Mactel Corporation vs. The City Government of Makati

The CTA's appellate jurisdiction over RTC decisions, orders, or resolutions in "local tax cases" under Section 7(a)(3) of Republic Act No. 9282, and its jurisdiction over special civil actions for certiorari assailing interlocutory orders issued by the RTC, attaches only when the RTC action itself is a local tax case — one involving the application of tax laws, such as protests of assessments, claims for refund, or challenges to tax ordinances. A petition for declaratory relief seeking to enforce a final and executory judgment that definitively resolved the proper basis for computing business taxes is civil in nature and does not constitute a local tax case, even if the underlying final judgment originated from a tax dispute. An interlocutory order issued in such a civil enforcement proceeding therefore falls outside the CTA's jurisdiction.

Mactel Corporation, a distributor of prepaid call and text cards, was assessed deficiency local business taxes by the City Government of Makati for taxable years 2001 to 2004 based on the gross face value of the prepaid cards sold. Mactel protested, asserting that the correct tax base should be only the 10% discount from face value that constituted its actual income. In 2007, the RTC of Makati, Branch 148, ruled in Civil Case No. 05-1040 that the assessment should cover only the actual income derived by Mactel — the discount given by telecom operators — and not the gross sales or face value. That decision became final and executory when the city did not appeal. For several years, the city complied, accepting tax submissions computed on the discount basis.

In 2015, the City Treasurer reversed course and issued a Notice of Assessment for taxable years 2010-2013 based again on the face value of the cards, assessing P157,200,855.92 in deficiency taxes. A Billing Statement for 2014 deficiency taxes in the amount of P24,693,707.82 also issued, and Mactel's application for renewal of its business permit was denied on the basis of the alleged deficiency.

• The 2007 Final Judgment: On August 1, 2005, the City Treasurer of Makati assessed Mactel deficiency taxes, fees, and charges of P30,799,127.21 for taxable years 2001 to 2004, based on the gross face value of prepaid call cards sold. Mactel protested, asserting that the correct tax base was the 10% discount from face value — its sole profit — and that the cards were prepaid services, not goods. After denial of the protest, Mactel appealed to the RTC. On November 13, 2007, the RTC of Makati, Branch 148, ruled in Civil Case No. 05-1040 that taxing the purchase price or capital component of the cards constituted unjust confiscation of property; the assessment was to cover only the actual income derived — the P3.00 markup per P300.00 card representing the 10% discount. Respondents sought reconsideration, which was denied on March 17, 2008. No appeal followed; the judgment became final and executory. For several years thereafter, Makati City accepted Mactel's tax filings computed on the discount basis.

• The 2015 Assessments and Business Permit Denial: On January 14, 2015, the City Treasurer abruptly changed position and issued a Notice of Assessment under Letter of Authority No. 2014-0345 for deficiency taxes, fees, and charges for 2010-2013 totaling P157,200,855.92, computed on the face value of prepaid cards. On the same date, Mactel applied to renew its business permit (deadline: January 20 annually) but was refused due to an alleged business tax deficiency for 2014 of P24,693,707.82. The City Administrator issued a Billing Statement dated January 22, 2015 reflecting the 2014 deficiency.

• Mactel's Protest and Recourse: Mactel filed a written protest to the Notice of Assessment on February 6, 2015, within the 60-day period under Section 195 of the Local Government Code. On February 10, 2015, Mactel attempted to protest the Billing Statement, but the City Administrator refused to receive the letter. At this point, the City Treasurer had 60 days from receipt of the protest — until approximately April 10, 2015 — to decide. Mactel, unable to operate without a business permit while its protest languished, filed a Petition for Declaratory Relief with application for TRO and preliminary injunction on March 4, 2015 before the RTC of Makati, Branch 59 (Civil Case No. 15-177).

• Nature of the Declaratory Relief Petition: Mactel's petition sought to compel respondents to adhere to the principle of conclusiveness of judgment arising from the final and executory 2007 Decision. Mactel prayed that its business tax liabilities be computed exclusively on the 10% discount it earned. The petition did not challenge the amount of the 2015 assessment per se; it sought a judicial declaration of rights and obligations under the pre-existing final judgment and injunctive relief to prevent irreparable injury.

