(02) tax (november 29,2014)
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G.R. No. L-36081 April 24, 1989
PROGRESSIVE DEVELOPMENT CORPORATION,petitioner ,
vs.
QUEZON CITY,respondent.
Jalandoni, Herrera, Del Castillo & Associates for petitioner.
FELICIANO,J.:
On 24 December 1969, the City Council of respondent Quezon City adopted
Ordinance No. 7997, Series of 1969, otherwise known as the Market Code ofQuezon City, Section 3 of which provided:
Sec. 3. Supervision Fee.- Privately owned and operated public
markets shall submit monthly to the Treasurer's Office, a certified
list of stallholders showing the amount of stall fees or rentals paid
daily by each stallholder, ... andshall pay 10% of the gross
receipts from stall rentalsto the City, ... , as supervision fee.
Failure to submit said list and to pay the corresponding amount
within the period herein prescribedshall subject the operator to the
penalties provided in this Code .. . includingrevocation of permit to
operate. ... .1
The Market Code was thereafter amended by Ordinance No. 9236, Series of 1972,
on 23 March 1972, which reads:SECTION 1. There is hereby imposed a five percent (5 %) tax on
gross receipts on rentals or lease of space in privately-owned
public markets in Quezon City.
xxx xxx xxx
SECTION 3. For the effective implementation of this Ordinance,
owners of privately owned public markets shall submit ... a
monthly certified list of stallholders of lessees of space in their
markets showing ... :
a. name of stallholder or lessee;
b. amount of rental;
c. period of lease, indicating therein whether the same is on a daily,
monthly or yearly basis.
xxx xxx xxx
SECTION 4. ...In case of consistent failure to pay the percentage
tax for the (3) consecutive months, the City shall revoke the permit
of the privately-owned marketto operate and/or take any other
appropriate action or remedy allowed by law for the collection of
the overdue percentage tax and surcharge.
xxx xxx xxx 2
On 15 July 1972, petitioner Progressive Development Corporation, owner and
operator of a public market known as the "Farmers Market & Shopping Center" filed
a Petition for Prohibition with Preliminary Injunction against respondent before the
then Court of First Instance of Rizal on the ground that the supervision fee or license
tax imposed by the above-mentioned ordinances is in reality a tax on income which
respondent may not impose, the same being expressly prohibited by Republic Act
No. 2264, as amended.
In its Answer, respondent, through the City Fiscal, contended that it had authority to
enact the questioned ordinances, maintaining that the tax on gross receipts imposed
therein is not a tax on income. The Solicitor General also filed an Answer arguing
that petitioner, not having paid the ten percent (10%) supervision fee prescribed by
Ordinance No. 7997, had no personality to question, and was estopped from
questioning, its validity; that the tax on gross receipts was not a tax on income but
one imposed for the enjoyment of the privilege to engage in a particular trade orbusiness which was within the power of respondent to impose.
In its Supplemental Petition of 23 September 1972, petitioner alleged having paid
under protest the five percent (5%) tax under Ordinance No. 9236 for the months of
June to September 1972. Two (2) days later, on 25 September 1972, petitioner
moved for judgment on the pleadings, alleging that the material facts had been
admitted by the parties.
On 21 October 1972, the lower court dismissed the petition, ruling 3 that the
questioned imposition is not a tax on income, but rather a privilege tax or license fee
which local governments, like respondent, are empowered to impose and collect.
Having failed to obtain reconsideration of said decision, petitioner came to us on the
present Petition for Review.
The only issue to be resolved here is whether the tax imposed by respondent on grossreceipts of stall rentals is properly characterized as partaking of the nature of an
income tax or, alternatively, of a license fee.
We begin with the fact that Section 12, Article III of Republic Act No. 537,
otherwise known as the Revised Charter of Quezon City, authorizes the City
Council:
xxx xxx xxx
(b) To provide for the levy and collection of taxes and other city
revenues and apply the same to the payment of city expenses in
accordance with appropriations.
(c) To tax, fix the license fee, and regulate the business ofthe
following:
...preparation and sale of meat, poultry, fish, game, butter, cheese,
lard vegetables, bread and other provisions.4
The scope of legislative authority conferred upon the Quezon City Council in respect
of businesses like that of the petitioner, is comprehensive: the grant of authority is
not only" [to] regulate" and "fix the license fee," but also " to tax" 5
Moreover, Section 2 of Republic Act No. 2264, as amended, otherwise known as the
Local Autonomy Act, provides that:
Any provision of law to the contrary notwithstanding, all chartered
cities, municipalities and municipal districtsshall have authority to
impose municipal license taxes or fees upon persons engaged in
any occupation or business, or exercising privileges in chartered
cities, municipalities or municipal districts by requiring them to
secure licenses at rates fixed by the municipal board or city council
of the city, the municipal council of the municipality, or the
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municipal district council of the municipal district; to collect fees
and charges for service rendered by the city, municipality or
municipal district; to regulate and impose reasonable fees for
services rendered in connection with any business, profession or
occupation being conducted within the city, municipality or
municipal district and otherwise to levy for public purposes just
and uniform taxes licenses or fees: ... 6
It is now settled that Republic Act No. 2264 confers upon local governments broad
taxing authority extending to almost "everything, excepting those which arementioned therein," provided that the tax levied is "for public purposes, just and
uniform," does not transgress any constitutional provision and is not repugnant to a
controlling statute. 7Both the Local Autonomy Act and the Charter of respondent
clearly show that respondent is authorized to fix the license fee collectible from and
regulate the business of petitioner as operator of a privately-owned public market.
