G.R. No. 219506 - Municipality of San Mateo, Isabela vs. Smart Communications, Inc.

On 27 June 2005, the Municipality of San Mateo, Isabela, enacted Ordinance No. 2005-491 entitled, "An Ordinance imposing Regulatory Fee known as Annual Antenna/Tower Fee for the Operation of All Citizens Band (CB), Very High Frequency (VHF), Ultra High Frequency (UHF) and Cellular Sites/Relay Stations Within the Municipality."
The ordinance was passed pursuant to Section 186 of Republic Act No. 7160 (Local Government Code of 1991), which authorizes local government units (LGUs) to levy other taxes, fees, or charges within their jurisdiction.
The ordinance imposed an annual fee on the operation of antenna cell sites and relay stations as follows:

Public and committee hearings were held on 9 May 2005, with due notice to Smart Communications, Inc. (SCI).
Following hearings, the ordinance was adopted by the Sangguniang Bayan and published on 18-24 July 2005 in the City Star newspaper as required by law.
The ordinance was validated by the Sangguniang Panlalawigan of Isabela on 21 November 2006.

Notices of assessment were sent to SCI and other affected businesses requiring payment of the annual tower fee. SCI was assessed Php 200,000.00 per year.
SCI failed to pay the assessed fees despite receiving demand letters dated 14 July 2010, 31 July 2010, and 23 February 2011.
SCI filed a Petition for Certiorari with application for a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction with the Regional Trial Court (RTC), assailing the validity of the ordinance.
The petition was raffled to Branch 20, which initially issued a TRO on 16 October 2012 but later dismissed the petition on 14 June 2013 for failure to exhaust administrative remedies.
Upon SCI’s Motion to Inhibit being granted, the petition was transferred to Branch 19 of the RTC.
On 8 May 2014, RTC Branch 19 granted SCI’s petition, declaring the ordinance null and void on grounds that the fee amount was arbitrary and lacked explanation on its composition.

The Municipality of San Mateo appealed to the CA.
On 13 February 2015, the CA affirmed the RTC’s decision, declaring the ordinance invalid, holding:

The ordinance imposes a tax, not a regulatory fee.
Non-exhaustion of administrative remedies was excused due to the purely legal nature of the issues.
The tax was unjust, excessive, and confiscatory.
The rates failed to comply with Section 143 of the Local Government Code (LGC), which prescribes allowable tax rates.

SCI’s Motion for Reconsideration was denied by the CA in its Resolution dated 18 June 2015.

The Municipality of San Mateo filed a Petition for Review on Certiorari before the Supreme Court seeking reversal of the CA decision.
The issues raised included whether the CA erred in:

Whether the Court of Appeals erred in entertaining SCI’s appeal despite its failure to exhaust administrative remedies.
Whether the Court of Appeals erred in ruling that Municipal Ordinance No. 2005-491 is unjust, excessive, and confiscatory, thereby invalidating it.