Ferrer vs. Bautista

Local government units may impose a Socialized Housing Tax pursuant to Section 43 of R.A. No. 7279 as a valid exercise of police power, provided the classification is reasonable and the tax is not confiscatory; however, garbage fees must be based on factors reasonably related to waste generation and cost of service, and penalty provisions must comply with statutory limitations under the Local Government Code.

Quezon City enacted Ordinance No. SP-2095, S-2011, imposing a 0.5% special assessment on land exceeding Php100,000.00 in assessed value to fund socialized housing programs, and Ordinance No. SP-2235, S-2013, imposing annual garbage fees based on land or floor area. Jose J. Ferrer, Jr., a registered co-owner of a 371-square-meter residential property in Quezon City covered by Transfer Certificate of Title No. 216288, paid real property tax inclusive of the garbage fee on January 7, 2014, and subsequently challenged both ordinances as unconstitutional and illegal.

• Ordinance No. SP-2095, S-2011 (Socialized Housing Tax) was enacted on October 17, 2011, imposing a special assessment equivalent to 0.5% on the assessed value of land in excess of Php100,000.00, to be collected by the City Treasurer and accrue to the Socialized Housing Programs of Quezon City for five years.
• The SHT proceeds are utilized for land purchase/land banking, improvement of housing facilities, land development, construction of core houses, and financing of public-private partnerships with the National Housing Authority.
• Section 7 of Ordinance No. SP-2095 provides for a tax credit equivalent to 20% of the total special assessment paid for each year from the 6th to the 10th year of payment, available only to taxpayers in good standing after five years of continued payment, and non-transferable to subsequent owners.
• Ordinance No. SP-2235, S-2013 was enacted on December 16, 2013, and approved by the City Mayor on December 26, 2013, imposing annual garbage fees based on land area for lots (Php100.00 to Php500.00) and floor area for condominium units and socialized housing projects (Php25.00 to Php200.00).
• The garbage fee accrues on January 1 and is paid simultaneously with real property tax, with a penalty of 25% of the fee due plus 2% monthly interest for non-payment.
• Petitioner Jose J. Ferrer, Jr. is a registered co-owner of a 371-square-meter residential property in Quezon City covered by Transfer Certificate of Title No. 216288.
• On January 7, 2014, petitioner paid his realty tax which already included the garbage fee in the sum of Php100.00.
• A separate case entitled Alliance of Quezon City Homeowners, Inc., et al. v. Hon. Herbert Bautista, et al., docketed as Civil Case No. Q-12-7-820, was filed on February 22, 2012, in the Quezon City Regional Trial Court assailing the legality of Ordinance No. SP-2095.
• Respondents did not dispute that Quezon City had revenue collections of Php13.69 billion in 2012.

• The SHT and garbage fee are being imposed to pay for basic essential public services (housing for informal settlers and garbage collection) that should be covered by existing revenues from property taxes, business taxes, and the Internal Revenue Allotment, not by new impositions.
• The ordinances violate Section 5, Article X of the 1987 Constitution as they are not justified by financial necessity and constitute an arbitrary exercise of the power to create sources of revenue.
• The SHT is an unauthorized increase in real property tax in violation of Sections 232 and 233 of the LGC, which require that real property tax be based on assessed value subject to general revision only every three years.
• The SHT violates the equal protection clause by favoring informal settlers who occupy property not their own and pay no taxes over law-abiding real property owners, constituting class legislation.
• The SHT is a forced charity and a penalty imposed on property owners for the government's failure to protect them from informal settlers.
• The garbage fee constitutes double taxation because garbage collection is a basic essential public service already funded by general taxes.
• The garbage fee is actually a tax, not a regulatory fee, and violates equal protection due to discriminatory classification based on land area versus floor area without relation to actual waste generation.
• The garbage fee is inconsistent with R.A. No. 9003 because it emphasizes only collection and payment without regard for segregation, composting, and recycling, and skips the mandated active involvement of barangays.
• The penalty clause in the garbage fee ordinance violates Section 168 of the LGC which limits total interest to 36 months.
• The garbage fee was collected on January 7, 2014, even though the required publication of its approval had not yet elapsed.

