City of Cagayan De Oro vs. Cagayan Electric Power

 G.R. No. 224825, October 17, 2018

CITY OF CAGAYAN DE ORO, Petitioner, v. CAGAYAN ELECTRIC POWER & LIGHT CO., INC. (CEPALCO), Respondent.

FACTS:

Petitioner, through its local legislative council, enacted Ordinance, which imposed an annual Mayor's Permit Fee of Five Hundred Pesos (P500.00) on every electric or telecommunications post belonging to public utility companies operating in the city.

Respondent, Cagayan Electric Power & Light Co., Inc. (CEPALCO) is a public utility engaged in the distribution of electric power and the owner of utility poles erected within Cagayan de Oro City. The ordinance entailed them to pay an annual Mayor's Permit Fee of P8,500,000.00.10.

CEPALCO thus filed a Petition for Declaratory Relief with Damages & Prayer for Temporary Restraining Order & Preliminary Injunction before the Cagayan RTC assailing the ordinance's validity. 

CEPALCO contended that the imposition, in the guise of police power, was unlawful for violating the fundamental principle that fees, charges, and other impositions shall not be unjust, excessive, oppressive, or confiscatory. Additionally, CEPALCO argued that, assuming the imposition was a valid regulatory fee, it violated the legislative franchise that specifically exempted the electricity distributor from taxes or fees assessed by Cagayan de Oro City.

RTC dismissed the petition for declaratory relief due to CEPALCO's failure to exhaust administrative remedies.

Aggrieved, CEPALCO elevated the case to the CA.

The CA declared the ordinance void for being exorbitant and unreasonable. The appellate court additionally held that the doctrine of exhaustion of administrative remedies was inapplicable considering the case involved a regulatory fee and not a tax measure.

Hence, instant petition before this Court.

ISSUES:

(1) Whether or not CEPALCO should have exhausted administrative remedies by challenging Ordinance No. 9527-2005 before the Secretary of Justice prior to instituting the present action;

(2) Whether or not the amount of the Mayor's Permit Fee is excessive, unreasonable, and exorbitant.

RULING:

(1) No. The Court rules that ordinances that impose regulatory fees do not need to be challenged before the Secretary of Justice.

In the case at bar, the ordinance imposes a fee since it was enacted pursuant to the city's police power and serves to regulate, not to raise revenue.

Review by the Secretary of Justice is mandatory only when what is being questioned is a tax ordinance or revenue measure. Section 187 does not require the same from parties who assail ordinances imposing regulatory fees. Stated otherwise, the procedure found in Section 187 must be followed when an ordinance imposes a tax; the institution of an action in court without complying with the requirements of the provision will lead to the dismissal of the case on the ground of non-exhaustion of administrative remedies. However, when an ordinance imposes a fee, direct recourse to the courts may be had without prior protest before the Secretary of Justice. Simply put, fees are not subject to the procedure outlined under Section 187.

(2) No. CEPALCO's failure to establish excessiveness, the Court rules in the negative. A judicious perusal of the record fails to reveal anything definitively showing the ordinance’s unreasonable, excessive, oppressive, or confiscatory nature; hence, because it enjoys the presumption of validity, the Court is constrained to reverse the decision of the CA.

The presumption of validity is a corollary of the presumption of constitutionality, a legal theory of common-law origin developed by courts to deal with cases challenging the constitutionality of statutes.