G.R. No. L-15502. October 25, 1960
AH NAM, PLAINTIFF AND APPELLEE, CITY OF MANILA, THIRD-PARTY PLAINTIFF AND APPELLANT, VS. CITY OF MANILA, ET AL., DEFENDANTS AND APPELLANTS, MUTUAL SECURITY INSURANCE CORPORATION…
BARRERA, J.:
36329), Ah Nam, owner of two bakery-establishments, prayed for a judgment
declaring illegal the imposition upon him, allegedly as a second-hand dealer, of
municipal license and permit fees amounting to P2,066.25, and ordering
defendants City Mayor and City Treasurer to desist from collecting the same.
After defendants had filed an answer sustaining the legality of the imposition,
and a third party complaint against the Mutual Security & Insurance
Corporation, which undertook the two bonds securing payment of the said amount
of P2,066.25,[1] the parties submitted a
stipulation of facts, the pertinent parts of which read:
“1. That the plaintiff is the owner and proprietor of two bakeries, namely,
the Liberty Bakery and the Panaderia Blumentritt situated at 1401 Sande St.,
Tondo, Manila, and 312 Pavia St., Tondo, Manila respectively;“2. That both bakeries are duly licensed and permitted to operate as such and
for this purpose, the plaintiff has paid the corresponding municipal license and
permit fees;“3. That in the operation of said bakeries, the plaintiff makes periodic
importation and purchases of flour contained in cloth-bags for which the
plaintiff pays no additional amount apart from the price of the flour;“4. That the empty flour bags are not used by the plaintiff as an ingredient
or material in the making of bread and other bakery products;“5. That after the consumption of the flour, the empty flour bagta left with
the plaintiff were sold by him inside said establishments under invoices
separate from those for the bread and other bakery products sold thereat;“6. That the plaintiff sold empty flour bags in his bakery at No. 1401 Sande
St., Tondo, Manila during the period from the 2nd quarter of 1952 to the 3rd
quarter of 1957, inclusive, and also in his bakery, at No, 312 Pavia St., Tondo,
Manila, from the 3rd quarter of 1951 to the 3rd quarter of 1957, inclusive, for
which the defendants are demanding from him payment of the sums of F967.50 and
Pl.098.75, respectively, or a total of P2,066.25, as municipal license and
permit fees, including penalties, for doing business as a dealer in second-hand
goods under Ordinances Nos. 2699 and 3000;“7. That the plaintiff has refused to make payments of the amounts demanded
by defendants on the ground that his acts of disposing of the empty flour bags
do not make him a dealer in second-hand goods within the purview of said city
ordinances;“8. That on April 28, 1958, the third-party defendant Mutual Security
Insurance Corporation and the plaintiff Ah Nam executed in favor of the
third-party plaintiff two (2) surety bonds, one for P1,098.75 and the other for
P967.50, whereby they bound themselves in each, jointly and severally, to pay
the third-party plaintiff the said amounts, representing the license and permit
fees, including penalties, assessed and demanded by defendant City Treasurer
from the plaintiff for the latter’s business of second-hand dealer of empty
flour bags, the same being due upon judgment having been rendered herein holding
plaintiff Ah Nam liable for said, municipal license and permit fees, including
penalties, * * *;* * * * * * *
“11. That plaintiff paid the 7% percentage tax on manufacturers imposed by
the Internal Revenue Code and the municipal license fees on each of plaintiff’s
two bakeries, based on the gross sales inclusive of the sales of money flour
bags;“12. That defendant City Treasurer assessed and collected from plaintiff the
municipal license fees prescribed by Ordinance New 3364 on plaintiff’s two
bakeries on the basis of the sworn statement of sales submitted by him to
defendant City Treasurer, wherein plaintiff declared all his gross sales as
sales- of bakery products only without mentioning his sales of empty flour bags,
and, as shown on the face of each of the following receipts, * * * the license
fees were computed on the basis of the said declared gross sales of bakery
products; and“13. That the amounts of license fees that the plaintiff had to pay in
accordance with Ordinance No- 3364 for operating his two bakeries are the same,
whether or not the sales of empty flour bags were added to the sales of the
bakery products. * * *.”
