LOCAL TAXATION

[G.R. No. 126232. November 27, 1998]

THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE CHAVEZ, and MANUEL DJ SIAYNGCO in their
capacity as PROVINCIAL GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL LEGAL ADVISE,
respectively, petitioners, vs. THE HONORABLE COURT OF APPEALS (FORMER SPECIAL 12TH DIVISION), PUBLIC
CEMENT CORPORATION, respondents.
D E C I S I O N
ROMERO, J .:
Before us is a petition for certiorari seeking the reversal of the decision of the Court of Appeals dated September 27, 1995
declaring petitioner without authority to levy taxes on stones, sand, gravel, earth and other quarry resources extracted from private
lands, as well as the August 26, 1996 resolution of the appellate court denying its motion for reconsideration.
The facts are as follows:
On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed Provincial Ordinance No. 3, known as "An ordinance
Enacting the Revenue Code of the Bulacan Province," which was to take effect on July 1, 1992, section 21 of the ordinance provides as
follows:
Section 21. Imposition of Tax. There is hereby levied and collected a tax of 10% of the fair market value in the locality per cubic meter
of ordinary stones, sand, gravel, earth and other quarry resources, such, but not limited to marble, granite, volcanic cinders, basalt, tuff
and rock phosphate, extracted from public lands or from beds of seas, lakes, rivers, streams, creeks and other public waters within its
territorial jurisdiction. (Italics ours)
Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated November 11, 1993, assessed private respondent Republic
Cement Corporation (hereafter Republic Cement) P2,524,692.13 for extracting limestone, shale and silica from several parcels
of private land in the province during the third quarter of 1992 until the second quarter of 1993. Believing that the province, on the basis
of above-said ordinance, had no authority to impose taxes on quarry resources extracted from private lands, Republic Cement formally
contested the same on December 23, 1993. The same was, however, denied by the Provincial Treasurer on January 17,
1994. Republic Cement, consequently filed a petition for declaratory relief with the Regional Trial Court of Bulacan on February 14,
1994. The province filed a motion to dismiss Republic Cement's petition, which was granted by the trial court on May 13, 1993, which
ruled that declaratory relief was improper, allegedly because a breach of the ordinance had been committed by Republic Cement.
On July 11, 1994, Republic Cement filed a petition for certiorari with the Supreme Court seeking to reverse the trial court's
dismissal of their petition. The Court, in a resolution dated July 27, 1994, referred the same to the Court of Appeals, where it was
docketed as CA G.R. SP No. 34915. The appellate court required petitioners to file a comment, which they did on September 7, 1994.
In the interim, the Province of Bulacan issued a warrant of levy against Republic Cement, allegedly because of its unpaid tax
liabilities. Negotiations between Republic Cement and petitioners resulted in an agreement and modus vivendi on December 12, 1994,
whereby Republic Cement agreed to pay under protest P1,262,346.00, 50% of the tax assessed by petitioner, in exchange for the lifting
of the warrant of levy. Furthermore, Republic Cement and petitioners agreed to limit the issue for resolution by the Court of Appeals to
the question as to whether or not the provincial government could impose and/or assess taxes on quarry resources extracted by
Republic Cement from private lands pursuant to Section 21 of the Provincial Ordinance No. 3. This agreement and modus vivendi were
embodied in a joint manifestation and motion signed by Governor Roberto Pagdanganan, on behalf of the Province of Bulacan, by
Provincial Treasurer Florence Chavez, and by Provincial Legal Officer Manuel Siayngco, as petitioner's counsel and filed with the Court
of Appeals on December 13, 1994. In a resolution dated December 29, 1994, the appellate court approved the same and limited the
issue to be resolved to the question whether or not the provincial government could impose taxes on stones, sand, gravel, earth and
other quarry resources extracted from private lands.
After due trial, the Court of Appeals, on September 27, 1995, rendered the following judgment:
WHEREFORE, judgment is hereby rendered declaring the Province of Bulacan under its Provincial Ordinance No. 3 entitled
"An Ordinance Enacting the Revenue Code of Bulacan Province" to be without legal authority to impose and assess taxes
on quarry resources extracted by RCC from private lands, hence the interpretation of Respondent Treasurer of Chapter II,
Article D, Section 21 of the Ordinance, and the assessment made by the Province of Bulacan against RCC is null and void.
Petitioner's motion for reconsideration, as well as their supplemental motion for reconsideration, was denied by the appellate court
on august 26, 1996, hence this appeal.
Petitioner's claim that the Court of Appeals erred in:
1. NOT HAVING OUTRIGHTLY DISMISSED THE SUBJECT PETITION ON THE GROUND THAT THE SAME IS
NOT THE APPROPRIATE REMEDY FROM THE TRIAL COURT'S GRANT OF THE PRIVATE
RESPONDENTS' (HEREIN PETITIONER) MOTION TO DISMISS;
2. NOT DISMISSING THE SUBJECT PETITION FOR BEING VIOLATIVE OF CIRCULAR 2-90 ISSUED BY THE
SUPREME COURT;
3. NOT DISMISSING THE PETITION FOR REVIEW ON THE GROUND THAT THE TRIAL COURT'S ORDER OF
MAY 13, 1994 HAD LONG BECOME FINAL AND EXECUTORY;
4. GOING BEYOND THE PARAMETERS OF ITS APPELLATE JURISDICTION IN RENDERING THE
SEPTEMBER 27, 1995 DECISION;
5. HOLDING THAT PRIVATE RESPONDENT (HEREIN PETITIONER) ARE ESTOPPED FROM RAISING THE
PROCEDURAL ISSUE IN THE MOTION FOR RECONSIDERATION;
6. THE INTERPRETATION OF SECTION 134 OF THE LOCAL GOVERNMENT CODE AS STATED IN THE
SECOND TO THE LAST PARAGRAPH OF PAGE 5 OF ITS SEPTEMBER 27, 1995 DECISION;
7. SUSTAINING THE ALLEGATIONS OF HEREIN RESPONDENT WHICH UNJUSTLY DEPRIVED PETITIONER
THE POWER TO CREATE ITS OWN SOURCES OF REVENUE;
8. DECLARING THAT THE ASSESSMENT MADE BY THE PROVINCE OF BULACAN AGAINST RCC AS NULL
AND VOID WHICH IN EFFECT IS A COLLATERAL ATTACK ON PROVINCIAL ORDINANCE NO. 3; AND
9. FAILING TO CONSIDER THE REGALIAN DOCTRINE IN FAVOR OF THE LOCAL GOVERNMENT.
The issues raised by petitioners are devoid of merit. The number and diversity of errors raised by appellants impel us, however,
to discuss the points raised seriatim.
In their first assignment of error, petitioners contend that instead of filing a petition for certiorari with the Supreme Court, Republic
Cement should have appealed from the order of the trial court dismissing their petition. Citing Martinez vs. CA,
[1]
they allege that a
motion to dismiss is a final order, the remedy against which is not a petition for certiorari, but an appeal, regardless of t he questions
sought to be raised on appeal, whether of fact or of law, whether involving jurisdiction or grave abuse of discretion of the trial court.
Petitioners' argument is misleading. While it is true that the remedy against a final order is an appeal, and not a petition
for certiorari, the petition referred to is a petition for certiorari under Rule 65. As stated in Martinez, the party aggrieved does not have
the option to substitute the special civil action for certiorari under Rule 65 for the remedy of appeal. The existence and availability of the
right of appeal are antithetical to the availment of the special civil action for certiorari.
Republic Cement did not, however, file a petition for certiorari under Rule 65, but an appeal by certiorari under Rule 45. Even law
students know that certiorari under Rule 45 is a mode of appeal, an appeal from the Regional Trial Court being taken in either of two
ways (a) by writ of error (involving questions of fact and law) and (b) by certiorari (limited only to issues of law), with an appeal
by certioraribeing brought to the Supreme Court, there being no provision of law for taking appeals by certiorari to the Court of
Appeals.
[2]
It is thus clearly apparent that Republic Cement correctly contested the trial court's order of dismissal by filing an appeal
by certiorari under Rule 45. In fact, petitioners, in their second assignment of error, admit that a petition for review on certiorari under
Rule 45 is available to a party aggrieved by an order granting a motion to dismiss.
[3]
They claim, however, that Republic Cement could
not avail of the same allegedly because the latter raised issues of fact, which is prohibited, Rule 45 providing that "(t)he petition shall
raise only questions of law which must be distinctly set forth."
[4]
In this respect, petitioners claim that Republic Cement's petition should
have been dismissed by the appellate court, Circular 2-90 providing:
4. Erroneous Appeals. - An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or
inappropriate mode shall be dismissed.
x x x x x x x x x
d) No transfer of appeals erroneously taken. -- No transfers of appeals erroneously taken to the Supreme Court or to the
Court of Appeals to whichever of these Tribunals has appropriate appellate jurisdiction will be allowed; continued ignorance
or wilful disregard of the law on appeals will not be tolerated.
Petitioners even fault the Court for referring Republic Cement's petition to the Court of Appeals, claiming that the same should
have been dismissed pursuant to Circular 2-90. Petitioners conveniently overlook the other provisions of Circular 2-90, specifically 4b)
thereof, which provides:
b) Raising factual issues in appeal by certiorari. - Although submission of issues of fact in an appeal by certiorari taken to
the Supreme Court from the regional trial court is ordinarily proscribed, the Supreme Court nonetheless retains the option, in
the exercise of its sound discretion and considering the attendant circumstances, either itself to take cognizance of and
decide such issues or to refer them to the Court of Appeals for determination.
As can be clearly adduced from the foregoing, when an appeal by certiorari under Rule 45 erroneously raises factual issues, the
Court has the option to refer the petition to the Court of Appeals. The exercise by the Court of this option may not now be questioned
by petitioners.
As the trial court's order was properly appealed by Republic Cement, the trial court's May 13, 1994 order never became final and
executory, rendering petitioner's third assignment of error moot and academic.
Petitioners' fourth and fifth assignment of errors are likewise without merit. Petitioners assert that the Court of Appeals could only
rule on the propriety of the trial court's dismissal of Republic Cement's petition for declaratory relief, allegedly because that was the sole
relief sought by the latter in its petition for certiorari. Petitioners claim that the appellate court overstepped its jurisdiction when it
declared null and void the assessment made by the Province of Bulacan against Republic Cement.
Petitioners gloss over the fact that, during the proceedings before the Court of Appeals, they entered into an agreement
and modus vivendi whereby they limited the issue for resolution to the question as to whether or not the provincial government could
impose and/or assess taxes on stones, sand, gravel, earth and other quarry resources extracted by Republic Cement from private
lands. This agreement andmodus vivendi were approved by the appellate court on December 29, 1994. All throughout the
proceedings, petitioners never questioned the authority of the Court of Appeals to decide this issue, an issue which it brought itself
within the purview of the appellate court. Only when an adverse decision was rendered by the Court of Appeals did petitioners question
the jurisdiction of the former.
Petitioners are barred by the doctrine of estoppel from contesting the authority of the Court of Appeals to decide the instant case,
as this Court has consistently held that "(a) party cannot invoke the jurisdiction of a court to secure affirmative relief against his
opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction."
[5]
The Supreme Court frowns
upon the undesirable practice of a party submitting his case for decision and then accepting the judgment, only if favorable, and
attacking it for lack of jurisdiction when adverse.
[6]

In a desperate attempt to ward off defeat, petitioners now repudiate the above-mentioned agreement and modus vivendi, claiming
that the same was not binding in the Province of Bulacan, not having been authorized by the Sangguniang Panlalawigan of
Bulacan. While it is true that the Provincial Governor can enter into contract and obligate the province only upon authority of
the sangguniang panlalawigan,
[7]
the same is inapplicable to the case at bar. The agreement and modus vivendi may have been
signed by petitioner Roberto Pagdanganan, as Governor of the Province of Bulacan, without authorization from the sangguniang
panlalawigan, but it was also signed by Manuel Siayngco, the Provincial Legal Officer, in his capacity as such, and as counsel of
petitioners.
It is a well-settled rule that all proceedings in court to enforce a remedy, to bring a claim, demand, cause of action or subject
matter of a suit to hearing, trial, determination, judgment and execution are within the exclusive control of the attorney.
[8]
With respect to
such matters of ordinary judicial procedure, the attorney needs no special authority to bind his client.
[9]
Such questions as what action or
pleading to file, where and when to file it, what are its formal requirements, what should be the theory of the case, what defenses to
raise, how may the claim or defense be proved, when to rest the case, as well as those affecting the competency of a witness, the
sufficiency, relevancy, materiality or immateriality of certain evidence and the burden of proof are within the authority of the attorney to
decide.
[10]
Whatever decision an attorney makes on any of these procedural questions, even if it adversely affects a client's case, will
generally bind a client. The agreement and modus vivendi signed by petitioner's counsel is binding upon petitioners, even if
the Sanggunian had not authorized the same, limitation of issues being a procedural question falling within the exclusive authority of the
attorney to decide.
In any case, the remaining issues raised by petitioner are likewise devoid of merit, a province having no authority to impose taxes
on stones, sand, gravel, earth and other quarry resources extracted from private lands. The pertinent provisions of the Local
Government Code are as follows:
Sec. 134. Scope of Taxing Powers. - Except as otherwise provided in this Code, the province may levy only the taxes, fees,
and charges as provided in this Article.
Sec. 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect not more than ten percent
(10%) of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources,
as defined under the National Internal Revenue Code, as amended, extracted from public lands or from the beds of seas,
lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction.
x x x x x x x x x (Italics supplied)
The appellate court, on the basis of Section 134, ruled that a province was empowered to impose taxes only on sand, gravel, and
other quarry resources extracted from public lands, its authority to tax being limited by said provision only to those taxes, fees and
charges provided in Article One, Chapter 2, Title One of Book II of the Local Government Code.
[11]
On the other hand, petitioners claim
that Sections 129
[12]
and 186
[13]
of the Local Government Code authorizes the province to impose taxes other than those specifically
enumerated under the Local Government Code.
The Court of Appeals erred in ruling that a province can impose only the taxes specifically mentioned under the Local Government
Code. As correctly pointed out by petitioners, Section 186 allows a province to levy taxes other than those specifically enumerated
under the Code, subject to the conditions specified therein.
This finding, nevertheless, affords cold comfort to petitioners as they are still prohibited from imposing taxes on stones, sand,
gravel, earth and other quarry resources extracted from private lands. The tax imposed by the Province of Bulacan is an excise tax,
being a tax upon the performance, carrying on, or exercise of an activity.
[14]
The Local Government Code provides:
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:
x x x x x x x x x
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or
charges on petroleum products;
x x x x x x x x x
A province may not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code. Unfortunately
for petitioners, the National Internal Revenue Code provides:
Section 151. - Mineral Products. -
(A) Rates of Tax. - There shall be levied, assessed and collected on minerals, mineral products and quarry resources,
excise tax as follows:
x x x x x x x x x
(2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based on the actual market
value of the gross output thereof at the time of removal, in case of those locally extracted or produced; or the
values used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added
tax, in the case of importation.
x x x x x x x x x
(B) [Definition of Terms]. - For purposes of this Section, the term-
x x x x x x x x x
(4) Quarry resources shall mean any common stone or other common mineral substances as the Director of
the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl,
marble, granite, volcanic cinders, basalt, tuff and rock phosphate; Provided, That they contain no metal or metals
or other valuable minerals in economically workable quantities.
It is clearly apparent from the above provision that the National Internal Revenue Code levies a tax on all quarry resources,
regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand,
gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Code. The province can,
however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly
empowered to do so under the Local Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from
private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the
National Internal Revenue Code.
Given the above disquisition, petitioners cannot claim that the appellate court unjustly deprived them of the power to create their
sources of revenue, their assessment of taxes against Republic Cement being ultra vires, traversing as it does the limitations set by the
Local Government Code.
Petitioners likewise aver that the appellate court's declaration of nullity of its assessment against Republic Cement is a collateral
attack on Provincial Ordinance No. 3, which is prohibited by public policy.
[15]
Contrary to petitioners' claim, the legality of the ordinance
was never questioned by the Court of Appeals. Rather, what the appellate court questioned was petitioners' assessment of taxes on
Republic Cement on the basis of Provincial Ordinance No. 3, not the ordinance itself.
Furthermore, Section 21 of Provincial Ordinance No. 3 is practically only a reproduction of Section 138 of the Local Government
Code. A cursory reading of both would show that both refer to ordinary sand, stone, gravel, earth and other quarry resources extracted
from public lands. Even if we disregard the limitation set by Section 133 of the Local Government Code, petitioners may not impose
taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands on the basis of Section 21 of Provincial
Ordinance No. 3 as the latter clearly applies only to quarry resources extracted from public lands. Petitioners may not invoke the
Regalian doctrine to extend the coverage of their ordinance to quarry resources extracted from private lands, for taxes, being burdens,
are not to be presumed beyond what the applicable statute expressly and clearly declares, tax statutes being construed strictissimi
juris against the government.
[16]

WHEREFORE, premises considered, the instant petition is DISMISSED for lack of merit and the decision of the Court of Appeals
is hereby AFFIRMED in toto. Costs against petitioner.
SO ORDERED.


