*

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.

Civil Procedure; Appeals; Prohibitions; One of the recognized

exceptions to the exhaustion-of-administrative remedies rule is
when only legal issues are to be resolved.—Petitioners argue that
Bayantel had failed to avail itself of the administrative remedies
provided for

_______________

* SECOND DIVISION.

170

170 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan Telecommunications,

Inc.

under the LGC, adding that the trial court erred in giving due
course to Bayantel’s petition for prohibition. To petitioners, the
appeal mechanics under the LGC constitute Bayantel’s plain and
speedy remedy in this case. The Court does not agree. With the
reality that Bayantel’s 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. As the Court has said in Ty vs. Trampe, 250 SCRA 500
(1995): x x x. Although as a rule, administrative remedies must
first be exhausted before resort to judicial action can prosper,
there is a well-settled exception in cases where the controversy
does not involve questions of fact but only of law. x x x.
Taxation; Realty Tax; Franchises; Local Governments; While
Section 14 of Republic Act 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.—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 franchisee’s
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

171

VOL. 484, MARCH 6, 2006 171

City Government of Quezon City vs. Bayan Telecommunications,

Inc.

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. Bayantel’s 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.
Same; Same; Same; Same; The realty tax exemption heretofore
enjoyed by Bayantel under its original franchise, but subsequently
withdrawn by force of Section 234 of the Local Government Code,
has been restored by Section 14 of Republic Act No. 7633.—With
the LGC’s taking effect on January 1, 1992, Bayantel’s
“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, expressly withdrawn. But, not long thereafter,
however, or on July 20, 1992, Congress passed Rep. Act No. 7633
amending Bayantel’s 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, of Bayantel’s 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.
Same; Same; Same; Same; The power to tax is primarily
vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a
valid delegation as before, but pursuant to direct authority
conferred by Section 5, Article X of the Constitution.—Bayantel’s
posture is well-taken. While the system of local government
taxation has changed with the

172

172 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan Telecommunications,

Inc.

onset of the 1987 Constitution, the power of local government

units to tax is still limited. As we explained in Mactan Cebu
International Airport Authority: The power to tax is primarily
vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by
virtue of a valid delegation as before, but pursuant to
direct authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the power may be
subject to such guidelines and limitations as the Congress may
provide which, however, must be consistent with the basic policy
of local autonomy. (at p. 680; Emphasis supplied.)
Same; Same; Same; Same; The Supreme Court has upheld the
power of Congress to grant exemptions over the power of local
government units to impose taxes.—In Philippine Long Distance
Telephone Company, Inc. (PLDT) vs. City of Davao, 363 SCRA 522
(2001), this Court has upheld the power of Congress to grant
exemptions over the power of local government units to impose
taxes. There, the Court wrote: Indeed, the grant of taxing
powers to local government units under the Constitution
and the LGC does not affect the power of Congress to
grant exemptions to certain persons, pursuant to a declared
national policy. The legal effect of the constitutional grant to local
governments simply means that in interpreting statutory
provisions on municipal taxing powers, doubts must be resolved
in favor of municipal corporations.

PETITION for review on certiorari of the decision and

resolution of the Regional Trial Court, Br. 227, Quezon
City.

The facts are stated in the opinion of the Court.

     The City Attorney for petitioners.
     De Mesa, Zaballero & Partners for respondent.

GARCIA, J.:

Before the Court, on pure questions of law, is this petition

for review on certiorari under Rule 45 of the Rules of Court
to nullify and set aside the following issuances of the
Regional Trial Court (RTC) of Quezon City, Branch 227, in
its Civil Case No. Q-02-47292, to wit:

173

VOL. 484, MARCH 6, 2006 173

City Government of Quezon City vs. Bayan
Telecommunications, Inc.

1
1) Decision dated June 6, 2003, declaring
respondent Bayan Telecommunications, Inc.
exempt from real estate taxation on its real
properties located in Quezon City; and
2
2) Order dated December 30, 2003, denying
petitioners’ motion for reconsideration.
The facts: 3
Respondent Bayan Telecommunications, Inc. (Bayantel)
is a legislative4 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 busi-

_______________

1 Penned by then Judge Vicente Q. Roxas, now Associate Justice of the Court of
Appeals; Rollo, pp. 46-71.
2 Rollo, p. 72.
3 Formerly named International Communications Corporation.
4 “An Act Granting the International Communications Corporation a Franchise
to Establish Radio Stations for Domestic Telecommunications, Radiophone,
Broadcasting and Telecasting.” Approved on June 17, 1961.
This franchise was later extended with the enactment of Republic Act No. 4905
on June 17, 1967, stating that: “SEC. 4. This franchise shall continue for a period
of twenty-five years from the date the first of said stations shall be placed in
operation, and is granted upon the express condition that the same shall be void
unless the construction of said station be begun within two years from the date of
the approval of this amendatory Act and be completed within four years from said
date.”

