G.R. No. 244602 - Mactel Corp. vs. City Government of Makati

Case Summary (G.R. No. 244602)

Prior final and executory judgment (Civil Case No. 05-1040)

In Civil Case No. 05-1040 (RTC Branch 148), the RTC rendered a decision on November 13, 2007 holding that petitioner’s tax assessment should be based on its actual income (the 10% discount/commission it received from telecom companies) and not on the entire face value of prepaid cards. That decision became final and executory after denial of reconsideration in March 2008 and respondents did not appeal. Respondents thereafter accepted petitioner’s tax submissions consistent with that ruling for several years.

Facts and Events Leading to the 2015 Disputes

New assessments, permit renewal denial, and administrative protests (2014–2015)

January 14, 2015: City Treasurer issued a Notice of Assessment for deficiency taxes covering 2010–2013 (Letter of Authority No. 2014-0345) assessing P157,200,855.92, again using the face value of prepaid cards as the tax base.
January 22, 2015: City Administrator issued a Billing Statement alleging a business tax deficiency for 2014 amounting to P24,693,707.82; petitioner’s business permit renewal was refused on account of alleged deficiency.
Petitioner filed administrative protest(s): protest to the January 14, 2015 Notice (filed February 6, 2015) and a protest concerning the January 22, 2015 Billing Statement (attempted February 10, 2015 but refused to be received by the City Administrator). The LGC gives the local treasurer 60 days to resolve such protests under Section 195.

Petition to the RTC and Interim Reliefs

Petition for Declaratory Relief and provisional measures in RTC (Civil Case No. 15-177)

March 4, 2015: While the administrative protest to the City Treasurer was still pending, petitioner filed a Petition for Declaratory Relief with application for Temporary Restraining Order and/or preliminary injunction before RTC Branch 59, seeking among other reliefs: application of the prior final and executory November 13, 2007 judgment (i.e., computation based on the 10% discount) and issuance of a temporary business permit.
April 28, 2015: RTC Branch 59 ordered respondents to desist from proceeding with assessments pending resolution of the case and directed issuance of a temporary business permit upon bond; this order was made interlocutory and followed by a Writ of Preliminary Injunction issued May 11, 2015 after bond posting. Motion for reconsideration by respondents denied August 6, 2015.

CTA Proceedings — Respondents’ Rule 65 Petition and CTA Rulings

Petition for certiorari to CTA and CTA Second Division dismissal

Respondents filed a petition for certiorari under Rule 65 to the Court of Tax Appeals (CTA), assailing the RTC’s interlocutory orders.
February 9, 2016: CTA Second Division dismissed the petition for lack of jurisdiction, reasoning that although the CTA may entertain certiorari against interlocutory RTC orders in a local tax case, the RTC petition in question was not a local tax case but a civil action seeking enforcement/recognition of the prior final judgment and interim reliefs (injunction and mandatory relief) rather than an appeal from denial of a protest or a claim for refund under Sections 195–196 LGC.

CTA En Banc Decisions — Initial Denial and Subsequent Amended Decision

CTA En Banc initial decision (Feb 14, 2018) and Amended Decision (Oct 9, 2018)

February 14, 2018: CTA En Banc affirmed the Second Division’s dismissal for lack of jurisdiction, holding the RTC action was a petition for certiorari and mandamus to enforce a prior final judgment and not an appeal from administrative denial under Sections 195–196 of the LGC; therefore it was not a local tax case falling within the CTA’s appellate jurisdiction.
On motion for reconsideration, the CTA En Banc issued an Amended Decision on October 9, 2018 reversing itself and ruling the case involved local tax matters because the RTC’s interlocutory orders restrained collection of allegedly due business taxes (calling upon CE Casecnan Water & Energy Co., Inc. v. Province of Nueva Ecija precedent), thereby placing the certiorari petition within the CTA’s jurisdiction.

Supreme Court Issues Presented and Standard of Review

Jurisdictional question and standards

Central legal question: whether the CTA had jurisdiction to entertain respondents’ Rule 65 petition assailing RTC interlocutory orders issued in Civil Case No. 15-177. Jurisdiction hinges on the nature of the action and the reliefs sought; the CTA’s appellate jurisdiction over RTC decisions is triggered only when the RTC has ruled on a local tax case within the scope of R.A. 9282 and Rule 4, Section 3(a)(3) RRCTA. The character of the action as pleaded and the relief sought determine subject-matter jurisdiction.

