American Bible Society vs. City of Manila

A municipal ordinance imposing a license fee based on gross sales or receipts on a religious corporation for the distribution and sale of Bibles and religious literature constitutes an unconstitutional restraint on the free exercise of religion and worship guaranteed by Article III, Section 1(7) of the Constitution.

Municipal governments under the Revised Charter of Manila (RA 409) possess broad taxing powers over businesses and occupations. Religious organizations engaging in activities with commercial aspects (such as selling religious literature) faced scrutiny regarding the limits of municipal taxing authority when applied to religious propagation activities.

• Filed in Court of First Instance (CFI) of Manila — Complaint for refund of taxes paid under protest and declaration of unconstitutionality of municipal ordinances
• CFI Manila — Dismissed the complaint for lack of merits, upholding the validity and applicability of the ordinances
• Appealed to Court of Appeals — Certified to the SC because errors assigned involved only questions of law
• SC — Reversed the CFI decision and ordered refund

• ABS is a foreign, non-stock, non-profit religious missionary corporation registered in the Philippines since 1898, with principal office at 636 Isaac Peral, Manila
• ABS distributes and sells Bibles, New Testaments, and gospel portions in English, foreign languages, and local dialects throughout the Philippines
• On May 29, 1953, the Acting City Treasurer informed ABS that it was conducting business without a Mayor's permit and required payment of permit fees and license fees under Ordinance No. 3000 (as amended) and Ordinance No. 2529 (as amended by Ordinances Nos. 2779, 2821, 3028, and 3364)
• Amount demanded: P5,891.45 (covering Q4 1945 to Q2 1953), broken down as:
  • P35.00 for Mayor's permit under Ordinance 3000
  • P35.00 compromise for failure to secure permit
  • P5,821.45 license fees based on gross sales under Ordinance 2529
  • ABS paid under protest on October 24, 1953, to avoid closure and further penalties, simultaneously filing suit to question the legality of the ordinances
  • Stipulation of facts showed quarterly sales from 1945-1953 ranging from P1,244.21 to P45,287.92
  • ABS claimed it sold Bibles at minimal prices (sometimes one-third of cost) to spread religious beliefs, operating at a loss funded by its New York headquarters and voluntary contributions; thus, not engaged in business for profit
  • City contended ABS made profits, citing cross-examination testimony showing Bibles purchased at 70 cents were sold at P1.30, $4.50 Bibles at P10, etc.

• Ordinances 2529 and 3000 are unconstitutional as applied to ABS because they constitute religious censorship and restrain the free exercise and enjoyment of religious profession and worship under Article III, Section 1(7) of the Constitution
• Section 2444(m-2) of the Revised Administrative Code (old Charter) was expressly repealed by Section 18 of RA 409 (new Charter), rendering the ordinances promulgated thereunder invalid
• Under RA 409 Section 18(ii), ordinances providing for percentage taxes based on gross sales require prior approval by the President of the Philippines, which these ordinances lacked
• ABS is not engaged in "business" for profit but in religious ministry; the sales are merely incidental to religious propagation and dissemination of beliefs
• Taxing the distribution of Bibles violates the Free Exercise Clause; the constitutional guaranty includes the right to disseminate religious information

• Ordinances were validly enacted under Section 2444(m-2) of the Revised Administrative Code, and said provision was superseded by Section 18(o) of RA 409, which substantially re-enacted the same taxing power
• Under the doctrine of simultaneous repeal and re-enactment, the ordinances continue in force because the re-enactment neutralizes the repeal
• Retail dealers in general merchandise (including books) are expressly enumerated in Section 18(o) of RA 409, not requiring Presidential approval under Section 18(ii) which applies only to businesses "not otherwise enumerated"
• ABS sales assumed "commercial proportions" (significant gross sales over eight years), placing it outside the protection of religious privilege
• The license fee is a valid exercise of police power for regulation and revenue generation

• Procedural Issues: N/A
• Substantive Issues:
  • Whether Ordinances 2529 and 3000 (as amended) are constitutional and valid
  • Whether Section 2444(m-2) of the Revised Administrative Code was repealed by Section 18 of RA 409
  • Whether ordinances providing for percentage taxes based on gross sales require Presidential approval under RA 409 Section 18(ii)
  • Whether the ordinances are applicable to ABS given its religious nature and activities

