G.R. No. L-37251 - City of Manila vs. Gomez

The case involves the City of Manila and its City Treasurer imposing an additional one-half percent (1/2%) realty tax on real properties, raising the total tax rate to three percent (3%).
Under Section 64 of the Revised Charter of Manila (Republic Act No. 409, effective June 18, 1949), the annual realty tax was fixed at one and one-half percent (1-1/2%).
The Special Education Fund Law (Republic Act No. 5447, effective January 1, 1969) imposed an additional one percent (1%) tax on the assessed value of real property, with the condition that the total realty tax not exceed three percent (3%).

Ordinance No. 7125, approved by the city mayor on December 26, 1971 and effective from the third quarter of 1972, imposed the additional one-half percent tax to satisfy the maximum tax limitation.
The ordinance declared:

“SECTION 1. An additional annual realty tax of one-half percent (1/2%), or in short a total of three percent (3%) realty tax (1-1/2% pursuant to the Revised Charter of Manila; 1% per Republic Act No. 5447; and 1/2% per this Ordinance) on the assessed value … is hereby levied and imposed.”

Esso Philippines, Inc. paid under protest the sum of P16,092.69 as the additional one-half percent tax for the third quarter of 1972 on its land and machineries located in Manila.
On November 9, 1972, Esso filed a complaint in the Court of First Instance of Manila seeking recovery of the taxed amount, arguing that the additional tax lacked statutory authorization from either the city charter or any applicable law.
The trial court, after hearing the evidence, declared the tax ordinance void and ordered the city treasurer to refund Esso the amount paid.

The City of Manila and its treasurer appealed the decision under Republic Act No. 5440.
Petitioners later argued that the tax ordinance was still in force, citing Ordinance No. 7566 (enacted on September 10, 1974), which imposed a two percent tax on commercial real properties, with the combined tax (including the one percent for the Special Education Fund) totaling three percent.
Esso Philippines, Inc. (now Petrophil Corporation) testified that it had consistently been paying the additional one-half percent tax, amounting to a total of P4,206,240.71 from 1975 to 1980 as part of the three percent realty tax.
Section 39(2) of the Real Property Tax Code (Presidential Decree No. 464, effective June 1, 1974) allows a city council to impose a realty tax “of not less than one-half of one percent but not more than two percent of the assessed value of real property,” while Section 41 confirms the one percent tax earmarked for the Special Education Fund.
The central controversy focuses on the legality of the additional one-half percent realty tax for the period from the third quarter of 1972 up to the second quarter of 1974.

Whether the additional one-half percent realty tax imposed by Ordinance No. 7125 was authorized by law or the city charter.
Whether the imposition of the additional tax violates the statutory provisions, given that the Revised Charter of Manila fixed the tax at one and one-half percent and the Special Education Fund Law contemplated a maximum total realty tax of three percent.

Whether Section 4 of the Special Education Fund Law, by capping the total realty tax at three percent and earmarking one percent for the education fund, implicitly authorizes an additional one-half percent tax.
The role of the Real Property Tax Code in clarifying the municipal power to levy taxes within prescribed limits.