Ongsuco vs. Malones

A local tax ordinance or revenue measure levying taxes, fees, or charges is void if enacted without a prior public hearing conducted in strict accordance with the procedural requirements of the Local Government Code and its Implementing Rules and Regulations, and a party challenging the validity of such ordinance on purely legal grounds need not exhaust administrative remedies before seeking judicial intervention.

Petitioners Evelyn Ongsuco and Antonia Salaya were stallholders at the Maasin Public Market in Iloilo, which had been newly renovated. The Municipality of Maasin, through its Sangguniang Bayan and Municipal Mayor Mariano Malones, sought to impose increased stall rentals and "goodwill fees" to generate revenue for repaying the loan obtained for the market renovation. The legal framework governing the enactment of local tax ordinances and revenue measures is found in Sections 186 and 187 of the Local Government Code of 1991 and Section 277 of its Implementing Rules and Regulations, which mandate prior public hearings conducted according to specific procedural requirements before any ordinance levying taxes, fees, or charges may be validly enacted.

Petitioners Evelyn Ongsuco and Antonia Salaya were stallholders at the Maasin Public Market in the Municipality of Maasin, Iloilo, which had undergone renovation. Prior to the renovation, petitioners had been paying monthly rentals of ₱45.00 for their stalls. On August 6, 1998, the Office of the Municipal Mayor sent a letter to the stallholders informing them of a meeting scheduled for August 11, 1998 to discuss revenue measures, including increased stall rentals and the imposition of "goodwill fees" in the amount of ₱20,000.00 payable every month. The meeting was held as scheduled, only five days after the notice was sent.

On August 17, 1998, the Sangguniang Bayan of Maasin approved Municipal Ordinance No. 98-01, entitled "The Municipal Revised Revenue Code." The ordinance contained provisions for increased stall rentals and the imposition of goodwill fees of ₱20,000.00 and ₱15,000.00 for stalls on the first and second floors of the municipal public market, respectively. The same ordinance authorized the respondent mayor to enter into lease contracts over the market stalls and incorporated a standard contract of lease for the stallholders. On September 18, 1998, the Sangguniang Bayan approved Resolution No. 68, series of 1998, seeking to declare the August 11, 1998 meeting inoperative as a public hearing because the majority of affected stallholders had not agreed to the goodwill fee measure. However, respondent vetoed this resolution on September 30, 1998, and the Sangguniang Bayan did not override the veto. Another purported public hearing was held on January 22, 1999, after the ordinance had already been enacted and approved.

On June 9, 1999, respondent wrote to petitioners informing them that they were occupying stalls in the newly renovated market without any lease contract, as a consequence of which the stalls were considered vacant and open to qualified applicants. Petitioners, together with other similarly situated stallholders, filed a Petition for Prohibition/Mandamus with a prayer for a temporary restraining order and/or writ of preliminary injunction before the RTC of Iloilo City on June 25, 1999, docketed as Civil Case No. 25843. Petitioners alleged that they were bona fide occupants who had religiously paid their monthly rentals and that the ordinance was invalid for lack of a properly conducted public hearing, as the notice sent on August 6, 1998 for the August 11, 1998 meeting violated the ten-day notice requirement under the Implementing Rules and Regulations of the Local Government Code.

While Civil Case No. 25843 was pending, respondent filed an ejectment case against petitioner Ongsuco before the 12th Municipal Circuit Trial Court of Cabatuan-Maasin, docketed as MCTC Civil Case No. 257. The MCTC ruled in favor of the Municipality on June 18, 2002, ordering Ongsuco to vacate Stalls No. 1-03 and 1-04 and to pay monthly rentals of ₱350.00 per stall from October 2001. The RTC of Maasin, Branch 36, affirmed this decision on April 29, 2003, and a writ of execution was issued on December 8, 2003. Meanwhile, the RTC dismissed Civil Case No. 25843 on July 15, 2003, finding that mandamus and prohibition did not lie and that petitioners had failed to exhaust administrative remedies. The Court of Appeals affirmed this dismissal on November 28, 2006, holding that the goodwill fee was a revenue measure, that prohibition was improper because the mayor's acts did not involve judicial or quasi-judicial functions, and that no proof was presented that petitioners had appealed to the Secretary of Justice as required under Section 187 of the Local Government Code.

