EN BANC

[G.R. No. L-12757. May 29, 1959.]

MUNICIPALITY OF COTABATO, ET AL., Plaintiffs-Appellees, v.
ROMAN R. SANTOS, ET AL., Defendants-Appellants.
First Assistant Solicitor General Guillermo E. Torrs and Solicitor
Sumilang V. Bernardo for Appellees.
Carlos & Laurea for appellants.
SYLLABUS
1. FISH AND FISHING; TAXATION; ORDINANCES, APPROVAL OF
SECRETARY OF AGRICULTURE WHEN NOT REQUIRED. --While the
provision of Section 4, Act No. 4003, as amended by Republic Act No.
659, refers to ordinances that may be approved by a municipality
pertaining to fishing or fisheries, the same does not apply to an
ordinance the purpose of which is not to regulate fishing or the
operation of fishpond but merely to impose taxes for purposes of
revenue. In the case at bar, the ordinance imposes a tax on the
privilege, business or occupation of operating a fish-breeding ground
or fishpond. The law requiring the submission of an ordinance to the
Secretary of Agriculture and Natural Resources for approval refers to
ordinances which prescribe rules relative to fishing or to the operation
of fishponds, and this must be so for a perusal of the provisions of the
Fisheries Act (Commonwealth Act No. 4003) will disclose that all its
provisions refer to the promotion, development, propagation and
preservation of fish and other aquatic resources. Not being an
ordinance regulating fishing or fishpond, the same need not be
submitted to the Secretary of Agriculture and Natural Resources to be
valid, it being sufficient that it be approved by the provincial board
concerned.
2. TAXATION; MUNICIPAL COUNCILS; POWER TO ENACT ORDINANCES
FOR PURPOSES OF REVENUE. Under Section 1 of Commonwealth
Act No. 472, a municipal council is given authority to impose taxes
upon any person engaged in any occupation or business, or exercising
privileges in the municipality for purposes of revenue. The privilege of
operating a fishpond is not one of those cases excepted in the law
which are placed beyond the power of a municipal council to tax or

levy (Section 3, Commonwealth Act 472).

DECISION
BAUTISTA ANGELO, J.:
This is an action to collect certain taxes and penalties allegedly due
from defendants. Under the first cause of action, plaintiff seeks to
recover t pe sum of P37, 530.00 representing the taxes and penalties
due on defendants fishponds corresponding to the years 1949, 1950
and the first quarter of 1951, and under the second cause of action,
the sum of P4,111.94 representing the accumulated taxes and
penalties due on the improvements made on the land covered by said
fishponds from 1949 to 1950.
Defendants, in their answer, set up certain special defenses among
them being that the ordinance unde which the taxes are sought to be
collected is invalid because it does not bear the approval of the
Secretary of Agriculture and Natural Resources as required by Section
4 of Act No. 4003, as amended, nor the approval of the Secretary of
Finance as required by law. After trial, the court rendered decision
ordering defendants to pay the taxes prayed for in the complaint.
Defendants appealed to the Court of Appeals. The case was certified to
this Court on the ground that it involves purely questions of law.
On February 24, 1949, the Municipal Council of Cotabato enacted
Ordinance No. 6 to take effect on January 1, 1949. This ordinance was
approved on March 28, 1949 by the provincial board under its
Resolution No. 138, series of 1949. In Article I, Chapter 5, of said
Ordinance, may be found a paragraph which imposes an annual tax for
the operation of a fish-breeding ground or fishpond at the rate of
P10.00 per hectare.
On October 8, 1949, the Bureau of Fisheries issued in favor of
defendants fishpond permits covering a total area of 1,390 hectares
pursuant to the provisions of Act No. 4003, as amended. After
defendants had taken possession of the leased premises, they
surrounded them with dikes and converted them into fishponds.
The first issue raised by appellants refers to the validity of the
ordinance in question. They contend that it is null and void because

