G.R. No. 180651 - Nursery Care Corp. vs. Acevedo

Case Summary (G.R. No. 180651)

Petitioner Payments and Administrative Correspondence

The petitioners paid under protest amounts assessed under Section 21 for the first quarter of 1999: Nursery Care Corp. P595,190.25; Shoemart, Inc. P3,283,520.14; Star Appliance Center P236,084.03; H&B, Inc. P1,271,118.74; Supplies Station, Inc. P239,501.25; Hardware Workshop, Inc. P609,953.24. They requested tax credit or refund from the City Treasurer (letter dated March 1, 1999); the request was denied by Treasurer Acevedo (letter dated March 10, 1999), and reconsideration was sought without success.

Applicable Law and Legal Framework

Constitutional and statutory sources controlling the dispute include the 1987 Constitution (as applicable to local taxation authority), the Local Government Code of 1991 (Section 143 on municipal/city power to impose business taxes), the Revenue Code of Manila (notably Sections 14/15/17/21 as cited), the National Internal Revenue Code (for reference to excise, VAT, percentage taxes), and procedural rules (Rules of Court regarding modes of appeal and Section 2, Rule 50 on appeals raising only questions of law). Relevant jurisprudence invoked includes City of Manila v. Coca‑Cola Bottlers Philippines, Inc.; Swedish Match Philippines, Inc. v. Treasurer of the City of Manila; and other authorities cited by the Court.

Procedural History

After administrative denial, the petitioners filed separate certiorari petitions in the Regional Trial Court (RTC), which were consolidated. The parties presented jointly framed issues to the RTC: (a) whether collection under Section 21 constitutes double taxation; and (b) whether failure to avail of remedies under Section 187 of the Local Government Code requires dismissal for non‑exhaustion of administrative remedies. The RTC rendered judgment on April 26, 2002; the petitioners appealed to the Court of Appeals (CA), which on June 18, 2007 dismissed the appeal for lack of jurisdiction under Section 2, Rule 50 (appeals raising only questions of law), and denied reconsideration on November 14, 2007. The petitioners then sought review in the Supreme Court.

Issues Presented to the Supreme Court

The petitioners raised three primary contentions: (A) that the CA erred in dismissing their appeal as presenting only a question of law; (B) that the CA should have reversed the RTC decision denying refund and dismissing certiorari; and (C) that imposition and collection of Section 21 taxes in addition to Sections 15 and 17 taxes constituted double taxation and violated the Local Government Code.

RTC’s Findings and Rationale

The RTC concluded there was no double taxation in the “narrow, strict or obnoxious” sense. It reasoned Section 15 and 17 taxes were imposed on wholesalers/distributors/dealers and retailers (i.e., taxes on business privilege), whereas Section 21 was framed as a tax payable by the person paying for the services — effectively an indirect tax on consumers/end‑users, collected by businesses as withholding agents. The court further noted Section 187 of the Local Government Code restricts suspension of tax ordinances pending administrative challenge, and thus denied refund and dismissed the petitions.

Court of Appeals Ruling on Jurisdiction

The CA determined the issues raised were purely questions of law that did not require re‑evaluation of evidence; under Section 2, Rule 50 a notice appeal from the RTC to the CA raising only questions of law must be dismissed for lack of jurisdiction. Accordingly, the CA dismissed the appeal and denied reconsideration.

Supreme Court: Jurisdictional Determination and Approach

The Supreme Court agreed, in principle, that the CA properly dismissed the appeal under the cited rule because the petitioners’ filings raised principally legal questions. However, invoking precedents that permit liberal application of procedural rules to secure substantial justice, the Court exercised its discretion to entertain the substantive merits despite the CA’s dismissal. The Court emphasized that procedural technicalities should not defeat substantive rights when equity and justice warrant a full adjudication.

Supreme Court Analysis on Double Taxation — Legal Test

The Court reiterated the established test for “double taxation” (the “obnoxious double taxation” standard): double taxation exists where the same taxpayer is taxed twice for the same thing — i.e., when two taxes are imposed (1) on the same subject matter, (2) for the same purpose, (3) by the same taxing authority, (4) within the same taxing jurisdiction, (5) for the same taxing period, and (6) of the same kind or character. The Court applied controlling precedents (City of Manila v. Coca‑Cola and Swedish Match) which had previously considered Section 21 vis‑à‑vis local business tax provisions and had held that the exempting proviso in Section 21 was intended to avoid double taxation.

Application of the Test to the Facts

The Court found that Section 21 and Sections 15 and 17 (and the analogous Section 14 for manufacturers) all: (a) operate on the privilege of doing business in the City of Manila (same subject matter); (b) aim to make persons conducting business contribute to city revenues (same purpose); (c) are imposed by the City of Manila (same taxing authority); (d) operate within the same territorial jurisdiction (City of Manila) and taxing period (per calendar year); and (e) are of the same nature — local business taxes measured on gross sales or receipts. Consequently, imposing Section 21 tax on entities already subject to Sect

Case Syllabus (G.R. No. 180651)

Case Topic and Core Legal Question

The case concerns the constitutionality and legality of municipal taxation under the Revenue Code of the City of Manila, specifically whether the City of Manila’s imposition, assessment, and collection of taxes under Section 21 of its Revenue Code, as applied to the petitioners for the first quarter of 1999, constituted double taxation in violation of applicable law.
Subsidiary questions included whether petitioners’ failure to pursue a statutorily provided administrative remedy (under Section 187 of the Local Government Code) barred judicial relief, and whether procedural rules on appeal to the Court of Appeals were correctly applied.

