MISAEL P. VERA, vs. HON. JOSE F.

FERNANDEZ, Judge

Two orders of the Court of First Instance of Negros Occidental, Branch V in Special Proceedings No. 7794, entitled: "Intestate
Estate of Luis D. Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of Claim and for an Order of Payment
of Taxes by the Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency income
taxes

The claim represents the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in the total sum
of P3,254.80. The Administrator opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the
Rules of Court

ISSUE:

whether or not the statute of non-claims Section 5, Rule 86 of the New Rule of Court, bars claim of the government for unpaid taxes,
still within the period of limitation prescribed in Section 331 and 332 of the National Internal Revenue Code.

HELD: NO

The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application
of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability
are imperious need. (Commissioner of Internal Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon
taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest,
neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment
to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the
presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect
to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the
operation of the principle of estoppel.

Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing the last paragraph of Section 315 of the Tax
Code payment of income tax shall be a lien in favor of the Government of the Philippines from the time the assessment was made
by the Commissioner of Internal Revenue until paid with interests, penalties, etc. By virtue of such lien, this court held that the
property of the estate already in the hands of an heir or transferee may be subject to the payment of the tax due the estate. A
fortiori before the inheritance has passed to the heirs, the unpaid taxes due the decedent may be collected, even without its having
been presented under Section 2 of Rule 86 of the Rules of Court. It may truly be said that until the property of the estate of the
decedent has vested in the heirs, the decedent, represented by his estate, continues as if he were still alive, subject to the payment
of such taxes as would be collectible from the estate even after his death. Thus in the case above cited, the income taxes sought
to be collected were due from the estate, for the three years 1946, 1947 and 1948 following his death in May, 1945.

The respondent estate's sole defense of prescription has been herein overruled, the Motion for Allowance of Claim is herein granted
and respondent estate is ordered to pay and discharge the same,
CITY GOVERNMENT OF QUEZON CITY vs. HON. JUDGE VICENTE G. ERICTA as Judge

Petition for review which seeks the reversal of the decision of the Court of First Instance declaring Section 9 of Ordinance No. 6118,
S-64, of the Quezon City Council null and void. provides: At least six (6) percent of the total area of the memorial park cemetery
shall be set aside for charity burial of deceased persons who are paupers and have been residents of Quezon City. For several
years, the aforequoted section of the Ordinance was not enforced by city authorities but seven years after the enactment of the
ordinance, the Quezon City Council passed the following resolution: RESOLVED by the council of Quezon assembled, to request,
as it does hereby request the City Engineer, Quezon City, to stop any further selling and/or transaction of memorial park lots in
Quezon City where the owners thereof have failed to donate the required 6% space intended for paupers burial.

Petitioners argue that the taking of the respondent's property is a valid and reasonable exercise of police power and that the land
is taken for a public use as it is intended for the burial ground of paupers

Respondent Himlayang Pilipino, Inc. contends that the taking or confiscation of property is obvious because the questioned
ordinance permanently restricts the use of the property such that it cannot be used for any reasonable purpose and deprives the
owner of all beneficial use of his property. Respondent also stresses that the general welfare clause is not available as a source of
power for the taking of the property in this case because it refers to "the power of promoting the public welfare by restraining and
regulating the use of liberty and property."

WON THE ORDINANCE IS VALID

HELD: NO

The power to regulate does not include the power to prohibit (People vs. Esguerra, 81 PhiL 33, Vega vs. Municipal Board of Iloilo,
L-6765, May 12, 1954; 39 N.J. Law, 70, Mich. 396). A fortiori, the power to regulate does not include the power to confiscate. The
ordinance in question not only confiscates but also prohibits the operation of a memorial park cemetery, because under Section 13
of said ordinance, 'Violation of the provision thereof is punishable with a fine and/or imprisonment and that upon conviction thereof
the permit to operate and maintain a private cemetery shall be revoked or cancelled.' The confiscatory clause and the penal provision
in effect deter one from operating a memorial park cemetery.

WON Section 9 of the ordinance in question is a valid exercise of police power? NO

There are three inherent powers of government by which the state interferes with the property rights, namely-. (1) police power, (2)
eminent domain, (3) taxation. These are said to exist independently of the Constitution as necessary attributes of sovereignty.

