FERRER V. BAUTISTA, G.R. NO.

210551, JUNE 30, 2015

Respondent Quezon City Council enacted Ordinance No. SP-2095, S-2011,2 or the Socialized Housing
Tax of Quezon City, Section 3 of which provides:

SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on the

assessed value of land in excess of One Hundred Thousand Pesos (Php100,000.00) shall be
collected by the City Treasurer which shall accrue to the Socialized Housing Programs of the
Quezon City Government. The special assessment shall accrue to the General Fund under a
special account to be established for the purpose.

Effective for five (5) years, the Socialized Housing Tax (SHT) shall be utilized by the Quezon City
Government for the following projects: (a) land purchase/land banking; (b) improvement of
current/existing socialized housing facilities; (c) land development; (d) construction of core
houses, sanitary cores, medium-rise buildings and other similar structures; and (e) financing of
public-private partnership agreement of the Quezon City Government and National Housing
Authority (NHA) with the private sector. Under certain conditions, a tax credit shall be enjoyed
by taxpayers regularly paying the special assessment:

SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special assessment tax as imposed by this
ordinance shall enjoy a tax credit. The tax credit may be availed of only after five (5) years of
continue[d] payment. Further, the taxpayer availing this tax credit must be a taxpayer in good
standing as certified by the City Treasurer and City Assessor.

Furthermore, only the registered owners may avail of the tax credit and may not be continued by the
subsequent property owners even if they are buyers in good faith, heirs or possessor of a right in
whatever legal capacity over the subject property.

Ordinance No. SP-2235, S-20135 was enacted and was approved by respondent City Mayor. The
proceeds collected from the garbage fees on residential properties shall be deposited solely and
exclusively in an earmarked special account under the general fund to be utilized for garbage collections.

Petitioner alleges that he is a registered co-owner of a residential property in Quezon City, he paid his
realty tax which already included the garbage fee in the sum of Php100.00.

B. ‘ Locus Standi of Petitioner

Respondents challenge petitioner ‘s legal standing to file this case on the ground that, in relation to
Section 3 of Ordinance No. SP-2095, petitioner failed to allege his ownership of a property that has an
assessed value of more than Php100,000.00 and, with respect to Ordinance No. SP-2335, by what
standing or personality he filed the case to nullify the same. According to respondents, the petition is
not a class suit, and that, for not having specifically alleged that petitioner filed the case as a taxpayer, it
could only be surmised whether he is a party-in-interest who stands to be directly benefited or injured
by the judgment in this case.

It is a general rule that every action must be prosecuted or defended in the name of the real party-in-
interest, who stands to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit.

Jurisprudence defines interest as "material interest, an interest in issue and to be affected by the
decree, as distinguished from mere interest in the question involved, or a mere incidental interest. By
real interest is meant a present substantial interest, as distinguished from a mere expectancy or a
future, contingent, subordinate, or consequential interest." "To qualify a person to be a real party-in-
interest in whose name an action must be prosecuted, he must appear to be the present real owner of
the right sought to be enforced."27

‘Legal standing ‘ or locus standi calls for more than just a generalized grievance.28 The concept has
been defined as a personal and substantial interest in the case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being challenged.29 The gist of the
question of standing is whether a party alleges such personal stake in the outcome of the controversy as
to assure that concrete adverseness which sharpens the presentation of issues upon which the court
depends for illumination of difficult constitutional questions.30ChanRoblesVirtualawlibrary

A party challenging the constitutionality of a law, act, or statute must show ‘not only that the law is
invalid, but also that he has sustained or is in immediate, or imminent danger of sustaining some direct
injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. ‘ It
must be shown that he has been, or is about to be, denied some right or privilege to which he is lawfully
entitled, or that he is about to be subjected to some burdens or penalties by reason of the statute
complained of.31ChanRoblesVirtualawlibrary

Tested by the foregoing, petitioner in this case clearly has legal standing to file the petition. He is a real
party-in-interest to assail the constitutionality and legality of Ordinance Nos. SP-2095 and SP-2235
because respondents did not dispute that he is a registered co-owner of a residential property in
Quezon City and that he paid property tax which already included the SHT and the garbage fee. He has
substantial right to seek a refund of the payments he made and to stop future imposition. While he is a
lone petitioner, his cause of action to declare the validity of the subject ordinances is substantial and of
paramount interest to similarly situated property owners in Quezon City.

Substantive Issues
On the Socialized Housing Tax

Respondents emphasize that the SHT is pursuant to the social justice principle found in Sections 1 and 2,
Article XIII of the 1987 Constitution and Sections 2 (a)58 and 4359 of R.A. No. 7279, or the Urban
Development and Housing Act of 1992 (UDHA). Relying on Manila Race Horse Trainers Assn., Inc. v. De
La Fuente, and Victorias Milling Co., Inc. v. Municipality of Victorias, etc., respondents assert that
Ordinance No. SP-2095 applies equally to all real property owners without discrimination. There is no
way that the ordinance could violate the equal protection clause because real property owners and
informal settlers do not belong to the same class.

Ordinance No. SP-2095 is also not oppressive since the tax rate being imposed is consistent with the
UDHA. While the law authorizes LGUs to collect SHT on properties with an assessed value of more than
P50,000.00, the questioned ordinance only covers properties with an assessed value exceeding
P100,000.00. As well, the ordinance provides for a tax credit equivalent to the total amount of the
special assessment paid by the property owner beginning in the sixth (6th) year of the effectivity of the
ordinance.

