGU. Thus, RA 7160 contemplates that only the construction, improvement, repair and
maintenance of infrastructure facilities owned by the LGU may be bankrolled with local government funds.
Clearly, the question of ownership of the open spaces (including the sidewalks) in Marikina Greenheights Subdivision
is material to the determination of the validity of the challenged appropriation and disbursement made by the City of
Marikina. Similarly significant is the character of the direct object of the expenditure, that is, the sidewalks.

Whether V.V. Soliven, Inc. has retained ownership of the open spaces and sidewalks or has already donated them to
the City of Marikina, and whether the public has full and unimpeded access to the roads and sidewalks of Marikina
Greenheights Subdivision, are factual matters. There is a need for the prior resolution of these issues before the validity
of the challenged appropriation and expenditure can be determined.

This case is REMANDED to the Regional Trial Court of Marikina City for the reception of evidence to determine (1)
whether V.V. Soliven, Inc. has retained ownership of the open spaces and sidewalks of Marikina Greenheights
Subdivision or has donated them to the City of Marikina and (2) whether the public has full and unimpeded access to,
and use of, the roads and sidewalks of the subdivision.
 THE PROVINCE OF NEGROS OCCIDENTAL, REPRESENTED BY ITS GOVERNOR ISIDRO P.
ZAYCO v. THE COMMISSIONERS, COMMISSION ON AUDIT, ET AL.
G.R. No. 182574, September 28, 2010
Carpio, J.:

Doctrine:
The President’s power of general supervision means the power of a superior officer to see to it that
subordinates perform their functions according to law. This is distinguished from the President’s power of
control which is the power 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 President over that of the subordinate officer.
Since LGUs are subject only to the power of general supervision of the President, the President’s authority
is limited to seeing to it that rules are followed and laws are faithfully executed.

Facts:
The Sangguniang Panlalawigan of Negros Occidental passed a resolution allocating P4,000,000 of its
retained earnings for the hospitalization and health care insurance benefits of 1,949 officials and employees
of the province. The Committee on Awards granted the insurance coverage to Philam Care Health System
Incorporated (Philam Care). Petitioner Province of Negros Occidental, and Philam Care entered into a
Group Health Care Agreement. After a post-audit investigation, the Provincial Auditor issued Notice of
Suspension suspending the premium payment because of lack of approval from the Office of the President
as provided under Administrative Order No. 103 (AO 103). Then President Joseph E. Estrada directed the
COA to lift the suspension but only in the amount ofP100,000. The Provincial Auditor ignored the directive
of the President. The COA ruled that under AO 103, no government entity, including a local government
unit, is exempt from securing prior approval from the President granting additional benefits to its
personnel. This is in conformity with the policy of standardization of compensation laid down in RA 6758.

Issue:
Whether or not COA committed grave abuse of discretion in affirming the disallowance of P3,760,000 for
premium paid for the hospitalization and health care insurance benefits granted by the Province of Negros
Occidental to its 1,949 officials and employees.

Ruling:
Yes. It is clear from Section 1 of AO 103 that the President authorized all agencies of the national
government as well as LGUs to grant the maximum amount of P2,000 productivity incentive benefit to each
employee who has rendered at least one year of service as of 31 December 1993. In Section 2, the
President enjoined all heads of government offices and agencies from granting productivity incentive
benefits or any and all similar forms of allowances and benefits without the President’s prior approval. From
a close reading of the provisions of AO 103, petitioner did not violate the rule of prior approval from the
President since Section 2 states that the prohibition applies only to “government offices/agencies, including
government-owned and/or controlled corporations, as well as their respective governing boards.” Nowhere
is it indicated in Section 2 that the prohibition also applies to LGUs. The President may only point out that
rules have not been followed but the President cannot lay down the rules, neither does he have the
discretion to modify or replace the rules. Thus, the grant of additional compensation like hospitalization
and health care insurance benefits in the present case does not need the approval of the President to be
valid.
 The Learning Child, Inc. (TLC) v. Ayala Alabang Village Association (AAVA), G.R. No. 134269
Date: July 7, 2010 | Ponente: Leonardo-De Castro, J.