• Mandatory Public Hearing: Petitioners argued that a public hearing was mandatory under Section 186 of the Local Government Code before the enactment of any ordinance levying taxes, fees, or charges, and that Municipal Ordinance No. 98-01 was invalid because the meetings held on August 11, 1998 and January 22, 1999 could not be considered valid public hearings, the first having been conducted only five days after notice in violation of the ten-day requirement under Article 277(b)(3) of the IRR, and the second having been held after the ordinance was already enacted.
• Exhaustion of Administrative Remedies: Petitioners claimed that they had attempted to appeal the enactment of Municipal Ordinance No. 98-01 before the Department of Justice but that their appeal was not acted upon due to their failure to attach a copy of the ordinance, which they had requested from the Municipal Treasurer but never received.
• Relief Sought: Petitioners prayed that respondent be enjoined from imposing the goodwill fees pending determination of their reasonableness and from barring petitioners from occupying their stalls and continuing their businesses.

• Nature of the Ordinance: Respondent maintained that Municipal Ordinance No. 98-01 was not per se a tax or revenue measure but involved the operation and management of an economic enterprise of the municipality, and therefore no public hearing was mandatory for its enactment.
• Validity of Public Hearings: Respondent insisted that public hearings were held on August 11, 1998 and January 22, 1999, satisfying any public hearing requirement.
• Illegal Occupancy: Respondent averred that petitioners were illegally occupying the market stalls and that the only way to legitimize their occupancy was to execute lease contracts with the municipality, admitting that petitioners had paid ₱45.00 per month before renovation but asserting that no rentals had been paid or collected since renovation began.
• Damages: Respondent sought moral damages of not less than ₱500,000.00 for social humiliation and hurt feelings caused by the filing of the case, and an order for petitioners to vacate the stalls and pay reasonable rentals.

• Exhaustion of Administrative Remedies: Whether petitioners exhausted administrative remedies before filing the case in court.
• Applicability of Exhaustion Doctrine: Whether the doctrine of exhaustion of administrative remedies is applicable in this case.
• Grave Abuse of Discretion: Whether respondent, as Municipal Mayor of Maasin, committed grave abuse of discretion.
• Propriety of Remedy: Whether the petition for prohibition was the proper remedy, notwithstanding the lower courts' ruling that mandamus and prohibition did not lie.
• Validity of the Ordinance: Whether Municipal Ordinance No. 98-01 was valid and enforceable despite the absence of a public hearing conducted in accordance with the Implementing Rules and Regulations of the Local Government Code prior to its enactment.

• Exhaustion of Administrative Remedies: No. Petitioners were not required to exhaust administrative remedies because the sole issue was a pure question of law—whether the ordinance was valid without a properly conducted prior public hearing—which falls within the exclusive competence and jurisdiction of the courts, not administrative agencies.
• Applicability of Exhaustion Doctrine: No. The doctrine of exhaustion of administrative remedies does not apply where the issue raised is a purely legal question, as this constitutes a recognized exception to the general rule.
• Grave Abuse of Discretion: Yes, in effect. The enforcement of a void ordinance deprived petitioners of their means of livelihood, and respondent had no jurisdiction to order petitioners' stalls vacated on the basis of an ordinance that was void for lack of a valid public hearing.
• Propriety of Remedy: Yes. Prohibition was the proper remedy because petitioners sought to prevent respondent from implementing the ordinance, and respondent was performing a ministerial function in enforcing it, having no discretion to decline collection of the fees fixed by the ordinance.
• Validity of the Ordinance: No. Municipal Ordinance No. 98-01 was declared void for having been enacted without a public hearing conducted in accordance with Section 277(b)(3) of the IRR of the Local Government Code, which requires the initial public hearing to be held not earlier than ten days from the sending of notices.

