DR. HERMENEGILDO SERAFICA, PLAINTIFF-APPELLANT, VS. THE TREASURER OF ORMOC CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON. ESTEBAN C. CONEJOS, AS MAYOR OF ORMOC CITY AND ORMOC CIT…

Direct appeal from a decision of the Court of First Instance of Leyte dismissing plaintiff’s complaint, without
pronouncement as to costs.

Plaintiff, Dr. Hermenegildo Serafica, seeks a declaration of nullity of Ordinance No.
13, Series of 1964, of Ormoc City, im­posing a
“tax of five pesos (P5.00) for every one thousand (1,000) board feet of
lumber sold at Ormoc City by any person, partner­ship,
firm, association, corporation, or entities”, pursuant to which the
Treasurer of said City levied on and collected from said plaintiff, as owner of
the Serafica Sawmill, the aggregate sum of P1,837.84,
as tax on 367,568 board feet of lumber sold, in said City, during the third
quarter of 1964.  After appropriate
proceed­ings, the lower court rendered judgment upholding the validity of said
ordinance and denying the relief prayed for by Dr. Serafica.  Hence, this appeal by the latter.

The contested ordinance reads:

“ORDINANCE NO. 13

“AN ORDINANCE IMPOSING A TAX OF FIVE PESOS (P5.00) FOR EVERY
ONE THOUSAND BOARD FEET OF LUMBER SOLD AT ORMOC CITY AND FOR OTHER PURPOSES

“BE IT ORDAINED, by authority of the Muni­cipal Board of Ormoc City, Philippines, pursuant to the provisions of
Republic Act 179, as amended by RA. 429, otherwise known as the Charter of Ormoc City, That:

“Section 1. City tax. 
– There shall be paid to the City Treasurer a city tax of five pesos
(P5.00) for every one thousand (1,000) board feet of lumber sold at Ormoc City by any person, partnership, firm, association,
corporation or entity.

“Section 2. Time and manner of payment and penalty for
delinquency.  – The city tax herein
pres­cribed shall be payable without penalty within twenty (20) days after the
close of every quarter for ‘which the tax is due.  Failure to pay the tax within the Pres­cribed
time shall render the taxpayer subject to a surcharge of fifty percentum (50%) for the first offense and one hundred percentum (100%) for subsequent failures to pay within the
prescribed period.

“Section 3. Payment to be rendered by tax payer.  – The taxpayer is hereby obliged to include
the tax due in every invoice issued for the sale of lumber which tax shall be
submitted for payment to the City Treasurer within twenty (20) days after the
close of every quarter.

“Section 4. Inspection of taxpayer’s books and records.  – For the purpose of enforcing the provi­sions
of this Ordinance, the City Treasurer or any of his deputies specifically
authorized in writing for the purpose, shall have authority to examine the
hooks and records of any person, partnership, firm, association, corporation or
entity subject to the tax herein imposed, PROVIDED, HOWEVER, That such
examination shall be made only during regular busi­ness hours, unless the
person, partnership, firm, association, corporation or entity concerned shall
consent otherwise.

“Sec. 5. Penalty for violation.  – Any violation of the provisions of this
Ordinance shall be punishable by a fine of not more than five hundred (P500.00)
pesos and an imprisonment of not more than three (3) months.

“Sec. 6. Construction of this Ordinance.  – If any part or section of this Ordinance
shall be declared unconstitutional or ultra vires,
such part or section shall not invalidate any other provision hereof.

“Sec. 7. Effectivity.  – This Ordinance shall take effect
immediately upon its approval.  ENACTED, June 17, 1964.

“‘RESOLVED, FURTHER, to authorize the City Treasurer to copies
of this Ordinance for issuance to all concerned;

“‘RESOLVED, FINALLY, to furnish a copy of this
resolution-ordinance each to the City Treasurer, the City Auditor, the City
Fiscal, the City Judge, and all concerned;

” ‘CARRIED.  Six
affirmative votes registered by Councilors Tugonon,
Alfaro, Kierulf, Abas, Besabella, and Du; one abstention
registered by Councilor Aviles.'”

xx                                          xx                                             xx

Plaintiff assails this ordinance as null and void upon the
grounds that:  (1) the Charter of Ormoc City (Republic Acts Nos. 179 and 429) authorizes the
same to “regulate”, but not to “tax” lumber yards; (2) the
ordinance in question imposes, in effect, double taxation, because the business
of lumber yard is already regulated under said Charter and the sale of lumber
is “a mere incident to the business of lumber yard”; (3) the tax
imposed is “unfair, unjust, arbitrary, unreasonable, oppressive and contra­ry
to the principles of taxation”; and (4) “the public was not heard and given a chance to
air its views” thereon.

