G.R. No. 203754 - Film Development Council of the Philippines vs. Colon Heritage Realty Corp.

Case Summary (G.R. No. 203754)

Applicable Law and Constitutional Basis

Primary statutes: Republic Act No. 9167 (Sections 13 and 14) and Section 140 of Republic Act No. 7160 (Local Government Code) concerning amusement taxes. Constitutional principle: the decision is governed by the 1987 Constitution’s protection of local fiscal autonomy — i.e., taxes levied by LGUs shall accrue to those LGUs and the power to apportion local resources is constitutionally safeguarded.

Relevant Text of Sections 13 and 14 (RA 9167)

Section 13 granted graded films an “amusement tax reward” tied to amusement taxes imposed and collected by LGUs. Section 14 required proprietors/operators/lessees to deduct and withhold amusement tax revenue on graded films during exhibition and remit such within 30 days from termination to FDCP, which would reward producers within 15 days of receipt. The provisions also authorized surcharges for delinquent remittances.

Procedural History

The Court’s June 16, 2015 Decision declared Sections 13 and 14 of RA 9167 unconstitutional for violating local fiscal autonomy. The Court nevertheless applied the doctrine of operative fact to preserve certain legal effects arising from actions taken while the provisions were in force: FDCP and producers need not return amounts already received, and amounts retained by theater proprietors pursuant to RA 9167 during its validity should be remitted to FDCP. FDCP’s motion for reconsideration was denied with finality in the Court’s October 15, 2019 Resolution. SMPHI filed an Urgent Motion (Jan 8, 2020) seeking clarification as to whether amusement taxes attributable to graded films exhibited after FDCP received the October 15, 2019 Resolution (receipt dated Dec 10, 2019; FDCP’s Memorandum dated Dec 11, 2019 directing remittances) remained payable to FDCP. The films in question were screened Dec 25, 2019–Jan 7, 2020, with remittances under Section 14 due 30 days after exhibition termination (e.g., Feb 6, 2020 for the Festival screenings).

Issue for Clarification

Whether SMPHI (and by extension other theater proprietors/operators/lessees) must remit amusement taxes withheld or which became due for remittance after December 10, 2019 to FDCP for films that were graded prior to the finality of the Court’s decision but were exhibited after that date, specifically those shown in the Metro Manila Film Festival.

Court’s Authority to Clarify and Decision to Entertain the Motion

The Court invoked its inherent power to amend and control its processes and orders to make them conformable to law and justice, permitting clarification of its prior Decision and Resolution despite those instruments having attained finality. The Court deemed clarification necessary because FDCP had interpreted the finality date in a manner that would extend its claimed rights beyond the scope sanctioned by the operative fact doctrine.

Finality, Receipt Date, and Effectivity of the Court’s Ruling

The Court emphasized that denial of reconsideration with finality means that the Court’s disposition is effective irrespective of the date the party actually received the Resolution. Under the Court’s rules, finality for purposes of potential further recourse may be reckoned from receipt, but finality of the Court’s disposition does not depend on later receipt dates for substantive effect: FDCP’s receipt of the October 15, 2019 Resolution on December 10, 2019 does not revive any right to claim amusement taxes after the Court’s final determination.

Operative Fact Doctrine: Scope and Limitation Applied

The Court reiterated that the operative fact doctrine permitted limited recognition of legal effects that occurred while the provisions were in force — namely, FDCP’s retention of amusement tax proceeds already received and the obligation of theater proprietors to remit amounts withheld during the effective period of RA 9167. However, that recognition is strictly temporal: it extends only from RA 9167’s effectivity up to the date the case attained finality (October 15, 2019). After that date FDCP no longer retained any right — equitable or legal — to receive or demand amusement taxes under the invalidated provisions.

Interpretation of Section 14 and FDCP’s Nature of Authority

The Court analyzed Section 14’s plain language: FDCP’s entitlement is limited to “all revenue from the amusement tax on the graded film … during the period the graded film is exhibited.” Section 14 does not confer taxing authority on FDCP; rather it channels revenue that otherwise would accrue to LGUs to FDCP as a reward, tied to actual exhibition. Thus, accrual of an amusement tax in tax-law terms (point of sale) is distinct from FDCP’s statutory right to remittance, which is contingent upon the film’s exhib

Case Syllabus (G.R. No. 203754)

Parties, Citation, and Nature of Proceeding

Supreme Court En Banc resolution reported at 888 Phil. 550, G.R. No. 203754, November 3, 2020.
Petitioners: Film Development Council of the Philippines (FDCP).
Respondents in related docketing: Colon Heritage Realty Corporation (CHRC), City of Cebu, and SM Prime Holdings, Inc. (SMPHI).
Proceeding: Resolution on an Urgent Motion for Clarification filed by SMPHI regarding the Court's prior Decision (June 16, 2015) and the Court's Resolution (October 15, 2019) in the consolidated matters FDCP v. CHRC, G.R. Nos. 203754 and 204418.

