G.R. No. L-24813 April 28, 1969
DR. HERMENEGILDO SERAFICA, plaintiff-appellant, vs. THE TREASURER OF ORMOC CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON. ESTEBAN C. CONEJOS, as Mayor of Ormoc City and ORMOC CITY, defendants-appellees.

FACTS

Plaintiff-appellant Dr. Hermenegildo Serafica, owner of the Serafica Sawmill, seeks the declaration of nullity of Ormoc City Ordinance No. 13, Series of 1964. The ordinance imposes a tax of five pesos (P5.00) for every one thousand board feet of lumber sold in Ormoc City. Pursuant to this ordinance, the City Treasurer levied and collected from Serafica the sum of P1,837.84 as tax on 367,568 board feet of lumber sold during the third quarter of 1964. The Court of First Instance of Leyte upheld the validity of the ordinance and dismissed Serafica’s complaint, prompting this direct appeal.

ISSUE

The main issue is whether Ormoc City Ordinance No. 13, Series of 1964, which imposes a tax on the sale of lumber, is valid and constitutional.

RULING

The Supreme Court AFFIRMED the decision of the lower court, upholding the validity of Ordinance No. 13. The Court ruled against the plaintiff-appellant on all grounds raised:
1. On the Authority to Tax: The Court held that the taxing power of Ormoc City under the Local Autonomy Act ( Republic Act No. 2264 ) is “broad” and “sufficiently plenary,” citing its previous decision in Ormoc Sugar Co. v. Municipal Board of Ormoc City. This power is broad enough to cover the imposition of a sales tax.
2. On Double Taxation: The Court distinguished between regulation (an exercise of police power) and taxation, noting they are different. It further stated that double taxation is not prohibited in the Philippines.
3. On the Tax Being Unfair or Oppressive: The Court found the appellant’s claim that the tax was unfair because it applied regardless of lumber category to be unsubstantiated. In the absence of proof, the presumption of validity of the ordinance stands.
4. On Lack of Public Hearing: The Court ruled that the Department of Finance Circular suggesting public hearings for tax ordinances is merely a suggestion, not an obligatory requirement. Non-compliance does not affect an ordinance’s validity.
5. On the Prohibition Against Taxing Forest Products: The Court distinguished the ordinance from invalid taxes on forest products. The tax here is imposed on the sale of lumber, not on the lumber itself as a forest product. It becomes due only upon sale, unlike the taxes struck down in cases like Golden Ribbon Lumber Co. v. City of Butuan, which were levied on the lumber produced regardless of sale.
6. On the Prohibition Against Percentage Taxes on Sales: The Court noted that the prohibition in the Local Autonomy Act against “any percentage tax on sales or other taxes in any form based thereon” applies only to municipalities and municipal districts, not to cities like Ormoc.
Therefore, the ordinance was declared valid and the decision of the lower court was affirmed, with costs against the plaintiff-appellant.