[G.R. No. 131359. May 5, 1999]
MANILA ELECTRIC COMPANY, petitioner vs. PROVINCE OF LAGUNA and BENITO R. BALAZO, in his capacity as Provincial
Treasurer of Laguna, respondents.
D E C I S I O N
VITUG, J .:
On various dates, certain municipalities of the Province of Laguna including, Bian, Sta Rosa, San Pedro, Luisiana, Calauan and
Cabuyao, by virtue of existing laws then in effect, issued resolutions through their respective municipal councils granting f ranchise in
favor of petitioner Manila Electric Company (MERALCO) for the supply of electric light, heat and power within their concerned
areas. On 19 January 1983, MERALCO was likewise granted a franchise by the National Electrification Administration to operate an
electric light and power service in the Municipality of Calamba, Laguna.
On 12 September 1991, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, was enacted to take
effect on 01 January 1992 enjoining local government units to create their own sources of revenue and to levy taxes, fees and charges,
subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to the provisions of the Code,
respondent province enacted Laguna Provincial Ordinance No. 01-92, effective 01 January 1993, providing, in part, as follows:
Sec. 2.09. Franchise Tax. There is hereby imposed a tax on businesses enjoying a franchise, at a rate of fifty percent (50%) of one
percent (1%) of the gross annual receipts, which shall include both cash sales and sales on account realized during the preceding
calendar year within this province, including the territorial limits on any city located in the province
[1]

On the basis of the above ordinance, respondent Provincial Treasurer sent a demand letter to MERALCO for the corresponding
tax payment. Petitioner MERALCO paid the tax, which then amounted to P19,520,628.42, under protest. A formal claim for refund was
thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to
the National Government pursuant to P.D. 551 already included the franchise tax imposed by the Provincial Tax
Ordinance. MERALCO contended that the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92,
insofar as it concerned MERALCO, contravened the provisions of Section 1 of P.D. 551 which read:
Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax payable by all grantees of franchises to
generate, distribute and sell electric current for light, heat and power shall be two per cent (2%) of their gross receipts received from the
sale of electric current and from transactions incident to the generation, distribution and sale of electric current.
Such franchise tax shall be payable to the Commissioner of Internal Revenue or his duly authorized representative on or before the
twentieth day of the month following the end of each calendar quarter or month, as may be provided in the respective franchise or
pertinent municipal regulation and shall, any provision of the Local Tax Code or any other law to the contrary notwithstanding, be in lieu
of all taxes and assessments of whatever nature imposed by any national or local authority on earnings, receipts, income and privilege
of generation, distribution and sale of electric current.
On 28 August 1995, the claim for refund of petitioner was denied in a letter signed by Governor Jose D. Lina. In denying the
claim, respondents relied on a more recent law, i.e., Republic Act No. 7160 or the Local Government Code of 1991, than the old decree
invoked by petitioner.
On 14 February 1996, petitioner MERALCO filed with the Regional Trial Court of Sta Cruz, Laguna, a complaint for refund, with a
prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order, against the Province of Laguna and also
Benito R. Balazo in his capacity as the Provincial Treasurer of Laguna. Aside from the amount of P19,520,628.42 for which petitioner
MERALCO had priority made a formal request for refund, petitioner thereafter likewise made additional payments under protest on
various dates totaling P27,669,566.91.
The trial court, in its assailed decision of 30 September 1997, dismissed the complaint and concluded:
WHEREFORE, IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS, JUDGMENT is hereby rendered in favor of the
defendants and against the plaintiff, by:
1. Ordering the dismissal of the Complaint; and
2. Declaring Laguna Provincial Tax Ordinance No. 01-92 as valid, binding, reasonable and enforceable.
[2]

In the instant petition, MERALCO assails the above ruling and brings up the following issues; viz:
1. Whether the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92, insofar as
petitioner is concerned, is violative of the non-impairment clause of the Constitution and Section 1 of Presidential Decree No. 551.
2. Whether Republic Act. No. 7160, otherwise known as the Local Government Code of 1991, has repealed, amended or
modified Presidential Decree No. 551.
3. Whether the doctrine of exhaustion of administrative remedies is applicable in this case.
[3]

The petition lacks merit.
Prefatorily, it might be well to recall that local governments do not have the inherent power to tax
[4]
except to the extent that such
power might be delegated to them either by the basic law or by statute. Presently, under Article X of the 1987 Constitution, a general
delegation of that power has been given in favor of local government units. Thus:
Sec. 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local
government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum,
allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications,
election, appointment and removal, term, salaries, powers and functions, and duties of local officials, and all other matters relating to
the organization and operation of the local units.
x x x x x x x x x
Sec. 5. Each local government shall have the power to create its own sources of revenues and 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.
The 1987 Constitution has a counterpart provision in the 1973 Constitution which did come out with a similar delegation of revenue
making powers to local governments.
[5]

Under the regime of the 1935 Constitution no similar delegation of tax powers was provided, and local government units instead
derived their tax powers under a limited statutory authority. Whereas, then, the delegation of tax powers granted at that time by statute
to local governments was confined and defined (outside of which the power was deemed withheld), the present constitutional rule
(starting with the 1973 Constitution), however, would broadly confer such tax powers subject only to specific exceptions that the l aw
might prescribe.
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,
[6]
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.
The Local Government Code of 1991 has incorporated and adopted, by and large the provisions of the now repealed Local Tax
Code, which had been in effect since 01 July 1973, promulgated into law by Presidential Decree No. 231
[7]
pursuant to the then
provisions of Section 2, Article XI, of the 1973 Constitution. The 1991 Code explicitly authorizes provincial governments,
notwithstanding any exemption granted by any law or other special law, x x x (to) impose a tax on businesses enjoying a
franchise. Section 137 thereof provides:
Sec. 137. Franchise Tax Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on
businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction. In the case of a newly started
business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any
fraction thereof, as provided herein. (Underscoring supplied for emphasis)
Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units,
the Local Government Code has effectively withdrawn under Section 193 thereof, tax exemptions or incentives theretofore enjoyed by
certain entities. This law states:
Section 193 Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local
water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code. (Underscoring supplied for emphasis)
The Code, in addition, contains a general repealing clause in its Section 534; thus:
Section 534. Repealing Clause. x x x.
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or
parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. (Underscoring
supplied for emphasis)
[8]

To exemplify, in Mactan Cebu International Airport Authority vs. Marcos,
[9]
the Court upheld the withdrawal of the real estate tax
exemption previously enjoyed by Mactan Cebu International Airport Authority. The Court ratiocinated:
x x x These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the
LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self -reliant
communities and make them effective partners in the attainment of national goals. The power to tax is the most effective instrument to
raise needed revenues to finance and support myriad activities of local government units for the delivery of basic service essential to
the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. It may also be relevant to
recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations
and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of
similarly situated enterprises, and there was a need for these entities to share in the requirements of development, fiscal or otherwise,
by paying the taxes and other charges due from them.
[10]

Petitioner in its complaint before the Regional Trial Court cited the ruling of this Court in Province of Misamis Oriental vs. Cagayan
Electric Power and Light Company, Inc.;
[11]
thus:
In an earlier case, the phrase shall be in lieu of all taxes and at any time levied, established by, or collected by any authority found in
the franchise of the Visayan Electric Company was held to exempt the company from payment of the 5% tax on corporate franchise
provided in Section 259 of the Internal Revenue Code (Visayan Electric Co. vs. David, 49 O.G. [No. 4] 1385)
Similarly, we ruled that the provision: shall be in lieu of all taxes of every name and nature in the franchise of the Manila Railroad
(Subsection 12, Section 1, Act No. 1510) exempts the Manila Railroad from payment of internal revenue tax for its importations of coal
and oil under Act No. 2432 and the Amendatory Acts of the Philippine Legislature (Manila Railroad vs. Rafferty, 40 Phil. 224).
The same phrase found in the franchise of the Philippine Railway Co. (Sec. 13, Act No. 1497) justified the exemption of the Philippine
Railway Company from payment of the tax on its corporate franchise under Section 259 of the Internal Revenue Code, as amended by
R.A. No. 39 (Philippine Railway Co vs. Collector of Internal Revenue, 91 Phil. 35).
Those magic words, shall be in lieu of all taxes also excused the Cotabato Light and Ice Plant Company from the payment of the tax
imposed by Ordinance No. 7 of the City of Cotabato (Cotabato Light and Power Co. vs. City of Cotabato, 32 SCRA 231).
So was the exemption upheld in favor of the Carcar Electric and Ice Plant Company when it was required to pay the corporate
franchise tax under Section 259 of the Internal Revenue Code as amended by R.A. No. 39 (Carcar Electric & Ice Plant vs. Collector of
Internal Revenue, 53 O.G. [No. 4] 1068). This Court pointed out that such exemption is part of the inducement for the acceptance of
the franchise and the rendition of public service by the grantee.
[12]

In the recent case of the City Government of San Pablo, etc., et al. vs. Hon. Bienvenido V. Reyes, et al.,
[13]
the Court has held that
the phrase in lieu of all taxes have to give way to the peremptory language of the Local Government Code specifically providing for
the withdrawal of such exemptions, privileges, and that upon the effectivity of the Local Government Code all exemptions except only
as provided therein can no longer be invoked by MERALCO to disclaim liability for the local tax. In fine, the Court has viewed its
previous rulings as laying stress more on the legislative intent of the amendatory law whether the tax exemption privilege is
to be withdrawn or not rather than on whether the law can withdraw, without violating the Constitution, the tax exemption or
not.
While the Court has, not too infrequently, referred to tax exemptions contained in special franchises as being in the nature
of contracts and a part of the inducement for carrying on the franchise, these exemptions, nevertheless, are far from being strictly
contractual in nature. Contractual tax exemptions, in the real sense of the term and where the non-impairment clause of the
Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in
government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its
private capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not
be revoked without impairing the obligations of contracts.
[14]
These contractual tax exemptions, however, are not to be confused with
tax exemptions granted under franchises. A franchise partakes the nature of a grant which is beyond the purview of the non-
impairment clause of the Constitution.
[15]
Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the
1935 and the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the
condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so
requires.
WHEREFORE, the instant petition is hereby DISMISSED. No costs.
SO ORDERED.


[G.R. No. 120082. September 11, 1996]
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. HON. FERDINAND J. MARCOS, in his capacity as the
Presiding Judge of the Regional Trial Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor,
HON. TOMAS R. OSMEA, and EUSTAQUIO B. CESA, respondents.
D E C I S I O N
DAVIDE, JR., J .:
For review under Rule 45 of the Rules of Court on a pure question of law are the decision of 22 March 1995
[1]
of the Regional Trial
Court (RTC) of Cebu City, Branch 20, dismissing the petition for declaratory relief in Civil Case No. CEB-16900, entitled Mactan Cebu
International Airport Authority vs. City of Cebu, and its order of 4 May 1995
[2]
denying the motion to reconsider the decision.
We resolved to give due course to this petition for it raises issues dwelling on the scope of the taxing power of local government
units and the limits of tax exemption privileges of government-owned and controlled corporations.
The uncontradicted factual antecedents are summarized in the instant petition as follows:
Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958, mandated to
principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in
the Province of Cebu and the Lahug Airport in Cebu City, x x x and such other airports as may be established in the Province of Cebu x
x x (Sec. 3, RA 6958). It is also mandated to:
a) encourage, promote and develop international and domestic air traffic in the Central Visayas and Mindanao regions as a
means of making the regions centers of international trade and tourism, and accelerating the development of the means of
transportation and communication in the country; and,
b) upgrade the services and facilities of the airports and to formulate internationally acceptable standards of airport
accommodation and service.
Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with
Section 14 of its Charter:
Sec. 14. Tax Exemptions. -- The Authority shall be exempt from realty taxes imposed by the National Government or any of its political
subdivisions, agencies and instrumentalities x x x.
On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the Treasurer of the City of Cebu, demanded
payment for realty taxes on several parcels of land belonging to the petitioner (Lot Nos. 913-G, 743, 88 SWO, 948-A, 989-A, 474,
109(931), I-M, 918, 919, 913-F, 941, 942, 947, 77 Psd., 746 and 991-A), located at Barrio Apas and Barrio Kasambagan, Lahug, Cebu
City, in the total amount of P2,229,078.79.
Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favor the aforecited Section 14 of RA 6958
which exempts it from payment of realty taxes. It was also asserted that it is an instrumentality of the government performing
governmental functions, citing Section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local
government units:
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) x x x
x x x
o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government
units. (underscoring supplied)
Respondent City refused to cancel and set aside petitioners realty tax account, insisting that the MCIAA is a government-controlled
corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Government Code t hat
took effect on January 1, 1992:
Section 193. Withdrawal of Tax Exemption Privilege. Unless otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons whether natural or juridical,including government-owned or controlled corporations, except local
water districts, cooperatives duly registered under RA No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code. (underscoring supplied)
x x x
Section 234. Exemptions from Real Property Taxes. x x x
(a) x x x
x x x
(e) x x x
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or controlled corporations are hereby withdrawn upon the effectivity of this
Code.
As the City of Cebu was about to issue a warrant of levy against the properties of petitioner, the latter was compelled to pay its tax
account under protest and thereafter filed a Petition for Declaratory Relief with the Regional Trial Court of Cebu, Branch 20,
on December 29, 1994. MCIAA basically contended that the taxing powers of local government units do not extend to the levy of taxes
or fees of any kind on an instrumentality of the national government. Petitioner insisted that while it is indeed a government-owned
corporation, it nonetheless stands on the same footing as an agency or instrumentality of the national government by the very nature of
its powers and functions.
Respondent City, however, asserted that MCIAA is not an instrumentality of the government but merely a government-owned
corporation performing proprietary functions. As such, all exemptions previously granted to it were deemed withdrawn by operation of
law, as provided under Sections 193 and 234 of the Local Government Code when it took effect on January 1, 1992.
[3]