On the contrary, petitioner claims that the collection of the SHT is tantamount to a penalty imposed on
real property owners due to the failure of respondent Quezon City Mayor and Council to perform their
duty to secure and protect real property owners from informal settlers, thereby burdening them with
the expenses to provide funds for housing. For petitioner, the SHT cannot be viewed as a ‘charity ‘ from
real property owners since it is forced, not voluntary.

Also, petitioner argues that the collection of the SHT is a kind of class legislation that violates the right of
property owners to equal protection of the laws since it favors informal settlers who occupy property
not their own and pay no taxes over law-abiding real property owners who pay income and realty taxes.

Petitioner further contends that respondent’s characterization of the SHT as “nothing more than an
advance payment on the real property tax” has no statutory basis. Allegedly, property tax cannot be
collected before it is due because, under the LGC, chartered cities are authorized to impose property tax
based on the assessed value and the general revision of assessment that is made every three (3) years.

As to the rationale of SHT stated in Ordinance No. SP-2095, which, in turn, was based on Section 43 of
the UDHA, petitioner asserts that there is no specific provision in the 1987 Constitution stating that the
ownership and enjoyment of property bear a social function. And even if there is, it is seriously doubtful
and far-fetched that the principle means that property owners should provide funds for the housing of
informal settlers and for home site development. Social justice and police power, petitioner believes,
does not mean imposing a tax on one, or that one has to give up something, for the benefit of another.
At best, the principle that property ownership and enjoyment bear a social function is but a reiteration
of the Civil Law principle that property should not be enjoyed and abused to the injury of other
properties and the community, and that the use of the property may be restricted by police power, the
exercise of which is not involved in this case.

Finally, petitioner alleges that Bistek villes will be constructed out of the SHT collected. Bistek is the
monicker of respondent City Mayor. The Bistekvilles makes it clear, therefore, that politicians will take
the credit for the tax imposed on real property owners.

On the Garbage Fee

Respondents claim that Ordinance No. S-2235, which is an exercise of police power, collects on the
average from every household a garbage fee in the meager amount of thirty-three (33) centavos per day
compared with the sum of P1,659.83 that the Quezon City Government annually spends for every
household for garbage collection and waste management.

In addition, there is no double taxation because the ordinance involves a fee. Even assuming that the
garbage fee is a tax, the same cannot be a direct duplicate tax as it is imposed on a different subject
matter and is of a different kind or character. Based on Villanueva, et al. v. City of Iloilo and Victorias
Milling Co., Inc. v. Municipality of Victorias, etc., there is no ‘taxing twice ‘ because the real property
tax is imposed on ownership based on its assessed value, while the garbage fee is required on the
domestic household. The only reference to the property is the determination of the applicable rate
and the facility of collection.

Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as an exercise of police
power. The cases of Calalang v. Williams, Patalinghug v. Court of Appeals, and Social Justice Society (SJS),
et al. v. Hon. Atienza, Jr., which were cited by respondents, are inapplicable since the assailed ordinance
is a revenue measure and does not regulate the disposal or other aspect of garbage.

The subject ordinance, for petitioner, is discriminatory as it collects garbage fee only from domestic
households and not from restaurants, food courts, fast food chains, and other commercial dining
places that spew garbage much more than residential property owners.

Petitioner likewise contends that the imposition of garbage fee is tantamount to double taxation
because garbage collection is a basic and essential public service that should be paid out from
property tax, business tax, transfer tax, amusement tax, community tax certificate, other taxes, and
the IRA of the Quezon City Government. To bolster the claim, he states that the revenue collection of
the Quezon City Government reached Php13.69 billion in 2012. A small portion of said amount could be
spent for garbage collection and other essential services.
It is further noted that the Quezon City Government already collects garbage fee under Section 4768
of R.A. No. 9003, or the Ecological Solid Waste Management Act of 2000, which authorizes LGUs to
impose fees in amounts sufficient to pay the costs of preparing, adopting, and implementing a solid
waste management plan, and that LGUs have access to the Solid Waste Management (SWM) Fund
created under Section 4669 of the same law. Also, according to petitioner, it is evident that Ordinance
No. S-2235 is inconsistent with R.A. No. 9003 for while the law encourages segregation, composting,
and recycling of waste, the ordinance only emphasizes the collection and payment of garbage fee;
while the law calls for an active involvement of the barangay in the collection, segregation, and
recycling of garbage, the ordinance skips such mandate.

The Court ‘s Ruling

LGUs are able to legislate only by virtue of a valid delegation of legislative power from the national
legislature; they are mere agents vested with what is called the power of subordinate legislation.
Congress enacted the LGC as the implementing law for the delegation to the various LGUs of the
State’s great powers, namely: the police power, the power of eminent domain, and the power of
taxation. The LGC was fashioned to delineate the specific parameters and limitations to be complied
with by each LGU in the exercise of these delegated powers with the view of making each LGU a fully
functioning subdivision of the State subject to the constitutional and statutory limitations.

Specifically, with regard to the power of taxation, it is indubitably the most effective instrument to raise
needed revenues in financing and supporting myriad activities of the LGUs for the delivery of basic
services essential to the promotion of the general welfare and the enhancement of peace, progress, and
prosperity of the people. As this Court opined in National Power Corp. v. City of Cabanatuan: In recent
years, the increasing social challenges of the times expanded the scope of state activity, and taxation has
become a tool to realize social justice and the equitable distribution of wealth, economic progress and
the protection of local industries as well as public welfare and similar objectives. Taxation assumes even
greater significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no
longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy
taxes, fees and other charges pursuant to Article X, Section 5 of the 1987 Constitution, viz:

Section 5. Each Local Government unit shall have the power to create its own
sources of revenue, to levy taxes, fees and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees and charges shall accrue exclusively to the local
governments.