• The RTC Interlocutory Orders: On April 28, 2015, the RTC of Makati, Branch 59, issued an Order (1) enjoining respondents from further proceeding with the assessment of local taxes pending resolution of the case, and (2) ordering respondents to issue a temporary business permit to Mactel. After a P500,000 bond was posted, a Writ of Preliminary Injunction and Mandatory Injunction issued on May 11, 2015. The RTC denied respondents' Motion for Reconsideration on August 6, 2015, explicitly recognizing that Mactel was not directly protesting the assessment but seeking definition of its rights under the 2007 final judgment.

• Lack of CTA Jurisdiction: Petitioner Mactel Corporation argued that the CTA lacked jurisdiction over the petition for certiorari because the RTC action was a Petition for Declaratory Relief, not a local tax case. The action sought enforcement of a final and executory judgment establishing the correct tax base (the 10% discount), not an appeal from a denial of a tax protest under Section 195 of the Local Government Code.

• Distinction from CE Casecnan: Petitioner maintained that the CTA En Banc erred in relying on CE Casecnan Water and Energy Company, Inc. v. Province of Nueva Ecija. Unlike in that case, where a taxpayer's injunction action implicitly challenged the validity of a real property tax assessment, the present petition relied on a pre-existing final and executory judgment that had already definitively resolved the tax base issue. The principle of stare decisis was inapplicable because the cases were not on all fours.

• Prematurity of Tax Protest: Petitioner contended that at the time the declaratory relief petition was filed, the protest to the Notice of Assessment for 2010-2013 was still pending before the City Treasurer, who had not yet rendered a decision. The statutory period for the City Treasurer to rule had not lapsed; thus, no appealable local tax controversy had ripened for judicial review.

• Irreparable Injury: Petitioner asserted that without injunctive relief, it would suffer grave and irreparable injury, as the demanded payment of P164,135,159.85 represented approximately 16,400% of its actual income for the relevant taxable year.

• Local Tax Issues Present: Respondents City Government of Makati and its officials argued that the case involved two distinct local tax issues: the Notice of Assessment dated January 14, 2015 for 2010-2013 deficiency business taxes, and the Billing Statement dated January 22, 2015 for 2014 deficiency business taxes. Because the RTC orders addressed these tax assessments, the case was necessarily a local tax case within the CTA's appellate jurisdiction.

• Application of CE Casecnan Precedent: Respondents asserted that the CTA En Banc correctly applied CE Casecnan, where the Supreme Court held that an action for injunction to restrain tax collection effectively challenges the propriety of the tax assessment and is thus a local tax case over which the CTA has jurisdiction.

• Scope of RTC Orders: Respondents emphasized that the RTC's Order dated April 28, 2015 involved two writs — a Writ of Preliminary Injunction against the Notice of Assessment and a Writ of Preliminary Mandatory Injunction concerning the Billing Statement and business permit — both directly impinging on the city's taxing power and therefore constituting matters properly cognizable by the CTA.

• Grave Abuse of Discretion: In the underlying certiorari petition, respondents maintained that the RTC committed grave abuse of discretion in issuing the injunctive writs because Mactel had not shown "grave and irreparable injury," and because even if the 2007 Decision applied, Mactel should still be liable for the correct local taxes properly computed.

• Nature of the RTC Action: Whether the Petition for Declaratory Relief filed before the RTC by Mactel constituted a "local tax case" such that interlocutory orders issued therein fall within the appellate jurisdiction of the CTA under Section 7(a)(3) of Republic Act No. 9282.

• Applicability of CE Casecnan: Whether the CTA En Banc correctly applied the ruling in CE Casecnan Water and Energy Company, Inc. v. Province of Nueva Ecija to conclude that an action seeking to restrain collection of business taxes is necessarily a local tax case within CTA jurisdiction, even when the restraint is grounded on a final and executory judgment determining the proper tax base.