Based on the foregoing, the court below rendered judgment holding that the
sale by plaintiff of the flour bags, after they were emptied of the contents,
was merely incidental to his bakery business, and did not make him a dealer of
used bags. Plaintiff was, therefore, declared not liable to pay any license and
permit fees in connection with the sale of such empty flour bags. From this
decision, defendants interpose the instant appeal, involving only a question of
law.
Assailing the ruling of the lower court, appellants contend that as appellee
made profit from the sales of the bags different from and in addition to the
proceeds of his bakery products, the sale of the bags is not merely incidental
to but separate and distinct from his bakery business. Furthermore as the price
of the fltur that appellee buys for use in his bakeries naturally includes the
cost of the bags, and as such bags, once emptied, are in turn sold, appellants
claim that appellee is actually “dealing” in used flour bags.
Section 752 of Ordinance No. 2699 relied upon by appellants, subjects to
licensing “any person who shall engage in, exercise or carry on the trade or
business of a dealer in second-hand furniture, household goods, used auto
mobiles, spare parts and other parts thereof, or other articles,” while Section
1 of Ordinance No. 3000, also invoked by appellants, requires that before a
person may I conduct or engage in any business, trade or occupation, he must
secure a permit from the City Mayor and the necessary license from the City
Treasurer.
The only question to be determined in this case is whether, under the
circumstances, appellee may be considered as engaged in the business or trade of
a dealer and, therefore, subject to the requirements of Ordinances Nos. 2699 and
3000. 1
On this point, the trial judge correctly held-
“Under said Sec. 752 of Ordinance No. 2699, in order that a person can be
legally required to pay the corresponding license, it should be made to appear
that he is a dealer. ‘A dealer in the popular, and therefore in the statutory
sense of the word is not one who buys to keep or makes to sell, but one who buys
to sell again.’ (Norries vs. Com., 27 Pa. 494; Com. vs. Campbell, 33 Pa. 385;
Bouvier’s Law Dictionary, p. 775.) This definition has been adopted by the
Supreme Court in the case of City of Manila vs. Bugsuk Lumber Co., 53 Off.
Gazette, 6111. Inasmuch as from the stipulation of facts, it clearly appears
that the plaintiff was selling only empty flour bags in his bakery at No, 1401
Sande, Tondo, Manila, which contained the flour used by him in connection with
his bakery business, plaintiff can not be considered as a dealer and, therefore,
he is not liable to pay a license under Ordinance No. 2699 as a dealer in
second-hand goods. It has not been shown that the plaintiff has been engaged in
the business of buying- and selling- of empty flour bags for it is admitted that
the empty flour bags sold by him are limited to those which contained the flour
used by him in his bakery business. Consequently, the sale of empty flour bags
was merely incidental to the business of bakery in which the plaintiff is
principally engaged. * * * .”
Neither may appellee be obliged to pay the permit and license fees required
under Ordinance No. 3000 because, as heretofore stated, the sale of the empty
bags is not being carried as a separate or distinct trade or enterprise, but
merely as incident to the bakery business. As a matter of fact, the sale of the
flour bags depends- on the volume of consumption or use by appellee’s bakery
business. Appellee does not buy empty flour bags, independently of the flour he
uses, for the purpose of re-selling them, nor does he buy flour in order to get
the empty bags for sale, the main reason for the purchase being the utility of
the flour to the bakery business. That after attaining his purpose, appellee
finds some use for the empty bags, is certainly incidental only to his bakery
business. As under the ordinance the fees are imposed on persons engaged in the
trade or business of dealer, and as appellee is not, in the real sense
of the term, engaged in the business of buying and selling used flour bags, the
lower court committed no error in exempting appellee from payment of the license
and permit fees in connection with the sale of such empty flour bags.
Wherefore, the decision appealed from is hereby affirmed, without
pronouncement as to costs. So ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L.,
Gutierrez David, and Paredes, JJ., concur.
Judgment affirmed.
[1] The third party defendant duly
filed an answer thereto.