Supreme Court’s Analysis — LGC Section 195 and Necessity to Exhaust Administrative Remedies

Application of Section 195 LGC and timing of administrative resolution

The Court emphasized Section 195 of the LGC: taxpayer must first file a written protest with the local treasurer within 60 days of receiving the Notice of Assessment; the treasurer has 60 days to resolve the protest, and the taxpayer then has 30 days to appeal the denial to the court of competent jurisdiction. At the time petitioner filed the RTC petition (March 4, 2015), its administrative protest to the City Treasurer for the 2010–2013 assessment was still pending and had not been denied (the 60-day decision period had not lapsed). The Court recognized petitioner’s practical dilemma — inability to continue business without a permit — but treated that reality as context for why petitioner sought interim relief from the RTC rather than as converting the character of the action into a local tax case.

Distinguishing Precedents — CE Casecnan and Ignacio

Distinguishing CE Casecnan and Ignacio precedents

The Court found the CTA En Banc’s reliance on CE Casecnan misplaced: CE Casecnan involved a pending protest that had been denied and a subsequent action that effectively challenged the propriety of a real property tax (RPT) reassessment; in that case, asking for an injunction to restrain collection necessarily implicated the validity of the tax assessment and thus was a local tax case. By contrast, in the present case: (a) petitioner had a prior final and executory judgment (Nov. 13, 2007) that had already determined the proper tax computation basis; and (b) at the time of filing, the administrative protest to the City Treasurer concerning the new assessment remained pending. Therefore CE Casecnan was not controlling.
The Court also invoked Ignacio v. Office of the City Treasurer of Quezon City to illustrate that actions principally grounded on non-tax considerations (e.g., due process or enforcement of ownership/possession rights) though tangentially related to tax collection may not qualify as local tax cases for CTA jurisdiction. Here, petitioner’s RTC petition primarily sought enforcement of a prior final judgment

Case Syllabus (G.R. No. 244602)

Case Citation and Procedural Posture

G.R. No. 244602; Decision of the Supreme Court rendered July 14, 2021 by the First Division (Carandang, J., penned the decision).
Petition for Review on Certiorari filed by petitioner Mactel Corporation assailing the Amended Decision (CTA En Banc, October 9, 2018) and Resolution (CTA En Banc, January 29, 2019) in CTA EB No. 1465.
The Amended Decision reversed and set aside an earlier CTA En Banc Decision (February 14, 2018) which had affirmed the CTA Second Division Decision (February 9, 2016) and Resolution (May 18, 2016) dismissing respondents’ Rule 65 petition for certiorari for lack of jurisdiction.
Ultimate relief sought before the Supreme Court: reversal of the CTA En Banc Amended Decision and reinstatement of the determination that the CTA lacked jurisdiction over the petition for certiorari filed by respondents assailing interlocutory RTC orders.

Parties and Their Roles

Petitioner: Mactel Corporation — engaged in trading goods, notably distribution of telecommunication products and services such as electronic load, SIM cards, and prepaid call and text cards.
Respondents: City Government of Makati (a local government unit created under R.A. No. 7854), the City Treasurer of Makati City (Nelia A. Barlis at relevant times), and the Officer-in-Charge of the Office of the City Administrator and Head of Business Permits Office (Eleno M. Mendoza, Jr. at relevant times).
Roles: City Treasurer responsible for collection of local taxes, fees, and charges; City Administrator/Head of Business Permits Office involved in issuance/renewal of business permits and billing statements.

Factual Background (2001–2007 original assessment and litigation)

August 1, 2005: City Treasurer issued Notice of Assessment for petitioner’s alleged deficiency taxes, fees and charges totaling ₱30,799,127.21 for taxable years 2001–2004.
October 13, 2005: Petitioner filed protest arguing the proper tax base was petitioner’s income (10% discount/commission on prepaid cards) not the gross sales/face value of the cards; petitioner contended cards are prepaid services rather than goods because cards become functionally useless after face value is exhausted.
October 19, 2005: Protest denied; petitioner appealed to the RTC of Makati City (raffled to Branch 148 as Civil Case No. 05-1040) and trial ensued.
November 13, 2007: RTC-Branch 148 rendered decision that assessment should cover only the actual income derived by petitioner, directing respondents to compute petitioner’s tax on the 10% discount/commission; the RTC characterized the ₱270.00 purchase price paid as capital/investment which should not be taxed as part of gross receipts.
March 17, 2008: Respondents’ motion for reconsideration denied; respondents did not appeal further, rendering the November 13, 2007 decision final and executory.
For several years thereafter, respondents accepted petitioner’s tax submissions computed on the discount/commission basis.