being an ordinance which imposes a tax on fishponds, it should have

been submitted to the Secretary of Agriculture and Natural Resources
for approval as required by Section 4, Act No. 4003, as amended by
Republic Act No. 659, which provides:jgc:chanrobles.com.ph
"All ordinances, rules or regulations pertaining to fishing or fisheries
promulgated or enacted by provincial boards, municipal boards or
councils, or municipal district councils shall be submitted to the
Secretary of Agriculture and Natural Resources for approval and shall
have full force and effect unless notice in writing of their disapproval is
communicated by the Secretary to the board or council concerned
within thirty days after submission of the ordinance, rule, or
regulation. (As amended by Republic Act No. 659.)"
The contention has no merit. While the provision above-quoted refers
to ordinances that may be approved by a municipality pertaining to
fishing or fisheries, the same does not apply to the ordinance in
question for its purposes is not to regulate fishing or the operation of
fish-pond but merely to impose taxes for purposes of revenue. In
effect, the ordinance imposes a tax on the privilege business, or
occupation of operating a fish-breeding ground or fishpond. The law
requiring the submission of an ordinance to the Secretary of
Agriculture and Natural Resources for approval refers to ordinances
which prescribe rules relativee to fishing or to the operation of
fishponds, and this must be so for a careful perusal of the provisions of
the Fisheries Act (Commonwealth Act No. 4003) will disclose that all
its provisions refer to the promotion, development, propagation and
preservation of fish and other aquatic resources. Not being an
ordinance regulating fishing or fishpond, the same need not be
submitted to the Secretary of Agriculture and Natural Resources to be
valid, it being sufficient that it be approved by the provincial board
concerned.
On the other hand, it cannot be disputed that the municipality of
Cotabato has the power to enact the ordinance in question, for, under
Section 1 of Commonwealth Act No. 472, a municipal council is given
authority to impose taxes upon any person engaged in any occupation
or business, or exercising privileges in the municipality for purposes of
revenue. The privilege of operating a fishpond is not one of those
cases excepted in the law which are placed beyond the power of a
municipal council to tax or levy (Section 3, Commonwealth Act 472).
The contention that the ordinance in question comes within the
exception provided for in said Section 3, paragraph (r), which provides
that Taxes or fees for the privilege of fishing, collecting or gathering

sponges from the sea bottoms or reefs or for prospecting for sponges
in any waters of the Philippines", is untenable for, as already said, said
ordinance does not seek to regulate fishing but merely to impose a tax
on the privilege of operating a fishpond.
It is not also necessary that the ordinance be submitted to
Secretary of Finance for approval as counsel contends, because
same does not involve an increase of more than 50 per cent of
original tax (Section 4 [3], Commonwealth Act No. 472).
ordinance is imposing such tax on fishponds for the first time.

the
the
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The validity of the ordinance is also impugned on the ground that it

imposes a license fee which is excessive, unreasonable and
confiscatory. It is contended that such fee is imposed to regulate
merely the operation of fishponds and not for purposes of raising
revenue. This is not correct, for the real purpose of the ordinance is to
raise revenue as may be gleaned from its title.
We however believe that the assessment on the improvements
introduced by defendant on the fishpond has included more than what
is authorized by law. The improvements as assessed consist of dikes,
gates, bodegas and guard-houses. The assessed value of the guardhouses and bodegas totals P6,850.00 which appellants are not now
questioning, but they dispute the assessment on the dikes and gates
in this wise: "After the swamps were leased to appellants, the latter
cleared the swamps and built dikes, by pushing the soil to form these
dikes in the same way that paddies are built on lands intended for the
cultivation of palay, the only difference being that dikes used in
fishponds are relatively much larger than the dikes used in ricelands."
We believe this contention to be correct, because those dikes can
really be considered as integral parts of the fishponds and not as
independent improvements. They cannot be taxed under the
assesement law. The assessment, therefore, with regard to
improvements should be notified by excluding the dikes and gates.
Modified as abovve indicated, we affirm the decision appealed from in
all other respects, without pronouncement as to costs.

EN BANC
[G.R. No. L-9023. November 13, 1956.]
BISLIG BAY LUMBER COMPANY. INC., Plaintiff-Appellee, vs. THE PROVINCIAL
GOVERNMENT OF SURIGAO, Defendant-Appellant.

D E C I S I O N
BAUTISTA ANGELO, J.:
Bislig Bay Lumber Co., Inc. is a timber concessionaire of a portion of public forest located
in the provinces of Agusan and Surigao. With a view to developing and exploiting its
concession, the company constructed at its expense a road from the barrio Mangagoy
into the area of the concession in Surigao, with a length of approximately 5.3
kilometers, a portion of which, or about 580 linear meters, is on a private property of
the company. The expenses incurred by the company in the construction of said road
amounted to P113,370, upon which the provincial assessor of Surigao assessed a tax in
the amount of P669.33.
Of this amount, the sum of P595.92 corresponds to the road constructed within the area
of the concession. This was paid under protest. Later, the company filed an action for its
refund in the Court of First Instance of Manila alleging that the road is not subject to tax.
Defendant filed a motion to dismiss on two grounds (1) that the venue is improperly
laid, and (2) that the complaint states no cause of action; chan roblesvirtualawlibrarybut
this motion was denied. Thereafter, Defendant filed its answer invoking the same
defenses it set up in its motions to dismiss. In the meantime, Congress approved
Republic Act No. 1125 creating the Court of Tax Appeals, whereupon Plaintiff moved
that the case be forwarded to the latter court as required by said Act. This motion
however, was denied and, after due trial, the court rendered decision ordering
Defendant to refund to Plaintiff the amount claimed in the complaint. This is an appeal
from said decision.
The first error assigned refers to the jurisdiction of the lower court. It is contended that
since the present case involves an assessment of land tax the determination of which
comes under the exclusive jurisdiction of the Court of Tax Appeals under Republic Act
No. 1125, the lower court erred in assuming jurisdiction over the case.
It is true that under section 22 of said Act the only cases that are required to be certified
and remanded to the Court of Tax Appeals which upon its approval are pending
determination before a court of first instance are apparently confined to those involving
disputed assessment of internal revenue taxes or custom duties, and the present case
admittedly refers to an assessment of land tax, but it does not mean that because of
that apparent omission or oversight the instant case should not be remanded to the
Court of Tax Appeals, for in interpreting the context of the section above adverted to we
should not ignore section 7 of the same act which defines the extent and scope of the
jurisdiction of said court. As we have held in a recent case, section 22 of Republic Act
No. 1125 should be interpreted in such a manner as to make it harmonize with section 7
of the same Act and that the primordial purpose behind the approval of said Act by
Congress is to give to the Court of Tax Appeals exclusive appellate jurisdiction over all
tax, customs, and real estate assessment cases through out the Philippines and to hear

