SECOND DIVISION Through counsel, the Corporation responded with a
LUZ R. YAMANE, in her capacity as the CITY TREASURER written tax protest dated 12 February 1999, addressed to the City
OF MAKATI CITY,
Petitioner,
- versus
BA LEPANTO CONDOMINUM CORPORATION,
Respondent.
G.R. No. 154993 October 25, 2005
x-------------------------------------------------------------------x
DECISION
TINGA, J.:
Petitioner City Treasurer of Makati, Luz Yamane (City
Treasurer), presents for resolution of this Court two novel
questions: one procedural, the other substantive, yet both of
obvious significance. The first pertains to the proper mode of
judicial review undertaken from decisions of the regional trial
courts resolving the denial of tax protests made by local
government treasurers, pursuant to the Local Government
Code. The second is whether a local government unit can, under
the Local Government Code, impel a condominium corporation
to pay business taxes.[1]
While we agree with the City Treasurers position on
the first issue, there ultimately is sufficient justification for the
Court to overlook what is essentially a procedural error. We
uphold respondents on the second issue. Indeed, there are
disturbing aspects in both procedure and substance that attend
the attempts by the City of Makati to flex its taxing muscle.
Considering that the tax imposition now in question has utterly
no basis in law, judicial relief is imperative. There are fewer
indisputable causes for the exercise of judicial review over the
exercise of the taxing power than when the tax is based on
whim, and not on law.
The facts, as culled from the record, follow.
Respondent BA-Lepanto Condominium Corporation (the
Corporation) is a duly organized condominium corporation
constituted in accordance with the Condominium Act,[2] which
owns and holds title to the common and limited common areas
of the BA-Lepanto Condominium (the Condominium), situated
in Paseo de Roxas, Makati City. Its membership comprises the
various unit owners of the Condominium. The Corporation is
authorized, under Article V of its Amended By-Laws, to collect
regular assessments from its members for operating expenses,
capital expenditures on the common areas, and other special
assessments as provided for in the Master Deed with
Declaration of Restrictions of the Condominium.
On 15 December 1998, the Corporation received a Notice of
Assessment dated 14 December 1998 signed by the City
Treasurer. The Notice of Assessment stated that the Corporation
is liable to pay the correct city business taxes, fees and charges,
computed as totaling P1,601,013.77 for the years 1995 to
1997.[3] The Notice of Assessment was silent as to the statutory
basis of the business taxes assessed.
Treasurer. It was evident in the protest that the Corporation was
perplexed on the statutory basis of the tax assessment.
With due respect, we submit that the
Assessment has no basis as the Corporation is not
liable for business taxes and surcharges and interest
thereon, under the Makati [Revenue] Code or even
under the [Local Government] Code.
The Makati [Revenue] Code and the [Local
Government] Code do not contain any provisions on
which the Assessment could be based. One might
argue that Sec. 3A.02(m) of the Makati [Revenue]
Code imposes business tax on owners or operators of
any business not specified in the said code. We
submit, however, that this is not applicable to the
Corporation as the Corporation is not an owner or
operator of any business in the contemplation of the
Makati [Revenue] Code and even the [Local
Government] Code.[4]
Proceeding from the premise that its tax liability arose
from Section 3A.02(m) of the Makati Revenue Code, the
Corporation proceeded to argue that under both the Makati
Code and the Local Government Code, business is defined as
trade or commercial activity regularly engaged in as a means of
livelihood or with a view to profit. It was submitted that the
Corporation, as a condominium corporation, was organized not
for profit, but to hold title over the common areas of the
Condominium, to manage the Condominium for the unit
owners, and to hold title to the parcels of land on which the
Condominium was located. Neither was the Corporation
authorized, under its articles of incorporation or by-laws to
engage in profit-making activities. The assessments it did collect
from the unit owners were for capital expenditures and
operating expenses.[5]
The protest was rejected by the City Treasurer in a
letter dated 4 March 1999. She insisted that the collection of
dues from the unit owners was effected primarily to sustain and
maintain the expenses of the common areas, with the end in
view [sic] of getting full appreciative living values [sic] for the
individual condominium occupants and to command better
marketable [sic] prices for those occupants who would in the
future sell their respective units.[6] Thus, she concluded since
the chances of getting higher prices for well-managed common
areas of any condominium are better and more effective that
condominiums with poor [sic] managed common areas, the
corporation activity is a profit venture making [sic].[7]
From the denial of the protest, the Corporation filed
an Appeal with the Regional Trial Court (RTC) of Makati.[8] On 1
March 2000, the Makati RTC Branch 57 rendered
a Decision[9] dismissing the appeal for lack of merit. Accepting
the premise laid by the City Treasurer, the RTC acknowledged,
in sadly risible language:
Herein appellant, to defray the improvements and
beautification of the common areas, collect [sic]
assessments from its members. Its end view is to
 get appreciate living rules for the unit owners
[sic], to give an impression to outsides [sic] of the
quality of service the condominium offers, so as to
allow present owners to command better prices in
the event of sale.[10]
With this, the RTC concluded that the activities of the
Corporation fell squarely under the definition of business under
Section 13(b) of the Local Government Code, and thus subject to
local business taxation.[11]
From this Decision of the RTC, the Corporation filed a Petition
for Review under Rule 42 of the Rules of Civil Procedure with the
Court of Appeals. Initially, the petition was dismissed
outright[12] on the ground that only decisions of the RTC brought
on appeal from a first level court could be elevated for review
under the mode of review prescribed under Rule 42.[13] However,
the Corporation pointed out in its Motion for
Reconsideration that under Section 195 of the Local Government
Code, the remedy of the taxpayer on the denial of the protest
filed with the local treasurer is to appeal the denial with the
court of competent jurisdiction.[14] Persuaded by this contention,
the Court of Appeals reinstated the petition.[15]
On 7 June 2002, the Court of Appeals Special Sixteenth
Division rendered the Decision[16] now assailed before this Court.
The appellate court reversed the RTC and declared that the
Corporation was not liable to pay business taxes to the City of
Makati.[17] In doing so, the Court of Appeals delved into
jurisprudential definitions of profit,[18] and concluded that the
Corporation was not engaged in profit. For one, it was held that
the very statutory concept of a condominium corporation
showed that it was not a juridical entity intended to make profit,
as its sole purpose was to hold title to the common areas in the
condominium and to maintain the condominium.[19]
The Court of Appeals likewise cited provisions from the
Corporations Amended Articles of Incorporation and Amended
By-Laws that, to its estimation, established that the Corporation
was not engaged in business and the assessment collected from
unit owners limited to those necessary to defray the expenses in
the maintenance of the common areas and management the
condominium.[20]
Upon denial of her Motion for Reconsideration,[21] the
City Treasurer elevated the present Petition for Review under
Rule 45. It is argued that the Corporation is engaged in business,
for the dues collected from the different unit owners is utilized
towards the beautification and maintenance of the
Condominium, resulting in full appreciative living values for the
condominium units which would command better market prices
should they be sold in the future. The City Treasurer likewise
avers that the rationale for business taxes is not on the income
received or profit earned by the business, but the privilege to
engage in business. The fact that the
Corporation is empowered to acquire, own, hold, enjoy, lease,
operate and maintain, and to convey sell, transfer or otherwise
dispose of real or personal property allegedly qualifies as
incident to the fact of [the Corporations] act of engaging in
business.[22]
The City Treasurer also claims that the Corporation had
filed the wrong mode of appeal before the Court of Appeals
when the latter filed its Petition for Review under Rule 42. It is
reasoned that the decision of the Makati RTC was rendered in
the exercise of original jurisdiction, it being the first court which
took cognizance of the case. Accordingly, with the Corporation
having pursued an erroneous mode of appeal, the
RTC Decision is deemed to have become final and executory.
First, we dispose of the procedural issue, which
essentially boils down to whether the RTC, in deciding an appeal
taken from a denial of a protest by a local treasurer under
Section 195 of the Local Government Code, exercises original
jurisdiction or appellate jurisdiction. The question assumes a
measure of importance to this petition, for the adoption of the
position of the City Treasurer that the mode of review of the
decision taken by the RTC is governed by Rule 41 of the Rules of
Civil Procedure means that the decision of the RTC would have
