Visayan Electric Co. v. David
REITERATIONFacts
The Antecedents: Visayan Electric Co., S.A. (VECO), a domestic corporation with a public utility franchise granted by Act No. 3499, operated in various municipalities in Cebu. Act No. 3499 stipulated that VECO shall pay a tax equal to two percentum of its gross earnings for electric current sold, which shall be in lieu of all other taxes. Procedural History: VECO filed a complaint seeking a declaration that the 5% municipal tax under Section 259 of the National Internal Revenue Code (NIRC), as amended by Republic Act No. 39, was not applicable to it, asserting its right to pay only the 2% tax provided in its franchise. The defendant, Saturnino David, Administrator of Revenue, moved for dismissal, later filing an answer arguing that Section 259 of the NIRC, as amended, repealed Section 8 of Act No. 3499, thus obligating VECO to pay the 5% tax. The trial court ruled in favor of the defendant, ordering VECO to pay the 5% tax. The Petition: VECO appealed the trial court's decision directly to the Supreme Court, questioning the applicability of the 5% tax rate over the 2% rate stipulated in its franchise.
Issue(s)
Whether Section 259 of the National Internal Revenue Code, as amended by Republic Act No. 39, repeals Section 8 of Act No. 3499, thereby increasing the franchise tax payable by the Visayan Electric Co., S.A. from 2% to 5% of its gross earnings. Whether a general law can amend or repeal a special law or franchise without express provision to that effect.
Ruling
The Supreme Court reversed the decision of the trial court. It declared that the Visayan Electric Co., S.A. is only obligated to pay the 2% tax as provided in Section 8 of Act No. 3499. No costs were awarded.
Ratio Decidendi
On the issue of whether Section 259 of the NIRC, as amended, repeals Section 8 of Act No. 3499: The Court held that Section 259 of the NIRC, as amended by Republic Act No. 39, does not amend Section 8 of Act No. 3499. Section 8 explicitly states that the 2% tax shall be "in lieu of all taxes of any kind levied, established or collected by any authority whatsoever, now or in the future." The amendment of a general law does not implicitly repeal a special law or franchise unless such intention is expressly stated. The Court emphasized that implied repeals are not favored by the courts. On the issue of whether a general law can amend or repeal a special law or franchise without express provision: The Court reiterated the well-established rule of legal hermeneutics that a subsequent general law, which does not expressly repeal a prior special law, does not affect the provisions of the special law. The Court cited its previous rulings in Manila Railroad Co. v. Rafferty and Philippine Railway Co. v. Collector of Internal Revenue. Special laws or concessions are considered akin to private contracts and are enacted after careful consideration of specific circumstances. A general law is presumed to have been enacted without specific intent to alter such special provisions unless explicitly stated. Therefore, Section 259 of the NIRC, being a general law, cannot be deemed to have amended or repealed the specific tax provision in VECO's franchise (Act No. 3499) without an express declaration of such intent.
Main Doctrine
A subsequent general law that does not expressly repeal a prior special law or franchise does not affect the provisions of the special law. The tax rate stipulated in a special franchise remains applicable unless expressly amended or repealed.