THE CITY OF OLONGAPO, PETITIONER, VS. THE STALLHOLDERS OF THE EAST BAJAC-BAJAC PUBLIC MARKET OF OLONGAPO CITY, CONSTANCIA P. MACOMB, FEDERICO ROBLES, ROSARIO L. SANTOS, LYDIA A.…

KAPUNAN, J.:

On June 30, 1993, the Olongapo City Council enacted Ordinance
No. 14 (Series of 1993), fixing the monthly rental fees for the different stalls
in the new public market. Respondents questioned the validity of said ordinance
by filing an appeal to the Secretary of Justice. The appeal was made pursuant to
Section 187 of the Local Government Code,^[1]
which states:

SEC. 187. Procedure for Approval and Effectivity of Tax
Ordinances and Revenue Measures; Mandatory Public Hearings. – The procedure
for approval of local tax ordinances and revenue measures shall be in accordance
with the provisions of this Code: Provided, That public hearings shall be
conducted for the purpose prior to the enactment thereof: Provided,
further, That any question on the constitutionality or legality of tax
ordinances or revenue measures may be raised on appeal within thirty (30) days
from the effectivity thereof to the Secretary of Justice who shall render a
decision within sixty (60) days from the date of receipt of the appeal:
Provided, however, That such appeal shall not have the effect of
suspending the effectivity of the ordinance and the accrual and payment of the
tax, fee, or charge levied therein: Provided, finally, That within thirty
(30) days after receipt of the decision or the lapse of the sixty-day period
without the Secretary of Justice acting upon the appeal, the aggrieved party may
file appropriate proceedings with a court of competent jurisdiction.
(Underscoring supplied.)

As grounds for their appeal, respondents alleged that the
ordinance: (1) violated Sections 130^[2]
and 186^[3] of the Local Government Code
as the rates fixed therein are unjust, excessive, oppressive, confiscatory, not
equitable, not based as far as practicable on the market vendors’ ability to
pay, and contrary to declared national policy; (2) was sought to be implemented
despite lack of publication; and (3) did not comply with “the essence and spirit
of the public hearings.”^[4]

In a Resolution dated September 29, 1993, the Secretary of
Justice upheld the validity of Ordinance No. 14 (Series of 1993).

Respondents moved for a reconsideration of the Justice
Secretary’s Resolution. The Secretary of Justice, however, refrained from taking
action on respondents’ motion for reconsideration apparently in view of the
pendency of a case^[5] filed in this Court
questioning the validity of said Section 187. In a Letter dated November 23,
1993 and addressed to counsel for respondents, Chief State Counsel Elmer T.
Bautista wrote:

With reference to your Motion for Reconsideration on the
Resolution of this Office dated September 29, 1993, upholding the
constitutionality and legality of Ordinance No. 14, s. 1993 of the City of
Olongapo, please be informed that in view of the adverse ruling of the Regional
Trial Court of Manila (Branch 33) dated October 26, 1993, and pending final
determination by the Supreme Court on the constitutionality of Section 187 of
Republic Act No. 7160 (Local Government Code of 1991), the Secretary of Justice
deemed it appropriate to refrain from taking action thereon in the meantime.

Per the Secretary’s Memorandum dated November 5, 1993, copy
attached, you are, however, advised to file your appeal with the court of
competent jurisdiction.^[6]

The contents of the “Secretary’s Memorandum” referred to in the
above letter is reproduced below:

In view of the adverse ruling of the Regional Trial Court of
Manila (Branch 33) dated October 26, 1993, and pending final determination by
the Supreme Court of the constitutionality of Section 187 of Republic Act No.
7160 (Local Government Code of 1991) which empowers the Secretary of Justice to
pass upon on appeal, the legality and/or constitutionality of tax ordinances or
revenue measures adopted by local government units, you are hereby directed to
refrain from taking action on and/or accepting petitions/appeals filed in
accordance with said legal mandate, and inform the appellants thereto to file
their appeal directly with the courts.^[7]

On December 22, 1993, respondents filed before the Regional
Trial Court (RTC) of Olongapo City an “action to declare void Olongapo City
Ordinance No. 14, s. of 1992 and for writ of prohibition.”

The City of Olongapo moved for the dismissal of the petition on
the ground that it did not state a cause of action. The RTC, however, held in
abeyance the resolution of this motion until after trial on the merits shall
have been terminated, the ground relied upon by the City being “not
indubitable.”^[8

^] At the pre-trial, the
parties agreed to limit themselves to the following issues: (1) whether the
ordinance was void; and (2) whether the proposed fees are equitable, justifiable
and affordable.^[9]

Thereafter, the City of Olongapo filed a Motion for Summary
Judgment. Finding there were no genuine issues as to any material fact, the RTC
granted the motion in an Order dated October 20, 1995. On January 30, 1996, the
RTC, without trial, rendered a decision sustaining the validity of Ordinance No.
14 (Series of 1993). The dispositive portion of the decision reads:

WHEREFORE, and the foregoing premises considered, the legality
or constitutionality of Ordinance No. 14, Series of 1993, enacted by the City
Council of Olongapo City on June 30, 1993 and which took effect on July 7, 1993,
is UPHELD.