long become final and executory by reason of the failure of the
Corporation to file a notice of appeal.[23]
There are discernible conflicting views on the issue.
The first, as expressed by the Court of Appeals, holds that the
RTC, in reviewing denials of protests by local treasurers,
exercises appellate jurisdiction. This position is anchored on the
language of Section 195 of the Local Government Code which
states that the remedy of the taxpayer whose protest is denied by
the local treasurer is to appeal with the court of competent
jurisdiction.[24] Apparently though, the Local Government Code
does not elaborate on how such appeal should be undertaken.
The other view, as maintained by the City Treasurer, is
that the jurisdiction exercised by the RTC is original in character.
This is the first time that the position has been presented to the
court for adjudication. Still, this argument does find
jurisprudential mooring in our ruling in Garcia v. De
Jesus,[25] where the Court proffered the following distinction
between original jurisdiction and appellate jurisdiction: Original
jurisdiction is the power of the Court to take judicial cognizance
of a case instituted for judicial action for the first time under
conditions provided by law. Appellate jurisdiction is the
authority of a Court higher in rank to re-examine the final order
or judgment of a lower Court which tried the case now elevated
for judicial review.[26]
The quoted definitions were taken from the
commentaries of the esteemed Justice Florenz Regalado. With
the definitions as beacon, the review taken by the RTC over the
denial of the protest by the local treasurer would fall within that
courts original jurisdiction. In short, the review is the initial
judicial cognizance of the matter. Moreover, labeling the said
review as an exercise of appellate jurisdiction is inappropriate,
since the denial of the protest is not the judgment or order of a
lower court, but of a local government official.
The stringent concept of original jurisdiction may
seemingly be neutered by Rule 43 of the 1997 Rules of Civil
Procedure, Section 1 of which lists a slew of administrative
agencies and quasi-judicial tribunals or their officers whose
decisions may be reviewed by the Court of Appeals in the
exercise of its appellate jurisdiction. However, the basic law of
jurisdiction, Batas Pambansa Blg. 129 (B.P. 129),[27]ineluctably
confers appellate jurisdiction on the Court of Appeals over final
rulings of quasi-judicial agencies, instrumentalities, boards or
commission, by explicitly using the phrase appellate
jurisdiction.[28] The power to create or characterize jurisdiction
of courts belongs to the legislature. While the traditional notion
of appellate jurisdiction connotes judicial review over lower
court decisions, it has to yield to statutory redefinitions that
clearly expand its breadth to encompass even review of decisions
of officers in the executive branches of government.
Yet significantly, the Local Government Code, or any
other statute for that matter, does not expressly confer appellate
jurisdiction on the part of regional trial courts from the denial of
a tax protest by a local treasurer. On the other hand, Section 22
of B.P. 129 expressly delineates the appellate jurisdiction of the
Regional Trial Courts, confining as it does said appellate
jurisdiction to cases decided by Metropolitan, Municipal, and
Municipal Circuit Trial Courts. Unlike in the case of the Court of
Appeals, B.P. 129 does not confer appellate jurisdiction on
Regional Trial Courts over rulings made by non-judicial entities.
From these premises, it is evident that the stance of the
City Treasurer is correct as a matter of law, and that the proper
remedy of the Corporation from the RTC judgment is an
ordinary appeal under Rule 41 to the Court of Appeals. However,
we make this pronouncement subject to two important
qualifications. First, in this particular case there are nonetheless
significant reasons for the Court to overlook the procedural error
and ultimately uphold the adjudication of the jurisdiction
exercised by the Court of Appeals in this case. Second, the
doctrinal weight of the pronouncement is confined to cases and
controversies that emerged prior to the enactment of Republic
Act No. 9282, the law which expanded the jurisdiction of the
Court of Tax Appeals (CTA).
Republic Act No. 9282 definitively proves in its Section
7(a)(3) that the CTA exercises exclusive appellate jurisdiction to
review on appeal decisions, orders or resolutions of the Regional
Trial Courts in local tax cases original decided or resolved by
them in the exercise of their originally or appellate jurisdiction.
Moreover, the provision also states that the review is triggered
by filing a petition for review under a procedure analogous to
that provided for under Rule 42 of the 1997 Rules of Civil
Procedure.[29]
Republic Act No. 9282, however, would not apply to
this case simply because it arose prior to the effectivity of that
law. To declare otherwise would be to institute a jurisdictional
rule derived not from express statutory grant, but from
implication. The jurisdiction of a court to take cognizance of a
case should be clearly conferred and should not be deemed to
exist on mere implications,[30] and this settled rule would be
needlessly emasculated should we declare that the Corporations
position is correct in law.
Be that as it may, characteristic of all procedural rules is
adherence to the precept that they should not be enforced
blindly, especially if mechanical application would defeat the
higher ends that animates our civil procedurethe just, speedy
and inexpensive disposition of every action and
proceeding.[31] Indeed, we have repeatedly upheldand utilized
ourselvesthe discretion of courts to nonetheless take cognizance
of petitions raised on an erroneous mode of appeal and instead
treat these petitions in the manner as they should have
appropriately been filed.[32] The Court of Appeals could very well
have treated the Corporations petition for review as an ordinary
appeal.
Moreover, we recognize that the Corporations error in
elevating the RTC decision for review via Rule 42 actually worked
to the benefit of the City Treasurer. There is wider latitude on
the part of the Court of Appeals to refuse cognizance over a
petition for review under Rule 42 than it would have over an
ordinary appeal under Rule 41. Under Section 13, Rule 41, the
stated grounds for the dismissal of an ordinary appeal prior to
the transmission of the case records are when the appeal was
taken out of time or when the docket fees were not paid.[33] On
the other hand, Section 6, Rule 42 provides that in order that the
Court of Appeals may allow due course to the petition for review,
it must first make a prima facie finding that the lower court has
committed an error that would warrant the reversal or
modification of the decision under review.[34] There is no similar
requirement of a prima facie determination of error in the case of
ordinary appeal, which is perfected upon the filing of the notice
of appeal in due time.[35]
Evidently, by employing the Rule 42 mode of review,
the Corporation faced a greater risk of having its petition
rejected by the Court of Appeals as compared to having filed an
ordinary appeal under Rule 41. This was not an error that worked
to the prejudice of the City Treasurer.
We now proceed to the substantive issue, on whether
the City of Makati may collect business taxes on condominium
corporations.
We begin with an overview of the power of a local government
unit to impose business taxes.
The power of local government units to impose taxes within its
territorial jurisdiction derives from the Constitution itself, which
recognizes the power of these units to create its own sources of
revenue and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy.[36] These
guidelines and limitations as provided by Congress are in main
contained in the Local Government Code of 1991 (the Code),
which provides for comprehensive instances when and how local
government units may impose taxes. The significant limitations
are enumerated primarily in Section 133 of the Code, which
include among others, a prohibition on the imposition of income
taxes except when levied on banks and other financial
institutions.[37] None of the other general limitations under
Section 133 find application to the case at bar.
The most well-known mode of local government taxation is
perhaps the real property tax, which is governed by Title II, Book
II of the Code, and which bears no application in this case. A
different set of provisions, found under Title I of Book II, governs
other taxes imposable by local government units, including
business taxes. Under Section 151 of the Code, cities such as
Makati are authorized to levy the same taxes fees and charges as
provinces and municipalities. It is in Article II, Title II, Book II of
the Code, governing municipal taxes, where the provisions on
business taxation relevant to this petition may be found.[38]
Section 143 of the Code specifically enumerates several types of
business on which municipalities and cities may impose taxes.
These include manufacturers, wholesalers, distributors, dealers
of any article of commerce of whatever nature; those engaged in
the export or commerce of essential commodities; contractors
and other independent contractors; banks and financial
institutions; and peddlers engaged in the sale of any
merchandise or article of commerce. Moreover, the
local sanggunian is also authorized to impose taxes on any other
businesses not otherwise specified under Section 143 which
the sanggunian concerned may deem proper to tax.
The coverage of business taxation particular to the City
of Makati is provided by the Makati Revenue Code (Revenue
