Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-10405           December 29, 1960

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitioner-appellant, vs.THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-appellees.

Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.Office of the Asst. Solicitor General Jose G. Bautista and Solicitor A. A. Torres for appellee.

 

CONCEPCION, J.:

Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal, dismissing the above entitled case and dissolving the writ of preliminary injunction therein issued, without costs.

On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted this action for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An Act Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and improvement" of Pasig feeder road terminals (Gen. Roxas — Gen. Araneta — Gen. Lucban — Gen. Capinpin — Gen. Segundo — Gen. Delgado — Gen. Malvar — Gen. Lim)"; that, at the time of the passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . . Pasig, Rizal" (according to the tracings attached to the petition as Annexes A and B, near Shaw Boulevard, not far away from the intersection between the latter and Highway 54), which projected feeder roads "do not connect any government property or any important premises to the main highway"; that the aforementioned Antonio Subdivision (as well as the lands on which said feeder roads were to be construed) were private properties of respondent Jose C. Zulueta, who, at the time of the passage and approval of said Act, was a member

of the Senate of the Philippines; that on May, 1953, respondent Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offering to donate said projected feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the offer was accepted by the council, subject to the condition "that the donor would submit a plan of the said roads and agree to change the names of two of them"; that no deed of donation in favor of the municipality of Pasig was, however, executed; that on July 10, 1953, respondent Zulueta wrote another letter to said council, calling attention to the approval of Republic Act. No. 920, and the sum of P85,000.00 appropriated therein for the construction of the projected feeder roads in question; that the municipal council of Pasig endorsed said letter of respondent Zulueta to the District Engineer of Rizal, who, up to the present "has not made any endorsement thereon" that inasmuch as the projected feeder roads in question were private property at the time of the passage and approval of Republic Act No. 920, the appropriation of P85,000.00 therein made, for the construction, reconstruction, repair, extension and improvement of said projected feeder roads, was illegal and, therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress because its members were made to

believe that the projected feeder roads in question were "public roads and not private streets of a private subdivision"'; that, "in order to give a semblance of legality, when there is absolutely none, to the aforementioned appropriation", respondents Zulueta executed on December 12, 1953, while he was a member of the Senate of the Philippines, an alleged deed of donation — copy of which is annexed to the petition — of the four (4) parcels of land constituting said projected feeder roads, in favor of the Government of the Republic of the Philippines; that said alleged deed of donation was, on the same date, accepted by the then Executive Secretary; that being subject to an onerous condition, said donation partook of the nature of a contract; that, such, said donation violated the provision of our fundamental law prohibiting members of Congress from being directly or indirectly financially interested in any contract with the Government, and, hence, is unconstitutional, as well as null and void ab initio, for the construction of the projected feeder roads in question with public funds would greatly enhance or increase the value of the aforementioned subdivision of respondent Zulueta, "aside from relieving him from the burden of constructing his subdivision streets or roads at his own expense"; that the construction of said

projected feeder roads was then being undertaken by the Bureau of Public Highways; and that, unless restrained by the court, the respondents would continue to execute, comply with, follow and implement the aforementioned illegal provision of law, "to the irreparable damage, detriment and prejudice not only to the petitioner but to the Filipino nation."

Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null and void; that the alleged deed of donation of the feeder roads in question be "declared unconstitutional and, therefor, illegal"; that a writ of injunction be issued enjoining the Secretary of Public Works and Communications, the Director of the Bureau of Public Works and Highways and Jose C. Zulueta from ordering or allowing the continuance of the above-mentioned feeder roads project, and from making and securing any new and further releases on the aforementioned item of Republic Act No. 920, and the disbursing officers of the Department of Public Works and Highways from making any further payments out of said funds provided for in Republic Act No. 920; and that pending final hearing on the merits, a writ of preliminary injunction be issued enjoining the aforementioned parties respondent from making and securing

any new and further releases on the aforesaid item of Republic Act No. 920 and from making any further payments out of said illegally appropriated funds.

Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to sue", and that the petition did "not state a cause of action". In support to this motion, respondent Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial governor, should represent the Province of Rizal, pursuant to section 1683 of the Revised Administrative Code; that said respondent is " not aware of any law which makes illegal the appropriation of public funds for the improvements of . . . private property"; and that, the constitutional provision invoked by petitioner is inapplicable to the donation in question, the same being a pure act of liberality, not a contract. The other respondents, in turn, maintained that petitioner could not assail the appropriation in question because "there is no actual bona fide case . . . in which the validity of Republic Act No. 920 is necessarily involved" and petitioner "has not shown that he has a personal and substantial interest" in said Act "and that its enforcement has caused or will cause him a direct injury."

Acting upon said motions to dismiss, the lower court rendered the aforementioned decision, dated October 29, 1953, holding that, since public interest is involved in this case, the Provincial Governor of Rizal and the provincial fiscal thereof who represents him therein, "have the requisite personalities" to question the constitutionality of the disputed item of Republic Act No. 920; that "the legislature is without power appropriate public revenues for anything but a public purpose", that the instructions and improvement of the feeder roads in question, if such roads where private property, would not be a public purpose; that, being subject to the following condition:

The within donation is hereby made upon the condition that the Government of the Republic of the Philippines will use the parcels of land hereby donated for street purposes only and for no other purposes whatsoever; it being expressly understood that should the Government of the Republic of the Philippines violate the condition hereby imposed upon it, the title to the land hereby donated shall, upon such violation, ipso facto revert to the DONOR, JOSE C. ZULUETA. (Emphasis supplied.)

which is onerous, the donation in question is a contract; that said donation or contract is "absolutely forbidden by the Constitution" and consequently "illegal", for Article 1409 of the Civil Code of the Philippines, declares in existence and void from the very beginning contracts "whose cause, objector purpose is contrary to law, morals . . . or public policy"; that the legality of said donation may not be contested, however, by petitioner herein, because his "interest are not directly affected" thereby; and that, accordingly, the appropriation in question "should be upheld" and the case dismissed.

At the outset, it should be noted that we are concerned with a decision granting the aforementioned motions to dismiss, which as much, are deemed to have admitted hypothetically the allegations of fact made in the petition of appellant herein. According to said petition, respondent Zulueta is the owner of several parcels of residential land situated in Pasig, Rizal, and known as the Antonio Subdivision, certain portions of which had been reserved for the projected feeder roads aforementioned, which, admittedly, were private property of said respondent when Republic Act No. 920, appropriating P85,000.00 for the "construction, reconstruction, repair, extension and improvement" of said

roads, was passed by Congress, as well as when it was approved by the President on June 20, 1953. The petition further alleges that the construction of said roads, to be undertaken with the aforementioned appropriation of P85,000.00, would have the effect of relieving respondent Zulueta of the burden of constructing his subdivision streets or roads at his own expenses, 1and would "greatly enhance or increase the value of the subdivision" of said respondent. The lower court held that under these circumstances, the appropriation in question was "clearly for a private, not a public purpose."

Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However, respondent Zulueta contended, in his motion to dismiss that:

A law passed by Congress and approved by the President can never be illegal because Congress is the source of all laws . . . Aside from the fact that movant is not aware of any law which makes illegal the appropriation of public funds for the improvement of what we, in the meantime, may assume as private property . . . (Record on Appeal, p. 33.)

The first proposition must be rejected most emphatically, it being inconsistent with the nature of the Government established under the Constitution of the Republic of the Philippines and the system of checks and balances underlying our political structure. Moreover, it is refuted by the decisions of this Court invalidating legislative enactments deemed violative of the Constitution or organic laws. 3

As regards the legal feasibility of appropriating public funds for a public purpose, the principle according to Ruling Case Law, is this:

It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose. . . . It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity

of private enterprises or business, does not justify their aid by the use public money. (25 R.L.C. pp. 398-400; Emphasis supplied.)

The rule is set forth in Corpus Juris Secundum in the following language:

In accordance with the rule that the taxing power must be exercised for public purposes only, discussed suprasec. 14, money raised by taxation can be expended only for public purposes and not for the advantage of private individuals. (85 C.J.S. pp. 645-646; emphasis supplied.)

