Angeles City v. Angeles City Electric Corp.
REITERATIONFacts
The Antecedents: Angeles City Electric Corporation (AEC) was granted a legislative franchise under RA 4079, with a provision that its payment of franchise tax for gross earnings was in lieu of all other taxes. Presidential Decree No. 551 later reduced the franchise tax for electric franchise holders to 2% of gross receipts, payable to the Commissioner of Internal Revenue, and stated it was in lieu of all taxes. The Local Government Code (LGC) of 1991 conferred upon cities the power to impose taxes on businesses enjoying a franchise. Angeles City enacted Tax Ordinance No. 33, S-93 (Revised Revenue Code of Angeles City - RRCAC). AEC, a member of the Metro Angeles Chamber of Commerce and Industry Inc. (MACCI), joined a petition questioning the RRCAC for being oppressive and lacking public hearings. AEC began paying local franchise tax to the City Treasurer quarterly, in addition to the national franchise tax paid to the Bureau of Internal Revenue (BIR). Procedural History: The City Treasurer issued a Notice of Assessment to AEC for business tax, license fee, and other charges from 1993 to 2004, totaling ₱94,861,194.10. AEC protested the assessment, claiming exemption under RA 4079, double taxation, prescription of the period to assess, and that the assessment was retroactive. The City Treasurer denied the protest. AEC appealed to the Regional Trial Court (RTC) of Angeles City via a Petition for Declaratory Relief. While the case was pending, the City Treasurer levied on AEC's real properties and scheduled an auction sale. AEC filed an Urgent Motion for Issuance of a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction to stop the sale. The RTC issued a TRO, and subsequently, a Writ of Preliminary Injunction upon AEC's posting of a ₱10,000,000.00 bond. The RTC denied the City Treasurer's motion for dissolution of the injunction. The Petition: Angeles City filed a Petition for Certiorari under Rule 65, seeking to set aside the RTC's Writ of Preliminary Injunction, arguing that the RTC gravely abused its discretion.
Issue(s)
Whether the Regional Trial Court gravely abused its discretion in issuing the writ of preliminary injunction enjoining Angeles City and its City Treasurer from levying, selling, and disposing of the properties of Angeles City Electric Corporation. Whether the prohibition on the issuance of a writ of injunction to enjoin the collection of taxes applies to local taxes.
Ruling
The petition is bereft of merit and is hereby DISMISSED.
Ratio Decidendi
On the issue of whether the Regional Trial Court gravely abused its discretion in issuing the writ of preliminary injunction: The Supreme Court found no grave abuse of discretion on the part of the RTC. It explained that for grave abuse of discretion to be established, the lower court must have exercised its power arbitrarily and despotically, which was not demonstrated by the petitioner. The Court highlighted that the prohibition against enjoining tax collection does not apply to local taxes. Furthermore, the records showed that the RTC conducted a hearing where both parties were heard, and AEC presented evidence demonstrating a clear and unmistakable legal right to its properties and the potential for serious damage if these vital operational properties were sold at auction. The Court found that the RTC's issuance of the injunction was justified to prevent the petition from becoming moot and academic and to preserve the status quo until the merits of the case could be determined. The Court also noted that the disputed tax assessment was not yet due and demandable, making the levy and auction premature. On the issue of whether the prohibition on the issuance of a writ of injunction to enjoin the collection of taxes applies to local taxes: The Supreme Court reiterated the principle that taxes are the lifeblood of the government, necessitating prompt collection. It noted that the National Internal Revenue Code (NIRC) expressly prohibits courts from granting injunctions to restrain the collection of national internal revenue taxes, with a narrow exception for cases where collection might jeopardize the government or taxpayer's interests, as determined by the Court of Tax Appeals (CTA). However, the Court clarified that this prohibition does not extend to local taxes, as there is no express provision in the Local Government Code (LGC) prohibiting courts from issuing injunctions to restrain the collection of local taxes. The Court cited Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II, emphasizing that while the LGC lacks a specific prohibition, courts must still adhere to procedural rules and requirements for injunctions. Despite the absence of an express prohibition, the Court stressed that injunctions enjoining the collection of local taxes are generally frowned upon, and courts should exercise extreme caution when issuing them.
Main Doctrine
The prohibition on the issuance of a writ of injunction to enjoin the collection of taxes applies only to national internal revenue taxes, and not to local taxes. However, courts must exercise extreme caution in issuing injunctions for local taxes.