Alta Vista Golf and Country Club vs. City of Cebu

A local government unit cannot impose amusement tax on golf courses under Section 140, in relation to Section 131(c), of the Local Government Code, because a golf course is not an "amusement place" — i.e., a venue where one seeks admission to entertain oneself by seeing or viewing a show or performance. Where the issue raised is a pure question of law within the competence of the courts, noncompliance with Section 187 of the Local Government Code is excused as an exception to the doctrine of exhaustion of administrative remedies.

Petitioner Alta Vista Golf and Country Club is a non-stock and non-profit corporation operating a golf course in Cebu City. On June 21, 1993, the Sangguniang Panlungsod of Cebu City enacted City Tax Ordinance No. LXIX, the "Revised Omnibus Tax Ordinance of the City of Cebu." Section 42 thereof, as amended by City Tax Ordinance Nos. LXXXII and LXXXIV (enacted December 2, 1996 and April 20, 1998, respectively), imposed amusement tax at the rate of 20% on the gross receipts from entrance, playing green, and/or admission fees of golf courses and polo grounds. The Local Government Code, through Section 140, authorizes the imposition of amusement tax on proprietors, lessees, or operators of "theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement," while Section 131(c) defines "amusement places" as those "where one seeks admission to entertain oneself by seeing or viewing the show or performance."

Petitioner Alta Vista Golf and Country Club is a non-stock and non-profit corporation operating a golf course in Cebu City. On June 21, 1993, the Sangguniang Panlungsod of Cebu City enacted the Revised Omnibus Tax Ordinance (City Tax Ordinance No. LXIX). Section 42 thereof, as later amended by City Tax Ordinance Nos. LXXXII and LXXXIV (enacted December 2, 1996 and April 20, 1998, respectively), imposed amusement tax at the rate of 20% on gross receipts from entrance, playing green, and/or admission fees of golf courses and polo grounds, alongside a 30% rate on theaters, cinemas, concert halls, circuses, and other similar places of entertainment.

On August 6, 1998, Cebu City Assessor Sandra I. Po prepared an Assessment Sheet assessing petitioner deficiency business taxes, fees, and other charges for 1998 totaling ₱3,820,095.68, which included amusement tax on the golf course amounting to ₱2,612,961.24 based on gross receipts of ₱13,064,806.20. Through the succeeding years, respondent Cebu City repeatedly attempted to collect the deficiency, a substantial portion of which consisted of the amusement tax. Petitioner steadfastly refused to pay, arguing that the imposition was irregular, improper, and illegal under the Local Government Code, which, according to petitioner, authorized amusement tax only on operators of theaters, cinemas, concert halls, and similar venues where one seeks to entertain oneself by seeing or viewing a show or performance. Petitioner relied on the ruling in Philippine Basketball Association vs. Court of Appeals, where professional basketball games were held not to fall under the same category as theaters, cinematographs, concert halls, and circuses.

On October 11, 2005, respondent City Treasurer Camarillo sent petitioner a letter seeking to collect deficiency business taxes, fees, and charges for 1998 totaling ₱2,981,441.52, of which ₱2,953,586.67 consisted of amusement tax on the golf course plus surcharges and interest. Petitioner, through counsel, wrote back on October 17, 2005 disputing the amusement tax assessment, and on November 30, 2005 proposed settling the other assessments first while the legality of the amusement tax remained unresolved, and requested the issuance of a Mayor's and/or Business Permit pending resolution. Respondent Camarillo treated the October 17 letter as a Protest of Assessment and denied it on December 5, 2005, ruling that the PBA case actually held PBA liable for amusement tax (to the national government), that Section 42 enjoyed the presumption of constitutionality, and that petitioner had failed to avail itself of the remedy under Section 187 of the Local Government Code. The ruling served as a final demand and threatened non-issuance of a business permit.

On January 12, 2006, petitioner was served a Closure Order dated December 28, 2005 issued by respondent Mayor Osmeña. The order cited petitioner's operation without a business permit for five years (2001–2005), nonpayment of deficiency business taxes and fees amounting to ₱17,499.64, and nonpayment of deficiency amusement tax and penalties totaling ₱2,953,586.86. The order directed petitioner to cease and desist from further operating immediately upon receipt, invoking the Mayor's authority under Section 455 of the Local Government Code and the general welfare clause under Section 16 thereof. These developments prompted petitioner to file with the RTC on January 13, 2006 a Petition for Injunction, Prohibition, Mandamus, Declaration of Nullity of Closure Order, Declaration of Nullity of Assessment, and Declaration of Nullity of Section 42 of the Revised Omnibus Tax Ordinance, with prayer for TRO and writ of preliminary injunction. On March 20, 2006, petitioner paid under protest the assessed amusement tax plus penalties, interest, and surcharges in the total amount of ₱2,750,249.17.