This paradigm shift results from the realization that genuine development can be achieved only by
strengthening local autonomy and promoting decentralization of governance. For a long time, the
country’s highly centralized government structure has bred a culture of dependence among local
government leaders upon the national leadership. It has also dampened the spirit of initiative,
innovation and imaginative resilience in matters of local development on the part of local government
leaders. The only way to shatter this culture of dependence is to give the LGUs a wider role in the
delivery of basic services, and confer them sufficient powers to generate their own sources for the
purpose. To achieve this goal, Section 3 of Article X of the 1987 Constitution mandates Congress to enact
a local government code that will, consistent with the basic policy of local autonomy, set the guidelines
and limitations to this grant of taxing powers x x x

The rule governing the taxing power of provinces, cities, municipalities and barangays is summarized in
Icard v. City Council of Baguio:

It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of
taxation. The charter or statute must plainly show an intent to confer that power or the municipality,
cannot assume it. And the power when granted is to be construed in strictissimi juris. Any doubt or
ambiguity arising out of the term used in granting that power must be resolved against the municipality.
Inferences, implications, deductions “all these” have no place in the interpretation of the taxing power
of a municipal corporation.

xxxx

Per Section 5, Article X of the 1987 Constitution, ‘the power to tax is no longer vested exclusively on
Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges.’
Nevertheless, such authority is ‘subject to such guidelines and limitations as the Congress may provide.’

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160,
otherwise known as the Local Government Code of 1991. Book II of the LGC governs local taxation and
fiscal matters.

Indeed, LGUs have no inherent power to tax except to the extent that such power might be delegated
to them either by the basic law or by the statute. Under the now prevailing Constitution, where there
is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although
Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is
to safeguard the viability and self-sufficiency of local government units by directly granting them
general and broad tax powers. Nevertheless, the fundamental law did not intend the delegation to be
absolute and unconditional; the constitutional objective obviously is to ensure that, while the local
government units are being strengthened and made more autonomous, the legislature must still see to
it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable
impositions; (b) each local government unit will have its fair share of available resources; (c) the
resources of the national government will not be unduly disturbed; and (d) local taxation will be fair,
uniform, and just.

Subject to the provisions of the LGC and consistent with the basic policy of local autonomy, every LGU
is now empowered and authorized to create its own sources of revenue and to levy taxes, fees, and
charges which shall accrue exclusively to the local government unit as well as to apply its resources
and assets for productive, developmental, or welfare purposes, in the exercise or furtherance of their
governmental or proprietary powers and functions. The relevant provisions of the LGC which establish
the parameters of the taxing power of the LGUs are as follows:

SECTION 130. Fundamental Principles. The following fundamental principles shall govern the exercise of
the taxing and other revenue-raising powers of local government units:

(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:

(1) be equitable and based as far as practicable on the taxpayer ‘s ability to pay;

(2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;

(4) not be contrary to law, public policy, national economic policy, or in restraint of trade;

(c) The collection of local taxes, fees, charges and other impositions shall in no case be let to any private
person;

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and
be subject to the disposition by, the local government unit levying the tax, fee, charge or other
imposition unless otherwise specifically provided herein; and,

(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. ‘ Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:

(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise
provided herein;

(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by
the local government unit concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing through,
the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for
bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such goods or
merchandise;

(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or
fishermen;

(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for
a period of six (6) and four (4) years, respectively from the date of registration;

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;

(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods
or services except as otherwise provided herein;

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation
of passengers or freight by hire and common carriers by air, land or water, except as provided in this
Code;

(k) Taxes on premiums paid by way of reinsurance or retrocession;

(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except tricycles;

(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided
herein;

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly
registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No.
6938) otherwise known as the ‘Cooperative Code of the Philippines ‘ respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities,
and local government units.

SECTION 151. Scope of Taxing Powers. ‘ Except as otherwise provided in this Code, the city, may levy
the taxes, fees, and charges which the province or municipality may impose: Provided, however, That
the taxes, fees and charges levied and collected by highly urbanized and independent component cities
shall accrue to them and distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement
taxes.

SECTION 186. Power To Levy Other Taxes, Fees or Charges. ‘ Local government units may exercise the
power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein
or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable
laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or
contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or
charges shall not be enacted without any prior public hearing conducted for the purpose.

On the Socialized Housing Tax

Contrary to petitioner ‘s submission, the 1987 Constitution explicitly espouses the view that the use of
property bears a social function and that all economic agents shall contribute to the common good.90
The Court already recognized this in Social Justice Society (SJS), et al. v. Hon. Atienza,
Jr.:91cralawlawlibrary

Property has not only an individual function, insofar as it has to provide for the needs of the owner, but
also a social function insofar as it has to provide for the needs of the other members of society. The
principle is this:

Police power proceeds from the principle that every holder of property, however absolute and
unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to
the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to
the right of the community. Rights of property, like all other social and conventional rights, are subject
to reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such
reasonable restraints and regulations established by law as the legislature, under the governing and
controlling power vested in them by the constitution, may think necessary and expedient.92
Police power, which flows from the recognition that salus populi est suprema lex (the welfare of the
people is the supreme law), is the plenary power vested in the legislature to make statutes and
ordinances to promote the health, morals, peace, education, good order or safety and general welfare
of the people.93 Property rights of individuals may be subjected to restraints and burdens in order to
fulfill the objectives of the government in the exercise of police power. 94 In this jurisdiction, it is well-
entrenched that taxation may be made the implement of the state ‘s police
power.95ChanRoblesVirtualawlibrary

Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to 0.5% on the assessed value of
land in excess of Php100,000.00. This special assessment is the same tax referred to in R.A. No. 7279 or
the UDHA.96 The SHT is one of the sources of funds for urban development and housing program.97
Section 43 of the law provides:

Sec. 43. Socialized Housing Tax. ‘ Consistent with the constitutional principle that the ownership and
enjoyment of property bear a social function and to raise funds for the Program, all local government
units are hereby authorized to impose an additional one-half percent (0.5%) tax on the assessed value of
all lands in urban areas in excess of Fifty thousand pesos (P50,000.00).

