G.R. No. 175723 - City of Manila vs. Grecia-Cuerdo

Case Summary (G.R. No. 175723)

Petitioners

City of Manila and its City Treasurer sought relief by way of a special civil action for certiorari under Rule 65 of the Rules of Court to annul Court of Appeals (CA) Resolutions (dated April 6, 2006 and November 29, 2006) that dismissed petitioners’ CA petition for lack of jurisdiction.

Respondents and Public Respondent

The petition challenged the RTC Branch 112’s July 9, 2004 order granting a writ of preliminary injunction in favor of the private respondents (taxpayer corporations), and the RTC’s October 15, 2004 denial of petitioners’ motion for reconsideration. The private respondents had sued for refund or recovery of illegally and/or erroneously collected local business taxes and obtained injunctive relief from the trial court.

Key Dates

Taxable period assessed by City of Manila: January–December 2002.
Payment under protest by private respondents: P19,316,458.77.
Complaint filed with RTC (Civil Case No. 04‑0019‑CFM): January 24, 2004; amended complaint: February 16, 2004.
RTC preliminary injunction: July 9, 2004; RTC denial of reconsideration: October 15, 2004.
CA Resolutions dismissing petition for certiorari and denying reconsideration: April 6, 2006 and November 29, 2006.
RTC decision on the merits awarding refund/credit: August 13, 2007 (total P19,316,458.77); Certificate of Finality: October 20, 2008; Writ of Execution: November 25, 2009.
Supreme Court decision: February 4, 2014 (for purposes of applicable constitutional basis, the 1987 Constitution governs).

Applicable Law

1987 Philippine Constitution (basis for judicial power and duty to determine grave abuse of discretion).
Revised Revenue Code of Manila (RRCM), specifically Sections 14–21 (basis for the local business tax assessments at issue).
Republic Act No. 1125 (creation of the Court of Tax Appeals, CTA).
Republic Act No. 9282 (amendatory law expanding CTA jurisdiction and elevating its rank).
Rules of Court: Rule 65 (special civil action for certiorari) and Rule 45 (petition for review on certiorari).
BP 129 and other statutes referenced concerning original and appellate powers of courts and tribunals.

Procedural Background and Core Relief Sought

The City assessed local business taxes for 2002 against the private respondents under various sections of the RRCM, including Section 21. Because payment of assessed taxes was a precondition to issuance of business permits, the private respondents paid the assessment under protest and filed suit in the RTC for refund or recovery and injunctive relief. The RTC granted a writ of preliminary injunction restraining enforcement of Section 21 against those taxpayers. Petitioners sought relief from the CA by filing a certiorari petition; the CA dismissed for lack of jurisdiction on grounds that the Court of Tax Appeals had exclusive appellate jurisdiction over local tax cases under RA 9282. Petitioners then filed a special civil action under Rule 65 with the Supreme Court to set aside the CA’s dismissal.

Issues Presented to the Supreme Court

The petition presented five principal issues: (1) whether the CA gravely erred in dismissing the petition for lack of jurisdiction; (2) whether the RTC gravely abused its discretion in issuing the writ of preliminary injunction enjoining implementation of Section 21; (3) whether the RTC abused its discretion in issuing the injunction despite the private respondents’ alleged failure to make a written claim for tax refund or credit with the City Treasurer; (4) whether the RTC erred in issuing the injunction given that under Section 21 of the Manila Revenue Code the City acts only as collecting agent; and (5) whether issuance of the injunction caused greater damage or prejudice to the City and its constituents.

Mootness, Finality and the Court’s Preliminary Disposition

The Supreme Court found the petition to be moot and academic in relation to the RTC’s interlocutory orders because the RTC later rendered a final decision on the merits (August 13, 2007) granting the full refund/credit (the same aggregate amount the taxpayers had paid under protest) and enjoining collection under Section 21; that decision became final and executory (Certificate of Finality dated October 20, 2008) and had been executed (Writ of Execution dated November 25, 2009). Because the trial court ultimately ruled for the respondents and that ruling was final and executed, the preliminary question concerning the propriety of the injunction no longer presented a live controversy. The Court invoked the well‑established rule that where issues are moot and academic, adjudication is ordinarily inappropriate. Nonetheless, the Court recognized the question of forum jurisdiction to be significant and of recurring importance, and therefore invoked the exception permitting resolution of issues capable of repetition yet evading review.

