LAOAG PRODUCERS’ COOPERATIVE MARKETING ASSOCIATION, INC., PLAINTIFF-APPELLANT, VS. THE MUNICIPALITY OF LAOAG, ILOCOS NORTE, AND PETRONILO JULIAN, AS MUNICIPAL TREASURER, DEFENDA…

Direct appeal^[1] by plaintiff-appellant Laoag
Producers’ Cooperative Marketing Association, Inc., from the decision of the
Court of First Instance of Ilocos Norte, in its Civil
Case No. 3976, upholding the validity of two (2) municipal ordinances of the Municipality of Laoag, Ilocos Norte (now
city).

In enacting the said
ordinances, the municipal council of Laoag invoked
the authority of the Local Autonomy Act (Republic Act No. 2264). The first,
Ordinance No. 10, series of
1960, provides that a permit be secured from the mayor’s office by all wholesale dealers and vendors of Virginia leaf tobacco, garlic
and onion duly registered with the Bureau of Internal Revenue before doing business in the municipality; for them
to report in writing the number of kilos sold and purchased by them within the
first ten (10) days of each succeeding month; imposes a “municipal tax or
inspection fee of one-half (1/2) centavo” “on every kilo of Virginia
leaf tobacco, garlic and onion on all wholesale dealers and vendors”; and
provides penalties for violation thereof. 
The second ordinance amended the first, by increasing the
“municipal tax or ins­pection fee” to one (1) centavo.

The statement of facts in plaintiff-appellant’s brief is accepted
by defendants-appellees municipality and its
municipal treasurer, Petronilo Julian.^[2]
Briefly, these facts are as follows: 
That plaintiff-appellant is a wholesale dealer in Virginia leaf tobacco;
that it has paid the tax prescribed by the ordinances, under protest, in the amount
of P2,401; that it pays a privilege tax as wholesaler in the amount of P400.00
per annum to the municipality pursuant to Ordinance No. 22, series of 1958; a
permit fee of P1.00, as required by Ordinance No. 18, series of 1957; a
quarterly garbage fee of P6.00, as required by Ordinance No. 10, series of
1950; an annual warehouse fee of P50.00, as imposed by Ordinance No. 1, series
of 1961; and pays the Bureau of Internal Revenue P100.00 for its dealer’s
license (known as “L-3”), aside from the amount of one-half (1/2)
centavo on every kilo of tobacco that it transports from the municipality.  On the other hand, the municipality renders
services to dealers and vendors, consisting of the inspection of their weighing
scales and balances, checking of their bodegas for the protection of farmers,
maintaining police outposts near bodegas to check whether or not the tobacco,
garlic or onion had been paid, and maintaining the fire department to see that
the bodegas are free from fire.  It may
be here added that the court a quo took judicial notice of the
fact that middlemen rake huge profits and are “farming the farmers”.

Appellant assails the validity of the two (2) ordinances on the
grounds that:  (a) they impose a sales
tax, which municipalities and municipal districts are not empowered to levy
under Republic Act 2264; (b) they impose an export tax in violation of Section
2287 of the Revised Administrative Code; (c) they give rise to double taxation;
(d) considered as regulatory measures, they prescribe unjust and excessive
amounts; and (e) they are ambiguous in the sense that they can be either
interpreted as imposing a tax or a license fee.

The last four (4) grounds relied upon by appellant to support its
claim to the invalidity of the ordinances are untenable.  The prohibition against the imposition by
municipal councils of a tax in any form whatever upon goods or merchandise
carried into the municipality, or out of the same, and any attempt to impose an
import or export tax upon such goods, under Section 2287 of the Revised
Administrative Code, is no longer in force, as having been impliedly repealed
by the Local Autonomy Act.^[3]
The fact that appellant is doubly taxed
in that it pays the Bureau of Internal Revenue one-half (1/2) centavo
for every kilo of tobacco that it transports from the municipality and that the
municipality also imposes a like amount (increased to one (1) centavo by the
amendatory ordinance) for the same quantity of tobacco upon appellant is not in­herently
obnoxious for the impositions are made by different government entities.^[4]
The record does not show any basis that the amount of one (1) centavo required
to be paid by the later ordinance is unjust or excessive.  That the questioned ordinances are ambiguous
in that they may be interpreted as revenue-raising or are police-power measures
is of no moment because Republic Act 2264 “confers upon all chartered
cities, municipalities and municipal districts the general power to levy not
only taxes but also municipal license taxes subject to specified
exceptions, as well as service fees.” (Nin Bay
Mining Co. vs. Muni­cipality of Roxas, supra).

The untenability
of the last four grounds of objection notwithstanding, the ordinances are
infirm on appellant’s first ground — that they violate the first proviso of
Section 2 of Republic Act 2264, which provides:

“Provided, That municipalities and municipal districts shall,
in no case, impose any percentage tax on sales or other taxes in any form based
thereon, . . . . . . . . . . . . . “

By the terms of the ordinance, a
wholesaler or vendor is required to report in writing the number of kilos sold
and purchased by him within the first ten (10) days of each succeeding
month.  Undoubtedly, this provision
serves as the basis upon which the volume of sale is determined from month to
month.  The “municipal tax or
inspection fee” is, in turn, imposed “on every kilo of Virginia leaf
tobacco, garlic and onion on all wholesale dealers and vendors” so that what
is taxed is precisely the volume of sales; or, as appellees
admit in their brief on page 6, “the volume of trade or output of said
dealer of leaf tobacco, garlic and onion”. 
The tax imposed is, therefore, a tax on sales, or one based thereon.^[5]
For a dealer is not one who buys to keep or makes to sell, but one who buys to
sell again;^[6]
the ordinances tax his sale when he sells again, and he cannot, by its very
nature, carry on his business unless he sells what he has bought.