• Validity of the Amusement Tax Imposition: Petitioner argued that Section 42 of the Revised Omnibus Tax Ordinance, as amended, is null and void for being ultra vires or beyond the taxing authority of Cebu City, because under the Local Government Code, amusement tax can only be imposed on operators of theaters, cinemas, concert halls, or places where one seeks to entertain oneself by seeing or viewing a show or performance — categories to which a golf course does not belong.
• Due Process and the Closure Order: Petitioner maintained that the Closure Order was unconstitutional as it had been summarily issued in violation of its right to due process, and that a city mayor has no power under the Local Government Code to deny the issuance of a business permit and order the closure of a business for nonpayment of taxes.
• Prescription: Petitioner contended that, assuming arguendo that Cebu City has the power to impose amusement tax, such tax for 1998 had already prescribed and could no longer be enforced.
• Jurisdiction and Procedural Compliance: Petitioner asserted that the RTC, as a court of general jurisdiction, could take cognizance of the petition, which involved not only the legality of a tax ordinance but also the nullity of the Closure Order and the issuance of injunctive writs. Petitioner likewise argued that Section 195 of the Local Government Code on protest of assessment does not require payment under protest, that Section 252 applies only to real property taxes, and that nothing in the Code deprives courts of the power to determine the constitutionality or validity of a tax ordinance due to prescription.
• Exhaustion of Administrative Remedies: Petitioner maintained that there was no need for exhaustion of administrative remedies because the issues were purely legal, the notice of closure was patently illegal for having been issued without due process, and there was an urgent need for judicial intervention.

• Jurisdiction and Procedural Compliance: Respondents argued that the RTC lacked jurisdiction over the subject matter, that petitioner failed to exhaust administrative remedies, and that petitioner did not comply with Section 187 of the Local Government Code, which requires an appeal to the Secretary of Justice within 30 days from the effectivity of a tax ordinance before seeking judicial recourse.
• Payment Under Protest: Respondents contended that petitioner failed to comply with Section 252 of the Local Government Code and Section 75 of Republic Act No. 3857 (the Revised Charter of the City of Cebu), which require payment under protest of the tax assessed.
• Authority to Institute the Case: Respondents asserted that petitioner failed to establish the authority of Ma. Theresa Ozoa to institute the case on behalf of petitioner.
• Validity of the Closure Order: Respondents argued that the Closure Order was a necessary consequence of petitioner's nonpayment of the amusement tax, as the Revised Omnibus Tax Ordinance directs that no permit shall be issued to a business enterprise which made no proper payment of tax, and no business may operate without a permit.
• Prescription and Mandatory Periods: Respondents relied on Reyes vs. Court of Appeals, arguing that the prescriptive periods fixed in Section 187 of the Local Government Code are mandatory and prerequisites before seeking redress in court, and that petitioner's filing on January 13, 2006 — without payment under protest and without appealing to the Secretary of Justice within 30 days from the April 20, 1998 effectivity of the ordinance — was long barred by prescription.

• Judicial Review vs. Section 187: Whether the power of judicial review over the validity of a local tax ordinance has been restricted by Section 187 of the Local Government Code.
• Amusement Tax on Golf Courses: Whether the City of Cebu or any local government unit can validly impose amusement tax on the act of playing golf.

• Judicial Review vs. Section 187: No. The power of judicial review over the validity of a local tax ordinance has not been restricted by Section 187 of the Local Government Code. Where the issue raised is a pure question of law within the competence and jurisdiction of the courts, the case constitutes an exception to the mandatory procedural requisites of Section 187 and the doctrine of exhaustion of administrative remedies.
• Amusement Tax on Golf Courses: No. A golf course is not an "amusement place" under Section 131(c) of the Local Government Code, as patrons go to play golf rather than to see or view a show or performance. Section 42 of the Revised Omnibus Tax Ordinance, as amended, imposing amusement tax on golf courses is null and void for being beyond the taxing authority of Cebu City under the Local Government Code.