Parties and Posture

Petitioners: Nursery Care Corporation; Shoemart, Inc.; Star Appliance Center, Inc.; H&B, Inc.; Supplies Station, Inc.; Hardware Workshop, Inc.
Respondents: Anthony Acevedo, in his capacity as City Treasurer of Manila, and the City of Manila.
Relief sought by petitioners: refund or tax credit of local business taxes paid under protest for the first quarter of 1999 and a declaration that Section 21, as enforced against them, constituted double taxation.

Relevant Statutory Provisions and Ordinance Text

Section 21 of the Revenue Code of Manila (as quoted in the source):
- Imposes "a tax of FIFTY PERCENT (50%) OF ONE PERCENT (1%) per annum on the gross sales or receipts of the preceding calendar year" on certain businesses and articles of commerce subject to excise, VAT, or percentage taxes under the NIRC.
- Defines application "On person who sells goods and services in the course of trade or businesses; x x x"
- Contains a proviso: "that all registered businesses in the City of Manila already paying the aforementioned tax shall be exempted from payment thereof."
- A modifying paragraph indicates the tax is payable by the person paying for the services and to be collected and remitted by the service provider within twenty (20) days after the end of each quarter.
Sections 15 and 17 of the Revenue Code of Manila: imposed taxes on wholesalers, distributors or dealers (Section 15) and on retailers (Section 17) — local business taxes targeted to specific classes of businesses.
Section 143 of the Local Government Code (LGC) — cited in the decision for the scope of municipal/city authority to impose business taxes, and enumerates categories of businesses that may be taxed and the limitation on rate for businesses subject to excise, VAT, or percentage tax under the NIRC (subsection (h) permitting a rate not exceeding 2% on gross sales or receipts for businesses not otherwise specified).

Facts / Antecedents

For the year 1999, the City of Manila assessed and collected:
- Local business taxes under Section 15 (Tax on Wholesalers, Distributors, or Dealers) and Section 17 (Tax on Retailers) from the petitioners.
- Additional taxes under Section 21 of the Revenue Code of Manila as a condition for renewing business licenses for 1999.
Petitioners paid the Section 21 assessments under protest for the first quarter of 1999 in the following amounts:
- Nursery Care Corporation: P595,190.25
- Shoemart Incorporated: P3,283,520.14
- Star Appliance Center: P236,084.03
- H & B, Inc.: P1,271,118.74
- Supplies Station, Inc.: P239,501.25
- Hardware Work Shop, Inc.: P609,953.24
Administrative correspondence:
- March 1, 1999: petitioners formally requested tax credit or refund from the Office of the City Treasurer.
- March 10, 1999: City Treasurer Anthony Acevedo denied the request.
- April 8, 1999: petitioners sought reconsideration; the denial was not reversed.
- Liberty Toledo later succeeded Acevedo as City Treasurer; meanwhile, petitioners filed certiorari petitions in the Regional Trial Court (RTC) on April 29, 1999.

Procedural History — Trial Court (RTC)

Petitions filed in RTC, docketed as Civil Cases Nos. 99-93668 to 99-93673.
Initially raffled to different branches, consolidated in Branch 34; presiding judge voluntarily inhibited himself and consolidated cases were transferred to Branch 23, then re-raffled to Branch 19 due to designation of Branch 23 as special drugs court.
Parties jointly submitted two issues to the RTC:
- Whether collection under Section 21 constitutes double taxation.
- Whether failure to exhaust administrative remedies (Section 187 LGC) for tax protests renders the action dismissible.
RTC Decision (April 26, 2002):
- Held there was no constitutionally proscribed double taxation in the "strict, narrow or obnoxious sense."
- Reasoned Sections 15 and 17 taxed businesses (wholesalers/distributors/dealers and retailers respectively) while Section 21 is a tax on consumers or end-users, with petitioners acting as collection/withholding agents; therefore different tax objects/subjects.
- Explained Section 21’s modifying paragraph indicates the tax is payable by consumers, collected by service providers, and remitted quarterly.
- Concluded that Section 21's enforcement did not require the court to enjoin its implementation, because Section 187 LGC precludes suspension of an ordinance’s effectivity pending challenge and ordinances carry a presumption of validity.
- Dismissed the petitions and denied refund claims; no pronouncement as to costs.

Procedural History — Court of Appeals

Petitioners appealed to the Court of Appeals (CA).
CA Ruling (June 18, 2007) in CA-G.R. SP No. 72191:
- Dismissed the appeal for lack of jurisdiction under Section 2, Rule 50 of the 1997 Rules on Civil Procedure, because the appeal raised only questions of law, and an appeal under Rule 41 to the CA that raises solely questions of law must be dismissed.
- Reasoned the disposition did not require re-calibration of the evidence; parties agreed on facts; the issue presented was purely legal.
Petitioners’ motion for reconsideration was denied by CA (Resolution promulgated November 14, 2007).

Issues Raised in the Supreme Court Petition

A. Whether the CA erred in dismissing the appeal as raising