The petition for declaratory relief was docketed as Civil Case No. CEB-16900.
In its decision of 22 March 1995,
[4]
the trial court dismissed the petition in light of its findings, to wit:
A close reading of the New Local Government Code of 1991 or RA 7160 provides the express cancellation and withdrawal of
exemption of taxes by government-owned and controlled corporation per Sections after the effectivity of said Code on January 1, 1992,
to wit: [proceeds to quote Sections 193 and 234]
Petitioners claimed that its real properties assessed by respondent City Government of Cebu are exempted from paying realty t axes in
view of the exemption granted under RA 6958 to pay the same (citing Section 14 of RA 6958).
However, RA 7160 expressly provides that All general and special laws, acts, city charters, decrees [sic], executive orders,
proclamations and administrative regulations, or part of parts thereof which are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly. (/f/, Section 534, RA 7160).
With that repealing clause in RA 7160, it is safe to infer and state that the tax exemption provided for in RA 6958 creating petitioner had
been expressly repealed by the provisions of the New Local Government Code of 1991.
So that petitioner in this case has to pay the assessed realty tax of its properties effective after January 1, 1992 until the present.
This Courts ruling finds expression to give impetus and meaning to the overall objectives of the New Local Government Code of 1991,
RA 7160. It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genui ne and
meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective
partners in the attainment of national goals. Toward this end, the State shall provide for a more responsive and accountable local
government structure instituted through a system of decentralization whereby local government units shall be given more powers,
authority, responsibilities, and resources. The process of decentralization shall proceed from the national government to the local
government units. x x x
[5]

Its motion for reconsideration having been denied by the trial court in its 4 May 1995 order, the petitioner filed the instant petition
based on the following assignment of errors:
I. RESPONDENT JUDGE ERRED IN FAILING TO RULE THAT THE PETITIONER IS VESTED WITH GOVERNMENT
POWERS AND FUNCTIONS WHICH PLACE IT IN THE SAME CATEGORY AS AN INSTRUMENTALITY OR AGENCY
OF THE GOVERNMENT.
II. RESPONDENT JUDGE ERRED IN RULING THAT PETITIONER IS LIABLE TO PAY REAL PROPERTY TAXES TO
THE CITY OF CEBU.
Anent the first assigned error, the petitioner asserts that although it is a government-owned or controlled corporation, it is
mandated to perform functions in the same category as an instrumentality of Government. An instrumentality of Government is one
created to perform governmental functions primarily to promote certain aspects of the economic life of the people.
[6]
Considering its task
not merely to efficiently operate and manage the Mactan-Cebu International Airport, but more importantly, to carry out the Government
policies of promoting and developing the Central Visayas and Mindanao regions as centers of international trade and tourism, and
accelerating the development of the means of transportation and communication in the country,
[7]
and that it is an attached agency of
the Department of Transportation and Communication (DOTC),
[8]
the petitioner may stand in [sic] the same footing as an agency or
instrumentality of the national government. Hence, its tax exemption privilege under Section 14 of its Charter cannot be considered
withdrawn with the passage of the Local Government Code of 1991 (hereinafter LGC) because Section 133 thereof specifically states
that the `taxing powers of local government units shall not extend to the levy of taxes or fees or charges of any kind on the national
government, its agencies and instrumentalities.
As to the second assigned error, the petitioner contends that being an instrumentality of the National Government, respondent
City of Cebu has no power nor authority to impose realty taxes upon it in accordance with the aforesaid Section 133 of the LGC, as
explained in Basco vs. Philippine Amusement and Gaming Corporation:
[9]

Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled
corporation with an original charter, PD 1869. All of its shares of stock are owned by the National Government. . . .
PAGCOR has a dual role, to operate and regulate gambling casinos. The latter role is governmental, which places it in the category of
an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is
exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government.
The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of consti tutional
laws enacted by Congress to carry into execution the powers vested in the federal government. (McCulloch v. Maryland, 4 Wheat 316,
4 L Ed. 579)
This doctrine emanates from the supremacy of the National Government over local governments.
Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in
that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no
state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal
responsibilities, or even to seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be
undesirable activities or enterprise using the power to tax as a tool for regulation (U.S. v. Sanchez, 340 US 42). The power to tax
which was called by Justice Marshall as the power to destroy (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power to wield it. (underscoring supplied)
It then concludes that the respondent Judge cannot therefore correctly say that the questioned provisions of the Code do not
contain any distinction between a government corporation performing governmental functions as against one performing merely
proprietary ones such that the exemption privilege withdrawn under the said Code would apply to allgovernment corporations. For it is
clear from Section 133, in relation to Section 234, of the LGC that the legislature meant to exclude instrumentalities of the national
governmentfrom the taxing powers of the local government units.
In its comment, respondent City of Cebu alleges that as a local government unit and a political subdivision, it has the power to
impose, levy, assess, and collect taxes within its jurisdiction. Such power is guaranteed by the Constitution
[10]
and enhanced further by
the LGC. While it may be true that under its Charter the petitioner was exempt from the payment of realty taxes,
[11]
this exemption was
withdrawn by Section 234 of the LGC. In response to the petitioners claim that such exemption was not repealed because being an
instrumentality of the National Government, Section 133 of the LGC prohibits local government units from imposing taxes, fees, or
charges of any kind on it, respondent City of Cebu points out that the petitioner is likewise a government-owned corporation, and
Section 234 thereof does not distinguish between government-owned or controlled corporations performing governmental and purely
proprietary functions. Respondent City of Cebu urges this Court to apply by analogy its ruling that the Manila International Airport
Authority is a government-owned corporation,
[12]
and to reject the application of Basco because it was promulgated . . . before the
enactment and the signing into law of R.A. No. 7160, and was not, therefore, decided in the light of the spirit and intention of the
framers of the said law.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no
limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the
constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed by the people through their
Constitutions.
[13]
Our Constitution, for instance, provides that the rule of taxation shall be uniform and equitable and Congress shall
evolve a progressive system of taxation.
[14]
So potent indeed is the power that it was once opined that the power to tax involves the
power to destroy.
[15]
Verily, taxation is a destructive power which interferes with the personal and property rights of the people and
takes from them a portion of their property for the support of the government. Accordingly, tax statutes must be construed strictly
against the government and liberally in favor of the taxpayer.
[16]
But since taxes are what we pay for civilized society,
[17]
or are the
lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
[18]
A claim of exemption from tax payments
must be clearly shown and based on language in the law too plain to be mistaken.
[19]
Elsewise stated, taxation is the rule, exemption
therefrom is the exception.
[20]
However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of
construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be
handled by the government in the course of its operations.
[21]

The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies,
no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the
Constitution.
[22]
Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may
provide which, however, must be consistent with the basic policy of local autonomy.
There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from the payment of realty taxes
imposed by the National Government or any of its political subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is
the rule and exemption therefrom the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. The only
exception to this rule is where the exemption was granted to private parties based on material consideration of a mutual nature, which
then becomes contractual and is thus covered by the non-impairment clause of the Constitution.
[23]

The LGC, enacted pursuant to Section 3, Article X of the Constitution, provides for the exercise by local government units of their
power to tax, the scope thereof or its limitations, and the exemptions from taxation.
Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units as follows:
SEC. 133. Common Limitations on the Taxing Power 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
Cooperatives 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.(emphasis supplied)
Needless to say, the last item (item o) is pertinent to this case. The taxes, fees or charges referred to are of any kind; hence, they
include all of these, unless otherwise provided by the LGC. The term taxes is well understood so as to need no further elaboration,
especially in light of the above enumeration. The term fees means charges fixed by law or ordinance for the regulation or inspection
of business or activity,
[24]
while charges are pecuniary liabilities such as rents or fees against persons or property.
[25]

Among the taxes enumerated in the LGC is real property tax, which is governed by Section 232. It reads as follows:
SEC. 232. Power to Levy Real Property Tax. A province or city or a municipality within the Metropolitan Manila Area may levy an
annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted.
Section 234 of the LGC provides for the exemptions from payment of real property taxes and withdraws previous exemptions
therefrom granted to natural and juridical persons, including government-owned and controlled corporations, except as provided
therein. It provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof had been granted, for consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious
cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and
government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and
transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons,
whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this
Code.
These exemptions are based on the ownership, character, and use of the property. Thus:
(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real properties owned
by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered cooperatives.
(b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i) charitable
institutions, (ii) houses and temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and
(iii) non-profit or religious cemeteries.
(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use to
which they are devoted are: (i) all lands, buildings and improvements which are actually directly and exclusively used for
religious, charitable or educational purposes; (ii) all machineries and equipment actually, directly and exclusively used by
local water districts or by government-owned or controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power; and (iii) all machinery and equipment used for pollution control and
environmental protection.
To help provide a healthy environment in the midst of the modernization of the country, all machinery and equipment for pollution
control and environmental protection may not be taxed by local governments.
2. Other Exemptions Withdrawn. All other exemptions previously granted to natural or juridical persons including government-
owned or controlled corporations are withdrawn upon the effectivity of the Code.
[26]

Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. It provides:
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local
water districts, cooperatives duly registered under R.A. 6938, non-stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.
On the other hand, the LGC authorizes local government units to grant tax exemption privileges. Thus, Section 192 thereof
provides:
SEC. 192. Authority to Grant Tax Exemption Privileges.-- Local government units may, through ordinances duly approved, grant tax
exemptions, incentives or reliefs under such terms and conditions as they may deem necessary.
The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government units and the except ions
to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of exceptions or provisos in these sections,
as shown by the following clauses:
(1) unless otherwise provided herein in the opening paragraph of Section 133;
(2) Unless otherwise provided in this Code in Section 193;
(3) not hereafter specifically exempted in Section 232; and
(4) Except as provided herein in the last paragraph of Section 234
initially hampers a ready understanding of the sections. Note, too, that the aforementioned clause in Section 133 seems to be
inaccurately worded. Instead of the clause unless otherwise provided herein, with the herein to mean, of course, the section, it
should have used the clause unless otherwise provided in this Code. The former results in absurdity since the section itself
enumerates what are beyond the taxing powers of local government units and, where exceptions were intended, the exceptions are
explicitly indicated in the next. For instance, in item (a) which excepts income taxes when levied on banks and other financial
institutions; item (d) which excepts wharfage on wharves constructed and maintained by the local government unit concerned; and
item (1) which excepts taxes, fees and charges for the registration and issuance of licenses or permits for the driving of tricycles. It
may also be observed that within the body itself of the section, there are exceptions which can be found only in other parts of the LGC,
but the section interchangeably uses therein the clause except as otherwise provided herein as in items (c) and (i), or the clause
except as provided in this Code in item (j). These clauses would be obviously unnecessary or mere surplusages if the opening clause
of the section were Unless otherwise provided in this Code instead of Unless otherwise provided herein. In any event, even if the
latter is used, since under Section 232 local government units have the power to levy real property tax, except those exempted
therefrom under Section 234, then Section 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133,
the taxing powers of local government units cannot extend to the levy of, inter alia, taxes, fees and charges of any kind on the National
Government, its agencies and instrumentalities, and local government units; however, pursuant to Section 232, provinces, cities, and
municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, real property owned by the
Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government -owned
and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the
LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates
the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption
insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the
enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the
Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the
beneficial use of such property has been granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real
property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the
said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax
granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the
petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as
shown above, the said section is qualified by Sections 232 and 234.
In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units
cannot extend to the levy of:
(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government units.
It must show that the parcels of land in question, which are real property, are any one of those enumerated in Section 234, either by
virtue of ownership, character, or use of the property. Most likely, it could only be the first, but not under any explicit provision of the
said section, for none exists. In light of the petitioners theory that it is an instrumentality of the Government, it could only be within the
first item of the first paragraph of the section by expanding the scope of the term Republic of the Philippines to embrace its
instrumentalities and agencies. For expediency, we quote:
(a) real property owned by the Republic of the Philippines, or any of its political subdivisions except when the beneficial use t hereof
has been granted, for consideration or otherwise, to a taxable person.
This view does not persuade us. In the first place, the petitioners claim that it is an instrumentality of the Government is based on
Section 133(o), which expressly mentions the word instrumentalities; and, in the second place, it fails to consider the fact that the
legislature used the phrase National Government, its agencies and instrumentalities in Section 133(o), but only the phrase Republic
of the Philippines or any of its political subdivisions in Section 234(a).
The terms Republic of the Philippines and National Government are not interchangeable. The former is broader and
synonymous with Government of the Republic of the Philippines which the Administrative Code of 1987 defines as the corporate
governmental entity through which the functions of government are exercised throughout the Philippines, including, save as the
contrary appears from the context, the various arms through which political authority is made affective in the Philippines, whether
pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local
government.
[27]
These autonomous regions, provincial, city, municipal or barangay subdivisions are the political subdivisions.
[28]

On the other hand, National Government refers to the entire machinery of the central government, as distinguished from the
different forms of local governments.
[29]
The National Government then is composed of the three great departments: the executive, the
legislative and the judicial.
[30]

An agency of the Government refers to any of the various units of the Government, including a department, bureau, office,
instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein;
[31]
while an
instrumentality refers to any agency of the National Government, not integrated within the department framework, vested wi th special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoyi ng operational
autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned and
controlled corporations.
[32]

If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption from payment of real property t axes
under the last sentence of the said section to the agencies and instrumentalities of the National Government mentioned in Section
133(o), then it should have restated the wording of the latter. Yet, it did not. Moreover, that Congress did not wish to expand the scope
of the exemption in Section 234(a) to include real property owned by other instrumentalities or agencies of the government including
government-owned and controlled corporations is further borne out by the fact that the source of this exemption is Section 40(a) of P.D.
No. 464, otherwise known as The Real Property Tax Code, which reads:
SEC. 40. Exemptions from Real Property Tax. The exemption shall be as follows:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned or
controlled corporation so exempt by its charter: Provided, however, That this exemption shall not apply to real property of the above-
mentioned entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person.
Note that as reproduced in Section 234(a), the phrase and any government-owned or controlled corporation so exempt by its charter
was excluded. The justification for this restricted exemption in Section 234(a) seems obvious: to limit further tax exemption privileges,
especially in light of the general provision on withdrawal of tax exemption privileges in Section 193 and the special provision on
withdrawal of exemption from payment of real property taxes in the last paragraph of Section 234. These policy considerations are
consistent with the State policy to ensure autonomy to local governments
[33]
and the objective of the LGC that they enjoy genuine and
meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective
partners in the attainment of national goals.
[34]
The power to tax is the most effective instrument to raise needed revenues to finance
and support myriad activities of local government units 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. It may also be relevant to recall that the original
reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of
government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated
enterprises, and there was a need for these entities to share in the requirements of development, fiscal or otherwise, by paying the
taxes and other charges due from them.
[35]

The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the Republic of the Philippines
whose beneficial use has been granted to the petitioner, and (b) whether the petitioner is a taxable person.
Section 15 of the petitioners Charter provides:
Sec. 15. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other
properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, int erests and
privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation,
aerodrome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, that the
operations control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach
control office, and the area control center shall be retained by the Air Transportation Office. No equipment, however, shall be removed
by the Air Transportation Office from Mactan without the concurrence of the Authority. The Authority may assist in the maintenance of
the Air Transportation Office equipment.
The airports referred to are the Lahug Air Port in Cebu City and the Mactan International Airport in the Province of
Cebu,
[36]
which belonged to the Republic of the Philippines, then under the Air Transportation Office (ATO).
[37]