The decision in Nin Bay Mining Co. vs. Municipality of Roxas,
supra, where the validity
of an ordinance imposing an inspection and verification fee on every ton of
silica excavated and shipped out of the municipality was upheld by this
Court, is not applicable to the case at bar because in said case, the issue
whether the levied fee cons­tituted a tax on sales was not raised.  The decision itself states:  “Neither the plaintiff nor the lower
court maintains that the subject matter of the ordinance in question comes
under any of the foregoing exceptions” (referring to the two (2) provisos
of Section 2 of Republic Act 22 64, the first of which was hereinbefore
quoted).

That the municipality possessed power to enact the ordinances
because Republic Act 2264 empowers it to levy not only taxes but also licenses;
that the inspection fees imposed are for services rendered by the municipality
(as proved in evidence by it) and that its power to impose inspection fees is
not restricted by the first proviso of Section 2 of the law, albeit the same
does not authorize a tax on sales, is no argument in favor of the validity of
the ordinances in question because in their actual application they do impose a
sales tax.

The cases of Yap Tak Wing vs. Municipal
Board of Manila, 68 Phil. 511; Manila Motor Co. vs. City of Manila, 72 Phil.
336; City of Bacolod vs. Gruet,
L-18290, 31 January 1963, 7 SCRA 164; and C. N. Hodges vs. Municipal Board of
the City of Iloilo, L-18276, 12 January 1967, 19 SCRA 28, are not applicable to
the present case.  In the Yap Tak Wing case, a certain ordinance of the City of Manila
providing for the reclassification of panciterias,
restaurants, cafes, carinderias and other public
eating places, and imposing increased rates of license fees and taxes
previously provided for by prior ordinances, was sought to be annulled on the
ground that the City of Manila had no power to enact the ordinance under its
police power to regulate the establishments mentioned because the power to
regulate does not include the power to impose taxes, but this Court upheld the
power of the city as a revenue measure and is within its power ” (m) to
tax, fix the license fee and regulate the business of hotels, restaurants,
refreshments places, cafes, lodging houses, and boarding houses . . . . . .
“, under Section 2444 of the Administrative Code, as amended by Act 3669;
the prior ordinances alluded to required licenses to operate the said
establishments and the rate of tax is based on volume of business and the
number of persons who may be accommodated in the establishment; the Yap Tak Wing case, therefore, does not compare with the present
case not only because no mention is made that the tax imposed is a tax on sales
but also because Manila is a city, which is not disauthorized
under the Local Autonomy Act from imposing a tax on sales, unlike
municipalities and municipal districts. 
The same reasons of non-applicability to the present case exists in the
Manila Motor case.  In City of Bacolod
vs. Gruet, supra, an imposition of P0.03 tax
on every case of Coca-cola was held as valid because the tax imposed by the
City of Bacolod “was within its express powers,
unlimited by the proviso applicable only to municipalities and municipal
districts” (7 SCRA 169), reference therein being made to the aforequoted proviso of Section 2 of the Local Autonomy
Act.  To the same effect in the ruling in
C. N. Hodges vs. Municipal Board, Iloilo City, supra, where the
ordinance of Iloilo City imposing a
municipal tax on the sale of real property was upheld as valid (except for a portion of the ordinance requiring payment of
the tax as a condition for the registration of the sale).  In brief, these four (4) cases relied upon by
appellees involve the common fact that the ordinances
whose validity were there upheld were enacted by chartered cities, in
contra-distinction to the fact, in the present case, that the ordinance in
question was enacted by a municipality, Laoag.

But appellees
argue that even if the “municipal tax or inspection fee” as provided
for in the ordinances, is a tax on sales, which is not allowed to be imposed by
municipalities and municipal districts but which is allowed to be imposed by
cities, the prohibition does not apply to appellee as
it is now a city.  The argument is
unavailing because the legality of an ordinance is dependent upon the power
that the municipal corporation had at the time of the enactment of the
ordinance;^[7] so that if the questioned ordinances were
invalid when enacted by Laoag as a municipality, they
did not become valid when it became a city.

FOR THE FOREGOING
REASONS, the appealed
decision is hereby reversed and another one entered, declaring Ordinance No.
10, series of 1960, and its amendatory Ordinance No. 10, series of 1964, of Laoag, Ilocos Norte, as null and
void, and ordering the defendants-appellees to refund
the taxes paid by plaintiff-appellant under the said ordinances, with legal
interest thereon.  No costs.

Concepcion, C.J., Dizon,
Makalintal, Zaldivar,
Castro, Fernando, Teehankee, Barredo,
Villamor, and Makasiar, JJ., concur.

^[1]
Received in the Supreme Court on 28
March 1967, Rollo, page 1.

^[2]
Brief for defendants-appellees, page 1.

^[3]
Nin Bay Mining Co. vs. Mun.
of Roxas, L-20125, 20 July 1965, 14 SCRA 660.

^[4]
Punzalan vs. Municipal Board of the City of Manila,
95 Phil. 46; Comm. of Int. Revenue vs. Lednicky,
L-18169, L-18286, L-21434, 31 July
1964, 11 SCRA 603.

^[5]
Cf. Marinduque Iron Mines vs.
Mun. of Hinabangan,
L-18924, 30 June 1964, 11
SCRA 416.

^[6]
Ah Nam vs.
City of Manila, et al., 109 Phil.
808, citing Norries vs. Com., 27 Pa.
494; Com. vs. Campbell, 33 Pa.
385; Bouvier’s Law Dictionary.

^[7]
City of Naga
vs. CA, L-24954, 14 August 1968,
24 SCRA 594.