G.R. No.

L-18129 January 31, 1963

C. N. HODGES, petitioner-appellant,
vs.
THE MUNICIPAL BOARD OF THE CITY OF ILOILO, ET AL., respondents-appellants.

Leon P. Gellada and Norberto J. Posecion for petitioner-appellant.

BAUTISTA ANGELO, J.:

On June 13, 1960, the Municipal Board of the City of Iloilo enacted Ordinance No. 33, series of
1960, pursuant to the provisions of Republic Act No. 2264, known as the Local Autonomy Act,
requiring any person, firm, association or corporation to pay a sales tax of 1/2 of 1% of the selling
price of any motor vehicle and prohibiting the registration of the sale of the motor vehicle in the
Motor Vehicles Office of the City of Iloilo unless the tax has been paid. It is expressly required therein
that the payment of the municipal tax shall be a requirement for registration and transfer of
ownership, the tax to be paid in the office of the city treasurer, and that the tax receipt shall be made
part of the documents to be presented to the Motor Vehicles Office..

C. N. Hodges, who was engaged in the business of buying and selling second-hand motor vehicles
in the City of Iloilo, is one of those affected by the enactment of the ordinance, and believing that the
same is invalid for having been passed in excess of the authority conferred by law upon the
municipal board, he filed on June 27, 1960 a petition for declaratory judgment with the Court of First
Instance of Iloilo praying that said ordinance be declared void ab initio, and that the City of Iloilo be
ordered to refund to him the amounts he was required to pay thereunder without prejudice to
determining its validity in an appropriate action.

The City of Iloilo, in its answer, justified the approval of the ordinance alleging that the same was
approved by virtue of the power and authority granted to it by Section 2 of Republic Act No. 2264,
known as the Local Autonomy Act.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts.1äwphï1.ñët

A copy of the petition for declaratory judgment was furnished the Solicitor General in accordance
with Section 4, Rule 66, of the Rules of Court.

The case having been submitted under a stipulation of facts, the court a quo rendered decision on
December 8, 1960 holding that that part of the ordinance which requires the owner of a used motor
vehicle to pay a sales tax of 1/2 of 1% of the selling price is valid, but the portion thereof which
requires the payment of the tax as a condition precedent for the registration of the sale in the Motor
Vehicles Office is invalid for being repugnant to Section 2(h) of Republic Act 2264.

Both parties have appealed.

Section 2 of Republic Act No. 2264, known as the Local Autonomy Act pursuant to which the
ordinance in question was approved by the Municipal Board of the City of Iloilo, provides in part:
 SEC. 2. Taxation.— Any provision of law to the contrary notwithstanding, all chartered cities,
municipalities and municipal districts shall have authority to impose municipal license taxes
or fees upon persons engaged in any occupation or business, or exercising privileges in
chartered cities, municipalities or municipal districts by requiring them to secure licenses at
rates fixed by the municipal board or city council of the city, the municipal council of the
municipality, or the municipal district council of the municipal district; to collect fees and
charges for services rendered by the city, municipality or municipal district; to regulate and
impose reasonable fees for services rendered in connection with any business, profession or
occupation being conducted within the city, municipality or municipal district and otherwise to
levy for public purposes, just and uniform taxes, licenses or fees; Provided, That
municipalities and municipal districts shall, in no case, impose any percentage tax on sales
or other taxes in any form based thereon nor impose taxes on articles subject to specific tax,
except gasoline, under the provisions of the national internal revenue code: ....

It would appear that the City of Iloilo, thru its municipal board, is empowered (a) to impose municipal
licenses, taxes or fees upon any person engaged in any occupation or business, or exercising any
privilege, in the city; (b) to regulate and impose reasonable fees for services rendered in connection
with any business, profession or occupation conducted within the city; and (c) to levy for public
purposes just and uniform taxes, licenses or fees. It would also appear that municipalities and
municipal districts are prohibited from imposing any percentage tax on sales or other taxes in any
form on articles subject to specific tax, except gasoline, under the provisions of the National Internal
Revenue Code.