It may be reasonable to assume that the term lands refer to lands in Cebu City then administered by the Lahug Air Port and
includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a transfer of
the lands, among other things, to the petitioner and not just the transfer of the beneficial use thereof, with the ownershi p being
retained by the Republic of the Philippines.
This transfer is actually an absolute conveyance of the ownership thereof because the petitioners authorized capital stock
consists of, inter alia, the value of such real estate owned and/or administered by the airports.
[38]
Hence, the petitioner is now the
owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable.
Moreover, the petitioner cannot claim that it was never a taxable person under its Charter. It was only exempted from the
payment of real property taxes. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it
a taxable person subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the foregoing
disquisitions, it had already become, even if it be conceded to be an agency or instrumentality of the Government, a taxable person
for such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real property taxes,
which, as earlier adverted to, applies to the petitioner.
Accordingly, the position taken by the petitioner is untenable. Reliance on Basco vs. Philippine Amusement and Gaming
Corporation
[39]
is unavailing since it was decided before the effectivity of the LGC. Besides, nothing can prevent Congress from
decreeing that even instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where
it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom.
WHEREFORE, the instant petition is DENIED. The challenged decision and order of the Regional Trial Court of Cebu, Branch 20,
in Civil Case No. CEB-16900 are AFFIRMED.
No pronouncement as to costs. SO ORDERED.
G.R. No. 149110 April 9, 2003
NATIONAL POWER CORPORATION, petitioner,
vs.
CITY OF CABANATUAN, respondent.
PUNO, J .:
This is a petition for review
1
of the Decision
2
and the Resolution
3
of the Court of Appeals dated March 12, 2001 and July 10, 2001,
respectively, finding petitioner National Power Corporation (NPC) liable to pay franchise tax to respondent City of Cabanatuan.
Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended.
4
It is tasked to
undertake the "development of hydroelectric generations of power and the production of electricity from nuclear, geothermal and other
sources, as well as, the transmission of electric power on a nationwide basis."
5
Concomitant to its mandated duty, petitioner has,
among others, the power to construct, operate and maintain power plants, auxiliary plants, power stations and substations for the
purpose of developing hydraulic power and supplying such power to the inhabitants.
6

For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income of P107,814,187.96 in
1992.
7
Pursuant to section 37 of Ordinance No. 165-92,
8
the respondent assessed the petitioner a franchise tax amounting to
P808,606.41, representing 75% of 1% of the latter's gross receipts for the preceding year.
9

Petitioner, whose capital stock was subscribed and paid wholly by the Philippine Government,
10
refused to pay the tax assessment. It
argued that the respondent has no authority to impose tax on government entities. Petitioner also contended that as a non-profit
organization, it is exempted from the payment of all forms of taxes, charges, duties or fees
11
in accordance with sec. 13 of Rep. Act No.
6395, as amended, viz:
"Sec.13. Non-profit Character of the Corporation; Exemption from all Taxes, Duties, Fees, Imposts and Other Charges by
Government and Governmental Instrumentalities.- The Corporation shall be non-profit and shall devote all its return from its
capital investment, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its
indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this
Act, the Corporation is hereby exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court or administrative
proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities,
municipalities and other government agencies and instrumentalities;
(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities,
municipalities and other government agencies and instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods required
for its operations and projects; and
(d) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the Philippines, its provinces, cities,
municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the
generation, transmission, utilization, and sale of electric power."
12

The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City, demanding that petitioner pay the assessed tax
due, plus a surcharge equivalent to 25% of the amount of tax, and 2% monthly interest.
13
Respondent alleged that petitioner's
exemption from local taxes has been repealed by section 193 of Rep. Act No. 7160,
14
which reads as follows:
"Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or juridical, including government owned or controlled
corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions, are hereby withdrawn upon the effectivity of this Code."
On January 25, 1996, the trial court issued an Order
15
dismissing the case. It ruled that the tax exemption privileges granted to
petitioner subsist despite the passage of Rep. Act No. 7160 for the following reasons: (1) Rep. Act No. 6395 is a particular law and it
may not be repealed by Rep. Act No. 7160 which is a general law; (2) section 193 of Rep. Act No. 7160 is in the nature of an implied
repeal which is not favored; and (3) local governments have no power to tax instrumentalities of the national government. Pertinent
portion of the Order reads:
"The question of whether a particular law has been repealed or not by a subsequent law is a matter of legislative intent. The
lawmakers may expressly repeal a law by incorporating therein repealing provisions which expressly and specifically cite(s)
the particular law or laws, and portions thereof, that are intended to be repealed. A declaration in a statute, usually in its
repealing clause, that a particular and specific law, identified by its number or title is repealed is an express repeal; all others
are implied repeal. Sec. 193 of R.A. No. 7160 is an implied repealing clause because it fails to identify the act or acts that are
intended to be repealed. It is a well-settled rule of statutory construction that repeals of statutes by implication are not favored.
The presumption is against inconsistency and repugnancy for the legislative is presumed to know the existing laws on the
subject and not to have enacted inconsistent or conflicting statutes. It is also a well-settled rule that, generally, general law
does not repeal a special law unless it clearly appears that the legislative has intended by the latter general act to modify or
repeal the earlier special law. Thus, despite the passage of R.A. No. 7160 from which the questioned Ordinance No. 165-92
was based, the tax exemption privileges of defendant NPC remain.
Another point going against plaintiff in this case is the ruling of the Supreme Court in the case of Basco vs. Philippine
Amusement and Gaming Corporation, 197 SCRA 52, where it was held that:
'Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government
owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the
National Government. xxx Being an instrumentality of the government, PAGCOR should be and actually is exempt
from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by mere local
government.'
Like PAGCOR, NPC, being a government owned and controlled corporation with an original charter and its shares of stocks
owned by the National Government, is beyond the taxing power of the Local Government. Coroll ary to this, it should be noted
here that in the NPC Charter's declaration of Policy, Congress declared that: 'xxx (2) the total electrification of the Phili ppines
through the development of power from all services to meet the needs of industrial development and dispersal and needs of
rural electrification are primary objectives of the nations which shall be pursued coordinately and supported by all
instrumentalities and agencies of the government, including its financial institutions.' (underscoring supplied). To allow plaintiff
to subject defendant to its tax-ordinance would be to impede the avowed goal of this government instrumentality.
Unlike the State, a city or municipality has no inherent power of taxation. Its taxing power is limited to that which i s provided for
in its charter or other statute. Any grant of taxing power is to be construed strictly, with doubts resolved against its existence.
From the existing law and the rulings of the Supreme Court itself, it is very clear that the plaintiff could not impose the subject
tax on the defendant."
16

On appeal, the Court of Appeals reversed the trial court's Order
17
on the ground that section 193, in relation to sections 137 and 151 of
the LGC, expressly withdrew the exemptions granted to the petitioner.
18
It ordered the petitioner to pay the respondent city government
the following: (a) the sum of P808,606.41 representing the franchise tax due based on gross receipts for the year 1992, (b) the tax due
every year thereafter based in the gross receipts earned by NPC, (c) in all cases, to pay a surcharge of 25% of the tax due and unpaid,
and (d) the sum of P 10,000.00 as litigation expense.
19

On April 4, 2001, the petitioner filed a Motion for Reconsideration on the Court of Appeal's Decision. This was denied by the appellate
court, viz:
"The Court finds no merit in NPC's motion for reconsideration. Its arguments reiterated therein that the taxing power of the
province under Art. 137 (sic) of the Local Government Code refers merely to private persons or corporations in which category
it (NPC) does not belong, and that the LGC (RA 7160) which is a general law may not impliedly repeal the NPC Charter which
is a special lawfinds the answer in Section 193 of the LGC to the effect that 'tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations except
local water districts xxx are hereby withdrawn.' The repeal is direct and unequivocal, not implied.
IN VIEW WHEREOF, the motion for reconsideration is hereby DENIED.
SO ORDERED."
20

In this petition for review, petitioner raises the following issues:
"A. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC, A PUBLIC NON-PROFIT CORPORATION, IS
LIABLE TO PAY A FRANCHISE TAX AS IT FAILED TO CONSIDER THAT SECTION 137 OF THE LOCAL GOVERNMENT
CODE IN RELATION TO SECTION 131 APPLIES ONLY TO PRIVATE PERSONS OR CORPORATIONS ENJOYING A
FRANCHISE.
B. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC'S EXEMPTION FROM ALL FORMS OF TAXES
HAS BEEN REPEALED BY THE PROVISION OF THE LOCAL GOVERNMENT CODE AS THE ENACTMENT OF A LATER
LEGISLATION, WHICH IS A GENERAL LAW, CANNOT BE CONSTRUED TO HAVE REPEALED A SPECIAL LAW.
C. THE COURT OF APPEALS GRAVELY ERRED IN NOT CONSIDERING THAT AN EXERCISE OF POLICE POWER
THROUGH TAX EXEMPTION SHOULD PREVAIL OVER THE LOCAL GOVERNMENT CODE."
21

It is beyond dispute that the respondent city government has the authority to issue Ordinance No. 165-92 and impose an annual tax on
"businesses enjoying a franchise," pursuant to section 151 in relation to section 137 of the LGC, viz:
"Sec. 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special law, the province may impose
a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual
receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction.
In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital
investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the
gross receipts for the preceding calendar year, or any fraction thereof, as provided herein." (emphasis supplied)
x x x
Sec. 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."
Petitioner, however, submits that it is not liable to pay an annual franchise tax to the respondent city government. It contends that
sections 137 and 151 of the LGC in relation to section 131, limit the taxing power of the respondent city government to private entities
that are engaged in trade or occupation for profit.
22

Section 131 (m) of the LGC defines a "franchise" as "a right or privilege, affected with public interest which is conferred upon private
persons or corporations, under such terms and conditions as the government and its political subdivisions may impose in the interest of
the public welfare, security and safety." From the phraseology of this provision, the petitioner claims that the word "private" modifies the
terms "persons" and "corporations." Hence, when the LGC uses the term "franchise," petitioner submits that it should refer specifically
to franchises granted to private natural persons and to private corporations.
23
Ergo, its charter should not be considered a "franchise"
for the purpose of imposing the franchise tax in question.
On the other hand, section 131 (d) of the LGC defines "business" as "trade or commercial activity regularly engaged in as means of
livelihood or with a view to profit." Petitioner claims that it is not engaged in an activity for profit, in as much as its charter specifically
provides that it is a "non-profit organization." In any case, petitioner argues that the accumulation of profit is merely incidental to its
operation; all these profits are required by law to be channeled for expansion and improvement of its facilities and services.
24

Petitioner also alleges that it is an instrumentality of the National Government,
25
and as such, may not be taxed by the respondent city
government. It cites the doctrine in Basco vs. Philippine Amusement and Gaming Corporation
26
where this Court held that local
governments have no power to tax instrumentalities of the National Government, viz:
"Local governments have no power to tax instrumentalities of the National Government.
PAGCOR has a dual role, to operate and regulate gambling casinos. The latter role is governmental, which places it in the
category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be
and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a
mere local government.
'The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation
of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC
Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)'
This doctrine emanates from the 'supremacy' of the National Government over local governments.
'Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the
States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254
US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way
as to prevent it from consummating its federal responsibilities, or even seriously burden it from accomplishment of
them.' (Antieau, Modern Constitutional Law, Vol. 2, p. 140, italics supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive
to be undesirable activities or enterprise using the power to tax as ' a tool regulation' (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the 'power to destroy' (Mc Culloch v. Maryland,supra) cannot be
allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it."
27

Petitioner contends that section 193 of Rep. Act No. 7160, withdrawing the tax privileges of government-owned or controlled
corporations, is in the nature of an implied repeal. A special law, its charter cannot be amended or modified impliedly by the local
government code which is a general law. Consequently, petitioner claims that its exemption from all taxes, fees or charges under its
charter subsists despite the passage of the LGC, viz:
"It is a well-settled rule of statutory construction that repeals of statutes by implication are not favored and as much as
possible, effect must be given to all enactments of the legislature. Moreover, it has to be conceded that the charter of the NPC
constitutes a special law. Republic Act No. 7160, is a general law. It is a basic rule in statutory construction that the enactment
of a later legislation which is a general law cannot be construed to have repealed a special law. Where there is a conflict
between a general law and a special statute, the special statute should prevail since it evinces the legislative intent more
clearly than the general statute."
28

Finally, petitioner submits that the charter of the NPC, being a valid exercise of police power, should prevail over the LGC. It alleges
that the power of the local government to impose franchise tax is subordinate to petitioner's exemption from taxation; "police power
being the most pervasive, the least limitable and most demanding of all powers, including the power of taxation."
29

The petition is without merit.
Taxes are the lifeblood of the government,
30
for without taxes, the government can neither exist nor endure. A principal attribute of
sovereignty,
31
the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens
obliges it to promote public interest and common good. The theory behind the exercise of the power to tax emanates from
necessity;
32
without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people.
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.
33
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
34
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."
35
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 l ocal
government code that will, consistent with the basic policy of local autonomy, set the guidelines and limitations to this grant of taxing
powers, viz:
"Section 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable
local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and
referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for
the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials, and all
other matters relating to the organization and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160,
36
also known as the Local Government Code of 1991 (LGC), various
measures have been enacted to promote local autonomy. These include the Barrio Charter of 1959,
37
the Local Autonomy Act of
1959,
38
the Decentralization Act of 1967
39
and the Local Government Code of 1983.
40
Despite these initiatives, however, the shackles
of dependence on the national government remained. Local government units were faced with the same problems that hamper their
capabilities to participate effectively in the national development efforts, among which are: (a) inadequate tax base, (b) lack of fiscal
control over external sources of income, (c) limited authority to prioritize and approve development projects, (d) heavy dependence on
external sources of income, and (e) limited supervisory control over personnel of national line agencies.
41

Considered as the most revolutionary piece of legislation on local autonomy,
42
the LGC effectively deals with the fiscal constraints faced
by LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws such as the imposition of taxes on
forest products, forest concessionaires, mineral products, mining operations, and the like. The LGC likewise provides enough flexibility
to impose tax rates in accordance with their needs and capabilities. It does not prescribe graduated fixed rates but merely specifies the
minimum and maximum tax rates and leaves the determination of the actual rates to the respective sanggunian.
43

One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the
national government from the coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees or charges of any
kind on the National Government, its agencies and instrumentalities, this rule now admits an exception, i.e., when specific provisions of
the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities, viz:
"Section 133. Common Limitations on the Taxing Powers of the 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:
x x x
(o) Taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, and local government
units." (emphasis supplied)
In view of the afore-quoted provision of the LGC, the doctrine in Basco vs. Philippine Amusement and Gaming Corporation
44
relied
upon by the petitioner to support its claim no longer applies. To emphasize, the Basco case was decided prior to the effectivity of the
LGC, when no law empowering the local government units to tax instrumentalities of the National Government was in effect. However,
as this Court ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos,
45
nothing prevents Congress from
decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax.
46
In
enacting the LGC, Congress exercised its prerogative to tax instrumentalities and agencies of government as it sees fit. Thus, after
reviewing the specific provisions of the LGC, this Court held that MCIAA, although an instrumentality of the national government, was
subject to real property tax, viz:
"Thus, reading together sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in section
133, the taxing power of local governments cannot extend to the levy of inter alia, 'taxes, fees and charges of any kind on the
national government, its agencies and instrumentalities, and local government units'; however, pursuant to section 232,
provinces, cities and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, 'real
property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has
been granted for consideration or otherwise, to a taxable person as provided in the item (a) of the first paragraph of section
12.'"
47

In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city government to impose on the
petitioner the franchise tax in question.
In its general signification, a franchise is a privilege conferred by government authority, which does not belong to citizens of the country
generally as a matter of common right.
48
In its specific sense, a franchise may refer to a general or primary franchise, or to a special or
secondary franchise. The former relates to the right to exist as a corporation, by virtue of duly approved articles of incorporation, or a
charter pursuant to a special law creating the corporation.
49
The right under a primary or general franchise is vested in the individuals
who compose the corporation and not in the corporation itself.
50
On the other hand, the latter refers to the right or privileges conferred
upon an existing corporation such as the right to use the streets of a municipality to lay pipes of tracks, erect poles or string wires.
51
The
rights under a secondary or special franchise are vested in the corporation and may ordinarily be conveyed or mortgaged under a
general power granted to a corporation to dispose of its property, except such special or secondary franchises as are charged with a
public use.
52