174

174 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan Telecommunications,
Inc.

ness transacted under this franchise by the said grantee

(Emphasis supplied).

On January 1, 1992, Rep. Act No. 7160, otherwise known

as the “Local Government Code of 1991” (LGC), took effect.
Section 232 of the Code grants local government units
within the Metro Manila Area the power to levy tax on real
properties, thus:

SEC. 232. Power to Levy Real Property Tax.—A province or city or

a municipality within the Metropolitan Manila Area may levy an
annual ad valorem tax on real property such as land, building,
machinery and other improvements not hereinafter specifically
exempted.

Complementing the aforequoted provision is the second

paragraph of Section 234 of the same Code which withdrew
any exemption from realty tax heretofore granted to or
enjoyed by all persons, natural or juridical, to wit:

SEC. 234. Exemptions from Real Property Tax.—The following are

exempted from payment of the real property tax:
x x x      x x x      x x x
Except as provided herein, any exemption from payment of real
property tax previously granted to, or enjoyed by, all persons,
whether natural or juridical, including government-owned-or-
controlled corporations is hereby withdrawn upon effectivity
of this Code (Emphasis supplied).

On July 20, 1992, barely few months after the LGC took
effect, Congress enacted Rep. Act No. 7633, amending
Bayantel’s original franchise. The amendatory law (Rep.
Act No. 7633) contained the following tax provision:

SEC. 11. The grantee, its successors or assigns shall be liable to

pay the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay.
In addition thereto, the grantee, its successors or assigns shall
pay a franchise tax equivalent to three percent (3%) of all gross
receipts of the tele-

175

VOL. 484, MARCH 6, 2006 175

City Government of Quezon City vs. Bayan Telecommunications,
Inc.

phone 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 . . . . x x x.
[Emphasis supplied]
It is undisputed that within the territorial boundary of
Quezon City, Bayantel owned several real properties on
which it maintained various telecommunications facilities.
These real properties, as hereunder described, are covered
by the following tax declarations:

(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-

096-04072 and D-096-04073 pertaining to
Bayantel’s Head Office and Operations Center in
Roosevelt St., San Francisco del Monte, Quezon
City allegedly the nerve center of petitioner’s
telecommunications franchise operations, said
Operation Center housing mainly petitioner’s
Network Operations Group and switching,
transmission and related equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-
124-00920 and D-124-00941 covering Bayantel’s
land, building and equipment in Maginhawa St.,
Barangay East Teacher’s Village, Quezon City
which houses telecommunications facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-
011-10811, and D-011-11540 referring to Bayantel’s
Exchange Center located in Proj. 8, Brgy. Bahay
Toro, Tandang Sora, Quezon City which houses the
Network Operations Group and cover switching,
transmission and other related equipment.

In 1993, the government of Quezon City, pursuant to the

taxing power vested on local government units by Section
5, Article X of the 1987 Constitution, infra, in relation to
Section 232 of the LGC, supra, enacted City Ordinance No.
SP-91, S-93, otherwise
5
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

_______________

5 This took effect on July 1, 1993.

176

176 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan
Telecommunications, Inc.

its Section 6, the withdrawal of exemption from real

property tax under Section 234 of the LGC, supra.
Furthermore, much like the LGC, the QCRC, under its
Section 230, withdrew tax exemption privileges in general,
as follows:

SEC. 230. Withdrawal of Tax Exemption Privileges.—Unless

otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether
natural or juridical, including government owned or controlled
corporations, except local water districts, cooperatives duly
registered under RA 6938, non-stock and non-profit hospitals and
educational institutions, business enterprises certified by the
Board of Investments (BOI) as pioneer or non-pioneer for a period
of six (6) and four (4) years, respectively, . . . are hereby
withdrawn effective upon approval of this Code (Emphasis
supplied).

Conformably with the City’s Revenue Code, new tax

declarations for Bayantel’s real properties in Quezon City
were issued by the City Assessor and were received by
Bayantel on August 13, 1998, except one (Tax Declaration
No. 124-01013) which was received on July 14, 1999. 6
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

_______________

6 Entitled “An Act to Promote and Govern the Development of Philippine

Telecommunications and the Delivery of Public Telecommunication Services.”