Petitioner, however, insist that the "supervision fee" collected from rentals, being a
return from capital invested in the construction of the Farmers Market, practically
operates as a tax on income, one of those expressly excepted from respondent's
taxing authority, and thus beyond the latter's competence. Petitioner cites the same
Section 2 of the Local Autonomy Act which goes on to state: 8
... Provided, however, That no city,municipality or municipal
districtmay levy or impose any of the following:xxx xxx xxx
(g) Taxes on income of any kind whatsoever;
The term "tax" frequently applies to all kinds of exactions of monies which become
public funds. It is often loosely used to include levies for revenue as well as levies
for regulatory purposes such that license fees are frequently called taxes
although license feeis a legal concept distinguishable fromtax:the former is
imposed in the exercise of police power primarily for purposes of regulation, while
the latter is imposed under the taxing power primarily for purposes of raising
revenues. 9Thus, if the generating of revenue is the primary purpose and regulation
is merely incidental, the imposition is a tax; but if regulation is the primary purpose,
the fact that incidentally revenue is also obtained does not make the imposition a
tax. 10
To be considered a license fee, the imposition questioned must relate to an
occupation or activity that so engages the public interest in health, morals, safety and
development as to require regulation for the protection and promotion of such public
interest; the imposition must also bear a reasonable relation to the probable expenses
of regulation, taking into account not only the costs of direct regulation but also its
incidental consequences as well.11When an activity, occupation or profession is of
such a character that inspection or supervision by public officials is reasonably
necessary for the safeguarding and furtherance of public health, morals and safety, or
the general welfare, the legislature may provide that such inspection or supervision
or other form of regulation shall be carried out at the expense of the persons engaged
in such occupation or performing such activity, and that no one shall engage in the
occupation or carry out the activity until a fee or charge sufficient to cover the cost
of the inspection or supervision has been paid. 12Accordingly, a charge of a fixed
sum which bears no relation at all to the cost of inspection and regulation may be
held to be a tax rather than an exercise of the police power. 13
In the case at bar, the "Farmers Market & Shopping Center" was built by virtue of
Resolution No. 7350 passed on 30 January 1967 by respondents's local legislative
body authorizing petitioner to establish and operate a market with a permit to sell
fresh meat, fish, poultry and other foodstuffs. 14The same resolution imposed upon
petitioner, as a condition for continuous operation, the obligation to "abide by and
comply with the ordinances, rules and regulations prescribed for the establishment,
operation and maintenance of markets in Quezon City." 15The "Farmers' Market and Shopping Center" being a public market in the' sense of a
market open to and inviting the patronage of the general public, even though
privately owned, petitioner's operation thereof required a license issued by the
respondent City, the issuance of which, applying the standards set forth above, was
done principally in the exercise of the respondent's police power. 16 The operation of
a privately owned market is, as correctly noted by the Solicitor General, equivalent
to or quite the same as the operation of a government-owned market; both are
established for the rendition of service to the general public, which warrants close
supervision and control by the respondent City, 17for the protection of the health of
the public by insuring, e.g., the maintenance of sanitary and hygienic conditions in
the market, compliance of all food stuffs sold therein with applicable food and drug
and related standards, for the prevention of fraud and imposition upon the buyingpublic, and so forth.
We believe and so hold that the five percent (5%) tax imposed in Ordinance No.
9236 constitutes, not a tax on income,not a city income tax (as distinguished from
the nationalincometax imposed by the National Internal Revenue Code) within the
meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee
for the regulation of the business in which the petitioner is engaged. While it is true
that the amount imposed by the questioned ordinances may be considered in
determining whether the exaction is really one for revenue or prohibition, instead of
one of regulation under the police power, 18it nevertheless will be presumed to be
reasonable. Local' governments are allowed wide discretion in determining the rates
of imposable license fees even in cases of purely police power measures, in the
absence of proof as to particular municipal conditions and the nature of the business
being taxed as well as other detailed factors relevant to the issue of arbitrariness or
unreasonableness of the questioned rates. 19Thus:
[A]n ordinance carries with it the presumption of validity. The
question of reasonableness though is open to judicial inquiry.
Much should be left thus to the discretion of municipal authorities.
Courts will go slow in writing off an ordinance as unreasonable
unless the amount is so excessive as to be prohibitory, arbitrary,
unreasonable, oppressive, or confiscatory. A rule which has gained
acceptance is that factors relevant to such an inquiry are the
municipal conditions as a whole and the nature of the business
made subject to imposition. 20
Petitioner has not shown that the rate of the gross receipts tax is so unreasonably
large and excessive and so grossly disproportionate to the costs of the regulatory
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service being performed by the respondent as to compel the Court to characterize the
imposition as a revenue measure exclusively. The lower court correctly held that the
gross receipts from stall rentals have been used only as a basis for computing the fees
or taxes due respondent to cover the latter's administrative expenses, i.e., for
regulation and supervision of the sale of foodstuffs to the public. The use of the gross
amount of stall rentals as basis for determining the collectible amount of license tax,
does not by itself, upon the one hand, convert or render the license tax into a
prohibited city tax on income. Upon the other hand, it has not been suggested that
such basis has no reasonable relationship to the probable costs of regulation andsupervision of the petitioner's kind of business. For, ordinarily, the higher the amount
of stall rentals, the higher the aggregate volume of foodstuffs and related items sold
in petitioner's privately owned market; and the higher the volume of goods sold in
such private market, the greater the extent and frequency of inspection and
supervision that may be reasonably required in the interest of the buying public.
Moreover, what we started with should be recalled here: the authority conferred upon
the respondent's City Council is notmerely "to regulate" but also embraces the
power "to tax" the petitioner's business.
Finally, petitioner argues that respondent is without power to impose a gross receipts
tax for revenue purposes absent an express grant from the national government. As a
general rule, there must be a statutory grant for a local government unit to impose
lawfully a gross receipts tax, that unit not having the inherent power oftaxation.21The rule, however, finds no application in the instant case where what is
involved is an exercise of, principally, the regulatory power of the respondent City
and where that regulatory power is expressly accompanied by the taxing power.
ACCORDINGLY, the Decision of the then Court of First Instance of Rizal, Quezon
City, Branch 18, is hereby AFFIRMED and the Court Resolved to DENY the
Petition for lack of merit.
SO ORDERED.
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ROMEO P. GEROCHI, KATULONG NG
BAYAN (KB) and ENVIRONMENTALIST
CONSUMERS NETWORK, INC. (ECN),Petitioners,
-versus-
DEPARTMENT OF ENERGY (DOE),
ENERGY REGULATORY COMMISSION(ERC), NATIONAL POWER CORPORATION
(NPC), POWER SECTOR ASSETS AND
LIABILITIES MANAGEMENT GROUP
(PSALM Corp.), STRATEGIC POWER
UTILITIES GROUP (SPUG),
and PANAYELECTRIC COMPANY INC.
(PECO),Respondents.
G.R. No. 159796
Present:
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
GARCIA,
VELASCO, JR. and
NACHURA,JJ.
