ANTONIO HERAS, PLAINTIFF AND APPELLEE, VS. THE CITY TREASURER OF QUEZON CITY, DEFENDANT AND APPELLANT.

Heras versus City Treasurer of Quezon City

The Case

This is the case of Heras versus the City Treasurer of Quezon City, decided in October 1960. Antonio Heras, the owner and operator of a public utility transport business, sued the City Treasurer of Quezon City to recover license fees and penalties he had paid under protest. The City Treasurer had assessed him as a transportation operator and as a storer of gasoline and crude oil under an ordinance of Quezon City. The case matters because it draws the outer boundary of a municipal corporation's power to tax and to license. It teaches that local governments have no inherent taxing power, that the power must be granted by statute and read strictly, and that a later national law on motor vehicle registration and operation prevails over a city charter. It also teaches the practical rule on protest: only the items actually contested in the protest may be refunded.

Procedural History

Heras filed the action in the Court of First Instance of Rizal, sitting in Quezon City, for the recovery of the amount he had paid under protest. The parties submitted the case for decision upon a stipulation of facts. The trial court rendered judgment in favor of Heras. It ordered the refund he sought and declared Section 2 of Chapter XVI and Section 3 of Chapter XXII of Ordinance Number 2673 of Quezon City null and void. The City Treasurer appealed. The appeal reached the Supreme Court, which reviewed the judgment of the trial court and affirmed it, but with a modification of the amount to be refunded.

Facts

Antonio Heras owned and operated the JD Transit and Taxi, a public utility duly licensed by the Public Service Commission and engaged in transporting passengers to and from Manila, Quezon City, Pasay, and their environs. Its principal office was at Aurora Boulevard, Cubao, Quezon City. To operate, Heras had secured and paid the necessary licenses and fees imposed by the Revised Motor Vehicles Law and other laws.

On June 29, 1956, the City Treasurer of Quezon City assessed against Heras the total amount of 2,582 pesos and 50 centavos. This covered a mayor's permit, municipal license fees, and penalties for the period from June 16 to December 31, 1956. The items included 750 pesos for transportation by land, Class A, for 214 units, and 412 pesos and 50 centavos for a motor vehicle depository, Class A, with more than 2,160 square meters. They also included 1,200 pesos for storage of more than 5,000 gallons of gasoline and 150 pesos for storage of more than 2,000 gallons of crude oil, plus a penalty of 50 pesos for late payment and for operating without permit and license. The stipulation of facts stated that the gasoline and crude oil were stored exclusively for the operation of Heras's public utility.

On July 16, 1956, Heras, through counsel, wrote the City Treasurer expressing willingness to pay the amount but deducting the 750 pesos for transportation by land and the 412 pesos and 50 centavos for the motor vehicle depository, a total of 1,162 pesos and 50 centavos. He took the position that the law does not empower municipal corporations to impose municipal license fees upon enterprises operating a transportation business. The City Treasurer rejected the objection and reiterated his demand. On August 6, 1956, Heras paid the full 2,582 pesos and 50 centavos under protest, stating that he was contesting the legality of the imposition on the ground that municipal corporations are inhibited from imposing license fees for the operation of motor vehicles for hire and compensation. He demanded a refund, and the City Treasurer refused.

Issues

• Whether or not the City Council of Quezon City may impose a license fee upon the storage of gasoline and crude oil kept exclusively for the operator's own use, under the power to tax, fix the license fee, and regulate the business of storage and sale of gasoline and other combustible materials.
• Whether or not the City Council may impose license fees on the transportation business of a public utility operator, in light of the later national law on motor vehicle registration and operation.
• Whether or not Heras may recover the entire amount he paid, or only the items he actually contested in his protest.

Applicable Provisions

Section 12, subsections (c) and (d), of the Revised Charter of Quezon City, Republic Act Number 537, provides:

Section 12. General powers and duties of the council. The City Council shall have power by ordinance or resolution: (c) To tax, fix the license fee, and regulate the business of the following: transportation companies and agencies; public vehicle; the storage and sale of oil, gasoline, or any of the products thereof and of all other highly combustible or explosive materials. (d) To regulate the storage and sale of oil, gasoline or any of the products thereof and of all other highly combustible or explosive materials.

