City of Manila v. Ace Hardware Phils., Inc.

THIRD DIVISION

[G.R. No. 187791. February 27, 2013.]

CITY OF MANILA AND CITY TREASURER OF MANILA, petitioners, vs. ACE HARDWARE PHILS., INC., ET AL., respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Third Division, issued a Resolution dated February 27, 2013, which reads as follows:

G.R. No. 187791 (City of Manila and City Treasurer of Manila vs. Ace Hardware Phils., Inc., et al.). — Respondents' Manifestation and Submission of a copy of the Universal Compromise Agreement dated December 27, 2012 is NOTED.

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Resolution 1 of the Court of Tax Appeals En Banc (CTA-En Banc), dated February 17, 2009, dismissing petitioners' Petition for Review, and the Resolution 2 dated May 7, 2009, denying petitioners' motion for reconsideration thereof, be annulled and set aside.

This case was commenced upon respondents' filing of a complaint with the Regional Trial Court of Pasay City (RTC) against petitioners for refund of alleged overpaid business taxes. On August 24, 2007, the RTC rendered judgment in favor of respondents, ordering petitioners to grant respondents a refund and/or tax credit. Petitioners appealed the case to the Court of Tax Appeals, First Division (CTA-1st Div.), but on September 29, 2008, the CTA-1st Div. promulgated its Decision denying their petition for review. Petitioners' motion for reconsideration of said CTA Decision was denied per Resolution dated November 10, 2008. Petitioners then elevated the matter to the CTA-En Banc, but in the assailed Resolution dated February 17, 2009, the court dismissed the petition for having been filed beyond the reglementary period. A motion for reconsideration of said Resolution was denied in the Resolution dated May 7, 2009.

Hence, petitioners filed the present petition for review on certiorari.

However, on December 14, 2012, before this Court could resolve the petition, petitioners and respondents filed a Joint Omnibus Motion (To: [1] Withdraw Petition for Review on Certiorari; [2] Confirm Compromise Agreement; and [3] Render Judgment Based on the Compromise Agreement). The parties submitted their Universal Compromise Agreement, dated June 1, 2012, the pertinent portions of which read as follows:

UNIVERSAL COMPROMISE AGREEMENT

WHEREAS, Tax Ordinance No. 7794, among others, provides as follows;

Section 21. Tax. — "Tax on Businesses Subject to the Excise, Value-Added or Percentage taxes under the NIRC" at the rate of three percent (3%); cEAaIS

WHEREAS, on September 29, 1993, before Tax Ordinance No. 7794 became effective, it was amended by Tax Ordinance No. 7807, among others, by lowering the Section 21 tax rate from three percent (3%) to one-half of one percent (1/2 of 1%) and further providing that "all registered businesses in the City of Manila that are already paying the aforementioned tax shall be exempt from payment thereof;

WHEREAS, the taxes, fees and charges levied under Tax Ordinance No. 7794, as amended by Tax Ordinance No. 7807, otherwise known as the "Revenue Code of the City of Manila" took effect on October 1, 1993;

WHEREAS, On 25 February 2000, the City Mayor of Manila approved Tax Ordinance No. 7988, otherwise known as "Revised Revenue Code of the City of Manila" repealing Tax Ordinance No. 7794, as amended, by increasing the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila and by deleting the provision under Section 21 of the Revenue Code of the City Manila that "all businesses already paying the aforementioned tax shall be exempt from payment thereof";

WHEREAS, on January 1, 2001, Tax Ordinance No. 8011 was enacted to further amend the Revised Revenue Code of the City of Manila (Revised Revenue Code of Manila, as amended) by increasing the rates of local business tax;

WHEREAS, due to its various business operations within the City of Manila, SM GROUP pays local business taxes to the City of Manila imposed pursuant to the Revised Revenue Code of the City of Manila, as amended;

WHEREAS, as a consequence of the foregoing, the SM GROUP paid under protest, the business taxes due under various sections of Tax Ordinance 7988, as amended, as evidenced by Official Receipts issued by the Office of the City Treasurer;

WHEREAS, SM GROUP, through its representative, Cecilia R. Patricio, within the period required by law, filed formal protests and requested the office of the Defendant City Treasurer to refund the amount of taxes paid under Section 21 and the increased rates under the Revised Revenue Code of the City of Manila, as amended; TcSICH

WHEREAS, the basis for SM GROUP's protests and claim for refund or tax credit, among others, are the declaration of nullity of both Tax Ordinance Nos. 7988 and 8011 by the Office of the Secretary of Justice in Resolutions dated August 17, 2000 and July 5, 2001; Sections 143(H) and 188 of the Local Government Code;

