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    Misamis Oriental Vs CEPALCO, 181 SCRA 38

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    Ron Laurel
    CEPALCO was granted a franchise by the national government to operate an electric system in several cities and municipalities. The franchise agreements stated that CEPALCO would pay a 3% franchise tax on gross earnings, with 2% going to the national government and 1% going to local governments. This tax was "in lieu of all taxes and assessments of whatever authority." A later law allowed provinces to impose their own franchise tax of up to 0.5% of gross receipts. Misamis Oriental province enacted an ordinance imposing this tax on CEPALCO. However, the Supreme Court ruled that CEPALCO was exempt from the provincial tax based on the terms of its original franchise agreements, which took precedence as special

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    Misamis Oriental Vs CEPALCO, 181 SCRA 38

    Uploaded by

    Ron Laurel
    148 views2 pages
    CEPALCO was granted a franchise by the national government to operate an electric system in several cities and municipalities. The franchise agreements stated that CEPALCO would pay a 3% franchise tax on gross earnings, with 2% going to the national government and 1% going to local governments. This tax was "in lieu of all taxes and assessments of whatever authority." A later law allowed provinces to impose their own franchise tax of up to 0.5% of gross receipts. Misamis Oriental province enacted an ordinance imposing this tax on CEPALCO. However, the Supreme Court ruled that CEPALCO was exempt from the provincial tax based on the terms of its original franchise agreements, which took precedence as special

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    Case Digest - Misamis Oriental vs CEPALCO, 181 SCRA 38

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    Misamis Oriental vs CEPALCO, 181 SCRA 38

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    CEPALCO was granted a franchise by the national government to operate an electric system in several cities and municipalities. The franchise agreements stated that CEPALCO would pay a 3% franchise tax on gross earnings, with 2% going to the national government and 1% going to local governments. This tax was "in lieu of all taxes and assessments of whatever authority." A later law allowed provinces to impose their own franchise tax of up to 0.5% of gross receipts. Misamis Oriental province enacted an ordinance imposing this tax on CEPALCO. However, the Supreme Court ruled that CEPALCO was exempt from the provincial tax based on the terms of its original franchise agreements, which took precedence as special

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    148 views2 pages

    Misamis Oriental Vs CEPALCO, 181 SCRA 38

    Uploaded by

    Ron Laurel
    CEPALCO was granted a franchise by the national government to operate an electric system in several cities and municipalities. The franchise agreements stated that CEPALCO would pay a 3% franchise tax on gross earnings, with 2% going to the national government and 1% going to local governments. This tax was "in lieu of all taxes and assessments of whatever authority." A later law allowed provinces to impose their own franchise tax of up to 0.5% of gross receipts. Misamis Oriental province enacted an ordinance imposing this tax on CEPALCO. However, the Supreme Court ruled that CEPALCO was exempt from the provincial tax based on the terms of its original franchise agreements, which took precedence as special

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    © All Rights Reserved
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    of 2

    Tax 1 Ronald Julian Laurel

    Misamis Oriental vs. CEPALCO

    181 SCRA 38

    FACTS: CEPALCO was granted a franchise on June 17, 1961 under R.A. 3247 to install, operate and
    maintain an electric light, heat and power system in the City of Cagayan De Oro and its suburbs. It was
    amended by R.A. 3570 which added the municipalities of Tagolon and Opol to CEPALCO’s sphere of
    operations, and was further amended by R.A. 6020 which extended its field of operations to the
    municipalities of Villanueva and Jasaan.

    The 3 R.A.s provides under Section 3 that:

    “In consideration of the franchise and rights…” CEPALCO “…shall pay a franchise tax equal to
    three (3) per centum of the gross earnings for electric current sold under this franchise, of whiche
    two (2) per centum goes into the National Treasury and one (1) per centum goes into the treasury
    of the Municipalities of Tagolon, Opol, Villanueva and Jasaan and Cagayan De Oro
    City… …Provided, that the said franchise tax of three (3) per centum of the gross earnings
    shall be in lieu of all taxes and assessments of whatever authority upon privileges, earnings,
    income, franchise, and poles, wires, transformers, and insulators of the grantee from which
    taxes and assessments the grantee is hereby expressly exempted.”

    On June 28, 1973, the Local Tax Code (P.D. 231) was promulgated which stated that the province may
    impose a tax on businesses enjoying franchise. Section 9 provides:

    “Any provision of special laws to the contrary notwithstanding, the province may impose a tax on
    businesses enjoying franchise, based on the gross receipts realized within its territorial
    jurisdiction, at the rate of not exceeding one-half of one per cent of the gross annual receipts for
    the preceding calendar year.

    In the case of newly started business, the rate shall not exceed three thousand pesos per
    year. Sixty per cent of the proceeds of the tax shall accrue to the general fund of the
    province and forty per cent to the general fund of the municipalities serviced by the business
    on the basis of the gross annual receipts derived therefrom by the franchise holder. In the case of
    a newly started business, forty per cent of the proceeds of the tax shall.”

    Pursuant thereto, the province of Misamis Oriental enacted Provincial Revenue Ordinance No. 19,
    whose section 12 states:

    “There shall be levied, collected and paid on businesses enjoying franchise tax of one-half of one
    per cent of their gross annual receipts for the preceding calendar year realized within the
    territorial jurisdiction of the province of Misamis Oriental.”

    Because of this, the province of Misamis Oriental demanded CEPALCO to pay the provincial franchise
    tax. CEPALCO refused to pay alleging that it is exempt from all taxes except the franchise tax required
    by R.A. 6020.
    Tax 1 Ronald Julian Laurel

    The province filed a complaint of declaratory relief praying the Court exercise the power to construe
    P.D. 231 in relation to the franchise of CEPALCO and to declare the franchise amended by P.D. 231.

    ISSUE: Whether or not CEPALCO is exempt from paying a provincial franchise tax due to the
    exempting clause in the contract of franchise

    HELD: Yes, CEPALCO is exempt from paying the provincial franchise tax. There is no provision in
    P.D. 231 expressly or impliedly amending or repealing Sec. 3 of R.A. 6020. The perceived repugnancy
    between the two statutes should be very clear before the Court may hold that the prior one has been
    repealed by the later, since there is no express provision to that effect (Manila Railroad Co. vs. Rafferty,
    40 Phil. 224). The rule is that a special and local statute applicable to a particular case is not repealed
    by a later statute which is general in its terms, provisions and application even if the terms of the
    general act are broad enough to include the cases in the special law (id.) unless there is manifest intent
    to repeal or alter the special law.

    Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while P.D. No.
    231 is a general tax law. The presumption is that the special statutes are exceptions to the general law
    (P.D. No. 231) because they pertain to a special charter granted to meet a particular set of conditions
    and circumstances.

    The franchise of respondent CEPALCO expressly exempts it from payment of "all taxes of whatever
    authority" except the three per centum (3%) tax on its gross earnings.

    The provision "shall be in lieu of all taxes of every name and nature" in the franchise, 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. As a charter is in the nature of a private contract, the
    imposition of another franchise tax on the corporation by the local authority would constitute an
    impairment of the contract between the government and the corporation.

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