177

VOL. 484, MARCH 6, 2006 177

City Government of Quezon City vs. Bayan Telecommunications,
Inc.
 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.
On account thereof, the Quezon City Treasurer sent out
notices of delinquency for the total amount of
P43,878,208.18, followed by the issuance of several
warrants of levy against Bayantel’s properties preparatory
to their sale at a public auction set on July 30, 2002.
Threatened with the imminent loss of its properties,
Bayantel immediately withdrew its appeal with the LBAA
and instead filed with the RTC of Quezon City a petition
for prohibition with an urgent application for a temporary
restraining order (TRO) and/or writ of preliminary
injunction, thereat docketed as Civil Case No. Q-02-47292,
which was raffled to Branch 227 of the court.
On July 29, 2002, or in the eve of the public auction
scheduled the following day, the lower court issued a TRO,
followed, after due hearing, by a writ of preliminary
injunction via its order of August 20, 2002.
And, having heard the parties on the merits, the same
court came out with its challenged Decision of June 6,
2003, the dispositive portion of which reads:

“WHEREFORE, premises considered, pursuant to the enabling

franchise under Section 11 of Republic Act No. 7633, the real
estate properties and buildings of petitioner [now, respondent
Bayantel] which have been admitted to be used in the operation of
petitioner’s franchise described in the following tax declarations
are hereby DECLARED exempt from real estate taxation:

178

178 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan Telecommunications,
Inc.

(1) Tax Declaration No. D-096-04071—

(2) Tax Declaration No. D-096-04074—
(3) Tax Declaration No. D-124-01013—
(4) Tax Declaration No. D-011-10810—
 (5) Tax Declaration No. D-011-10811—
(6) Tax Declaration No. D-011-10809—
(7) Tax Declaration No. D-124-00941—
(8) Tax Declaration No. D-124-00940—
(9) Tax Declaration No. D-124-00939—
(10) Tax Declaration No. D-096-04072—
(11) Tax Declaration No. D-096-04073—
(12) Tax Declaration No. D-011-11540—

The preliminary prohibitory injunction issued in the August

20, 2002 Order of this Court is hereby made permanent. Since
this is a resolution of a purely legal issue, there is no
pronouncement as to costs.
SO ORDERED.”

Their motion for reconsideration having been denied by the

court in its Order dated December 30, 2003, petitioners
elevated the case directly to this Court on pure questions of
law, ascribing to the lower court the following errors:

I. [I]n declaring the real properties of respondent

exempt from real property taxes notwithstanding
the fact that the tax exemption granted to Bayantel
in its original franchise had been withdrawn by the
[LGC] and that the said exemption was not restored
by the enactment of RA 7633.
II. [In] declaring the real properties of respondent
exempt from real property taxes notwithstanding
the enactment of the [QCRC] which withdrew the
tax exemption which may have been granted by RA
7633.
III. [In] declaring the real properties of respondent
exempt from real property taxes notwithstanding
the vague and ambiguous grant of tax exemption
provided under Section 11 of RA 7633.
IV. [In] declaring the real properties of respondent
exempt from real property taxes notwithstanding
the fact that [it] had failed

179

VOL. 484, MARCH 6, 2006 179

City Government of Quezon City vs. Bayan
Telecommunications, Inc.
 to exhaust administrative remedies in its claim for
real property tax exemption. (Words in bracket
added.)

As we see it, the errors assigned may ultimately be reduced

to two (2) basic issues, namely:

1. Whether or not Bayantel’s real properties in

Quezon City are exempt from real property taxes
under its legislative franchise; and
2. Whether or not Bayantel is required to exhaust
administrative remedies before seeking judicial
relief with the trial court.

We shall first address the second issue, the same being

procedural in nature.
Petitioners argue that Bayantel had failed to avail itself
of the administrative remedies provided for under the LGC,
adding that the trial court erred in giving due course to
Bayantel’s petition for prohibition. To petitioners, the
appeal mechanics under the LGC constitute Bayantel’s
plain and speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following
provision of Rule 65 of the Rules of Court:

SEC. 2. Petition for prohibition.—When the proceedings of any

tribunal, . . . are without or in excess of its or his jurisdiction, or
with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be
rendered commanding the respondent to desist from further
proceedings in the action or matter specified therein, or
otherwise, granting such incidental reliefs as law and justice may
require.

