Title
Ferrer, Jr. vs. Bautista
Case
G.R. No. 210551
Decision Date
Jun 30, 2015
Petitioner challenged Quezon City ordinances imposing a socialized housing tax and garbage fee. SC upheld housing tax as constitutional but struck down garbage fee as discriminatory and excessive, ordering refunds.

Case Summary (G.R. No. 210551)

Substance and mechanics of the Socialized Housing Tax ordinance

  • Enacted October 17, 2011. Imposed a special assessment of 0.5% on assessed value of land in excess of Php100,000, to accrue to a special account in the General Fund for Quezon City’s socialized housing programs (land purchase/banking, improvement of facilities, land development, construction of core houses/sanitary cores/medium-rise buildings, financing PPP agreements with NHA). Effective for five years.
  • Contains a tax credit provision: taxpayers who dutifully pay the special assessment for five consecutive years may avail of a tax credit equivalent to total special assessment paid, spread over the 6th to 10th years in five equal 20% installments. Only registered owners who paid may avail; credits are not transferable to subsequent owners or successors.

Ordinance No. SP-2235 (Garbage Fee)

Substance and mechanics of the garbage fee ordinance

  • Enacted December 16, 2013; approved by the Mayor ten days later and set to take effect accordingly. Imposed an annual garbage fee on domestic households, condominium units, socialized housing projects/units, and high-rise residential developments, with rates tied to land area or floor area (schedules provided). Collection accrues to a special account under the General Fund solely for garbage collections. Penalty clause imposes 25% penalty plus 2% monthly interest for nonpayment.

Procedural posture: Respondents’ submissions and petitioner’s subsequent filings

Response and procedural filings

  • Respondents filed comment and urgent motion to dissolve the TRO on February 17, 2014. Petitioner filed Reply and Memorandum on March 3, 2014 and September 8, 2014. The Court considered procedural defenses raised by respondents and addressed jurisdictional and remedy issues before reaching substantive questions.

Jurisdictional and procedural issues — Nature of remedy and Rule 65 propriety

Proper remedy and Court’s exercise of original jurisdiction

  • Respondents argued Rule 65 was improper because they performed legislative functions, not judicial/quasi-judicial acts. The Court agreed the ordinances were legislative acts; however, petitioner’s relief sought a declaration of unconstitutionality and prohibition of enforcement, which called for an effective remedy. The Court treated the petition as one in the nature of prohibition/mandamus under Rule 65 because the practical relief sought was to prevent further enforcement; it recognized that the Mayor, Treasurer, and Assessor perform ministerial functions in collecting/executing the ordinances and thus could be subject to such relief. The Court also noted it may exercise original jurisdiction over declaratory matters of transcendental importance or where immediate resolution is required for public interest.

Locus standi of petitioner

Standing and party-in-interest analysis

  • Respondents challenged petitioner’s standing for not alleging specifics on assessed value or taxpayer status. The Court found petitioner had standing: he was a registered co-owner, paid property tax which included the SHT and garbage fee, and thus had a present, substantial interest (right to refund and to prevent future imposition). His claim was sufficient to challenge the ordinances’ constitutionality on behalf of similarly situated owners.

Litis pendentia (existence of pending related cases)

Allegation of litis pendentia and Court’s finding

  • Respondents cited an earlier Quezon City RTC civil case challenging SP-2095 (Alliance of Quezon City Homeowners, Inc. v. Bautista) and sought dismissal on litis pendentia grounds. The Court found respondents failed to attach pleadings and, even assuming some identity of parties, the requisites for litis pendentia (identity of parties, identity of rights and reliefs, and that judgment in one would be res judicata in the other) were not established. Dismissal on litis pendentia was denied.

Requirement to exhaust administrative remedies under LGC Section 187

Exhaustion of administrative remedies exception

  • Respondents argued petitioner failed to appeal to the Secretary of Justice under Section 187 of the LGC prior to court action. The Court recalled precedent that Section 187’s timelines are generally mandatory but recognized exceptions where the case raises pure questions of law or transcendental public interest and requires immediate resolution. The Court exercised discretion to relax exhaustion requirement owing to the novel legal issues and broad public impact.

