G.R. No. 219506 , June 23, 2021
Municipality of San Mateo, Isabela, represented by Municipal Mayor Crispina R. Agcaoili, M.D., and Atty. Alfredo S. Remigio, in his capacity as the Municipal Legal Officer, Petitioners, vs. Smart Communications, Inc., Respondent.

FACTS

On June 27, 2005, the Municipality of San Mateo, Isabela enacted Ordinance No. 2005-491, imposing an Annual Antenna/Tower Fee for the operation of CB, VHF, UHF, and Cellular Sites/Relay Stations. The fee for a tower site for a cell site/relay station was set at Php200,000.00 per year. The ordinance was enacted pursuant to the Local Government Code, with public hearings conducted and publication in a newspaper of local circulation. After validation by the Sangguniang Panlalawigan, the Municipality sent Notices of Assessment and subsequent demand letters to Smart Communications, Inc. (SCI) for the unpaid fees. SCI filed a Petition for Certiorari before the Regional Trial Court (RTC), assailing the ordinance’s validity. The RTC initially dismissed the petition for failure to exhaust administrative remedies but, upon reconsideration and transfer to another branch, declared the ordinance null and void, finding the fee arbitrary. The Court of Appeals affirmed the RTC’s decision, ruling the ordinance was a tax measure, the fee was unjust and excessive, and exhaustion of administrative remedies was excused. The Municipality filed this Petition for Review.

ISSUE

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

RULING

The Supreme Court ruled in favor of the Municipality, reversing the Court of Appeals.
1. On exhaustion of administrative remedies: The Court held that the fees imposed under Ordinance No. 2005-491 are regulatory fees, not taxes. The ordinance’s whereas clauses indicate its primary purpose is to regulate the proliferation of communication facilities and ensure public safety; revenue generation is merely incidental. Since it is a regulatory fee, the procedure under Section 187 of the Local Government Code for challenging tax ordinances (appeal to the Secretary of Justice) is inapplicable. Therefore, exhaustion of administrative remedies was unnecessary, and SCI’s direct resort to the courts was proper.
2. On the validity of the ordinance: The Court held that SCI failed to overcome the presumption of validity of the ordinance. The burden of proving invalidity rests on the challenger. SCI merely alleged the fee was unjust and excessive without presenting evidence, such as the costs of regulation or comparable fees from other localities, to substantiate its claim. The Municipality, for its part, provided a justification, stating the fee was based on the need to regulate strategically located communication facilities affecting public safety and welfare. The Court emphasized that without proof of unreasonableness, the legislative judgment of the local authority must be respected. The ordinance was enacted within the Municipality’s police power under the Local Government Code, and the fee was presumed reasonable and commensurate with the cost of regulation.