G.R. No. L-24265 December 28, 1979
Procter & Gamble Philippine Manufacturing Corporation vs. The Municipality of Jagna, Province of Bohol

FACTS

Procter & Gamble Philippine Manufacturing Corporation (appellant), a domestic corporation, maintained a bodega in the Municipality of Jagna, Bohol, for storing copra purchased locally, which it then shipped for use in its manufacturing operations. On December 13, 1957, the Municipal Council of Jagna enacted Ordinance No. 4, Series of 1957, imposing a storage fee of ten centavos for every one hundred kilos of “exportable copra” deposited in any bodega within its jurisdiction. From 1958 to 1963, the appellant paid the municipality a total of P42,265.13 in storage fees, allegedly under protest.
On March 3, 1964, the appellant filed a suit in the Court of First Instance of Manila seeking a declaration that the ordinance was inapplicable to it or, alternatively, ultra vires and void. It also prayed for a refund of all fees paid. The appellant argued it was not in the business of storing copra for others, that the levy was effectively an illegal export tax, and that the fee was excessive and revenue-generating. The municipality defended its power to enact the ordinance and raised defenses of lack of jurisdiction, prescription, and laches.

ISSUE

The primary issue was whether the Municipality of Jagna had the legal authority to enact and enforce Ordinance No. 4, Series of 1957, imposing a storage fee on copra.

RULING

The Supreme Court upheld the validity of the ordinance. The legal logic centered on the municipality’s taxing authority under Commonwealth Act No. 472 , the prevailing law when the ordinance was enacted. This law granted municipal councils broad authority to impose license taxes on businesses and to collect fees for services rendered. The Court found the storage fee was a form of municipal license tax levied on the appellant’s business activity of storing copra, an integral part of its manufacturing operations. The fee was not a tax on the copra itself as property but a charge on the privilege of conducting the storage business.
The Court rejected the argument that the fee was an unconstitutional export tax. The term “exportable copra” in the ordinance was interpreted to mean copra destined for shipment out of the municipality, not exclusively for foreign export. The levy was imposed on the storage activity regardless of the final destination of the goods. Furthermore, the fee was deemed not excessive or unreasonable, as the municipality provided surveillance and lookout services for the stored copra, constituting a beneficial service that justified the charge.
However, the Court corrected the trial court’s ruling on prescription. It held that the six-year prescriptive period under Article 1145(2) of the Civil Code, not the five-year period cited by the lower court, governed actions for the recovery of municipal license taxes. Consequently, the appellant’s action, filed within six years from the first payment in 1958, had not prescribed. Nonetheless, since the ordinance itself was declared valid, the claim for refund was denied. The judgment of the lower court was affirmed insofar as it sustained the ordinance, with costs against the appellant.