Substantive issues framed by the parties

Core substantive challenges and competing rationales

  • Petitioner’s contentions: the SHT and garbage fee improperly shift to property owners financial responsibility for services and housing that should be funded from existing revenue sources and IRA; SHT is effectively a penalty and discriminatory/class legislation favoring informal settlers; garbage fee is double taxation and inconsistent with R.A. No. 9003 (Ecological Solid Waste Management Act) by emphasizing collection rather than required segregation programs and barangay-level roles; also alleged publication noncompliance.
  • Respondents’ contentions: ordinances presumed constitutional; SHT is authorized by Section 43 of R.A. No. 7279 (UDHA) and grounded in social justice and police power; ordinances are reasonable and nondiscriminatory; garbage fee is a regulatory fee (not a tax), within city police power and general welfare clause, and properly enacted under LGC; publication/effectivity complied with where ordinance provides its own effectivity provision.

Legal standards applied by the Court — municipal ordinances, taxing/fee powers, and relevant constitutional/statutory provisions

Governing constitutional and statutory framework

  • The Court reiterated that municipal ordinances carry a presumption of validity but must conform to the Constitution and national statutes, be reasonable, nondiscriminatory, not oppressive, and be passed in accordance with required procedures. Under the 1987 Constitution (Art. X, Sec. 5) and the LGC (RA 7160), LGUs have delegated taxing powers subject to statutory guidelines and limitations. Relevant LGC provisions cited include Sections 16 (general welfare/police powers), 59, 130, 132, 133, 151, 168, 186, 187, and 188. Statutory authorizations specifically relevant are Section 43 of RA 7279 (UDHA) for SHT and Sections 46–47 and other provisions of RA 9003 (Ecological Solid Waste Management Act) for waste-fee authority and SWM Funds.

Court’s analysis and ruling on the Socialized Housing Tax

Validation of the Socialized Housing Tax under UDHA and police power

  • The Court sustained the constitutionality and legality of Ordinance No. SP-2095. Reasoning: (1) Section 43 of RA 7279 expressly authorizes LGUs to impose an additional 0.5% tax on assessed value of lands in urban areas in excess of P50,000 to fund socialized housing; Quezon City’s ordinance adopts a higher threshold (P100,000) and a tax rate within statutory allowance; (2) the City’s stated public purposes (urban renewal, removal of blight, provision of socialized housing and services) align with UDHA goals and the social function of property recognized under the Constitution; (3) the measure is characterized as exercise of police power with regulatory purpose toward general welfare and not an arbitrary confiscation; (4) the ordinance is reasonable, nondiscriminatory (classification between owners and informal settlers is rational and germane to purpose), and even provides relief in the form of a tax credit mechanism. The TRO was lifted as to SP-2095.

Court’s analysis and ruling on the Garbage Fee

Invalidation of the garbage fee ordinance for inequitable classification and other defects

  • The Court declared Ordinance No. SP-2235 unconstitutional and illegal, and permanently enjoined its enforcement. Key findings: (1) while LGUs have authority under the LGC and RA 9003 to regulate solid waste management and impose reasonable fees limited to specified SWM functions, the challenged ordinance’s fee schedule is unjust and inequitable and violates equal protection and LGC principles requiring taxes/fees to be equitable and based on ability to pay; (2) the ordinance’s rate structure—tying fees to land area or floor area and applying disparate rates between similar occupants (e.g., condominium unit occupants versus lot occupants)—does not reasonably measure waste generation nor correspond to statutory fee-basis factors (types/volume/distance/capacity/costs/technology) articulated under RA 9003 and its IRR; (3) the ordinance’s classifications are not germane to its declared objective of promoting shared responsibility and waste reduction; (4) the penalty clause lacks the statutory limitation in LGC Section 168 (interest cap over 36 months); (5) the recor

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