In section 131 (m) of the LGC, Congress unmistakably defined a franchise in the sense of a secondary or special franchise. This is to
avoid any confusion when the word franchise is used in the context of taxation. As commonly used, a franchise tax is "a tax on the
privilege of transacting business in the state and exercising corporate franchises granted by the state."
53
It is not levied on the
corporation simply for existing as a corporation, upon its property
54
or its income,
55
but on its exercise of the rights or privileges granted
to it by the government. Hence, a corporation need not pay franchise tax from the time it ceased to do business and exercise its
franchise.
56
It is within this context that the phrase "tax on businesses enjoying a franchise" in section 137 of the LGC should be
interpreted and understood. Verily, to determine whether the petitioner is covered by the franchise tax in question, the followi ng
requisites should concur: (1) that petitioner has a "franchise" in the sense of a secondary or special franchise; and (2) that it is
exercising its rights or privileges under this franchise within the territory of the respondent city government.
Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended by Rep. Act No. 7395, constitutes petitioner's primary and
secondary franchises. It serves as the petitioner's charter, defining its composition, capitalization, the appointment and the specific
duties of its corporate officers, and its corporate life span.
57
As its secondary franchise, Commonwealth Act No. 120, as amended, vests
the petitioner the following powers which are not available to ordinary corporations, viz:
"x x x
(e) To conduct investigations and surveys for the development of water power in any part of the Philippines;
(f) To take water from any public stream, river, creek, lake, spring or waterfall in the Philippines, for the purposes specified in
this Act; to intercept and divert the flow of waters from lands of riparian owners and from persons owning or interested in
waters which are or may be necessary for said purposes, upon payment of just compensation therefor; to alter, straighten,
obstruct or increase the flow of water in streams or water channels intersecting or connecting therewith or contiguous to its
works or any part thereof: Provided, That just compensation shall be paid to any person or persons whose property is, directly
or indirectly, adversely affected or damaged thereby;
(g) To construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines, power
stations and substations, and other works for the purpose of developing hydraulic power from any river, creek, lake, spring and
waterfall in the Philippines and supplying such power to the inhabitants thereof; to acquire, construct, install, maintain, operate,
and improve gas, oil, or steam engines, and/or other prime movers, generators and machinery in plants and/or auxiliary plants
for the production of electric power; to establish, develop, operate, maintain and administer power and lighting systems for the
transmission and utilization of its power generation; to sell electric power in bulk to (1) industrial enterprises, (2) city, municipal
or provincial systems and other government institutions, (3) electric cooperatives, (4) franchise holders, and (5) real estate
subdivisions x x x;
(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise dispose of property incident to, or
necessary, convenient or proper to carry out the purposes for which the Corporation was created: Provided, That in case a
right of way is necessary for its transmission lines, easement of right of way shall only be sought: Provided, however, That in
case the property itself shall be acquired by purchase, the cost thereof shall be the fair market value at the time of the taking of
such property;
(i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of
private and public ownership, as the location of said works may require xxx;
(j) To exercise the right of eminent domain for the purpose of this Act in the manner provided by law for instituting
condemnation proceedings by the national, provincial and municipal governments;
x x x
(m) To cooperate with, and to coordinate its operations with those of the National Electrification Administration and public
service entities;
(n) To exercise complete jurisdiction and control over watersheds surrounding the reservoirs of plants and/or projects
constructed or proposed to be constructed by the Corporation. Upon determination by the Corporation of the areas required for
watersheds for a specific project, the Bureau of Forestry, the Reforestation Administration and the Bureau of Lands shall, upon
written advice by the Corporation, forthwith surrender jurisdiction to the Corporation of all areas embraced within the
watersheds, subject to existing private rights, the needs of waterworks systems, and the requirements of domestic water
supply;
(o) In the prosecution and maintenance of its projects, the Corporation shall adopt measures to prevent environmental
pollution and promote the conservation, development and maximum utilization of natural resources xxx "
58

With these powers, petitioner eventually had the monopoly in the generation and distribution of electricity. This monopoly was
strengthened with the issuance of Pres. Decree No. 40,
59
nationalizing the electric power industry. Although Exec. Order No.
215
60
thereafter allowed private sector participation in the generation of electricity, the transmission of electricity remains the monopoly
of the petitioner.
Petitioner also fulfills the second requisite. It is operating within the respondent city government's territorial jurisdicti on pursuant to the
powers granted to it by Commonwealth Act No. 120, as amended. From its operations in the City of Cabanatuan, petitioner realized a
gross income of P107,814,187.96 in 1992. Fulfilling both requisites, petitioner is, and ought to be, subject of the franchise tax in
question.
Petitioner, however, insists that it is excluded from the coverage of the franchise tax simply because its stocks are wholly owned by the
National Government, and its charter characterized it as a "non-profit" organization.
These contentions must necessarily fail.
To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a privilege to do business.
The taxable entity is the corporation which exercises the franchise, and not the individual stockholders. By virtue of its charter, petitioner
was created as a separate and distinct entity from the National Government. It can sue and be sued under its own name,
61
and can
exercise all the powers of a corporation under the Corporation Code.
62

To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply that petitioner is not
engaged in business. Section 2 of Pres. Decree No. 2029
63
classifies government-owned or controlled corporations (GOCCs) into those
performing governmental functions and those performing proprietary functions, viz:
"A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or
proprietary functions, which is directly chartered by special law or if organized under the general corporation law is owned or
controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at
least a majority of its outstanding voting capital stock x x x." (emphases supplied)
Governmental functions are those pertaining to the administration of government, and as such, are treated as absolute obligation on the
part of the state to perform while proprietary functions are those that are undertaken only by way of advancing the general interest of
society, and are merely optional on the government.
64
Included in the class of GOCCs performing proprietary functions are "business-
like" entities such as the National Steel Corporation (NSC), the National Development Corporation (NDC), the Social Security System
(SSS), the Government Service Insurance System (GSIS), and the National Water Sewerage Authority (NAWASA),
65
among others.
Petitioner was created to "undertake the development of hydroelectric generation of power and the production of electricity from
nuclear, geothermal and other sources, as well as the transmission of electric power on a nationwide basis."
66
Pursuant to this
mandate, petitioner generates power and sells electricity in bulk. Certainly, these activities do not partake of the sovereign functions of
the government. They are purely private and commercial undertakings, albeit imbued with public interest. The public interest involved in
its activities, however, does not distract from the true nature of the petitioner as a commercial enterprise, in the same league with
similar public utilities like telephone and telegraph companies, railroad companies, water supply and irrigation companies, gas, coal or
light companies, power plants, ice plant among others; all of which are declared by this Court as ministrant or proprietary functions of
government aimed at advancing the general interest of society.
67

A closer reading of its charter reveals that even the legislature treats the character of the petitioner's enterprise as a "business,"
although it limits petitioner's profits to twelve percent (12%), viz:
68

"(n) When essential to the proper administration of its corporate affairs or necessary for the proper transaction of
its business or to carry out the purposes for which it was organized, to contract indebtedness and issue bonds subject to
approval of the President upon recommendation of the Secretary of Finance;
(o) To exercise such powers and do such things as may be reasonably necessary to carry out the business and purposes for
which it was organized, or which, from time to time, may be declared by the Board to be necessary, useful, incidental or
auxiliary to accomplish the said purpose xxx."(emphases supplied)
It is worthy to note that all other private franchise holders receiving at least sixty percent (60%) of its electricity requirement from the
petitioner are likewise imposed the cap of twelve percent (12%) on profits.
69
The main difference is that the petitioner is mandated to
devote "all its returns from its capital investment, as well as excess revenues from its operation, for expansion"
70
while other franchise
holders have the option to distribute their profits to its stockholders by declaring dividends. We do not see why this fact can be a source
of difference in tax treatment. In both instances, the taxable entity is the corporation, which exercises the franchise, and not the
individual stockholders.
We also do not find merit in the petitioner's contention that its tax exemptions under its charter subsist despite the passage of the LGC.
As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist clearly and categori cally, and
supported by clear legal provisions.
71
In the case at bar, the petitioner's sole refuge is section 13 of Rep. Act No. 6395 exempting from,
among others, "all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities,
municipalities and other government agencies and instrumentalities." However, section 193 of the LGC withdrew, subject to limited
exceptions, the sweeping tax privileges previously enjoyed by private and public corporations. Contrary to the contention of petitioner,
section 193 of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes.
72
It reads:
"Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions, are hereby withdrawn upon the effectivity of this Code." (emphases supplied)
It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as
expressed in the familiar maxim expressio unius est exclusio alterius.
73
Not being a local water district, a cooperative registered under
R.A. No. 6938, or a non-stock and non-profit hospital or educational institution, petitioner clearly does not belong to the exception. It is
therefore incumbent upon the petitioner to point to some provisions of the LGC that expressly grant it exemption from local taxes.
But this would be an exercise in futility. Section 137 of the LGC clearly states that the LGUs can impose franchise tax "notwithstanding
any exemption granted by any law or other special law." This particular provision of the LGC does not admit any exception. In City
Government of San Pablo, Laguna v. Reyes,
74
MERALCO's exemption from the payment of franchise taxes was brought as an issue
before this Court. The same issue was involved in the subsequent case of Manila Electric Company v. Province of Laguna.
75
Ruling in
favor of the local government in both instances, we ruled that the franchise tax in question is imposable despite any exempti on enjoyed
by MERALCO under special laws, viz:
"It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support their position that
MERALCO's tax exemption has been withdrawn. The explicit language of section 137 which authorizes the province to impose
franchise tax 'notwithstanding any exemption granted by any law or other special law' is all-encompassing and clear. The
franchise tax is imposable despite any exemption enjoyed under special laws.
Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this
Code, tax exemptions or incentives granted to or presently enjoyed by all persons, whether natural or juridical, including
government-owned or controlled corporations except (1) local water districts, (2) cooperatives duly registered under R.A. 6938,
(3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious
import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory construction that the express
mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est
exclusio alterius. In the absence of any provision of the Code to the contrary, and we find no other provision in point, any
existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn.
Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit may now
impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar based on the
incoming receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax privil eges enjoyed under
existing law or charter is clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing
such exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical to attempt to
enumerate all the existing statutes providing for special tax exemptions or privileges, the LGC provided for an express, albeit
general, withdrawal of such exemptions or privileges. No more unequivocal language could have been used."
76
(emphases
supplied).
It is worth mentioning that section 192 of the LGC empowers the LGUs, through ordinances duly approved, to grant tax exemptions,
initiatives or reliefs.
77
But in enacting section 37 of Ordinance No. 165-92 which imposes an annual franchise tax "notwithstanding any
exemption granted by law or other special law," the respondent city government clearly did not intend to exempt the petitioner from the
coverage thereof.
Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the
local government units 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 observed in the Mactan case, "the original reasons for the withdrawal of tax
exemption privileges granted to government-owned or controlled corporations and all other units of government were that such privilege
resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises."
78
With the added burden of
devolution, it is even more imperative for government entities to share in the requirements of development, fiscal or otherwi se, by
paying taxes or other charges due from them.
IN VIEW WHEREOF, the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals dated March 12,
2001 and July 10, 2001, respectively, are hereby AFFIRMED.
SO ORDERED.


G.R. No. 162015 March 6, 2006
THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY TREASURER OF QUEZON CITY, DR. VICTOR B.
ENRIGA, Petitioners,
vs.
BAYAN TELECOMMUNICATIONS, INC., Respondent.
D E C I S I O N
GARCIA,J .:
Before the Court, on pure questions of law, is this petition for review on certiorari under Rule 45 of the Rules of Court to nullify and set
aside the following issuances of the Regional Trial Court (RTC) of Quezon City, Branch 227, in its Civil Case No. Q-02-47292, to wit:
1) Decision
1
dated June 6, 2003, declaring respondent Bayan Telecommunications, Inc. exempt from real estate taxation on its real
properties located in Quezon City; and
2) Order
2
dated December 30, 2003, denying petitioners motion for reconsideration.
The facts:
Respondent Bayan Telecommunications, Inc.
3
(Bayantel) is a legislative franchise holder under Republic Act (Rep. Act) No. 3259
4
to
establish and operate radio stations for domestic telecommunications, radiophone, broadcasting and telecasting.
Of relevance to this controversy is the tax provision of Rep. Act No. 3259, embodied in Section 14 thereof, which reads:
SECTION 14. (a) The grantee shall be liable to pay the same taxes on its real estate, buildings and personal property, exclusive of the
franchise, as other persons or corporations are now or hereafter may be required by law to pay. (b) The grantee shall further pay to the
Treasurer of the Philippines each year, within ten days after the audit and approval of the accounts as prescribed in this Act, one and
one-half per centum of all gross receipts from the business transacted under this franchise by the said grantee (Emphasis supplied).
On January 1, 1992, Rep. Act No. 7160, otherwise known as the "Local Government Code of 1991" (LGC), took effect. Section 232 of
the Code grants local government units within the Metro Manila Area the power to levy tax on real properties, thus:
SEC. 232. Power to Levy Real Property Tax. A province or city or a municipality within the Metropolitan Manila Area may levy an
annual ad valorem tax on real property such as land, building, machinery and other improvements not hereinafter specifically
exempted.
Complementing the aforequoted provision is the second paragraph of Section 234 of the same Code which withdrew any exemption
from realty tax heretofore granted to or enjoyed by all persons, natural or juridical, to wit:
SEC. 234 - Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
xxx xxx xxx
Except as provided herein, any exemption from payment of real property tax previously granted to, or enjoyed by, all persons, whether
natural or juridical, including government-owned-or-controlled corporations is hereby withdrawn upon effectivity of this Code (Emphasis
supplied).
On July 20, 1992, barely few months after the LGC took effect, Congress enacted Rep. Act No. 7633, amending Bayantels original
franchise. The amendatory law (Rep. Act No. 7633) contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, as other persons or corporations are now or hereafter may be required by law to pay. In addition
thereto, the grantee, its successors or assigns shall pay a franchise tax equivalent to three percent (3%) of all gross recei pts of the
telephone or other telecommunications businesses transacted under this franchise by the grantee, its successors or assigns and the
said percentage shall be in lieu of all taxes on this franchise or earnings thereof. Provided, That the grantee, its successors or assigns
shall continue to be liable for income taxes payable under Title II of the National Internal Revenue Code . xxx. [Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon City, Bayantel owned several real properties on which it maintained
various telecommunications facilities. These real properties, as hereunder described, are covered by the following tax declarations:
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-096-04072 and D-096-04073 pertaining to Bayantels Head Office and
Operations Center in Roosevelt St., San Francisco del Monte, Quezon City allegedly the nerve center of petitioners
telecommunications franchise operations, said Operation Center housing mainly petitioners Network Operations Group and
switching, transmission and related equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-124-00920 and D-124-00941 covering Bayantels land, building and
equipment in Maginhawa St., Barangay East Teachers Village, Quezon City which houses telecommunications facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-011-10811, and D-011-11540 referring to Bayantels Exchange
Center located in Proj. 8, Brgy. Bahay Toro, Tandang Sora, Quezon City which houses the Network Operations Group and
cover switching, transmission and other related equipment.
In 1993, the government of Quezon City, pursuant to the taxing power vested on local government units by Section 5, Article X of the
1987 Constitution, infra, in relation to Section 232 of the LGC, supra, enacted City Ordinance No. SP-91, S-93, otherwise known as the
Quezon City Revenue Code (QCRC),
5
imposing, under Section 5 thereof, a real property tax on all real properties in Quezon City, and,
reiterating in its Section 6, the withdrawal of exemption from real property tax under Section 234 of the LGC, supra. Furthermore, much
like the LGC, the QCRC, under its Section 230, withdrew tax exemption privileges in general, as follows:
SEC. 230. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to,
or presently enjoyed by all persons, whether natural or juridical, including government owned or controlled corporations, except local
water districts, cooperatives duly registered under RA 6938, non-stock and non-profit hospitals and educational institutions, business
enterprises certified by the Board of Investments (BOI) as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively,
are hereby withdrawn effective upon approval of this Code (Emphasis supplied).
Conformably with the Citys Revenue Code, new tax declarations for Bayantels real properties in Quezon City were issued by the City
Assessor and were received by Bayantel on August 13, 1998, except one (Tax Declaration No. 124-01013) which was received on July
14, 1999.
Meanwhile, on March 16, 1995, Rep. Act No. 7925,
6
otherwise known as the "Public Telecommunications Policy Act of the Philippines,"
envisaged to level the playing field among telecommunications companies, took effect. Section 23 of the Act provides:
SEC. 23. Equality of Treatment in the Telecommunications Industry. Any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the
foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the
life span of the franchise, or the type of service authorized by the franchise.
On January 7, 1999, Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in the city f rom the roll of
taxable real properties. With its request having been denied, Bayantel interposed an appeal with the Local Board of Assessment
Appeals (LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay the real property taxes assessed against it
by the Quezon City government.
On account thereof, the Quezon City Treasurer sent out notices of delinquency for the total amount ofP43,878,208.18, followed by the
issuance of several warrants of levy against Bayantels properties preparatory to their sale at a public auction set on July 30, 2002.
Threatened with the imminent loss of its properties, Bayantel immediately withdrew its appeal with the LBAA and instead filed with the
RTC of Quezon City a petition for prohibition with an urgent application for a temporary restraining order (TRO) and/or writ of
preliminary injunction, thereat docketed as Civil Case No. Q-02-47292, which was raffled to Branch 227 of the court.
On July 29, 2002, or in the eve of the public auction scheduled the following day, the lower court issued a TRO, followed, af ter due
hearing, by a writ of preliminary injunction via its order of August 20, 2002.
And, having heard the parties on the merits, the same court came out with its challenged Decision of June 6, 2003, the dispositive
portion of which reads:
WHEREFORE, premises considered, pursuant to the enabling franchise under Section 11 of Republic Act No. 7633, the real estate
properties and buildings of petitioner [now, respondent Bayantel] which have been admitted to be used in the operation of petitioners
franchise described in the following tax declarations are hereby DECLARED exempt from real estate taxation:
(1) Tax Declaration No. D-096-04071
(2) Tax Declaration No. D-096-04074
(3) Tax Declaration No. D-124-01013
(4) Tax Declaration No. D-011-10810
(5) Tax Declaration No. D-011-10811
(6) Tax Declaration No. D-011-10809
(7) Tax Declaration No. D-124-00941
(8) Tax Declaration No. D-124-00940
(9) Tax Declaration No. D-124-00939
(10) Tax Declaration No. D-096-04072
(11) Tax Declaration No. D-096-04073
(12) Tax Declaration No. D-011-11540
The preliminary prohibitory injunction issued in the August 20, 2002 Order of this Court is hereby made permanent. Since this is a
resolution of a purely legal issue, there is no pronouncement as to costs.
SO ORDERED.
Their motion for reconsideration having been denied by the court in its Order dated December 30, 2003, petitioners elevated the case
directly to this Court on pure questions of law, ascribing to the lower court the following errors:
I. [I]n declaring the real properties of respondent exempt from real property taxes notwithstanding the fact that the tax exemption
granted to Bayantel in its original franchise had been withdrawn by the [LGC] and that the said exemption was not restored by the
enactment of RA 7633.
II. [In] declaring the real properties of respondent exempt from real property taxes notwithstanding the enactment of the [QCRC] which
withdrew the tax exemption which may have been granted by RA 7633.
III. [In] declaring the real properties of respondent exempt from real property taxes notwi thstanding the vague and ambiguous grant of
tax exemption provided under Section 11 of RA 7633.
IV. [In] declaring the real properties of respondent exempt from real property taxes notwithstanding the fact that [it] had failed to exhaust
administrative remedies in its claim for real property tax exemption. (Words in bracket added.)
As we see it, the errors assigned may ultimately be reduced to two (2) basic issues, namely:
1. Whether or not Bayantels real properties in Quezon City are exempt from real property taxes under its legislative franchise;
and
2. Whether or not Bayantel is required to exhaust administrative remedies before seeking judicial relief with the trial court.
We shall first address the second issue, the same being procedural in nature.
Petitioners argue that Bayantel had failed to avail itself of the administrative remedies provided for under the LGC, adding that the trial
court erred in giving due course to Bayantels petition for prohibition. To petitioners, the appeal mechanics under the LGC constitute
Bayantels plain and speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following provision of Rule 65 of the Rules of Court:
SEC. 2. Petition for prohibition. When the proceedings of any tribunal, are without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter
specified therein, or otherwise, granting such incidental reliefs as law and justice may require.
With the reality that Bayantels real properties were already levied upon on account of its nonpayment of real estate taxes t hereon, the
Court agrees with Bayantel that an appeal to the LBAA is not a speedy and adequate remedy within the context of the aforequoted
Section 2 of Rule 65. This is not to mention of the auction sale of said properties already scheduled on July 30, 2002.
Moreover, one of the recognized exceptions to the exhaustion- of-administrative remedies rule is when, as here, only legal issues are to
be resolved. In fact, the Court, cognizant of the nature of the questions presently involved, gave due course to the instant petition. As
the Court has said in Ty vs. Trampe:
7