• Nature of the RTC Action: The RTC Petition for Declaratory Relief was not a local tax case within the contemplation of Section 7(a)(3) of Republic Act No. 9282. Jurisdiction is determined by the allegations of the complaint and the character of the relief sought. Mactel's petition did not protest the amount of the assessment or invoke any provision of tax law; rather, it sought enforcement of a final and executory judgment — the November 13, 2007 Decision in Civil Case No. 05-1040 — which had already conclusively established that the proper tax base was the 10% discount. The petition was civil in nature, grounded on the principle of conclusiveness of judgment, and sought to define Mactel's rights and obligations under that final adjudication. The interlocutory orders of the RTC merely preserved the status quo and prevented irreparable harm while that civil question was being litigated; they did not rule on the validity of any tax assessment. Applying Ignacio v. Office of the City Treasurer of Quezon City, where an action for annulment of levy and auction sale grounded on due process violations was held not to be a local tax case because it was not anchored on a tax issue but on procedural due process, the Supreme Court concluded that the RTC action here similarly fell outside the CTA's jurisdiction.

• Applicability of CE Casecnan: The CTA En Banc's reliance on CE Casecnan was erroneous; the cases were not on all fours. In CE Casecnan, the taxpayer filed an action for injunction to restrain collection of a reassessed RPT after its protest had been denied and the matter was pending before the Local Board of Assessment Appeals. No final and executory judgment had determined the proper assessment basis. The Supreme Court there held that an injunction to restrain collection necessarily required the RTC first to rule on the propriety of the assessment, thus converting the action into a local tax case. In the present case, a final and executory judgment had already determined the correct tax base. Mactel was not implicitly or explicitly challenging the validity of the assessment on tax-law grounds; it was compelling adherence to res judicata. Moreover, at the time the declaratory relief petition was filed, the administrative protest to the 2010-2013 assessment was still pending before the City Treasurer, who had 60 days to decide. No justiciable tax controversy had ripened for RTC adjudication as a local tax case.

• Jurisdiction Over the Subject Matter — The jurisdiction of a court is determined by the nature of the action pleaded as appearing in the allegations of the complaint and the character of the relief sought. The averments in the complaint and the relief prayed for constitute the primary bases for ascertaining whether the court has jurisdiction.

• Definition of a "Local Tax Case" for Purposes of CTA Appellate Jurisdiction — A "local tax case" within the meaning of Section 7(a)(3) of Republic Act No. 9282 is a dispute between a local government unit and a taxpayer involving the imposition of the LGU's power to levy tax, fees, or charges against the property or business of the taxpayer. Such cases may involve: (1) the legality or validity of real property tax assessments; (2) protests of assessments; (3) disputed assessments, surcharges, or penalties; (4) the validity of a tax ordinance; (5) claims for tax refund or credit; (6) claims for tax exemption; (7) actions to collect tax due; and (8) prescription of assessments. A petition for declaratory relief seeking enforcement of a final and executory judgment on the proper tax base, without invocation of substantive tax law, does not fall within this category.

• Doctrine of Conclusiveness of Judgment — When a right or fact has been judicially tried and determined by a court of competent jurisdiction, the judgment is conclusive upon the parties in any subsequent litigation on a different cause of action involving the same right or fact. The 2007 Decision in Civil Case No. 05-1040, having attained finality, conclusively established the proper tax base for Mactel's business taxes as the 10% discount, not the face value of the prepaid cards.

• Distinction Between CE Casecnan and Enforcement of Final Judgment — The principle in CE Casecnan — that an action for injunction to restrain tax collection implicitly challenges the assessment's propriety and is therefore a local tax case — does not apply where a final and executory judgment has already definitively resolved the basis of taxation. In such a situation, the action is not anchored on a tax issue but on the enforcement of a final adjudication, and the interlocutory orders issued by the RTC are not in a local tax case for purposes of CTA appellate review.

• "While it is true that the case involves two local taxes specifically, the Billing Assessment dated 22 January 2015 and the Notice of Assessment dated 22 January 2015 which petitioner reiterates, it is not automatic that it is a local tax case within the original or appellate jurisdiction of the Regional Trial Courts and thereafter within the exclusive appellate jurisdiction of this Court. Otherwise stated, involvement of local tax in a case does not mean that it is a local tax case appealable to this Court." — CTA En Banc original Decision, quoted approvingly by the Supreme Court. This passage underscores that the mere presence of a tax-related document in litigation does not convert an action into a local tax case for jurisdictional purposes.