Statutory Background (RA 9167 and the Local Government Code)

Republic Act No. 9167 (approved June 7, 2002) created the FDCP and included Sections 13 and 14 concerning privileges for graded films and the deduction/withholding/remittance of amusement tax by theater proprietors to FDCP.
Section 13 (as quoted in the source) conferred amusement tax rewards to producers of films graded "A" or "B" (100% for "A"; 65% for "B"; remaining 35% to FDCP funds).
Section 14 (as quoted in the source) provided that all revenue from amusement tax on a graded film "during the period the graded film is exhibited" shall be deducted and withheld by theater proprietors and remitted within thirty (30) days from termination of exhibition to FDCP, which shall reward corresponding amusement tax to producers within fifteen (15) days from receipt; provision for surcharge for delinquency.
Republic Act No. 7160 (Local Government Code, January 1, 1992), Section 140, authorizes provinces to levy an amusement tax on gross receipts from admission fees (referenced for comparison and interplay with RA 9167).

Factual Background Relevant to the Clarification

The Supreme Court, in its June 16, 2015 Decision, struck down Sections 13 and 14 of RA 9167 as invalid and unconstitutional for violating the principle of local fiscal autonomy by effectively earmarking and confiscating amusement taxes that should inure to LGUs.
Despite the unconstitutionality ruling, the Court applied the doctrine of operative fact to recognize certain legal effects produced while the provisions were in force: FDCP and producers need not return amounts already received under the then-effective statute; amounts retained by cinema proprietors due to FDCP at that time should be remitted to FDCP.
FDCP filed a motion for reconsideration; the Court denied it with finality in its October 15, 2019 Resolution.
SMPHI filed an Urgent Motion for Clarification (dated January 8, 2020) drawing attention to an FDCP Memorandum dated December 11, 2019, wherein FDCP's Chairperson and CEO directed theater owners to process amusement tax remittances "accorded to films graded before December 10, 2019" and warned of legal action for non-compliance.
SMPHI pointed out that Metro Manila Film Festival (MMFF) screenings commenced December 25, 2019 and ran mostly until January 7, 2020; under Section 14 of RA 9167, remittance to FDCP would be due thirty (30) days after termination of exhibition (e.g., February 6, 2020), and thus SMPHI sought clarification whether the operative fact doctrine applied to films graded before December 10, 2019 but exhibited after the finality date.
FDCP, in its Comment, asserted that the reckoning point of finality was December 10, 2019—the date it received the October 15, 2019 Resolution—and contended that amusement taxes based on sales completed prior to that receipt date already accrued to FDCP; FDCP distinguished accrual of tax (point of sale) from obligation to pay (remittance schedule under Section 14).

Procedural Posture and Relief Sought in Urgent Motion

SMPHI prayed that the Court clarify the effectivity of the operative fact doctrine concerning films graded before December 10, 2019 but exhibited after the Court's finality, specifically whether amusement taxes withheld or due for remittance after December 10, 2019 (e.g., MMFF films) must be remitted to FDCP.
FDCP filed its Comment opposing SMPHI’s position, arguing that accrual occurs at point of sale and that taxes accruing prior to FDCP’s receipt of the Resolution were already FDCP’s.

Lower Decision: June 16, 2015 (Core Holdings Relevant to Clarification)

The June 16, 2015 Decision declared Sections 13 and 14 of RA 9167 unconstitutional because they violated local fiscal autonomy by earmarking or confiscating amusement taxes that should have gone to LGUs.
The Decision explained that Section 14 did not remove the power of LGUs to levy amusement taxes under Section 140 of the LGC; instead, it diverted the revenue those LGUs would otherwise receive to FDCP, thereby depriving LGUs of the benefit of taxes levied by their taxing power.
The Decision recognized FDCP’s statutory mandate to provide incentives to film producers and that Section 14 tied the reward mechanism to revenue "during the period the graded film is exhibited."
Under the operative fact doctrine, the Court permitted FDCP to retain amusement taxes already received during the provisions’ effectivity but held the provisions void prospectively.

October 15, 2019 Resolution (Finality and Remand)

The Court denied FDCP’s motion for reconsideration dated August 5, 2015 with finality and denied the City of Cebu’s partial reconsideration motion; it partly granted CHRC’s manifestation and remanded Civil Case No. CEB-35601 to the RTC to determine payment and compliance by CHRC.
The October 15, 2019 Resolution rendered final the determination that Sections 13 and 14 are unconstitutional, thereby fixing the end point of the operative fact doctrine’s limited application.

Legal Issues Presented for Clarification

Whether SMPHI should remit to FDCP amusement taxes that were withheld or were due for remittance after December 10, 2019, specifically with respect to graded films exhibited during the MMFF but graded before FDCP’s receipt of the Court's October 15, 2019 Resolution.
Whether FDCP’s interpretation that the finality of the Court’s June 16, 2015 Decision and October 15, 2019 Resolution is tied to FDCP’s receipt of the Resolution (December 10, 2019) affects the operative fact doctrine’s temporal scope.

Applicable Doctrines, Rules, and Authorities Cited by the Court

The Court's inherent power to a