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. Facts: Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative franchise holder under Republic Act (Rep. Act) No. 3259 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, 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enjoyed by, all persons, whether natural or juridical, including government-owned-orcontrolled corporations is hereby withdrawn upon effectivity of this Code (Emphasis supplied).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. A ct 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 receipts

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] 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), 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 nonpioneer 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 which was received on July 14, 1999. Meanwhile, on March 16, 1995, Rep. Act No. 7925, 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 from 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. Bayantel 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. Issues: 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. Ruling: Petitioners argue that Bayantel had failed to avail itself of the administrative remedies provided for under the LGC. 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 thereon, 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. 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 actually, 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, local governments are empowered to levy taxes. And pursuant to this constitutional empowerment, juxtaposed with Section 232 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. 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.

G.R. No. 126496 April 30, 1997 GMCR, INC.; SMART COMMUNICATIONS, INC.; INTERNATIONAL COMMUNICATIONS CORP.; ISLA COMMUNICATIONS CO., INC., petitioners, vs. BELL TELECOMMUNICATION PHILIPPINES, INC.; THE NATIONAL TELECOMMUNICATIONS COMMISSION and HON. SIMEON L. KINTANAR in his official capacity as Commissioner of the National Telecommunications,respondents. COMMISSIONER SIMEON L. KINTANAR, NATIONAL TELECOMMUNICATIONS COMMISSION, petitioner, vs. BELL TELECOMMUNICATION PHILIPPINES, INC., respondent.

Facts: BellTel filed with the NTC an Application for a Certificate of Public Convenience and Necessity to Procure, Install, Operate and Maintain Nationwide Integrated Telecommunications Services. At the time of the filing of this application, BellTel had not been granted a legislative franchise to engage in the business of telecommunications service. Republic Act No. 7692 was enacted granting BellTel a congressional franchise which gave private respondent BellTel the right, privilege and authority to carry on the business of telecommunications services. Private respondent BellTel filed with the NTC a second Application praying of Certificate of Public Convenience and Necessity then moved to withdraw its earlier application which was ordered withdrawn, without prejudice. Written opposition for the second application and other pertinent pleadings were filed by petitioners GMCR, Inc., et al. The application was referred to the Common Carriers Authorization Department (CCAD) for study and recommendation, which found Belltel to be financially capable and its proposal technically feasible. Agreeing with CCAD, NTC Deputy Commissioners Fidelo Dumlao and Consuelo Perez adopted the same and expressly signified their approval. The Legal Department thereof prepared a working draft of the order granting provisional authority to private respondent BellTel. The said working draft was initialed by 2 Deputy Commissioners Perez but was not signed by Commissioner Simeon Kintanar. BellTel filed a motion to promulgate, after previously filing two urgent ex-parte motion to resolve application which were not acted upon by the NTC. On 4 July 1995, the NTC denied the motion in an order signed solely by Commissioner Kintanar. On 17 July 1995, BellTel filed a petition for certiorari, mandamus and prohibition against NTC before the Supreme Court. The Court referred the case to the Court of Appeals pursuant to Paragraph 1, Section 9 of BP 129. The Court of Appeals granted BellTels position. Hence, the petitions for review by the opposing telecommunication companies and Commissioner Kintanar

Issue: Whether or not the vote of the Chairman of the Commission is sufficient to legally render an NTC order,resolution or decision. Ruling: We find the consolidated petitions wanting of merit. NTC is a collegial body requiring a majority vote out of the three members of the commission in order to validly decide a case or any incident therein. Corollarily, the vote alone of the chairman of the commission, absent the required concurring vote coming from the rest of the membership of the commission to at least arrive at a majority decision, is not sufficient to legally render an NTC order, resolution or decision. The NTC acts through a three-man body, and the three members of the commission each has one vote to cast in every deliberation concerning a case or any incident therein that is subject to the jurisdiction of the NTC. When we consider the historical milieu in which the NTC evolved into the quasi-judicial agency it is now under Executive Order No. 146 which organized the NTC as a threeman commission and expose the illegality of all memorandum circulars negating the collegial nature of the NTC under Executive Order No. 146, we are left with only one logical conclusion: the NTC is a collegial body and was a collegial body even during the time when it was acting as a one-man regime. Memorandum Circulars 1-1-93 and 3-1-93 are on their face null and void ab initio for being unabashedly contrary to law. They were nullified by respondent Court of Appeals because they are absolutely illegal and, as such, are without any force and effect. The fact that implementation of these illegal regulations has resulted in the institutionalization of the one-man rule in the NTC, is not and can never be a ratification of such an illegal practice. At the least, these illegal regulations are an erroneous interpretation of E.O. No. 546 and in the context of and its predecessor laws. At the most, these illegal regulations are attempts to validate the one-man rule in the NTC as executed by persons with the selfish interest of maintaining their illusory hold of power. Since the questioned memorandum circulars are inherently and patently null and void for being totally violative of the spirit and letter of E.O. No. 546 that constitutes the NTC as a collegial body, no court may shirk from its duty of striking down such illegal regulations.

