CITY TREASURER OF MANILA v. CHINA BANKING CORPORATION & the HON. PRESIDING JUDGE, MTC, BR. 23, MANILA

.. REPUBLIC OF THE PHILIPPIN S COURT OF TAX APPEALS I Quezon City I I FIRST DIVISION I CITY TREASURER OF MANILA, CTA E . CASE NO. 434 I Petitioner, (RTC S A NO. 04-111014) I I (MTC C VIL CASE NOS. 175169CV, I 175172 V, 175177CV and I 175178 v .I I -versus- ACO TA, P.J. CAS NEDA, JR., I CHINA BANKING CORPORATION, BAU ISTA, and the Hon. PRESIDING UY, I JUDGE, METROPOLITAN TRIAL CAS NOVA, and COURT, BRANCH 23, MANILA, PA NCA-ENRIQUEZ, JJ,. I Respondents . Promul ated: I ti 2009 ~-1-p~c-~ I ~'/If} . I dfA , - X- -- - - -- - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - -X I DI;CISION Casanova, J: This is an appeal to the Court of Tax Appeals Bane by way of a verified Petition for Review1 filed by � the petitioner-City T easurer of Manila (CITY TREASURER), under Section 7 (a)(3) of Republic Act o. 9282, otherwise known as "An Act Expanding The Jurisdiction Of The Cou Of Tax Appeals (CTA)" assailing the following Orders : ~ 1 CTA En Bane Rollo, pp. 4-10. 88 '7

I ' erA EB CASE NO. 434 (RTC SCA NO. 04-111014) II DECISION � Ill 1. The AUGUST 4, 2008 ORDER2 issued y the Regional Trial Court, Branch 19, Manila (RTC 19), which ismissed the Special Civil Ill Action No. 04-111014 entitled, ''Libe M. Toledo/ in her official capacity as City Treasurer of Ma ila/ petitioner vs. CHINA BANKING CORPORATION and the 'ON. PRESIDING JUDGE; II METROPOLITAN TRIAL COURT; BRANCH 2~ MANILA/ respondents/; for lack of merit; I 2. The SEPTEMBER 25, 2008 ORDER3 o RTC 19 which denied the Motion for Reconsideration of the C TREASURER; and II 3. The JULY 26, 2004 JOINT ORD R4 promulgated by the Metropolitan Trial Court Branch 23, Manila (MTC 23), which denied the motion filed by CITY TRE SURER to dismiss the four civil cases filed by respondent-( ina Banking Corporation (CHINA BANK) seeking for refund oft xes paid by the latter. II The facts of the case, as culled from the record , are as follows: II Petitioner-Erlinda Marteja/CITY TREASURER is of legal age, Filipino and currently In-Charge of Office-City Treasurer of Manila with office address at City II Treasurer's Office, City Hall, Manila. Respondent-CHINA BANK is a universal bankin corporation organized and II operating under existing Philippine laws, with princip I office at 8745 Paseo de Roxas corner Villar Street, Makati City. On the other hand, respondent-Han. Presiding Judge of MTC 23 (PUBLIC RESPONDE T, for brevity), is being impleaded as Nominal Party, with office address at GSIS Annex Building, Concepcion Street, Manila, where they could be serve with summons and other court's processes. CHINA BANK filed with the MTC Civil Case No . 175169 CV, 175172 CV, 175177 CV, and 175178 CV for refund of taxes it pai under prote~t in January 2003.~ 2 Annex "A", Petition for Review, CTA En Bane Rollo, pp. 14-19. 3 Annex "B", Petition for Review, CTA En Bane Rollo, p. 20. 4 Sub-Annex "D", Annex "C" Petition for Review, CTA En Bane Rollo p. 47. 988

