City of Naga v. San Miguel Brewery
REITERATIONFacts
The Antecedents: The City of Naga enacted Ordinance No. 141 on October 15, 1954, levying a municipal tax of 1/48 of a centavo for every bottle of certain beverages corked, capped, or stoppered within the city. San Miguel Brewery, Inc. (SMB), with a plant in Naga City, paid this tax from October 1954 to June 1961, totaling P64,281.95. Subsequently, on June 19, 1959, Republic Act No. 2264 (Local Autonomy Act) took effect. Pursuant to this, Naga City passed Ordinance No. 234 on January 1, 1961, imposing an annual tax of P2,300.00 on SMB's business as a manufacturer of aerated water. SMB paid this additional tax. Procedural History: SMB filed a complaint seeking to annul Ordinance No. 141 and to refund the taxes paid under it, alleging double taxation. The City of Naga argued the ordinance was valid and within its powers. The Court of First Instance of Manila ruled that Ordinance No. 141 was not applicable to SMB and ordered a refund of P2,892.57 paid under protest, plus legal interest. The City of Naga appealed. The Petition: The Court of Appeals annulled Ordinance No. 141, citing Medina v. City of Baguio. It held that while taxes paid from October 1954 to June 1961 were improperly collected, a refund was not in order as payment was not proven to be under protest. However, it affirmed the refund of P2,892.57 collected from July to December 1961, which was paid under protest. The City of Naga filed a petition for review on certiorari with the Supreme Court.
Issue(s)
Whether Ordinance No. 141, enacted by the City of Naga, is a valid exercise of its taxing power. Whether the City of Naga had the authority to impose a tax on specific articles like bottled beverages at the time of the ordinance's enactment. Whether the enactment of Republic Act No. 2264 (Local Autonomy Act) retroactively validated Ordinance No. 141.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, upholding the annulment of Ordinance No. 141 and the refund of taxes paid under protest. The Court ruled that the City of Naga lacked the authority to impose such a tax on specific articles when Ordinance No. 141 was enacted in 1954.
Ratio Decidendi
On the validity of Ordinance No. 141: The Court held that Ordinance No. 141, which imposed a tax on specific articles (bottled beverages), was an exercise of the power of taxation, not police power. The City of Naga's charter (Republic Act No. 305) and Commonwealth Act No. 472 did not grant it the authority to impose a tax on specific articles at the time of the ordinance's enactment in 1954. The Court reiterated its ruling in Medina v. City of Baguio that such power was not vested in chartered cities at that time. On the effect of Republic Act No. 2264 (Local Autonomy Act): The Court clarified that the subsequent approval of Republic Act No. 2264 on June 19, 1959, did not validate Ordinance No. 141. The legality of an ordinance is determined by the powers of the enacting body at the time of its passage. The Local Autonomy Act did not contain any provision suggesting a curative or retroactive effect to validate ordinances enacted without proper authority prior to its effectivity. Therefore, the ordinance remained infirm from its origin. On the applicability of Bacolod v. Gruet: The Court distinguished the cited case of Bacolod v. Gruet, explaining that the ordinance in that case became effective after the approval of Republic Act No. 2264, making it a relevant precedent for ordinances enacted under the new law. In contrast, Ordinance No. 141 was enacted before the Local Autonomy Act, rendering Bacolod v. Gruet inapplicable to the present case. The Court reiterated that Medina v. City of Baguio, Stanvac v. Antigua, and Wa Yu v. City of Lipa were the controlling precedents for ordinances enacted prior to the Local Autonomy Act.
Main Doctrine
A municipal ordinance imposing a tax on specific articles, enacted prior to the Local Autonomy Act, is void for lack of authority, and subsequent legislation validating such powers does not retroactively cure the defect of origin.