This is the charter provision the City Treasurer invoked, and the Court read it strictly against the city.

Section 17 of Republic Act Number 587, amending subsection (b) of Section 70 of the Revised Motor Vehicles Law, provides:

No other taxes or fees than those prescribed in this Act shall be imposed for the registration or operation, or on the owner of any motor vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the provisions of any city charter to the contrary notwithstanding.

This later national law is the basis for striking down the license fees on the transportation business.

Section 63 of Republic Act Number 537, the Revised Charter of Quezon City, governs the recovery of taxes paid under protest, and it is the basis for limiting the refund to the contested items.

Ruling

On the first issue, the Court held that the charter authorized impositions on business or transactions involving profit. The use of the conjunction "and" between "storage" and "sale" in subsections (c) and (d) meant that the power referred to the storage and sale of gasoline or other combustible materials, not merely to storage for the operator's exclusive use and consumption. Section 2 of Chapter XVI of the ordinance therefore contravened the authority granted and was null and void. The Court rejected the argument that the charter empowered the city to regulate establishments for the storage of highly combustible materials, because that power referred only to the business of storing such materials, and Heras was not engaged in that business. The ordinance imposed a fee upon storage, not upon the business of storage. The Court laid down the governing principle in these words:

Subordinate entities like municipal councils can exercise the power of taxation only to the extent specified by law; and this power cannot be extended by strained implications.

It added that legislative powers in regard to taxes and licenses are not inherent in municipal corporations but must be granted by statute either expressly or by necessary implication, and that like other delegated powers they are subject to strict construction.

On the second issue, the Court held that Section 17 of Republic Act Number 587, being a later enactment, repealed pro tanto Section 12, subsection (c), of the Revised Charter of Quezon City. The business of transportation comprises simply the operation of motor vehicles, which the Revised Motor Vehicles Law defines as including all vehicles using the public highways if propelled by any power other than muscular power. To tax or impose a license fee on the transportation business was therefore to tax the operation of the vehicles, already exclusively covered by the Revised Motor Vehicles Law.

On the third issue, the Court held that the payment under protest referred only to the two items of 750 pesos and 412 pesos and 50 centavos. This was obvious from the first letter and from the specific ground invoked, namely, that a municipal corporation has no power to impose license fees on the operation of motor vehicles for hire or compensation, which includes the motor vehicle depository. The other items were voluntarily paid and may not be recovered.

Doctrine

First, municipal corporations have no inherent power to tax or to license. The power must be granted by statute, either expressly or by necessary implication, and it is subject to strict construction. It cannot be extended by strained implications. Second, a grant of power to tax, fix the license fee, and regulate the business of the storage and sale of gasoline and other combustible materials does not authorize a license fee upon mere storage for the operator's own exclusive use. The word "and" between "storage" and "sale" confines the grant to business or transactions involving profit. Third, a later national law prescribing the taxes and fees for the registration or operation of motor vehicles repeals pro tanto, to that extent, a city charter provision allowing municipal license fees on the transportation business, because the operation of motor vehicles is exclusively covered by the national law. Fourth, taxes paid under protest may be recovered only as to the items actually contested in the protest. Items voluntarily paid, not covered by the protest, may not be refunded.

Disposition

The Supreme Court affirmed the judgment of the trial court, but ordered the City Treasurer to refund only 1,162 pesos and 50 centavos instead of the full 2,582 pesos and 50 centavos, without pronouncement as to costs.

Remember This

The line to memorize is that municipal councils can exercise the power of taxation only to the extent specified by law, and this power cannot be extended by strained implications. Examiners use this case on the strict construction of municipal taxing powers, on the repeal of a city charter by a later national law on motor vehicles, and on the rule that only items actually contested in a protest may be refunded.