Code), enacted through Municipal Ordinance No. 92-072. The
Revenue Code remains in effect as of this
writing. Article A, Chapter III of the Revenue Code governs
business taxes in Makati, and it is quite specific as to the
particular businesses which are covered by business taxes. To
give a sample of the specified businesses under the Revenue
Code which are not enumerated under the Local Government
Code, we cite Section 3A.02(f) of the Code, which levies a gross
receipt tax :
(f) On contractors and other independent contractors
defined in Sec. 3A.01(q) of Chapter III of this Code, and on
owners or operators of business establishments rendering or
offering services such as: advertising agencies; animal hospitals;
assaying laboratories; belt and buckle shops; blacksmith shops;
bookbinders; booking officers for film exchange; booking offices
for transportation on commission basis; breeding of game cocks
and other sporting animals belonging to others; business
management services; collecting agencies; escort services;
feasibility studies; consultancy services; garages; garbage
disposal contractors; gold and silversmith shops; inspection
services for incoming and outgoing cargoes; interior decorating
services; janitorial services; job placement or recruitment
agencies; landscaping contractors; lathe machine shops;
management consultants not subject to professional tax;
medical and dental laboratories; mercantile agencies;
messsengerial services; operators of shoe shine stands; painting
shops; perma press establishments; rent-a-plant services; polo
players; school for and/or horse-back riding academy; real estate
appraisers; real estate brokerages; photostatic, white/blue
printing, Xerox, typing, and mimeographing services; rental of
bicycles and/or tricycles, furniture, shoes, watches, household
appliances, boats, typewriters, etc.; roasting of pigs, fowls, etc.;
shipping agencies; shipyard for repairing ships for others; shops
for shearing animals; silkscreen or T-shirt printing shops;
stables; travel agencies; vaciador shops; veterinary clinics; video
rentals and/or coverage services; dancing schools/speed
reading/EDP; nursery, vocational and other schools not
regulated by the Department of Education, Culture and Sports,
(DECS), day care centers; etc.[39]
Other provisions of the Revenue Code likewise subject
hotel and restaurant owners and operators[40], real estate dealers,
and lessors of real estate[41] to business taxes.
Should the comprehensive listing not prove
encompassing enough, there is also a catch-all provision similar
to that under the Local Government Code. This is found in
Section 3A.02(m) of the Revenue Code, which provides:
(m) On owners or operators of any
business not specified above shall pay the tax at
the rate of two percent (2%) for 1993, two and one-
half percent (2 %) for 1994 and 1995, and three
percent (3%) for 1996 and the years thereafter of
the gross receipts during the preceding year.[42]
The initial inquiry is what provision of the Makati
Revenue Code does the City Treasurer rely on to make the
Corporation liable for business taxes. Even at this point, there
already stands a problem with the City Treasurers cause of
action.
Our careful examination of the record reveals a highly
disconcerting fact. At no point has the City Treasurer been
candid enough to inform the Corporation, the RTC, the Court of
Appeals, or this Court for that matter, as to what exactly is the
precise statutory basis under the Makati Revenue Code for the
levying of the business tax on petitioner. We have examined all
of the pleadings submitted by the City Treasurer in all the
antecedent judicial proceedings, as well as in this present
petition, and also the communications by the City Treasurer to
the Corporation which form part of the record. Nowhere therein
is there any citation made by the City Treasurer of any provision
of the Revenue Code which would serve as the legal authority for
the collection of business taxes from condominiums in Makati.
Ostensibly, the notice of assessment, which stands as
the first instance the taxpayer is officially made aware of the
pending tax liability, should be sufficiently informative to
apprise the taxpayer the legal basis of the tax. Section 195 of the
Local Government Code does not go as far as to expressly require
that the notice of assessment specifically cite the provision of the
ordinance involved but it does require that it state the nature of
the tax, fee or charge, the amount of deficiency, surcharges,
interests and penalties. In this case, the notice of assessment
sent to the Corporation did state that the assessment was for
business taxes, as well as the amount of the assessment. There
may have been prima facie compliance with the requirement
under Section 195. However in this case, the Revenue Code
provides multiple provisions on business taxes, and at varying
rates. Hence, we could appreciate the Corporations confusion, as
expressed in its protest, as to the exact legal basis for the
tax.[43] Reference to the local tax ordinance is vital, for the power
of local government units to impose local taxes is exercised
through the appropriate ordinance enacted by the sanggunian,
and not by the Local Government Code alone.[44] What
determines tax liability is the tax ordinance, the Local
Government Code being the enabling law for the local legislative
body.
Moreover, a careful examination of the Revenue Code
shows that while Section 3A.02(m) seems designed as a catch-all
provision, Section 3A.02(f), which provides for a different tax
rate from that of the former provision, may be construed to be of
similar import. While Section 3A.02(f) is quite exhaustive in
enumerating the class of businesses taxed under the provision,
the listing, while it does not include condominium-related
enterprises, ends with the abbreviation etc., or et cetera.
 We do note our discomfort with the unlimited breadth
and the dangerous uncertainty which are the twin hallmarks of
the words et cetera. Certainly, we cannot be disposed to uphold
any tax imposition that derives its authority from enigmatic and
uncertain words such as et cetera. Yet we cannot even say with
definiteness whether the tax imposed on the Corporation in this
case is based on et cetera, or on Section 3A.02(m), or on any
other provision of the Revenue Code. Assuming that the
assessment made on the Corporation is on a provision other
than Section 3A.02(m), the main legal issue takes on a different
complexion. For example, if it is based on et cetera under Section
3A.02(f), we would have to examine whether the Corporation
faces analogous comparison with the other businesses listed
under that provision.
Certainly, the City Treasurer has not been helpful in
that regard, as she has been silent all through out as to the exact
basis for the tax imposition which she wishes that this Court
uphold. Indeed, there is only one thing that prevents this Court
from ruling that there has been a due process violation on
account of the City Treasurers failure to disclose on paper the
statutory basis of the taxthat the Corporation itself does not
allege injury arising from such failure on the part of the City
Treasurer.
We do not know why the Corporation chose not to put
this issue into litigation, though we can ultimately presume that
no injury was sustained because the City Treasurer failed to cite
the specific statutory basis of the tax. What is essential though is
that the local treasurer be required to explain to the taxpayer
with sufficient particularity the basis of the tax, so as to leave no
doubt in the mind of the taxpayer as to the specific tax involved.
In this case, the Corporation seems confident enough in
litigating despite the failure of the City Treasurer to admit on
what exact provision of the Revenue Code the tax liability
ensued. This is perhaps because the Corporation has anchored
its central argument on the position that the Local Government
Code itself does not sanction the imposition of business taxes
against it. This position was sustained by the Court of Appeals,
and now merits our analysis.
As stated earlier, local tax on businesses is authorized
under Section 143 of the Local Government Code. The word
business itself is defined under Section 131(d) of the Code as
trade or commercial activity regularly engaged in as a means of
livelihood or with a view to profit.[45] This definition of business
takes on importance, since Section 143 allows local government
units to impose local taxes on businesses other than those
specified under the provision. Moreover, even those business
activities specifically named in Section 143 are themselves
susceptible to broad interpretation. For example, Section 143(b)
authorizes the imposition of business taxes on wholesalers,
distributors, or dealers in any article of commerce of whatever
kind or nature.
It is thus imperative that in order that the Corporation
may be subjected to business taxes, its activities must fall within
the definition of business as provided in the Local Government
Code. And to hold that they do is to ignore the very statutory
nature of a condominium corporation.
The creation of the condominium corporation is
sanctioned by Republic Act No. 4726, otherwise known as the
Condominium Act. Under the law, a condominium is an interest
in real property consisting of a separate interest in a unit in a
residential, industrial or commercial building and an undivided
interest in common, directly or indirectly, in the land on which it
is located and in other common areas of the building.[46] To
enable the orderly administration over these common areas
which are jointly owned by the various unit owners, the
Condominium Act permits the creation of a condominium
corporation, which is specially formed for the purpose of holding