From the cursory analysis of the provisions above-stated we can readily draw the conclusion that the
City of Iloilo has the authority and power to approve the ordinance in question for it merely imposes
a percentage tax on the sale of a second-hand motor vehicle that may be carried out within the city
by any person, firm, association or corporation owning or dealing with it who may come within the
jurisdiction. Indeed, it cannot be disputed that a sales tax of 1/2 of 1% of the selling price of a
second-hand motor vehicle comes within the category of a just tax within the provision of Section 2
of Republic Act 2264. It is true that the tax in question is in the form of a percentage tax on the
proceeds of the sale of a second-hand motor vehicle which comes within the prohibition of the
section above adverted to; but the prohibition only refers to municipalities and municipal districts and
does not comprehend chartered cities as the City of Iloilo.

But the ordinance, besides imposing a percentage tax, also imposes an additional requirement. It
provides that the payment of the tax shall be a requirement for registration and transfer of ownership
and that unless the tax is paid the registration and transfer of ownership cannot be effected in the
Motor Vehicles Office of the City. The Court a quo considered this portion invalid reasoning as
follows: "Chartered cities are not authorized to establish any condition on the registration of Motor
vehicles. To require the payment of sales tax before the registration of the sale can be made in the
Motor Vehicles Office, is tantamount to imposing a tax for the registration of motor vehicles."

We disagree. The court a quo undoubtedly had in mind the provisions of Section 2(h) of Republic Act
No. 2264 which prohibits a chartered city from imposing a tax on the registration of motor vehicles
and the issuance of all kinds of licenses or permits for the driving thereof, which is one of the
exceptions constituting a restriction on the taxation power granted by said Act to a city, municipality
or municipal district. But the requirement of the ordinance cannot be considered a tax in the light
viewed by the court a quo for the same is merely a coercive measure to make the enforcement of
the contemplated sales tax more effective. Well-settled is the principle that taxes are imposed for the
support of the government in return for the general advantage and protection which the government
affords to taxpayers and their property (Union Refrigerator Transit Co. v. Com., 26 S. Ct. 36, 199 I
[2nd] 160). Taxes are the lifeblood of the government. It is imperative that the power to impose them
to be clothed with the implied authority to devise ways and means to accomplish their collection in
the most effective manner. Without this implied power the end of government may falter or fail.

It is a general and undisputed proposition of law that a municipal corporation possesses and
can exercise the following powers, and no others: First, those granted in express words;
second, those necessarily or fairly implied in or incident to the powers expressly granted;
third, those essential to the accomplishment of the declared objects and purposes of the
corporation not simply convenient, but indispensable. (Dillon, Municipal Corporations, 5th
Ed., Vol. I, p. 449; citing Cook Co. v. McCrea, 93 Ill. 236; Ottawa v. Carey, 108 U.S., 110)

Municipal corporations may exercise all powers in the fair intent and purpose of their creation
which are reasonably proper to give effect to the powers expressly granted, and in so doing
they gave the choice of the means adapted to the ends and are not confined to any one
mode of operation. (62 C.J.S., Section 117, citingSpahn v. Stewart, 103 S.W. 2d 651, 559,
268 Ky. 97; Riddle v. Ledbetter, 5 S.E., 2d 542, 216 N.C. 491)

If the power of municipalities are to be confined to those expressly granted by the law, in
many cases they will be denied even the power of self-preservation as well as of the means
necessary to accomplish the essential object of their creation. Hence in giving corporations
authority to carry out the powers expressly granted to them, it is understood that they are
also given the power to adopt such means as may be necessary for accomplishing their
ends (Sinco, Philippine Political Law, l0th ed., p 688, citing Smith v. New Bern, 16 Am. Rep.
766.)

We are therefore, of the opinion that the ordinance in question is valid it being a valid exercise of the
power of taxation granted to Iloilo City by Section 2 of Republic Act No. 2264.

WHEREFORE, the decision appealed from is modified by declaring Ordinance No. 22 of the City of
Iloilo valid even with regard to the portion which requires the payment of the tax as a condition
precedent for the registration of the sale in the Motor Vehicles Office of said city. No costs.

Bengzon, C.J., Labrador, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Concepcion and Reyes, J.B.L., JJ., vote for affirmance.
Padilla, J., took no part.