SC affirms validity of CUSA fees levied by SBMA on SBFZ tenants

Published August 23, 2021, 6:39 PM

by Rey Panaligan 

Supreme Court (SC)

The imposition of fees for Common Use Service Area (CUSA) by the Subic Bay Metropolitan Authority (SBMA) on all its tenants in the Subic Bay Freeport Zone (SBFZ) is legal and constitutional, the Supreme Court (SC) has ruled.

In a resolution made public last Aug. 10, the SC said denied the petition filed by Philip Morris Philippines Manufacturing, Inc. which challenged the 2016 decision of the Court of Appeals (CA) upholding the order issued by the Olongapo City regional trial court (RTC).

The resolution stated that Republic Act No. 7227, the Bases Conversion and Development Act of 1992, and its implementing rules and regulations (IRR) “expressly grant the SBMA with authority to fix reasonable service and utility fees necessary for the establishment, operation, maintenance of utilities, other services, and infrastructure of the SBFZ….”

Subic Bay Metropolitan Authority

“Necessarily, these fees would include the charges collected by SBMA from its tenants to cover expenses for security services or law enforcement, fire protection and prevention, street cleaning, and street lighting, which comprise the CUSA Fee,” it said.

Also, the resolution stated that “Administrative Order No. 31 dated Oct. 1, 2012, directed GOCCs (Government Owned and Controlled Corporations), such as SBMA, not only to rationalize existing fees but also to impose additional charges ‘to enable the government to effectively provide services without straining the National Government’s sources.’”

“The said issuance also based the imposition of fees on the principle of equity whereby persons who receive or benefit from the services rendered should share the cost for such services,” it added.

Case records showed that on Aug. 1, 2008, SBMA and Philip Morris executed Assignment of Leasehold Rights (ALR) over 49,279 square meters in Subic Technopark for a period of 50 years.

On Oct. 1, 2012, SBMA implemented its CUSA policy which was filed with the University of the Philippines (UP) Law Center and letters were sent to all locators and residents. Public hearings were also conducted by SBMA.

Philip Morris received P59,166.12 per month billings for CUSA fee. It paid the billings to avoid penalties.

On Aug. 30, 2013, Philip Morris filed a complaint before the RTC. It questioned the validity of CUSA fee and claimed that in reality, it is a property tax.

It also alleged that RA 7227 did not grant SBMA the power to tax but only to collect reasonable fees for sanitation system, collection and disposal of garbage and/or installation and maintenance of a sewage system.

In its defense, SBMA said as a “self-sustaining” agency, it does not receive any revenue allotment from the National Government, although it operates, in all respects, like a local government unit providing all municipal services at SBFZ.

Thus, it said the CUSA fee was implemented as among the key initiatives to recover expenses it pays for security services or law enforcement, fire protection and prevention, street cleaning, street lighting and 24-hours emergency response, road maintenance, facilities management, and garbage collection.

The RTC dismissed Philip Morris’ complaint. It ruled that CUSA is a cost-recovery mechanism under RA 7227 and sanctioned under the lease agreements. It also ruled that the CUSA rates, including the penalties, were reasonable, not confiscatory, and the policy implementing the fees was duly published.

Philip Morris elevated the case to the CA but its petition was dismissed.

The CA said that while SBMA has no power to tax, it is empowered by law to regulate the operation and maintenance of utilities as well as other services, and to fix just and reasonable rates and charges. It also said that the imposition of CUSA “does not partake the nature of a tax.”

Philip Morris elevated the case to the SC. It said that the CA committed serious and reversible error in holding that SBMA is authorized under RA 7227 and its IRR to impose CUSA on its tenants who had been charged for garbage fee and road user’s fee.

It also claimed that the CUSA fee is unconstitutional for violations of the non-impairment and equal protection clauses enshrined in the 1987 Constitution.

It pointed out that with the CUSA fee, doing business in the SBFZ becomes costlier and more difficult.

In resolving the issue, the SC said:

“Both the RTC and the CA had correctly found the CUSA Fee as reasonable and not confiscatory. The Court is also convinced by the illustration provided by the SBMA that the actual collections were not sufficient for the annual cost of providing the four services they cover.

“We reject the position made by Philip Morris that the CUSA Fee is a tax measure since the revenue generated therefrom did not exceed the cost of the regulation.

“The SBMA not previously collecting charges or fees for the subject services from business establishments or locators in the SBFZ is not a bar to the subsequent implementation of the CUSA Fee.

“The law clearly granted it authority to impose reasonable fees and charges for the provision of the municipal services covered by the CUSA Fee.

“WHEREFORE, the petition is DENIED. The Dec. 15, 2016 Decision and July 11, 2017 Resolution of the Court of Appeals in CA-G.R. SP No. 145186 are hereby AFFIRMED. SO ORDERED.”