I. _ CfA EB CASE NO. 434 (RTC SCA NO. 04- 111014) I DECISION I -� Upon service of summons, petitioner-CITY TR ASURER filed her motions I to dismiss said cases based on: 1) Lack of jurisdictio , and 2) Forum Shopping due to respondent-CHINA BANK's failure to observe ection 196 of R.A. 7160, I otherwise known as the Local Government Code (LG ) of 1991, as well as the filing of other cases with the Regional Trial Court fo refund of taxes collected I under Section 21 of the Manila Revenue Code (MRC), s amended. I Respondent-CHINA BANK filed its Opposition to the said motions and PUBLIC RESPONDENT issued three (3) Orders all dated August 18, 2003, I denying petitioner-CITY TREASURER's motions to dis iss Civil Case Nos. 175169 CV, 175172 CV, and 175178 CV. I Upon receipt of the August 18, 2003 Order of PUBLIC RESPONDENT, I petitioner-CITY TREASURER seasonably filed a Moti n for Reconsideration on I- October 7, 2003. Respondent-CHINA BANK filed its o position to the said motion on October 15, 2003. On July 6, 2004, PUBLIC RESPO DENT issued the JULY 26, I 2004 JOINT ORDER denying the Motion for Reconsi eration of petitioner-CITY TREASURER. With the JOINT ORDER, PUBLIC RESP NDENT included Civil Case I No. 175177 CV in the denial of the Motion for Recons deration when in truth and in fact, there was no Motion to Dismiss nor Motion r Reconsideration filed by I the petitioner-CITY TREASURER therein. - Petitioner-CITY TREASURER then filed a Peti ion for Certiorari with the RTC 19, which issued the AUGUST 4, 2008 ORDER ismissing the said petition I for lack of merit. On September 4, 2008, petitione -CITY TREASURER filed a Motion for Reconsideration praying that said Order be reconsidered, and the ... three (3) cases being tried by MTC 23 be dismissed for lack of jurisdiction and utter lack of merit. RTC 19 promulgated the SEP EMBER 25, 2008 ORDER I denying petitioner-CITY TREASURER's motion for econsideration for lack of I merit. ~ r� 98 9 I I

I. CTA EB CASE NO. 434 II (RTC SCA NO. 04- 111014) DECISION II Page 4 of 9 I On November 11, 2008, petitioner-CITY TR ASURER filed the instant I Petition for Review with the CTA En Bane, praying t at a Decision be rendered reversing the AUGUST 4, 2008 ORDER as well as he SEPTEMBER 25, 2008 I I ORDER, and dismissing Civil Case Nos. 175169 CV, 1 5172 CV, 175177 CV, and I I 175178 CV for failure of CHINA BANK to file a writte claim for refund with the I CITY TREASURER. I Petitioner raised the following issues5 in suppo of the instant Petition for I Review, to wit: I 1. WHETHER OR NOT THE REGIONAL TRIA COURT ERRED IN HOLDING THAT THE LETTERS OF PROTE OF RESPONDENT I CHINA BANKING CORPORATION IS A WR EN CLAIM FOR I REFUND; I i 2. WHETHER OR NOT THE METROPOLITAN TRIAL COURT HAS i JURISDICTION OVER THE CASES CONSIDER! G THAT THERE ARE NO WRffiEN CLAIM FOR REFUND; and 3. WHETHER OR NOT THE CASES SHOULD BE DISMISSED BY THE TRIAL COURT. The CTA En Bane promulgated a Resolution on November 27, 2008, ordering the respondent to file a Comment on the s id Petition for Review. On December 15, 2008, respondent-CHINA BANK filed "Comment"7 praying that the instant Petition for Review be dismissed for lack f merit and the AUGUST 4, 2008 ORDER and SEPTEMBER 25, 2008 ORDER of R C 19 in Civil Case No. 04- 111014 be affirmed. On December 24, 2008, petition r-CITY TREASURER filed a "Reply to the Comment of Respondent"8� The Cou En Bane promulgated a Resolution9 on January 5, 2009 giving due course to the petition for review and ordering the parties to file their r~spective Memoran a. In complia�nce with th~.@-. 5 Petition for Review, CTA En Bank Rollo, p. 7. 6 CTA En Bane Rollo, pp. 181-182. 7 CTA En Bane Rollo, pp. 183- 195. 8 CTA En Bane Rollo, pp. 202-206. 9 CTA En Bane Rollo, pp. 208-209. S90

