THIRD DIVISION

[G.R. No. 149110. April 9, 2003.]

NATIONAL POWER CORPORATION, petitioner , vs. CITY OF

CABANATUAN, respondent .

The Solicitor General for petitioner.

Edgardo G. Villarin and Trese D. Wenceslao for respondent.

SYNOPSIS

Petitioner is a government owned and controlled corporation created under

Commonwealth Act No. 120, as amended. For many years, petitioner sold electric power to
the residents of Cabanatuan City. Pursuant to a 1992 ordinance, the respondent assessed
the petitioner a franchise tax. In refusing to pay the tax assessment, petitioner argued that
the respondent had no authority to impose tax on government entities like itself and that it
was a tax exempt entity by express provisions of law. Hence, respondent filed a collection
suit demanding payment of the assessed tax due alleging that petitioner's exemption from
local taxes has been repealed. The trial court dismissed the case and ruled that the tax
exemption privileges granted to petitioner still subsists. On appeal, the Court of Appeals
reversed the trial court's order. Petitioner's motion for reconsideration was denied by the
appellate court. Hence, this petition for review filed before the Supreme Court.

The Supreme Court denied this petition and affirmed the decision of the Court of
Appeals. According to the Court, one of the most significant provisions of the Local
Government Code (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, Local Government Units (LGU) 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 LGU to impose taxes,
fees or charges on the aforementioned entities. In the case at bar, Section 151 in relation to
Section 137 of the LGC clearly authorized the respondent city government to impose on the
petitioner the franchise tax in question.

SYLLABUS

1. TAXATION; TAXES AS THE LIFEBLOOD OF THE GOVERNMENT;

CONSTRUED. — Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure. A principal attribute of sovereignty, 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; without taxes,
government cannot fulfill its mandate of promoting the general welfare and well-being of the
people.

2. ID.; POWER TO TAX; LOCAL GOVERNMENT UNITS; ENJOY DIRECT

AUTHORITY TO LEVY TAXES, FEES AND OTHER CHARGES PURSUANT TO ARTICLE
X, SECTION 5 OF THE CONSTITUTION; RATIONALE. — In recent years, the increasing
social challenges of the times expanded the scope of state activity, and taxation has
become a tool to realize social justice and the equitable distribution of wealth, economic
progress and the protection of local industries as well as public welfare and similar
objectives. Taxation assumes even greater significance with the ratification of the 1987
Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress;
local legislative bodies are now given direct authority to levy taxes, fees and other charges
pursuant to Article X, Section 5 of the 1987 Constitution, viz: "Section 5. — Each Local
Government unit shall have the power to create its own sources of revenue, to levy taxes,
fees and charges subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees and charges shall
accrue exclusively to the Local Governments." This paradigm shift results from the
realization that genuine development can be achieved only by strengthening local autonomy
and promoting decentralization of governance. For a long time, the country's highly
centralized government structure has bred a culture of dependence among local
government leaders upon the national leadership. It has also "dampened the spirit of
initiative, innovation and imaginative resilience in matters of local development on the part
of local government leaders." The only way to shatter this culture of dependence is to give
the LGUs a wider role in the delivery of basic services, and confer them sufficient powers
to generate their own sources for the purpose. To achieve this goal, Section 3 of Article X
of the 1987 Constitution mandates Congress to enact a local government code that will,
consistent with the basic policy of local autonomy , set the guidelines and limitations to
this grant of taxing powers.

3. ID.; ID.; ID.; CANNOT IMPOSE TAXES, FEES OR CHARGES OF ANY KIND
ON THE NATIONAL GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES AS A
RULE; EXCEPTION. — Considered as the most revolutionary piece of legislation on local
autonomy, 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. 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: . . . (o) Taxes, fees, or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units."
 4. MERCANTILE LAW; FRANCHISE; DEFINED AND CONSTRUED. — 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. 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. The right under a primary or general franchise is vested in the individuals who
compose the corporation and not in the corporation itself. 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. 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. ISDHc T

5. TAXATION; FRANCHISE TAX IMPOSED UNDER THE LOCAL

GOVERNMENT CODE; REQUISITES. — 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." It is not levied on the
corporation simply for existing as a corporation, upon its property or its income, 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. 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 following 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. 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.

6. ID.; TAX EXEMPTION; CONSTRUED STRONGLY AGAINST THE

CLAIMANT; APPLICATION IN CASE AT BAR. — As a rule, tax exemptions are construed
strongly against the claimant. Exemptions must be shown to exist clearly and categorically,
and supported by clear legal provisions. 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. 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." 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. 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.