The rationale of the SHT is found in the preambular clauses of the subject ordinance, to wit:

WHEREAS, the imposition of additional tax is intended to provide the City Government with sufficient
funds to initiate, implement and undertake Socialized Housing Projects and other related preliminary
activities;

WHEREAS, the imposition of 0.5% tax will benefit the Socialized Housing Programs and Projects of the
City Government, specifically the marginalized sector through the acquisition of properties for human
settlements;

WHEREAS, the removal of the urban blight will definitely increase fair market value of properties in the
city[.]

The above-quoted are consistent with the UDHA, which the LGUs are charged to implement in their
respective localities in coordination with the Housing and Urban Development Coordinating Council, the
national housing agencies, the Presidential Commission for the Urban Poor, the private sector, and other
non-government organizations.98 It is the declared policy of the State to undertake a comprehensive
and continuing urban development and housing program that shall, among others, uplift the conditions
of the underprivileged and homeless citizens in urban areas and in resettlement areas, and provide for
the rational use and development of urban land in order to bring about, among others, reduction in
urban dysfunctions, particularly those that adversely affect public health, safety and ecology, and access
to land and housing by the underprivileged and homeless citizens.99 Urban renewal and resettlement
shall include the rehabilitation and development of blighted and slum areas100 and the resettlement of
program beneficiaries in accordance with the provisions of the UDHA.101ChanRoblesVirtualawlibrary

Under the UDHA, socialized housing102 shall be the primary strategy in providing shelter for the
underprivileged and homeless.103 The LGU or the NHA, in cooperation with the private developers and
concerned agencies, shall provide socialized housing or resettlement areas with basic services and
facilities such as potable water, power and electricity, and an adequate power distribution system,
sewerage facilities, and an efficient and adequate solid waste disposal system; and access to primary
roads and transportation facilities.104 The provisions for health, education, communications, security,
recreation, relief and welfare shall also be planned and be given priority for implementation by the LGU
and concerned agencies in cooperation with the private sector and the beneficiaries
themselves.105ChanRoblesVirtualawlibrary

Moreover, within two years from the effectivity of the UDHA, the LGUs, in coordination with the NHA,
are directed to implement the relocation and resettlement of persons living in danger areas such as
esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and other public places like
sidewalks, roads, parks, and playgrounds.106 In coordination with the NHA, the LGUs shall provide
relocation or resettlement sites with basic services and facilities and access to employment and
livelihood opportunities sufficient to meet the basic needs of the affected
families.107ChanRoblesVirtualawlibrary

Clearly, the SHT charged by the Quezon City Government is a tax which is within its power to impose.
Aside from the specific authority vested by Section 43 of the UDHA, cities are allowed to exercise such
other powers and discharge such other functions and responsibilities as are necessary, appropriate, or
incidental to efficient and effective provision of the basic services and facilities which include, among
others, programs and projects for low-cost housing and other mass dwellings.108 The collections made
accrue to its socialized housing programs and projects. The tax is not a pure exercise of taxing power or
merely to raise revenue; it is levied with a regulatory purpose. The levy is primarily in the exercise of the
police power for the general welfare of the entire city. It is greatly imbued with public interest.
Removing slum areas in Quezon City is not only beneficial to the underprivileged and homeless
constituents but advantageous to the real property owners as well. The situation will improve the value
of the their property investments, fully enjoying the same in view of an orderly, secure, and safe
community, and will enhance the quality of life of the poor, making them law-abiding constituents and
better consumers of business products.
Though broad and far-reaching, police power is subordinate to constitutional limitations and is subject
to the requirement that its exercise must be reasonable and for the public good.109 In the words of City
of Manila v. Hon. Laguio, Jr.:110cralawlawlibrary

The police power granted to local government units must always be exercised with utmost observance
of the rights of the people to due process and equal protection of the law. Such power cannot be
exercised whimsically, arbitrarily or despotically as its exercise is subject to a qualification, limitation or
restriction demanded by the respect and regard due to the prescription of the fundamental law,
particularly those forming part of the Bill of Rights. Individual rights, it bears emphasis, may be adversely
affected only to the extent that may fairly be required by the legitimate demands of public interest or
public welfare. Due process requires the intrinsic validity of the law in interfering with the rights of the
person to his life, liberty and property.

xxxx

To successfully invoke the exercise of police power as the rationale for the enactment of the Ordinance,
and to free it from the imputation of constitutional infirmity, not only must it appear that the interests
of the public generally, as distinguished from those of a particular class, require an interference with
private rights, but the means adopted must be reasonably necessary for the accomplishment of the
purpose and not unduly oppressive upon individuals. It must be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. A reasonable relation must
exist between the purposes of the police measure and the means employed for its accomplishment, for
even under the guise of protecting the public interest, personal rights and those pertaining to private
property will not be permitted to be arbitrarily invaded.

Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights ‘ a violation of the due process clause.111

As with the State, LGUs may be considered as having properly exercised their police power only if there
is a lawful subject and a lawful method or, to be precise, if the following requisites are met: (1) the
interests of the public generally, as distinguished from those of a particular class, require its exercise and
(2) the means employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals.112ChanRoblesVirtualawlibrary

In this case, petitioner argues that the SHT is a penalty imposed on real property owners because it
burdens them with expenses to provide funds for the housing of informal settlers, and that it is a class
legislation since it favors the latter who occupy properties which is not their own and pay no taxes.
We disagree.

Equal protection requires that all persons or things similarly situated should be treated alike, both as to
rights conferred and responsibilities imposed.113 The guarantee means that no person or class of
persons shall be denied the same protection of laws which is enjoyed by other persons or other classes
in like circumstances.114 Similar subjects should not be treated differently so as to give undue favor to
some and unjustly discriminate against others.115 The law may, therefore, treat and regulate one class
differently from another class provided there are real and substantial differences to distinguish one class
from another.116ChanRoblesVirtualawlibrary

An ordinance based on reasonable classification does not violate the constitutional guaranty of the
equal protection of the law. The requirements for a valid and reasonable classification are: (1) it must
rest on substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must not be
limited to existing conditions only; and (4) it must apply equally to all members of the same
class.117ChanRoblesVirtualawlibrary

For the purpose of undertaking a comprehensive and continuing urban development and housing
program, the disparities between a real property owner and an informal settler as two distinct classes
are too obvious and need not be discussed at length. The differentiation conforms to the practical
dictates of justice and equity and is not discriminatory within the meaning of the Constitution. Notably,
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 over another.118 It is inherent in the power to tax that a State is free to select
the subjects of taxation.119 Inequities which result from a singling out of one particular class for
taxation or exemption infringe no constitutional limitation.120ChanRoblesVirtualawlibrary

Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or
oppressive since the tax being imposed therein is below what the UDHA actually allows. As pointed out
by respondents, while the law authorizes LGUs to collect SHT on lands with an assessed value of more
than P50,000.00, the questioned ordinance only covers lands with an assessed value exceeding
P100,000.00. Even better, on certain conditions, the ordinance grants a tax credit equivalent to the total
amount of the special assessment paid beginning in the sixth (6th) year of its effectivity. Far from being
obnoxious, the provisions of the subject ordinance are fair and just.

On the Garbage Fee

In the United States of America, it has been held that the authority of a municipality to regulate garbage
falls within its police power to protect public health, safety, and welfare.121 As opined, the purposes
and policy underpinnings of the police power to regulate the collection and disposal of solid waste are:
(1) to preserve and protect the public health and welfare as well as the environment by minimizing or
eliminating a source of disease and preventing and abating nuisances; and (2) to defray costs and ensure
financial stability of the system for the benefit of the entire community, with the sum of all charges
marshalled and designed to pay for the expense of a systemic refuse disposal
scheme.122ChanRoblesVirtualawlibrary

Ordinances regulating waste removal carry a strong presumption of validity.123 Not surprisingly, the
overwhelming majority of U.S. cases addressing a city's authority to impose mandatory garbage service
and fees have upheld the ordinances against constitutional and statutory
challenges.124ChanRoblesVirtualawlibrary

A municipality has an affirmative duty to supervise and control the collection of garbage within its
corporate limits.125 The LGC specifically assigns the responsibility of regulation and oversight of solid
waste to local governing bodies because the Legislature determined that such bodies were in the best
position to develop efficient waste management programs.126 To impose on local governments the
responsibility to regulate solid waste but not grant them the authority necessary to fulfill the same
would lead to an absurd result. ‘127 As held in one U.S. case:

x x x When a municipality has general authority to regulate a particular subject matter, the manner and
means of exercising those powers, where not specifically prescribed by the legislature, are left to the
discretion of the municipal authorities. x x x Leaving the manner of exercising municipal powers to the
discretion of municipal authorities "implies a range of reasonableness within which a municipality's
exercise of discretion will not be interfered with or upset by the judiciary."128

In this jurisdiction, pursuant to Section 16 of the LGC and in the proper exercise of its corporate powers
under Section 22 of the same, the Sangguniang Panlungsod of Quezon City, like other local legislative
bodies, is empowered to enact ordinances, approve resolutions, and appropriate funds for the general
welfare of the city and its inhabitants.129 Section 16 of the LGC provides:

SECTION 16. General Welfare. ‘ Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for
its efficient and effective governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units shall ensure and support,
among other things, the preservation and enrichment of culture, promote health and safety, enhance
the right of the people to a balanced ecology, encourage and support the development of appropriate
and self-reliant scientific and technological capabilities, improve public morals, enhance economic
prosperity and social justice, promote full employment among their residents, maintain peace and
order, and preserve the comfort and convenience of their inhabitants.
The general welfare clause is the delegation in statutory form of the police power of the State to
LGUs.130 The provisions related thereto are liberally interpreted to give more powers to LGUs in
accelerating economic development and upgrading the quality of life for the people in the
community.131 Wide discretion is vested on the legislative authority to determine not only what the
interests of the public require but also what measures are necessary for the protection of such interests
since the Sanggunian is in the best position to determine the needs of its
constituents.132ChanRoblesVirtualawlibrary