xxx. Although as a rule, administrative remedies must first be exhausted before resort to judicial action can prosper, there is a well-
settled exception in cases where the controversy does not involve questions of fact but only of law. xxx.
Lest it be overlooked, an appeal to the LBAA, to be properly considered, required prior payment under protest of the amount
of P43,878,208.18, a figure which, in the light of the then prevailing Asian financial crisis, may have been difficult to raise up. Given this
reality, an appeal to the LBAA may not be considered as a plain, speedy and adequate remedy. It is thus understandable why Bayantel
opted to withdraw its earlier appeal with the LBAA and, instead, filed its petition for prohibition with urgent application for injunctive relief
in Civil Case No. Q-02-47292. The remedy availed of by Bayantel under Section 2, Rule 65 of the Rules of Court must be upheld.
This brings the Court to the more weighty question of whether or not Bayantels real properties in Quezon City are, under its franchise,
exempt from real property tax.
The lower court resolved the issue in the affirmative, basically owing to the phrase "exclusive of this franchise" found in Section 11 of
Bayantels amended franchise, Rep. Act No. 7633. To petitioners, however, the language of Section 11 of Rep. Act No. 7633 is neither
clear nor unequivocal. The elaborate and extensive discussion devoted by the trial court on the meaning and import of said phrase,
they add, suggests as much. It is petitioners thesis that Bayantel was in no time given any express exemption from the payment of real
property tax under its amendatory franchise.
There seems to be no issue as to Bayantels exemption from real estate taxes by virtue of the term "exclusive of the franchise"
qualifying the phrase "same taxes on its real estate, buildings and personal property," found in Section 14, supra, of its franchise, Rep.
Act No. 3259, as originally granted.
The legislative intent expressed in the phrase "exclusive of this franchise" cannot be construed other than distinguishing between two
(2) sets of properties, be they real or personal, owned by the franchisee, namely, (a) those actually, directly and exclusively used in its
radio or telecommunications business, and (b) those properties which are not so used. It is worthy to note that the properties subject of
the present controversy are only those which are admittedly falling under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to grant or delegate to local governments of Congress
inherent power to tax the franchisees properties belonging to the second group of properties indicated above, that is, all properties
which, "exclusive of this franchise," are not actually and directly used in the pursuit of its franchise. As may be recalled, the taxing
power of local governments under both the 1935 and the 1973 Constitutions solely depended upon an enabling law. Absent such
enabling law, local government units were without authority to impose and collect taxes on real properties within their respective
territorial jurisdictions. While Section 14 of Rep. Act No. 3259 may be validly viewed as an implied delegation of power to tax, the
delegation under that provision, as couched, is limited to impositions over properties of the franchisee which are not actual ly, directly
and exclusively used in the pursuit of its franchise. Necessarily, other properties of Bayantel directly used in the pursuit of its business
are beyond the pale of the delegated taxing power of local governments. In a very real sense, therefore, real properties of Bayantel,
save those exclusive of its franchise, are subject to realty taxes. Ultimately, therefore, the inevitable result was that all realties which are
actually, directly and exclusively used in the operation of its franchise are "exempted" from any property tax.
Bayantels franchise being national in character, the "exemption" thus granted under Section 14 of Rep. Act No. 3259 applies to all its
real or personal properties found anywhere within the Philippine archipelago.
However, with the LGCs taking effect on January 1, 1992, Bayantels "exemption" from real estate taxes for properties of whatever kind
located within the Metro Manila area was, by force of Section 234 of the Code, supra, expressly withdrawn. But, not long thereafter,
however, or on July 20, 1992, Congress passed Rep. Act No. 7633 amending Bayantels original franchise. Worthy of note is that
Section 11 of Rep. Act No. 7633 is a virtual reenacment of the tax provision, i.e., Section 14, supra, of Bayantels original franchise
under Rep. Act No. 3259. Stated otherwise, Section 14 of Rep. Act No. 3259 which was deemed impliedly repealed by Section 234 of
the LGC was expressly revived under Section 14 of Rep. Act No. 7633. In concrete terms, the realty tax exemption heretofore enjoyed
by Bayantel under its original franchise, but subsequently withdrawn by force of Section 234 of the LGC, has been restored by Section
14 of Rep. Act No. 7633.
The Court has taken stock of the fact that by virtue of Section 5, Article X of the 1987 Constitution,
8
local governments are empowered
to levy taxes. And pursuant to this constitutional empowerment, juxtaposed with Section 232
9
of the LGC, the Quezon City government
enacted in 1993 its local Revenue Code, imposing real property tax on all real properties found within its territorial jurisdiction. And as
earlier stated, the Citys Revenue Code, just like the LGC, expressly withdrew, under Section 230 thereof, supra, all tax exemption
privileges in general.
This thus raises the question of whether or not the Citys Revenue Code pursuant to which the city treasurer of Quezon City l evied real
property taxes against Bayantels real properties located within the City effectively withdrew the tax exemption enjoyed by Bayantel
under its franchise, as amended.
Bayantel answers the poser in the negative arguing that once again it is only "liable to pay the same taxes, as any other persons or
corporations on all its real or personal properties, exclusive of its franchise."
Bayantels posture is well-taken. While the system of local government taxation has changed with the onset of the 1987 Constitution,
the power of local government units to tax is still limited. As we explained in Mactan Cebu International Airport Authority:
10

The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no
longer merely be virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide
which, however, must be consistent with the basic policy of local autonomy. (at p. 680; Emphasis supplied.)
Clearly then, while a new slant on the subject of local taxation now prevails in the sense that the former doctrine of local government
units delegated power to tax had been effectively modified with Article X, Section 5 of the 1987 Constitution now in place, .the basic
doctrine on local taxation remains essentially the same. For as the Court stressed in Mactan, "the power to tax is [still] primarily vested
in the Congress."
This new perspective is best articulated by Fr. Joaquin G. Bernas, S.J., himself a Commissioner of the 1986 Constitutional Commission
which crafted the 1987 Constitution, thus:
What is the effect of Section 5 on the fiscal position of municipal corporations? Section 5 does not change the doctrine that municipal
corporations do not possess inherent powers of taxation. What it does is to confer municipal corporations a general power to levy taxes
and otherwise create sources of revenue. They no longer have to wait for a statutory grant of these powers. The power of the legislative
authority relative to the fiscal powers of local governments has been reduced to the authority to impose limitations on municipal powers.
Moreover, these limitations must be "consistent with the basic policy of local autonomy." The important legal effect of Secti on 5 is thus
to reverse the principle that doubts are resolved against municipal corporations. Henceforth, in interpreting statutory provisions on
municipal fiscal powers, doubts will be resolved in favor of municipal corporations. It is understood, however, that taxes imposed by
local government must be for a public purpose, uniform within a locality, must not be confiscatory, and must be within the jurisdiction of
the local unit to pass.
11
(Emphasis supplied).
In net effect, the controversy presently before the Court involves, at bottom, a clash between the inherent taxing power of the
legislature, which necessarily includes the power to exempt, and the local governments delegated power to tax under the aegi s of the
1987 Constitution.
Now to go back to the Quezon City Revenue Code which imposed real estate taxes on all real properties within the citys territory and
removed exemptions theretofore "previously granted to, or presently enjoyed by all persons, whether natural or juridical .,"
12
there can
really be no dispute that the power of the Quezon City Government to tax is limited by Section 232 of the LGC which expressly provides
that "a province or city or municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as
land, building, machinery, and other improvement not hereinafter specifically exempted." Under this law, the Legislature highlighted its
power to thereafter exempt certain realties from the taxing power of local government units. An interpretation denying Congress such
power to exempt would reduce the phrase "not hereinafter specifically exempted" as a pure jargon, without meaning whatsoever.
Needless to state, such absurd situation is unacceptable.
For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of Davao,
13
this Court has upheld the power of
Congress to grant exemptions over the power of local government units to impose taxes. There, the Court wrote:
Indeed, the grant of taxing powers to local government units under the Constitution and the LGC does not affect the power of Congress
to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional grant to local
governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of
municipal corporations. (Emphasis supplied.)
As we see it, then, the issue in this case no longer dwells on whether Congress has the power to exempt Bayantels properties from
realty taxes by its enactment of Rep. Act No. 7633 which amended Bayantels original franchise. The more decisive question turns on
whether Congress actually did exempt Bayantels properties at all by virtue of Section 11 of Rep. Act No. 7633.
Admittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware that the LGC has already withdrawn Bayantels
former exemption from realty taxes, Congress opted to pass Rep. Act No. 7633 using, under Section 11 thereof, exactly the same
defining phrase "exclusive of this franchise" which was the basis for Bayantels exemption from realty taxes prior to the LGC. In plain
language, Section 11 of Rep. Act No. 7633 states that "the grantee, its successors or assigns shall be liable to pay the same taxes on
their real estate, buildings and personal property, exclusive of this franchise, as other persons or corporations are now or hereafter may
be required by law to pay." The Court views this subsequent piece of legislation as an express and real intention on the part of
Congress to once again remove from the LGCs delegated taxing power, all of the franchisees (Bayantels) properties that are actually,
directly and exclusively used in the pursuit of its franchise.
WHEREFORE, the petition is DENIED.
No pronouncement as to costs.
SO ORDERED.