title to the common area, in which the holders of separate
interests shall automatically be members or shareholders, to the
exclusion of others, in proportion to the appurtenant interest of
their respective
units.[47] The necessity of a condominium corporation has not
gained widespread acceptance[48], and even is merely permissible
under the Condominium Act.[49] Nonetheless, the condominium
corporation has been resorted to by many condominium
projects, such as the Corporation in this case.
In line with the authority of the condominium
corporation to manage the condominium project, it may be
authorized, in the deed of restrictions, to make reasonable
assessments to meet authorized expenditures, each
condominium unit to be assessed separately for its share of such
expenses in proportion (unless otherwise provided) to its owners
fractional interest in any common areas.[50] It is the collection of
these assessments from unit owners that form the basis of the
City Treasurers claim that the Corporation is doing business.
The Condominium Act imposes several limitations on
the condominium corporation that prove crucial to the
disposition of this case. Under Section 10 of the law, the
corporate purposes of a condominium corporation are limited to
the holding of the common areas, either in ownership or any
other interest in real property recognized by law; to the
management of the project; and to such other purposes as may
be necessary, incidental or convenient to the accomplishment of
such purpose.[51] Further, the same provision prohibits the
articles of incorporation or by-laws of the condominium
corporation from containing any provisions which are contrary
to the provisions of the Condominium Act, the enabling or
master deed, or the declaration of restrictions of the
condominium project.[52]
We can elicit from the Condominium Act that a
condominium corporation is precluded by statute from engaging
in corporate activities other than the holding of the common
areas, the administration of the condominium project, and other
acts necessary, incidental or convenient to the accomplishment
of such purposes. Neither the maintenance of livelihood, nor the
procurement of profit, fall within the scope of permissible
corporate purposes of a condominium corporation under the
Condominium Act.
The Court has examined the particular Articles of
Incorporation and By-Laws of the Corporation, and these
documents unmistakably hew to the limitations contained in the
Condominium Act. Per the Articles of Incorporation, the
Corporations corporate purposes are limited to: (a) owning and
holding title to the common and limited common areas in the
Condominium Project; (b) adopting such necessary measures for
the protection and safeguard of the unit owners and their
property, including the power to contract for security services
and for insurance coverage on the entire project; (c) making and
adopting needful rules and regulations concerning the use,
enjoyment and occupancy of the units and common areas,
including the power to fix penalties and assessments for
violation of such rules; (d) to provide for the maintenance,
repair, sanitation, and cleanliness of the common and limited
common areas; (e) to provide and contract for public utilities
and other services to the common areas; (f) to contract for the
services of persons or firms to assist in the management and
operation of the Condominium Project; (g) to discharge any lien
or encumbrances upon the Condominium Project; (h) to enforce
the terms contained in the Master Deed with Declaration of
Restrictions of the Project; (i) to levy and
collect those assessments as provided in the Master Deed, in
order to defray the costs, expenses and losses of the
condominium; (j) to acquire, own, hold, enjoy, lease operate and
maintain, and to convey, sell transfer, mortgage or otherwise
dispose of real or personal property in connection with the
purposes and activities of the corporation; and (k) to exercise
and perform such other powers reasonably necessary, incidental
or convenient to accomplish the foregoing purposes.[53]
Obviously, none of these stated corporate purposes are
geared towards maintaining a livelihood or the obtention of
profit. Even though the Corporation is empowered to levy
assessments or dues from the unit owners, these amounts
collected are not intended for the incurrence of profit by the
Corporation or its members, but to shoulder the multitude of
necessary expenses that arise from the maintenance of the
Condominium Project. Just as much is confirmed by Section 1,
Article V of the Amended By-Laws, which enumerate the
particular expenses to be defrayed by the regular assessments
collected from the unit owners. These would include the salaries
of the employees of the Corporation, and the cost of
maintenance and ordinary repairs of the common areas.[54]
The City Treasurer nonetheless contends that the
collection of these assessments and dues are with the end view of
getting full appreciative living values for the condominium units,
and as a result, profit is obtained once these units are sold at
higher prices. The Court cites with approval the two
counterpoints raised by the Court of Appeals in rejecting this
contention. First, if any profit is obtained by the sale of the units,
it accrues not to the corporation but to the unit owner. Second,
if the unit owner does obtain profit from the sale of the
corporation, the owner is already required to pay capital gains
tax on the appreciated value of the condominium unit.[55]
Moreover, the logic on this point of the City Treasurer
is baffling. By this rationale, every Makati City car owner may be
considered as being engaged in business, since the repairs or
improvements on the car may be deemed oriented towards
appreciating the value of the car upon resale. There is an evident
distinction between persons who spend on repairs and
improvements on their personal and real property for the
purpose of increasing its resale value, and those who defray such
expenses for the purpose of preserving the property. The vast
majority of persons fall under the second category, and it would
be highly specious to subject these persons to local business
taxes. The profit motive in such cases is hardly the driving factor
behind such improvements, if it were contemplated at all. Any
profit that would be derived under such circumstances would
merely be incidental, if not accidental.
Besides, we shudder at the thought of upholding tax
liability on the basis of the standard of full appreciative living
values, a phrase that defies statutory explication,
commonsensical meaning, the English language, or even
definition from Google. The exercise of the power of taxation
constitutes a deprivation of property under the due process
clause,[56] and the taxpayers right to due process is violated when
arbitrary or oppressive methods are used in assessing and
collecting taxes.[57] The fact that the Corporation did not fall
within the enumerated classes of taxable businesses under either
the Local Government Code or the Makati Revenue Code already
forewarns that a clear demonstration is essential on the part of
the City Treasurer on why the Corporation should be taxed
anyway. Full appreciative living values is nothing but blather in
search of meaning, and to impose a tax hinged on that standard
is both arbitrary and oppressive.
The City Treasurer also contends that the fact that the
Corporation is engaged in business is evinced by the Articles of
Incorporation, which specifically empowers the Corporation to
acquire, own, hold, enjoy, lease, operate and maintain, and to
convey, sell, transfer mortgage or otherwise dispose of real or
personal property.[58] What the City Treasurer fails to add is that
every corporation
organized under the Corporation Code[59] is so specifically
empowered. Section 36(7) of the Corporation Code states that
every corporation incorporated under the Code has the power
and capacity to purchase, receive, take or grant, hold, convey,
sell, lease, pledge, mortgage and otherwise deal with such real
and personal property . . . as the transaction of the lawful
business of the corporation may reasonably and necessarily
require . . . .[60] Without this power, corporations, as juridical
persons, would be deprived of the capacity to engage in most
meaningful legal relations.
Again, whatever capacity the Corporation may have
pursuant to its power to exercise acts of ownership over personal
and real property is limited by its stated corporate purposes,
which are by themselves further limited by the Condominium
Act. A condominium corporation, while enjoying such powers of
ownership, is prohibited by law from transacting its properties
for the purpose of gainful profit.
Accordingly, and with a significant degree of comfort,
we hold that condominium corporations are generally exempt
from local business taxation under the Local Government Code,
irrespective of any local ordinance that seeks to declare
otherwise.
Still, we can note a possible exception to the rule. It is
not unthinkable that the unit owners of a condominium would
band together to engage in activities for profit under the shelter
of the condominium corporation.[61] Such activity would be
prohibited under the Condominium Act, but if the fact is
established, we see no reason why the condominium corporation
may be made liable by the local government unit for business
taxes. Even though such activities would be considered as ultra
vires, since they are engaged in beyond the legal capacity of the
condominium corporation[62], the principle of estoppel would
preclude the corporation or its officers and members from
invoking the void nature of its undertakings for profit as a means
of acquitting itself of tax liability.