G.R. No. 88404 October 18, 1990 PHILIPPINE LONG DISTANCE TELEPHONE CO. [PLDT], petitioner, vs. THE NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., (EXPRESS TELECOMMUNICATIONS CO., INC. [ETCI]), respondents. Facts: Petitioner PLDT assails, by way of certiorari and Prohibition under Rule 65, two Orders of public respondent NTC, namely, the Order of granting private respondent ETCI provisional authority to install, operate and maintain a Cellular Mobile Telephone System in Metro-Manila ,and the Order denying reconsideration. On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "An Act Granting Felix Alberto and Company, Incorporated, a Franchise to Establish Radio Stations for Domestic and Transoceanic Telecommunications." Felix Alberto & Co., Inc. (FACI) was the original corporate name, which was changed to ETCI with the amendment of the Articles of Incorporation in 1964. Much later, "CELLCOM, Inc." was the name sought to be adopted before the Securities and Exchange Commission, but this was withdrawn and abandoned. Alleging urgent public need, ETCI filed an application with public respondent NTC for the issuance of a Certificate of Public Convenience and Necessity (CPCN) to construct, install, establish, operate and maintain a Cellular Mobile Telephone System and an Alpha Numeric Paging System. PLDT filed an opposition with a motion to dismiss. On 12 November 1987, NTC overruled PLDTs opposition and declared RA 2090 should be liberally construed so as to include the operation of a cellular mobile telephone service as part of services of the franchise. On 12 December 1988, NTC granted ETCI provisional authority to install, operate, and maintain a cellular mobile telephone service initially in Metro Manila subject to the terms and conditions set forth in its order, including an interconnection agreement to be entered with PLDT. PLDT filed a motion to set aside order which was denied by the NTC on 8 May 1989. PLDT challenged the12 December 1988 and 8 May 1989 NTC orders before the Supreme Court through a special civil action for certiorari and prohibition. Issue: Whether the provisional authority was properly granted. Held: The provisional authority granted by the NTC (which is the regulatory agency of the National Government over all telecommunications entities) has a definite expiry period of 18 months unless sooner renewed; may be revoked, amended or revised by the NTC; covers one of four phases; limited to Metro Manila only; and does not authorize the installation and operation of an alphanumeric paging system. It was further issued after due hearing, with PLDT attending and granted after a prima facie showing that ETCI had the necessary legal, financial and technical capabilities; and that public interest, convenience and necessity so demanded. Provisional authority would be meaningless if the grantee were not allowed to operate, as its lifetime is limited and may be revoked by the NTC at any time in accordance with law.

Issue: Whether ETCIs franchise includes operation of cellular mobile telephone system (CMTS) Held: The NTC construed the technical term radiotelephony liberally as to include the operation of a cellular mobile telephone system. The construction given by an administrative agency possessed of the necessary special knowledge, expertise and experience and deserves great weight and respect. It can only be set aside by judicial intervention on proof of gross abuse of discretion, fraud or error of law. Issue: Whether PLDT can refuse interconnection with ETCI. Held: The NTC merely exercised its delegated authority to regulate the use of telecommunication networks when it decreed interconnection. PLDT cannot refuse interconnection as such is mandated under RA 6949 or the Municipal Telephone Act of 1989. What interconnection seeks to accomplish is to enable the system to reach out to the greatest number of people possible in line with governmental policies. With the broader reach, public interest and convenience will be better served. Public need, public interest, and the common good are the decisive, if not the ultimate, considerations. To these public and national interests, public utility companies must yield. The NTC order does not deprive PLDT due process as it allows the parties themselves to discuss and agree upon the specific terms and conditions of the interconnection agreement instead of the NTC itself laying down the standards of interconnection which it can very well impose.