Promulgated:
July 17, 2007
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DECISION
NACHURA, J.:
Petitioners Romeo P. Gerochi,Katulong Ng Bayan(KB), and Environmentalist
Consumers Network, Inc. (ECN) (petitioners), come before this Court in this original
action praying that Section 34 of Republic Act (RA) 9136, otherwise known as the
Electric Power Industry Reform Act of 2001 (EPIRA), imposing the Universal
Charge,[1]
and Rule 18 of the Rules and Regulations (IRR)[2]
which seeks to
implement the said imposition, be declared unconstitutional. Petitioners also pray
that the Universal Charge imposed upon the consumers be refunded and that a
preliminary injunction and/or temporary restraining order (TRO) be issued directing
the respondents to refrain from implementing, charging, and collecting the said
charge.[3]
The assailed provision of law reads:
SECTION 34. Universal Charge. Within one (1) year
from the effectivity of this Act, a universal charge to be
determined, fixed and approved by the ERC, shall be imposed on
all electricity end-users for the following purposes:
(a) Payment for the stranded debts[4]
in excess of the amount
assumed by the National Government and stranded contract
costs of NPC[5]
and as well as qualified stranded contract
costs of distribution utilities resulting from the restructuring
of the industry;
(b) Missionary electrification;[6]
(c) The equalization of the taxes and royalties applied toindigenous or renewable sources of energy vis--vis imported
energy fuels;
(d) An environmental charge equivalent to one-fourth of one
centavo per kilowatt-hour (P0.0025/kWh), which shall accrue
to an environmental fund to be used solely for watershed
rehabilitation and management. Said fund shall be managed
by NPC under existing arrangements; and
(e) A charge to account for all forms of cross-subsidies for a
period not exceeding three (3) years.
The universal charge shall be a non-bypassable charge which shall
be passed on and collected from all end-users on a monthly basis
by the distribution utilities. Collections by the distribution utilities
and the TRANSCO in any given month shall be remitted to the
PSALM Corp. on or before the fifteenth (15th) of the succeeding
month, net of any amount due to the distribution utility. Any end-
user or self-generating entity not connected to a distribution utility
shall remit its corresponding universal charge directly to the
TRANSCO. The PSALM Corp., as administrator of the fund, shall
create a Special Trust Fund which shall be disbursed only for the
purposes specified herein in an open and transparent manner. All
amount collected for the universal charge shall be distributed to the
respective beneficiaries within a reasonable period to be provided
by the ERC.
The Facts
Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took
effect.[7]
On April 5, 2002, respondent National Power Corporation-Strategic Power
Utilities Group[8]
(NPC-SPUG) filed with respondent Energy Regulatory
Commission (ERC) a petition for the availment from the Universal Charge of its
share for Missionary Electrification, docketed as ERC Case No. 2002-165.[9]
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On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case
No. 2002-194, praying that the proposed share from the Universal Charge for the
Environmental charge of P0.0025 per kilowatt-hour (/kWh), or a total
of P119,488,847.59, be approved for withdrawal from the Special
Trust Fund (STF) managed by respondent Power Sector Assets and
Liabilities Management Group (PSALM)[10]
for the rehabilitation and management
of watershed areas.[11]
On December 20, 2002, the ERC issued an Order[12]in ERC Case No. 2002-
165 provisionally approving the computed amount of P0.0168/kWh as the share of
the NPC-SPUG from the Universal Charge for Missionary Electrification and
authorizing the National Transmission Corporation (TRANSCO) and Distribution
Utilities to collect the same from its end-users on a monthly basis.
On June 26, 2003, the ERC rendered its Decision[13]
(for ERC Case No. 2002-
165) modifying its Order of December 20, 2002, thus:
WHEREFORE, the foregoing premises considered, the
provisional authority granted to petitioner National Power
Corporation-Strategic Power Utilities Group (NPC-SPUG) in theOrder dated December 20, 2002 is hereby modified to the effect
that an additional amount of P0.0205 per kilowatt-hour should be
added to the P0.0168 per kilowatt-hour provisionally authorized by
the Commission in the said Order. Accordingly, a total amount
of P0.0373 per kilowatt-hour is hereby APPROVED for
withdrawal from the Special Trust Fund managed by PSALM as its
share from the Universal Charge for Missionary Electrification
(UC-ME) effective on the following billing cycles:
(a) June 26-July 25, 2003 for National Transmission
Corporation (TRANSCO); and
(b) July 2003 for Distribution Utilities (Dus).
Relative thereto, TRANSCO and Dus are directed to
collect the UC-ME in the amount of P0.0373 per kilowatt-hour and
remit the same to PSALM on or before the 15th
day of the
succeeding month.
In the meantime, NPC-SPUG is directed to submit, not
later than April 30, 2004, a detailed report to include Audited
Financial Statements and physical status (percentage of
completion) of the projects using the prescribed format.
Let copies of this Order be furnished petitioner NPC-
SPUG and all distribution utilities (Dus).
SO ORDERED.
On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the
ERC, among others,[14]
to set aside the above-mentioned Decision, which the ERC
granted in its Order dated October 7, 2003, disposing:
WHEREFORE, the foregoing premises considered, theMotion for Reconsideration filed by petitioner National Power
Corporation-Small Power Utilities Group (NPC-SPUG) is hereby
GRANTED. Accordingly, the Decision dated June 26, 2003 is
hereby modified accordingly.
Relative thereto, NPC-SPUG is directed to submit a
quarterly report on the following:
1. Projects for CY 2002 undertaken;
2. Location
3. Actual amount utilized to complete the
project;4. Period of completion;
5. Start of Operation; and
6. Explanation of the reallocation of UC-ME
funds, if any.
SO ORDERED.[15]
Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194,
authorizing the NPC to draw up to P70,000,000.00 from PSALM for its 2003
Watershed Rehabilitation Budget subject to the availability of funds for the
Environmental Fund component of the Universal Charge.[16]
On the basis of the said ERC decisions, respondent Panay Electric Company,
Inc. (PECO) charged petitioner Romeo P. Gerochi and all other end-users with the
Universal Charge as reflected in their respective electric bills starting from the month
of July 2003.[17]
Hence, this original action.
Petitioners submit that the assailed provision of law and its IRR which sought
to implement the same are unconstitutional on the following grounds:
1) The universal charge provided for under Sec. 34 of the
EPIRA and sought to be implemented under Sec. 2, Rule 18 of
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the IRR of the said law is a tax which is to be collected from
all electric end-users and self-generating entities. The power to
tax is strictly a legislative function and as such, the delegation
of said power to any executive or administrative agency like
the ERC is unconstitutional, giving the same unlimited
authority. The assailed provision clearly provides that the
Universal Charge is to be determined, fixed and approved by
the ERC, hence leaving to the latter complete discretionary
legislative authority.
2) The ERC is also empowered to approve and determine where
the funds collected should be used.