Subsequent Assessments, Protests, and Administrative Acts (2014–2015)

January 14, 2015: City Treasurer issued Notice of Assessment under LOA No. 2014-0345 assessing deficiency taxes/fees/charges for taxable years 2010–2013 totaling ₱157,200,855.92, based on the face value (gross sales) of prepaid cards.
January 14, 2015 (same date): Petitioner applied for renewal of business permit (deadline January 20) but renewal was denied due to an alleged business tax deficiency for 2014.
January 22, 2015: City Administrator issued a Billing Statement showing alleged deficiency business tax for 2014 totaling ₱24,693,707.82 (including surcharges/deficiency).
February 6, 2015: Petitioner filed written protest against the Notice of Assessment dated January 14, 2015.
February 10, 2015: Petitioner attempted to file a protest against the Billing Statement; City Administrator refused to receive the letter.
As of February–April 2015: Petitioner's protest to City Treasurer for 2010–2013 was still within the 60-day administrative decision period under Section 195 of the Local Government Code; City Treasurer had until April 10, 2015 to decide.

Petition for Declaratory Relief and RTC Interlocutory Orders (Civil Case No. 15-177)

March 4, 2015: Petitioner filed Petition for Declaratory Relief with application for Temporary Restraining Order and/or preliminary injunction in RTC Makati Branch 59 (Civil Case No. 15-177), seeking:
- Declaration that respondents must apply the doctrine of conclusiveness of judgment based on the final November 13, 2007 RTC decision, i.e., compute taxes on the 10% discount rather than gross value;
- Mandatory injunction to compel issuance of business permit and restrain respondents from refusing to issue business permit due to alleged 2014 tax deficiency;
- Prohibitory injunction to enjoin assessment/collection based on gross value pending resolution of the main case.
April 28, 2015: RTC Branch 59 issued Order granting preliminary injunctive relief (subject to bond), ordering respondents to desist from further assessment of petitioner’s local taxes pending resolution and to issue a temporary business permit in favor of petitioner; bond set at ₱500,000.00 (dispositive excerpt quoted).
May 11, 2015: After bond posting, trial court issued Writ of Preliminary Injunction to enjoin assessment/collection of alleged excessive taxes and command issuance of temporary business permit pending resolution.
May 13, 2015: Respondents filed Motion for Reconsideration of the April 28, 2015 order; denied by RTC in Order dated August 6, 2015.
RTC proceeded to set the main case for pre-trial.

Respondents’ Petition for Certiorari to the Court of Tax Appeals (Rule 65)

Respondents filed Petition for Certiorari (Rule 65) before the Court of Tax Appeals (CTA) assailing RTC Orders of April 28, 2015 and August 6, 2015, alleging:
- Grave abuse of discretion by the RTC in issuing interlocutory orders;
- The matter involves the computation and collection of local taxes and thus falls within CTA jurisdiction as a local tax case.
Petitioner’s position before CTA: CTA lacked jurisdiction because the RTC proceedings were not a local tax case but civil action to enforce a prior final and executory judgment; without injunctive relief petitioner would suffer grave and irreparable injury (claimed aggregate deficiency demanded represented 16,400% of actual income for that year).

CTA Second Division Ruling (February 9, 2016) and Subsequent Proceedings

February 9, 2016: CTA Second Division dismissed respondents’ petition for certiorari for lack of jurisdiction.
Reasoning: While CTA may entertain certiorari assailing RTC interlocutory orders, the underlying RTC action must be a local tax case. The CTA determined the Petition for Declaratory Relief filed by petitioner was not a local tax case under Sections 195 or 196 of the Local Government Code because it sought certiorari/mandamus to enforce the prior final judgment and to compel is