G.R. No. L-11525; February 24, 1917
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant, vs. SEVERO GALAROSA, defendant-appellee.

FACTS:
Prior to December 18, 1911, cockpit operators in Bulusan, Sorsogon, paid a quarterly license tax of P100 (P50 to the Government and P50 to the municipality). On December 18, 1911, the municipal council passed Ordinance No. 125, reducing the tax in the barrio of San Vicente to P65 quarterly (P50 to the Government and P15 to the municipality). This ordinance was subsequently disapproved by the provincial board, and no appeal was taken from that disapproval. At the time, Municipal Council Resolution No. 48 (October 26, 1910) was in force, imposing a uniform additional tax of P50 throughout the municipality.

In January 1912, defendant Severo Galarosa obtained a cockpit license in San Vicente and paid the reduced tax of P65 per quarter for five quarters (through the first quarter of 1913). Upon discovery, the Collector of Internal Revenue demanded payment of P175 (the difference between the tax paid under Ordinance No. 125 and the P100 tax required under Resolution No. 48 for five quarters) and imposed an administrative fine of P100 under Section 145 of Act No. 1189 for delinquency. Defendant refused to pay. The Government filed an action to recover both the additional tax and the fine. The Court of First Instance initially dismissed defendant’s untimely appeal regarding the fine but proceeded with the action for the tax. After trial, the court dismissed the entire case, holding that the Government was estopped from collecting the higher tax because defendant was induced by the ordinance to obtain the license.

ISSUE:
1. Whether Ordinance No. 125 was valid and effective despite its disapproval by the provincial board.
2. Whether the Government is estopped from collecting the full license tax prescribed by law due to the municipal council’s passage of the reducing ordinance and the defendant’s reliance thereon.

RULING:
The Supreme Court reversed the judgment of the trial court.

1. On the Validity of Ordinance No. 125: The ordinance was void from its inception. Under Section 41 of Act No. 82 (the Municipal Code), the provincial board has the authority to disapprove municipal ordinances that are beyond the powers conferred upon the council. The disapproval was final, as no appeal was taken. Furthermore, the ordinance was illegal on its face. Paragraph 5 of Section 144 of Act No. 1189, as amended, only authorized municipal councils to impose a higher license tax than the statutory rate, not a lower one. Ordinance No. 125, which sought to reduce the tax, was therefore ultra vires. Consequently, the governing laws were Section 144 of Act No. 1189 and the valid Municipal Resolution No. 48, requiring a total tax of P100 per quarter.

2. On the Defense of Estoppel: The Government is not estopped by the illegal acts of its officials. The principle that every person is presumed to know the law applies. Defendant was charged with knowledge of the legal tax rate. The erroneous collection of a lower sum by municipal officials, acting under a void ordinance, does not bind the Government or absolve the taxpayer from his obligation to pay the full amount prescribed by law. The Government cannot be prejudiced by the unauthorized acts of its agents. The benefits received by the defendant (the cockpit license) obligate him to pay the lawful fee.

3. On the Fine: The imposition of the P100 administrative fine by the Collector of Internal Revenue was proper under Section 145 of Act No. 1189, as amended, which mandates a fine equal to one quarter’s license tax for delinquency of ten days or more.

DISPOSITIVE PORTION:
The appealed judgment is reversed. Defendant Severo Galarosa is ordered to pay the Government the sum of P275 (P175 for the deficient tax and P100 as fine). No costs awarded.