Doctrine: Contracts Clause; Limitations on the use of land imposed by contract yield to reasonable
exercise of police power and, hence, zoning ordinances are superior to contractual restrictions on the use
of property.

Summary: The case is 3 consolidated petitions for review on certiorari concerning the operation of The
Learning Child, a preparatory AND grade school located in Ayala Alabang Village. AAVA filed an injunction
case against TLC and the spouses Alfonso for violating the Deed of Restrictions which limits the use of the
lot to a preparatory (nursery and kindergarten) school. The Supreme Court held that AAVA’s and ALI’s
insistence on (1) the enforcement of the Deed of Restriction or (2) the obtainment of the approval of the
affected residents for any modification of the Deed of Restrictions is reasonable absent any interest or
zoning purpose asserted by the Municipality contrary to that of the subdivision developer in declaring the
subject property as institutional.

Deed of Restrictions Metropolitan Manila Muntinlupa Zoning Muntinlupa Resolution

Commission Ordinance Ordinance No. 91-39 No. 94-179
No. 81-01
“USE AND OCCUPANCY Classified Ayala Reclassified the subject Corrected a
– The property shall be Alabang Village for property as typographical error in
used exclusively for zoning purposes as a “institutional” the description of a
the establishment and low-density residential parcel of land under
maintenance thereon area, thereby limiting the heading
of a preparatory the use of the subject “Institutional Zone” in
(nursery and property to the Appendix B of
kindergarten) school, establishment or Ordinance No. 91-39 ,
which may include operation of a nursery adjusting the
such installations as an and kindergarten description “Lot 25,
office for school school, which should Block 1, Phase V, Ayala
administration, not exceed two Alabang” to “Lot 25,
playground and garage classrooms. Block 3, Phase V, Ayala
for school vehicles.” Alabang”

Facts:
 Sale of Lot 25, Block 3, Phase V, Ayala Alabang – Ayala Land Inc. (ALI) sold this parcel of land to
spouses Yuson. They then sold it to spouses Alfonso. A Deed of Restrictions was annotated on the TCT
which expressly provides that, “the property shall be used exclusively for the establishment and
maintenance thereon of a preparatory (nursery and kindergarten) school.” ALI turned over the right
and power to enforce the restrictions on the properties in the Ayala Alabang Village to the association
of homeowners, the AAVA.
 Establishment of TLC and Expansion – In 1989, the spouses opened on the same lot The Learning
Child Pre-school which initially consisted of nursery and kindergarten classes. In 1991, it was expanded
to include a grade school program, the School of the Holy Cross.
 AAVA Protest – The AAVA filed with the RTC of Makati an action for injunction against TLC and the
spouses Alfonso, alleging breach of contract by the defendant spouses of the Deed of Restrictions.
 RTC of Makati – Rendered a Decision in favour of AAVA, emphasizing that the restrictions were in
reality an easement which an owner of a real estate may validly impose under Article 688 of the Civil
Code.
 Motion for Reconsideration – TLC alleged that with the passage of Muntinlupa Zoning Ordinance No.
91-39 which reclassified the subject property as “institutional,” there ceased to be legal basis for the
RTC to uphold the Deed of Restrictions. RTC agreed and set aside its earlier Decision. Citing Ortigas &
Co. Limited Partnership v. Feati Bank & Trust Co., it decreed that while the non-impairment of
contracts is constitutionally guaranteed, the rule is not absolute since it has to be reconciled with the
legitimate exercise of police power by the municipality.
 CA – Upon appeal by the AAVA, it set aside the Resolution of the RTC and reinstated the previous
decision in favour of AAVA. TLC and spouses Alfonso filed a Motion for Reconsideration from this
Decision but was denied.
 Motion to Intervene – Aquino, et al., students of TLC, alleging that they are minor children who suffer
from various learning disabilities and behavioural disorders benefiting from TLC’s full-inclusion
program, filed a Motion for Leave to Intervene and their own Motion for Reconsideration with the
CA. The CA denied their Motions for being proscribed by Section 2, Rule 19 of the 1997 Rules on Civil
Procedure.
 Zoning Ordinance Case – In the meantime, the Municipality of Muntinlupa passed Resolution No. 94-
179 correcting an alleged typo on abovementioned Ordinance No. 91-39, effectively placing Lot 25,
Block 3, Phase V (herein subject lot) under the “Institutional Zone.”
o HLURB – According to the Housing and Land Use Regulatory Board (HLURB), the Resolution
was not a mere correction of a typo but an actual rezoning of the property into an institutional
area and would require the conduct of public hearings.
o Office of the President – The Office of the President set aside this conclusion of the HLURB
and declared Resolution No. 94-179 as a valid corrective issuance. It further held that the
Deed of Restrictions had lost its force and effect in view of the passage of Ordinance No. 91-
39.
o CA – The CA upheld the validity of Resolution No. 94-179 but held that the Office of the
President erred; that Ordinance No. 91-39 did not have the effect of nullifying the Deed of
Restrictions inasmuch as there is no conflict between the two.