One of the operative principles of decentralization is that, subject to the provisions of the LGC and
national policies, the LGUs shall share with the national government the responsibility in the
management and maintenance of ecological balance within their territorial jurisdiction.133 In this
regard, cities are allowed to exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and effective provision of the
basic services and facilities which include, among others, solid waste disposal system or environmental
management system and services or facilities related to general hygiene and sanitation.134 R.A. No.
9003, or the Ecological Solid Waste Management Act of 2000,135 affirms this authority as it expresses
that the LGUs shall be primarily responsible for the implementation and enforcement of its provisions
within their respective jurisdictions while establishing a cooperative effort among the national
government, other local government units, non-government organizations, and the private
sector.136ChanRoblesVirtualawlibrary

Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees and charges for
services rendered.137 ‘Charges ‘ refer to pecuniary liability, as rents or fees against persons or property,
while ‘Fee ‘ means a charge fixed by law or ordinance for the regulation or inspection of a business or
activity.138ChanRoblesVirtualawlibrary

The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed for the
regulation of an activity. The basis for this could be discerned from the foreword of said Ordinance, to
wit:

WHEREAS, Quezon City being the largest and premiere city in the Philippines in terms of population and
urban geographical areas, apart from being competent and efficient in the delivery of public service,
apparently requires a big budgetary allocation in order to address the problems relative and connected
to the prompt and efficient delivery of basic services such as the effective system of waste management,
public information programs on proper garbage and proper waste disposal, including the imposition of
waste regulatory measures;
WHEREAS, to help augment the funds to be spent for the city ‘s waste management system, the City
Government through the Sangguniang Panlungsod deems it necessary to impose a schedule of
reasonable fees or charges for the garbage collection services for residential (domestic household) that
it renders to the public.

Certainly, as opposed to petitioner ‘s opinion, the garbage fee is not a tax. In Smart Communications,
Inc. v. Municipality of Malvar, Batangas,139 the Court had the occasion to distinguish these two
concepts:

In Progressive Development Corporation v. Quezon City, the Court declared that ‘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. ‘

In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court reiterated that the purpose and effect
of the imposition determine whether it is a tax or a fee, and that the lack of any standards for such
imposition gives the presumption that the same is a tax.

We accordingly say that the designation given by the municipal authorities does not decide whether the
imposition is properly a license tax or a license fee. The determining factors are the purpose and effect
of the imposition as may be apparent from the provisions of the ordinance. Thus, ‘[w]hen no police
inspection, supervision, or regulation is provided, nor any standard set for the applicant to establish, or
that he agrees to attain or maintain, but any and all persons engaged in the business designated,
without qualification or hindrance, may come, and a license on payment of the stipulated sum will issue,
to do business, subject to no prescribed rule of conduct and under no guardian eye, but according to the
unrestrained judgment or fancy of the applicant and licensee, the presumption is strong that the power
of taxation, and not the police power, is being exercised. ‘

In Georgia, U.S.A., assessments for garbage collection services have been consistently treated as a fee
and not a tax.140 In another U.S. case,141 the garbage fee was considered as a "service charge" rather
than a tax as it was actually a fee for a service given by the city which had previously been provided at
no cost to its citizens.

Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235 violates the
rule on double taxation142 must necessarily fail.

Nonetheless, although a special charge, tax, or assessment may be imposed by a municipal corporation,
it must be reasonably commensurate to the cost of providing the garbage service.143 To pass judicial
scrutiny, a regulatory fee must not produce revenue in excess of the cost of the regulation because such
fee will be construed as an illegal tax when the revenue generated by the regulation exceeds the cost of
the regulation.144ChanRoblesVirtualawlibrary

Petitioner argues that the Quezon City Government already collects garbage fee under Section 47 of R.A.
No. 9003, which authorizes LGUs to impose fees in amounts sufficient to pay the costs of preparing,
adopting, and implementing a solid waste management plan, and that it has access to the SWM Fund
under Section 46 of the same law. Moreover, Ordinance No. S-2235 is inconsistent with R.A. No. 9003,
because the ordinance emphasizes the collection and payment of garbage fee with no concern for
segregation, composting and recycling of wastes. It also skips the mandate of the law calling for the
active involvement of the barangay in the collection, segregation, and recycling of garbage.

We now turn to the pertinent provisions of R.A. No. 9003.

Under R.A. No. 9003, it is the declared policy of the State to adopt a systematic, comprehensive and
ecological solid waste management program which shall, among others, ensure the proper segregation,
collection, transport, storage, treatment and disposal of solid waste through the formulation and
adoption of the best environmental practices in ecological waste management.145 The law provides
that segregation and collection of solid waste shall be conducted at the barangay level, specifically for
biodegradable, compostable and reusable wastes, while the collection of non-recyclable materials and
special wastes shall be the responsibility of the municipality or city.146 Mandatory segregation of solid
wastes shall primarily be conducted at the source, to include household, institutional, industrial,
commercial and agricultural sources.147Segregation at source refers to a solid waste management
practice of separating, at the point of origin, different materials found in solid waste in order to promote
recycling and re-use of resources and to reduce the volume of waste for collection and disposal.148
Based on Rule XVII of the Department of Environment and Natural Resources (DENR) Administrative
Order No. 2001-34, Series of 2001,149 which is the Implementing Rules and Regulations (IRR) of R.A. No.
9003, barangays shall be responsible for the collection, segregation, and recycling of biodegradable,
recyclable, compostable and reusable wastes.150 For the purpose, a Materials Recovery Facility (MRF),
which shall receive biodegradable wastes for composting and mixed non-biodegradable wastes for final
segregation, re-use and recycling, is to be established in every barangay or cluster of
barangays.151ChanRoblesVirtualawlibrary

According to R.A. 9003, an LGU, through its local solid waste management board, is mandated by law to
prepare a 10-year solid waste management plan consistent with the National Solid Waste Management
Framework.152 The plan shall be for the re-use, recycling and composting of wastes generated in its
jurisdiction; ensure the efficient management of solid waste generated within its jurisdiction; and place
primary emphasis on implementation of all feasible re-use, recycling, and composting programs while
identifying the amount of landfill and transformation capacity that will be needed for solid waste which
cannot be re-used, recycled, or composted.153 One of the components of the solid waste management
plan is source reduction:

(e) Source reduction ‘ The source reduction component shall include a program and implementation
schedule which shows the methods by which the LGU will, in combination with the recycling and
composting components, reduce a sufficient amount of solid waste disposed of in accordance with the
diversion requirements of Section 20.