Explaining the reason underlying said rule, Corpus Juris Secundum states:

Generally, under the express or implied provisions of the constitution, public funds may be used only for public purpose. The right of the legislature to appropriate funds is correlative with its right to tax, and, under constitutional provisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof

to another purpose, no appropriation of state funds can be made for other than for a public purpose.

x x x           x x x          x x x

The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public. (81 C.J.S. pp. 1147; emphasis supplied.)

Needless to say, this Court is fully in accord with the foregoing views which, apart from being patently sound, are a necessary corollary to our democratic system of government, which, as such, exists primarily for the promotion of the general welfare. Besides, reflecting as they do, the established jurisprudence in the United States, after whose constitutional system ours has been patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional law. lawphil.net

This notwithstanding, the lower court felt constrained to uphold the appropriation

in question, upon the ground that petitioner may not contest the legality of the donation above referred to because the same does not affect him directly. This conclusion is, presumably, based upon the following premises, namely: (1) that, if valid, said donation cured the constitutional infirmity of the aforementioned appropriation; (2) that the latter may not be annulled without a previous declaration of unconstitutionality of the said donation; and (3) that the rule set forth in Article 1421 of the Civil Code is absolute, and admits of no exception. We do not agree with these premises.

The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter consists of an amendment of the organic law, removing, with retrospective operation, the constitutional limitation infringed by said statute. Referring to the P85,000.00 appropriation for the projected feeder roads in question, the legality thereof depended upon whether said roads were public or private property when the bill, which, latter on, became Republic Act 920, was passed by Congress, or, when said bill was approved by the President and the disbursement of said sum became

effective, or on June 20, 1953 (see section 13 of said Act). Inasmuch as the land on which the projected feeder roads were to be constructed belonged then to respondent Zulueta, the result is that said appropriation sought a private purpose, and hence, was null and void. 4 The donation to the Government, over five (5) months after the approval and effectivity of said Act, made, according to the petition, for the purpose of giving a "semblance of legality", or legalizing, the appropriation in question, did not cure its aforementioned basic defect. Consequently, a judicial nullification of said donation need not precede the declaration of unconstitutionality of said appropriation.

Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to exceptions. For instance, the creditors of a party to an illegal contract may, under the conditions set forth in Article 1177 of said Code, exercise the rights and actions of the latter, except only those which are inherent in his person, including therefore, his right to the annulment of said contract, even though such creditors are not affected by the same, except indirectly, in the manner indicated in said legal provision.

Again, it is well-stated that the validity of a statute may be contested only by one

who will sustain a direct injury in consequence of its enforcement. Yet, there are many decisions nullifying, at the instance of taxpayers, laws providing for the disbursement of public funds, 5upon the theory that "the expenditure of public funds by an officer of the State for the purpose of administering an unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the request of a taxpayer. 6Although there are some decisions to the contrary, 7the prevailing view in the United States is stated in the American Jurisprudence as follows:

In the determination of the degree of interest essential to give the requisite standing to attack the constitutionality of a statute, the general rule is that not only persons individually affected, but also taxpayers, have sufficient interest in preventing the illegal expenditure of moneys raised by taxation and may therefore question the constitutionality of statutes requiring expenditure of public moneys. (11 Am. Jur. 761; emphasis supplied.)

However, this view was not favored by the Supreme Court of the U.S. in

Frothingham vs. Mellon (262 U.S. 447), insofar as federal laws are concerned, upon the ground that the relationship of a taxpayer of the U.S. to its Federal Government is different from that of a taxpayer of a municipal corporation to its government. Indeed, under thecomposite system of government existing in the U.S., the states of the Union are integral part of the Federation from an international viewpoint, but, each state enjoys internally a substantial measure of sovereignty, subject to the limitations imposed by the Federal Constitution. In fact, the same was made by representatives of each state of the Union, not of the people of the U.S., except insofar as the former represented the people of the respective States, and the people of each State has, independently of that of the others, ratified said Constitution. In other words, the Federal Constitution and the Federal statutes have become binding upon the people of the U.S. in consequence of an act of, and, in this sense, through the respective states of the Union of which they are citizens. The peculiar nature of the relation between said people and the Federal Government of the U.S. is reflected in the election of its President, who is chosen directly, not by the people of the U.S., but by electors chosen by each State, in such manner as the

legislature thereof may direct (Article II, section 2, of the Federal Constitution). lawphi1.net