Still, the City Treasurer has not posited the claim that
the Corporation is engaged in business activities beyond the
statutory purposes of a condominium corporation. The
assessment appears to be based solely on the Corporations
collection of assessments from unit owners, such assessments
being utilized to defray the necessary expenses for the
Condominium Project and the common areas. There is no
contemplation of business, no orientation towards profit in this
case. Hence, the assailed tax assessment has no basis under the
Local Government Code or the Makati Revenue Code, and the
insistence of the city in its collection of the void tax constitutes
an attempt at deprivation of property without due process of
law.

WHEREFORE, the petition is DENIED. No costs.

SO ORDERED.

DANTE O. TINGA
Associate Justice
 SECOND DIVISION
LEPANTO CONSOLIDATED MINING COMPANY, Petitioner,
- versus -
HON. MAURICIO B. AMBANLOC,
in his capacity as the Provincial Promulgated:
Treasurer of Benguet, Respondent.
G.R. No. 180639 June 29, 2010
x ------------------------------------------------------------------ x
DECISION
ABAD, J.:
This case is about the liability of a mining corporation
for taxes imposed by a province for the extraction of sand and
gravel from areas covered by its mining lease with the national
government and used exclusively in its mining operations.
The Facts and the Case
The national government issued to petitioner Lepanto
Consolidated Mining Company (Lepanto) a mining lease
contract covering, among others, its TIKEM leased mining claim
at Sitio Nayak, Barrio Palasan
(Suyoc), Municipality of Mankayan, Benguet. The contract
granted Lepanto the right to extract and use for its purposes all
mineral deposits within the boundary lines of its mining
claim. Upon inquiry, the Mines and Geo-sciences Bureau of the
Department of Environment and Natural Resources (DENR)
advised Lepanto that, under its contract, it did not have to get a
permit to extract and use sand and gravel from within the
mining claim for its operational and infrastructure needs. Based
on this advice, Lepanto proceeded to extract and remove sand,
gravel, and other earth materials from the mining site.
Lepanto used the quarried materials to back-fill
stopesportions of the earth excavated as a result of
miningreplacing what had been mined to maintain the integrity
of the ground. It also used sand and gravel to construct and
maintain concrete structures needed in its mining operation,
such as a tailings dam, access roads, and offices. Its use of quarry
resources, readily available within its mining claim, was more
practical and cheaper than having to outsource them.
Respondent Mauricio Ambanloc, the provincial
treasurer of Benguet, sent a demand letter to Lepanto, asking it
to pay the province P1,901,893.22 as sand and gravel tax, for the
quarry materials that it extracted from its mining site from 1997
to 2000. Lepanto sent a letter-protest to the provincial treasurer,
but the latter denied the same, insisting on payment.
Lepanto filed a petition with the Regional Trial Court
(RTC) of Benguet to question the assessment.[1] The RTC ruled
that Lepanto was liable for the amount assessed, with interest at
the rate of 2 percent per month from the time the tax should
have been paid. Lepanto appealed the RTC decision to the Court
of Tax Appeals (CTA) where it was raffled to its Second
Division.[2] The Second Division affirmed the ruling of the RTC
with the modification that the interest of 2 percent per month
shall not exceed 36 months.[3]
Lepanto appealed the decision of the Second Division
to the CTA En Banc.[4] Three justices of the CTA voted to affirm
the decision but three justices dissented. Because the needed
vote of four members could not be obtained, the En
Banc dismissed the appeal, resulting in the affirmance of the
decision of the Second Division. Lepantos motion for
reconsideration met the same fate, hence, this appeal.
The Issue Presented
The sole issue presented in this case is whether or not
Lepanto is liable for the tax imposed by
the Province of Benguet on the sand and gravel that it extracted
from within the area of its mining claim and used exclusively in
its mining operations.
The Courts Rulings
One. Lepanto claims that the tax on sand and gravel
applied only to commercial extractions. In its case, it extracted
these materials for use solely in its mining operations. Lepanto
did not supply other users for some profit. Thus, its extractions
were not commercial and should not be subject to provincial
tax.
The CTAs Second Division held, however, that sand
and gravel taxes may be imposed even on non-commercial
extractions. Since Section 138 of the Local Government Code
(Republic Act 7160) authorized provinces to impose a tax on the
extraction of sand and gravel from public lands, without
distinguishing between personal and commercial uses, then the
tax should be deemed to cover extractions for both
purposes. The provision reads:
Sec. 138. Tax on Sand, Gravel and
Other Quarry Resources. The province
may levy and collect not more than ten
percent (10%) fair market value in the
locality per cubic meter of ordinary
stones, sand gravel, earth, and other
quarry resources, as defined under the
National Internal Revenue Code, as
amended, extracted from public lands or
from the beds of seas, lakes, rivers,
streams, creeks, and other public waters
within its territorial jurisdiction.
But the CTA Second Division ruling overlooks the fact
that Republic Act 7160 is not the provincial governments basis
for taxing Lepantos extraction. It is but the general law that
delegates to provinces the power to impose taxes on the
extraction of quarry resources. As it happens, the scope and
validity of such delegation is not the issue in this case. The
question of Lepantos liability for tax should be determined
based on the revenue measure itself, which in this case, was the
Revised Benguet Revenue Code (the revenue code).[5] The
relevant provisions of this provincial revenue code reads:
Article D. Tax on Sand, Gravel and Other Quarry
Resources.
xxxx
SECTION 3. Imposition of
Tax. There shall be levied a tax of ten (10)
percent of fair market value in the locality
per cubic meter of ordinary stones, sand,
gravel, earth, and other quarry resources,
x x x applied for and expected to be
extracted or removed from public lands x
x x within the territorial jurisdiction of
Benguet Province.
This provision may not apply in
case of gratuitous permits for government
projects within Benguet Province.
SECTION 4. Conditions for the
Issuance of Permit.
(g) The permittee shall within ten
(10) days after the end of each month
submit to the Provincial Treasurer, the
Municipal Treasurer and Barangay
Treasurer where the materials are
extracted, copies of sworn statement
stating the quantity in terms of cubic
meter and kind of materials extracted or
removed by him; the amount of tax or
fees paid; the quantity and kind of
materials sold or disposed of during the
period covered by said report; the selling
price per cubic meter; the names and
addresses of the buyers; and the quantity
and kind of materials left in stock
SECTION 5. Mode, Time and Place
of Payment. The tax shall be paid to the
Provincial Treasurer or his duly
authorized representative before the
approval by the Provincial Governor of
the permit to extract or remove the
materials applied for and before the said
materials are extracted or removed. x x x
SECTION 6. Surcharges and
Interests. Failure to pay the tax as
provided herein shall subject the
permittee to a surcharge of Twenty-five
(25%) percent of the original amount of
tax due plus Two (2%) percent per month
of the unpaid amount including the
surcharges until such amount is fully
paid, but in no case shall the total amount
or portion thereof exceed thirty-six (36)
months. x x x
Lepanto insists that the subject tax intended to cover
only commercial extractions since the provincial revenue code
referred to fair market value of the resources, quantity sold or
disposed, amount left in stock, selling price, and buyers
information.
Not necessarily. The provincial revenue code provides
that the subject tax had to be paid prior to the issuance of the
permit to extract sand and gravel. Its Article D, Section 2,
enumerates four kinds of permits: commercial, industrial,
special, and gratuitous. Special permits covered only personal
use of the extracted materials and did not allow the permitees to
sell materials coming from his concession.[6] Among applicants
for permits, however, only gratuitous permits were exempt from
the sand and gravel tax. It follows that persons who applied for
special permits needed to pay the tax, even though they did not
extract materials for commercial purposes. Thus, the tax needed
to be paid regardless of the applicability of the administrative
and reportorial requirements of that revenue code.
Two. Lepanto claims that the tax can only be levied
against extractions by persons or entities required to apply for
permits to remove quarry resources. Since the mining lease
contract with the national government granted it the right to
extract and utilize all mineral deposits from within its mining
claim, Lepanto claims that it did not need to apply for a separate
permit from the local government. Paragraph 9 of its Mining
Lease Contract provides that:
This Lease hereby grants unto the
LESSEE, his successors or assigns, the
right to extract and utilize for their own
benefit all mineral deposits within the
boundary lines of the mining claim/s
covered by this Lease continued vertically
downward.
But this merely declares that Lepantos extraction and
use of mineral deposits bears the consent of the national
government, in line with the principle that exploration of
natural resources can only be done under the control and
supervision of the State. The contract makes no mention of any
exemption from securing government permits.
Lepanto invokes the Bureau of Mines and Geo-Sciences
view that the mining company did not require it to get any of
the permits that Mines Administrative Order MRD-27 might
require.[7] But that Bureaus view applied only to permits under
MRD-27. The Bureau has no authority to determine the
applicability of local ordinances. Besides, even the Bureau itself
states that the exemption from MRD-27 is not absolute as it
shall not apply if the sand and gravel were to be disposed of
commercially. An exemption from the requirements of the
provincial government should have a clear basis, whether in law,
ordinance, or even from the contract itself. Unfortunately for
Lepanto, it failed to show its entitlement to such exemption.
 Three. Lepanto relies on the principle that when a
company is taxed on its main business, it is no longer taxable for
engaging in an activity that is but a part of, incidental to, and
necessary to such main business. Lepanto points out that, since
it did not extract and use sand and gravel as independent
activities but as integral parts of its mining operations, it should
not be subjected to a separate tax on the same.