Police power is defined by Freund as 'the power of promoting the public welfare by restraining and regulating the use of liberty and
property. It is usually exerted in order to merely regulate the use and enjoyment of property of the owner. If he is deprived of his
property outright, it is not taken for public use but rather to destroy in order to promote the general welfare. In police power, the
owner does not recover from the government for injury sustained in consequence thereof. It has been said that police power is the
most essential of government powers, at times the most insistent, and always one of the least limitable of the powers of government.
This power embraces the whole system of public regulation. The Supreme Court has said that police power is so far-reaching in
scope that it has almost become impossible to limit its sweep. As it derives its existence from the very existence of the state itself,
it does not need to be expressed or defined in its scope. Being coextensive with self-preservation and survival itself, it is the most
positive and active of all governmental processes, the most essential insistent and illimitable Especially it is so under the modern
democratic framework where the demands of society and nations have multiplied to almost unimaginable proportions. The field and
scope of police power have become almost boundless, just as the fields of public interest and public welfare have become almost
all embracing and have transcended human foresight. Since the Courts cannot foresee the needs and demands of public interest
and welfare, they cannot delimit beforehand the extent or scope of the police power by which and through which the state seeks to
attain or achieve public interest and welfare.

The police power being the most active power of the government and the due process clause being the broadest station on
governmental power, the conflict between this power of government and the due process clause of the Constitution is oftentimes
inevitable.

It will be seen from the foregoing authorities that police power is usually exercised in the form of mere regulation or restriction in the
use of liberty or property for the promotion of the general welfare. It does not involve the taking or confiscation of property with the
exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the purpose of protecting
the peace and order and of promoting the general welfare as for instance, the confiscation of an illegally possessed article, such as
opium and firearms.

It seems to the court that Section 9 of Ordinance No. 6118, Series of 1964 of Quezon City is not a mere police regulation but an
outright confiscation. It deprives a person of his private property without due process of law, nay, even without compensation.
There is no reasonable relation between the setting aside of at least six (6) percent of the total area of an private cemeteries for
charity burial grounds of deceased paupers and the promotion of health, morals, good order, safety, or the general welfare of the
people. The ordinance is actually a taking without compensation of a certain area from a private cemetery to benefit paupers who
are charges of the municipal corporation. Instead of building or maintaining a public cemetery for this purpose, the city passes the
burden to private cemeteries.

The expropriation without compensation of a portion of private cemeteries is not covered by Section 12(t) of Republic Act 537, the
Revised Charter of Quezon City which empowers the city council to prohibit the burial of the dead within the center of population of
the city and to provide for their burial in a proper place subject to the provisions of general law regulating burial grounds and
cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in Section 177 (q) that a Sangguniang
panlungsod may "provide for the burial of the dead in such place and in such manner as prescribed by law or ordinance" it simply
authorizes the city to provide its own city owned land or to buy or expropriate private properties to construct public cemeteries. This
has been the law and practise in the past. It continues to the present. Expropriation, however, requires payment of just
compensation. The questioned ordinance is different from laws and regulations requiring owners of subdivisions to set aside certain
areas for streets, parks, playgrounds, and other public facilities from the land they sell to buyers of subdivision lots. The necessities
of public safety, health, and convenience are very clear from said requirements which are intended to insure the development of
communities with salubrious and wholesome environments. The beneficiaries of the regulation, in turn, are made to pay by the
subdivision developer when individual lots are sold to home-owners.

As a matter of fact, the petitioners rely solely on the general welfare clause or on implied powers of the municipal corporation, not
on any express provision of law as statutory basis of their exercise of power. The clause has always received broad and liberal
interpretation but we cannot stretch it to cover this particular taking. Moreover, the questioned ordinance was passed after
Himlayang Pilipino, Inc. had incorporated. received necessary licenses and permits and commenced operating. The sequestration
of six percent of the cemetery cannot even be considered as having been impliedly acknowledged by the private respondent when
it accepted the permits to commence operations

.
VELASCO VS VILLEGAS

This is an appeal from an order of the lower court dismissing a suit for declaratory relief challenging the constitutionality based on
Ordinance No. 4964 of the City of Manila, the contention being that it amounts to a deprivation of property of petitioners-appellants
of their means of livelihood without due process of law. The assailed ordinance is worded thus: "It shall be prohibited for any operator
of any barber shop to conduct the business of massaging customers or other persons in any adjacent room or rooms of said barber
shop, or in any room or rooms within the same building where the barber shop is located as long as the operator of the barber shop
and the room where massaging is conducted is the same person."