3) The imposition of the Universal Charge on all end-users is
oppressive and confiscatory and amounts to taxation without
representation as the consumers were not given a chance to be
heard and represented.[18]
Petitioners contend that the Universal Charge has the characteristics of a tax
and is collected to fund the operations of the NPC. They argue that thecases[19]invoked by the respondents clearly show the regulatory purpose of the
charges imposed therein, which is not so in the case at bench. In said cases, the
respective funds[20]
were created in order to balance and stabilize the prices of oil and
sugar, and to act as buffer to counteract the changes and adjustments in prices, peso
devaluation, and other variables which cannot be adequately and timely monitored
by the legislature. Thus, there was a need to delegate powers to administrative
bodies.[21]
Petitioners posit that the Universal Charge is imposed not for a similar
purpose.
On the other hand, respondent PSALM through the Office of the Government
Corporate Counsel (OGCC) contends that unlike a tax which is imposed to provide
income for public purposes, such as support of the government, administration of the
law, or payment of public expenses, the assailed Universal Charge is levied for aspecific regulatory purpose, which is to ensure the viability of the country's electric
power industry. Thus, it is exacted by the State in the exercise of its inherent police
power. On this premise, PSALM submits that there is no undue delegation of
legislative power to the ERC since the latter merely exercises a limited authority or
discretion as to the execution and implementation of the provisions of the EPIRA.[22]
Respondents Department of Energy (DOE), ERC, and NPC, through the Office
of the Solicitor General (OSG), share the same view that the Universal Charge is not
a tax because it is levied for a specific regulatory purpose, which is to ensure the
viability of the country's electric power industry, and is, therefore, an exaction in the
exercise of the State's police power. Respondents further contend that said Universal
Charge does not possess the essential characteristics of a tax, that its imposition
would redound to the benefit of the elec tric power industry and not to the public, and
that its rate is uniformly levied on electricity end-users, unlike a tax which is
imposed based on the individual taxpayer's ability to pay. Moreover, respondents
deny that there is undue delegation of legislative power to the ERC since the EPIRA
sets forth sufficient determinable standards which would guide the ERC in the
exercise of the powers granted to it. Lastly, respondents argue that the imposition of
the Universal Charge is not oppressive and confiscatory since it is an exercise of the
police power of the State and it complies with the requirements of due
process.[23]
On its part, respondent PECO argues that it is duty-bound to collect and remit
the amount pertaining to the Missionary Electrification and Environmental Fund
components of the Universal Charge, pursuant to Sec. 34 of the EPIRA and the
Decisions in ERC Case Nos. 2002-194 and 2002-165. Otherwise, PECO could be
held liable under Sec. 46[24]
of the EPIRA, which imposes fines and penalties for any
violation of its provisions or its IRR.[25]
The Issues
The ultimate issues in the case at bar are:
1) Whether or not, the Universal Charge imposed under Sec. 34
of the EPIRA is a tax; and
2) Whether or not there is undue delegation of legislative power
to tax on the part of the ERC.[26]
Before we discuss the issues, the Court shall first deal with an obvious
procedural lapse.
Petitioners filed before us an original action particularly denominated as a
Complaint assailing the constitutionality of Sec. 34 of the EPIRA imposing the
Universal Charge and Rule 18 of the EPIRA's IRR. No doubt, petitioners have locusstandi.They impugn the constitutionality of Sec. 34 of the EPIRA because they
sustained a direct injury as a result of the imposition of the Universal Charge as
reflected in their electric bills.
However, petitioners violated the doctrine of hierarchy of courts when they
filed this Complaint directly with us. Furthermore, the Complaint is bereft of any
allegation of grave abuse of discretion on the part of the ERC or any of the public
respondents, in order for the Court to consider it as a petition for certiorarior
prohibition.
Article VIII, Section 5(1) and (2) of the 1987 Constitution[27]
categorically
provides that:
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SECTION 5. The Supreme Court shall have the following
powers:
1. Exercise original jurisdiction over casesaffecting
ambassadors, other public ministers and consuls, and
overpetitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or
certiorari, as the law or the rules of court may provide, final
judgments and orders of lower courts in:
(a) All cases in which the constitutionality or
validityof any treaty, international or
executive agreement, law, presidential
decree, proclamation, order, instruction,
ordinance, or regulation is in question.
But this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo
warranto, and habeas corpus, while concurrent with that of the regional trial courtsand the Court of Appeals, does not give litigants unrestrained freedom of choice of
forum from which to seek such relief.[28]
It has long been established that this Court
will not entertain direct resort to it unless the redress desired cannot be obtained in
the appropriate courts, or where exceptional and compelling circumstances justify
availment of a remedy within and call for the exercise of our primary
jurisdiction.[29]
This circumstance alone warrants the outright dismissal of the present
action.
This procedural infirmity notwithstanding, we opt to resolve the
constitutional issue raised herein. We are aware that if the constitutionality of Sec.
34 of the EPIRA is not resolved now, the issue will certainly resurface in the near
future, resulting in a repeat of this litigation, and probably involving the same
parties. In the public interest and to avoid unnecessary delay, this Court renders itsruling now.
The instant complaint is bereft of merit.
TheFi rst Issue
To resolve the first issue, it is necessary to distinguish the States power of
taxation from the police power.
The power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be
found only in the responsibility of the legislature which imposes the tax on the
constituency that is to pay it.[30]
It is based on the principle that taxes are the
lifeblood of the government, and their prompt and certain availability is an imperious
need.[31]
Thus, the theory behind the exercise of the power to tax emanates from
necessity; without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people.[32]
On the other hand, police power is the power of the state to promote public
welfare by restraining and regulating the use of liberty and property .[33]
It is the most
pervasive, the least limitable, and the most demanding of the three fundamentalpowers of the State. The justification is found in the Latin maximssalus populi est
suprema lex(the welfare of the people is the supreme law) andsic utere tuo ut
alienum non laedas (so use your property as not to injure the property of others). As
an inherent attribute of sovereignty which virtually extends to all public needs, police
power grants a wide panoply of instruments through which the State, asparens
patriae, gives effect to a host of its regulatory powers .[34]
We have held that the
power to "regulate" means the power to protect, foster, promote, preserve, and
control, with due regard for the interests, first and foremost, of the public, then of the
utility and of its patrons.[35]
The conservative and pivotal distinction between these two powers rests in
the purpose for which the charge is made. If generation of revenue is the primarypurpose and regulation is merely incidental, the imposition is a tax; but if regulation
is the primary purpose, the fact that revenue is incidentally raised does not make the
imposition a tax.[36]
In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the
State's police power, particularly its regulatory dimension, is invoked. Such can be
deduced from Sec. 34 which enumerates the purposes for which the Universal
Charge is imposed[37]
and which can be amply discerned as regulatory in
character. The EPIRA resonates such regulatory purposes, thus:
SECTION 2. Declaration of Policy. It is hereby declared the
policy of the State:
(a) To ensure and accelerate the total electrification of the
country;
(b) To ensure the quality, reliability, security and affordability of
the supply of electric power;
(c) To ensure transparent and reasonable prices of electricity in a
regime of free and fair competition and full public
accountability to achieve greater operational and economic
efficiency and enhance the competitiveness of Philippine
products in the global market;
(d) To enhance the inflow of private capital and broaden the
ownership base of the power generation, transmission and
distribution sectors;
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(e) To ensure fair and non-discriminatory treatment of public and
private sector entities in the process of restructuring the
electric power industry;
(f) To protect the public interest as it is affected by the rates and
services of electric utilities and other providers of electric
power;
(g) To assure socially and environmentally compatible energy
sources and infrastructure;
(h) To promote the utilization of indigenous and new andrenewable energy resources in power generation in order to
reduce dependence on imported energy;
(i) To provide for an orderly and transparent privatization of the
assets and liabilities of the National Power Corporation
(NPC);
(j) To establish a strong and purely independent regulatory body
and system to ensure consumer protection and enhance the
competitive operation of the electricity market; and
(k) To encourage the efficient use of energy and other modalities
of demand side management.