With the reality that Bayantel’s 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
180

180 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan
Telecommunications, Inc.
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 7
instant petition. As the Court has
said in Ty vs. Trampe:

x x x. Although as a rule, administrative remedies must first be

exhausted before resort to judicial action can prosper, there is a
well-settled exception in cases where the controversy does not
involve questions of fact but only of law. x x x.

Lest it be overlooked, an appeal to the LBAA, to be

properly considered, required prior payment under protest
of the amount of P43,878,208.18, a figure which, in the
light of the then prevailing Asian financial crisis, may have
been difficult to raise up. Given this reality, an appeal to
the LBAA may not be considered as a plain, speedy and
adequate remedy. It is thus understandable why Bayantel
opted to withdraw its earlier appeal with the LBAA and,
instead, filed its petition for prohibition with urgent
application for injunctive relief in Civil Case No. Q-02-
47292. The remedy availed of by Bayantel under Section 2,
Rule 65 of the Rules of Court must be upheld.
This brings the Court to the more weighty question of
whether or not Bayantel’s 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 Bayantel’s 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 elabo-

_______________

7 250 SCRA 500 (1995).

181

VOL. 484, MARCH 6, 2006 181

City Government of Quezon City vs. Bayan
Telecommunications, Inc.
rate 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 Bayantel’s 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
franchisee’s 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

182

182 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan
Telecommunications, Inc.

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.
Bayantel’s 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 LGC’s taking effect on January 1,
1992, Bayantel’s “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 Bayantel’s 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
Bayantel’s 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
8
of
Section 5, Article X of the 1987 Constitution, local
governments

_______________

8 Sec. 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes . . . subject to such guidelines
and limitations as the Congress may provide, consistent with the basic
policy of local autonomy. x x x. Mactan Cebu International Airport
Authority vs. Marcos, 261 SCRA 667 (1996), per then Associate Justice,
now retired Chief Justice Hilario G. Davide, Jr., ponente.

183

VOL. 484, MARCH 6, 2006 183

City Government of Quezon City vs. Bayan
Telecommunications, Inc.

are empowered to levy taxes. And pursuant to this9

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 City’s Revenue Code, just like the
LGC, expressly withdrew, under Section 230 thereof,
supra, all tax exemption privileges in general.
This thus raises the question of whether or not the
City’s Revenue Code pursuant to which the city treasurer of
Quezon City levied real property taxes against Bayantel’s
real properties located within the City effectively withdrew
the tax exemption enjoyed by Bayantel under its franchise,
as amended.
Bayantel answers the poser in the negative arguing that
once again it is only “liable to pay the same taxes, as any
other persons or corporations on all its real or personal
properties, exclusive of its franchise.”
Bayantel’s posture is well-taken. While the system of
local government taxation has changed with the onset of
the 1987 Constitution, the power of local government units
to tax is still limited. As we explained
10
in Mactan Cebu
International Airport Authority:

The power to tax is primarily vested in the Congress; however, in

our jurisdiction, it may be exercised by local legislative bodies, no
longer merely be virtue of a valid delegation as before, but
pursuant to direct authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the power may be
subject to such guidelines and limitations as the Congress may
provide which, however, must be consistent with the basic policy
of local autonomy. (at p. 680; Emphasis supplied.)

_______________

9 SEC. 232. Power to Levy Real Property Tax.—A province or city or

municipality within the Metropolitan Manila Area may levy an annual ad
valorem tax on real property such as land, building, machinery, and other
improvement not hereinafter specifically exempted.
10 See Footnote #8, supra.

184

184 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan
Telecommunications, Inc.

Clearly then, while a new slant on the subject of local

taxation now prevails in the sense that the former doctrine
of local government units’ delegated power to tax had been
effectively modified with Article X, Section 5 of the 1987
Constitution now in place, .the basic doctrine on local
taxation remains essentially the same. For as the Court
stressed in Mac-tan, “the power to tax is [still]
primarily vested in the Congress.”
This new perspective is best articulated by Fr. Joaquin
G. Bernas, S.J., himself a Commissioner of the 1986
Constitutional Commission which crafted the 1987
Constitution, thus:

“What is the effect of Section 5 on the fiscal position of municipal

corporations? Section 5 does not change the doctrine that
municipal corporations do not possess inherent powers of
taxation. What it does is to confer municipal corporations
a general power to levy taxes and otherwise create sources
of revenue. They no longer have to wait for a statutory grant of
these powers. The power of the legislative authority relative to
the fiscal powers of local governments has been reduced to the
authority to impose limitations on municipal powers. Moreover,
these limitations must be “consistent with the basic policy of local
autonomy.” The important legal effect of Section 5 is thus to
reverse the principle that doubts are resolved against
municipal corporations. Henceforth, in interpreting statutory
provisions on municipal fiscal powers, doubts will be resolved in
favor of municipal corporations. It is understood, however, that
taxes imposed by local government must be for a public purpose,
uniform within a locality, must not be confiscatory, 11and must be
within the jurisdiction of the local unit to pass.” (Emphasis
supplied.)