• Judicial Review vs. Section 187: Section 187 of the Local Government Code requires an aggrieved party to appeal to the Secretary of Justice within 30 days from the effectivity of a tax ordinance, and to await the Secretary's decision or the lapse of 60 days before filing the appropriate court proceedings. As established in Reyes vs. Court of Appeals and affirmed in Hagonoy Market Vendor Association vs. Municipality of Hagonoy, Bulacan, these periods are mandatory and constitute a prerequisite before seeking judicial redress, because any delay in implementing tax measures would be detrimental to the public. Nevertheless, the Court has recognized exceptions. In Ongsuco vs. Malones, the Court held that where the issue raised is a purely legal question within the competence and jurisdiction of the courts and not the administrative agency, the doctrine of exhaustion of administrative remedies does not apply, because resolving questions of law is an exercise of judicial power exclusively allocated to the Supreme Court and such lower courts as the Legislature may establish. In Cagayan Electric Power and Light Co., Inc. (CEPALCO) vs. City of Cagayan De Oro, the Court relaxed the application of Section 187 in view of more substantive matters. In the present case, the parties themselves acknowledged before the RTC that the case involved only questions of law and agreed to submit the case for resolution without presenting evidence. The petition raised pure questions of law involving substantive matters imperative for the Court to resolve, thus falling within the recognized exceptions to Section 187 and the doctrine of exhaustion of administrative remedies.

• Amusement Tax on Golf Courses: Section 140 of the Local Government Code authorizes the imposition of amusement tax on "the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement." Section 131(c) defines "amusement places" as those "where one seeks admission to entertain oneself by seeing or viewing the show or performance." Applying the principle of ejusdem generis, as elaborated in Pelizloy Realty Corporation vs. The Province of Benguet, the general phrase "other places of amusement" must be construed to include only those akin to the specifically enumerated venues — theaters, cinemas, concert halls, circuses, and boxing stadia — all of which are venues primarily for the staging of spectacles or the holding of public shows, exhibitions, performances, and other events meant to be viewed by an audience. The ordinary definitions of "show" and "performance" denote not only visual engagement but also active doing — displaying, staging, or presenting — such that actions are manifested to and perceived by an audience. A golf course does not meet this criterion: people go to a golf course to engage in a physical sport activity, not to see or view a show or performance, and the proprietor does not actively display, stage, or present a show or performance. There is no basis for singling out golf courses for amusement tax purposes from other places where people go to play sports, such as gyms, courts, or shooting ranges, in contravention of the fundamental principle of uniformity of taxation under Section 130(a) of the Local Government Code. Respondents cannot invoke the residual power to tax under Section 186, because Section 140, in relation to Section 131(c), already explicitly and clearly covers amusement tax, and a local government unit must exercise its authority within the limitations and guidelines set forth in those statutory provisions.

• Ejusdem Generis — Where a general word or phrase follows an enumeration of particular and specific words of the same class, the general word or phrase is construed to include, or to be restricted to, persons, things, or cases akin to, resembling, or of the same kind or class as those specifically mentioned. Applied here to interpret "other places of amusement" in Section 140 of the Local Government Code as limited to venues primarily for staging spectacles or holding public shows, exhibitions, and performances meant to be viewed by an audience — a category to which golf courses do not belong.
• Exhaustion of Administrative Remedies — Exception for Pure Questions of Law — The general rule requiring exhaustion of administrative remedies before seeking judicial intervention admits of exceptions, including where the issue raised is a purely legal question within the competence and jurisdiction of the courts and not the administrative agency. Resolving questions of law constitutes an exercise of judicial power exclusively allocated to the courts.
• Uniformity of Taxation — Under Section 130(a) of the Local Government Code, taxation shall be uniform in each local government unit. Like the kindred concept of equal protection, it requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities. Singling out golf courses for amusement tax while not similarly taxing other sports venues violates this principle.
• Residual Power to Tax — Limitation — Under Section 186 of the Local Government Code, local government units may levy taxes, fees, or charges on any base or subject not otherwise specifically enumerated therein or taxed under other applicable laws. This residual power cannot be invoked where the Local Government Code already explicitly and clearly covers the subject of taxation, as in the case of amusement tax under Section 140 in relation to Section 131(c).