From the aforementioned purposes, it can be gleaned that the assailed
Universal Charge is not a tax, but an exaction in the exercise of the State's police
power. Public welfare is surely promoted.
Moreover, it is a well-established doctrine that the taxing power may be used as
an implement of police power.[38]
In Valmonte v. Energy Regulatory Board, et
al.[39]
and in Gaston v. Republic Planters Bank,[40]
this Court held that the Oil Price
Stabilization Fund (OPSF) and the Sugar Stabilization Fund (SSF) were exactions
made in the exercise of the police power. The doctrine was reiterated in Osmea v.
Orbos[41]
with respect to the OPSF. Thus, we disagree with petitioners that the
instant case is different from the aforementioned cases. With the Universal Charge,
a Special Trust Fund (STF) is also created under the administration of
PSALM.[42] The STF has some notable characteristics similar to the OPSF and theSSF, viz.:
1) In the implementation of stranded cost recovery, the ERC
shall conduct a review to determine whether there is under-
recovery or over recovery and adjust (true-up) the level of the
stranded cost recovery charge. In case of an over-recovery, the
ERC shall ensure that any excess amount shall be remitted to
the STF. A separate account shall be created for these amounts
which shall be held in trust for any future claims of
distribution utilities for stranded cost recovery. At the end of
the stranded cost recovery period, any remaining amount in
this account shall be used to reduce the electricity rates to the
end-users.[43]
2) With respect to the assailed Universal Charge, if the total
amount collected for the same is greater than the actual
availments against it, the PSALM shall retain the balance
within the STF to pay for periods where a shortfall occurs.[44]
3) Upon expiration of the term of PSALM, the administration ofthe STF shall be transferred to the DOF or any of the DOF
attached agencies as designated by the DOF Secretary.[45]
The OSG is in point when it asseverates:
Evidently, the establishment and maintenance of the Special Trust
Fund, under the last paragraph of Section 34, R.A. No. 9136, is
well within the pervasive and non-waivable power and
responsibility of the government to secure the physical and
economic survival and well-being of the community, thatcomprehensive sovereign authority we designate as the police
power of the State.[46]
This feature of the Universal Charge further boosts the position that the same is
an exaction imposed primarily in pursuit of the State's police objectives. The STF
reasonably serves and assures the attainment and perpetuity of the purposes for
which the Universal Charge is imposed, i.e., to ensure the viability of the country's
electric power industry.
The Second Issue
The principle of separation of powers ordains that each of the three branchesof government has exclusive cognizance of and is supreme in matters falling within
its own constitutionally allocated sphere. A logical corollary to the doctrine of
separation of powers is the principle of non-delegation of powers, as expressed in the
Latin maximpotestas delegata non delegari potest (what has been delegated cannot
be delegated). This is based on the ethical principle that such delegated power
constitutes not only a right but a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the intervening mind of
another.[47]
In the face of the increasing complexity of modern life, delegation of
legislative power to various specialized administrative agencies is allowed as an
exception to this principle.[48]Given the volume and variety of interactions in today's
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society, it is doubtful if the legislature can promulgate laws that will deal adequately
with and respond promptly to the minutiae of everyday life. Hence, the need to
delegate to administrative bodies - the principal agencies tasked to execute laws in
their specialized fields - the authority to promulgate rules and regulations to
implement a given statute and effectuate its policies. All that is required for the valid
exercise of this power of subordinate legislation is that the regulation be germane to
the objects and purposes of the law and that the regulation be not in contradiction to,
but in conformity with, the standards prescribed by the law. These requirements are
denominated as the completeness test and the sufficient standard test.
Under the first test, the law must be complete in all its terms and conditions
when it leaves the legislature such that when it reaches the delegate, the only thing
he will have to do is to enforce it. The second test mandates adequate guidelines or
limitations in the law to determine the boundaries of the delegate's authority and
prevent the delegation from running riot.[49]
The Court finds that the EPIRA, read and appreciated in its entirety, in relation
to Sec. 34 thereof, is complete in all its essential terms and conditions, and that it
contains sufficient standards.
Although Sec. 34 of the EPIRA merely provides that within one (1) year fromthe effectivity thereof, a Universal Charge to be determined, fixed and approved by
the ERC, shall be imposed on all electricity end-users, and therefore, does not state
the specific amount to be paid as Universal Charge, the amount nevertheless is made
certain by the legislative parameters provided in the law itself. For one, Sec.
43(b)(ii) of the EPIRA provides:
SECTION 43. Functions of the ERC. The ERC shall promote
competition, encourage market development, ensure customer
choice and penalize abuse of market power in the restructured
electricity industry. In appropriate cases, the ERC is authorized to
issue cease and desist order after due notice and hearing. Towards
this end, it shall be responsible for the following key functions inthe restructured industry:
x x x x
(b) Within six (6) months from the effectivity of this Act,
promulgate and enforce, in accordance with law, a National Grid
Code and a Distribution Code which shall include, but not limited
to the following:
x x x x
(ii) Financial capability standards for the generating
companies, the TRANSCO, distribution utilities and suppliers:
Provided, That in the formulation of the financial capability
standards, the nature and function of the entity shall be considered:
Provided, further, That such standards are set to ensure that the
electric power industry participants meet the minimum financial
standards to protect the public interest. Determine, fix, and
approve, after due notice and public hearings the universal charge,
to be imposed on all electricity end-users pursuant to Section 34hereof;
Moreover, contrary to the petitioners contention, the ERC does not enjoy a
wide latitude of discretion in the determination of the Universal Charge. Sec. 51(d)
and (e) of the EPIRA[50]
clearly provides:
SECTION 51. Powers. The PSALM Corp. shall, in the
performance of its functions and for the attainment of its objective,
have the following powers:
x x x x
(d) To calculate the amount of the stranded debts and stranded
contract costs of NPC which shall form the basis for ERC
in the determination of the universal charge;
(e) To liquidate the NPC stranded contract costs, utilizing the
proceeds from sales and other property contributed to it,
including the proceeds from the universal charge.