But in the cases where this principle has been applied,

the taxes which were stricken down were in the nature of
business taxes. The reasoning behind those cases was that the
incidental activity could not be treated as a business separate
and distinct from the main business of the taxpayer. Here the
tax is an excise tax imposed on the privilege of extracting sand
and gravel. And it is settled that provincial governments can
levy excise taxes on quarry resources independently from the
national government.[8]

WHEREFORE, the Court DENIES the petition

and AFFIRMS the decision of the Court of Tax Appeals En
Banc in CTA EB 201 dated May 17, 2007.

SO ORDERED.

ROBERTO A. ABAD

Associate Justice
 Republic of the Philippines Such franchise tax shall be payable to the
Supreme Court Commissioner of Internal Revenue or his duly
Manila authorized representative on or before the
twentieth day of the month following the end of
FIRST DIVISION each calendar quarter or month as may be
provided in the respective franchise or pertinent
ANGELES CITY, municipal regulation and shall, any provision of
the Local Tax Code or any other law to the
Petitioner, contrary notwithstanding, be in lieu of all taxes and
assessments of whatever nature imposed by any
- versus - national or local authority on earnings, receipts,
income and privilege of generation, distribution
ANGELES CITY ELECTRIC
and sale of electric current.
CORPORATION and
REGIONAL TRIAL COURT
BRANCH 57, ANGELES CITY, On January 1, 1992, RA 7160 or the Local Government Code
(LGC) of 1991 was passed into law, conferring upon provinces and cities
Respondents. the power, among others, to impose tax on businesses enjoying
franchise.[4] In accordance with the LGC, the Sangguniang
G.R. No. 166134 June 29, 2010
Panlungsod of Angeles Cityenacted on December 23, 1993 Tax
Ordinance No. 33, S-93, otherwise known as the Revised Revenue Code
of Angeles City (RRCAC).
x---------------------------------------------x
On February 7, 1994, a petition seeking the reduction of the
tax rates and a review of the provisions of the RRCAC was filed with
DECISION
the Sangguniang Panlungsod by Metro Angeles Chamber of Commerce
and Industry Inc. (MACCI) of which AEC is a member. There being no
action taken by the Sangguniang Panlungsod on the matter, MACCI
DEL CASTILLO, J.:
elevated the petition[5] to the Department of Finance, which referred
the same to the Bureau of Local Government Finance (BLGF). In the
The prohibition on the issuance of a writ of injunction to enjoin the
petition, MACCI alleged that the RRCAC is oppressive, excessive, unjust
collection of taxes applies only to national internal revenue taxes, and not
and confiscatory; that it was published only once, simultaneously
to local taxes.
on January 22, 1994; and that no public hearings were conducted prior
to its enactment. Acting on the petition, the BLGF issued a First
This Petition[1] for Certiorari under Rule 65 of the Rules of
Indorsement[6] to the City Treasurer of Angeles City, instructing the
Court seeks to set aside the Writ of Preliminary Injunction issued by
latter to make representations with the Sangguniang Panlungsod for
the Regional Trial Court (RTC) of Angeles City, Branch 57, in Civil Case
the appropriate amendment of the RRCAC in order to ensure
No. 11401, enjoining Angeles City and its City Treasurer from levying,
compliance with the provisions of the LGC, and to make a report on the
seizing, disposing and selling at public auction the properties owned by
action taken within five days.
Angeles Electric Corporation (AEC).
Factual Antecedents
Thereafter, starting July 1995, AEC has been paying the local
franchise tax to the Office of the City Treasurer on a quarterly basis, in
On June 18, 1964, AEC was granted a legislative franchise
addition to the national franchise tax it pays every quarter to the Bureau
under Republic Act No. (RA) 4079[2] to construct, maintain and operate
of Internal Revenue (BIR).
an electric light, heat, and power system for the purpose of generating
and distributing electric light, heat and power for sale in Angeles City,
Proceedings before the City Treasurer
Pampanga. Pursuant to Section 3-A thereof,[3] AECs payment of
franchise tax for gross earnings from electric current sold was in lieu of
On January 22, 2004, the City Treasurer issued a Notice of
all taxes, fees and assessments.
Assessment[7] to AEC for payment of business tax, license fee and other
charges for the period 1993 to 2004 in the total amount
On September 11, 1974, Presidential Decree No. (PD) 551
of P94,861,194.10. Within the period prescribed by law, AEC protested
reduced the franchise tax of electric franchise holders. Section 1 of PD
the assessment claiming that:
551 provided that:
(a) pursuant to RA 4079, it is exempt from paying
SECTION 1. Any provision of law or local
local business tax;
ordinance to the contrary notwithstanding, the
franchise tax payable by all grantees of franchises
(b) since it is already paying franchise tax on
to generate, distribute and sell electric current for
business, the payment of business tax would result in
light, heat and power shall be two percent (2%) of
double taxation;
their gross receipts received from the sale of
electric current and from transactions incident to
(c) the period to assess had prescribed because
the generation, distribution and sale of electric
under the LGC, taxes and fees can only be assessed
current.
 and collected within five (5) years from the date they
become due; and
(d) the assessment and collection of taxes under the
RRCAC cannot be made retroactive to 1993 or prior
to its effectivity.[8]
On February 17, 2004, the City Treasurer denied the protest
for lack of merit and requested AEC to settle its tax liabilities.[9]
Proceedings before the RTC
Aggrieved, AEC appealed the denial of its protest to the RTC
of Angeles City via a Petition for Declaratory Relief,[10] docketed as Civil
Case No. 11401.
On April 5, 2004, the City Treasurer levied on the real
properties of AEC.[11] A Notice of Auction Sale[12] was published and
posted announcing that a public auction of the levied properties of AEC
would be held on May 7, 2004.
This prompted AEC to file with the RTC, where the petition
for declaratory relief was pending, an Urgent Motion for Issuance of
Temporary Restraining Order and/or Writ of Preliminary
Injunction[13] to enjoin Angeles City and its City Treasurer from levying,
annotating the levy, seizing, confiscating, garnishing, selling and
disposing at public auction the properties of AEC.
Meanwhile, in response to the petition for declaratory relief
filed by AEC, Angeles City and its City Treasurer filed an Answer with
Counterclaim[14] to which AEC filed a Reply.[15]
After due notice and hearing, the RTC issued a Temporary
Restraining Order (TRO)[16] on May 4, 2004, followed by an
Order[17] dated May 24, 2004 granting the issuance of a Writ of
Preliminary Injunction, conditioned upon the filing of a bond in the
amount of P10,000,000.00. Upon AECs posting of the required
bond, the RTC issued a Writ of Preliminary Injunction on May 28,
2004,[18] which was amended on May 31, 2004 due to some clerical
errors.[19]
On August 5, 2004, Angeles City and its City Treasurer filed a
Motion for Dissolution of Preliminary Injunction and Motion for
Reconsideration of the Order dated May 24, 2004,[20] which was
opposed by AEC.[21]
Finding no compelling reason to disturb and reconsider its
previous findings, the RTC denied the joint motion on October 14,
2004.[22]
Issue
Being a special civil action for certiorari, the issue in the
instant case is limited to the determination of whether the RTC gravely
abused its discretion in issuing the writ of preliminary injunction
enjoining Angeles City and its City Treasurer from levying, selling, and
disposing the properties of AEC. All other matters pertaining to the
validity of the tax assessment and AECs tax exemption must therefore
be left for the determination of the RTC where the main case is pending
decision.
Petitioners Arguments
Petitioners main argument is that the collection of taxes
cannot be enjoined by the RTC, citing Valley Trading Co., Inc. v. Court
of First Instance of Isabela, Branch II,[23] wherein the lower courts denial
of a motion for the issuance of a writ of preliminary injunction to enjoin
the collection of a local tax was upheld. Petitioner further reasons that
since the levy and auction of the properties of a delinquent taxpayer are
proper and lawful acts specifically allowed by the LGC, these cannot be
the subject of an injunctive writ. Petitioner likewise insists that AEC
must first pay the tax before it can protest the assessment. Finally,
petitioner contends that the tax exemption claimed by AEC has no
legal basis because RA 4079 has been expressly repealed by the LGC.
Private respondents Arguments
Private respondent AEC on the other hand asserts that there was no
grave abuse of discretion on the part of the RTC in issuing the writ of
preliminary injunction because it was issued after due notice and
hearing, and was necessary to prevent the petition from becoming
moot. In addition, AEC claims that the issuance of the writ of
injunction was proper since the tax assessment issued by the City
Treasurer is not yet final, having been seasonably appealed pursuant to
Section 195[24] of the LGC. AEC likewise points out that following the
case of Pantoja v. David,[25] proceedings to invalidate a warrant of
distraint and levy to restrain the collection of taxes do not violate the
prohibition against injunction to restrain the collection of taxes because
