Forum Shopping in Tax Appeals: When Multiple Petitions Lead to Dismissal

The rule against forum shopping is a cornerstone of Philippine civil procedure, designed to prevent parties from pursuing the same case in multiple courts to increase their chances of a favorable outcome. In tax litigation, where the stakes are often millions of pesos, the temptation to file multiple appeals can be strong. The Supreme Court's decision in Commissioner of Internal Revenue v. Norkis Trading Company, Inc. (G.R. Nos. 251306-07, June 16, 2021) clarifies how this rule applies to appeals before the Court of Tax Appeals (CTA) En Banc—and why dismissing both of a party's petitions may be too harsh a penalty.

The Facts of the Case

The case began when the Commissioner of Internal Revenue (CIR) issued an assessment against Norkis Trading Company, Inc. for alleged deficiency income taxes amounting to over P285 million for fiscal year ending June 30, 2007. Norkis filed a judicial protest before the CTA, which was docketed as CTA Case No. 8862.

In August 2017, the CTA Second Division canceled the assessment. It found that the CIR failed to prove that Norkis underdeclared its sales, which meant the regular three-year prescriptive period applied—not the extended 10-year period for substantial underdeclaration. Since Norkis received the assessment in April 2014, well beyond the three-year period that expired in October 2010, the assessment was void.

The CIR filed a motion for reconsideration, then a supplemental motion seeking to admit additional documents, and later another motion for reconsideration. The CTA Division denied all of them, with the last denial noting that a second motion for reconsideration is prohibited under the rules.

The Two Petitions Before the CTA En Banc

While the CTA Division was still resolving the CIR's final motion, the CIR filed a Petition for Review Ad Cautelam before the CTA En Banc (CTA EB No. 1766), assailing the main decision and the resolution denying its first motion for reconsideration. After the CTA Division denied the second motion, the CIR filed another petition before the CTA En Banc (CTA EB No. 1845), this time seeking to admit the additional documents and reopen the proceedings.

The CTA En Banc consolidated the two cases but later dismissed both petitions on the ground of litis pendentia—a pending suit. It ruled that both petitions involved the same parties, rights, reliefs, and factual foundation, and that resolving one would amount to res judicata in the other. The CIR's simultaneous petitions amounted to forum shopping.

The Issue

The sole issue before the Supreme Court was whether the CTA En Banc erred in dismissing both petitions for violating the rule against forum shopping.

The Supreme Court's Ruling

The Supreme Court agreed with the CTA En Banc that the CIR committed forum shopping—but only partially. The Court held that only the second petition (CTA EB No. 1845) should have been dismissed, not both.

Forum Shopping Was Committed

The Court found that both petitions stemmed from a single assessment and sought the same ultimate relief: to reverse the CTA Division's cancellation of the assessment and allow the CIR to reestablish the timeliness of its assessment. Although the second petition focused on admitting additional documents and reopening the proceedings, this did not create a separate matter that could be litigated independently of the assessment case.

The petitions had identical parties, causes of action, subject matter, and reliefs sought. A favorable judgment in either case would have remanded the proceedings to the CTA Division, effectively resulting in res judicata in the other. These are the requisites of litis pendentia, and the filing of the second petition while the first was pending constituted forum shopping.

But Both Petitions Should Not Have Been Dismissed

The Court then made a crucial distinction. Litis pendentia literally means "a pending suit." It may be invoked to dismiss a later action between the same parties involving the same cause of action because the second action becomes unnecessary and vexatious. However, dismissing both petitions is a harsh penalty that deprives the CIR of its right to appeal.

The Court reasoned that once one of the two pending actions is dismissed, the litis pendentia ceases to exist. The parties are then confined to a single suit, and the evil of multiplicity of suits is eliminated. The CIR may be prohibited from lodging multiple appeals, but it must still be allowed to pursue at least one avenue of redress from an unfavorable judgment.

Accordingly, the Supreme Court directed the CTA En Banc to reinstate CTA EB No. 1766 and proceed with the case, while affirming the dismissal of CTA EB No. 1845.

Practical Takeaways

• Forum shopping occurs when a party files multiple cases or appeals involving the same parties, causes of action, subject matter, and reliefs, especially when a favorable judgment in one would result in res judicata in the other.
• The remedy for litis pendentia is dismissal of the later-filed action, not all pending actions. Once one case is dismissed, the pending suit ceases, and the remaining case may proceed.
• A "Petition for Review Ad Cautelam" (filed out of caution) does not immunize a party from a finding of forum shopping if a subsequent petition raises the same issues and seeks the same relief.
• In tax appeals, careful sequencing of remedies is critical. Filing multiple petitions before the CTA En Banc, even for seemingly different aspects of the same assessment, can trigger dismissal of the later-filed case.
• The rule against forum shopping protects the courts from vexatious litigation, but it should not be applied so harshly as to deprive a party of all opportunity to seek redress.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.