City of Naga vs. Agna

A municipal ordinance that changes or repeals an existing municipal license tax takes effect in the next succeeding year after the year of its approval pursuant to Section 2309 of the Revised Administrative Code, while Section 2 of Republic Act No. 2264 (Local Autonomy Act) governs only the effectivity of ordinances creating an entirely new tax. The two provisions are in pari materia and can be reconciled by applying each to the class of ordinance it specifically addresses.

The City of Naga, through its Municipal Board, enacted local ordinances imposing and amending sales taxes on businesses operating within its jurisdiction. The City's taxing authority derived from multiple sources: Republic Act No. 305 (the Charter of the City of Naga), Republic Act No. 2264 (the Local Autonomy Act), and the Revised Administrative Code, each containing provisions on when tax ordinances take effect. Private respondents were merchants in Naga City subject to the local sales tax under Ordinance No. 4, which prescribed a graduated tax on quarterly gross sales.

On June 15, 1970, the Municipal Board of the City of Naga enacted Ordinance No. 360, entitled "An ordinance repealing Ordinance No. 4, as amended, imposing a sales tax on the quarterly sales or receipts on all businesses in the City of Naga." The ordinance changed the graduated tax on quarterly gross sales of merchants prescribed in Section 3 of Ordinance No. 4 to a percentage tax on gross sales. It was transmitted to the City Mayor for approval or veto on June 25, 1970, and was duly posted in designated places by the Secretary of the Municipal Board. The City Mayor did not act on the ordinance within ten days of receipt, so it was deemed approved on July 6, 1970 pursuant to Section 14 of Republic Act No. 305 (the Charter of the City of Naga). The ordinance itself provided that it shall take effect upon its approval.

Pursuant to Ordinance No. 360, private respondents Catalino Agna, Felipe Agna, and Salud Velasco paid taxes on their gross sales for the quarter from July 1, 1970 to September 30, 1970. Catalino Agna paid P1,805.17 under Official Receipt No. 1826591; Felipe Agna paid P625.00 under Official Receipt No. 1826594; and Salud Velasco paid P129.81 under Official Receipt No. 1820339. On February 13, 1971, the private respondents filed a claim for refund with the City Treasurer, seeking the difference between what they paid under Ordinance No. 360 and what they would have paid under the prior Ordinance No. 4—namely P1,555.17 for Catalino Agna, P560.00 for Felipe Agna, and P127.81 for Salud Velasco—together with interest from the date of payment. They alleged that under existing law, specifically Section 2309 of the Revised Administrative Code, Ordinance No. 360 did not take effect in 1970, the year of its approval, but in the next succeeding year, 1971, and that the taxes collected for the third quarter of 1970 were therefore illegal and refundable.

The City Treasurer denied the claim for refund. Private respondents then filed a complaint with the Court of First Instance of Naga (Civil Case No. 7084), seeking a declaration that Ordinance No. 360 was effective only in 1971; that Sections 4, 6, and 8 of the ordinance were null and void as unjust, oppressive, and arbitrary; and that petitioners be required to refund the sums claimed with interest, plus attorney's fees of P1,000.00 and costs. They also prayed for an injunction against enforcement of the ordinance. Petitioners, in their answer, countered that the payments were voluntary, that the ordinance was duly published, and that under Section 14 of Republic Act No. 305 the ordinance took effect ten days after passage. They also raised estoppel, lack of cause of action, and improper party defenses, and counterclaimed for P20,000.00 in exemplary damages.

The parties stipulated on the facts at the pre-trial and trial. On October 9, 1971, the respondent Judge rendered judgment holding that Ordinance No. 360 was enforceable only in 1971 and ordering petitioners to reimburse the private respondents the sums of P1,555.17 to Catalino Agna, P560.00 to Felipe Agna, and P127.81 to Salud Velasco, with corresponding interest from the filing of the complaint until reimbursement, plus P500.00 as attorney's fees and costs. Petitioners elevated the case to the Supreme Court.