The relation between the people of the Philippines and its taxpayers, on the other hand, and the Republic of the Philippines, on the other, is not identical to that obtaining between the people and taxpayers of the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to that existing between the people and taxpayers of each state and the government thereof, except that the authority of the Republic of the Philippines over the people of the Philippines is more fully direct than that of the states of the Union, insofar as the simple and unitary type of our national government is not subject to limitations analogous to those imposed by the Federal Constitution upon the states of the Union, and those imposed upon the Federal Government in the interest of the Union. For this reason, the rule recognizing the right of taxpayers to assail the constitutionality of a legislation appropriating local or state public funds — which has been upheld by the Federal Supreme Court (Crampton vs. Zabriskie, 101 U.S. 601) — has greater application in the Philippines than that adopted with respect to acts of Congress of the United States appropriating federal funds.

Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a land by the Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the purpose of contesting the price being paid to the owner thereof, as unduly exorbitant. It is true that in Custodio vs. President of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of the Government was not permitted to question the constitutionality of an appropriation for backpay of members of Congress. However, in Rodriguez vs. Treasurer of the Philippines and Barredo vs.Commission on Elections (84 Phil., 368; 45 Off. Gaz., 4411), we entertained the action of taxpayers impugning the validity of certain appropriations of public funds, and invalidated the same. Moreover, the reason that impelled this Court to take such position in said two (2) cases — the importance of the issues therein raised — is present in the case at bar. Again, like the petitioners in the Rodriguez and Barredo cases, petitioner herein is not merely a taxpayer. The Province of Rizal, which he represents officially as its Provincial Governor, is our most populated political subdivision, 8and, the taxpayers therein bear a substantial portion of the burden of taxation, in the Philippines.

Hence, it is our considered opinion that the circumstances surrounding this case sufficiently justify petitioners action in contesting the appropriation and donation in question; that this action should not have been dismissed by the lower court; and that the writ of preliminary injunction should have been maintained.

Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the lower court for further proceedings not inconsistent with this decision, with the costs of this instance against respondent Jose C. Zulueta. It is so ordered.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez David, Paredes, and Dizon, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-4817             May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants, vs.THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.

Calanog and Alafriz for plaintiffs-appellants.City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serreno for defendants-appellants.

REYES, J.:

This suit was commenced in the Court of First Instance of Manila by two lawyers, a medical practitioner, a public accountant, a dental surgeon and a pharmacist, purportedly "in their own behalf and in behalf of other professionals practising in the City of Manila who may desire to join it." Object of the suit is the annulment of Ordinance No. 3398 of the City of Manila together with the provision of the Manila charter authorizing it and the refund of taxes collected under the ordinance but paid under protest.

The ordinance in question, which was approved by the municipal board of the City of Manila on July 25, 1950, imposes a municipal occupation tax on persons exercising various professions in the city

and penalizes non-payment of the tax "by a fine of not more than two hundred pesos or by imprisonment of not more than six months, or by both such fine and imprisonment in the discretion of the court." Among the professions taxed were those to which plaintiffs belong. The ordinance was enacted pursuant to paragraph (1) of section 18 of the Revised Charter of the City of Manila (as amended by Republic Act No. 409), which empowers the Municipal Board of said city to impose a municipal occupation tax, not to exceed P50 per annum, on persons engaged in the various professions above referred to.

Having already paid their occupation tax under section 201 of the National Internal Revenue Code, plaintiffs, upon being required to pay the additional tax prescribed in the ordinance, paid the same under protest and then brought the present suit for the purpose already stated. The lower court upheld the validity of the provision of law authorizing the enactment of the ordinance but declared the ordinance itself illegal and void on the ground that the penalty there in provided for non-payment of the tax was not legally authorized. From this decision both parties appealed to this Court, and the only question they have presented for our determination is whether this ruling is correct or not, for

though the decision is silent on the refund of taxes paid plaintiffs make no assignment of error on this point.

