City of Manila vs. Judge Gomez

A statutory provision prescribing a maximum ceiling on total real property tax impliedly authorizes the imposition of an additional tax up to that ceiling, even if the power to impose the specific additional rate is not expressly stated, where the pre-existing tax rate plus the expressly mandated additional tax falls below the prescribed maximum and the legislative intent to fill the gap is discernible from subsequent enactments.

Section 64 of the Revised Charter of Manila, Republic Act No. 409, effective June 18, 1949, fixed the annual realty tax at one and one-half percent. Section 4 of the Special Education Fund Law, Republic Act No. 5447, effective January 1, 1969, imposed an additional one percent real property tax for the Special Education Fund and provided that "the total real property tax shall not exceed a maximum of three per centum." The three-percent ceiling left a gap of one-half percent between the existing one and one-half percent charter rate plus the one percent education fund levy and the statutory maximum, prompting the Manila Municipal Board to enact Ordinance No. 7125 imposing the additional one-half percent. The Real Property Tax Code, Presidential Decree No. 464, effective June 1, 1974, later fixed the basic realty tax at two percent and reaffirmed the one percent Special Education Fund levy, confirming the legislative intent to allow a two-percent basic realty tax.

The City of Manila, through its Municipal Board, enacted Ordinance No. 7125, approved by the city mayor on December 26, 1971 and effective beginning the third quarter of 1972. The ordinance levied an additional annual realty tax of one-half percent on the assessed value of real property, bringing the total realty tax to three percent — composed of one and one-half percent pursuant to the Revised Charter of Manila, one percent pursuant to Republic Act No. 5447 (the Special Education Fund Law), and one-half percent pursuant to the ordinance itself. The enactment was prompted by the provision in section 4 of the Special Education Fund Law that "the total real property tax shall not exceed a maximum of three per centum," which the Municipal Board interpreted as authorizing the additional levy.

Esso Philippines, Inc. owned land and machineries located in Manila subject to realty tax. It paid under protest the sum of P16,092.69 as additional one-half percent realty tax for the third quarter of 1972. On November 9, 1972, Esso filed a complaint in the Court of First Instance of Manila for recovery of that amount, contending that the additional one-half percent tax was void for lack of statutory authorization. The trial court agreed, declaring the ordinance void and ordering the city treasurer to refund the tax. The City of Manila and its treasurer appealed to the Supreme Court under Republic Act No. 5440.

In subsequent manifestations before the Supreme Court, the petitioners averred that Ordinance No. 7125 remained in force and that Ordinance No. 7566, enacted on September 10, 1974, imposed a two percent tax on commercial real properties, which together with the one percent Special Education Fund tax yielded the same three percent total. Esso, now Petrophil Corporation, revealed that it had continued paying the additional one-half percent tax and that from 1975 to 1980 it paid a total of P4,206,240.71 as three percent tax on its real properties. The Real Property Tax Code, Presidential Decree No. 464, effective June 1, 1974, subsequently authorized city councils to impose a realty tax of up to two percent and reaffirmed the one percent Special Education Fund levy, confirming the validity of the additional one-half percent from that date forward. The controversy thus narrowed to the legality of the additional one-half percent tax for the two-year period from the third quarter of 1972 to the second quarter of 1974.

• Validity Under the Doctrine of Implications: Petitioners contended that the additional one-half percent realty tax was sanctioned by the provision in section 4 of the Special Education Fund Law fixing three percent as the maximum total real property tax, the doctrine of implications in statutory construction meaning that what is plainly implied is as much a part of the statute as what is expressed.
• Continuing Validity of the Ordinance: Petitioners averred that Ordinance No. 7125 remained in force and that Ordinance No. 7566, enacted on September 10, 1974, imposed a two percent tax on commercial real properties, which together with the one percent Special Education Fund tax produced the same three percent total, confirming the legislative intent to allow a two-percent basic realty tax.
• Confirmation by the Real Property Tax Code: Petitioners relied on section 39(2) of Presidential Decree No. 464, which authorized city councils to impose a realty tax of up to two percent, as confirming the prior intention of the lawmaker to fix two percent as the realty tax proper.

• Lack of Express Authorization: Respondent Esso Philippines, Inc. contended that the additional one-half percent tax was void because it was authorized neither by the Revised Charter of Manila nor by any law, the power of a municipal corporation to levy a tax requiring express grant and not mere inference.
• Misconstruction of the Special Education Fund Law: Respondent argued that the three-percent maximum in the Special Education Fund Law referred only to a contingency where the application of the additional one percent realty tax would raise the total realty tax above three percent, and that it could not be construed as authority to impose an additional realty tax beyond the one percent fixed by that law.

• Validity of the Additional Realty Tax: Whether Ordinance No. 7125, imposing an additional one-half percent realty tax, was valid for the period from the third quarter of 1972 to the second quarter of 1974, notwithstanding the absence of an express statutory grant authorizing that specific additional rate.