• Exhaustion of Administrative Remedies: The general rule requires exhaustion of administrative remedies before judicial intervention, as this affords the administrative agency the opportunity to correct its own errors and promotes judicial economy. However, a recognized exception exists where the issue is a purely legal question within the competence and jurisdiction of the courts rather than the administrative agency. Here, the parties were not disputing any factual matter; the sole question was whether Municipal Ordinance No. 98-01 was valid and enforceable despite the absence of a public hearing held in accordance with the IRR. This is a pure question of law, over which the RTC had original jurisdiction pursuant to Section 5(2)(a), Article VIII of the Constitution, which recognizes the jurisdiction of lower courts over cases involving the constitutionality or validity of ordinances. The Court cited J.M. Tuason and Co., Inc. vs. Court of Appeals, Ynot vs. Intermediate Appellate Court, and Commissioner of Internal Revenue vs. Santos in affirming the RTC's jurisdiction to resolve questions of validity of local ordinances in the first instance.

• Applicability of Exhaustion Doctrine: Because the issue was purely legal, the rationale for the exhaustion doctrine—deferring to an administrative body of special competence—did not apply. The courts, not the Secretary of Justice, are the proper forum for resolving questions of law involving the interpretation and application of statutes and ordinances. The premature invocation of judicial intervention, fatal in ordinary cases, was not applicable here because no administrative process could resolve a pure question of law.

• Grave Abuse of Discretion: Respondent's enforcement of Municipal Ordinance No. 98-01, which was void for lack of a valid prior public hearing, could not confer jurisdiction to order petitioners' stalls vacated. The mayor's duty to enforce the ordinance under Section 444 of the Local Government Code presupposed a valid ordinance. Since the ordinance was void, respondent had no authority to deem the stalls vacant or to bar petitioners from occupying them, thereby depriving them of their means of livelihood without legal basis.

• Propriety of Remedy: The lower courts erred in dismissing the petition on the ground that prohibition and mandamus were improper. Petitioners' primary intention was to prevent respondent from implementing the ordinance—i.e., collecting goodwill fees and barring them from their stalls—which is in the nature of prohibition (commanding desistance), not mandamus (compelling performance). For a writ of prohibition, the requisites are that the impugned act must be that of a tribunal, corporation, board, officer, or person exercising judicial, quasi-judicial, or ministerial functions, and that there is no plain, speedy, and adequate remedy in the ordinary course of law. Respondent was performing a ministerial function in enforcing the ordinance, as the ordinance left him no discretion on whether to collect the fees or in what amounts. The ordinance enjoyed a presumption of validity, and the mayor had a duty under Section 444 of the Local Government Code to enforce it, but this duty was ministerial in nature. Given the urgency—petitioners' stalls had already been deemed vacant, threatening their livelihood—and the absence of any adequate administrative remedy, prohibition was proper.

• Validity of the Ordinance: Respondent's argument that goodwill fees and rentals were not revenue measures requiring a public hearing was rejected. Article 219 of the Local Government Code provides that LGUs may levy taxes, fees, or charges, and Article 221(g) defines "charges" as "pecuniary liability, as rents or fees against persons or property." Rentals and goodwill fees imposed for the occupancy of market stalls fall squarely within this definition. Section 186 of the Local Government Code mandates that an ordinance levying taxes, fees, or charges shall not be enacted without a prior public hearing. Section 277 of the IRR specifies the procedure: the initial public hearing shall be held not earlier than ten days from the sending of notices. Here, notices were sent on August 6, 1998, and the supposed public hearing was held on August 11, 1998—only five days later—in clear violation of the ten-day requirement. The Sangguniang Bayan's attempt to correct this defect through Resolution No. 68 was vetoed by respondent and never overridden. The subsequent "public hearing" on January 22, 1999 could not cure the defect because it was held after the ordinance had already been enacted on August 17, 1998, and Section 186 requires the public hearing to precede enactment. Accordingly, the ordinance was void and could not confer jurisdiction upon respondent to order the stalls vacated.