WHEREAS, Defendant City Treasurer, denied all the protests and requests for tax credit filed by the SM GROUP; thus, the SM GROUP timely filed several court cases to claim for Refunds and/or Issuance of Tax Credits of Taxes Illegally Collected ("the Refund/Tax Credit Cases"), the details and status of which are as follows:

xxx xxx xxx

9. SC G.R. No. 187791, entitled; "The City of Manila and the City Treasurer of Manila versus Ace Hardware Phils., Inc., SM Prime Holdings, Inc., Star Appliance Center, Inc., Supervalue, Inc., Watsons Personal Care Stores (Phils.), Inc.", for the refund and/or issuance of tax credit in the amount of P8,989,626.18, is currently pending before the Supreme Court (SC) after it was elevated by the City of Manila. This case emanated from an Order in favor of the SM Group issued by Branch 114 of the Regional Trial Court of Pasay City, in Civil Case No. 06-1305 entitled "Ace Hardware Phils., Inc., SM Prime Holdings, Inc., Star Appliance Center, Inc., Supervalue, Inc. Watsons Personal Care Stores (Phils.), Inc. versus the City of Manila and the City Treasurer of Manila." That Order has been affirmed by the CTA en banc (CTA-EB).

WHEREAS, while the above-enumerated cases were pending before the various courts, the Supreme Court rendered a decision in G.R. No. 156252 entitled "Coca-Cola Bottlers Phils. vs. City of Manila, et al. (the "Coca-Cola Case") in which the high court declared Tax Ordinance Nos. 7988 and 8011 as null and void.

WHEREAS, in order to nurture a climate favourable to the growth of existing businesses; attract new investors; show its sincerity and sense of exigency to improve the quality of life of its constituents, the City of Manila announced on July 16, 2007 that in line with the final ruling of the Supreme Court in the Coca-Cola case, it had issued a Memorandum ordering the City Treasurer and the Officer-in-Charge of Business Promotion and Development to cease and desist from imposing and collecting Section 21 tax and announcing that tax ordinance to be imposed starting 3rd quarter of 2007 onwards and until such time that a new ordinance has been enacted by the City Council, shall be Tax Ordinance No. 7794, as amended by Ordinance No. 7807; CAcDTI

WHEREAS, in order to finally bring an end to all litigation between the parties, they have agreed to an amicable settlement of all the above enumerated cases.

THEREFORE, in consideration of the foregoing premises, the parties hereby agree as follows:

1. Objects of the Compromise. This Compromise Agreement refers to all the local business tax claim covered by the Refund/Tax Credit Cases, in the total amount of PESOS: ONE HUNDRED FIFTY-ONE MILLION THREE HUNDRED NINETY-SEVEN THOUSAND EIGHT HUNDRED TWENTY-EIGHT AND 76/100 (P151,397,828.76).

2. Terms of the Compromise. In full and final settlement of all the foregoing claims for tax credit and/or refund by the SM GROUP as specified in the Refund/Tax Credit Cases, the City of Manila hereby contracts and agrees to issue separate tax credit certificates, individually and in the names of each of the following members of the SM Group, to be used and/or applied in equal amounts, over a seven (7) year period beginning with the year 2013 and up to the year 2019, in the total amount of PESOS: NINETY MILLION (P90,000,000.00), broken down among the individual corporations of the SM Group, as follows:

Company Name	Amount
Metro Manila Shopping Mecca Corp.	P25,191,000.00
SM Mart, Inc.	32,937,000.00
SM Land, Inc. (formerly Shoemart, Inc.)	1,853,000.00
SM Prime Holdings, Inc.	8,944,000.00
Star Appliance Center, Inc.	5,877,000.00
Supervalue, Inc.	5,590,000.00
Mandurriao Star, Inc.	4,868,000.00
Watsons Personal Care Stores Phils., Inc.	430,000.00
Ace Hardware Philippines, Inc.	1,527,000.00
Surplus Marketing, Corp.	654,000.00
Sports Central (Manila), Inc.	533,000.00
Shopping Center  Management Corp.	417,000.00
Warehouse Development Co., Inc.	377,000.00
Signature Lines, Inc.	277,000.00
Wonderfoods, Inc.	280,000.00
West Avenue Theaters Corp.	245,000.00
	—————————————
Total	P90,000,000.00
	============