WON IT IS A POLICE POWER MEASURE?

HELD: YES

It is a police power measure. The objectives behind its enactment are: "(1) To be able to impose payment of the license fee for
engaging in the business of massage clinic under Ordinance No. 3659 as amended by Ordinance 4767, an entirely different
measure than the ordinance regulating the business of barbershops and, (2) in order to forestall possible immorality which might
grow out of the construction of separate rooms for massage of customers." 3 This Court has been most liberal in sustaining
ordinances based on the general welfare clause.

As far back as U.S. v. Salaveria, 4 a 1918 decision, this Court through Justice Malcolm made clear the significance and scope of
such a clause, which "delegates in statutory form the police power to a municipality. As above stated, this clause has been given
wide application by municipal authorities and has in its relation to the particular circumstances of the case been liberally construed
by the courts.
TIO VS VIDEOGRAM

PETITIONER assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory
Board" with broad powers to regulate and supervise the videogram industry

On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No. 1994 amended the
National Internal Revenue Code providing, SEC. 134. Video Tapes. — There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or imported
blank video tapes shall be subject to sales tax.

WON THE TAX IMPOSED IS VALID?

HELD: YES

The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization that earnings of
videogram establishments of around P600 million per annum have not been subjected to tax, thereby depriving the Government of
an additional source of revenue. It is an end-user tax, imposed on retailers for every videogram they make available for public
viewing. It is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-owners pay to the
government, but which is passed on to the entire cost of the admission ticket, thus shifting the tax burden on the buying or the
viewing public. It is a tax that is imposed uniformly on all videogram operators.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry,
particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid
imposition.

The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one
industry over another. 11

It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities
which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation". 12 Taxation has
been made the implement of the state's police power.13
ORTIGAS VS FEATI

Plaintiff (formerly known as "Ortigas, Madrigal y Cia") is a limited partnership and defendant Feati Bank and Trust Co., is a
corporation duly organized and existing in accordance with the laws of the Philippines. Plaintiff is engaged in real estate business,
developing and selling lots to the public, particularly the Highway Hills Subdivision along Epifanio de los Santos Avenue,
Mandaluyong, Rizal. 1

Plaintiff, as vendor, and Augusto Padilla y Angeles and Natividad Angeles, as vendees, entered into separate agreements of sale
on installments over two parcels of land.

Both the agreements (of sale on installment) and the deeds of sale contained the stipulations or restrictions that: 1. The parcel of
land subject of this deed of sale shall be used the Buyer exclusively for residential purposes, and she shall not be entitled to take
or remove soil, stones or gravel from it or any other lots belonging to the Seller. 2. All buildings and other improvements (except the
fence) which may be constructed at any time in said lot must be, (a) of strong materials and properly painted, (b) provided with
modern sanitary installations connected either to the public sewer or to an approved septic tank, and (c) shall not be at a distance
of less than two (2) meters from its boundary lines. 2

Eventually, defendant-appellee acquired Lots Nos. 5 and 6, with TCT Nos. 101613 and 106092 issued in its name, respectively and
the building restrictions were also annotated therein.

Plaintiff-appellant claims that the restrictions annotated on TCT Nos. 101509, 101511, 101719, 101613, and 106092 were imposed
as part of its general building scheme designed for the beautification and development of the Highway Hills Subdivision which forms
part of the big landed estate of plaintiff-appellant where commercial and industrial sites are also designated or established. 8

Defendant-appellee, upon the other hand, maintains that the area along the western part of Epifanio de los Santos Avenue (EDSA)
from Shaw Boulevard to Pasig River, has been declared a commercial and industrial zone, per Resolution No. 27, dated February
4, 1960 of the Municipal Council of Mandaluyong, Rizal. 9 It alleges that plaintiff-appellant 'completely sold and transferred to third
persons all lots in said subdivision facing Epifanio de los Santos Avenue" 10 and the subject lots thereunder were acquired by it
"only on July 23, 1962 or more than two (2) years after the area ... had been declared a commercial and industrial zone ...