The Complaint is DISMISSED.

SO ORDERED.^[10]

Respondents appealed to the Court of Appeals, assigning the
following errors:

(A.) THE LOWER COURT COMMITTED GRAVE AND REVERSIBLE ERROR IN
DECIDING THE CASE ON SUMMARY JUDGMENT UNDER RULE 34 OF THE RULES OF COURT.

(B.) THE LOWER COURT DID NOT ACCORD DUE PROCESS TO THE
APPELLANTS.

(C.) THE DECISION IS NOT JUSTIFIED BY THE EVIDENCE.^[11]

In its Decision dated August 31, 1998, the Court of Appeals
held that the issue of the ordinance’s publication did not require any trial and
that the City had complied with the requirements of publication. It declared:

As to the issue [of] whether or not the enactment of Ordinance
No. 14, Series of 1993 is void insofar as the procedural requirements of the
Local Government Code or R.A. 7160 on the approval of revenue measures under
Rules 187 and 188 thereof is concerned, we find that the trial court did not err
in finding that no genuine triable issue exists that requires trial on the
merits..

Exhibits “4”, “4-A”, “5”, “6”, “7”, “8”, “9” and “10” attached
to the Answer undisputedly show that proper publication, posting in public
places, and public hearings were complied with in accordance with the
requirements of the Local Government Code of 1991. We find no genuine triable
issue on this matter and therefore the trial court committed no reversible error
in rendering summary judgment thereon. We agree with the RTC that the procedural
requirements have been met by the City Council of defendant Olongapo City in the
enactment of the subject ordinance. There were publications, posting and public
hearings as shown by the aforementioned exhibits of defendants. The fact that
appellants’ views were not considered by the City Council does not render the
enactment of the ordinance invalid.^[12]

However, as regards the question of whether the market rental
rates were unjust, excessive, confiscatory and inequitable, the Court of Appeals
held that the same was a factual issue that required the presentation of
evidence. Consequently, it remanded the case to the RTC for trial on this issue.

Aggrieved by the decision of the Court of Appeals, the City of
Olongapo brought the instant petition for review.

The nature of the proceedings conducted before the RTC is at
issue in this case.

Petitioner City of Olongapo submits that the RTC merely
reviewed the decision of the Secretary of Justice upholding the validity of
Ordinance No. 14 (Series of 1993). As such, the review by the RTC was confined
to the evidence presented in the administrative proceedings. Petitioner, citing
the cases of Santos vs. Moreno^[13]and Taleon vs. Secretary of Public
Works and Communications,^[14] argues
that evidence not presented before the Secretary of Justice should not be
admitted and considered by the reviewing court. The RTC’s function, according to
petitioner, is limited to determining whether there is evidence in the
administrative record substantial enough to support the findings therein; hence,
the CA erred in ordering the remand of the case for trial.

Respondents, on the other hand, contend that the petition filed
in the RTC was an original action. The Court of Appeals agreed with respondents,
holding that, based on the allegations of the complaint, the case brought by
respondents was an original case.

We find no error in this ruling for it is elementary that the
nature of the action is determined by the allegations of the complaint or
petition.^[15] Respondents explicitly
alleged in their petition that:

1. This is a petition to declare void the rates for market stalls at the
   Pag-asa Public Market imposed under Ordinance No. 14 s. of 1992 of the City of
   Olongapo for being unjust, excessive, oppressive, confiscatory, and, contrary to
   declared national policy.^[16]

The petition alleged the same grounds for declaring the
ordinance void as those raised in the appeal to the Secretary of Justice, thus:

III. Grounds For Voiding Ordinance
No. 46 s. of 1992

9. Ordinance No. 14, s. of 1993 violates Section 130, and, 186 of the Local
   Government Code of 1991, because the rates therein fixed are unjust, excessive,
   oppressive, confiscatory, not equitable and based as far as practicable on the
   market vendors[‘] ability to pay, and, contrary to declared national policy.
   
10. Ordinance No. 14, s. of 1993 is sought to be implemented already, yet, as
    far as known to the appellants, it has not yet been published in full for three
    (3) consecutive days in a newspaper of local circulation.
11. The essence and spirit of the public hearing was not complied with.^[17]

Consider, too, the circumstances under which respondents sought
relief from the RTC. Perhaps doubting his jurisdiction to entertain respondents’
appeal as a result of the filing of Drilon vs. Lim, supra, the Justice
Secretary issued a Memorandum directing the Chief State Counsel to refrain from
acting on or accepting appeals filed under Section 187 of the Local Government
Code and to “inform the appellants (herein petitioners) to file their appeal
directly with the courts.” The Chief State Counsel, complying with the
Memorandum, advised in his letter to respondents to “file their appeal
with the court of competent jurisdiction,” the “appeal” referring to an action
to question the validity of the subject ordinance. The Memorandum and the
accompanying letter thus amounted to an abdication by the Secretary of Justice
of his jurisdiction over the appeal, as conferred by Section 187.

