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LEILA M. DE LIMA v. CITY OF MANILA

FACTS:

The City Council of Manila passed Ordinance No. 8331 on November 26, 2013. The ordinance, which imposed percentage tax on gross sales of retailers, took effect on December 9, 2013, and was implemented by the City of Manila on January 2, 2014. On January 6, 2014, operators of retail businesses in Manila filed an appeal before Secretary of Justice Leila De Lima, challenging the constitutionality and legality of Section 104 of the ordinance. They argued that the increased tax rates exceeded the limit set by the Local Government Code of 1991 (LGC). The City of Manila claimed that the ordinance was enacted in compliance with procedural requirements and that the imposition of retail tax is a valid exercise of its power. The Secretary of Justice declared Section 104 of the ordinance void for being contrary to the LGC. The City of Manila filed a motion for reconsideration, but before the resolution was acted upon, they filed a Petition for Review Ad Cautelam before the Regional Trial Court (RTC) of Manila. The RTC dismissed the petition for lack of jurisdiction, and the City of Manila appealed to the Court of Appeals (CA). The CA set aside the RTC decision and remanded the case for further proceedings.

The petitioner filed a Motion for Reconsideration and the retail business operators filed a Motion for Partial Reconsideration with the Court of Appeals (CA). The CA denied both motions. The petitioner then filed a petition for review on certiorari with the Court, raising procedural issues. The Court determined that the appeal before the RTC was timely filed according to the procedure set forth in the LGC. The Court stressed the importance of observing the timeframe provided by the LGC in resolving questions regarding revenue measures and tax ordinances. The petitioner's appeal before the RTC could not be anchored on inaction because the petitioner had acted on the appeal.

The controversy in this case arose from Ordinance No. 8331 passed by the City Council. Retail business operators affected by the ordinance filed an appeal questioning its constitutionality and legality before the petitioner within the prescribed period. The petitioner issued a resolution declaring the ordinance void, and the City of Manila filed a Petition for Review Ad Cautelam before the RTC. The Court clarified that certiorari is a remedy to correct the exercise of governmental functions and that it has the duty to determine the validity of any legislative or executive action. However, the petition for certiorari should have been lodged before the CA instead of the RTC.

In a separate case, Bicol Power Corp. filed a petition challenging its inclusion in the tax mapping project initiated by the Bureau of Internal Revenue (BIR). The RTC issued a TRO enjoining the BIR from implementing the project and later issued a writ of preliminary injunction, which the CA affirmed. The BIR filed a petition for review on certiorari, arguing that the RTC did not have jurisdiction to entertain the petition.

ISSUES:

  1. Whether certiorari and prohibition are appropriate remedies to raise constitutional issues and review the acts of legislative and executive officials.

  2. Whether the Regional Trial Court (RTC) has jurisdiction to entertain a petition for review ad cautelam regarding the resolution of the Secretary of Justice.

  3. Whether the remedy for a party from an adverse resolution of the Secretary of Justice is a petition for certiorari or a petition for review.

  4. Whether the evaluation of the appeal lodged by the retail business operators involves an exercise of quasi-judicial power by the Secretary of Justice.

  5. Whether the decision on the legality or constitutionality of tax ordinances and revenue measures under Section 187 of the Local Government Code (LGC) is a proper subject of appeal through a petition for review under Rule 43.

  6. Whether a special civil action for certiorari under Rule 65 is an appropriate remedy to question the acts of quasi-judicial agencies.

  7. Whether the Court of Appeals (CA) or the Regional Trial Court (RTC) has jurisdiction over a petition for certiorari under Rule 65 questioning the acts of quasi-judicial agencies.

  8. Whether the tax ordinance imposing higher tax rates is valid.

  9. Whether the respondent committed forum shopping.

  10. Whether the respondent is guilty of forum shopping.

  11. Whether the filing of a motion for reconsideration before the Secretary of Justice is necessary prior to filing a petition for certiorari.

  12. Whether Section 104 of Ordinance No. 8331, series of 2013 is constitutional.

  13. Whether the tax rate imposed under Section 104 of Ordinance No. 8331, series of 2013 is void.

RULING:

  1. Certiorari and prohibition are appropriate remedies to raise constitutional issues and review the acts of legislative and executive officials.

  2. The RTC does not have jurisdiction to entertain a petition for review ad cautelam regarding the resolution of the Secretary of Justice. The jurisdiction over the resolution of the Secretary of Justice is determined by the nature of the power exercised by the latter under the Local Government Code.

  3. The remedy for a party from an adverse resolution of the Secretary of Justice is a petition for certiorari or a petition for review, depending on the nature of the power exercised by the Secretary of Justice.

  4. Yes, the evaluation of the appeal lodged by the retail business operators involves an exercise of quasi-judicial power by the Secretary of Justice.

  5. Yes, the decision on the legality or constitutionality of tax ordinances and revenue measures under Section 187 of the LGC is a proper subject of appeal through a petition for review under Rule 43.

  6. Yes, a special civil action for certiorari under Rule 65 is an appropriate remedy to question the acts of quasi-judicial agencies.