ISSUE

whether or not the resolution of the Municipal Council of Mandaluyong declaring Lots Nos. 5 and 6, among others, as part of the
commercial and industrial zone of the municipality, prevailed over the building restrictions imposed by plaintiff-appellant on the lots
in question AS PER THEIR CONTRACT

HELD: YES

Resolution No. 27, s-1960 declaring the western part of highway 54, now E. de los Santos Avenue (EDSA, for short) from Shaw
Boulevard to the Pasig River as an industrial and commercial zone, was obviously passed by the Municipal Council of Mandaluyong,
Rizal in the exercise of police power to safeguard or promote the health, safety, peace, good order and general welfare of the
people in the locality.

It should be stressed, that while non-impairment of contracts is constitutionally guaranteed, the rule is not absolute, since it has to
be reconciled with the legitimate exercise of police power, i.e., "the power to prescribe regulations to promote the health, morals,
peace, education, good order or safety and general welfare of the people. 35 Invariably described as "the most essential, insistent,
and illimitable of powers" 36 and "in a sense, the greatest and most powerful attribute of government, 37 the exercise of the power
may be judicially inquired into and corrected only if it is capricious, 'whimsical, unjust or unreasonable, there having been a denial
of due process or a violation of any other applicable constitutional guarantee. 38 As this Court held through Justice Jose P. Bengzon
police power "is elastic and must be responsive to various social conditions; it is not, confined within narrow circumscriptions of
precedents resting on past conditions; it must follow the legal progress of a democratic way of life."

The scope of police power keeps expanding as civilization advances, stressed this Court, speaking thru Justice Laurel in the leading
case of Calalang v. Williams, 'the right to exercise the police power is a continuing one, and a business lawful today may in the
future, because of changed situation, the growth of population or other causes, become a menace to the public health and welfare,
and be required to yield to the public good.' And in People v. Pomar (46 Phil. 440), it was observed that 'advancing civilization is
bringing within the scope of police power of the state today things which were not thought of as being with in such power
yesterday. The development of civilization), the rapidly increasing population, the growth of public opinion, with an increasing desire
on the part of the masses and of the government to look after and care for the interests of the individuals of the state, have brought
within the police power many questions for regulation which formerly were not so considered.
Furthermore, We restated in Philippine American Life Ins. Co. v. Auditor General49 that laws and reservation of essential attributes
of sovereign power are read into contracts agreed upon by the parties. Thus — Not only are existing laws read into contracts in
order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into
contracts as a postulate of the legal order. The policy of protecting contracts against impairments presupposes the maintenance of
a government by virtue of which contractual relations are worthwhile – a government which retains adequate authority to secure
the peace and good order of society.

It is, therefore, clear that even if the subject building restrictions were assumed by the defendant-appellee as vendee of Lots Nos.
5 and 6, in the corresponding deeds of sale, and later, in Transfer Certificates of Title Nos. 101613 and 106092, the contractual
obligations so assumed cannot prevail over Resolution No. 27, of the Municipality of Mandaluyong, which has validly exercised its
police power through the said resolution. Accordingly, the building restrictions, which declare Lots Nos. 5 and 6 as residential,
cannot be enforced.
CIR V PALANCA

This is an appeal by the Government from the decision of the Court of Tax Appeals in CTA Case No. 571 ordering the petitioner to
refund to PALANCA representing alleged overpayment of income taxes. The petitioner filed with the Bureau of Internal Revenue
his income tax return, claiming, among others, a deduction for interest. Subsequently, the petitioner filed an amended return,
claiming therein an additional deduction representing interest paid on the donee’s gift tax. The claim for deduction was based on
the provisions of Section 30(b)(1) of the Tax Code, which authorizes the deduction from gross income of interest paid within the
taxable year on indebtedness. A claim for the refund of alleged overpaid income taxes is the difference between the amounthe paid
as income taxes under his original return

The Commissioner of Internal Revenue now seeks the reversal of the Court of Tax Appeal’s ruling on the aforementioned petition
for review. Specifically, he takes issue with the said court’s determination that the amount paid by respondent Palanca for interest
on his delinquent estate and inheritance tax is deductible from the gross income for that year under section 30(b)(1) of the Revenue
Code, and, that said respondent’s claim for refund therefor has not prescribed.

The Commissioner urges that a tax is not an indebtedness. Citing American cases, he argues that there is a material and
fundamental distinction between a "tax" and a "debt.". He adopts the view that "debts are due to the government in its corporate
capacity, while taxes are due to the government in its sovereign capacity. A debt is a sum of money due upon contract express or
implied or one which is evidenced by a judgment. Taxes are imposts levied by government for its support or some special purpose
which the government has recognized." In view of the distinction, then, the Commissioner submits that the deductibility of "interest
on indebtedness" from a person’s income tax under section 30(b)(1) cannot extend to "interest on taxes."