Procedural Defect in Petitioners’ Chosen Remedy and the Court’s Rule Relaxation

The Supreme Court identified a procedural error by petitioners: they invoked Rule 65 (certiorari) before the Supreme Court to challenge CA Resolutions that were final in nature (they disposed of the petition completely). The Court emphasized that when an assailed order is final, the proper remedy is a petition for review on certiorari under Rule 45, which continues the appellate process; Rule 65 is an original action that lies only when no other plain, speedy, and adequate remedy exists and cannot substitute for a lost appeal. Despite this defect, the Court — guided by the Rules’ liberal spirit and in the interest of substantial justice — exercised discretion to treat the Rule 65 petition as a petition for review on certiorari under Rule 45 because: (1) it was filed within the 15‑day reglementary period for Rule 45; (2) an error of judgment was alleged; and (3) the jurisdictional issue was of sufficient significance to justify relaxation of procedural rules.

Central Legal Question and Holding

The central legal question addressed was whether the Court of Tax Appeals has jurisdiction to entertain petitions for certiorari challenging interlocutory orders issued by the RTC in local tax cases pending before it. The Supreme Court held affirmatively: the CTA possesses jurisdiction to entertain such petitions for certiorari in aid of its exclusive appellate jurisdiction over local tax cases.

Statutory and Constitutional Rationale

Statutory scope: RA 1125 originally established the CTA and enumerated its jurisdiction; RA 9282 expanded that jurisdiction, expressly granting the CTA exclusive appellate jurisdiction to review by appeal “decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction.” RA 9282 also elevated the CTA’s rank and declared that it shall possess all the inherent powers of a court of justice.
Constitutional foundation: Article VIII and related provisions of the 1987 Constitution vest judicial power in the Supreme Court and such lower courts as may be established by law, and charge courts with the duty to determine whether there has been grave abuse of discretion amounting to lack or excess of jurisdiction. On the strength of that constitutional grant, the Court reasoned that the CTA — as the specially constituted tax court with appellate authority over local tax litigation — is empowered to determine whether an RTC has committed grave abuse of discretion in interlocutory rulings and, where necessary, to issue writs of certiorari in aid of its appellate jurisdiction.
Avoidance of split jurisdiction: the Court stressed pragmatic and institutional considerations: to vest appellate review of local tax cases in the CTA but deny to the CTA the power to issue extraordinary writs in aid of that appellate jurisdiction would risk split jurisdiction (one court deciding appeals on the merits while another resolves interlocutory incidents) and would frustrate the CTA’s effective supervision of matters within its exclusive appellate domain.
Precedent and rules: the Court relied on prior decisions (J.M. Tuason & Co. v. Jaramillo; De Jesus v. Court of Appeals; Galang v. Geronimo; Bulilis v. Nuez) recognizing that where a court has appellate jurisdiction over a matter, it also may exercise certiorari powers in aid of that appellate jurisdiction. The Rules of Court (Section 6, Rule 135) authorize courts, when jurisdiction is conferred, to employ auxiliary writs an

Case Syllabus (G.R. No. 175723)

Facts of the Case

Petitioner City of Manila, through City Treasurer Liberty M. Toledo, assessed local business taxes against private respondents for the taxable period January to December 2002.
The assessment included taxes purportedly due under Sections 14, 15, 16, 17 of the Revised Revenue Code of Manila (RRCM) and local business taxes collectible under Section 21 of the same Code.
Because payment of the assessed taxes was a precondition for issuance of business permits, private respondents paid under protest the assessed amount of P 19,316,458.77.
On January 24, 2004, private respondents filed a complaint in the Regional Trial Court (RTC) of Pasay City, Branch 112, titled "Refund or Recovery of Illegally and/or Erroneously-Collected Local Business Tax, Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction," docketed as Civil Case No. 04-0019-CFM.
In their February 16, 2004 amended complaint, private respondents alleged that, in relation to Section 21, Sections 14–20 of the RRCM violated the limitations and guidelines under Section 143(h) of Republic Act No. 7160 (Local Government Code) concerning double taxation; they further alleged that Manila Ordinance No. 8011 amending the RRCM had been declared illegal and unconstitutional by the Department of Justice.
On July 9, 2004, the RTC granted private respondents’ application for a writ of preliminary injunction enjoining enforcement of Section 21 against them; the RTC denied petitioners’ motion for reconsideration on October 15, 2004.
Petitioners sought relief from the Court of Appeals (CA) via a special civil action for certiorari challenging the RTC orders; the CA dismissed petitioners’ petition for lack of jurisdiction in its April 6, 2006 Resolution and denied petitioners’ motion for reconsideration on November 29, 2006.
Petitioners then filed the present petition before the Supreme Court, originally captioned as a special civil action for certiorari under Rule 65 of the Rules of Court.
On August 13, 2007, the RTC rendered a decision on the merits in the main case granting tax refunds or credits to the private respondents in the aggregate amount of P 19,316,458.77, allocated among the responding taxpayers (specific amounts for each respondent are set out in the RTC’s dispositive portion).
The RTC issued a Certificate of Finality on October 20, 2008, and a Writ of Execution was issued on November 25, 2009.