Issues/Ratio:

 WON the CA is correct in upholding the validity of Muntinlupa Resolution No. 94-179  YES, being
a mere corrective issuance, it is not invalidated by the lack of notice and hearing as AAVA contends.
o Both the Official Zoning Map of Muntinlupa and that of the Ayala Alabang Village show that
the subject lot is classified as “institutional.” The official zoning map is an indispensable and
integral part of a zoning ordinance, without which said ordinance would be considered void.
o It is clear that there was a typo and the Court is merely affirming the correction made by the
same entity which committed the error.
o The authority of the HLURB is subordinate to that of the Office of the President and the acts
of the former may be set aside by the latter.

 WON the CA was correct in denying Aquino, et al.’s Motion to Intervene  MOOT, since their motion
was filed in 1998, Aquino, et al., would no longer be in grade school at this time.
o For the sake of argument, the Court finds no reversible error in CA’s denial of their Motion.
The motion was filed three months after the CA had already rendered its Decision.
 o Section 2, Rule 19 of the 1997 Rules on Civil Procedure clearly imports that intervention
cannot be allowed when the trial court has already rendered its Decision, and much less, as
in the instant case, when even the CA had rendered its own Decision on appeal.

 WON TLC and the spouses Alfonso should be enjoined from continuing the operation of a grade
school in the subject property  YES, sub-issues below:

 WON Muntinlupa Municipal Ordinance No. 91-39, as corrected by Muntinlupa Resolution No. 91-
179, has the effect of nullifying the provisions of the Deed of Restrictions on the subject property
 NO, there is a way to harmonize the seemingly opposing provisions.
o TLC and spouses Alfonso: Reclassification of properties is a valid exercise of the state’s police
power, with which contractual obligations should be reconciled.
o AAVA: Even where the exercise of police power is valid, the same does not operate to
automatically negate all other legal relationships in existence since the better policy is to
reconcile the conflicting rights.
o Review of jurisprudence:
 Ortigas & Co. Limited Partnership v. Feati Bank & Trust Co: The Court, in upholding
the exercise of police power attendant in the reclassification of the subject property
therein over the Deed of Restrictions over the same property, took into consideration
the prevailing conditions in the area. “Resolution was passed in the exercise of police
power to safeguard or promote the health, safety, peace, good order and general
welfare of the people in the locality.”
 Co v. Intermediate Appellate Court: The Court denied the applicability of
reclassification. “This is not to suggest that a zoning ordinance cannot affect existing
legal relationships for it is settled that it can legally do so, being an exercise of police
power. As such, it is superior to the impairment clauses. xxx The zoning ordinance in
question, while valid as a police measure, was not intended to affect existing rights
protected by the impairment clause. It is always a wise policy to reconcile apparently
conflicting rights under the Constitution and to preserve both instead of nullifying one
against the other.”
 Presley v. Bel-Air Village Association: The Court allowed the operation of the Hot Pan
de Sal Store despite the Deed of Restrictions, but not without examining the
surrounding area like in Ortigas.
o SC: The subject property, though declared as an institutional lot, nevertheless lies within a
residential subdivision and is surrounded by residential lots. TLC’s student population had
swelled to 350 students. The greater traffic will affect adjacent property owners’ enjoyment
and use of their own properties. AAVA’s insistence on the enforcement of the Deed of
Restrictions is thus reasonable. Also, the Municipality of Muntinlupa did not appear to have
any special justification for declaring the subject lot as an institutional property.