ISSUE:

WON THE INDEBTEDNESS BE CONSODERED AS A DEUCTIBLE ITEM IN THE INCOME TAX RETURN

HELD: YES

We find for the respondents. While "taxes" and "debt" are distinguishable legal concepts, in certain cases as in the suit at bar, on
account of their nature, the distinction becomes inconsequential. This qualification is recognized even in the United States. Thus,
"The term ‘debt’ is properly used in a comprehensive sense as embracing not merely money due by contract, but whatever one is
bound to render to another, either for contract or the requirements of the law.

"Where statutes impose a personal liability for a tax, the tax becomes at least in a broad sense, a debt."

In our jurisdiction, the rule is settled that although taxes already due have not, strictly speaking, the same concept as debts, they
are, however, obligations that may be considered as such. (Sambrano v. Court of Tax Appeals, 101 Phil. 1). In a more recent case,
Commissioner of Internal Revenue v. Prieto, 109 Phil. 592, we explicitly announced that while the distinction between "taxes" and
"debts" was recognized in this jurisdiction, the variance in their legal conception does not extend to the interests paid on them, at
least insofar as Section 30(b) (1) of the National Internal Revenue Code is concerned.

"Under the law, for interest to be deductible, it must be shown that there be an indebtedness, that there should be interest upon it,
and that what is claimed as an interest deduction should have been paid or accrued within the year. It is here conceded that the
interest paid by respondent was in consequence of the late payment of her donor’s tax, and the same was paid within the year it is
sought to be deducted. The only question to be determined, as stated by the parties, is whether or not such interest was paid upon
an indebtedness within the contemplation of Section (30) (b) (1) of the Tax Code

Within the meaning of that definition it is apparent that a tax may be considered an indebtedness. ‘It follows that the interest paid
by herein respondent for the late payment of her donor’s tax is deductible from her gross income under Section 30(b) of the Tax
Code above-quoted.’"
PROGRESSIVE DEVELOPMENT CORPORATION vs. QUEZON CITY

The City Council of respondent Quezon City adopted Ordinance No. 7997, Series of 1969, otherwise known as the Market Code of
Quezon City, Section 3 of which provided: Sec. 3. Supervision Fee.- Privately owned and operated public markets shall submit
monthly to the Treasurer's Office, a certified list of stallholders showing the amount of stall fees or rentals paid daily by each
stallholder, ... and shall pay 10% of the gross receipts from stall rentals to the City, ... , as supervision fee.

Petitioner Progressive Development Corporation, owner and operator of a public market known as the "Farmers Market & Shopping
Center" filed a Petition for Prohibition with Preliminary Injunction against respondent before the then Court of First Instance of Rizal
on the ground that the supervision fee or license tax imposed by the above-mentioned ordinances is in reality a tax on income which
respondent may not impose, the same being expressly prohibited by Republic Act No. 2264, Local Autonomy Act

Respondent, through the City Fiscal, contended that it had authority to enact the questioned ordinances, maintaining that the tax
on gross receipts imposed therein is not a tax on income. The Solicitor General also filed an Answer arguing that petitioner, not
having paid the ten percent (10%) supervision fee prescribed by Ordinance No. 7997, had no personality to question, and was
estopped from questioning, its validity; that the tax on gross receipts was not a tax on income but one imposed for the enjoyment
of the privilege to engage in a particular trade or business which was within the power of respondent to impose.

ISSUE: whether the tax imposed by respondent on gross receipts of stall rentals is properly characterized as partaking of the nature
of an income tax or, alternatively, of a license fee.

HELD;

The scope of legislative authority conferred upon the Quezon City Council in respect of businesses like that of the petitioner, is
comprehensive: the grant of authority is not only" [to] regulate" and "fix the license fee," but also " to tax"
It is now settled that Republic Act No. 2264 confers upon local governments broad taxing authority extending to almost "everything,
excepting those which are mentioned therein," provided that the tax levied is "for public purposes, just and uniform," does not
transgress any constitutional provision and is not repugnant to a controlling statute. 7 Both the Local Autonomy Act and the Charter
of respondent clearly show that respondent is authorized to fix the license fee collectible from and regulate the business of petitioner
as operator of a privately-owned public market.