Procedural History

Initial administrative assessment by City of Manila for 2002 tax year; taxpayers paid under protest.
Civil complaint filed in RTC (Jan. 24, 2004); amended complaint filed Feb. 16, 2004.
RTC granted preliminary injunction (July 9, 2004); denied reconsideration (Oct. 15, 2004).
Petitioners filed special civil action for certiorari with the CA contesting the RTC interlocutory orders; CA dismissed for lack of jurisdiction (Apr. 6, 2006) and denied reconsideration (Nov. 29, 2006).
Petitioners filed a special civil action for certiorari under Rule 65 before the Supreme Court (the present petition).
RTC later rendered judgment on the merits in favor of the plaintiffs (Aug. 13, 2007), which became final and executory (Certificate of Finality Oct. 20, 2008) and execution issued (Nov. 25, 2009).

Issues Presented by Petitioners (as raised before the Supreme Court)

I. Whether the Court of Appeals gravely erred in dismissing the case for lack of jurisdiction.
II. Whether the Regional Trial Court gravely abused its discretion amounting to lack or excess of jurisdiction in issuing the writ of preliminary injunction enjoining implementation of Section 21 of the RRCM against private respondents.
III. Whether the RTC gravely abused its discretion in issuing the writ of injunction despite private respondents’ failure to make a written claim for tax credit or refund with the City Treasurer of Manila.
IV. Whether the RTC gravely abused its discretion considering that, under Section 21 of the Manila Revenue Code as amended, petitioners are mere collecting agents of the City Government.
V. Whether the RTC gravely abused its discretion in issuing the writ of injunction because such injunction would cause greater damage and prejudice to the City of Manila and its constituents.

Lower Courts’ Rulings on Relief Sought

The RTC (Branch 112, Pasay City) issued a writ of preliminary injunction on July 9, 2004, enjoining enforcement of Section 21 against the private respondents; this injunction survived denial of petitioners’ motion for reconsideration on October 15, 2004.
The Court of Appeals dismissed petitioners’ certiorari petition for lack of jurisdiction in its April 6, 2006 Resolution and denied petitioners’ motion for reconsideration on November 29, 2006.
On the merits, the RTC rendered judgment on August 13, 2007 granting tax refunds/credits to the private respondents in the total amount of P 19,316,458.77 and enjoined defendants from collecting taxes under Section 21; that decision became final and executory (Certificate of Finality, Oct. 20, 2008) and a Writ of Execution was issued (Nov. 25, 2009).

Supreme Court’s Preliminary Determinations (Mootness and Procedural Posture)

The Supreme Court found the present petition to be moot and academic because the main case had been decided on the merits by the RTC in favor of private respondents, that decision had become final and executory, and execution had been issued; thus, the interlocutory issues concerning the preliminary injunction have lost practical utility.
Despite mootness, the Court resolved the jurisdictional question due to its significance, invoking the exception for issues capable of repetition yet evading review.
The Court determined that petitioners had availed of the wrong remedy by filing a special civil action for certiorari under Rule 65 against CA Resolutions that were final disposals of their petition; the proper remedy would have been a petition for review on certiorari under Rule 45.
In the interest of substantial justice and under the liberal spirit of the Rules of Court, the Supreme Court relaxed the rules and treated the petition for certiorari under Rule 65 as a petition for