City of Naga v. Agna
REITERATIONFacts
The Antecedents: Private respondents, merchants in Naga City, paid quarterly gross sales taxes for the period of July 1, 1970, to September 30, 1970, under Ordinance No. 360, series of 1970. This ordinance changed the tax structure from a graduated tax on quarterly gross sales to a percentage tax on gross sales. Subsequently, the private respondents filed a claim for refund, asserting that Ordinance No. 360 was not effective in 1970, the year of its approval, but only in 1971, the year following its approval, as per their interpretation of existing laws. They alleged that the taxes paid in 1970 were therefore illegal. Procedural History: The City Treasurer denied the refund claims. Consequently, the private respondents filed a complaint with the Court of First Instance (CFI) of Camarines Sur, seeking a declaration that Ordinance No. 360 was effective only in 1971, that certain sections of the ordinance were void, and for a refund of the taxes paid, plus interest, attorney's fees, and costs. The CFI ruled in favor of the private respondents, declaring the ordinance enforceable in 1971 and ordering the refund. The City of Naga and its officials then filed a petition for review with the Supreme Court, which was treated as a special civil action. The Petition: Petitioners argued that Ordinance No. 360 took effect in the quarter of its approval (July 1970). They invoked Section 14 of Republic Act No. 305 (Charter of Naga City), which states that an ordinance takes effect 10 days after passage unless otherwise stated. They contended that the ordinance was deemed approved on July 6, 1970, as the Mayor did not act on it within 10 days of receipt. They also invoked Section 2 of Republic Act No. 2264 (Local Autonomy Act), which states a tax ordinance takes effect 15 days after passage. Petitioners argued that Section 2 of RA 2264 superseded Section 14 of RA 305 for tax ordinances. Conversely, private respondents argued that Ordinance No. 360, being an amendment to an existing tax, should take effect in the year following its approval, citing Section 2309 of the Revised Administrative Code.
Issue(s)
Whether Ordinance No. 360 of the City of Naga, series of 1970, took effect in 1970 or 1971. Whether the private respondents are entitled to a refund of the taxes paid under Ordinance No. 360 for the quarter from July 1, 1970, to September 30, 1970.
Ruling
The Supreme Court dismissed the petition, affirming the decision of the Court of First Instance. The Court ruled that Ordinance No. 360, series of 1970, was enforceable only in 1971, the year following its approval. Consequently, the private respondents were entitled to a refund of the taxes paid for the quarter from July 1, 1970, to September 30, 1970, plus corresponding interests and attorney's fees.
Ratio Decidendi
On Issue 1: The Court held that Ordinance No. 360, series of 1970, took effect in 1971. The Court reconciled Section 2309 of the Revised Administrative Code and Section 2 of Republic Act No. 2264 by distinguishing the types of ordinances they govern. Section 2309 distinguishes between ordinances that change existing municipal license taxes and those that create entirely new taxes. Ordinances changing existing taxes must be enacted prior to December 15th of any year to take effect in the next succeeding year, to allow taxpayers to adjust. Ordinance No. 360, which changed the graduated sales tax to a percentage tax, falls under this category. While Section 2 of RA 2264 provides a general rule for tax ordinances, the Court found that Section 2309 of the Revised Administrative Code specifically addresses ordinances that modify existing taxes, and thus should govern in this instance. The Court noted that RA 2264 did not expressly repeal Section 2309, and statutes in pari materia should be construed together. Therefore, the ordinance's effectivity was correctly determined to be in 1971. On Issue 2: Based on the ruling that Ordinance No. 360 was effective only in 1971, the taxes paid by the private respondents for the quarter from July 1, 1970, to September 30, 1970, were paid under an ordinance that was not yet legally enforceable. Consequently, these payments were deemed illegal, and the private respondents were entitled to a refund. The Court affirmed the CFI's order for the petitioners to reimburse the private respondents the amounts paid, plus corresponding interests from the filing of the complaint until reimbursement, and attorney's fees.
Main Doctrine
The Court held that Ordinance No. 360 of the City of Naga, which amended an existing graduated sales tax to a percentage tax, falls under the purview of Section 2309 of the Revised Administrative Code. This provision mandates that ordinances changing existing municipal license taxes take effect in the next succeeding year after their approval. Therefore, Ordinance No. 360, enacted in 1970, was deemed effective only in 1971, entitling the private respondents to a refund of taxes paid in 1970 under the amended ordinance.