Petitioner, however, insist that the "supervision fee" collected from rentals, being a return from capital invested in the construction
of the Farmers Market, practically operates as a tax on income, one of those expressly excepted from respondent's taxing authority,
and thus beyond the latter's competence.

The term "tax" frequently applies to all kinds of exactions of monies which become public funds. It is often loosely used to include
levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is
a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation,
while the latter is imposed under the taxing power primarily for purposes of raising revenues. 9 Thus, if the generating of revenue
is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact
that incidentally revenue is also obtained does not make the imposition a tax. 10

To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest
in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the
imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of
direct regulation but also its incidental consequences as well. 11 When an activity, occupation or profession is of such a character
that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health,
morals and safety, or the general welfare, the legislature may provide that such inspection or supervision or other form of regulation
shall be carried out at the expense of the persons engaged in such occupation or performing such activity, and that no one shall
engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision
has been paid. 12 Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may
be held to be a tax rather than an exercise of the police power. 13

In the case at bar, the "Farmers Market & Shopping Center" was built by virtue of Resolution No. 7350 passed on 30 January 1967
by respondents's local legislative body authorizing petitioner to establish and operate a market with a permit to sell fresh meat, fish,
poultry and other foodstuffs. 14 The same resolution imposed upon petitioner, as a condition for continuous operation, the obligation
to "abide by and comply with the ordinances, rules and regulations prescribed for the establishment, operation and maintenance of
markets in Quezon City." 15

The "Farmers' Market and Shopping Center" being a public market in the' sense of a market open to and inviting the patronage of
the general public, even though privately owned, petitioner's operation thereof required a license issued by the respondent City, the
issuance of which, applying the standards set forth above, was done principally in the exercise of the respondent's police power
We believe and so hold that the five percent (5%) tax imposed in Ordinance No. 9236 constitutes, not a tax on income, not
a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the
meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of the business in which the
petitioner is engaged. While it is true that the amount imposed by the questioned ordinances may be considered in determining
whether the exaction is really one for revenue or prohibition, instead of one of regulation under the police power, 18 it nevertheless
will be presumed to be reasonable. Local' governments are allowed wide discretion in determining the rates of imposable license
fees even in cases of purely police power measures, in the absence of proof as to particular municipal conditions and the nature of
the business being taxed as well as other detailed factors relevant to the issue of arbitrariness or unreasonableness of the
questioned rates

Petitioner has not shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly
disproportionate to the costs of the regulatory service being performed by the respondent as to compel the Court to characterize
the imposition as a revenue measure exclusively. The lower court correctly held that the gross receipts from stall rentals have been
used only as a basis for computing the fees or taxes due respondent to cover the latter's administrative expenses, i.e., for regulation
and supervision of the sale of foodstuffs to the public. The use of the gross amount of stall rentals as basis for determining the
collectible amount of license tax, does not by itself, upon the one hand, convert or render the license tax into a prohibited city tax
on income. Upon the other hand, it has not been suggested that such basis has no reasonable relationship to the probable costs of
regulation and supervision of the petitioner's kind of business. For, ordinarily, the higher the amount of stall rentals, the higher the
aggregate volume of foodstuffs and related items sold in petitioner's privately owned market; and the higher the volume of goods
sold in such private market, the greater the extent and frequency of inspection and supervision that may be reasonably required in
the interest of the buying public. Moreover, what we started with should be recalled here: the authority conferred upon the
respondent's City Council is not merely "to regulate" but also embraces the power "to tax" the petitioner's business.
LTO VS. BUTUAN CITY

To resolve the issue of whether under the present set up the power of the Land Registration Office ("LTO") to register, tricycles in
particular, as well as to issue licenses for the driving thereof, has likewise devolved to local government units. The Regional Trial
Court (Branch 2) of Butuan City held: 3 that the authority to register tricycles, the grant of the corresponding franchise, the issuance
of tricycle drivers’ license, and the collection of fees therefor had all been vested in the Local Government Units ("LGUs").
Accordingly, it decreed the issuance of a permanent writ of injunction against LTO, prohibiting and enjoining LTO, as well as its
employees and other persons acting in its behalf, from (a) registering tricycles and (b) issuing licenses to drivers of tricycles. The
Court of Appeals, on appeal to it, sustained the trial court.

Respondent City of Butuan asserts that one of the salient provisions introduced by the Local Government Code is in the area of
local taxation which allows LGUs to collect registration fees or charges along with, in its view, the corresponding issuance of all
kinds of licenses or permits for the driving of tricycles.