and decide them as soon as possible (Ollada vs. The Court of Tax Appeals, 99 Phil.,
604). Considering this interpretation of the law, it logically follows that the lower court
did not act properly in denying the motion to remand the instant case to the Court of
Tax Appeals.
Considering, however, that it would be more expeditious to decide this case now than
to remand it to the Court of Tax Appeals because, even if this course is taken, it may
ultimately be appealed to this court, we will now proceed to discuss the case on the
merits.
The Tax in question has been assessed under section 2 of Commonwealth Act No. 470
which provides:chanroblesvirtuallawlibrary
SEC. 2. Incidence of real property tax. Except in chartered cities, there shall be
levied, assessed, and collected, an annual ad- valorem tax on real property, including
land, buildings, machinery, and other improvements not hereinafter specifically
exempted.
Note that said section authorizes the levy of real tax not only on lands, buildings, or
machinery that may be erected thereon, but also on any other improvements, and
considering the road constructed by Appellee on the timber concession granted to it as
an improvement, Appellant assessed the tax now in dispute upon the authority of the
above provision of the law.
It is the theory of Appellant that, inasmuch as the road was constructed by Appellee for
its own use and benefit it is subject to real tax even if it was constructed on a public
land. On the other hand, it is the theory of Appellee that said road is exempt from real
tax because (1) the road belongs to the national government by right of accession, (2)
the road cannot be removed or separated from the land on which it is constructed and
so it is part and parcel of the public land, and (3), according to the evidence, the road
was built not only for the use and benefit of Appellee but also of the public in general.
We are inclined to uphold the theory of Appellee. In the first place, it cannot be disputed
that the ownership of the road that was constructed by Appellee belongs to the
government by right accession not only because it is inherently incorporated or
attached to the timber land leased to Appellee but also because upon the expiration of
the concession, said road would ultimately pass to the national government (Articles
440 and 445, new Civil Code; chan roblesvirtualawlibraryTabotabo vs. Molero, 22 Phil.,
418). In the second place, while the road was constructed by Appellee primarily for its
use and benefit, the privilege is not exclusive, for, under the lease contract entered into
by the Appellee and the government and by public in by the general. Thus, under said
lease contract, Appellee cannot prevent the use of portions, of the concession for
homesteading purposes (clause 12). It is also in duty bound to allow the free use of
forest products within the concession for the personal use of individuals residing in or
within the vicinity of the land (clause 13). The government has reserved the right to set
aside communal forest for the use of the inhabitants of the region, and to set forest
reserves for public uses (clause 14). It can also grant licenses covering any portion of the
territory for the cutting and extraction of timber to be used in public works, for mining
purposes, or for the construction of railway lines (clause 15). And, if it so desires, it can
provide for logging railroad, cable ways timber chute os slide, telephone lines, pumping

stations log landings, and other rights of way for the use of forest licensees,
concessionaires, permittees, or other lessees (clause 26). In other words, the
government has practically reserved the rights to use the road to promote its varied
activities. Since, as above shown, the road in question cannot be considered as an
improvement which belongs to Appellee, although in part is for its benefit, it is clear that
the same cannot be the subject of assessment within the meaning of section 2 of
Commonwealth Act No. 470.
We are not oblivious of the fact that the present assessment was made by Appellant on
the strength of an opinion rendered by the Secretary of Justice, but we find that the
same is predicated on authorities which are not in point, for they refer to improvements
that belong to the lessee although constructed on lands belonging to the government. It
is well settled that a real tax, being a burden upon the capital, should be paid by the
owner of the land and not by a usufructuary (Mercado vs. Rizal, 67 Phil., 608; chan
roblesvirtualawlibraryArticle 597, new Civil Code). Appellee is but a partial usufructuary
of the road in question.

Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case,
where it was declared that the reservoir dam went with and formed part of the
reservoir and that the dam would be "worthless and useless except in connection
with the outlet canal, and the water rights in the reservoir represent and include
whatever utility or value there is in the dam and headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United
States. This case involved drain tunnels constructed by plaintiff when it expanded
its mining operations downward, resulting in a constantly increasing flow of water
in the said mine. It was held that:
Whatever value they have is connected with and in fact is an
integral part of the mine itself. Just as much so as any shaft which
descends into the earth or an underground incline, tunnel, or drift
would be which was used in connection with the mine.