2.a. The same breakdown, on a per-case basis, is as follows:

xxx xxx xxx

2.a.9. SC G.R. No. 187791, entitled "The City of Manila and the City Treasurer of Manila versus Ace Hardware Phils., Inc., SM Prime Holdings, Inc., Star Appliance Center, Inc., Supervalue, Inc., Watsons Personal Care Stores (Phils.), Inc.,", before the Supreme Court (SC), which emanated from Civil Case No. 06-1305 entitled "Ace Hardware Phils., Inc., SM Prime Holdings, Inc., Star Appliance Center, Inc., Supervalue, Inc., Watsons Personal Care Stores (Phils.), Inc., versus the City of Manila and the City Treasurer of Manila", Branch 114 of the Regional Trial Court of Pasay City, as follows: ADaECI

a.	SM Mart, Incorporated	P4,398,000.00
b.	Supervalue, Incorporated	1,217,000.00
c.	SM Prime Holdings, Inc.	596,000.00
d.	Star Appliance Center, Inc.	856,000.00
e.	Ace Hardware Phils., Inc.	247,000.00
f.	Watsons Personal Care Stores Phils., Inc.	246,000.00
		—————————————
TOTAL	P7,560,000.00
		============

xxx xxx xxx

3. Additional Terms. In addition to the foregoing, the parties hereby further agree as follows:

3.a. No interest shall be due on the claim for refund and/or tax credit of the SM GROUP.

3.b. The costs of the suits shall be borne by each of the parties concerned.

3.c. Tax Credit Certificates equivalent to the total refundable amount due shall be issued by the City Treasurer of Manila in favor of the individual corporations of the SM Group based on Par. 2 above, which shall be applied as payment for business taxes over a period of seven (7) years beginning 2013 until 2019.

3.d. The City Mayor and the City Treasurer warrant their authority to enter into this compromise agreement in behalf of the City of Manila and to sign for and on behalf of the City of Manila all agreements and documents necessary and requisite to the settlement of this obligations.

3.e. Both parties agree to waive and discharge any and all actions or claims of whatever nature or kind that have, or may in the future arise, out of or in connection with the aforementioned Refund/Tax Credit Cases, provided, that in case(s) where the legality of this compromise agreement is questioned preventing its execution, whether judicial or extrajudicial, or in cases of default, such as but not limited to failure to issue tax credit certificates upon the execution of the agreement, breach of warranty of capacity to execute the agreement, or in other case(s) of breach of this compromise agreement, the aggrieved party may seek recourse to the appropriate courts for the immediate issuance of writ(s) of execution against the party-in-breach, provided further, that where such recourse becomes necessary under this provision, the party-in-breach shall be liable for the full amount(s) originally adjudicated by the respective courts, and not the discounted amounted specified in this agreement. CSDAIa

4. Joint Obligations of the Parties. Upon the execution of this Universal Compromise Agreement, the parties shall file the necessary joint motion for the approval hereof and rendition of Judgment in accordance with this agreement and/or, where applicable, the issuance of an Order declaring that full and faithful compliance with the UCA shall be deemed as full satisfaction and compliance with the appropriate Court's Judgment and Writ of Execution.

IN WITNESS WHEREOF, the parties have hereunto affixed their signatures this 1st day of June 2012, in the City of Manila.

SM GROUP OF COMPANIES	CITY OF MANILA
Plaintiff	Defendant
By:	By:
CECILIA R. PATRICIO	HON. ALFREDO S. LIM
Senior Vice-President	Mayor, City of Manila
Corporate Tax Division

The parties stated in their Joint Omnibus Motion that they have decided to end all litigation between them and amicably settle their respective claims. They likewise pray that the Court render judgment approving the Universal Compromise Agreement dated June 1, 2012 and adopting the same as the judgment of the Court.

In Gaisano v. Akol, 3 the Court defined a compromise agreement as a contract whereby the parties make reciprocal concessions, avoid litigation, or put an end to one already commenced. Its validity depends on its fulfillment of the requisites and principles of contracts dictated by law; its terms and conditions being not contrary to law, morals, good customs, public policy and public order.

A close reading of the afore-quoted Universal Compromise Agreement would show the same to be sanctioned under Article 2028 of the Civil Code, its terms and conditions not being contrary to law, morals, good customs, public policy and public order. Hence, the Court finds nothing objectionable with the same.

WHEREFORE, the Joint Omnibus Motion is GRANTED. The Universal Compromise Agreement dated June 1, 2012 is hereby APPROVED and ADOPTED as the judgment in this case. Herein parties are ORDERED to strictly and faithfully comply with said Universal Compromise Agreement. This case is now deemed TERMINATED.

No pronouncement as to costs.

SO ORDERED."

Very truly yours,

 

(SGD.) LUCITA ABJELINA SORIANODivision Clerk of Court

 

Footnotes

1.Penned by Presiding Justice Ernesto D. Acosta, with Associate Justices Juanito C. Castañeda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova and Olga Palanca-Enriquez, concurring.

2.Id.

3.G.R. No. 193840, June 15, 2011, 652 SCRA 378, 381.