• Procedural: N/A
• Substantive:
  • Validity of Ordinances: Ordinances 2529 and 3000 are constitutional and valid exercises of the City's taxing power under RA 409 Section 18(o), which substantially re-enacted the former Section 2444(m-2) of the Revised Administrative Code; the re-enactment preserved the ordinances' validity by continuing the law without interruption
  • Presidential Approval: Not required because retail dealers in general merchandise (including books) fall under Section 18(o), not Section 18(ii) which applies only to businesses not otherwise enumerated in the preceding subsections
  • Applicability to ABS: Ordinance 2529 (license fees based on gross sales) cannot be applied to ABS; imposing a flat license tax on the distribution and sale of Bibles constitutes an unconstitutional restraint on the free exercise of religion under Article III, Section 1(7) of the Constitution
  • Ordinance 3000: While constitutional per se (citing Coleman v. City of Griffin), it is inapplicable to ABS because the power to require a permit is inseparable from the power to tax; if the City cannot constitutionally tax the religious activity, it cannot require a permit for it
  • Refund: City of Manila ordered to refund P5,891.45 paid under protest

• Free Exercise Clause (Article III, Section 1(7) of the 1935 Constitution) — Guarantees the free exercise and enjoyment of religious profession and worship without discrimination. The SC held that this includes the right to disseminate religious information and distribute religious literature. Any restraint on this right must be justified by a clear and present danger of substantive evil which the State has the right to prevent.
• Murdock Doctrine (from Murdock v. Pennsylvania) — A flat license tax imposed as a condition for the exercise of constitutional privileges (religion and press) is unconstitutional. The power to tax the exercise of a privilege is the power to control or suppress its enjoyment. Such taxes are not nominal regulatory fees but potent instruments of censorship that can deprive religious activities of necessary resources and close doors to those without full purses.
• Re-enactment Doctrine — When a legislature repeals an old statute and simultaneously re-enacts the same provisions, rights and liabilities accrued under the original statute are preserved because the re-enactment neutralizes the repeal, continuing the law without interruption. The SC found Section 18(o) of RA 409 substantially re-enacted Section 2444(m-2) despite minor differences (removal of P500 annual cap).
• Inseparability of Licensing and Taxing Power — Where a municipality cannot constitutionally tax a religious activity, it cannot require a license or permit for the exercise of that activity, as the power to license is the power to control.
• Preferred Position Doctrine — Constitutional rights of freedom of press and religion occupy a preferred position as against property rights or governmental regulatory interests.

• "The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right to disseminate religious information. Any restraint of such right can only be justified like other restraints of freedom of expression on the grounds that there is a clear and present danger of any substantive evil which the State has the right to prevent."
• "The power to tax the exercise of a privilege is the power to control or suppress its enjoyment. * * * Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance."
• "It is one thing to impose a tax on the income or property of a preacher. It is quite another thing to exact a tax from him for the privilege of delivering a sermon."
• "When we balance the constitutional rights of owners of property against those of the people to enjoy freedom of press and religion, as we must here, we remain mindful of the fact that the latter occupy a preferred position."

• Murdock v. Pennsylvania — Controlling precedent establishing that flat license taxes on religious canvassing and literature distribution violate the Free Exercise Clause; cited extensively by SC to support ruling that taxing Bible sales is unconstitutional.
• Aglipay v. Ruiz — Cited for definition of religion as "a profession of faith to an active power that binds and elevates man to its Creator."
• Davis v. Beason — Cited for definition of religion as reference to one's views of his relations to His Creator and obligations of reverence and obedience.
• Marsh v. State of Alabama — Cited for the principle that freedom of press and religion occupies preferred position over property rights; dissemination cannot be conditioned upon official approval.
• Tucker v. Texas — Cited alongside Marsh regarding freedom of religious expression in company-owned towns.
• Coleman v. City of Griffin — Cited to establish that permit requirements for distribution of literature are not per se unconstitutional, but cannot be applied to restrain religious exercise.

• Article III, Section 1(7) of the 1935 Constitution — "No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed." Basis for holding license fee unconstitutional as applied to religious activity.
• Republic Act No. 409 (Revised Charter of the City of Manila), Section 18(o) — Grants City power to tax and fix license fees on dealers in general merchandise including retail dealers. SC held this substantially re-enacted former Section 2444(m-2).
• Republic Act No. 409, Section 18(ii) — Requires Presidential approval for ordinances taxing businesses not otherwise enumerated in preceding subsections. SC held this inapplicable to retail book dealers covered by Section 18(o).
• Section 2444(m-2) of the Revised Administrative Code — Former Charter provision granting taxing power over retail dealers. Held repealed but substantially re-enacted by RA 409 Section 18(o).
• Commonwealth Act No. 466 (National Internal Revenue Code), Section 27(e) — Cited regarding income tax exemptions for religious organizations; SC noted that while income from religious activities may be exempt from income tax, this does not automatically exempt from municipal license taxes, though the latter may still violate Free Exercise Clause.