The source reduction component shall describe the following:

(1) strategies in reducing the volume of solid waste generated at source;

(2) measures for implementing such strategies and the resources necessary to carry out such activities;

(3) other appropriate waste reduction technologies that may also be considered, provided that such
technologies conform with the standards set pursuant to this Act;

(4) the types of wastes to be reduced pursuant to Section 15 of this Act;

(5) the methods that the LGU will use to determine the categories of solid wastes to be diverted from
disposal at a disposal facility through re-use, recycling and composting; and

(6) new facilities and of expansion of existing facilities which will be needed to implement re-use,
recycling and composting.

The LGU source reduction component shall include the evaluation and identification of rate structures
and fees for the purpose of reducing the amount of waste generated, and other source reduction
strategies, including but not limited to, programs and economic incentives provided under Sec. 45 of this
Act to reduce the use of non-recyclable materials, replace disposable materials and products with
reusable materials and products, reduce packaging, and increase the efficiency of the use of paper,
cardboard, glass, metal, and other materials. The waste reduction activities of the community shall also
take into account, among others, local capability, economic viability, technical requirements, social
concerns, disposition of residual waste and environmental impact: Provided, That, projection of future
facilities needed and estimated cost shall be incorporated in the plan. x x x154
The solid waste management plan shall also include an implementation schedule for solid waste
diversion:

SEC. 20. Establishing Mandatory Solid Waste Diversion. ‘ Each LGU plan shall include an implementation
schedule which shows that within five (5) years after the effectivity of this Act, the LGU shall divert at
least 25% of all solid waste from waste disposal facilities through re-use, recycling, and composting
activities and other resource recovery activities: Provided, That the waste diversion goals shall be
increased every three (3) years thereafter: Provided, further, That nothing in this Section prohibits a
local government unit from implementing re-use, recycling, and composting activities designed to
exceed the goal.

The baseline for the twenty-five percent (25%) shall be derived from the waste characterization
result155 that each LGU is mandated to undertake.156ChanRoblesVirtualawlibrary

In accordance with Section 46 of R.A. No. 9003, the LGUs are entitled to avail of the SWM Fund on the
basis of their approved solid waste management plan. Aside from this, they may also impose SWM Fees
under Section 47 of the law, which states:

SEC. 47. Authority to Collect Solid Waste Management Fees ‘ The local government unit shall impose
fees in amounts sufficient to pay the costs of preparing, adopting, and implementing a solid waste
management plan prepared pursuant to this Act. The fees shall be based on the following minimum
factors:

(a) types of solid waste;

(b) amount/volume of waste; and

(c) distance of the transfer station to the waste management facility.

The fees shall be used to pay the actual costs incurred by the LGU in collecting the local fees. In
determining the amounts of the fees, an LGU shall include only those costs directly related to the
adoption and implementation of the plan and the setting and collection of the local fees.
Rule XVII of the IRR of R.A. No. 9003 sets forth the details:

Section 1. Power to Collect Solid Waste Management Fees. ‘ The Local SWM Board/Local SWM Cluster
Board shall impose fees on the SWM services provided for by the LGU and/or any authorized
organization or unit. In determining the amounts of the fees, a Local SWM Board/Local SWM Cluster
Board shall include only those costs directly related to the adoption and implementation of the SWM
Plan and the setting and collection of the local fees. This power to impose fees may be ceded to the
private sector and civil society groups which have been duly accredited by the Local SWM Board/Local
SWM Cluster Board; provided, the SWM fees shall be covered by a Contract or Memorandum of
Agreement between the respective board and the private sector or civil society group.

The fees shall pay for the costs of preparing, adopting and implementing a SWM Plan prepared pursuant
to the Act. Further, the fees shall also be used to pay the actual costs incurred in collecting the local fees
and for project sustainability.

Section 2. Basis of SWM Service Fees

Reasonable SWM service fees shall be computed based on but not limited to the following minimum
factors:

a) Types of solid waste to include special waste

b) amount/volume of waste

c) distance of the transfer station to the waste management facility

d) capacity or type of LGU constituency

e) cost of construction

f) cost of management
g) type of technology

Section 3. Collection of Fees. ‘ Fees may be collected corresponding to the following levels:

a) Barangay ‘ The Barangay may impose fees for collection and segregation of biodegradable,
compostable and reusable wastes from households, commerce, other sources of domestic wastes, and
for the use of Barangay MRFs. The computation of the fees shall be established by the respective SWM
boards. The manner of collection of the fees shall be dependent on the style of administration of
respective Barangay Councils. However, all transactions shall follow the Commission on Audit rules on
collection of fees.

b) Municipality ‘ The municipal and city councils may impose fees on the barangay MRFs for the
collection and transport of non-recyclable and special wastes and for the disposal of these into the
sanitary landfill. The level and procedure for exacting fees shall be defined by the Local SWM
Board/Local SWM Cluster Board and supported by LGU ordinances, however, payments shall be
consistent with the accounting system of government.

c) Private Sector/Civil Society Group ‘ On the basis of the stipulations of contract or Memorandum of
Agreement, the private sector or civil society group shall impose fees for collection, transport and
tipping in their SLFs. Receipts and invoices shall be issued to the paying public or to the government.