G.R. No. 144486. April 13, 2005 RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), Petitioners, vs. PROVINCIAL ASSESOR OF SOUTH COTABATO, PROVINCIAL TREASURER OF SOUTH COTABATO, MUNICIPAL ASSESSOR OF TUPI, SOUTH COTABATO, and MUNICIPAL TREASURER OF TUPI, SOUTH COTABATO, Respondents. Facts: R.A. No. 2036 of 1957, as amended by R.A. No. 4054, granted RCPI a 50-year franchise. Thus, Sec. 14 of the amended law, in gist, provides that the grantee shall pay the same taxes as may be required by law. Said tax shall be in lieu of any and all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial or national, from which taxes the grantee is hereby expressly exempted. On 10 June 1985, the municipal treasurer of Tupi, South Cotabato assessed RCPI real property taxes from 1981 to 1985. The municipal treasurer demanded that RCPI pay P166,810 as real property tax on its radio station building in Barangay Kablon, as well as on its machinery shed, radio relay station tower and its accessories, and generating sets, based on the following tax declarations. RCPI protested the assessment before the Local Board of Assessment Appeals (LBAA') and claimed that all its assessed properties are personal properties and thus exempt from the real property tax. It also pointed out that its franchise exempts RCPI from 'paying any and all taxes of any kind, nature or description in exchange for its payment of tax equal to one and one-half per cent on all gross receipts from the business conducted under its franchise. It further claimed that any deviation from its franchise would violate the non-impairment of contract clause of the Constitution. Finally, RCPI stated that the value of the properties assessed has depreciated since their acquisition in the 1960s. The Provincial Assessor of South Cotabato opposed RCPI's claims on all points. The Local Board of Assessment Appeals ruled that appellant is ordered to pay the real property taxes, inclusive of all penalties, surcharges and interest accruing as of the date of actual payment, on the properties covered; in which the Central Board of Assessment Appeals affirmed. The Appellate Court ruled that decision of the Central Board of Assessment Appeals is hereby MODIFIED. Petitioner is declared exempt from paying the real property taxes assessed upon its machinery and radio equipment mounted as accessories to its relay tower. The decision assessing taxes upon petitioner's radio station building, machinery shed, and relay station tower is, however, affirmed.

Issues: 1. Whether the appellate court erred when it excluded RCPI's tower, relay station building, and machinery shed from tax exemption; and 2. Whether the appellate court erred when it did not resolve the issue of nullity of the tax declarations and assessments due to non-inclusion of depreciation allowance.

Ruling: Exemption from Real Property Tax First, Congress passed the Local Government Code that withdrew all the tax exemptions existing at the time of its passage including that of RCPI's. Second, Congress enacted the franchise of telecommunications companies, such as Islacom, Bell, Island Country, IslaTel, TeleTech, Major Telecoms, and Smart, with the 'in lieu of all taxes' proviso. Third, Congress passed RA 7925 entitled 'An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunications Services' which, through Section 23, mandated the equality of treatment of service providers in the telecommunications industry. The existing legislative policy is clearly against the revival of the 'in lieu of all taxes' clause in franchises of telecommunications companies. After the VAT on telecommunications companies took effect on January 1, 1996, Congress never again included the 'in lieu of all taxes' clause in any telecommunications franchise it subsequently approved. RCPI cannot also invoke the equality of treatment clause under Section 23 of Republic Act No. 7925. The franchises of the petitioners all expressly declare that the franchisee shall pay the real estate tax, using words similar to Section 14 of RA 2036, as amended. It is an elementary rule in taxation that exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority. It is the taxpayer's duty to justify the exemption by words too plain to be mistaken and too categorical to be misinterpreted. Exclusion of Depreciation Allowance RCPI contends that the tax declarations and assessments covering its radio relay station tower, radio station building, and machinery shed are void because the assessors did not consider depreciation allowance in their assessments. The Court have examined the records of this case and found that RCPI raised before the LBAA and the CBAA the nullity of the assessments due to the non-inclusion of depreciation allowance. Therefore, RCPI did not raise this issue for the first time. However, even if the court considers this issue, under the Real Property Tax Code depreciation allowance applies only to machinery and not to real property.