Golden Ribbon Lumber Co. v. City of Butuan
REITERATIONFacts
The Antecedents: Golden Ribbon Lumber Company, Inc. (appellee), a corporation operating a lumber mill and lumber yard in Butuan City, paid taxes amounting to P2,069.26 under Ordinance No. 5, as amended by subsequent ordinances, of the City of Butuan. Appellee claimed the ordinance was void and filed an action to have it declared so, to recover the taxes paid, and to permanently enjoin the City from enforcing it. Procedural History: The Court of First Instance of Agusan declared Ordinance No. 5, as amended, void and ordered the City of Butuan and its City Treasurer (appellants) to refund the P1,190.92 paid under protest, with legal interests and costs. Appellants appealed, arguing the tax was a legal privilege tax and that payments not made under protest were not refundable. Appellee denied alleged tax delinquencies. The Petition: The core of the dispute revolved around the validity of Ordinance No. 5, as amended, and whether the appellee was legally bound to pay the taxes imposed. The parties submitted a stipulation of facts, agreeing that the only legal questions were the validity of the ordinance and the refundability of payments made without protest. The lower court ruled in favor of the appellee, prompting the present appeal.
Issue(s)
Whether Ordinance No. 5, as amended, which imposes a tax of "two fifths (.004) centavo for every board foot of lumber sawn manufactured and/or produced," is a valid and legal exercise of the City of Butuan's taxing power. Whether payments made without protest, in case of a decision in favor of the taxpayer, are subject to reimbursement.
Ruling
The appealed decision of the Court of First Instance of Agusan is hereby affirmed. Ordinance No. 5, as amended, of the City of Butuan is declared void and ultra vires. The City of Butuan and its City Treasurer are ordered to refund to Golden Ribbon Lumber Company, Inc. the sum of P1,190.92 paid under protest, with legal interests thereon from the filing of the complaint until fully paid, and to pay the costs.
Ratio Decidendi
On Issue 1: The Supreme Court held that Ordinance No. 5, as originally approved and as later amended, was ultra vires and, therefore, null and void. The Court determined that the tax imposed was not a license or privilege tax on the business of operating lumber mills or lumber yards, as contended by the appellants, but rather a tax on the "sawn manufactured and/or produced lumber." This conclusion was reached by examining the ordinance's operation, practical results, and incidents, rather than merely its title. The Court emphasized that municipal corporations derive their taxing powers from legislative grants, which must be strictly construed. Since "sawn manufactured and/or produced lumber" constitutes "forest products" under Section 263 of the National Internal Revenue Code, municipal corporations are explicitly prohibited from imposing taxes of such nature by Commonwealth Act No. 472, Section 3, and Republic Act No. 2264. The Court reasoned that the power to tax lumber mills and lumber yards does not implicitly include the power to tax the products they process or sell. Citing Cu Unjieng v. Patstone and Vega v. Municipal Board, the Court reiterated that any doubt or ambiguity in a grant of taxing power to a municipality must be resolved against the municipality. On Issue 2: The Supreme Court affirmed that only payments made under protest are subject to reimbursement. Citing paragraph 8 of the Stipulation of Facts, the Court noted that among the payments made by Golden Ribbon Lumber Company, Inc., only the last payment of P1,190.92, made on May 14, 1958, was explicitly made under protest. The Court found the appellants' contention that appellee had no cause of action because most payments were not under protest to be untenable because the present action was specifically limited to the recovery of the P1,190.92 paid under protest. This effectively limited the refundable amount to only that portion for which the proper procedural requirement (payment under protest) was met.
Main Doctrine
An ordinance imposing a tax on the sawn, manufactured, or produced lumber, which are considered forest products, is ultra vires and void if the city's charter only grants the power to tax lumber mills and lumber yards, and not the products themselves. The nature of a tax is determined by its operation and practical results, not its title.