Accordingly, the action before the RTC cannot be deemed to be
anything but an original action, and the function of the trial court cannot be
limited to reviewing the evidence adduced before the Secretary of Justice.

Nevertheless, petitioner maintains that trial is unnecessary in
any case because all the court had to do was determine whether the rates fixed
in the assailed ordinance conform to Department of Interior and Local Government
Memorandum Circular No. 93-63, specifically the provision limiting the return of
investment to 12 to 15% and that requiring a cost recovery scheme. Presumably,
this determination can be made, as both the Secretary of Justice and the RTC
did, by a mere examination of the documents submitted by petitioner.

However, it is precisely the accuracy of these documents that
respondents are disputing. Consequently, respondents may examine the officials
who executed said documents. They may present their own evidence, both
documentary and testimonial, to prove that the figures in the documents are
inaccurate. All these require a trial so that the parties may properly ventilate
their respective causes. Thus, the CA correctly ruled that:

The lower court based its conclusion that the market rates are
just and equitable in accordance with the Local Government Code on the
affidavits of one Loreto P. Azores, the City Treasurer of defendant and member
of the Local Finance Committee (p. 204, Original Records); and Johnny B.
Choa, City Budget Officer of defendant and the Officer in Charge of the City
Accountant’s Office as well as a member of the Local Finance Committee (p.
207, id.). In view of the complaint of plaintiffs-appellants as to the
equitableness, justifiability and affordability of the market rates imposed, it
behooved the trial court to conduct trial on the merits which would involve,
among others, the cross-examination of said affiants so as to determine whether
or not the computation of the Local Finance Committee is based on facts or mere
estimates. Fundamental issues as to the details concerning the issue of
expenditures in constructing a public market place; the claim of
plaintiffs-appellants that the construction of the new public market came from
the Mt. Pinatubo Calamity Fund, at no cost to the City (p. 20, Brief for the
Plaintiffs-Appellants); the actual cost of operations and basis of computed
revenue; the validity of the schedule of personal services; the actual
maintenance and operating expenses, and others, that would be necessary in the
determination of the justness of the market rates, would require trial on the
merits if proper judgment is to be resolved by the court a quo.^[18]

WHEREFORE, the decision of the Court of Appeals is
AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and
Ynares-Santiago, JJ., concur.

---

^[1] Republic Act No. 7160.

^[2] SEC. 130.
Fundamental Principles. — The following fundamental principles shall
govern the exercise of the taxing and other revenue-raising powers of local
government units:

(a) Taxation shall be uniform in each local government
unit;

(b) Taxes, fees, charges, and other impositions shall:

(1) be equitable and based as far as practicable on the
taxpayer’s ability to pay;

(2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;

(4) not be contrary to law, public policy, national economic
policy, or in restraint of trade;

(c) The collection of local taxes, fees, charges and other
impositions shall in no case be let to any private person;

(d) The revenue collected pursuant to the provisions of this
Code shall inure solely to the benefit of, and be subject to deposition by, the
local government unit levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and

(e) Each local government unit shall, as far as practicable,
evolve a progressive system of taxation.

^[3] SEC. 186. Power
To Levy Other Taxes, Fees or Charges. — Local government units may exercise
the power to levy taxes, fees or charges on any base or subject not otherwise
specifically enumerated herein or taxed under the National Internal Revenue
Code, as amended, or other applicable laws: Provided, That the taxes,
fees, or other charges shall not be unjust, excessive, oppressive, confiscatory
or contrary to declare national policy: Provided, further, That the
ordinance levying such taxes, fees or charges shall not be enacted without any
prior public hearing conducted for the purpose.

^[4] Records, p. 40.

^[5] Drilon vs.
Lim, 235 SCRA 135 (1994), where this Court subsequently sustained the
constitutionality of Section 187.

^[6] Records, p. 15.

^[7] Id., at 16.

^[8] Id., at
126-127.

^[9] Id., at
148-149.

^[10] Id., at 240.

^[11] Rollo, p.
26.

^[12] Id., at
27-28.

^[13] 21 SCRA 1141
(1967).

^[14] 20 SCRA 69
(1967).

^[15] Union Bank of
the Philippines vs. Court of Appeals, 290 SCRA 198 (1998).

^[16] Records, p. 3.

^[17] Id., at 5.

^[18] Rollo, pp.
28-29.