the proceedings are directed at the right of the City Treasurer to collect
the tax by distraint or levy. As to its tax liability, AEC maintains that it is
exempt from paying local business tax. In any case, AEC counters that
the issue of whether it is liable to pay the assessed local business tax is a
factual issue that should be determined by the RTC and not by the
Supreme Court via a petition for certiorari under Rule 65 of the Rules of
Court.
Our Ruling
We find the petition bereft of merit.
The LGC does not specifically prohibit an injunction enjoining the
collection of taxes
A principle deeply embedded in our jurisprudence is that
taxes being the lifeblood of the government should be collected
promptly,[26] withoutunnecessary hindrance[27] or delay.[28] In line with
this principle, the National Internal Revenue Code of 1997 (NIRC)
expressly provides that no court shall have the authority to grant an
injunction to restrain the collection of any national internal revenue
tax, fee or charge imposed by the code.[29] An exception to this rule
obtains only when in the opinion of the Court of Tax Appeals (CTA) the
collection thereof may jeopardize the interest of the government
and/or the taxpayer.[30]
The situation, however, is different in the case of the
collection of local taxes as there is no express provision in the LGC
prohibiting courts from issuing an injunction to restrain local
governments from collecting taxes. Thus, in the case of Valley Trading
Co., Inc. v. Court of First Instance of Isabela, Branch II, cited by the
petitioner, we ruled that:
Unlike the National Internal Revenue Code, the
Local Tax Code[31] does not contain any specific
 provision prohibiting courts from enjoining the
collection of local taxes. Such statutory lapse or
intent, however it may be viewed, may have
allowed preliminary injunction where local taxes
are involved but cannot negate the procedural
rules and requirements under Rule 58.[32]
In light of the foregoing, petitioners reliance on the above-
cited case to support its view that the collection of taxes cannot be
enjoined is misplaced. The lower courts denial of the motion for the
issuance of a writ of preliminary injunction to enjoin the collection of
the local tax was upheld in that case, not because courts are prohibited
from granting such injunction, but because the circumstances required
for the issuance of writ of injunction were not present.
Nevertheless, it must be emphasized that although there is
no express prohibition in the LGC, injunctions enjoining the collection
of local taxes are frowned upon. Courts therefore should exercise
extreme caution in issuing such injunctions.
No grave abuse of discretion was committed by the RTC
Section 3, Rule 58, of the Rules of Court lays down the
requirements for the issuance of a writ of preliminary injunction, viz:
(a) That the applicant is entitled to the
relief demanded, and the whole or part of such
relief consists in restraining the commission or
continuance of the acts complained of, or in the
performance of an act or acts, either for a limited
period or perpetually;
(b) That the commission, continuance
or non-performance of the act or acts complained
of during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, or agency or a
person is doing, threatening, or attempting to do,
or is procuring or suffering to be done, some act or
acts probably in violation of the rights of the
applicant respecting the subject of the action or
proceeding, and tending to render the judgment
ineffectual.
Two requisites must exist to warrant the issuance of a writ of
preliminary injunction, namely: (1) the existence of a clear and
unmistakable right that must be protected; and (2) an urgent and
paramount necessity for the writ to prevent serious damage.[33]
In issuing the injunction, the RTC ratiocinated that:
It is very evident on record that
petitioner[34] resorted and filed an urgent motion
for issuance of a temporary restraining order and
preliminary injunction to stop the scheduled
auction sale only when a warrant of levy was issued
and published in the newspaper setting the
auction sale of petitioners property by the City
Treasurer, merely few weeks after the petition for
declaratory relief has been filed, because if the
respondent will not be restrained, it will render this
petition moot and academic. To the mind of the
Court, since there is no other plain, speedy and
adequate remedy available to the petitioner in the
ordinary course of law except this application for a
temporary restraining order and/or writ of
preliminary injunction to stop the auction sale
and/or to enjoin and/or restrain respondents from
levying, annotating the levy, seizing, confiscating,
garnishing, selling and disposing at public auction
the properties of petitioner, or otherwise exercising
other administrative remedies against the
petitioner and its properties, this alone justifies the
move of the petitioner in seeking the injunctive
reliefs sought for.
Petitioner in its petition is questioning
the assessment or the ruling of the City Treasurer
on the business tax and fees, and not the local
ordinance concerned.This being the case, the
Court opines that notice is not required to the
Solicitor General since what is involved is just a
violation of a private right involving the right of
ownership and possession of petitioners
properties. Petitioner, therefore, need not comply
with Section 4, Rule 63 requiring such notice to the
Office of the Solicitor General.
The Court is fully aware of the Supreme
Court pronouncement that injunction is not
proper to restrain the collection of taxes. The issue
here as of the moment is the restraining of the
respondent from pursuing its auction sale of the
petitioners properties. The right of ownership and
possession of the petitioner over the properties
subject of the auction sale is at stake.
Respondents assert that not one of the
witnesses presented by the petitioner have proven
what kind of right has been violated by the
respondent, but merely mentioned of an injury
which is only a scenario based on speculation
because of petitioners claim that electric power
may be disrupted.
Engr. Abordos testimony reveals and
even his Affidavit Exhibit S showed that if the
auction sale will push thru, petitioner will not only
lose control and operation of its facility, but its
employees will also be denied access to
equipments vital to petitioners operations, and
since only the petitioner has the capability to
operate Petersville sub station, there will be a
massive power failure or blackout which will
adversely affect business and economy, if not lives
and properties in Angeles City and surrounding
communities.
Petitioner, thru its witnesses, in the
hearing of the temporary restraining order,
presented sufficient and convincing evidence
 proving irreparable damages and injury which that it would sustain serious damage if these properties, which are vital
were already elaborated in the temporary to its operations, would be sold at public auction. As we see it then, the
restraining order although the same may be writ of injunction was properly issued.
realized only if the auction sale will proceed. And
unless prevented, restrained, and enjoined, grave A final note. While we are mindful that the damage to a
and irreparable damage will be suffered not only taxpayers property rights generally takes a back seat to the paramount
by the petitioner but all its electric consumers in need of the State for funds to sustain governmental functions,[40] this
Angeles, Clark, Dau and Bacolor, Pampanga. rule finds no application in the instant case where the disputed tax
assessment is not yet due and demandable. Considering that AEC was
The purpose of injunction is to prevent able to appeal the denial of its protest within the period prescribed
injury and damage from being under Section 195 of the LGC, the collection of business taxes[41] through
incurred, otherwise, it will render any judgment in levy at this time is, to our mind, hasty, if not premature.[42] The issues of
this case ineffectual. tax exemption, double taxation, prescription and the alleged retroactive
application of the RRCAC, raised in the protest of AEC now pending
As an extraordinary remedy, injunction with the RTC, must first be resolved before the properties of AEC can
is calculated to preserve or maintain the status quo be levied. In the meantime, AECs rights of ownership and possession
of things and is generally availed of to prevent must be respected.
actual or threatened acts, until the merits of the
case can be heard (Cagayan de Oro City Landless WHEREFORE, the petition is hereby DISMISSED.
Res. Assn. Inc. vs. CA, 254 SCRA 220)
SO ORDERED.
It appearing that the two essential
requisites of an injunction have been satisfied, as
there exists a right on the part of the petitioner to MARIANO C. DEL CASTILLO
be protected, its right[s] of ownership and Associate Justice
possession of the properties subject of the auction
sale, and that the acts (conducting an auction sale)
against which the injunction is to be directed, are
violative of the said rights of the petitioner, the
Court has no other recourse but to grant the prayer
for the issuance of a writ of preliminary injunction
considering that if the respondent will not be
restrained from doing the acts complained of, it
will preempt the Court from properly adjudicating
on the merits the various issues between the
parties, and will render moot and academic the
proceedings before this court.[35]