• Validity of the Additional Realty Tax: Yes. The additional one-half percent realty tax was validly imposed, the three-percent maximum ceiling prescribed by section 4 of the Special Education Fund Law having impliedly authorized the augmentation of the pre-existing one and one-half percent charter rate by an additional one-half percent, pursuant to the doctrine of implications in statutory construction.

• Validity of the Additional Realty Tax: The doctrine of implications provides that what is plainly implied in the language of a statute is as much a part of it as what is expressed. The Revised Charter of Manila fixed the realty tax at one and one-half percent, while the later Special Education Fund Law definitively fixed three percent as the maximum total real property tax, of which one percent would accrue to the Special Education Fund. The unavoidable inference was that the later law authorized an additional one-half percent realty tax, since the contingency posited by the taxpayer — where the one percent education fund levy would push the total above three percent — could not arise in the City of Manila, where the pre-existing rate was only one and one-half percent. Inferentially, the law fixed at two percent the realty tax accruing to a city or municipality. This inference was confirmed by the Real Property Tax Code, Presidential Decree No. 464, which specifically fixed the basic real property tax at two percent and reaffirmed the one percent Special Education Fund levy. While the power of a municipal corporation to levy a tax must be expressly granted and not merely inferred, what was disputed here was not the power to impose a realty tax — which was undisputed — but the amount thereof, whether one and one-half percent or two percent. Section 4 of the Special Education Fund Law, as confirmed by the Real Property Tax Code, in prescribing a total realty tax of three percent, thus impliedly authorized the augmentation by one-half percent of the pre-existing one and one-half percent realty tax.

• Doctrine of Implications in Statutory Construction — That which is plainly implied in the language of a statute is as much a part of it as that which is expressed. The Court applied this doctrine to hold that the three-percent maximum ceiling on total real property tax prescribed by the Special Education Fund Law impliedly authorized municipal corporations to impose an additional one-half percent realty tax to fill the gap between the pre-existing one and one-half percent charter rate plus the one percent education fund levy and the statutory maximum. The doctrine was invoked notwithstanding the general rule that the taxing power of a municipal corporation must be expressly granted, because the power to impose a realty tax was not controverted; only the permissible amount was in dispute.

• "We hold that the doctrine of implications in statutory construction sustains the City of Manila's contention that the additional one-half percent realty tax is sanctioned by the provision in section 4 of the Special Education Fund Law that 'the total real property tax shall not exceed a maximum of three per centum.'" — This passage states the ratio decidendi, identifying the doctrine of implications as the basis for upholding the additional one-half percent realty tax.

• "It is true, as contended by the taxpayer, that the power of a municipal corporation to levy a tax should be expressly granted and should not be merely inferred. But in this case, the power to impose a realty tax is not controverted. What is disputed is the amount thereof, whether one and one-half percent only or two percent." — This passage reconciles the general rule requiring express grant of taxing power with the specific holding, clarifying that the dispute concerned the rate, not the existence, of the taxing authority.

• "The unavoidable inference is that the later law authorized the imposition of an additional one-half percent realty tax since the contingency referred to by the complaining taxpayer would not arise in the City of Manila." — This passage explains why the taxpayer's interpretation of the three-percent ceiling as a mere contingency provision was rejected, reinforcing the Court's application of the doctrine of implications.

• In re McCulloch Dick, 38 Phil. 41 — Cited as the source of the doctrine of implications, specifically the formulation that "that which is plainly implied in the language of a statute is as much a part of it as that which is expressed." The Court followed this doctrine as the controlling principle of statutory construction in upholding the ordinance.

• Section 64, Republic Act No. 409 (Revised Charter of Manila) — Fixed the annual realty tax at one and one-half percent. This was the pre-existing rate that the additional one-half percent augmented to reach the two-percent basic realty tax impliedly authorized by the Special Education Fund Law.
• Section 4, Republic Act No. 5447 (Special Education Fund Law) — Imposed an additional one percent real property tax for the Special Education Fund and provided that "the total real property tax shall not exceed a maximum of three per centum." The three-percent ceiling was construed as impliedly authorizing the additional one-half percent realty tax.
• Section 39(2), Presidential Decree No. 464 (Real Property Tax Code) — Authorized city councils to impose a realty tax of not less than one-half percent but not more than two percent of the assessed value of real property. This provision confirmed the prior legislative intent to fix two percent as the basic realty tax.
• Section 41, Presidential Decree No. 464 (Real Property Tax Code) — Reaffirmed the one percent tax on real property for the Special Education Fund in addition to the basic two percent realty tax, confirming the three-percent total.
• Section 2, Republic Act No. 2264 — Referenced in connection with the principle that what was disputed was the amount of the realty tax, not the power to impose it.

Barredo (Chairman), Concepcion Jr., Fernandez, and De Castro, JJ., concurred. Justice Abad Santos was on leave. Justice Fernandez was designated to sit in the Second Division.