To begin with defendants' appeal, we find that the lower court was in error in saying that the imposition of the penalty provided for in the ordinance was without the authority of law. The last paragraph (kk) of the very section that authorizes the enactment of this tax ordinance (section 18 of the Manila Charter) in express terms also empowers the Municipal Board "to fix penalties for the violation of ordinances which shall not exceed to(sic) two hundred pesos fine or six months" imprisonment, or both such fine and imprisonment, for a single offense." Hence, the pronouncement below that the ordinance in question is illegal and void because it imposes a penalty not authorized by law is clearly without basis.

As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing it constitute class legislation, are unjust and oppressive, and authorize what amounts to double taxation.

In raising the hue and cry of "class legislation", the burden of plaintiffs' complaint is not that the professions to which they respectively belong have

been singled out for the imposition of this municipal occupation tax; and in any event, the Legislature may, in its discretion, select what occupations shall be taxed, and in the exercise of that discretion it may tax all, or it may select for taxation certain classes and leave the others untaxed. (Cooley on Taxation, Vol. 4, 4th ed., pp. 3393-3395.) Plaintiffs' complaint is that while the law has authorized the City of Manila to impose the said tax, it has withheld that authority from other chartered cities, not to mention municipalities. We do not think it is for the courts to judge what particular cities or municipalities should be empowered to impose occupation taxes in addition to those imposed by the National Government. That matter is peculiarly within the domain of the political departments and the courts would do well not to encroach upon it. Moreover, as the seat of the National Government and with a population and volume of trade many times that of any other Philippine city or municipality, Manila, no doubt, offers a more lucrative field for the practice of the professions, so that it is but fair that the professionals in Manila be made to pay a higher occupation tax than their brethren in the provinces.

Plaintiffs brand the ordinance unjust and oppressive because they say that it

creates discrimination within a class in that while professionals with offices in Manila have to pay the tax, outsiders who have no offices in the city but practice their profession therein are not subject to the tax. Plaintiffs make a distinction that is not found in the ordinance. The ordinance imposes the tax upon every person "exercising" or "pursuing" — in the City of Manila naturally — any one of the occupations named, but does not say that such person must have his office in Manila. What constitutes exercise or pursuit of a profession in the city is a matter of judicial determination. The argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof. (51 Am. Jur., 341.)

In view of the foregoing, the judgment appealed from is reversed in so far as it declares Ordinance No. 3398 of the City of Manila illegal and void and affirmed in so far as it holds the validity of the provision of the Manila charter

authorizing it. With costs against plaintiffs-appellants.

Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-19201             June 16, 1965

REV. FR. CASIMIRO LLADOC, petitioner, vs.The COMMISSIONER OF INTERNAL REVENUE and The COURT of TAX APPEALS, respondents.

Hilado and Hilado for petitioner.Office of the Solicitor General for respondents.

PAREDES, J.:

Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental,

and predecessor of herein petitioner, for the construction of a new Catholic Church in the locality. The total amount was actually spent for the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April 29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner was the priest. The tax amounted to P1,370.00 including surcharges, interests of 1% monthly from May 15, 1958 to June 15, 1960, and the compromise for the late filing of the return.

Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest and the motion for reconsideration presented to the Commissioner of Internal Revenue were denied. The petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the petition for review, the Rev. Fr. Casimiro Lladoc claimed, among others, that at the time of the donation, he was not the parish priest in Victorias; that there is no legal entity or juridical person known as the "Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the

donee's gift tax. It was also asserted that the assessment of the gift tax, even against the Roman Catholic Church, would not be valid, for such would be a clear violation of the provisions of the Constitution.