• Effectivity under the City Charter: Petitioners argued that under Section 14 of Republic Act No. 305 (the Charter of the City of Naga), an ordinance takes effect on the tenth day following its passage unless otherwise stated. Since Ordinance No. 360 was enacted on June 15, 1970 and deemed approved on July 6, 1970 (after the Mayor failed to act within ten days of receipt on June 25, 1970), it took effect on July 6, 1970—the date of deemed approval—because the ordinance itself provided it shall take effect upon approval.
• Effectivity under the Local Autonomy Act: Petitioners alternatively contended that under Section 2 of Republic Act No. 2264 (Local Autropy Act), a tax ordinance goes into effect on the fifteenth day after its passage unless the ordinance provides otherwise. Under this provision, Ordinance No. 360 could have taken effect on June 30, 1970, or on July 6, 1970, the date of deemed approval. Petitioners maintained that Section 2 of Republic Act No. 2264, being a later law specifically referring to tax ordinances, superseded Section 14 of Republic Act No. 305 on the matter of effectivity.
• Voluntary Payment and Estoppel: Petitioners claimed that private respondents were not compelled but voluntarily paid the taxes under Ordinance No. 360, and that they were estopped from questioning the validity of the ordinance.
• Procedural Defenses: Petitioners raised that private respondents had no cause of action, that the complaint did not allege facts sufficient to justify a writ of preliminary injunction, that the refund claim was untenable, and that the City Mayor and City Treasurer were not proper parties in interest.

• Effectivity under the Revised Administrative Code: Respondents contended that Ordinance No. 360 became effective and enforceable only in 1971, the year following its approval, invoking Section 2309 of the Revised Administrative Code, which provides that a municipal license tax already in existence shall be subject to change only by ordinance enacted prior to the 15th day of December of any year, effective in the next succeeding year.
• Nature of the Ordinance as a Change to an Existing Tax: Respondents argued that Ordinance No. 360 changed the existing graduated sales tax on gross sales prescribed in Ordinance No. 4 to a percentage tax, and therefore fell within the first clause of Section 2309, requiring it to take effect in the next succeeding year after the year of its approval.

• Reconcilability of Statutory Provisions: Whether Section 2309 of the Revised Administrative Code and Section 2 of Republic Act No. 2264 (Local Autonomy Act) are in irreconcilable conflict regarding the effectivity of municipal tax ordinances.
• Effectivity of Ordinance No. 360: Whether Ordinance No. 360, which changed an existing municipal license tax, took effect in the year of its approval (1970) or in the year following its approval (1971).

• Reconcilability of Statutory Provisions: No. The two provisions are in pari materia and can be reconciled: Section 2309 governs ordinances changing an existing municipal license tax, while Section 2 of Republic Act No. 2264 governs ordinances creating an entirely new tax.
• Effectivity of Ordinance No. 360: No, it did not take effect in 1970. Ordinance No. 360, being one that changed an existing municipal license tax, fell under the first clause of Section 2309 of the Revised Administrative Code and took effect only in 1971, the year following its approval. Taxes collected in 1970 were therefore illegal and refundable.

• Reconcilability of Statutory Provisions: Section 2309 of the Revised Administrative Code distinguishes between two types of municipal ordinances: (1) one that changes a municipal license tax already in existence, which takes effect in the next succeeding year, and (2) one that creates an entirely new tax, which may be effective at the beginning of any subsequent quarter. Section 2 of Republic Act No. 2264, by contrast, refers merely to a "tax ordinance" without qualification and provides that it goes into effect on the fifteenth day after passage unless the ordinance provides otherwise. Republic Act No. 2264 contains no express repeal of Section 2309; its Section 9 merely repeals acts inconsistent with its provisions. Under established principles of statutory construction, a statute will not be construed as repealing prior acts on the same subject absent express words of repeal or irreconcilable repugnancy. The two provisions relate to the same subject matter—enactment and effectivity of tax ordinances—and are therefore in pari materia, to be construed together so that effect may be given to every provision of each. The apparent conflict is resolved by applying Section 2309's first clause to ordinances changing an existing tax and Section 2 of Republic Act No. 2264 to ordinances creating an entirely new tax.

• Effectivity of Ordinance No. 360: Ordinance No. 360 changed the graduated sales tax on gross sales of dealers of merchandise and sari-sari merchants prescribed in Section 3 of Ordinance No. 4 to a percentage tax on gross sales. This squarely fell within the first clause of Section 2309, which requires that an ordinance changing a municipal license tax already in existence take effect in the next succeeding year. The evident purpose of this rule is to enable taxpayers to adjust to the new charge or burden. Accordingly, Ordinance No. 360 was effective and enforceable only in 1971, and the taxes collected from private respondents for the quarter July 1 to September 30, 1970 were illegally collected and must be refunded, together with interest from the filing of the complaint until reimbursement.