In net effect, the controversy presently before the Court

involves, at bottom, a clash between the inherent taxing
power of the legislature, which necessarily includes the
power to exempt, and the local government’s delegated
power to tax under the aegis of the 1987 Constitution.

_______________

11 Bernas, The Constitution of the Republic of the Philippines, a

Commentary, Vol. 11, 1988 ed., p. 381.

185

VOL. 484, MARCH 6, 2006 185

City Government of Quezon City vs. Bayan
Telecommunications, Inc.

Now to go back to the Quezon City Revenue Code which

imposed real estate taxes on all real properties within the
city’s territory and removed exemptions theretofore
“previously granted to, or presently
12
enjoyed by all persons,
whether natural or juridical ….,” there can really be no
dispute that the power of the Quezon City Government to
tax is limited by Section 232 of the LGC which expressly
provides that “a province or city or municipality within the
Metropolitan Manila Area may levy an annual ad valorem
tax on real property such as land, building, machinery, and
other improvement not hereinafter specifically
exempted.” Under this law, the Legislature highlighted its
power to thereafter exempt certain realties from the taxing
power of local government units. An interpretation denying
Congress such power to exempt would reduce the phrase
“not hereinafter specifically exempted” as a pure jargon,
without meaning whatsoever. Needless to state, such
absurd situation is unacceptable.
For sure, in Philippine Long Distance 13
Telephone
Company, Inc. (PLDT) vs. City of Davao, this Court has
upheld the power of Congress to grant exemptions over the
power of local government units to impose taxes. There, the
Court wrote:

Indeed, the grant of taxing powers to local government

units under the Constitution and the LGC does not affect
the power of Congress to grant exemptions to certain
persons, pursuant to a declared national policy. The legal effect of
the constitutional grant to local governments simply means that
in interpreting statutory provisions on municipal taxing powers,
doubts must be resolved in favor of municipal corporations.
(Emphasis supplied.)

As we see it, then, the issue in this case no longer dwells on

whether Congress has the power to exempt Bayantel’s
proper-

_______________

12 Section 6, Quezon City Revenue Code, quoted in Petitioners’

Memorandum; Rollo, p. 323.
13 363 SCRA 522 (2001), per Associate Justice Vicente V. Mendoza,
ponente.

186

186 SUPREME COURT REPORTS ANNOTATED

City Government of Quezon City vs. Bayan
Telecommunications, Inc.
ties from realty taxes by its enactment of Rep. Act No. 7633
which amended Bayantel’s original franchise. The more
decisive question turns on whether Congress
actually did exempt Bayantel’s properties at all by
virtue of Section 11 of Rep. Act No. 7633.
Admittedly, Rep. Act No. 7633 was enacted subsequent
to the LGC. Perfectly aware that the LGC has already
withdrawn Bayantel’s 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
Bayantel’s 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
LGC’s delegated taxing power, all of the franchisee’s
(Bayantel’s) properties that are actually, directly and
exclusively used in the pursuit of its franchise.
WHEREFORE, the petition is DENIED.
No pronouncement as to costs.
SO ORDERED.

          Puno (Chairperson), Sandoval-Gutierrez, Corona

and Azcuna, JJ., concur.

Petition denied.

Notes.—Any exemption from the payment of a tax must

be clearly stated in the language of the law. (Commissioner
of Internal Revenue vs. Court of Appeals, 329 SCRA 237
[2000])
187

VOL. 484, MARCH 6, 2006 187

United Kimberly-Clark Employees Union-Philippine
Transport General Workers’ Organization vs. Kimberly-
Clark Phils., Inc.

The power to tax is no longer vested exclusively on

Congress. (National Power Corporation vs. City of
Cabanatuan, 401 SCRA 259 [2003])
Section 193 of the Local Government Code is indicative
of the legislative intent to vest broad taxing powers upon
 local government units and to limit exemptions from local
taxation to entities specifically provided. (Philippine Rural
Electric Cooperatives Association, Inc. vs. The Secretary,
Department of Interior and Local Government, 403 SCRA
558 [2003])

——o0o——

© Copyright 2019 Central Book Supply, Inc. All rights reserved.