After hearing, the CTA rendered judgment, the pertinent portions of which are quoted below:

... . Parish priests of the Roman Catholic Church under canon laws are similarly situated as its Archbishops and Bishops with respect to the properties of the church within their parish. They are the guardians, superintendents or administrators of these properties, with the right of succession and may sue and be sued.

x x x           x x x           x x x

The petitioner impugns the, fairness of the assessment with the argument that he should not be held liable for gift taxes on donation which he did not receive personally since he was not yet the parish priest of Victorias in the year 1957 when said donation was given. It is intimated that if someone has to

pay at all, it should be petitioner's predecessor, the Rev. Fr. Crispin Ruiz, who received the donation in behalf of the Catholic parish of Victorias or the Roman Catholic Church. Following petitioner's line of thinking, we should be equally unfair to hold that the assessment now in question should have been addressed to, and collected from, the Rev. Fr. Crispin Ruiz to be paid from income derived from his present parish where ever it may be. It does not seem right to indirectly burden the present parishioners of Rev. Fr. Ruiz for donee's gift tax on a donation to which they were not benefited.

x x x           x x x           x x x

We saw no legal basis then as we see none now, to include within the Constitutional exemption, taxes which partake of the nature of an excise upon the use made of the properties or upon the exercise of the privilege of receiving the properties. (Phipps vs. Commissioner of Internal Revenue, 91 F [2d] 627; 1938, 302 U.S. 742.)

It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored by law, and the party claiming exemption must justify his claim by a clear, positive, or express grant of such privilege by law. (Collector vs. Manila Jockey Club, G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.)

The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the Constitution of the Philippines, should not be interpreted to mean exemption from all kinds of taxes. Statutes exempting charitable and religious property from taxation should be construed fairly though strictly and in such manner as to give effect to the main intent of the lawmakers. (Roman Catholic Church vs. Hastrings 5 Phil. 701.)

x x x           x x x           x x x

WHEREFORE, in view of the foregoing considerations, the decision of the respondent Commissioner of Internal Revenue appealed from, is hereby affirmed except with

regard to the imposition of the compromise penalty in the amount of P20.00 (Collector of Internal Revenue v. U.S.T., G.R. No. L-11274, Nov. 28, 1958); ..., and the petitioner, the Rev. Fr. Casimiro Lladoc is hereby ordered to pay to the respondent the amount of P900.00 as donee's gift tax, plus the surcharge of five per centum (5%) as ad valorem penalty under Section 119 (c) of the Tax Code, and one per centum (1%) monthly interest from May 15, 1958 to the date of actual payment. The surcharge of 25% provided in Section 120 for failure to file a return may not be imposed as the failure to file a return was not due to willful neglect.( ... ) No costs.

The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly committed by the Tax Court, all of which converge on the singular issue of whether or not petitioner should be liable for the assessed donee's gift tax on the P10,000.00 donated for the construction of the Victorias Parish Church.

Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious purposes. The exemption is only from the payment of taxes assessed on such properties enumerated, as property taxes, as contra distinguished from excise taxes. In the present case, what the Collector assessed was a donee's gift tax; the assessment was not on the properties themselves. It did not rest upon general ownership; it was an excise upon the use made of the properties, upon the exercise of the privilege of receiving the properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the exempting provisions of the section just mentioned. A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of giftinter vivos, the imposition of which on property used exclusively for religious purposes, does not constitute an impairment of the Constitution. As well observed by the learned respondent Court, the phrase "exempt from taxation," as employed in the Constitution (supra) should not be interpreted to mean exemption from all kinds of taxes. And there being no clear, positive or express grant of such

privilege by law, in favor of petitioner, the exemption herein must be denied.

The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a tax liability exists, is, who should be called upon to pay the gift tax? Petitioner postulates that he should not be liable, because at the time of the donation he was not the priest of Victorias. We note the merit of the above claim, and in order to put things in their proper light, this Court, in its Resolution of March 15, 1965, ordered the parties to show cause why the Head of the Diocese to which the parish of Victorias pertains, should not be substituted in lieu of petitioner Rev. Fr. Casimiro Lladoc it appearing that the Head of such Diocese is the real party in interest. The Solicitor General, in representation of the Commissioner of Internal Revenue, interposed no objection to such a substitution. Counsel for the petitioner did not also offer objection thereto.

On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal issues and/or defenses he might wish to raise, to which resolution counsel for petitioner, who also appeared as counsel for the Head of the Diocese, the Roman Catholic Bishop of Bacolod, manifested that it was submitting itself to the jurisdiction

and orders of this Court and that it was presenting, by reference, the brief of petitioner Rev. Fr. Casimiro Lladoc as its own and for all purposes.

