G.R. No. L-15502; October 25, 1960
AH NAM, plaintiff-appellee, vs. CITY OF MANILA, ET AL., defendants-appellants; CITY OF MANILA, third-party plaintiff-appellant, vs. MUTUAL SECURITY INSURANCE CORPORATION, third-party defendant-appellee.

FACTS

Plaintiff-appellee Ah Nam is the owner and proprietor of two duly licensed bakeries (Liberty Bakery and Panaderia Blumentritt). In the operation of these bakeries, he periodically imports and purchases flour contained in cloth bags, paying no additional amount apart from the price of the flour. The empty flour bags are not used as an ingredient in making bakery products. After consuming the flour, Ah Nam sold the empty flour bags at his bakery establishments under invoices separate from those for bakery products. The defendants-appellants (City of Manila, its Mayor, and Treasurer) demanded payment from Ah Nam of municipal license and permit fees totaling P2,066.25, including penalties, for doing business as a dealer in second-hand goods under City Ordinances Nos. 2699 and 3000, covering sales of the empty bags from 1951/1952 to 1957. Ah Nam refused payment, contending that disposing of the empty flour bags did not make him a dealer in second-hand goods. The parties submitted a stipulation of facts. It was also stipulated that Ah Nam had paid the 7% percentage tax on manufacturers and municipal license fees for his bakeries based on gross sales (which, for license fee purposes, were declared as from bakery products only, though adding the bag sales would not have changed the license fee amount due to the applicable ordinance schedule). The Court of First Instance of Manila ruled in favor of Ah Nam, declaring the sale of empty flour bags merely incidental to his bakery business and that he was not a dealer in used bags. The City of Manila appealed.

ISSUE

Whether, under the stipulated facts, Ah Nam is engaged in the business or trade of a dealer in second-hand goods, thereby subjecting him to the municipal license and permit fees required under City Ordinances Nos. 2699 and 3000 for such business.

RULING

No. The Supreme Court affirmed the lower court’s decision, holding that Ah Nam is not liable for the license and permit fees as a dealer in second-hand goods.
1. Under Section 752 of Ordinance No. 2699, a license is required only for a person engaged in the trade or business of a dealer. Citing precedent (City of Manila vs. Bugsuk Lumber Co.) and legal definitions, a “dealer” is “one who buys to sell again.” The stipulated facts show Ah Nam sold only the empty flour bags that had contained the flour he used in his bakery business. He was not engaged in the business of buying and selling empty flour bags; the sales were limited to bags from his own consumption. Therefore, he could not be considered a dealer under the ordinance.
2. The sale of the empty flour bags was merely incidental to his principal bakery business. It was not carried on as a separate or distinct trade or enterprise. The sale of bags depended entirely on the volume of flour consumed in his bakeries. He did not buy empty flour bags independently for resale, nor did he buy flour primarily to obtain the empty bags for sale; the purchase was for the utility of the flour in his bakery. Finding a use for the empty bags afterward was incidental.
3. Consequently, Ah Nam was also not obliged to pay the permit and license fees under Ordinance No. 3000, as that ordinance applies to persons engaged in a business, trade, or occupation, and he was not engaged in the business of buying and selling used flour bags.
The decision appealed from was affirmed, without costs.