Thus, the law is complete and passes the first test for valid delegation of
legislative power.
As to the second test, this Court had, in the past, accepted as sufficient
standards the following: "interest of law and order;"[51]
"adequate and efficient
instruction;"[52]
"public interest;"[53]
"justice and equity;"[54]
"public convenience and
welfare;"[55]
"simplicity, economy and efficiency;"[56]
"standardization and regulation
of medical education;"[57]
and "fair and equitable employment
practices."[58]
Provisions of the EPIRA such as, among others, to ensure the total
electrification of the country and the quality, reliability, security and affordability of
the supply of electric power[59]and watershed rehabilitation and
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management[60]
meet the requirements for valid delegation, as they provide the
limitations on the ERCs power to formulate the IRR. These are sufficient standards.
It may be noted that this is not the first time that the ERC's conferred powers
were challenged. InFreedom from Debt Coalition v. Energy Regulatory
Commission,[61]
the Court had occasion to say:
In determining the extent of powers possessed by the ERC,
the provisions of the EPIRA must not be read in separate parts.Rather, the law must be read in its entirety, because a statute is
passed as a whole, and is animated by one general purpose and
intent. Its meaning cannot to be extracted from any single part
thereof but from a general consideration of the statute as a whole.
Considering the intent of Congress in enacting the EPIRA and
reading the statute in its entirety, it is plain to see that the law has
expanded the jurisdiction of the regulatory body, the ERC in this
case, to enable the latter to implement the reforms sought to be
accomplished by the EPIRA. When the legislators decided to
broaden the jurisdiction of the ERC, they did not intend to abolish
or reduce the powers already conferred upon ERC's predecessors.
To sustain the view that the ERC possesses only the powers andfunctions listed under Section 43 of the EPIRA is to frustrate the
objectives of the law.
In his Concurring and Dissenting Opinion[62]
in the same case, then Associate
Justice, now Chief Justice, Reynato S. Puno described the immensity of police power
in relation to the delegation of powers to the ERC and its regulatory functions over
electric power as a vital public utility, to wit:
Over the years, however, the range of police power was
no longer limited to the preservation of public health, safety and
morals, which used to be the primary social interests in earlier
times.Police power now requires the State to "assume anaffirmative duty to eliminate the excesses and injustices that are
the concomitants of an unrestrained industrial economy." Police
power is now exerted "to further the public welfare a concept as
vast as the good of society itself." Hence, "police power is but
another name for the governmental authority to further the welfare
of society that is the basic end of all government."When police
power is delegated to administrative bodies with regulatory
functions, its exercise should be given a wide latitude. Police
power takes on an even broader dimension in developing countries
such as ours, where the State must take a more active role in
balancing the many conflicting interests in society. The Questioned
Order was issued by the ERC, acting as an agent of the State in the
exercise of police power. We should have exceptionally good
grounds to curtail its exercise. This approach is more compelling in
the field of rate-regulation of electric power rates.Electric power
generation and distribution is a traditional instrument of economic
growth that affects not only a few but the entire nation. It is an
important factor in encouraging investment and promoting
business. The engines of progress may come to a screeching halt if
the delivery of electric power is impaired. Billions of pesos would
be lost as a result of power outages or unreliable electric power
services.The State thru the ERC should be able to exercise its
police power with great flexibility, when the need arises.
This was reiterated inNational Association of Electricity Consumers for
Reforms v. Energy Regulatory Commission[63]
where the Court held that the ERC, as
regulator, should have sufficient power to respond in real time to changes wrought
by multifarious factors affecting public utilities.
From the foregoing disquisitions, we therefore hold that there is no undue
delegation of legislative power to the ERC.
Petitioners failed to pursue in their Memorandum the contention in theComplaint that the imposition of the Universal Charge on all end-users is oppressive
and confiscatory, and amounts to taxation without representation. Hence, such
contention is deemed waived or abandoned per Resolution[64]
of August 3,
2004.[65]
Moreover, the determination of whether or not a tax is excessive, oppressive
or confiscatory is an issue which essentially involves questions of fact, and thus, this
Court is precluded from reviewing the same.[66]
As a penultimate statement, it may be well to recall what this Court said of
EPIRA:
One of the landmark pieces of legislation enacted by
Congress in recent years is the EPIRA. It established a new policy,
legal structure and regulatory framework for the electric powerindustry. The new thrust is to tap private capital for the expansion
and improvement of the industry as the large government debt and
the highly capital-intensive character of the industry itself have
long been acknowledged as the critical constraints to the program.
To attract private investment, largely foreign, the jaded structure of
the industry had to be addressed. While the generation and
transmission sectors were centralized and monopolistic, the
distribution side was fragmented with over 130 utilities, mostly
small and uneconomic. The pervasive flaws have caused a low
utilization of existing generation capacity; extremely high and
uncompetitive power rates; poor quality of service to consumers;
dismal to forgettable performance of the government power sector;
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high system losses; and an inability to develop a clear strategy for
overcoming these shortcomings.
Thus, the EPIRA provides a framework for the
restructuring of the industry, including the privatization of the
assets of the National Power Corporation (NPC), the transition to a
competitive structure, and the delineation of the roles of various
government agencies and the private entities. The law ordains the
division of the industry into four (4) distinctsectors, namely: generation, transmission, distribution and
supply.
Corollarily, the NPC generating plants have to privatized and its
transmission business spun off and privatized thereafter.[67]
Finally, every law has in its favor the presumption of constitutionality, and to
justify its nullification, there must be a clear and unequivocal breach of the
Constitution and not one that is doubtful, speculative, or
argumentative.[68]
Indubitably, petitioners failed to overcome this presumption in
favor of the EPIRA. We find no clear violation of the Constitution which would
warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR are
unconstitutional and void.
WHEREFORE, the instant case is hereby DISMISSED for lack of merit.
SO ORDERED.
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G.R. No. L-67649 June 28, 1988
ENGRACIO FRANCIA,petitioner,
vs.
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.