7. POLITICAL LAW; GOVERNMENT OWNED AND CONTROLLED

CORPORATION; CONSTRUED. — Section 2 of Pres. Decree No. 2029 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 . . . ." 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. 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), among others.

DECISION

PUNO, J : p

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. CEDSc A

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. . . . 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.
Corollary to this, it should be noted here that in the NPC Charter's declaration of
Policy, Congress declared that: '. . . (2) the total electrification of the Philippines
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.' (emphasis 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 is 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 P10,000.00 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 law — finds 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 . . . 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)

xxx xxx xxx

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 local 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:

xxx xxx xxx

(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. STIEHc

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 following 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:

"xxx xxx xxx

(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 . . .;

(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 . . .;

(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;

xxx xxx xxx

(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 . .
." 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 jurisdiction 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 . . .." (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. c aHCSD

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 . .
. ."(emphasis 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 categorically, 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." (emphasis 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 exemption 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 privileges 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 (emphasis 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
t he 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 otherwise, 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.
 Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.

Footnotes

1. Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure. See
Petition, Rollo, pp. 8-28.

2. CA-G.R. CV No. 53297, penned by Assoc. Justice Rodrigo Cosico. See Annex "A" of
the Petition, Rollo, pp. 30-38.

3. Id., Annex "B" of the Petition, Rollo, p. 39.

4. Among the amendments to Comm. Act No. 120 are Rep. Act No. 6395 (1971) and Pres.
Decree No. 938 (1976).

5. Rep. Act No. 6395, Sec. 2.

6. Id., Sec. 3.

7. Rollo, p. 41.

8. "Section 37. Imposition of Tax — Notwithstanding any exemption granted by law or

other special law, there is hereby imposed an annual tax on a business enjoying
franchise at a rate of 75% of 1% of the gross receipts for the preceding year realized
within the territorial jurisdiction of Cabanatuan City."

9. Rollo, p. 41.

10. Rollo, p. 48. Rep. Act No. 6395, Sec. 5. "Capital Stock of the Corporation. — The
authorized capital stock of the Corporation is three hundred million pesos divided into
three million shares having a par value of one hundred pesos each, which shares are
not to be transferred, negotiated, pledged, mortgaged, or otherwise given as a security
for the payment of any obligation. The said capital stock has been subscribed and paid
wholly by the Government of the Philippines in accordance with the provisions of
Republic Act Numbered Four Thousand Eight Hundred Ninety-Seven."

11. Rollo, pp. 52-53.

12. Rep. Act No. 6395, Sec. 13, as amended by P.D. No. 938.

13. Complaint, Records, pp. 1-3. The case was docketed as Civil Case No. 1659-AF and
was raffled to Branch 30 presided by Judge Federico B. Fajardo, Jr.

14. "The Local Government Code of 1991." The law took effect on January 1, 1992.

15. Records, pp. 45-54.

16. Records, pp. 52-54.

17. Supra note 2.

18. Id. at 36-37.

19. Id. at 38.

20. Rollo, p. 39.

21. Petition, pp. 9-10; Rollo, pp. 16-17.

22. Rollo, p. 18.

23. Petition, p. 11; Rollo, p. 18.

24. Ibid.

25. Citing the case of Maceda v. Macaraig, 197 SCRA 771, 800 (1991).

26. 197 SCRA 52 (1991).

27. Id. at 64-65.

28. Rollo, p. 21.

29. Id. at 21-22.

30. Commissioner vs. Pineda , 21 SCRA 105, 110 (1967) citing Bull vs. United States , 295
U.S. 247, 15 AFTR 1069, 1073; Surigao Electric Co., Inc. vs. Court of Tax Appeals , 57
SCRA 523 (1974).

31. Hong Kong & Shanghai Banking Corp. vs. Rafferty , 19 Phil. 145 (1918); Wee Poco vs.
Posadas, 64 Phil. 640 (1937); Reyes vs. Almanzor , 196 SCRA 322, 327 (1991).

32. Phil. Guaranty Co., Inc. vs. CIR , 13 SCRA 775, 780 (1965).

33. Vitug and Acosta, Tax Law and Jurisprudence , 2nd ed. (2000) at 1.

34. Mactan Cebu International Airport Authority vs. Marcos , 261 SCRA 667, 680 (1996)
citing Cruz, Isagani A., Constitutional Law (1991) at 84.