In view here of and considering that as heretofore stated, the assessment at bar had been properly made and the imposition of the tax is not a violation of the constitutional provision exempting churches, parsonages or convents, etc. (Art VI, sec. 22 [3], Constitution), the Head of the Diocese, to which the parish Victorias Pertains, is liable for the payment thereof.

The decision appealed from should be, as it is hereby affirmed insofar as tax liability is concerned; it is modified, in the sense that petitioner herein is not personally liable for the said gift tax, and that the Head of the Diocese, herein substitute petitioner, should pay, as he is presently ordered to pay, the said gift tax, without special, pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.Barrera, J., took no part.

Wenceslao Pascual v Secretary of Public Works and Communications, et al

Facts: "A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such expenditure, is merely incidental in the promotion of a particular enterprise."

Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction, upon the ground that RA No. 920, which apropriates funds for public works particularly for the construction and improvement of Pasig feeder road terminals. Some of the feeder roads, however, as alleged and as contained in the tracings attached to the petition, were nothing but projected and planned subdivision roads, not yet constructed within the Antonio Subdivision, belonging to private respondent Zulueta, situated at Pasig, Rizal; and which projected feeder roads do not connect any government property or any

important premises to the main highway. The respondents' contention is that there is public purpose because people living in the subdivision will directly be benefitted from the construction of the roads, and the government also gains from the donation of the land supposed to be occupied by the streets, made by its owner to the government.

ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of justifying an expenditure of the government?

HELD: No. It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose. It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited

by their promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of private enterprises or business, does not justify their aid by the use public money.   The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public.

Punsalan v. Municipal Board of the City of Manila

Facts: Petitioners, who are professionals in the city, assail OrdinanceNo. 3398 together with the law authorizing it (Section 18 of the Revised Charter of the City of Manila). The ordinance imposes a municipaloccupation tax on persons exercising various professions in the city and penalizes non-payment of the same. The law

authorizing said ordinanceempowers the Municipal Board of the city to impose a municipaloccupation tax on persons engaged in various professions. Petitioners, having already paid their occupation tax under section 201 of the National Internal Revenue Code, paid the tax under protest as imposed byOrdinance No. 3398. The lower court declared the ordinance invalid and affirmed the validity of the law authorizing it.

Issue: Whether or Not the ordinance and law authorizing it constitute class legislation, and authorize what amounts to double taxation.

Held: The Legislature may, in its discretion, select what occupationsshall be taxed, and in its discretion may tax all, or select classes of occupation for taxation, and leave others untaxed. It is not for the courts to judge which cities or

municipalities should be empowered to impose occupation taxes aside from that imposed by the National Government. That matter is within the domain of political departments. The argument against double taxation may not be invoked if one tax is imposed by the state and the other is imposed by the city. It is widely recognized that there is nothing inherently terrible in the requirement that taxes be exacted with respect to the same occupation by both the state and the political subdivisions thereof. Judgment of the lower court is reversed with regards to the ordinance and affirmed as to the law authorizing it.

Lladoc v Commissioner of Internal Revenue

Facts: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in cash to the parish priest of Victorias, Negros Occidental; the amount spent for the construction of a new Catholic Church in the locality,m as intended.

In1958, MB Estate filed the donor’s gift tax return. In 1960, the Commissioner issued an assessment for donee’s gift tax against the parish. The priest lodged a protest to the assessment and requested the withdrawal thereof.

Issue: Whether the Catholic Parish is tax exempt.

Held: The phrase “exempt from taxation” should not be interpreted to mean exemption from all kinds of taxes. The exemption is only from the payment of taxes assessed on such properties as property taxes as contradistinguished from excise taxes. A donee’s gift tax is not a property tax but an excise tax imposed on the transfer of property by way of gift inter vivos. It does not rest upon general ownership, but an excise upon the use made of the properties, upon the exercise of the privilege of receiving the properties.

The imposition of such excise tax on property used for religious purpose do not constitute an impairment of the Constitution.

The tax exemption of the parish, thus, does not extend to excise taxes.