From the afore-quoted provisions, it is clear that the authority of a municipality or city to impose fees is
limited to the collection and transport of non-recyclable and special wastes and for the disposal of these
into the sanitary landfill. Barangays, on the other hand, have the authority to impose fees for the
collection and segregation of biodegradable, compostable and reusable wastes from households,
commerce, other sources of domestic wastes, and for the use of barangay MRFs. This is but consistent
with Section 10 of R.A. No. 9003 directing that segregation and collection of biodegradable,
compostable and reusable wastes shall be conducted at the barangay level, while the collection of non-
recyclable materials and special wastes shall be the responsibility of the municipality or city.

In this case, the alleged bases of Ordinance No. S-2235 in imposing the garbage fee is the volume of
waste currently generated by each person in Quezon City, which purportedly stands at 0.66 kilogram per
day, and the increasing trend of waste generation for the past three years.157 Respondents did not
elaborate any further. The figure presented does not reflect the specific types of wastes generated ‘
whether residential, market, commercial, industrial, construction/demolition, street waste, agricultural,
agro-industrial, institutional, etc. It is reasonable, therefore, for the Court to presume that such amount
pertains to the totality of wastes, without any distinction, generated by Quezon City constituents. To
reiterate, however, the authority of a municipality or city to impose fees extends only to those related
to the collection and transport of non-recyclable and special wastes.

Granting, for the sake of argument, that the 0.66 kilogram of solid waste per day refers only to non-
recyclable and special wastes, still, We cannot sustain the validity of Ordinance No. S-2235. It violates
the equal protection clause of the Constitution and the provisions of the LGC that an ordinance must be
equitable and based as far as practicable on the taxpayer ‘s ability to pay, and not unjust, excessive,
oppressive, confiscatory.158ChanRoblesVirtualawlibrary

In the subject ordinance, the rates of the imposable fee depend on land or floor area and whether the
payee is an occupant of a lot, condominium, social housing project or apartment. For easy reference, the
relevant provision is again quoted below:

The rates being charged by the ordinance are unjust and inequitable: a resident of a 200 sq. m. unit in
a condominium or socialized housing project has to pay twice the amount than a resident of a lot similar
in size; unlike unit occupants, all occupants of a lot with an area of 200 sq. m. and less have to pay a
fixed rate of Php100.00; and the same amount of garbage fee is imposed regardless of whether the
resident is from a condominium or from a socialized housing project.

Indeed, the classifications under Ordinance No. S-2235 are not germane to its declared purpose of
promoting shared responsibility with the residents to attack their common mindless attitude in over-
consuming the present resources and in generating waste. 160 Instead of simplistically categorizing the
payee into land or floor occupant of a lot or unit of a condominium, socialized housing project or
apartment, respondent City Council should have considered factors that could truly measure the
amount of wastes generated and the appropriate fee for its collection. Factors include, among others,
household age and size, accessibility to waste collection, population density of the barangay or district,
capacity to pay, and actual occupancy of the property. R.A. No. 9003 may also be looked into for
guidance. Under said law, SWM service fees may be computed based on minimum factors such as types
of solid waste to include special waste, amount/volume of waste, distance of the transfer station to the
waste management facility, capacity or type of LGU constituency, cost of construction, cost of
management, and type of technology. With respect to utility rates set by municipalities, a municipality
has the right to classify consumers under reasonable classifications based upon factors such as the cost
of service, the purpose for which the service or the product is received, the quantity or the amount
received, the different character of the service furnished, the time of its use or any other matter which
presents a substantial difference as a ground of distinction.
[A] lack of uniformity in the rate charged is not necessarily unlawful discrimination. The establishment
of classifications and the charging of different rates for the several classes is not unreasonable and
does not violate the requirements of equality and uniformity. Discrimination to be unlawful must
draw an unfair line or strike an unfair balance between those in like circumstances having equal rights
and privileges. Discrimination with respect to rates charged does not vitiate unless it is arbitrary and
without a reasonable fact basis or justification.

On top of an unreasonable classification, the penalty clause of Ordinance No. SP-2235, which states:

SECTION 3. Penalty Clause. A penalty of 25% of the garbage fee due plus an interest of 2% per
month or a fraction thereof (interest) shall be charged against a household owner who refuses
to pay the garbage fee herein imposed.

lacks the limitation required by Section 168 of the LGC, which provides:

SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. ‘ The sanggunian
may impose a surcharge not exceeding twenty-five (25%) of the amount of taxes, fees or
charges not paid on time and an interest at the rate not exceeding two percent (2%) per month
of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid but in
no case shall the total interest on the unpaid amount or portion thereof exceed thirty-six (36)
months.

WHEREFORE, the petition is PARTIALLY GRANTED. The constitutionality and legality of Ordinance No.
SP-2095, S-2011, or the Socialized Housing Tax of Quezon City, is SUSTAINED for being consistent with
Section 43 of Republic Act No. 7279. On the other hand, Ordinance No. SP-2235, S-2013, which collects
an annual garbage fee on all domestic households in Quezon City, is hereby declared as
UNCONSTITUTIONAL AND ILLEGAL.