City Of Cavite V Hon.docx

City of Cavite, et. al. v Hon .Honorable Judge, et al. GR. No. 72614, October 10, 1922, (J. Paras) Facts: Petitioners argue that since all establishments of amusement within Cebu City are subject to the same rate of taxes imposed by sections 57 and 65 (G), the rule on uniformity of taxation is not violated. Section 23, second paragraph of the Local Tax Code states: "The rates of the taxes, fees, or other impositions that the city shall fix may exceed the maximum rates allowed for the province or municipality by not more than fifty percent, except the rates of the taxes and fees provided in Section 12, 13, 14, 15-A and 19(A-5) in Chapter II of this Code which shall be uniform for the city and the province or municipality as the case maybeCity of Cebu passed Ordinances I and II which were submitted to the respondents Secretary and Acting Finance for review. After review, respondents ordered the suspension of the following provisions: A. Tax Ordinance No.1 Section 57 – Social Ameliration Tax, Section 65 Fixed Tax on Business, (Tax on amusement places) Reason for suspension – Violation of uniformity of taxation required by Sec. 13 of P.D. 231 Section 74 - Food and Drugs Fee – to be collected from sari sari store, food establishments, drugstores, etc. Reason for suspension – Unauthorized by PD 231 Storage fees, for attached properties stored in the Office of the City Sheriff Reason for suspension – Fees are excessive, violating Sec 2(d) of PD 231 Fish Inpection Fees Reason for suspension – Fees are in restraint of trade violating P.D 231.. Tax Ordinance No. 2 Section 1 – Imposed a city of tax 0.30 for every case of beer or ten cans sold in Cebu. Reason for suspension – This tax was withdrawn by PD 426. As regards the first group, we hold that petitioners herein have no cause of action to assail the legality of the contested warrants and of the seizures made in pursuance thereof, for the simple reason that said corporations have their respective personalities, separate and distinct from the personality of herein petitioners, regardless of the amount of shares of stock or of the interest of each of them in said corporations, and whatever the o􀁈ces they hold therein may be.Social Ameliration Tax, Section 65 Fixed Tax on Business, (Tax on amusement places) Reason for suspension – Violation of uniformity of taxation required by Sec. 13 of P.D. 231 Section 74 - Food and Drugs Fee – to be collected from sari sari store, food establishments, drugstores, From the aforesaid order of suspension, petitioners filed a petition for review in the Court of First Instance of Cebu which rendered judgment to nullify Tax Ordinance No. 1 and No. 2. Petitioners appealed to Court of Appeals which affirmed the lower court’s decision. Issue: Whether or not the Intermediate Appellate Court is correct Ruling: Yes. Petition Denied.

The legality of a seizure can be contested only by the party whose rights have been impaired thereby, and that the objection to an unlawful search and seizure is purely personal and cannot be availed of by third parties. In Stonehill, et al. vs. Diokno, et al. (GR L-19550, 19 June 1967; 20 SCRA 383) the Supreme Court impliedly recognized the right of a corporation to object against unreasonable searches and seizures; holding that the corporations have their respective personalities, separate and distinct from the personality of the corporate officers, regardless of the amount of shares of stock or the interest of each of them in said corporations, whatever, the offices they hold therein may be; and that the corporate officers therefore may not validly object to the use in evidence against them of the documents, papers and things seized from the offices and premises of the corporations, since the right to object to the admission of said papers in evidence belongs exclusively to the corporations, to whom the seized effects belong, and may not be invoked by the corporate officers in proceedings against them in their individual capacity. The distinction between the Stonehill case and the present case is that: in the former case, only the officers of the various corporations in whose offices documents, papers and effects were searched and seized were the petitioners; while in the latter, the corporation to whom the seized documents belong, and whose rights have thereby been impaired, is itself a petitioner. On that score, the corporation herein stands on a different footing from the corporations in Stonehill. Moreover, herein, the search warrant was void inasmuch as First, there was no personal examination conducted by the Judge of the complainant (De Leon) and his witness (Logronio). The Judge did not ask either of the two any question the answer to which could possibly be the basis for determining whether or not there was probable cause against Bache & Co. and Seggerman. The participation of the Judge in the proceedings which led to the issuance of Search Warrant 2-M-70 was thus limited to listening to the stenographer’s readings of her notes, to a few words of warning against the commission of perjury, and to administering the oath to the complainant and his witness. This cannot be consider a personal examination. Second, the search warrant was issued for more than one specific offense. The search warrant was issued for at least 4 distinct offenses under the Tax Code. The first is the violation of Section 46(a), Section 72 and Section 73 (the filing of income tax returns), which are interrelated. The second is the violation of Section 53 (withholding of income taxes at source). The third is the violation of Section 208 (unlawful pursuit of business or occupation); and the fourth is the violation of Section 209 (failure to make a return of receipts, sales, business or gross value of output actually removed or to pay the tax due thereon). Even in their classification the 6 provisions are embraced in 2 different titles: Sections 46(a), 53, 72 and 73 are under Title II (Income Tax); while Sections 208 and 209 are under Title V (Privilege Tax on Business and Occupation).