• Doctrine of Exhaustion of Administrative Remedies — Before seeking judicial intervention, a party must first avail of all administrative processes afforded, giving the administrative officer every opportunity to decide the matter within his or her jurisdiction. The doctrine is based on practical and legal reasons: lesser expense, speedier disposition, and comity and convenience toward administrative agencies. However, exceptions include when the issue is purely a legal question, when the administrative action is patently illegal, when there is estoppel, when irreparable injury would result, and when urgency of judicial intervention is indicated. In this case, the doctrine did not apply because the sole issue—the validity of the ordinance for lack of a proper public hearing—was a pure question of law within the exclusive competence of the courts.

• Distinction Between Prohibition and Mandamus — Prohibition is a remedy to command a tribunal, board, officer, or person to desist from further proceedings; mandamus is a remedy to compel the performance of a ministerial duty. The requisites for prohibition are: (1) the impugned act must be that of a tribunal, corporation, board, officer, or person, whether exercising judicial, quasi-judicial, or ministerial functions; and (2) there is no plain, speedy, and adequate remedy in the ordinary course of law. The Court applied this doctrine by holding that petitioners' prayer to prevent the mayor from enforcing the ordinance was in the nature of prohibition, not mandamus, and that the mayor's enforcement of the ordinance was a ministerial function.

• Ministerial vs. Quasi-Judicial Functions — A ministerial function is one performed in a prescribed manner without regard to the exercise of the officer's own judgment; a quasi-judicial function involves investigation of facts, holding hearings, and drawing conclusions of a judicial nature. The Court held that the mayor's enforcement of Municipal Ordinance No. 98-01 was ministerial, as the ordinance fixed the amounts of rentals and goodwill fees and left no discretion to the mayor or municipal treasurer on whether or how much to collect.

• Presumption of Validity of Ordinances — A municipal ordinance enjoys the presumption of validity unless declared otherwise, and the municipal mayor has the duty under Section 444 of the Local Government Code to enforce all laws and ordinances. However, this presumption does not save an ordinance that was enacted in violation of mandatory procedural requirements, such as the prior public hearing requirement under Section 186 of the Local Government Code and Section 277 of its IRR.

• "It is categorical, therefore, that a public hearing be held prior to the enactment of an ordinance levying taxes, fees, or charges; and that such public hearing be conducted as provided under Section 277 of the Implementing Rules and Regulations of the Local Government Code." — This passage states the ratio decidendi on the validity of the ordinance, establishing that the prior public hearing requirement is mandatory and procedural, and that non-compliance renders the ordinance void.

• "Since no public hearing had been duly conducted prior to the enactment of Municipal Ordinance No. 98-01, said ordinance is void and cannot be given any effect. Consequently, a void and ineffective ordinance could not have conferred upon respondent the jurisdiction to order petitioners' stalls at the municipal public market vacant." — This passage articulates the legal consequence of the procedural defect: a void ordinance confers no authority, and any action taken pursuant to it is likewise without legal basis.

• "The rule on the exhaustion of administrative remedies is intended to preclude a court from arrogating unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special competence. Thus, a case where the issue raised is a purely legal question, well within the competence; and the jurisdiction of the court and not the administrative agency, would clearly constitute an exception." — This passage defines the exception to the exhaustion doctrine for pure questions of law, a principle frequently cited in subsequent jurisprudence on administrative law.