GUTIERREZ, JR., J.:
The petitioner invokes legal and equitable grounds to reverse the questioned decision
of the Intermediate Appellate Court, to set aside the auction sale of his property
which took place on December 5, 1977, and to allow him to recover a 203 squaremeter lot which was, sold at public auction to Ho Fernandez and ordered titled in the
latter's name.
The antecedent facts are as follows:
Engracio Francia is the registered owner of a residential lot and a two-story house
built upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay City,
Metro Manila. The lot, with an area of about 328 square meters, is described and
covered by Transfer Certificate of Title No. 4739 (37795) of the Registry of Deeds
of Pasay City.
On October 15, 1977, a 125 square meter portion of Francia's property was
expropriated by the Republic of the Philippines for the sum of P4,116.00
representing the estimated amount equivalent to the assessed value of the aforesaid
portion.
Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, onDecember 5, 1977, his property was sold at public auction by the City Treasurer of
Pasay City pursuant to Section 73 of Presidential Decree No. 464 known as the Real
Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez
was the highest bidder for the property.
Francia was not present during the auction sale since he was in Iligan City at that
time helping his uncle ship bananas.
On March 3, 1979, Francia received a notice of hearing of LRC Case No. 1593-P "In
re: Petition for Entry of New Certificate of Title" filed by Ho Fernandez, seeking the
cancellation of TCT No. 4739 (37795) and the issuance in his name of a new
certificate of title. Upon verification through his lawyer, Francia discovered that a
Final Bill of Sale had been issued in favor of Ho Fernandez by the City Treasurer on
December 11, 1978. The auction sale and the final bill of sale were both annotated atthe back of TCT No. 4739 (37795) by the Register of Deeds.
On March 20, 1979, Francia filed a complaint to annul the auction sale. He later
amended his complaint on January 24, 1980.
On April 23, 1981, the lower court rendered a decision, the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered dismissing the amended complaint and ordering:
(a) The Register of Deeds of Pasay City to issue
a new Transfer Certificate of Title in favor of the
defendant Ho Fernandez over the parcel of land
including the improvements thereon, subject to
whatever encumbrances appearing at the back of
TCT No. 4739 (37795) and ordering the same
TCT No. 4739 (37795) cancelled.
(b) The plaintiff to pay defendant Ho Fernandez
the sum of P1,000.00 as attorney's fees. (p. 30,
Record on Appeal)
The Intermediate Appellate Court affirmed the decision of the lower court in toto.
Hence, this petition for review.
Francia prefaced his arguments with the following assignments of grave errors of
law:I
RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A
GRAVE ERROR OF LAW IN NOT HOLDING PETITIONER'S OBLIGATION
TO PAY P2,400.00 FOR SUPPOSED TAX DELINQUENCY WAS SET-OFF BY
THE AMOUNT OF P4,116.00 WHICH THE GOVERNMENT IS INDEBTED TO
THE FORMER.
II
RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A
GRAVE AND SERIOUS ERROR IN NOT HOLDING THAT PETITIONER WAS
NOT PROPERLY AND DULY NOTIFIED THAT AN AUCTION SALE OF HIS
PROPERTY WAS TO TAKE PLACE ON DECEMBER 5, 1977 TO SATISFY AN
ALLEGED TAX DELINQUENCY OF P2,400.00.
IIIRESPONDENT INTERMEDIATE APPELLATE COURT FURTHER
COMMITTED A SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN
NOT HOLDING THAT THE PRICE OF P2,400.00 PAID BY RESPONTDENT HO
FERNANDEZ WAS GROSSLY INADEQUATE AS TO SHOCK ONE'S
CONSCIENCE AMOUNTING TO FRAUD AND A DEPRIVATION OF
PROPERTY WITHOUT DUE PROCESS OF LAW, AND CONSEQUENTLY,
THE AUCTION SALE MADE THEREOF IS VOID. (pp. 10, 17, 20-21, Rollo)
We gave due course to the petition for a more thorough inquiry into the petitioner's
allegations that his property was sold at public auction without notice to him and that
the price paid for the property was shockingly inadequate, amounting to fraud and
deprivation without due process of law.
A careful review of the case, however, discloses that Mr. Francia brought theproblems raised in his petition upon himself. While we commiserate with him at the
loss of his property, the law and the facts militate against the grant of his petition.
We are constrained to dismiss it.
Francia contends that his tax delinquency of P2,400.00 has been extinguished by
legal compensation. He claims that the government owed him P4,116.00 when a
portion of his land was expropriated on October 15, 1977. Hence, his tax obligation
had been set-off by operation of law as of October 15, 1977.
There is no legal basis for the contention. By legal compensation, obligations of
persons, who in their own right are reciprocally debtors and creditors of each other,
are extinguished (Art. 1278, Civil Code). The circumstances of the case do not
satisfy the requirements provided by Article 1279, to wit:
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(1) that each one of the obligors be bound principally and that he
be at the same time a principal creditor of the other;
xxx xxx xxx
(3) that the two debts be due.
xxx xxx xxx
This principal contention of the petitioner has no merit. We have consistently ruled
that there can be no off-setting of taxes against the claims that the taxpayer may have
against the government. A person cannot refuse to pay a tax on the ground that the
government owes him an amount equal to or greater than the tax being collected. Thecollection of a tax cannot await the results of a lawsuit against the government.
In the case ofRepublic v. Mambulao Lumber Co. (4 SCRA 622), this Court ruled
that Internal Revenue Taxes can not be the subject of set-off or compensation. We
stated that:
A claim for taxes is not such a debt, demand, contract or judgment
as is allowed to be set-off under the statutes of set-off, which are
construed uniformly, in the light of public policy, to exclude the
remedy in an action or any indebtedness of the state or
municipality to one who is liable to the state or municipality for
taxes. Neither are they a proper subject of recoupment since they
do not arise out of the contract or t ransaction sued on. ... (80 C.J.S.,
7374). "The general rule based on grounds of public policy is well-
settled that no set-off admissible against demands for taxes leviedfor general or local governmental purposes. The reason on which
the general rule is based, is that taxes are not in the nature of
contracts between the party and party but grow out of duty to, and
are the positive acts of the government to the making and
enforcing of which, the personal consent of individual taxpayers is
not required. ..."
We stated that a taxpayer cannot refuse to pay his tax when called upon by the
collector because he has a claim against the governmental body not included in the
tax levy.
This rule was reiterated in the case of Corders v. Gonda(18 SCRA 331) where we
stated that: "... internal revenue taxes can not be the subject of compensation:
Reason: government and taxpayer are not mutually creditors and debtors of eachother' under Article 1278 of the Civil Code and a "claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off."