[G.R. No. 126232. November 27, 1998]
THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE CHAVEZ, and MANUEL DJ SIAYNGCO in their
capacity as PROVINCIAL GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL LEGAL ADVISE,
respectively, petitioners, vs. THE HONORABLE COURT OF APPEALS (FORMER SPECIAL 12TH DIVISION), PUBLIC
CEMENT CORPORATION, respondents.
D E C I S I O N
ROMERO, J .:
Before us is a petition for certiorari seeking the reversal of the decision of the Court of Appeals dated September 27, 1995
declaring petitioner without authority to levy taxes on stones, sand, gravel, earth and other quarry resources extracted from private
lands, as well as the August 26, 1996 resolution of the appellate court denying its motion for reconsideration.
The facts are as follows:
On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed Provincial Ordinance No. 3, known as "An ordinance
Enacting the Revenue Code of the Bulacan Province," which was to take effect on July 1, 1992, section 21 of the ordinance provides as
follows:
Section 21. Imposition of Tax. There is hereby levied and collected a tax of 10% of the fair market value in the locality per cubic meter
of ordinary stones, sand, gravel, earth and other quarry resources, such, but not limited to marble, granite, volcanic cinders, basalt, tuff
and rock phosphate, extracted from public lands or from beds of seas, lakes, rivers, streams, creeks and other public waters within its
territorial jurisdiction. (Italics ours)
Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated November 11, 1993, assessed private respondent Republic
Cement Corporation (hereafter Republic Cement) P2,524,692.13 for extracting limestone, shale and silica from several parcels
of private land in the province during the third quarter of 1992 until the second quarter of 1993. Believing that the province, on the basis
of above-said ordinance, had no authority to impose taxes on quarry resources extracted from private lands, Republic Cement formally
contested the same on December 23, 1993. The same was, however, denied by the Provincial Treasurer on January 17,
1994. Republic Cement, consequently filed a petition for declaratory relief with the Regional Trial Court of Bulacan on February 14,
1994. The province filed a motion to dismiss Republic Cement's petition, which was granted by the trial court on May 13, 1993, which
ruled that declaratory relief was improper, allegedly because a breach of the ordinance had been committed by Republic Cement.
On July 11, 1994, Republic Cement filed a petition for certiorari with the Supreme Court seeking to reverse the trial court's
dismissal of their petition. The Court, in a resolution dated July 27, 1994, referred the same to the Court of Appeals, where it was
docketed as CA G.R. SP No. 34915. The appellate court required petitioners to file a comment, which they did on September 7, 1994.
In the interim, the Province of Bulacan issued a warrant of levy against Republic Cement, allegedly because of its unpaid tax
liabilities. Negotiations between Republic Cement and petitioners resulted in an agreement and modus vivendi on December 12, 1994,
whereby Republic Cement agreed to pay under protest P1,262,346.00, 50% of the tax assessed by petitioner, in exchange for the lifting
of the warrant of levy. Furthermore, Republic Cement and petitioners agreed to limit the issue for resolution by the Court of Appeals to
the question as to whether or not the provincial government could impose and/or assess taxes on quarry resources extracted by
Republic Cement from private lands pursuant to Section 21 of the Provincial Ordinance No. 3. This agreement and modus vivendi were
embodied in a joint manifestation and motion signed by Governor Roberto Pagdanganan, on behalf of the Province of Bulacan, by
Provincial Treasurer Florence Chavez, and by Provincial Legal Officer Manuel Siayngco, as petitioner's counsel and filed with the Court
of Appeals on December 13, 1994. In a resolution dated December 29, 1994, the appellate court approved the same and limited the
issue to be resolved to the question whether or not the provincial government could impose taxes on stones, sand, gravel, earth and
other quarry resources extracted from private lands.
After due trial, the Court of Appeals, on September 27, 1995, rendered the following judgment:
WHEREFORE, judgment is hereby rendered declaring the Province of Bulacan under its Provincial Ordinance No. 3 entitled
"An Ordinance Enacting the Revenue Code of Bulacan Province" to be without legal authority to impose and assess taxes
on quarry resources extracted by RCC from private lands, hence the interpretation of Respondent Treasurer of Chapter II,
Article D, Section 21 of the Ordinance, and the assessment made by the Province of Bulacan against RCC is null and void.
Petitioner's motion for reconsideration, as well as their supplemental motion for reconsideration, was denied by the appellate court
on august 26, 1996, hence this appeal.
Petitioner's claim that the Court of Appeals erred in:
1. NOT HAVING OUTRIGHTLY DISMISSED THE SUBJECT PETITION ON THE GROUND THAT THE SAME IS
NOT THE APPROPRIATE REMEDY FROM THE TRIAL COURT'S GRANT OF THE PRIVATE
RESPONDENTS' (HEREIN PETITIONER) MOTION TO DISMISS;
2. NOT DISMISSING THE SUBJECT PETITION FOR BEING VIOLATIVE OF CIRCULAR 2-90 ISSUED BY THE
SUPREME COURT;
3. NOT DISMISSING THE PETITION FOR REVIEW ON THE GROUND THAT THE TRIAL COURT'S ORDER OF
MAY 13, 1994 HAD LONG BECOME FINAL AND EXECUTORY;
4. GOING BEYOND THE PARAMETERS OF ITS APPELLATE JURISDICTION IN RENDERING THE
SEPTEMBER 27, 1995 DECISION;
5. HOLDING THAT PRIVATE RESPONDENT (HEREIN PETITIONER) ARE ESTOPPED FROM RAISING THE
PROCEDURAL ISSUE IN THE MOTION FOR RECONSIDERATION;
6. THE INTERPRETATION OF SECTION 134 OF THE LOCAL GOVERNMENT CODE AS STATED IN THE
SECOND TO THE LAST PARAGRAPH OF PAGE 5 OF ITS SEPTEMBER 27, 1995 DECISION;
7. SUSTAINING THE ALLEGATIONS OF HEREIN RESPONDENT WHICH UNJUSTLY DEPRIVED PETITIONER
THE POWER TO CREATE ITS OWN SOURCES OF REVENUE;
8. DECLARING THAT THE ASSESSMENT MADE BY THE PROVINCE OF BULACAN AGAINST RCC AS NULL
AND VOID WHICH IN EFFECT IS A COLLATERAL ATTACK ON PROVINCIAL ORDINANCE NO. 3; AND
9. FAILING TO CONSIDER THE REGALIAN DOCTRINE IN FAVOR OF THE LOCAL GOVERNMENT.
The issues raised by petitioners are devoid of merit. The number and diversity of errors raised by appellants impel us, however,
to discuss the points raised seriatim.
In their first assignment of error, petitioners contend that instead of filing a petition for certiorari with the Supreme Court, Republic
Cement should have appealed from the order of the trial court dismissing their petition. Citing Martinez vs. CA,
[1]
they allege that a
motion to dismiss is a final order, the remedy against which is not a petition for certiorari, but an appeal, regardless of the questions
sought to be raised on appeal, whether of fact or of law, whether involving jurisdiction or grave abuse of discretion of the trial court.
Petitioners' argument is misleading. While it is true that the remedy against a final order is an appeal, and not a petition
for certiorari, the petition referred to is a petition for certiorari under Rule 65. As stated in Martinez, the party aggrieved does not have
the option to substitute the special civil action for certiorari under Rule 65 for the remedy of appeal. The existence and availability of the
right of appeal are antithetical to the availment of the special civil action for certiorari.
Republic Cement did not, however, file a petition for certiorari under Rule 65, but an appeal by certiorari under Rule 45. Even law
students know that certiorari under Rule 45 is a mode of appeal, an appeal from the Regional Trial Court being taken in either of two
ways (a) by writ of error (involving questions of fact and law) and (b) by certiorari (limited only to issues of law), with an appeal
by certioraribeing brought to the Supreme Court, there being no provision of law for taking appeals by certiorari to the Court of
Appeals.
[2]
It is thus clearly apparent that Republic Cement correctly contested the trial court's order of dismissal by filing an appeal
by certiorari under Rule 45. In fact, petitioners, in their second assignment of error, admit that a petition for review on certiorari under
Rule 45 is available to a party aggrieved by an order granting a motion to dismiss.
[3]
They claim, however, that Republic Cement could
not avail of the same allegedly because the latter raised issues of fact, which is prohibited, Rule 45 providing that "(t)he petition shall
raise only questions of law which must be distinctly set forth."
[4]
In this respect, petitioners claim that Republic Cement's petition should
have been dismissed by the appellate court, Circular 2-90 providing:
4. Erroneous Appeals. - An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or
inappropriate mode shall be dismissed.
x x x x x x x x x
d) No transfer of appeals erroneously taken. -- No transfers of appeals erroneously taken to the Supreme Court or to the
Court of Appeals to whichever of these Tribunals has appropriate appellate jurisdiction will be allowed; continued ignorance
or wilful disregard of the law on appeals will not be tolerated.
Petitioners even fault the Court for referring Republic Cement's petition to the Court of Appeals, claiming that the same should
have been dismissed pursuant to Circular 2-90. Petitioners conveniently overlook the other provisions of Circular 2-90, specifically 4b)
thereof, which provides:
b) Raising factual issues in appeal by certiorari. - Although submission of issues of fact in an appeal by certiorari taken to
the Supreme Court from the regional trial court is ordinarily proscribed, the Supreme Court nonetheless retains the option, in
the exercise of its sound discretion and considering the attendant circumstances, either itself to take cognizance of and
decide such issues or to refer them to the Court of Appeals for determination.
As can be clearly adduced from the foregoing, when an appeal by certiorari under Rule 45 erroneously raises factual issues, the
Court has the option to refer the petition to the Court of Appeals. The exercise by the Court of this option may not now be questioned
by petitioners.
As the trial court's order was properly appealed by Republic Cement, the trial court's May 13, 1994 order never became final and
executory, rendering petitioner's third assignment of error moot and academic.
Petitioners' fourth and fifth assignment of errors are likewise without merit. Petitioners assert that the Court of Appeals could only
rule on the propriety of the trial court's dismissal of Republic Cement's petition for declaratory relief, allegedly because that was the sole
relief sought by the latter in its petition for certiorari. Petitioners claim that the appellate court overstepped its jurisdiction when it
declared null and void the assessment made by the Province of Bulacan against Republic Cement.
Petitioners gloss over the fact that, during the proceedings before the Court of Appeals, they entered into an agreement
and modus vivendi whereby they limited the issue for resolution to the question as to whether or not the provincial government could
impose and/or assess taxes on stones, sand, gravel, earth and other quarry resources extracted by Republic Cement from private
lands. This agreement andmodus vivendi were approved by the appellate court on December 29, 1994. All throughout the
proceedings, petitioners never questioned the authority of the Court of Appeals to decide this issue, an issue which it brought itself
within the purview of the appellate court. Only when an adverse decision was rendered by the Court of Appeals did petitioners question
the jurisdiction of the former.
Petitioners are barred by the doctrine of estoppel from contesting the authority of the Court of Appeals to decide the instant case,
as this Court has consistently held that "(a) party cannot invoke the jurisdiction of a court to secure affirmative relief against his
opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction."
[5]
The Supreme Court frowns
upon the undesirable practice of a party submitting his case for decision and then accepting the judgment, only if favorable, and
attacking it for lack of jurisdiction when adverse.
[6]

In a desperate attempt to ward off defeat, petitioners now repudiate the above-mentioned agreement and modus vivendi, claiming
that the same was not binding in the Province of Bulacan, not having been authorized by the Sangguniang Panlalawigan of
Bulacan. While it is true that the Provincial Governor can enter into contract and obligate the province only upon authority of
the sangguniang panlalawigan,
[7]
the same is inapplicable to the case at bar. The agreement and modus vivendi may have been
signed by petitioner Roberto Pagdanganan, as Governor of the Province of Bulacan, without authorization from the sangguniang
panlalawigan, but it was also signed by Manuel Siayngco, the Provincial Legal Officer, in his capacity as such, and as counsel of
petitioners.
It is a well-settled rule that all proceedings in court to enforce a remedy, to bring a claim, demand, cause of action or subject
matter of a suit to hearing, trial, determination, judgment and execution are within the exclusive control of the attorney.
[8]
With respect to
such matters of ordinary judicial procedure, the attorney needs no special authority to bind his client.
[9]
Such questions as what action or
pleading to file, where and when to file it, what are its formal requirements, what should be the theory of the case, what defenses to
raise, how may the claim or defense be proved, when to rest the case, as well as those affecting the competency of a witness, the
sufficiency, relevancy, materiality or immateriality of certain evidence and the burden of proof are within the authority of the attorney to
decide.
[10]
Whatever decision an attorney makes on any of these procedural questions, even if it adversely affects a client's case, will
generally bind a client. The agreement and modus vivendi signed by petitioner's counsel is binding upon petitioners, even if
the Sanggunian had not authorized the same, limitation of issues being a procedural question falling within the exclusive authority of the
attorney to decide.
In any case, the remaining issues raised by petitioner are likewise devoid of merit, a province having no authority to impose taxes
on stones, sand, gravel, earth and other quarry resources extracted from private lands. The pertinent provisions of the Local
Government Code are as follows:
Sec. 134. Scope of Taxing Powers. - Except as otherwise provided in this Code, the province may levy only the taxes, fees,
and charges as provided in this Article.
Sec. 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect not more than ten percent
(10%) of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources,
as defined under the National Internal Revenue Code, as amended, extracted from public lands or from the beds of seas,
lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction.
x x x x x x x x x (Italics supplied)
The appellate court, on the basis of Section 134, ruled that a province was empowered to impose taxes only on sand, gravel, and
other quarry resources extracted from public lands, its authority to tax being limited by said provision only to those taxes, fees and
charges provided in Article One, Chapter 2, Title One of Book II of the Local Government Code.
[11]
On the other hand, petitioners claim
that Sections 129
[12]
and 186
[13]
of the Local Government Code authorizes the province to impose taxes other than those specifically
enumerated under the Local Government Code.
The Court of Appeals erred in ruling that a province can impose only the taxes specifically mentioned under the Local Government
Code. As correctly pointed out by petitioners, Section 186 allows a province to levy taxes other than those specifically enumerated
under the Code, subject to the conditions specified therein.
This finding, nevertheless, affords cold comfort to petitioners as they are still prohibited from imposing taxes on stones, sand,
gravel, earth and other quarry resources extracted from private lands. The tax imposed by the Province of Bulacan is an excise tax,
being a tax upon the performance, carrying on, or exercise of an activity.
[14]
The Local Government Code provides:
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:
x x x x x x x x x
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or
charges on petroleum products;
x x x x x x x x x
A province may not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code. Unfortunately
for petitioners, the National Internal Revenue Code provides:
Section 151. - Mineral Products. -
(A) Rates of Tax. - There shall be levied, assessed and collected on minerals, mineral products and quarry resources,
excise tax as follows:
x x x x x x x x x
(2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based on the actual market
value of the gross output thereof at the time of removal, in case of those locally extracted or produced; or the
values used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added
tax, in the case of importation.
x x x x x x x x x
(B) [Definition of Terms]. - For purposes of this Section, the term-
x x x x x x x x x
(4) Quarry resources shall mean any common stone or other common mineral substances as the Director of
the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl,
marble, granite, volcanic cinders, basalt, tuff and rock phosphate; Provided, That they contain no metal or metals
or other valuable minerals in economically workable quantities.
It is clearly apparent from the above provision that the National Internal Revenue Code levies a tax on all quarry resources,
regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand,
gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Code. The province can,
however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly
empowered to do so under the Local Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from
private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the
National Internal Revenue Code.
Given the above disquisition, petitioners cannot claim that the appellate court unjustly deprived them of the power to create their
sources of revenue, their assessment of taxes against Republic Cement being ultra vires, traversing as it does the limitations set by the
Local Government Code.
Petitioners likewise aver that the appellate court's declaration of nullity of its assessment against Republic Cement is a collateral
attack on Provincial Ordinance No. 3, which is prohibited by public policy.
[15]
Contrary to petitioners' claim, the legality of the ordinance
was never questioned by the Court of Appeals. Rather, what the appellate court questioned was petitioners' assessment of taxes on
Republic Cement on the basis of Provincial Ordinance No. 3, not the ordinance itself.
Furthermore, Section 21 of Provincial Ordinance No. 3 is practically only a reproduction of Section 138 of the Local Government
Code. A cursory reading of both would show that both refer to ordinary sand, stone, gravel, earth and other quarry resources extracted
from public lands. Even if we disregard the limitation set by Section 133 of the Local Government Code, petitioners may not impose
taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands on the basis of Section 21 of Provincial
Ordinance No. 3 as the latter clearly applies only to quarry resources extracted from public lands. Petitioners may not invoke the
Regalian doctrine to extend the coverage of their ordinance to quarry resources extracted from private lands, for taxes, being burdens,
are not to be presumed beyond what the applicable statute expressly and clearly declares, tax statutes being construed strictissimi
juris against the government.
[16]

WHEREFORE, premises considered, the instant petition is DISMISSED for lack of merit and the decision of the Court of Appeals
is hereby AFFIRMED in toto. Costs against petitioner.
SO ORDERED.


