G.R. No. 181277 - Swedish Match Philippines, Inc. vs. Treasurer of the City of Manila

Case Summary (G.R. No. 181277)

Key Dates

Payment of taxes at issue: 20 October 2001. Claim letter to City Treasurer: 17 September 2003. Petition for refund filed in RTC: 17 October 2003 (Civil Case No. 03‑108163). RTC decision dismissing petition: 14 June 2004. CTA Second Division and CTA En Banc affirmed dismissal; Supreme Court decision: July 3, 2013.

Applicable Law and Rules

Constitutional basis: 1987 Constitution (applicable because the decision date is after 1990). Statutory and regulatory sources: Local Government Code of 1991 (notably Section 143 and Section 196), 1997 Rules of Civil Procedure (Rules 4 and 7 regarding pleadings, verification, and certification against forum shopping), and the Manila Revenue Code (Ordinance No. 7794 as amended by Ordinance Nos. 7988 and 8011), specifically Sections 14 and 21. Relevant jurisprudence cited by the Court includes Coca‑Cola Bottlers Philippines, Inc. v. City of Manila and other precedents on corporate authority to sue and on verification and non‑forum shopping requirements.

Procedural History

Petitioner paid P470,932.21 in local business taxes for the fourth quarter of 2001, of which P164,552.04 corresponded to taxes assessed under Section 21. Petitioner requested refund by administrative letter in September 2003 and filed a Petition for Refund in RTC in October 2003. The RTC dismissed the petition for failure to plead corporate capacity and to show authority of Ms. Beleno who signed the Verification and Certification of Non‑Forum Shopping. The CTA Second Division affirmed for lack of proof of authority; the CTA En Banc likewise denied review, sustaining dismissal. Petitioner elevated the matter to the Supreme Court by Rule 45 petition.

Issues Presented

Whether Ms. Beleno was authorized to file the Petition for Refund and to sign the Verification and Certification of Non‑Forum Shopping on behalf of the corporation. 2) Whether assessment and collection under Section 21 of the Manila Revenue Code constituted double taxation given petitioner’s payment under Section 14.

Legal Principles on Corporate Authority to Sue and Verification Requirements

A corporation’s power to sue and be sued is exercised by its board of directors; corporate officers normally require board authority to perform acts that bind the corporation. Verification and Certification of Non‑Forum Shopping are formal requirements under the Rules of Court; a verification signed without proof of board authority is ordinarily defective. However, the Court recognizes that the verification requirement is a matter of form, not substance, and noncompliance may be corrected or tolerated where substantial justice so requires. The Court has developed a jurisprudential exception allowing certain officers (e.g., Chairperson, President, General Manager, Personnel Officer, and in some labor cases an employment specialist) to sign without an accompanying board resolution when the officer is in a position to verify the allegations.

Application of Principles to Ms. Beleno’s Authority

The petition was accompanied at filing by a Verification and Certification of Non‑Forum Shopping signed by Ms. Beleno but lacked contemporaneous proof of board authorization. The Supreme Court found that petitioner later submitted a Secretary’s Certificate and Minutes of a Special Board Meeting (19 May 2004) explicitly authorizing and ratifying Ms. Beleno’s prior institution of tax refund cases and her execution of Verifications/Certifications. This retroactive ratification, together with Ms. Beleno’s position as Finance Director—an office with direct responsibility and factual knowledge over tax payments—constituted substantial compliance and justified application of the liberal jurisprudential exception. The Court emphasized that the corporation’s subsequent ratification was not an ordinary late production of authority but an explicit approval and ratification of acts already performed, thereby curing the procedural defect and allowing the case to be decided on the merits.

Rationale for Relaxing Strict Formal Requirement

The Court reiterated that procedural rules are tools to secure substantial justice and should not be applied rigidly to defeat meritorious claims. Given the material issue (refund of taxes) and the finance director’s role in tax matters, the Court found a compelling reason to relax strict compliance. Prior precedents (including Mediserv and other cases recognizing exceptions) supported treating the Secretary’s Certificate and board ratification as curing the technical defect in the verification and certification.

Legal Standard for Double Taxation

The Court applied the established test for double taxation: duplicate taxes exist when (1) imposed 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. If all six elements are present, imposition of both taxes constitutes double taxation and is objectionable.

Application of Double Taxation Test to Sections 14 and 21

Sections 14 and 21 of the Manila Revenue Code were analyzed under the six‑part test. The Court concluded that both sections, as applied to petitioner, taxed the same subject matter—the privilege of doing business in the City of Manila—for the same purpose (raising city revenues), by the same taxing authority (City of Manila), within the same territorial jurisdiction and taxing period, and were of the same nature (local business tax computed on gross sales or receipts). The distinctions proffered by respondent—claiming Section 14 targets manufacturers while Section 21 targets businesses subject to excise/VAT/percentage tax—were rejected as specious where, by operation of Sections 143(a) and 143(h) of the Local Government Code, businesses already taxed under one paragraph should not be double‑taxed under another. The Court relied on its prior ruling in City of Manila v. Coca‑C

Case Syllabus (G.R. No. 181277)

Case Caption, Decision and Procedural Posture

Supreme Court, First Division; G.R. No. 181277; Decision penned by Chief Justice Sereno; dated 03 July 2013; petition is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure.
Petition challenges Court of Tax Appeals En Banc Decision dated 1 October 2007 and Resolution dated 14 January 2008 in C.T.A. EB No. 241.
Parties: Swedish Match Philippines, Inc. (petitioner) versus The Treasurer of the City of Manila (respondent).
The CTA En Banc had affirmed the CTA Second Division which affirmed the dismissal by the RTC, Branch 21, Manila, of petitioner’s claim for a tax refund.