• J.M. Tuason and Co., Inc. vs. Court of Appeals, 113 Phil. 673 (1961) — Cited as authority for the proposition that the RTC has jurisdiction to resolve questions of constitutionality and validity of laws, including local ordinances, in the first instance.
• Ynot vs. Intermediate Appellate Court, 232 Phil. 615 (1987) — Cited alongside Tuason for the same proposition regarding RTC jurisdiction over validity of ordinances.
• Commissioner of Internal Revenue vs. Santos, 343 Phil. 411 (1997) — Cited for the same proposition regarding RTC first-instance jurisdiction over questions of validity of laws and ordinances.
• National Irrigation Administration vs. Enciso, G.R. No. 142571, May 5, 2006 — Cited for the enumeration of exceptions to the doctrine of exhaustion of administrative remedies.
• Perez vs. Court of Appeals, G.R. No. L-80838, November 29, 1988 — Cited for the definition and requisites of a petition for prohibition.
• Rivera vs. Espiritu, 425 Phil. 169 (2002) — Cited for the requisites of a writ of prohibition.
• Destileria Limtuaco & Co. Inc. vs. Advertising Board of the Philippines, G.R. No. 164242, November 28, 2008 — Cited for the definition of ministerial function.

• Section 186, Local Government Code of 1991 — Empowers LGUs to levy taxes, fees, or charges, provided they are not unjust, excessive, oppressive, or confiscatory, and mandates that the ordinance levying such taxes, fees, or charges shall not be enacted without a prior public hearing. Applied as the statutory basis for declaring Municipal Ordinance No. 98-01 void for lack of a valid prior public hearing.
• Section 187, Local Government Code of 1991 — Prescribes the procedure for approval and effectivity of tax ordinances and revenue measures, including mandatory public hearings and the remedy of appeal to the Secretary of Justice within thirty days from effectivity. The lower courts relied on this provision to require exhaustion of administrative remedies; the Supreme Court held that this requirement did not apply because the issue was a pure question of law.
• Section 277, Implementing Rules and Regulations of the Local Government Code — Details the procedure for publication and public hearings for tax ordinances, requiring that the initial public hearing be held not earlier than ten days from the sending of notices, and prohibiting enactment of any tax ordinance or revenue measure in the absence of a duly conducted public hearing. Applied to find that the five-day notice period violated the ten-day requirement, rendering the ordinance void.
• Article 219, Local Government Code of 1991 — Provides that each LGU shall exercise its power to create its own sources of revenue and to levy taxes, fees, or charges, subject to the provisions of the Code. Applied to establish that goodwill fees and rentals fall within the scope of revenue measures.
• Article 221(g), Local Government Code of 1991 — Defines "charges" as "pecuniary liability, as rents or fees against persons or property." Applied to classify the goodwill fees and increased rentals imposed by Municipal Ordinance No. 98-01 as charges subject to the public hearing requirement.
• Section 444, Local Government Code of 1991 — Enumerates the powers, duties, and functions of the municipal mayor, including the duty to enforce all laws and ordinances and to ensure that all taxes and revenues are collected. Applied to characterize the mayor's enforcement of the ordinance as a ministerial function, while also establishing that a void ordinance confers no authority.
• Sections 2 and 3, Rule 65, Rules of Court — Define the circumstances under which petitions for prohibition and mandamus may be filed. Applied to determine that prohibition, not mandamus, was the proper remedy, as petitioners sought to command desistance from enforcing the ordinance.
• Section 5(2)(a), Article VIII, 1987 Constitution — Establishes the appellate jurisdiction of the Supreme Court and impliedly recognizes the original jurisdiction of lower courts over cases involving the constitutionality or validity of ordinances. Applied to support the RTC's jurisdiction over the pure question of law regarding the ordinance's validity.
• Section 55(c), Local Government Code of 1991 — Provides that the local chief executive may veto an ordinance only once and that the sanggunian may override the veto by a two-thirds vote. Noted in connection with respondent's veto of Resolution No. 68, which the Sangguniang Bayan did not override.

Leonardo A. Quisumbing (per Special Order No. 755, replacing Associate Justice Antonio Eduardo B. Nachura), Antonio T. Carpio (Chairperson), Diosdado M. Peralta, and Roberto A. Abad (per Special Order No. 753, replacing Associate Justice Presbitero J. Velasco, Jr.).