Relying on the foregoing provisions of the law, the Sangguniang Panlungsod ("SP") of Butuan, on 16 August 1992, passed SP
Ordinance No.916-92 entitled "An Ordinance Regulating the Operation of Tricycles-for-Hire, providing mechanism for the issuance
of Franchise, Registration and Permit, and Imposing Penalties for Violations thereof and for other Purposes." The ordinance
provided for, among other things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the
registration of the vehicle, and fees for the issuance of a permit for the driving thereof.

In order to settle the variant positions of the parties, the City of Butuan, represented by its City Mayor Democrito D. Plaza, filed on
28 June 1994 with the trial court a petition for "prohibition, mandamus, injunction with a prayer for preliminary restraining order ex-
parte" seeking the declaration of the validity of SP Ordinance No.962-93 and the prohibition of the registration of tricycles-for-hire
and the issuance of licenses for the driving thereof by the LTO.

ISSUE:

Coming up to this Court, petitioners raise this sole assignment of error, to wit: "The Court of Appeals [has] erred in sustaining the
validity of the writ of injunction issued by the trial court which enjoined LTO from (1) registering tricycles-for-hire and (2) issuing
licenses for the driving thereof since the Local Government Code devolved only the franchising authority of the LTFRB. Functions
of the LTO were not devolved to the LGU’s."

HELD:

The petition is impressed with merit.

Finely put, registration and licensing functions are vested in the LTO while franchising and regulatory responsibilities had been
vested in the LTFRB.

LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant franchises for the operation thereof.
"To regulate" means to fix, establish, or control; to adjust by rule, method, or established mode; to direct by rule or restriction; or to
subject to governing principles or laws. 12 A franchise is defined to be a special privilege to do certain things conferred by
government on an individual or corporation, and which does not belong to citizens generally of common right. 13 On the other hand,
"to register" means to record formally and exactly, to enroll, or to enter precisely in a list or the like, 14 and a "driver’s license" is the
certificate or license issued by the government which authorizes a person to operate a motor vehicle. 15 The devolution of the
functions of the DOTC, performed by the LTFRB, to the LGUs, as so aptly observed by the Solicitor General, is aimed at curbing
the alarming increase of accidents in national highways involving tricycles. It has been the perception that local governments are in
good position to achieve the end desired by the law-making body because of their proximity to the situation that can enable them
to address that serious concern better than the national government.
The reliance made by respondents on the broad taxing power of local government units, specifically under Section 133 of the Local
Government Code, is tangential. Police power and taxation, along with eminent domain, are inherent powers of sovereignty which
the State might share with local government units by delegation given under a constitutional or a statutory fiat. All these inherent
powers are for a public purpose and legislative in nature but the similarities just about end there. The basic aim of police power is
public good and welfare. Taxation, in its case, focuses on the power of government to raise revenue in order to support its existence
and carry out its legitimate objectives. Although correlative to each other in many respects, the grant of one does not necessarily
carry with it the grant of the other. The two powers are, by tradition and jurisprudence, separate and distinct powers, varying in their
respective concepts, character, scopes and limitations. To construe the tax provisions of Section 133(1) indistinctively would result
in the repeal to that extent of LTO’s regulatory power which evidently has not been intended. If it were otherwise, the law could
have just said so in Section 447 and 458 of Book III of the Local Government Code in the same manner that the specific devolution
of LTFRB’s power on franchising of tricycles has been provided. Repeal by implication is not favored. 20 The power over tricycles
granted under Section 458(a)(3)(VI) of the Local Government Code to LGUs is the power to regulate their operation and to grant
franchises for the operation thereof. The exclusionary clause contained in the tax provisions of Section 133(1) of the Local
Government Code must not be held to have had the effect of withdrawing the express power of LTO to cause the registration of all
motor vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are essentially regulatory in nature,
exercised pursuant to the police power of the State, whose basic objectives are to achieve road safety by insuring the road
worthiness of these motor vehicles and the competence of drivers prescribed by R. A. 4136. Not insignificant is the rule that a
statute must not be construed in isolation but must be taken in harmony with the extant body of laws.

WHEREFORE, the assailed decision which enjoins the Land Transportation Office from requiring the due registration of tricycles
and a license for the driving thereof is REVERSED and SET ASIDE.