Statement of Facts

On 20 October 2001, petitioner paid business taxes totaling P470,932.21 based on Sections 14 and 21 of Ordinance No. 7794 (Manila Revenue Code), as amended by Ordinance Nos. 7988 and 8011.
Of the total paid, P164,552.04 corresponded to payment under Section 21 of the Manila Revenue Code.
Petitioner disputed liability under Section 21 and, by letter dated 17 September 2003, claimed a refund from the City Treasurer asserting that Section 21 payment constituted double taxation in view of payment under Section 14.
On 17 October 2003, petitioner filed a Petition for Refund of Taxes with the RTC of Manila (Civil Case No. 03-108163) pursuant to Section 196 of the Local Government Code of 1991, alleging double taxation.
RTC, Branch 21, Manila rendered a Decision on 14 June 2004 dismissing the Petition for failure to plead corporate capacity to sue and to state authority of Tiarra T. Batilaran-Beleno (Ms. Beleno), who executed the Verification and Certification of Non-Forum Shopping.
On denial of reconsideration the RTC stated that Sections 14 and 21 “pertained to taxes of a different nature” and therefore double taxation elements were not established.
CTA Second Division affirmed dismissal on ground petitioner failed to state authority of Ms. Beleno to institute suit.
CTA En Banc denied petition for review, holding the Verification and Certification of Non-Forum Shopping was signed by Ms. Beleno (Finance Manager) without a board resolution or secretary’s certificate proving her authority, warranting dismissal.

Issues Presented for Resolution by the Supreme Court

Whether Tiarra T. Batilaran-Beleno (Ms. Beleno) was authorized to file the Petition for Refund of Taxes with the RTC on behalf of petitioner-corporation.
Whether imposition and collection of tax under Section 21 of the Manila Revenue Code constituted double taxation in view of taxes collected and paid under Section 14 of the same code.

Petitioner’s Contentions (as presented)

Ms. Beleno acted within her authority when she instituted the Petition for Refund despite lack of an accompanying Secretary’s Certificate at filing.
The Board of Directors ratified her authority by Resolution adopted 19 May 2004; such ratification retroactively applied to the date of her signing, validating the Verification and Certification and the filing.
Section 21’s enforcement resulted in double taxation because petitioner had already paid business tax under Section 14 for the same subject matter and period.
Ordinance Nos. 7988 and 8011 cannot be the basis for collection of business taxes, because these ordinances had been declared null and void in Coca-Cola Bottlers Philippines, Inc. v. City of Manila.

Respondent’s Contentions (as presented)

Petitioner failed to establish authority of Ms. Beleno to institute the action on behalf of the corporation; the Verification and Certification of Non-Forum Shopping must be valid at time of filing.
Citing Philippine Airlines v. Flight Attendants and Stewards Association of the Philippines (PAL v. FASAP), respondent asserts defective Verification/Certification submitted without proof of signatory’s authority violates Section 5, Rule 7 of the 1997 Rules of Civil Procedure and renders the Petition defective.
Sections 14 and 21 pertain to different objects of taxation and are not of the same kind or character; Section 14 taxes manufacturers/assemblers/processors while Section 21 applies to businesses subject to excise, VAT, or percentage tax under the NIRC.
Under Section 21 the petitioner is a withholding tax agent of the City of Manila and thus not exempt from Section 21 assessment.

Relevant Statutory Provisions and Ordinance Texts (as quoted in source)

Section 14 (Tax on Manufacturers, Assemblers and other Processors): imposes a graduated tax on manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers and compounders of liquors, distilled spirits, and wines and manufacturers of any articles of commerce, with schedule based on gross receipts or sales for the preceding calendar year.
Section 21 (Tax on Business Subject to the Excise, Value-Added or Percentage Taxes under the NIRC): imposes a tax of fifty percent (50%) of one percent (1%) per annum on gross sales or receipts of businesses subject to excise, VAT or percentage taxes under the NIRC, with proviso exempting “all registered businesses in the City of Manila already paying the aforementioned tax” from payment thereof.
Ordinance Nos. 7988 and 8011 amended Ordinance No. 7794 and were central to the tax assessment challenged; prior jurisprudence declared these amending ordinances null and void for failure to comply with publication requirements.

Precedents and Doctrines Cited by the Court

Principle that the power of a corporation to sue and be sued is lodged in the board of directors and corporate officers cannot exercise corporate powers without board authority (citing Cebu Metro Pharmacy, Inc. v. Euro-Med Laboratories, Shipside Inc. v. CA).