• The petition for certiorari is improper because the Quezon City Council exercises legislative, not judicial or quasi-judicial functions, and the City Mayor, Treasurer, and Assessor exercise ministerial functions.
• Petitioner lacks locus standi because he failed to specifically allege ownership of property with assessed value exceeding Php100,000.00 for the SHT challenge, and did not specify his standing for the garbage fee challenge.
• The petition is dismissible on the ground of litis pendentia because of the pending RTC case filed by Alliance of Quezon City Homeowners, Inc. assailing the same SHT ordinance.
• Petitioner failed to exhaust administrative remedies under Section 187 of the LGC, which requires an appeal to the Secretary of Justice within 30 days from effectivity before filing a court action.
• Ordinances enjoy a presumption of constitutionality, and the burden of establishing invalidity rests heavily upon the challenger.
• The SHT is a valid exercise of police power pursuant to Section 43 of R.A. No. 7279 (UDHA) and the constitutional principle that the ownership and enjoyment of property bear a social function.
• The SHT does not violate equal protection because real property owners and informal settlers are distinct classes, and the ordinance applies equally to all property owners without discrimination.
• The SHT is not oppressive or confiscatory because it imposes a lower threshold (Php100,000) than the Php50,000 authorized by UDHA, and provides a tax credit mechanism.
• The garbage fee is a valid exercise of police power and a regulatory fee, not a tax, intended to defray costs of waste management.
• There is no double taxation because the garbage fee is imposed for a specific service distinct from the real property tax which is imposed on ownership.
• The classification in the garbage fee ordinance based on land and floor area is reasonable and equitable.
• Publication requirements were complied with; Ordinance SP-2095 took effect after publication, while Ordinance SP-2235 became effective upon approval as provided in the ordinance itself.

• Procedural Issues:
  • Whether the petition for certiorari is the proper remedy given that respondents exercise legislative and ministerial functions
  • Whether petitioner has legal standing (locus standi) to file the petition
  • Whether the petition should be dismissed on the ground of litis pendentia due to a pending RTC case
  • Whether petitioner failed to exhaust administrative remedies under Section 187 of the LGC
• Substantive Issues:
  • Whether Ordinance No. SP-2095 (Socialized Housing Tax) is constitutional and legally valid
  • Whether Ordinance No. SP-2235 (Garbage Fee) is constitutional and legally valid

• Procedural:
  • The petition is treated as one for prohibition and declaratory relief due to its essence of seeking to prevent implementation of the ordinances; direct resort to the Supreme Court is allowed given the transcendental importance of the issues affecting all Quezon City property owners and the need for guidance of other LGUs.
  • Petitioner has legal standing as a real party-in-interest being a registered co-owner of property who paid the challenged fees and stands to be directly injured by their enforcement.
  • The ground of litis pendentia is untenable because there is no substantial identity of parties or causes of action between this petition and the pending RTC case; petitioner is not a party in the RTC case and the reliefs sought may differ.
  • The requirement to exhaust administrative remedies is dispensed with because the petition raises pure questions of law regarding constitutionality and involves transcendental importance.
• Substantive:
  • Ordinance No. SP-2095 is SUSTAINED as constitutional and legal. It is a valid exercise of police power through taxation pursuant to Section 43 of R.A. No. 7279. The classification between property owners (who are taxed) and informal settlers (who benefit) is reasonable and germane to the purpose of socialized housing. The tax is not confiscatory as it imposes a lower rate and higher threshold than authorized by law, and provides tax credits to dutiful taxpayers.
  • Ordinance No. SP-2235 is DECLARED UNCONSTITUTIONAL AND ILLEGAL. It violates the equal protection clause because the classification based on land area or floor area is not germane to the purpose of garbage collection and does not reflect actual waste generation, resulting in unjust and inequitable rates. It also violates Section 168 of the LGC because the penalty clause lacks the required limitation that total interest shall not exceed 36 months. Furthermore, under R.A. No. 9003, cities are authorized to impose fees only for non-recyclable and special wastes, not for all garbage, and barangays are responsible for collection of biodegradable wastes.

• Transcendental Importance Doctrine — The Supreme Court may relax procedural rules, including the doctrine of hierarchy of courts and exhaustion of administrative remedies, when the case involves issues of transcendental importance affecting the public interest and requiring immediate resolution.
• Strictissimi Juris in Local Taxation — Local government units have no inherent power to taxation; such power is delegated by Congress and must be construed strictly against the LGU. Any doubt or ambiguity arising from the terms granting taxing power must be resolved against the municipality.
• Police Power Through Taxation — Taxation may be used as an implement of the state's police power to promote general welfare, provided the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals.
• Requisites for Valid Classification — For a classification to be valid under the equal protection clause, it must: (1) rest on substantial distinctions; (2) be germane to the purpose of the law; (3) not be limited to existing conditions only; and (4) apply equally to all members of the same class.
• Distinction Between Tax and Fee — If the generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; if regulation is the primary purpose, the fact that revenue is incidentally obtained does not make the imposition a tax. A regulatory fee must not produce revenue in excess of the cost of regulation.
• Tests for Validity of Ordinances — An ordinance must pass formal tests (enacted within corporate powers, proper procedure) and substantive tests (not contrary to Constitution or statutes, not unfair or oppressive, not discriminatory, consistent with public policy).

