G.R. No. 150763 - Rural Bank of Makati, Inc. vs. Municipality of Makati

Petitioners are Rural Bank of Makati, Inc., Esteban S. Silva (bank president and general manager), and Magdalena V. Landicho (corporate secretary). Respondents are the Municipality of Makati and Atty. Victor A.L. Valero (municipal attorney).
In August 1990, Atty. Valero inquired at the Rural Bank of Makati regarding its tax payments. Petitioners asserted exemption from taxes under Republic Act No. 720, as amended.

On November 19, 1990, Municipality of Makati filed complaints with the Prosecutor’s Office against petitioners for violations related to non-payment of mayor’s permit fee and business taxes under the Metropolitan Tax Code and Metro Manila Commission ordinances.
Concurrent criminal cases were filed in the Metropolitan Trial Court (Criminal Case Nos. 140208 and 140209).
While these cases were pending, the municipality ordered the closure of the bank. Consequently, petitioners paid under protest the amount of Php 82,408.66 covering the mayor’s permit fee and business taxes.

On October 18, 1991, petitioners filed a complaint for recovery of the protested amount and damages with the Regional Trial Court (RTC) of Makati, docketed as Civil Case No. 91-2866.
Petitioners argued that:

Payment was coerced due to closure order despite pending criminal cases and lack of formal notice/assessment of fees.
Collection process was oppressive, arbitrary, illegal, and ultra vires since respondent Valero lacked enforcement authority.
Municipal ordinances imposing business taxes and permit fees were invalid due to non-publication.
Petitioners claimed losses in expected earnings amounting to Php 19,778.

Respondent municipality asserted payment was a legal obligation and part of police power to regulate business.
Atty. Valero claimed no coercion was exercised, challenged petitioners’ exemption claims, and filed a counterclaim for moral and other damages, alleging harassment.

RTC dismissed petitioners’ complaint and awarded Atty. Valero Php 200,000 as moral damages and Php 50,000 as attorney’s fees. The municipality’s counterclaim was dismissed.
RTC ruled that:

Petitioners’ exemption claim under RA No. 720 was invalid due to Executive Order No. 93 and the Rural Bank Act of 1992 withdrawing such exemptions.
Payment of fees and licenses was mandatory under municipality’s police power and general welfare clause.
Municipal ordinances on fees were valid and sufficiently published or at least not proven otherwise by petitioners.
Atty. Valero’s impleading was proper since he was executing official duties; hence, harassment claim was baseless.

The Court of Appeals (CA) affirmed the RTC decision “in toto.”
The CA upheld the validity of the closure order because the bank operated without valid permits and without paying requisite fees.
The CA rejected petitioners’ contention that the police power exercised was limited to legislative action or that ordinances were invalid for lack of publication.
Petitioners’ motion for reconsideration was denied by CA (November 9, 2001).

Whether the petitioner bank is liable to pay the business taxes and mayor’s permit fees imposed by respondent municipality.
Whether the closure of the petitioner bank was valid and justified.
Whether the petitioners are entitled to an award of refund, unrealized profits, and damages.
Whether respondent Atty. Victor A.L. Valero is entitled to moral damages and attorney’s fees.