Lastly, the search warrant does not particularly describe the things to be seized. Search Warrant No. 2-M-70 tends to defeat the major objective of the Bill of Rights, i.e., the elimination of general warrants, for the language used therein is so all-embracing as to include all conceivable records of the corporation, which, if seized, could possibly render its business inoperative. Thus, Search Warrant 2-M-70 is null and void. Petitioners assert that the City of Cebu has the authority or power to impose the food and drug fees and charges provided for in section 74(Q) of Tax Ordinance No. 1 even though sari-sari stores and drug store are already taxed under sec. 65-a, par. 2 of the ordinance as retailers, and food establishments are also already taxed under sec. 65-b of the same ordinance as manufacturers. The reason being that this kind of business requires close supervision and control which would justify the imposition of higher and additional regulatory fees. Section 36 of the Local Tax Code provides as follows: Sec. 36 Permit fee - The local government may collect a fee sufficient to cover the cost of regulation, inspection and surveillance relative to the issuance of a permit which shall be required of an individual or any juridical entity before the same shall engage in any business or occupation under the provisions of this Code. As correctly observed by respondent Court, the law (Section 36) contemplates a single fee for the issuance of a permit to engage in any business or occupation. But Sec. 74 (Q) of Tax Ordinance No. 1 imposes another permit fee on foods and drugs establishments. As a result, the taxpayer will have to pay another permit fee for conducting the same business in the same city. Such multiple imposition of permit fees is unreasonable and oppressive and is definitely not sanctioned by the Local Tax Code As illustrated by respondent court in its assailed decision, quoting the observation of the trial court, a typewriter with a fair market value of P3,000.00 will have to pay a sheriff's storage fee of P5.00 a day. Thus, it would take only 600 days, or less than two years, for the typewriter to completely eat up its value on account of storage fees. Being excessive and confiscatory, the suspension of the imposition of storage fees by the lower court was correct. Petitioners assail the aforesaid ruling pointing out that the said provision is not against the fishermen but rather against the traders and fish vendors, and that the rate of imposition is very minimal it being fixed at P0.03 per kilo of fish only. This contention is not correct. Sec. 5(K) of the Local Tax Code limits the taxing powers of Local governments as follows "Sec. 5. Common limitations on the taxing powers of local governments - The exercise of the taxing powers of provinces cities, municipalities and barrios shall not extend to the imposition of the following: (K) Taxes or fees on agricultural products when sold by the farmers or producers thereof, whether in their original form or not" The aforequoted provision prohibits a local government from imposing an inspection fee on agricultural products and fish is an agricultural product. Contrary to the claim of petitioners, under Section 102 of City Ordinance No. 1 a fisherman selling his fish within the city has to pay the inspection fee of P0.03 for every kilo of fish sold. Furthermore, the imposition of the tax will definitely restrict the free flow of fresh fish to Cebu City because the price of fish will have to increase. The lower court held that City Tax Ordinance No. 11 imposing a tax on the sale of beer is not within the taxing power of Cebu City.This ruling according to petitioners is erroneous because the City of Cebu is empowered by Sec. 24 of the Local Tax Code, as amended to impose this kind of tax. Again, the said contention of petitioners is not tenable. True, under the original provisions of Section 24 of the Local Tax Code, a city could levy taxes on articles already subject to specific tax under the provisions of

the National Internal Revenue Code provided the rate imposed by the City did not exceed 25% of the rates provided by the National Internal Revenue Code. But Section 24 was subsequently amended by PD 426 to read as follows – "SEC 24. Additional taxing powers The city may levy any tax, fee or other imposition not specifically enumerated or otherwise provided for in this Code, subject to the provisions of section 49 and 50 of this Code as herein amended." This power to tax articles subject to specific tax which was expressly granted to cities by the original provisions of section 24, was deleted in the amendment. The said section 24, as it now reads, merely grants the city the power to "levy any tax, fee or other imposition not specifically enumerated or otherwise provided for" in the Local Tax Code. The amendment evinces the intent of the lawmaker to remove such taxing authority (on articles already subject to the national specific tax) from the cities like Cebu City.