Quezon City Govt vs BayanTel Corp franchise, Rep. Act No. 7633.
To petitioners, however, the
FACTS
Respondent Bayan Telecommunications, Inc.
(Bayantel) is a legislative franchise holder under Republic Act
(R.A.) No. 3259 (1961) to establish and operate radio
stations for domestic telecommunications, radiophone,
broadcasting and telecasting. Section 14 (a) of R.A. No.
3259 states: “The grantee shall be liable to pay the same
taxes on its real estate, buildings and personal property,
exclusive of the franchise, xxx”.
In 1992, R.A. 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. Barely few months after the LGC took effect,
Congress enacted R.A. No. 7633, amending Bayantel’s
original franchise. The Section 11 of the amendatory
contained the following tax provision: “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, xxx“. In 1993, the
government of Quezon City enacted an ordinance otherwise
known as the Quezon City Revenue Code withdrawing tax
exemption privileges.
On January 7, 1999, Bayantel wrote the office of the
City Assessor seeking the exclusion of its real properties but
the 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 Bayantels properties preparatory to their sale
at a public auction set on July 30, 2002.
Threatened with the imminent loss of its
properties, Bayantel immediately withdrew its appeal with
the LBAA and instead filed with the RTC of Quezon City a
petition for prohibition with an urgent application for a
temporary restraining order (TRO) and/or writ of preliminary
injunction, thereat docketed as Civil Case No. Q-02-47292,
which was raffled to Branch 227 of the court.
ISSUE
Whether or not Bayantels real properties in Quezon City are,
under its franchise, exempt from real property tax.
RULING
The lower court resolved the issue in the
affirmative, basically owing to the phrase exclusive of this
franchise found in Section 11 of Bayantels amended
language of Section 11 of Rep. Act No. 7633 is neither clear
nor unequivocal. The elaborate and extensive discussion
devoted by the trial court on the meaning and import of said
phrase, they add, suggests as much. It is petitioners thesis
that Bayantel was in no time given any express exemption
from the payment of real property tax under its amendatory
franchise.
There seems to be no issue as to Bayantels
exemption from real estate taxes by virtue of the term
exclusive of the franchise qualifying the phrase same taxes
on its real estate, buildings and personal property, found in
Section 14, supra, of its franchise, Rep. Act No. 3259, as
originally granted.
The legislative intent expressed in the phrase
exclusive of this franchise cannot be construed other than
distinguishing between two (2) sets of properties, be they
real or personal, owned by the franchisee, namely,
(a) those actually, directly and exclusively used
in its radio or telecommunications business, and
(b) those properties which are not so used.
It is worthy to note that the properties subject of
the present controversy are only those which are admittedly
falling under the first category.
To the mind of the Court, Section 14 of Rep. Act
No. 3259 effectively works to grant or delegate to local
governments of Congress inherent power to tax the
franchisees properties belonging to the second group of
properties indicated above, that is, all properties which,
exclusive of this franchise, are not actually and directly used
in the pursuit of its franchise.
As may be recalled, the taxing power of local
governments under both the 1935 and the 1973
Constitutions solely depended upon an enabling law.
Absent such enabling law, local government units were
without authority to impose and collect taxes on real
properties within their respective territorial jurisdictions.
While Section 14 of Rep. Act No. 3259 may be
validly viewed as an implied delegation of power to tax, the
delegation under that provision, as couched, is limited to
impositions over properties of the franchisee which are not
actually, directly and exclusively used in the pursuit of its
franchise. Necessarily, other properties of Bayantel directly
used in the pursuit of its business are beyond the pale of the
delegated taxing power of local governments. In a very real
sense, therefore, real properties of Bayantel, save those
exclusive of its franchise, are subject to realty taxes.
Ultimately, therefore, the inevitable result was that all
realties which are actually, directly and exclusively used
in the operation of its franchise are exempted from
any property tax.
Bayantels franchise being national in character,
the exemption thus granted under Section 14 of Rep. Act No.
3259 applies to all its real or personal properties found
anywhere within the Philippine archipelago.
Section 14 of Rep. Act No. 3259 which was
deemed impliedly repealed by Section 234 of the LGC was
expressly revived under Section 14 of Rep. Act No. 7633. In
concrete terms, the realty tax exemption heretofore enjoyed
by Bayantel under its original franchise, but subsequently
withdrawn by force of Section 234 of the LGC, has been
restored by Section 14 of Rep. Act No. 7633.
The Court has taken stock of the fact that by
virtue of Section 5, Article X of the 1987 Constitution,local
governments are empowered to levy taxes. And pursuant to
this constitutional empowerment, juxtaposed with Section
232 of the LGC, the Quezon City government enacted in
1993 its local Revenue Code, imposing real property tax on
all real properties found within its territorial jurisdiction. And
as earlier stated, the City’s Revenue Code, just like the LGC,
expressly withdrew, under Section 230 thereof, supra, all tax
exemption privileges in general.
The Quezon City Revenue Code which imposed
real estate taxes on all real properties within the citys
territory and removed exemptions theretofore previously
granted to, or presently enjoyed by all persons, whether
natural or juridical ., 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.
longer dwells on whether Congress has the power to exempt
Bayantels properties from realty taxes by its enactment of
Rep. Act No. 7633 which amended Bayantels original
franchise. The more decisive question turns on
whether Congress actually did exempt Bayantels
properties at all by virtue of Section 11 of Rep. Act
No. 7633.
Admittedly, Rep. Act No. 7633 was enacted
subsequent to the LGC. Perfectly aware that the LGC has
already withdrawn Bayantels former exemption from realty
taxes, Congress opted to pass Rep. Act No. 7633 using,
under Section 11 thereof, exactly the same defining phrase
exclusive of this franchise which was the basis for
Bayantels exemption from realty taxes prior to the LGC.
In plain language, Section 11 of Rep. Act No.
7633 states that the grantee, its successors or assigns shall
be liable to pay the same taxes on their real estate, buildings
and personal property, exclusive of this franchise, as other
persons or corporations are now or hereafter may be
required by law to pay. The Court views this subsequent
piece of legislation as an express and real intention on
the part of Congress to once again remove from the
LGCs delegated taxing power, all of the franchisees
(Bayantels) properties that are actually, directly and
exclusively used in the pursuit of its franchise.

For sure, in Philippine Long Distance 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