35. Pimentel, The Local Government Code of 1991: The Key to National Development
(1993) at 2-4.

36. Supra note 14.

37. Rep. Act No. 2370 (1959).

38. Rep. Act No. 2264 (1959).

39. Rep. Act No. 5185 (1967).

40. B.P. Blg. 337 (1983).

41. Sponsorship Remarks of Cong. Hilario De Pedro III, Records of the House of
Representatives, 3rd Regular Session (1989–1990), Vol. 8, p. 757.

42. Pimentel, supra note 20; "Brilliantes, Issues and Trends in Local Governance in the
Philippines," The Local Government Code: An Assessment" (1999) at 3.
43. Supra note 41.

44. Supra note 26.

45. Supra note 34.

46. Id. at 692.

47. Id. at 686.

48. J.R. S. Business Corp., et al. vs. Ofilada, et al. , 120 Phil. 618, 628 (1964).

49. J. Campos, Jr., I Corporation Code (1990) at 2.

50. Supra note 48.

51. Ibid.

52. Ibid.

53. People v. Knight, 67 N.E. 65, 66, 174 N.Y. 475, 63 L.R.A. 87.

54. Tremont & Suffolk Mills v. City of Lowell , 59 N.E. 1007, 178 Mass. 469.

55. United North & South Development Co. v. Health , Tex. Civ. App., 78 S.W.2d 650, 652.

56. In re Commercial Safe Deposit Co. of Buffalo , 266 N.Y.S. 626, 148 Misc. 527.

57. Rep. Act No. 6395, Sec. 2 extends NAPOCOR's corporate existence "for fifty years
from and after the expiration of its present corporate existence."

58. Rep. Act No. 6395, Sec. 3.

59. "Establishing Basic Policies for the Electric Power Industry." Issued by former
President Ferdinand E. Marcos on November 7, 1972.

60. "Amending Presidential Decree No. 40 and Allowing the Private Sector to Generate
Electricity." Issued by former President Corazon C. Aquino on July 10, 1987.

61. Rep. Act No. 6395, Sec. 3 (d).

62. Rep. Act No. 6395, Sec. 4 (p) authorizes NAPOCOR to "exercise all the powers of a
corporation under the Corporation Law insofar as they are not inconsistent with the
provisions of this Act."

63. Approved on February 4, 1986.

64. Social Security System Employees Association vs. Soriano , 7 SCRA 1016, 1020
(1963).

65. See Boy Scouts of the Philippines vs. NLRC , 196 SCRA 176, 185 (1991); Shipside
Incorporated vs. CA, 352 SCRA 334, 350 (2001).

66. Rep. Act No. 6395, Sec. 2.

67. National Waterworks & Sewerage Authority vs. NWSA Consolidated Unions , 11
SCRA 766, 774 (1964).

68. Rep. Act No. 7648, Sec. 4. The law, also known as "Electric Power Crisis Act," was
signed on April 5, 1993.

69. Rep. Act No. 6395, Sec. 14 reads: "Contract with Franchise Holders, Conditions of. —
The Corporation shall, in any contract for the supply of electric power to a franchise
holder, require as a condition that the franchise holder, if it receives at least sixty per cent
of its electric power and energy from the Corporation, shall not realize a rate of return of
more than twelve per cent annually on a rate base composed of the sum of its net assets
in operation revalued from time to time, plus two-month operating capital, subject to the
non-impairment-of-obligations-of-contracts provision of the Constitution: Provided, That
in determining the rate of return, interest on loans, bonds and other debts shall not be
included as expenses. It shall likewise be a condition in the contract that the Corporation
shall cancel or revoke the contract upon judgment of the Public Service Commission
after due hearing and upon a showing by customers of the franchise holder that
household electrical appliances, have been damaged resulting from deliberate
overloading by, or power deficiency of, the franchise holder. The Corporation shall
renew all existing contracts with franchise holders for the supply of electric power and
energy in order to give effect to the provisions hereof."

70. Rep. Act No. 6395, Sec. 13.

71. Commissioner of Internal Revenue v. Guerrero , 21 SCRA 180 (1967).

72. City Government of San Pablo, Laguna v. Reyes , 305 SCRA 353 (1999).

73. Commissioner of Customs vs. Court of Tax Appeals , 251 SCRA 42, 56 (1995).

74. Supra note 72.

75. 306 SCRA 750 (1999).

76. Supra note 72 at 361-362.

77. "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."

78. Supra note 34 at 690.