G.R. No. 192629 - Filinvest Land, Inc. vs. Adia

Cebu City Ordinance No. LXIX (Revised Omnibus Tax Ordinance of the City of Cebu) was enacted circa 1993.

Sections 42 and 43 imposed an amusement tax on proprietors, lessees, or operators of theaters, cinemas, and other places of amusement, requiring payment of 30% of the gross receipts from admission fees to the City Treasurer.
The tax rate was later reduced to 10% pursuant to an amendatory ordinance.

On June 7, 2002, Congress passed Republic Act No. 9167, which created the Film Development Council of the Philippines (FDCP).

Sections 13 and 14 of RA 9167 provided that for graded films (classified as “A” or “B”), the amusement tax on such films should be deducted and withheld by cinema proprietors and remitted to the FDCP, which in turn would award an incentive or reward to the film producers.
These provisions effectively reallocated the amusement tax—from local government units (LGUs) to the FDCP—when films were exhibited.

FDCP asserted that all cities within Metro Manila and other highly urbanized and independent component cities had complied with RA 9167, except Cebu City.
Cebu City continued to insist on its right to receive the amusement tax instead of remitting the amounts to the FDCP, prompting conflicts with cinema proprietors and operators.

FDCP issued demand letters with surcharges to cinema proprietors and operators, including respondent Colon Heritage Realty Corporation (CHRC) and SM Prime Holdings, Inc. (SMPHI), for the unpaid amusement taxes.
Cebu City filed a Petition for Declaratory Relief before the RTC of Cebu City, Branch 14 (Civil Case No. CEB-35529).
CHRC similarly filed a petition before the RTC of Cebu City, Branch 5 (Civil Case No. CEB-35601), seeking to declare Sections 13 and 14 of RA 9167 as invalid and unconstitutional.
SMPHI intervened in Civil Case No. CEB-35529 on August 13, 2010.

On September 25, 2012, the RTC of Cebu City, Branch 5 issued a Judgment declaring Sections 13 and 14 of RA 9167 unconstitutional.
On October 24, 2012, a similar Decision was rendered by the RTC of Cebu City, Branch 14, under Civil Case No. CEB-35529.

FDCP filed two petitions for review on certiorari challenging the RTCs’ declarations of unconstitutionality.
The petitions were consolidated by the Court in a Resolution dated March 4, 2013.

FDCP, CHRC, and Cebu City subsequently filed their respective motions for reconsideration or partial reconsideration.

FDCP sought the imposition of surcharges on delinquent taxpayers despite the impending constitutional invalidation, arguing for the effectivity of the law under the doctrine of operative fact.
CHRC admitted that it did not withhold tax remittances to FDCP but argued that it had already remitted the amusement taxes to Cebu City, thereby invoking the principle against double taxation.
Cebu City contended against the application of the operative fact doctrine, arguing that once declared unconstitutional, the tax provisions should have no legal effect and that remitting previously received funds to FDCP would be inequitable.

Whether the provisions of RA 9167, dedicating portions of the amusement tax to the FDCP, violate the principle of local fiscal autonomy by effectively confiscating the amusement taxes due to LGUs.
The implications of declaring these sections unconstitutional, particularly regarding the collection and remittance of amusement taxes.

Whether the doctrine of operative fact should apply, recognizing that the legal effects of a law that was in force prior to its declaration of unconstitutionality should be given effect to ensure fairness and avoid undue burden on those who acted in good faith.
Whether FDCP, cinema proprietors, and LGUs should be bound by or relieved of obligations arising from the tax remittances during the period when Sections 13 and 14 were operative.

FDCP’s motion for reconsideration seeking enforcement of surcharge payments on the basis that all aspects of the law, including surcharges, took effect before being declared unconstitutional.
CHRC’s contention to avoid double taxation by asserting that it had already remitted the due amusement tax to Cebu City, and its request for remand to determine the precise payment facts.
Cebu City’s challenge against the operative application of the doctrine, arguing that the declaration of unconstitutionality nullifies all legal effects of the provisions and that enforcing remittance would violate equitable principles and public fund disbursement procedures.