 WON AAVA is estopped from enforcing the Deed of Restrictions  NO

o TLC and spouses Alfonso: The AAVA had allegedly abrogated said restrictions by its own acts.
o However, TLC and the spouses Alfonso failed to prove by clear and convincing evidence the
gravity of AAVA’s acts so as to bar the latter from insisting compliance.
o The circumstances around the enumerated acts of AAVA also show that there was no
intention on the part of AAVA to abrogate the Deed of Restrictions nor to waive its right to
have said restrictions enforced.
 o Finally, a thorough examination of the records of the case shows that AAVA consistently
insisted upon compliance with the Deed of Restrictions.

Ruling: TLC and the spouses Alfonso are ordered to CEASE AND DESIST from the operation of the Learning
Child School beyond nursery and kindergarten. The current students will be allowed to finish their
elementary studies up to their graduation in Grade 7. Enrollment of new grade school students will no
longer be permitted.
LTO vs. City of Butuan; Power of LGU

7/10/2013

0 Comments

G. R. No. 131512. January 20, 2000

Facts:
Relying on the fiscal autonomy granted to LGU's by the Constittuion and the provisons of the Local
Government Code, the Sangguniang Panglunsod of the City of Butuan enacted 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.

The RTC and CA ruled that the power to give registration and license for driving tricycles has been
devolved to LGU's.

Issue:
Whether or not, the registration of tricycles was given to LGU's, hence the ordinance is a valid
exercise of police power.

Ruling:
No, based on the-"Guidelines to Implement the Devolution of LTFRBs Franchising Authority over
Tricycles-For-Hire to Local Government units pursuant to the Local Government Code"- the newly
delegated powers to LGU's pertain to the franchising and regulatory powers 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. Corollarily, the exercised of a police power must be through a valid
delegation. In this case the police power of registering tricycles was not delegated to the LGU’s, but
remained in the LTO.

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.
 Adds the Court, 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. All these inherent powers are for a public purpose and legislative in nature but the
similarities just about end there. 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 powers are, by tradition and
jurisprudence, separate and distinct powers, varying in their respective concepts, character, scopes
and limitations.

To construe the tax provisions of Section 133 (1) of the LGC indistinctively would result in the
repeal to that extent of LTO's regulatory power which evidently has not been intended. If it were
otherwise, the law could have just said so in Section 447 and 458 of Book III of the Local Government
Code in the same manner that the specific devolution of LTFRB's power on franchising of tricycles has
been provided. Repeal by implication is not favored.

The power over tricycles granted under Section 458(a)(3)(VI) of the Local Government Code to
LGUs is the power to regulate their operation and to grant franchises for the operation thereof. The
exclusionary clause contained in the tax provisions of Section 133 (1) of the Local Government Code
must not be held to have had the effect of withdrawing the express power of LTO to cause the
registration of all motor vehicles and the issuance of licenses for the driving thereof. These functions
of the LTO are essentially regulatory in nature, exercised pursuant to the police power of the State,
whose basic objectives are to achieve road safety by insuring the road worthiness of these motor
vehicles and the competence of drivers prescribed by R. A. 4136. Not insignificant is the rule that a
statute must not be construed in isolation but must be taken in harmony with the extant body of laws.

LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant
franchises for the operation thereof, and not to issue registration.

Ergo, the ordinance being repugnant to a statute is void and ultra vires.