Villanueva vs. City of Iloilo

On January 15, 1960, the municipal board enacted Ordinance 11, Series of 1960, entitled "An Ordinance Imposing Municipal License Tax On Persons Engaged In The Business Of Operating Tenement Houses," pursuant to Republic Act No. 2264, the Local Autonomy Act.

The plaintiffs-appellees are Eusebio Villanueva, Remedios Sian Villanueva, Pio Sian Melliza, and Teresita S. Topacio, who own tenement houses (apartment buildings) in Iloilo City containing multiple apartments or "accessorias" rented to Filipino and Chinese merchants, with first floors used as stores and second floors as dwellings.

The plaintiffs have been paying real estate taxes on their properties under the Iloilo City Charter and fixed taxes as "real estate dealers" under Section 182 of the National Internal Revenue Code.

Under the challenged ordinance, the City collected P5,824.30 from the Villanueva spouses and P1,317.00 from the other plaintiffs for the years 1960-1964, imposing rates ranging from P5.00 to P30.00 per door annually depending on the materials used and location of the tenement house.

The ordinance defines a tenement house as "any building or dwelling for renting space divided into separate apartments or accessorias" and carries a penal clause imposing fines not exceeding P200.00 or imprisonment not exceeding six months, or both, for violations.

The ordinance constitutes prohibited double taxation, or treble taxation, because plaintiffs already pay real estate taxes on the buildings and fixed taxes as real estate dealers under the National Internal Revenue Code, making the additional municipal tax an unconstitutional burden on the same property and business activity.

The ordinance violates the rule of uniformity of taxation because it singles out tenement house owners for additional taxation while owners of other buildings pay only real estate taxes, and because no other cities impose similar taxes, creating unequal treatment.

The penal clause providing for imprisonment for non-payment violates the constitutional prohibition against imprisonment for debt or non-payment of poll tax, making the ordinance oppressive and unreasonable.

The decision in *City of Iloilo v. Remedios Sian Villanueva*, G.R. No. L-12695, declaring a similar ordinance ultra vires, should operate as res judicata or estoppel by judgment against the City.

The tax is not a real estate tax because it lacks the essential characteristics thereof: it is not based on assessed value, does not require intervention of assessors, is not payable at fixed times, and does not create a lien on the property, but rather is a fixed fee per door imposed on the business operation.

There is no prohibited double taxation because a license tax on a business is distinct in character from a real estate tax on the property used in that business, and from national internal revenue taxes; the Philippines has no constitutional prohibition against double taxation, which is permissible provided taxes are uniform.

The penal clause is valid and authorized by Section 21 of the City Charter, which empowers the municipal board to fix penalties not exceeding P200.00 fine or six months imprisonment; a tax is not a "debt" within the constitutional prohibition on imprisonment for debt, and the tax is not a poll tax.

The rule of uniformity is satisfied because tenement houses constitute a distinct class of property and business, and uniformity requires only equal treatment within that class, not identical treatment across all types of property or across different cities.

There is no res judicata because the previous case involved Ordinance 86 enacted under the City Charter, while the present case involves Ordinance 11 enacted under the Local Autonomy Act, which was not yet in effect during the previous litigation, creating different causes of action and subject matters.

**Substantive Issues:** (1) Whether Ordinance 11 is a valid license tax under Republic Act No. 2264 or an invalid real estate tax beyond the City's power; (2) Whether the ordinance constitutes prohibited double taxation; (3) Whether the penal clause renders the ordinance oppressive and unconstitutional; and (4) Whether the ordinance violates the rule of uniformity of taxation.

**Substantive:** The Court held that (1) the tax is a valid municipal license tax on the business of operating tenement houses, not a real estate tax, as evidenced by its nature as an exaction on the right to pursue a business and its lack of the characteristics of a property tax; (2) there is no prohibited double taxation because a license tax and a real estate tax are different in kind and character, and the same business may be taxed by both national and local governments; (3) the penal clause is valid because a tax is not a debt under the constitutional prohibition, and the City Charter expressly authorizes such penalties; and (4) the ordinance does not violate uniformity because tenement houses are a distinct class, and uniformity requires only that all members of that class be taxed equally, not that the tax be imposed in all cities or on all types of property.

**_Nature of License Tax vs. Real Estate Tax_** — A license tax is an imposition on the right to pursue a business, occupation, or calling, while a real estate tax is a direct tax on property ownership based on assessed value; the true nature of a tax is determined by its spirit, context, and subject-matter rather than by isolated words used in the ordinance.

**_Res Judicata_** — The doctrine requires identity of parties, subject-matter, and cause of action; a prior judgment invalidating an ordinance based on one statute does not preclude litigation on a subsequent ordinance based on a different statute enacted after the prior judgment.

**_Uniformity of Taxation_** — The rule requires that taxes be uniform and equal within a class of property or business similarly situated; it does not require that taxes be imposed on all classes of property or in all territorial subdivisions simultaneously.

"It is a well-settled rule that a license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax. The State may collect an ad valorem tax on property used in a calling, and at the same time impose a license tax on that calling, the imposition of the latter kind of tax being in no sense a double tax."

"The spirit, rather than the letter, of an ordinance determines the construction thereof, and the court looks less to its words and more to the context, subject-matter, consequence and effect."

"Taxes are uniform and equal when imposed upon all property of the same class or character within the taxing authority."

**_Punsalan v. Municipal Board of the City of Manila_**, G.R. No. L-4817, May 26, 1954 — Cited for the principle that double taxation cannot be invoked where one tax is imposed by the state and the other by the city, and that license fees may be exacted by both with respect to the same occupation.

**_People v. Santiago Mendaros_**, G.R. No. L-6975, May 27, 1955 — Followed for the rule that a license tax on a business (fishpond operation) does not constitute double taxation even if the land is subject to property tax.

**_Veronica Sanchez v. Collector of Internal Revenue_**, G.R. No. L-7521, October 18, 1955 — Cited to support that a tax on real estate dealers does not constitute double taxation despite the payment of real estate taxes.

**_Nin Bay Mining Co. v. Municipality of Roxas_**, G.R. No. L-20125, July 20, 1965 — Cited for the interpretation of Republic Act No. 2264 granting local governments authority to tax everything except matters specifically enumerated therein.

**_C.N. Hodges v. Municipal Board of the City of Iloilo_**, G.R. No. L-18276, January 12, 1967 — Cited for the scope of taxing authority under the Local Autonomy Act.

**Commonwealth Act No. 158 (Iloilo City Charter), Section 38** — Limits real estate tax to one percentum of assessed value; cited by plaintiffs to argue the ordinance exceeds this limit if construed as a property tax.

**Commonwealth Act No. 158, Section 21** — Authorizes the municipal board to fix penalties for ordinance violations not exceeding P200 fine or six months imprisonment.

**National Internal Revenue Code, Section 182(A)(3)(s)** — Imposes fixed taxes on real estate dealers; cited to show plaintiffs are subject to national taxes on the same business activity.

**1935 Constitution, Article III, Section 1(12)** — Prohibits imprisonment for debt or non-payment of a poll tax; argued by plaintiffs to invalidate the penal clause.

**1935 Constitution, Article VI, Section 22(1)** — Requires that the rule of taxation shall be uniform; basis for the uniformity challenge.