GR L 18276; (January, 1967) (Digest)
G.R. No. L-18276 January 12, 1967
C. N. HODGES, petitioner-appellee, vs. THE MUNICIPAL BOARD OF THE CITY OF ILOILO; Honorable Rodolfo Ganzon, in his capacity as City Mayor of the City of Iloilo; and the CITY OF ILOILO, respondents-appellants.
FACTS
On June 7, 1960, the Municipal Board of the City of Iloilo enacted Ordinance 31, series of 1960, entitled “An Ordinance Imposing Municipal Tax On The Sale of Real Property Situated In The City of Iloilo.” The ordinance imposed a real property sales tax of one-half (1/2) of one percent (1%) of the contract price/consideration on any sale of real property in the city. The tax must be paid to the city treasurer within five days from the sale, and the payment receipt is made a requirement for the registration of the sale and transfer of ownership in the Office of the Register of Deeds. Penal sanctions are prescribed for violations. The ordinance took effect on July 1, 1960. Petitioner C.N. Hodges, engaged in buying and selling real estate in Iloilo, would be subject to the tax. Before the ordinance’s effectivity, on June 28, 1960, he filed an action for declaratory relief to test its validity. After the ordinance took effect, he paid taxes under it and amended his petition to include the City as a party and to seek reimbursement for the amounts paid. The respondents justified the ordinance under the city charter and Section 2 of the Local Autonomy Act (Republic Act 2264) and contended the petition stated no cause of action. The trial court annulled the ordinance and ordered reimbursement to Hodges. The respondents appealed.
ISSUE
1. Whether the trial court acquired jurisdiction despite the petitioner’s alleged failure to exhaust administrative remedies.
2. Whether Ordinance 31, series of 1960, of the City of Iloilo is ultra vires or beyond the corporate powers of the City to enact.
RULING
1. On the preliminary issue of exhaustion of administrative remedies, the Supreme Court ruled that the trial court properly acquired jurisdiction. The administrative remedy under Section 2 of the Local Autonomy Act, which allows the Secretary of Finance to suspend a tax ordinance if “unjust, excessive, oppressive or confiscatory,” does not apply because the petitioner challenged the ordinance on the ground that it was beyond the City’s corporate powers, a purely legal question. Furthermore, the Secretary’s authority is discretionary and not a mandatory prerequisite to court action. The defense of non-exhaustion was not posed in issue below and, in any case, pertains to absence of a cause of action, not jurisdiction. A justiciable controversy existed, ripe for judicial determination.
2. On the main issue, the Supreme Court ruled that the tax imposition itself is valid, but the condition making tax payment a requirement for registration of the sale and transfer of ownership is ultra vires.
* Validity of the Tax: Under Section 2 of the Local Autonomy Act, the grant of taxing power to chartered cities is plenary and covers everything except those specifically mentioned. The real property sales tax levied is not among the exceptions listed. Its public purpose, justness, and uniformity are not disputed. Therefore, the City of Iloilo had the authority to impose such a tax. This is consistent with the precedent set in C.N. Hodges vs. The Municipal Board of the City of Iloilo, et al., G.R. L-18129, January 31, 1963, which upheld a similar ordinance imposing a sales tax on motor vehicles.
* Invalidity of the Registration Condition: The portion of the ordinance that makes tax payment a prerequisite for the registration of the sale and transfer of ownership in the Register of Deeds is beyond the City’s power. The Legislature, through statutes like the Land Registration Act and Republic Act 456, has specified the minimum requirements for registering conveyances of real property. No entity other than the Legislature may add to these statutory requirements. By imposing an additional condition for registration, the municipal board effectively attempted to amend the law, a power it does not possess. This condition is severable from the rest of the ordinance.
The judgment of the trial court was MODIFIED. Ordinance 31, series of 1960, is declared VALID as to the imposition of the tax, but the portion prescribing tax payment as a requirement for registration and transfer of ownership is declared NULL and VOID.