.CfA EB CASE NO. 434 (RTC SCA NO. 04- 111014) DECISION said Resolution, petitioner-CITY TREASURER filed a emorandum 10 on January 28, 2009 while respondent-CHINA BANK filed its Me orandum11 on February 9, 2009. The instant case was submitted for decision in Resolution12 promulgated on February 12, 2009. After a careful and thorough evaluation and c nsideration of the records of the case, the Court En Bane finds the arg ments of petitioner-CITY TREASURER meritorious. Pertinent to the resolution of this case is Sectio 196 of the LGC, to wit: "Sec. 196. Claim for refund of Tax Credit - No case or proceeding shall be maintained in any Court forth recovery of any tax, fee or charges erroneously or illegally collected u til a written claim for refund or credit has been filed with the local t easurer. No case or I proceeding shall be entertained in any Court after the expiration of two (2) years from the date of payment of such tax, f e or charge, or from the date the taxpayer is entitled to a refund or cred1 ." I As correctly argued by pet itioner-CITY TREASU ER, the subject letter was I a letter under protest of CHINA BANK's payment for an alleged additional local government tax. The said letter is hereby reproduced or easy reference: I "January 16, 2003 I Office of the City Treasurer City of Manila ~ Ground Floor, City Hall Manila I I Gentlemen, We refer to your assessment for Mayo 's permit and other I regulatory fee for the year 2003, specifically the ad itional business tax of PESOS: SEVENll' TWO THOUSAND SIX HUNDR D NINEll' THREE & 55/100 (P72,693.55) for the year 2003 which i 50% of 1% of th~ i �1 CTA En Bane Rollo, pp. 2 10-2 17. 11 CTA En Bane Rollo, pp. 218-235 . 12 CTA En Bane Rollo, p. 238 . I .. 9 . ::) . J.

CTA EB CASE NO. 434 (RTC SCA NO. 04-111014) DECISION previous year's gross receipt. It is our position tha we are not liable on the said additional local tax. And assuming tha we are covered by Section 21 of the City ordinance, we vehement y disagree with the aforesaid assessment on the ground that such cons tute double taxation. In the meantime, to avoid penalties/surchar es and any threat of closure, we are remitting the aforesaid assessm nt UNDER PROTEST included in Manager's check No. 0000006655 amo nting to PESOS: ONE HUNDRED TWENTY TWO THOUSAND SEVEN H NORED SEVENTY & 55/100 ONLY (P122,770.55) payable to CHINA BANK-ERMITA BRANCH. Please issue receipt for the corresponding a XXX XXX " This letter is not a claim for refund, as conte plated in the above-cited provision. This Court sitting en bane had the occasion to ule on the very same issue presented in the instant petition in CfA EB Case No. 1 6 entitled, "China Banking Corporation vs. The City Treasurer ofManila/; to wit: "It is clear from the wordings of the letter t at it is but a notice to the City Treasurer that petitioner is instituting the a propriate legal action for refund. The said letter does not ask the City Tr asurer to do any act, in particular, to make a refund or credit of petition r's alleged erroneous payment of local taxes. In the very words of the I tter, the petitioner is about to institute a claim for refund or credit. The letter is not an action I by itself, rather it shows payment under protest so s to negate waiver or acquiescence on the part of the taxpayer."13 I In above letter, respondent-CHINA BANK wa merely alleging that it is not liable on the assessed additional business tax and assuming that it is covered by Section 21 of the Manila Revenue Code, t e same constitutes double taxation. As opposed to the argument of respondent- HINA BANK, the Court Ena- 13 China Banking Corporation vs . City Treasurer of Manila, CTA EB Case No. 146, August 2, 2006, as affirmed by the Supreme Comt in "China Banking Corporation vs. The City Treasurer of Manila", G.R. No I 174999, March 5, 2007 Resolution. � I