  7. The CA has jurisdiction over a petition for certiorari under Rule 65 questioning the acts of quasi-judicial agencies.

  8. The tax ordinance imposing higher tax rates is invalid. The Court finds that the respondent has already imposed a tax in accordance with the provisions of the Local Government Code (LGC) when it enacted Ordinance No. 7794 and its amendment, Ordinance No. 7807. The subsequent ordinance, Ordinance No. 8331, which imposed higher tax rates, exceeds the allowed adjustment under Section 191 of the LGC. According to Section 191, any subsequent increase in tax rates should comply with the limit of not more than ten percent (10%) of the rates fixed under the LGC and should not be more frequent than once every five (5) years.

  9. The respondent did not commit forum shopping. The petitioner claims that the respondent committed forum shopping by filing a Petition for Review ad cautelam before the Regional Trial Court while its motion for reconsideration is still pending. However, the Court finds that the petitioner failed to establish that the respondent filed multiple actions with the same cause and prayer, or that the respondent engaged in the simultaneous pursuit of remedies in different courts for the same purpose. Hence, there is no basis to dismiss the case on the ground of forum shopping.

  10. The respondent is not guilty of forum shopping. While the respondent disclosed and attached a copy of its Motion for Reconsideration to its Petition for Review ad cautelam, the essence of forum shopping lies in the institution of multiple actions. The fact that the respondent has disclosed the pending motion does not negate actual forum shopping.

  11. A motion for reconsideration before the Secretary of Justice is not necessary prior to filing a petition for certiorari. Section 187 of the Local Government Code (LGC) does not mention the remedy of a motion for reconsideration. The provision indicates that the proper remedy is to file appropriate proceedings with a court of competent jurisdiction.

  12. Section 104 of Ordinance No. 8331, series of 2013 is declared NULL and VOID insofar as it imposes more than 2.20% tax rate on gross receipts on sales amounting to Php 50,000.00 up to Php 400,000.00.

PRINCIPLES:

  • Petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues and review the acts of legislative and executive officials.

  • Jurisdiction over the resolution of the Secretary of Justice is determined by the nature of the power exercised by the latter under the Local Government Code.

  • The Regional Trial Court does not have jurisdiction to entertain a petition for review ad cautelam regarding the resolution of the Secretary of Justice.

  • The remedy for a party from an adverse resolution of the Secretary of Justice is a petition for certiorari or a petition for review, depending on the nature of the power exercised by the Secretary of Justice.

  • Quasi-judicial or administrative adjudicatory power involves the authority to adjudicate the rights of persons before an administrative agency and to hear and determine questions of fact and decide issues in accordance with the standards laid down by law.

  • In the performance of judicial or quasi-judicial acts, there must be a law that gives rise to specific rights of persons or property, and the controversy must be brought before a tribunal, board, or officer with the power and authority to determine the law and adjudicate the rights of the parties.

  • The Secretary of Justice must exercise quasi-judicial power in evaluating appeals lodged by retail business operators.

  • The decision on the legality or constitutionality of tax ordinances and revenue measures under Section 187 of the LGC can be appealed through a petition for review under Rule 43.

  • A special civil action for certiorari under Rule 65 is an appropriate remedy to question the acts of quasi-judicial agencies.

  • The CA has exclusive jurisdiction to entertain a petition for certiorari under Rule 65 questioning the acts of quasi-judicial agencies.

  • The Local Government Code does not dictate the tax rates to be imposed by local government units (LGUs), but merely sets the minimum or maximum rates, leaving the determination of actual rates to the LGUs. (National Power Corporation v. City of Cabanatuan)

  • Any subsequent increase in tax rates imposed by an LGU must comply with the limitations and restrictions set forth in the Local Government Code, including the maximum adjustment limit of ten percent (10%) of the rates fixed under the Code and the requirement of not more frequent adjustment than once every five (5) years. (Section 191 of the LGC)

  • The power of LGUs to exercise their taxing power must be exercised in accordance with fundamental principles set forth in the LGC and is subject to certain limitations and restrictions. (Sections 130, 133, and 186 of the LGC)

  • Forum shopping exists when a party avails themselves of different judicial remedies in different courts, all substantially founded on the same transactions and raising substantially the same issues. It can be committed through litis pendentia, res judicata, or the splitting of causes of action (Chua, et al. v. Metropolitan Bank and Trust Co., et al.).

  • Compliance with the rule on certification against forum shopping is separate from the avoidance of forum shopping itself. Mere proper execution of a certification against non-forum shopping does not absolve a party who has committed forum shopping (Spouses Melo v. CA).

  • The primary consideration in determining forum shopping is whether the filing of multiple actions would result in conflicting decisions by different tribunals.

  • The filing of a motion for reconsideration before the Secretary of Justice is not necessary prior to filing a petition for certiorari under Rule 65 of the Rules of Court. Section 187 of the LGC does not mention the remedy of a motion for reconsideration and instead indicates that the proper remedy is to file appropriate proceedings with a court of competent jurisdiction.

  • The tax imposed by a legislative body must be based on a reasonable classification and must have uniformity, equality, and fairness.

  • A tax ordinance that imposes an arbitrary or oppressive rate is void for being confiscatory.