THE MUNICIPAL GOVERNMENT OF PAGSANJAN, LAGUNA PLAINTIFF AND APPELLEE, VS. ANGGEL E. REYES, DEFENDANT AND APPELLANT.

The defendant-appellant, Angel E. Reyes, was the owner of a dessicated coconut factory located in Pagsanjan, Laguna, which operated from March, 1948  to July 20, 1950. At the time the appellant commenced his business the license tax was P600 per annum.  On March 14,  1948, the municipal council  of Pagsanjan passed Ordinance No. 2, series of 1948, increasing said tax to P3,000 per annum, which was approved by the  Provincial Board of Laguna on April 5, 1948 and by the Secretary of Finance on February 22, 1949.   The appellant had paid P150 and made a deposit of P600 upon account of his license taxes.  Computing the tax at the rate of P3,000 per annum, the plaintiff-appellee, the Municipal Government of Pagsanjan, demanded from  the appellant the total sum of P4,500 which the latter refused to pay, contending not  only  that the appellee had. no power to enact Ordinance No. 2 which was also oppressive,  unjust and  unreasonable, but that, even if  valid, it became effective in the year succeeding the ap proval . by the Secretary of  Finance.  The appellee was therefore constrained to,file in the Court of First Instance of Laguna a complaint against the appellant for the recovery of P4,500, plus the sum of P500 as damages.   After answer by the appellant and. due trial, the court  rendered a decision holding that the increased license tax prescribed in Ordinance  No.  2  became effective on  January 1, 1949, the year following its passage in 1948, and sentencing the appellant to  pay the appellee P4,140,  representing delinquent taxes with a surcharge of twenty per cent.  From this decision defendant Angel E. Reyes has appealed.

The ordinance in question  was enacted in pursuance of Commonwealth Act  No. 472.  Previously the law on the matter was Act No. 3422, section 2 of which provided that the municipal council had no authority, without the approval of the Secretary of the Interior and the  Secretary of Finance, to impose fixed municipal license taxes on business not excepted in said Act or-otherwise covered by the provisions of said section and subject to the fixed annual tax imposed in section  fourteen  hundred  and fifty-seven of the Administrative Code of 1917, as amended;  if the tax on each business was in excess of P25 per annum.  Under. section 4 of Commonwealth Act No. 472, the approval of the Secretary of Finance shall be secured “2”.   Whenever tile rate of fixed municipal license taxes on business not excepted in this Act or otherwise covered by the  preceding paragraph  and subject  to the  fixed annual tax imposed in section one hundred eighty-two of the National Internal Revenue Law, is  in excess of fifty  pesos per annum; and 3.  Whenever  the municipal license tax  on any business, occupation, or privilege the rate of which is not limited. above increased  by  more than fifty per  centum.”  It  is noteworthy that under the latter Act the appellee was empowered to enact the ordinance in question  but “the approval of the Secretary  of Finance  shall be secured.” On the other hand, under the former law, Act No. 3422, a1 municipal council had no authority,  without the approval of the Secretary of Interior and the Secretary of Finance, to impose  a  license  tax of the kind  imposed by  ordinance in question.  In our opinion the difference is more formal than substantial, because the fact remains that both under Commonwealth Act No. 472 and under Act No. 3422, the specific  approval of the Secretary of Finance is required. The provision is not merely one which permits or assumes the validity of an ordinance until disapproved by the Secretary of  Finance.   The evident purpose  of  the law is  to forestall the  imposition of unreasonable  and oppressive license taxes  on business; in the  language of our decision in Santos ms.  Aquino,  94 Phil.,  65 “to  forestall’ abuse  of power by the municipal councils.”

It is interesting to note that the Department of Finance promulgated Provincial  Circular No. 12, enjoining all municipal  treasurers  not to enforce the  collection  of a tax imposed by an ordinance which requires the approval of the Secretary of Finance, without said approval; and this circular  was so  applied  and interpreted in a  decision of the Secretary of Finance rendered on  February  10,  1949, the dispositive part of which reads  as follows:

“The records of this Department show that the rates  of municipal license taxes fixed  in  the  aforesaid  ordinance which require the approval  of  this  Department, were  approved under our letter dated September  22, 1947″.  It is, therefore, evident  that the  collection of the increase rate made by the municipal treasurer  before the said date is illegal  and contrary to  existing instruction. In view thereof and it appearing that the payments were made  under protest, the provincial treasurer is hereby  instructed to take  immediate steps or refund to the  taxpayers the amounts which they paid in excess of P50.00 before September 22, 1947.”

This  Court already held  that the  approval of the Secretary of the  Interior and the  Secretary  of Finance required in section 2 of Act No. 8422, was a condition sine qua non for the validity of an ordinance passed under said Act.  (Li  Seng Giap  & Co.,  et al. vs. Municipality of Daet, 54 Phil., 625;  Smith  Bell &  Co.  vs. Municipality of Zamboanga, 55 Phil., 467.) Our conclusion is that the ordinance in question  became valid only after it was approved by the Secretary of Finance on February 22, 1949.   To be valid however is one thing, and to be effective and enforceable is another thing. Section  2230  of the Administrative Code provides that an  ordinance or resolution shall take  effect  on the  tenth day after its passage.  This is the general rule; but section 2309 of  said Code provides that “a  municipal license tax already in existence shall be subject  to change only by ordinance  enacted prior to the fourteenth of  December of any year for the next succeeding year;  but an entirely new tax may’ be created  by  an ordinance  enacted during the current year, effective at the beginning of any succeeding quarter. * * *”  Since ordinance No.  2, imposes a tax on dessicated coconut business, and merely changes the rate already in existence by increasing it to P3,000 per  annum, said ordinance become effective and enforceable on January 1, 1950, the year following February 22, 1949, when it was approved by the Secretary of Finance.

Appellee’s contention that the accrual of the license tax should be distinguished from its collection which may be made only after the date of the approval by the Secretary of Finance is untenable if not absurd. The theory is at war with the general rule against retroactive application of statues, besides being flagrantly unbusinesslike and speculative; for under the law there is no definite period within which approval by the Secretary of Finance should be obtained, and under the decision in Santos vs. Aquino, supra, the Department of Finance not only may approve but also may disapprove or reduce the tax imposed.

Upon the other hand, appellant’s contention that the ordinance in question is null and void for being oppressive, unjust and unreasonable, deserves no serious consideration. He argued in the lower court that the annual license tax of P3,000 constituted so heavy a burden that his business had to be closed. In the stipulation of facts submitted by the parties, no reference whatsoever was made to said contention. Much less was any evidence presented on the point.

It being understood that Ordinance No. 2, series of 1948, became effective and enforceable only on January 1, 1950, and that defendant-appelle all the unpaid taxes on his business from March, 1948 to July 30, 1950, plus the corresponding surcharge deducting what was already paid or deposited by the appelant upon account of said taxes, the appealed decision is in other respects affirmed. So ordered without costs.

Bengzon, Padilla, Reyes, A. Bautista Angelo, Labrador, Reyes, J.B.L. and Endencia, JJ., concur.