• Statutes in Pari Materia — Statutes relating to the same person or thing, or to the same class of persons or things, or having the same purpose or object, are in pari materia and should be construed together. Later statutes are deemed supplementary or complementary to earlier enactments, and the legislature is presumed to have enacted the new provision with reference to existing legislation on the same subject. When the new and old provisions cannot be reconciled, the former prevails as the later expression of legislative will. The Court applied this doctrine to reconcile Section 2309 of the Revised Administrative Code and Section 2 of Republic Act No. 2264, holding that both can stand together, each governing a distinct class of tax ordinance.

• Repeal by Implication — A statute will not be construed as repealing prior acts on the same subject in the absence of express words to that effect unless there is an irreconcilable repugnancy between them, or unless the new law is evidently intended to supersede all prior acts on the matter and to comprise itself the sole and complete system of legislation on that subject. The Court found that Republic Act No. 2264's general repealing clause (Section 9) did not expressly or impliedly repeal Section 2309, as the two provisions could be harmonized.

• Effectivity of Ordinances Changing Existing Municipal License Taxes — Under Section 2309 of the Revised Administrative Code, a municipal ordinance changing a municipal license tax already in existence takes effect in the next succeeding year after the year of its approval, the purpose being to enable taxpayers to adjust to the new charge. An ordinance creating an entirely new tax, however, may take effect at the beginning of any subsequent quarter.

• "Actually we do not see any conflict between Section 2309 of the Revised Administrative Code and Section 2 of the Republic Act No. 2264 (Local Autonomy Act). The conflict, if any, is more apparent than real. It is one that is not incapable of reconciliation. And the two provisions can be reconciled by applying the first clause of Section 2309 of the Revised Administrative Code when the problem refers to the effectivity of an ordinance changing or repealing a municipal license tax already in existence. But where the problem refers to effectivity of an ordinance creating an entirely new tax, let Section 2 of Republic Act No. 2264 (Local Autonomy Act) govern." — This passage articulates the ratio decidendi: the reconciliation of the two statutory provisions by classifying tax ordinances according to whether they change an existing tax or create a new one.

• "A statute will not be construed as repealing prior acts on the same subject in the absence of words to that effect unless there is an irreconcilable repugnancy between them, or unless the new law is evidently intended to supersede all prior acts on the matter in hand and to comprise itself the sole and complete system of legislation on that subject." — This is the canonical formulation of the doctrine against implied repeal relied upon by the Court, drawn from Black on Interpretation of Laws.

• "The evident purpose of the provision is to enable the taxpayers to adjust themselves to the new charge or burden brought about by the new ordinance." — This explains the legislative purpose behind Section 2309's requirement that ordinances changing existing taxes take effect in the following year.

No controlling judicial precedents were cited by the Court. The decision relied primarily on treatises: Black on Interpretation of Laws and Sutherland Statutory Construction, for principles of statutory construction, pari materia, and repeal by implication.

• Section 2309, Revised Administrative Code — Provides that a municipal license tax already in existence shall be subject to change only by ordinance enacted prior to the 15th day of December of any year, effective in the next succeeding year, while an entirely new tax may be created by ordinance enacted during a quarter year, effective at the beginning of any subsequent quarter. Applied to Ordinance No. 360, which changed an existing graduated sales tax to a percentage tax, requiring it to take effect in 1971.
• Section 2, Republic Act No. 2264 (Local Autonomy Act) — Provides that a tax ordinance shall go into effect on the fifteenth day after its passage unless the ordinance provides otherwise, with the Secretary of Finance's authority to suspend effectivity within 120 days. Held applicable only to ordinances creating entirely new taxes, not to those changing existing municipal license taxes.
• Section 14, Republic Act No. 305 (Charter of the City of Naga) — Provides that each approved ordinance shall take effect on the tenth day following its passage unless otherwise stated, and that an ordinance is deemed approved if the Mayor does not return it with veto or approval within ten days of receipt. Used to determine that Ordinance No. 360 was deemed approved on July 6, 1970, but held not the governing provision on effectivity of tax ordinances in light of Section 2309.
• Section 9, Republic Act No. 2264 (Local Autonomy Act) — General repealing clause repealing all acts inconsistent with the Act. Held not to constitute an express repeal of Section 2309 of the Revised Administrative Code.

Teehankee (Chairman), Makasiar, Esguerra, and Muñoz Palma, JJ., concurred.