There are other factors which compel us to rule against the petitioner. The tax was
due to the city government while the expropriation was effected by the national
government. Moreover, the amount of P4,116.00 paid by the national government for
the 125 square meter portion of his lot was deposited with the Philippine National
Bank long before the sale at public auction of his remaining property. Notice of the
deposit dated September 28, 1977 was received by the petitioner on September 30,
1977. The petitioner admitted in his testimony that he knew about the P4,116.00
deposited with the bank but he did not withdraw it. It would have been an easy
matter to withdraw P2,400.00 from the deposit so that he could pay the tax
obligation thus aborting the sale at public auction.
Petitioner had one year within which to redeem his property although, as well be
shown later, he claimed that he pocketed the notice of the auction sale without
reading it.
Petitioner contends that "the auction sale in question was made without complying
with the mandatory provisions of the statute governing tax sale. No evidence, oral or
otherwise, was presented that the procedure outlined by law on sales of property for
tax delinquency was followed. ... Since defendant Ho Fernandez has the affirmative
of this issue, the burden of proof therefore rests upon him to show that plaintiff was
duly and properly notified ... .(Petition for Review, Rollo p. 18; emphasis supplied)We agree with the petitioner's claim that Ho Fernandez, the purchaser at the auction
sale, has the burden of proof to show that there was compliance with all the
prescribed requisites for a tax sale.
The case of Valencia v. Jimenez(11 Phil. 492) laid down the doctrine that:
xxx xxx xxx
... [D]ue process of law to be followed in tax proceedings must be
established by proof and thegeneral rule is that the purchaser of a
tax title is bound to take upon himself the burden of showing the
regularity of all proceedings leading up to the sale. (emphasis
supplied)
There is no presumption of the regularity of any administrative action which results
in depriving a taxpayer of his property through a tax sale. (Camo v. Riosa Boyco, 29
Phil. 437); Denoga v. Insular Government, 19 Phil. 261). This is actually anexception to the rule that administrative proceedings are presumed to be regular.
But even if the burden of proof lies with the purchaser to show that all legal
prerequisites have been complied with, the petitioner can not, however, deny that he
did receive the notice for the auction sale. The records sustain the lower court's
finding that:
[T]he plaintiff claimed that it was illegal and irregular. He insisted
that he was not properly notified of the auction sale. Surprisingly,
however, he admitted in his testimony that he received the letter
dated November 21, 1977 (Exhibit "I") as shown by his signature
(Exhibit "I-A") thereof. He claimed further that he was not present
on December 5, 1977 the date of the auction sale because he went
to Iligan City. As long as there was substantial compliance with therequirements of the notice, the validity of the auction sale can not
be assailed ... .
We quote the following testimony of the petitioner on cross-examination, to wit:
Q. My question to you is this letter marked as
Exhibit I for Ho Fernandez notified you that the
property in question shall be sold at public
auction to the highest bidder on December 5,
1977 pursuant to Sec. 74 of PD 464. Will you
tell the Court whether you received the original
of this letter?
A. I just signed it because I was not able to read
the same. It was just sent by mail carrier.
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Q. So you admit that you received the original of
Exhibit I and you signed upon receipt thereof but
you did not read the contents of it?
A. Yes, sir, as I was in a hurry.
Q. After you received that original where did you
place it?
A. I placed it in the usual place where I place my
mails.
Petitioner, therefore, was notified about the auction sale. It was negligence on hispart when he ignored such notice. By his very own admission that he received the
notice, his now coming to court assailing the validity of the auction sale loses its
force.
Petitioner's third assignment of grave error likewise lacks merit. As a general rule,
gross inadequacy of price is not material (De Leon v. Salvador, 36 SCRA 567; Ponce
de Leon v. Rehabilitation Finance Corporation, 36 SCRA 289; Tolentino v. Agcaoili,
91 Phil. 917 Unrep.). See alsoBarrozo Vda. de Gordon v. Court of Appeals(109
SCRA 388) we held that "alleged gross inadequacy of price is not material when the
law gives the owner the right to redeem as when a sale is made at public auction,
upon the theory that the lesser the price, the easier it is for the owner to effect
redemption." In Velasquez v. Coronel(5 SCRA 985), this Court held:
... [R]espondent treasurer now claims that the prices for which the
lands were sold are unconscionable considering the widedivergence between their assessed values and the amounts for
which they had been actually sold. However, while in ordinary
sales for reasons of equity a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks
one's conscience as to justify the courts to interfere, such does not
follow when the law gives to the owner the right to redeem, as
when a sale is made at public auction, upon the theory that the
lesser the price the easier it is for the owner to effect the
redemption. And so it was aptly said: "When there is the right to
redeem, inadequacy of price should not be material, because the
judgment debtor may reacquire the property or also sell his right to
redeem and thus recover the loss he claims to have suffered byreason of the price obtained at the auction sale."
The reason behind the above rulings is well enunciated in the case of Hilton et. ux. v.
De Long, et al.(188 Wash. 162, 61 P. 2d, 1290):
If mere inadequacy of price is held to be a valid objection to a sale
for taxes, the collection of taxes in this manner would be greatly
embarrassed, if not rendered altogether impracticable. In Black on
Tax Titles (2nd Ed.) 238, the correct rule is stated as follows:
"where land is sold for taxes, the inadequacy of the price given is
not a valid objection to the sale." This rule arises from necessity,
for, if a fair price for the land were essential to the sale, it would be
useless to offer the property. Indeed, it is notorious that the prices
habitually paid by purchasers at tax sales are grossly out of
proportion to the value of the land. (Rothchild Bros. v. Rollinger,
32 Wash. 307, 73 P. 367, 369).
In this case now before us, we can aptly use the language ofMcGuire, et al. v. Bean,
et al. (267 P. 555):
Like most cases of this character there is here a certain element of
hardship from which we would be glad to relieve, but do so would
unsettle long-established rules and lead to uncertainty and
difficulty in the collection of taxes which are the life blood of the
state. We are convinced that the present rules are just, and that theybring hardship only to those who have invited it by their own
neglect.
We are inclined to believe the petitioner's claim that the value of the lot has greatly
appreciated in value. Precisely because of the widening of Buendia Avenue in Pasay
City, which necessitated the expropriation of adjoining areas, real estate values have
gone up in the area. However, the price quoted by the petitioner for a 203 square
meter lot appears quite exaggerated. At any rate, the foregoing reasons which answer
the petitioner's claims lead us to deny the petition.
And finally, even if we are inclined to give relief to the petitioner on equitable
grounds, there are no strong considerations of substantial justice in his favor. Mr.
Francia fai
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