Reyes vs San Pablo City (305 SCRA 353)

City Government of San Pablo, Laguna vs Reyes
305 SCRA 353 [GR No. 127708 March 25, 1999]

Facts: Act 3648 granted the Escudero Electric Service Company a legislative franchise to maintain and operate an electric light and power system in the city of San Pablo and nearby municipalities. Section 10 of said act provides:

In consideration of the franchise and rights hereby granted, the grantee shall pay unto the municipal treasury of each municipality in which it is supplying electric current to the public under this franchise, a tax equal to two percentum of the gross earning from electric current sold or supplied under this franchise in each said municipality. Said tax shall be due and payable quarterly and shall be in lieu of any and all taxes of any kind nature or description levied, established or collected by any authority whatsoever, municipal, provincial or insular, now or in the future, or its pole wires, insulator, switches, transformers, and structures, installations, conductors and accessories placed in and over and under all public property, including public streets and highways, provincial roads, bridges and public squares, and on its franchises, rights, privileges, receipts, revenues and profits from which taxes the grantee is hereby expressly exempted.

Escudero’s franchise was transferred to the plaintiff MERALCO under RA 2340.

On October 5, 1992, the sangguniang panlungsod of San Pablo City enacted ordinance no. 56 otherwise known as the Revenue Code of the City of San Pablo. Pursuant to sec 2.09 article D of the said ordinance, the petitioner city treasurer sent to private respondent a letter demanding payment of the aforesaid franchise tax.

Issue: Whether or not the city of San Pablo may impose a local franchise tax to MERALCO.

Held: Yes. A general law cannot be construed to have repealed a special law by mere implication unless the intent to repeal or alter is manifest and it must be convincingly demonstrated that the two laws are so clearly repugnant and patently inconsistent that they cannot co-exist.

It is our view that petitions correctly rely on the provisions of sections 137 and 193 of the LGC to support their position that MERALCO’s tax exemption has been withdrawn.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 not withstanding any exemption granted by law or other special law is all encompassing and clear. The franchise is imposable despite any exemption enjoyed under special law.

Sec 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 all persons whether natural or juridical, including GOCCs except: 1.) local water districts; 2.) Cooperatives duly registered under RA 6938; 3.) Non-stock and non-profit hospitals and education institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the 3 enumerated entities. It is a basic precept of statutory construction that the express mention of one person, thing, act or consequences excludes all others as expressed in the familiar maxim expressio unius est exclusio alterus. 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 the MERALCO under the existing law was clearly intended to be withdrawn.

Reading together section 193 and 137 of the LGC conclude that under the LGC, the local government unit may now impose a local tax at a rate not excluding 50% of 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax privilege only enjoy and an existing law or charter is clearly manifested by the language used in 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.

It is true that the phrase “in lieu of all taxes” found in special franchises has been held in several cases to exempt the franchise holder from payment of tax on its corporate franchise imposed of the internal revenue code, as the charter is in the nature of a private contract and the exemption is part of the inducement for the acceptance of the franchise, and that the imposition of another franchise tax by the local authority would constitute an impairment of contract between the government and the corporation. But these “magic words” contained in the phrase “shall be in lieu of all taxes” have to give way to the premptory language of the LGC specifically providing for the withdrawal of such exemption privileges.


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