������� CfA EB CASE NO. 434 �' (RTC SCA NO. 04- 111014) DECISION II Page 7 of 9 I Bane finds that the letter did not apprise the petition r-CTIY TREASURER of the former's intention to effect a refund. The letter is but a notice to the petitioner- I CITY TREASURER that respondent-CHINA BANK is aying the above-indicated I amount in the assessment under protest. I I In addition, the Court En Bane cannot subscrib to the pronouncement of Honorable Zenaida R. Daguna, Presiding Judge of RTC 19, to wit: I I "The protest made was a formal objection o the tax assessment I made against the Private Respondent. I Considering the justification made in the letter of protest, the intention is to free the Private respondent of any tax liability under the assessment. If ever payment was made, the end view is to refund the same. So basically, the letter protest has the sam purpose of what was required under the Local Government Code. It bei g the case the Letter of Protest is considered substantial compliance wi h the requirement of 'written claim for refund'." Also in the same China Ban/!4 case, the CTA Bane ruled that, "the LGC does not require a specific form of the letter of refun . However, there must be a categorical written statement on the part of th taxpayer whether he is manifesting his intention to effect a claim for r und or credit of alleged erroneous payment of local taxes, or writing a lett r of protest or both". The Court En Bane cannot assume that respondent-CHIN BANK's ultimate intention in writing the above-quoted letter is to ask for a refu d of payment of its alleged tax liabilities. Well entrenched in our jurisprudence is that t x refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris ag inst the person or entity claiming the exemption (Commissioner of Int rna/ Revenue vs. S.C. Johnson and Son, Inc., 309 SCRA 87 [1999]). Accordingly, the claimantet- 14 Supra, note 13.

I CTA EB CASE NO. 434 (RTC SCA NO. 04- 111014) I DECISION I I has the burden of proof to establish the factual basis of his or her claim for tax credit or refund (Citibank N.A. vs. Court or A 'Peals, 280 SCRA 459 � [1997]). I With this pronouncement, the Court En Bane fi ds that the MTC 23 has no jurisdiction over 175169 CV, 175172 CV, 175177 CV, and 175178 CV for failure � of respondent-CHINA BANK to file a written claim for refund with the petitioner- em TREASURER, pursuant to Section 196 of the LGC Compliance with the said II provision is a condition sine qua non, non-complianc of which would not vest the court a quo jurisdiction over the subject cases. T us, Civil Case Nos. 175169 � CV, 175172 CV, 175177 CV, and 175178 CV should b dismissed by the MTC 23 for lack of jurisdiction. II WHEREFORE, premises considered, the i stant Petition is hereby � GRANTED. Accordingly, the August 4, 2008 and S ptember 25, 2008 Orders issued by the Regional Trial Court, Branch 19, Manila in Special Civil Action No. II 04-111014 entitled, "Liberty M. Toledo/ in her officia capacity as City Treasurer of Manila/ petitioner vs. CHINA BANKING COR if?A TION and the HON. PRESIDING JUDG~ METROPOLITAN TRIAL CO~ 7; BRANCH 2~ MANILA/ respondents" are hereby REVERSED and SET ASI E. Accordingly, Civil Case Nos. 175169 CV, 175172 CV, 175177 CV, and 175178 CV are hereby DISMISSED for lack of jurisdiction due to responde t-CHINA BANK's failure to file a written claim for refund with petitioner-em TR ASURER. SO ORDERED. CAES R A. CASANOVA Ass ciate Justice 994

' CTA EB CASE NO. 434 (RTC SCA NO. 04-111014) DECISION Page 9 pf 9 WE CONCUR: ELRN~EST.O Do. A~ I Presiding Justice I I S2.-u-;;; c.aT-~A :h JUANITO c. CASTANEDA, JR: Associate Justice I ... C~UEZ AEssR~~~~Pus.ticeUY Justice II II II CERTIFICATION Pursuant to Article VIII, Section 13 of the Cons itution, it is hereby II certified that the conclusions in the above decision we e reached in consultation before the case was assigned to the writer of the opin on of the Court. II ~- Q~ ERNE "ffi�D. ACoSTA P esiding Justice II �� M ~�� n ,r.J J