As a rule, the issuance of a preliminary injunction rests

entirely within the discretion of the court taking cognizance of the case
and will not be interfered with, except where there is grave abuse of
discretion committed by the court.[36] For grave abuse of discretion to
prosper as a ground for certiorari, it must be demonstrated that the
lower court or tribunal has exercised its power in an arbitrary and
despotic manner, by reason of passion or personal hostility, and it must
be patent and gross as would amount to an evasion or to a unilateral
refusal to perform the duty enjoined or to act in contemplation of
law.[37] In other words, mere abuse of discretion is not enough.[38]

Guided by the foregoing, we find no grave abuse of discretion

on the part of the RTC in issuing the writ of injunction. Petitioner, who
has the burden to prove grave abuse of discretion,[39] failed to show that
the RTC acted arbitrarily and capriciously in granting the injunction.
Neither was petitioner able to prove that the injunction was issued
without any factual or legal justification. In assailing the injunction,
petitioner primarily relied on the prohibition on the issuance of a writ
of injunction to restrain the collection of taxes. But as we have already
said, there is no such prohibition in the case of local taxes. Records also
show that before issuing the injunction, the RTC conducted a hearing
where both parties were given the opportunity to present their
arguments. During the hearing, AEC was able to show that it had a
clear and unmistakable legal right over the properties to be levied and