• "In light of Pelizloy Realty, a golf course cannot be considered a place of amusement. As petitioner asserted, people do not enter a golf course to see or view a show or performance. Petitioner also, as proprietor or operator of the golf course, does not actively display, stage, or present a show or performance. People go to a golf course to engage themselves in a physical sport activity, i.e., to play golf." — This passage articulates the ratio decidendi on why golf courses fall outside the statutory definition of "amusement places" and therefore cannot be subjected to amusement tax.
• "A case where the issue raised is a purely legal question, well within the competence; and the jurisdiction of the court and not the administrative agency, would clearly constitute an exception. Resolving questions of law, which involve the interpretation and application of laws, constitutes essentially an exercise of judicial power that is exclusively allocated to the Supreme Court and such lower courts the Legislature may establish." — This defines the exception to the doctrine of exhaustion of administrative remedies and to Section 187 of the Local Government Code, establishing that pure questions of law may be brought directly to the courts.
• "There is no basis for singling out golf courses for amusement tax purposes from other places where people go to play sports. This is in contravention of one of the fundamental principles of local taxation: that the '[t]axation shall be uniform in each local government unit.' — This passage ties the invalidity of the amusement tax on golf courses to the constitutional and statutory principle of uniformity of taxation.

• Philippine Basketball Association vs. Court of Appeals, 392 Phil. 133 (2000) — Interpreted the counterpart provision of Section 140 in the Local Tax Code of 1973 (PD No. 231), holding that professional basketball games do not fall under "other places of amusement" because they cater to sports and gaming rather than artistic forms of entertainment. Followed and extended in this case to golf courses.
• Pelizloy Realty Corporation vs. The Province of Benguet, G.R. No. 183137, April 10, 2013, 695 SCRA 491 — Declared null and void the imposition of amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots, applying ejusdem generis and the PBA ruling. Directly controlling precedent followed in this case.
• Reyes vs. Court of Appeals, 378 Phil. 232 (1999) — Held that the prescriptive periods in Section 187 of the Local Government Code are mandatory and prerequisites before seeking judicial redress. Distinguished in this case, as the Court found the present petition to fall within recognized exceptions.
• Hagonoy Market Vendor Association vs. Municipality of Hagonoy, Bulacan, 426 Phil. 769 (2002) — Affirmed that the periods in Section 187 are mandatory and that the validity of revenue measures must not be left uncertain for a considerable length of time. Distinguished on the same ground as Reyes.
• Ongsuco vs. Malones, 619 Phil. 492 (2009) — Recognized that a purely legal question within the competence of the courts constitutes an exception to the doctrine of exhaustion of administrative remedies. Followed in this case.
• Cagayan Electric Power and Light Co., Inc. (CEPALCO) vs. City of Cagayan De Oro, G.R. No. 191761, November 14, 2012, 685 SCRA 609 — Relaxed the application of Section 187 in view of more substantive matters. Followed in this case.
• Manila Electric Co. vs. Province of Laguna, 366 Phil. 428 (1999) — Declared that under the 1987 Constitution, where there is neither a grant nor a prohibition by statute, the tax power of local government units must be deemed to exist. Cited to contextualize the residual taxing power, which the Court held inapplicable here because Section 140 already expressly covers amusement tax.

• Section 140, Local Government Code (R.A. No. 7160) — Authorizes the province to levy amusement tax on proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than 30% of gross receipts from admission fees. Applied as the statutory basis for determining whether golf courses may be subjected to amusement tax; the Court held they cannot.
• Section 131(c), Local Government Code — Defines "amusement places" as including "theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performance." Applied as the controlling definition to determine that golf courses are not amusement places.
• Section 187, Local Government Code — Prescribes the procedure for challenging the constitutionality or legality of tax ordinances, requiring an appeal to the Secretary of Justice within 30 days from effectivity. Held mandatory in general but inapplicable in this case because the issues were pure questions of law constituting an exception.
• Section 186, Local Government Code — Grants local government units the residual power to levy taxes, fees, or charges on any base or subject not otherwise specifically enumerated in the Code or taxed under other laws. Held inapplicable because amusement tax is already specifically covered by Section 140 in relation to Section 131(c).
• Section 130(a), Local Government Code — States the fundamental principle that taxation shall be uniform in each local government unit. Applied to show that singling out golf courses for amusement tax while not taxing other sports venues violates uniformity.
• Section 455, Local Government Code — Enumerates the powers and duties of the city mayor, including the enforcement of laws and ordinances and the issuance of executive orders. Invoked by respondent Mayor Osmeña as authority for the Closure Order; the Court nullified the Closure Order as a consequence of invalidating the underlying tax imposition.
• Section 16, Local Government Code — The general welfare clause. Invoked by respondent Mayor in the Closure Order; the Court's nullification of the Closure Order rendered this invocation moot.
• Rule 41, Section 2(c), Rules of Court — Provides that where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45. Applied to confirm the propriety of the direct appeal to the Supreme Court.

Sereno, C.J. (Chairperson); Bersamin, J.; Perlas-Bernabe, J.; Jardeleza, J.