• "The judicial policy is that this Court will entertain direct resort to it when the redress sought cannot be obtained in the proper courts or when exceptional and compelling circumstances warrant availment of a remedy within and calling for the exercise of Our primary jurisdiction."
• "LGUs must be reminded that they merely form part of the whole; that the policy of ensuring the autonomy of local governments was never intended by the drafters of the 1987 Constitution to create an imperium in imperio and install an intra-sovereign political subdivision independent of a single sovereign state."
• "It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of taxation. The charter or statute must plainly show an intent to confer that power or the municipality, cannot assume it. And the power when granted is to be construed in strictissimi juris."
• "Police power proceeds from the principle that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the right of the community."
• "Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed."
• "For the purpose of garbage collection, there is, in fact, no substantial distinction between an occupant of a lot, on one hand, and an occupant of a unit in a condominium, socialized housing project or apartment, on the other hand."

• Social Justice Society (SJS) Officers v. Lim — Cited for the doctrine that transcendental importance of issues warrants relaxation of procedural defects and taking primary jurisdiction over the petition.
• Drilon v. Lim — Cited for the ruling that Section 187 of the LGC (procedure for approval and effectivity of tax ordinances) is mandatory.
• Victorias Milling Co., Inc. v. Municipality of Victorias — Cited for the presumption of validity of ordinances and the rule that factors relevant to reasonableness inquiry include municipal conditions and nature of business subject to imposition.
• Manila Race Horse Trainers Assn., Inc. v. De La Fuente — Cited for the principle that an ordinance applies equally to all real property owners without discrimination.
• Smart Communications, Inc. v. Municipality of Malvar, Batangas — Cited for the distinction between a tax (revenue generation primary) and a regulatory fee (regulation primary).
• City of Manila v. Hon. Laguio, Jr. — Cited for the requirements of lawful subject and lawful method in the exercise of police power.
• Batangas CATV, Inc. v. Court of Appeals — Cited for the principle that municipal ordinances are subordinate to state laws and LGUs are mere agents of the national government.
• National Power Corp. v. City of Cabanatuan — Cited for the constitutional basis of LGU taxing powers under Article X, Section 5 and the shift toward local autonomy.
• Pelizloy Realty Corporation v. Province of Benguet — Cited for the rule that municipal corporations have no inherent power of taxation and must be construed strictissimi juris.

• 1987 Constitution, Article X, Section 5 — Grants LGUs power to create sources of revenue and levy taxes subject to guidelines by Congress.
• 1987 Constitution, Article XII, Section 6 — Provides that the use of property bears a social function.
• 1987 Constitution, Article II, Section 9 — Social justice principle.
• 1987 Constitution, Article XIII, Sections 1 and 2 — Social justice and property regulation provisions.
• R.A. No. 7160 (Local Government Code of 1991), Section 130 — Fundamental principles governing taxing powers (uniformity, equity, public purpose, not confiscatory).
• R.A. No. 7160, Section 133 — Common limitations on taxing powers.
• R.A. No. 7160, Section 151 — Scope of taxing powers of cities.
• R.A. No. 7160, Section 168 — Limitation on surcharges and penalties (not exceeding 25% surcharge and 2% monthly interest, total not exceeding 36 months).
• R.A. No. 7160, Section 186 — Power to levy other taxes, fees, or charges.
• R.A. No. 7160, Section 187 — Procedure for approval and effectivity of tax ordinances; mandatory public hearings.
• R.A. No. 7279 (Urban Development and Housing Act of 1992), Section 43 — Authorizes LGUs to impose Socialized Housing Tax of 0.5% on assessed value of lands exceeding Php50,000.
• R.A. No. 9003 (Ecological Solid Waste Management Act of 2000), Sections 10, 20, 46, 47 — Provisions on segregation at source, mandatory waste diversion, SWM Fund, and authority to collect fees based on type/volume of waste and distance.