With respect to the first ground, We have held in Ormoc Sugar Co. v. Municipal Board of Ormoc
City,^[1]
that the taxing power of the City of Ormoc,
under section 2 of the Local Autonomy Act ^[2]
is “broad” and “sufficiently plenary to cover everything,
excepting those mentioned therein”.1 It should
be noted that in said case of Ormoc Sugar Co., We
upheld the validity of a sales tax.

As regards the second ground, suffice it to say that regulation and taxation are two different things,
the first being an exercise of police power, whereas the latter is not, apart
from the fact that double taxation is not prohibited in the Philippines.2

The third objection is premised upon the fact that the tax in
question is imposed regardless of the class of lumber sold, although there are
several categories thereof, commanding different prices.  Plaintiff has not proven, however, or even
alleged the prices cor­responding to each category, so that, like the lower
court, We have no means to ascertain the accuracy of the conclusions drawn by
him, and must, accordingly, rely upon the presumption that the City Council had
merely complied with its duty and that the ordinance is valid, unless and until
the contrary has been duly established.3

The last objection is based
upon Provincial Circular No. 24 of the Department of Finance, dated March 31,
1960, suggesting that, “in the enactment of tax ordinances x x under
the Local Autonomy Act, x x x where practicable,
public hearings be held wherein the views of the public x x x may be
heard.” This is, however, a mere suggestion, compliance with which is not
obligatory, so that failure to act in accordance therewith can not and does not
affect the validity of the tax ordinance.

Indeed, since local governments are subject, not to the con­trol,
but merely to the general supervision of the President, it is, to say the
least, doubtful that the latter could have made compliance with said circular
obligatory.4

We have not overlooked the fact that, pursuant to Sec. 2 of
Republic Act No. 2264 as amended, “no city, municipality or municipal
district may levy or impose x x x

x x x                                              x x x                                         x x
x

(e)  Taxes on forest products or forest
concessions.”

Although lumber is a forest product, this limitation has no
application to the case at bar, the tax in question being imposed, not
upon lumber, but upon its sale. 
Said tax is not levied upon the lumber in plaintiff’s
sawmill and does not become due until after the lumber has been sold.  Hence, the case at bar is dis­tinguishable
from Golden Ribbon, Lumber Co., Inc. v. City of Butuan1 in that
the ordinance involved therein, provided that “every person, association
or corporation operating a lumber mill and/or lumber yard within the territory
of the City of Butuan shall pay to the City a tax of
two-fifths (P.004) centavo for every board foot of lumber sawn, manufactured
and/or produced.” In short, the tax in that case was imposed upon the
“lumber” – a forest pro­duct, not subject to local taxation – whether
sold or not.  Similarly, Santos
Lumber Co. v. City of Cebu
2 and Jos. S. Johnston & Sons v. Ramon Regondola3 cited by the plaintiff, refer to situa­tions
arising before the enactment of Republic Act No. 2264 4, and hence, are inapplicable to the present case.

Neither have We overlooked the proviso in Sec. 2 of said Act
prohibiting the imposition of “any percentage tax on sales or other taxes
in any form based thereon,” for this injunction is directed exclusively to
“municipalities and municipal districts, ” and does not apply to
cities.

WHEREFORE, the decision appealed from should be, as it is
hereby affirmed, with costs against plaintiff herein.

IT IS SO ORDERE D.

Reyes, J.B.L., Acting C.J., Dizon, Makalintal, Zaldivar, Sanchez,
Fernando, and Barredo,
JJ., concur.

Castro and Capistrano,
JJ., did not take part.

Teehankee, J., in the result.

^[1]
L-24322, July 21, 1967.

^[2]
Republic Act No. 2264, as amended by Republic Act No. 4497.

1 City of Bacolod v. Cruet, L-18290, Jan. 31, 1963; Hodges v.
Municipal Board, L-18129, Jan. 31,
1963; Hodges v. Municipal Board, L-18276, Jan. 12, 1967.

2 Pepsi-Cola Bottling Co. v.
City of Butuan, L-22814, Aug. 28, 1968; Manufacturers
Life Ins. Co. v. Meer, 89 Phil. 351, 357; City
of Baguio v. De Leon, L-24756, Oct. 31, 1968;
Comm. of Int. Revenue v. Hawaiian-Phil. Co., L-16315, May 30, 1964; City
of Bacolod v. Gruet,
supra; Syjuco v. Municipality of Parañaque,
L-11265, Nov. 27, 1959; City of Manila v. Interisland
Gas Service, 99 Phil. 847, 854.

3 Central Barrio, City of Davao v. City Treasurer,
L-25811, April 3, 1968; Morfe v. Mutuc, L-20387, Jan. 31, 1968.

4 Pelaez
v. Auditor General, L-23825, Dec.
24, 1965; Hebron v.
Reyes, 104 Phil. 175; Querubin v. Castro,
L-9779, July 31, 1958.

1 L-18534, Dec. 24, 1964.

2 102 Phil. 871.

3 L-9355, Nov. 26, 1957.

4 June 19, 1959.