• "In this case, a reading of the Annulment Complaint shows that Teresa's action before the RTC-Br. is essentially one for recovery of ownership and possession of the property, with damages, which is not anchored on a tax issue, but on due process considerations." — The Supreme Court quoting Ignacio v. Office of the City Treasurer of Quezon City, applied by analogy to establish that civil actions collateral to tax matters but grounded on non-tax legal principles fall outside CTA jurisdiction.

• "Petitioner's argument in disputing the local tax assessment does not involve the application of tax laws because this issue has already been resolved with finality when petitioner secured a final and executory judgment embodied in the Decision dated November 13, 2007. What petitioner seeks instead is to enforce the said final and executory judgment." — The Supreme Court's articulation of the dispositive distinction between a local tax case and the enforcement of a final judgment.

• CE Casecnan Water and Energy Company, Inc. v. Province of Nueva Ecija, 760 Phil. 835 (2015) — The CTA En Banc had relied on this case to assert jurisdiction; the Supreme Court distinguished it. In CE Casecnan, an injunction to restrain RPT collection implicitly challenged the assessment's propriety, making it a local tax case. Here, a final and executory judgment had already resolved the tax base; thus, the principle did not apply. The cases were not on all fours.

• Ignacio v. Office of the City Treasurer of Quezon City, 817 Phil. 1133 (2017) — Applied as controlling on the jurisdictional question. An action for recovery of property and annulment of levy based on due process violations was not a local tax case because the allegations did not contest the tax assessment but only the lack of notice. Analogously, Mactel's petition did not involve application of tax laws but enforcement of a final judgment.

• City of Manila v. Judge Grecia-Cuerdo, 726 Phil. 4 (2014) — Recognized that the CTA has jurisdiction over special civil actions for certiorari assailing interlocutory orders issued by the RTC in a local tax case. Applied to establish the threshold requirement: the RTC action must first be a local tax case before the CTA can exercise certiorari jurisdiction.

• Mitsubishi Motors Philippines Corp. v. Bureau of Customs, 760 Phil. 954 (2015) — Cited for the definition of jurisdiction as the power and authority of a court to hear, try, and decide a case, and the requirement that a court must acquire jurisdiction over the subject matter.

• Padlan v. Dinglasan, 707 Phil. 83 (2013) — Cited for the principle that jurisdiction is determined by the nature of the action pleaded as appearing in the allegations of the complaint and the character of the relief sought.

• Section 7(a)(3), Republic Act No. 9282 — Grants the CTA exclusive appellate jurisdiction to review by appeal decisions, orders, or resolutions of Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction. The provision's scope was the central interpretive question. The Court held that the RTC action from which the assailed interlocutory orders emanated must itself be a local tax case, properly so characterized, before the CTA can exercise jurisdiction.

• Rule 4, Section 3(a)(3), 2005 Revised Rules of the Court of Tax Appeals — Implements Section 7(a)(3) of R.A. 9282, providing that the CTA in Division has jurisdiction over decisions, resolutions, or orders of the RTC in local tax cases decided in the exercise of original jurisdiction. Applied to confirm the jurisdictional threshold.

• Section 195, Local Government Code of 1991 (Republic Act No. 7160) — Governs the administrative protest of assessment. The Court traced the procedure: taxpayer files written protest within 60 days from receipt of notice of assessment; local treasurer decides within 60 days; denial or inaction triggers a 30-day period to appeal to the court of competent jurisdiction. Applied to demonstrate that at the time Mactel filed its declaratory relief petition, the protest was still pending administrative resolution; no local tax case had yet ripened for judicial adjudication.

Chief Justice Alexander G. Gesmundo (Chairperson), Associate Justice Samuel H. Caguioa, Associate Justice Rodil V. Zalameda, and Associate Justice Mario V. Gaerlan, concurred.

N/A — The decision was unanimous; no dissenting opinions were recorded.