[G.R. No. 125948. December 29, 1998]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.
D E C I S I O N
MARTINEZ, J .:
This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No.
36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed
petitioners' complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil
pipelines. The original pipeline concession was granted in 1967
[1]
and renewed by the Energy Regulatory Board in 1992.
[2]

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before
the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for
the fiscal year 1993 pursuant to the Local Government Code.
[3]
The respondent City Treasurer assessed a business tax on the
petitioner amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the
fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the
amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which
reads:
"Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum Act. It is
engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local Government Code of
1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local
Government Code. Therefore, the authority to impose tax 'on contractors and other independent contractors' under Section 143,
Paragraph (e) of the Local Government Code does not include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local Government
Code. The said section limits the imposition of fees and charges on business to such amounts as may be commensurate to the cost of
regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on
gross receipts is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to
the cost of regulation, inspection and licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition."
[4]

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code.
[5]

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint
[6]
for tax refund with prayer for a writ
of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its
complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section
133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and
independent contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors
for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer i llegally and
erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid.
[7]

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local
Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hi re and
common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the
said code pertains to the mode or manner by which a product is delivered to its destination.
[8]

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed against
the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal
provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose concession was lately renewed
by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation
obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden
the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending
its services and facilities to a single specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local
governments than the previous enactments, to make them economically and financially viable to serve the
people and discharge their functions with a concomitant obligation to accept certain devolution of powers, x
x x So, consistent with this policy even franchise grantees are taxed (Sec. 137) and contractors are also
taxed under Sec. 143 (e) and 151 of the Code."
[9]

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case
to the respondent Court of Appeals for consideration and adjudication.
[10]
On November 29, 1995, the respondent court rendered a
decision
[11]
affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18,
1996.
[12]

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996.
[13]
Petitioner moved for
a reconsideration which was granted by this Court in a Resolution
[14]
of January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a
transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of
transporting persons or property from place to place, for compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out
as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established roads; and
4. The transportation must be for hire.
[15]

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De
Guzman vs. Court of Appeals
[16]
we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids
making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the 'general public,' i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article 1877 deliberately refrained from
making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide neatly with the notion of 'public servi ce,'
under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, 'public service' includes:
'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric light heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services.' "(Underscoring
Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers onl y
to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.
[17]

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86
thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation
of such other petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is hereby declared to be a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common
carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations
No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business
tax as provided for in Section 133 (j), of the Local Government Code, to wit:
"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 :
x x x x x x x x x
(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."
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common Limitations on the Taxing
Powers of Local Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being deemed to be
exempted from the taxing powers of the local government units. May we know the reason why the transportation business is
being excluded from the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that local
government units may not impose taxes on the business of transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to impose
a tax on business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross annual receipts. So,
transportation contractors who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of what is already being imposed by the National Internal Revenue Code
which is the so-called "common carriers tax." We do not want a duplication of this tax, so we just provided for an exception under
Section 125 [now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x
[18]

It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax
against common carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal
Revenue Code.
[19]
To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of
the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in
CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.


[G.R. No. 152492. October 16, 2003]
PALMA DEVELOPMENT CORPORATION, petitioner, vs. MUNICIPALITY OF MALANGAS, ZAMBOANGA DEL SUR, respondent.
D E C I S I O N
PANGANIBAN, J .:
In accordance with the Local Government Code of 1991, a municipal ordinance imposing fees on goods that pass through the
issuing municipalitys territory is null and void.
The Case
The Petition for Review
[1]
before us assails the August 31, 2001 Decision
[2]
and the February 6, 2002 Resolution
[3]
of the Court of
Appeals (CA) in CA-GR CV No. 56477. Thedispositive portion of the challenged Decision reads as follows:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the assailed Decision is VACATED and SET ASIDE, and this case is
ordered REMANDED to the court a quo for the reception of evidence of the parties on the matter or point delineated in the final
sentence above-stated.
[4]

The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
The facts are undisputed. Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to
wholesalers in Zamboanga City. It uses the municipalport of Malangas, Zamboanga del Sur as transshipment point for its goods. The
port, as well as the surrounding roads leading to it, belong to and are maintained by the Municipalityof Malangas, Zamboanga del Sur.
On January 16, 1994, the municipality passed Municipal Revenue Code No. 09, Series of 1993, which was subsequently
approved by the Sangguniang Panlalawigan ofZamboanga del Sur in Resolution No. 1330 dated August 4, 1994. Section 5G.01 of the
ordinance reads:
Section 5G.01. Imposition of fees. There shall be collected service fee for its use of the municipal road[s] or streets leading to the
wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance on all goods and all
equipment harbored or sheltered in the premises of the wharf and other within the jurisdiction of this municipality in the following
schedule:
a) Vehicles and Equipment: rate of fee
1. Automatic per unit P10.00
2. Ford Fiera P10.00
3. Trucks P10.00
x x x x x x x x x
b) Other Goods, Construction Material products:
1. Bamboo craft P20.00
2. Bangus/Kilo 0.30
x x x x x x x x x
41. Rice and corn grits/sack 0.50
[5]

Accordingly, the service fees imposed by Section 5G.01 of the ordinance was paid by petitioner under protest. It contended that
under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, municipal governments did not have the
authority to tax goods and vehicles that passed through their jurisdictions. Thereafter, before the Regional Trial Court (RTC)
of Pagadian City, petitioner filed against the Municipality of Malangas on November 20, 1995, an action for declaratory relief assailing
the validity of Section 5G.01 of the municipal ordinance.
On the premise that the case involved the validity of a municipal ordinance, the RTC directed respondent to secure the opinion of
the Office of the Solicitor General. The trial court likewise ordered that the opinions of the Departments of Finance and of Justice be
sought. As these opinions were still unavailable as of October 17, 1996, petitioners counsel filed, without objection from respondent, a
Manifestation seeking the submission of the case for the RTCs decision on a pure question of law.
In due time, the trial court rendered its November 13, 1996 Decision declaring the entire Municipal Revenue Code No. 09
as ultra vires and, hence, null and void.
Ruling of the Court of Appeals
The CA held that local government units already had revenue-raising powers as provided for under Sections 153 and 155 of RA
No. 7160. It ruled as well that within the purview of these provisions -- and therefore valid -- is Section 5G.01, which provides for a
service fee for the use of the municipal road or streets leading to the wharf and to any point along the shorelines within the jurisdiction
of the municipality and for police surveillance on all goods and all equipment harbored or sheltered in the premises of the wharf and
other within the jurisdiction of this municipality.
However, since both parties had submitted the case to the trial court for decision on a pure question of law without a full-blown
trial on the merits, the CA could not determine whether the facts of the case were within the ambit of the aforecited sections of RA No.
7160. The appellate court ruled that petitioner still had to adduce evidence to substantiate its allegations that the assailed ordinance
had imposed fees on the movement of goods within the Municipality of Malangas in the guise of a toll fee for the use of municipal roads
and a service fee for police surveillance. Thus, the CA held that the absence of such evidence necessitated the remand of the case to
the trial court.
Hence, this Petition.
[6]

Issues
Petitioner raises the following issues for our consideration:
1. Whether or not the Court of Appeals erred when it ordered that the extant case be remanded to the lower court for
reception of evidence.
2. Whether or not the Court of Appeals erred when it ruled that a full blown trial on the merits is necessary and that plaintiff-
appellee, now petitioner, has to adduce evidence to substantiate its thesis that the assailed municipal ordinance, in fact,
imposes fees on the movement of goods within the jurisdiction of the defendant and that this imposition is merely in the
guise of a toll fee for the use of municipal roads and service fee for police surveillance.
3. Whether or not the Court of Appeals erred when it did not rule that the questioned municipal ordinance is contrary to the
provisions of R.A. No. 7160 or the Local Government Code of the Philippines.
[7]

In brief, the issues boil down to the following: 1) whether Section 5G.01 of Municipal Revenue Code No. 09 is valid; and 2)
whether the remand of the case to the trial court is necessary.
The Courts Ruling
The Petition is meritorious.
First Issue:
Validity of the Imposed Fees
Petitioner argues that while respondent has the power to tax or impose fees on vehicles using its roads, it cannot tax
the goods that are transported by the vehicles. The provision of the ordinance imposing a service fee for police surveillance on goods is
allegedly contrary to Section 133(e) of RA No. 7160, which reads:
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, andbarangays shall not extend to the levy of the following:
x x x x x x x x x
e) Taxes, fees and charges and other impositions upon goods carried into and out of, or passing through, the territorial jurisdi ctions 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;
On the other hand, respondent maintains that the subject fees are intended for services rendered, the use of municipal roads and
police surveillance. The fees are supposedly not covered by the prohibited impositions under Section 133(e) of RA No. 7160.
[8]
It
further contends that it was empowered by the express mandate of Sections 153 and 155 of RA No. 7160 to enact Section 5G.01 of the
ordinance. The pertinent provisions of this statute read as follows:
Section 153. Service Fees and Charges. -- Local government units may impose and collect such reasonable fees and charges for
services rendered.
x x x x x x x x x
Section 155. Toll Fees or Charges. -- The sanggunian concerned may prescribe the terms and conditions and fix the rates for the
imposition of toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system
funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from
officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office
personnel delivering mail, physically-handicapped, and disabled citizens who are sixty-five (65) years or older.
When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the
said facility shall be free and open for public use.
Respondent claims that there is no proof that the P0.50 fee for every sack of rice or corn is a fraudulent legislation enacted to
subvert the limitation imposed by Section 133(e) of RA No. 7160. Moreover, it argues that allowing petitioner to use its roads without
paying the P0.50 fee for every sack of rice or corn would contravene the principle of unjust enrichment.
By express language of Sections 153 and 155 of RA No. 7160, local government units, through their Sanggunian, may prescribe
the terms and conditions for the imposition of toll fees or charges for the use of any public road, pier or wharf funded and constructed by
them. A service fee imposed on vehicles using municipal roads leading to the wharf is thus valid. However, Section 133(e) of RA No.
7160 prohibits the imposition, in the guise of wharfage, of fees -- as well as all other taxes or charges in any form whatsoever --
on goods or merchandise. It is therefore irrelevant if the fees imposed are actually for police surveillance on the goods, because any
other form of imposition on goods passing through the territorial jurisdiction of the municipality is clearly prohibited by Section 133(e).
Under Section 131(y) of RA No. 7160, wharfage is defined as a fee assessed against the cargo of a vessel engaged in foreign or
domestic trade based on quantity, weight, or measure received and/or discharged by vessel. It is apparent that a wharfage does not
lose its basic character by being labeled as a service fee for police surveillance on all goods.
Unpersuasive is the contention of respondent that petitioner would unjustly be enriched at the formers expense. Though the rules
thereon apply equally well to the government,
[9]
for unjust enrichment to be deemed present, two conditions must generally concur: (a)
a person is unjustly benefited, and (b) such benefit is derived at anothers expense or damage.
[10]

In the instant case, the benefits from the use of the municipal roads and the wharf were not unjustly derived by petitioner. Those
benefits resulted from the infrastructure that the municipality was mandated by law to provide.
[11]
There is no unjust enrichment where
the one receiving the benefit has a legal right or entitlement thereto, or when there is no causal relation between ones enrichment and
the others impoverishment.
[12]

Second Issue:
Remand of the Case
Petitioner asserts that the remand of the case to the trial court for further reception of evidence is unnecessary, because the facts
are undisputed by both parties. It has already been clearly established, without need for further evidence, that petitioner transports rice
and corn on board trucks that pass through the municipal roads leading to the wharf. Under protest, it paid the service fees, a fact that
respondent has readily admitted without qualification.
Respondent, on the other hand, is silent on the issue of the remand of the case to the trial court. The former merely defends the
validity of the ordinance, arguing neither for nor against the remand.
We rule against the remand. Not only is it frowned upon by the Rules of Court;
[13]
it is also unnecessary on the basis of the facts
established by the admissions of the parties. Besides, the fact sought to be established with the reception of additional evidence is
irrelevant to the due settlement of the case.
The pertinent portion of the assailed CA Decision reads:
To be stressed is the fact that local government units now have the following common revenue raising powers under the Local
Government Code:
Section 153. Service Fees and Charges. -- Local government units may impose and collect such reasonable fees and charges for
services rendered.
x x x x x x x x x
Section 155. Toll Fees or Charges. -- The Sanggunian concerned may prescribe the terms and conditions and fix the rates for the
imposition of toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system
funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from
officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office
personnel delivering mail, physically-handicapped, and disabled citizens who are sixty-five (65) years or older.
When public safety and welfare so requires, the Sanggunian concerned may discontinue the collection of the tolls, and thereafter the
said facility shall be free and open for public use. x x x
As we see it, the disputed municipal ordinance, which provides for a service fee for the use of the municipal road or streets leading to
the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance on all goods and all
equipment harbored or sheltered in the premises of the wharf and other within the jurisdiction of this municipality, seems to fall within
the compass of the above cited provisions of R.A. No. 7160. As elsewhere indicated, the parties in this case, nonetheless, chose to
submit the issue to the Trial Court on a pure question of law, without a full-blown trial on the merits: consequently, we are not prepared
to say, at this juncture, that the facts of the case inevitably call for the application, and/or that these make out a clear-cut case within the
ambit and purview, of the aforecited section. The plaintiff, thus, has to adduce evidence to substantiate its thesis that the assailed
municipal ordinance, in fact, imposes fees on the movement of goods within the jurisdiction of the defendant, and that this imposition is
merely in the guise of a toll fee for the use of municipal roads and service fee for police surveillance. Competent evidence upon this
score must, thus, be presented.
[14]

We note that Section 5G.01 imposes two types of service fees: 1) one for the use of the municipal roads and 2) another for police
surveillance on all goods and equipment sheltered in the premises of the wharf. The amount of service fees, however, is based on the
type of vehicle that passes through the road and the type of goods being transported.
While both parties admit that the service fees imposed are for the use of the municipal roads, petitioner maintains that the service
fee for police surveillance on goods harbored on the wharf is in the guise of a wharfage,
[15]
a prohibited imposition under Section 133(e)
of RA No. 7160.
Thus, the CA held that the case should be remanded to the trial court in order to resolve this factual dispute. The appellate court
noted that under Section 155 of RA No. 7160, municipalities apparently now have the power to impose fees for the use of municipal
roads.
Nevertheless, a remand is still unnecessary even if the service fee charged against the goods are for police surveillance, because
Section 133(e) of RA No. 7160 expressly prohibits the imposition of all other taxes, fees or charges in any form whatsoever upon the
merchandise or goods that pass through the territorial jurisdiction of local government units. It is therefore immaterial to the instant
case whether the service fee on the goods is for police surveillance or not, since the subject provision of the revenue ordinance is
invalid. Reception of further evidence to establish this fact would not legalize the imposition of such fee in any way.
Furthermore, neither party disputes any of the other material facts of the case. From their respective Briefs before the CA and
their Memoranda before this Court, they do not dispute the fact that petitioner, from its principal place of business, transports rice and
corn on board trucks bound for respondents wharf. The trucks traverse the municipal roads en route to the wharf, where the sacks of
rice and corn are manually loaded into marine vessels bound for Zamboanga City. Likewise undisputed is the fact that respondent
imposed and collected fees under the ordinance from petitioner. The former admits that it has been collecting, in addition to the fees on
vehicles, P0.50 for every sack of rice or corn that the latter has been shipping through the wharf.
[16]

The foregoing allegations are formal judicial admissions that are conclusive upon the parties making them. They require no
further proof in accordance with Section 4 of Rule 129 of the Rules of Court, which reads:
SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case,
does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such
admission was made.
Judicial admissions made by parties in the pleadings, in the course of the trial, or in other proceedings in the same case are
conclusive. No further evidence is required to prove them. Moreover, they cannot be contradicted unless it is shown that they have
been made through palpable mistake, or that they have not been made at all.
[17]

WHEREFORE, the Petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals are hereby SET
ASIDE. The imposition of a service fee for police surveillance on all goods harbored or sheltered in the premises of the
municipal port of Malangas under Sec. 5G.01 of the Malangas Municipal Revenue Code No. 09, series of 1993, is declared NULL AND
VOID for being violative of Republic Act No. 7160.
SO ORDERED.