G.R. No. 233861 , January 12, 2021
City of Iloilo, Petitioner, vs. Philippine Ports Authority and Development Bank of the Philippines

FACTS

On November 3, 2005, the Development Bank of the Philippines (DBP) received a Notice of Garnishment from petitioner City of Iloilo, levying bank deposits of the Philippine Ports Authority (PPA) to collect realty and business tax delinquencies, interest, charges, and penalties amounting to Php44,298,470.11, pursuant to the Supreme Court’s final judgments in G.R. Nos. 109791 and 143214. PPA requested the City to recall the notice, claiming it had already fully paid the tax liabilities subject of those judgments, and asked DBP to release its funds, but both requests were denied. On June 5, 2009, PPA filed a complaint against the City and DBP before the Regional Trial Court (RTC) of Manila for declaration of nullity of the notice of garnishment with prayer for injunction. The RTC denied the application for a writ of injunction and later dismissed PPA’s complaint for lack of merit, finding the garnishment also covered other liabilities like those for the Iloilo Port Complex. PPA appealed to the Court of Appeals (CA). Meanwhile, DBP remitted PPA’s garnished deposits to the City. The CA granted PPA’s appeal, declared the Notice of Garnishment void, and directed the City to return Php26,661,552.41 to PPA. The CA held that PPA is a government instrumentality whose properties for public use are tax-exempt, that the Iloilo Port Complex’s taxability was already settled by a final RTC decision, that the garnishment was invalid as liabilities were paid, and that the City violated the Local Government Code by not issuing a notice of assessment prior to distraint. The City of Iloilo filed this petition for review.

ISSUE

1. Whether the Court of Appeals had jurisdiction to review the RTC decision, or if exclusive appellate jurisdiction lies with the Court of Tax Appeals.
2. Whether the Court of Appeals erred in holding that Section 196 of the Local Government Code (on tax exemption of government instrumentalities) does not apply.

RULING

1. The Court of Appeals correctly exercised jurisdiction. The CTA’s exclusive appellate jurisdiction under Republic Act No. 9282 extends only to “local tax cases” from the RTC. The nature of the action is determined by the allegations in the complaint. PPA’s complaint was not a tax case but an action questioning the propriety of the garnishment as a remedy to enforce a final Supreme Court judgment, claiming the tax liabilities had already been paid. The action was anchored on the alleged irregularity of the execution process, not on a challenge to the tax assessment itself. Thus, it was not a local tax case under the CTA’s jurisdiction.
2. The Supreme Court affirmed the CA’s ruling. The Court reiterated that PPA is a government instrumentality, and following the precedent in MIAA v. Court of Appeals, its properties devoted to public use are exempt from real property tax. As an incident of this exemption, such properties are also exempt from the means to collect such taxes, like garnishment. The Notice of Garnishment was void because PPA had already fully settled the tax liabilities adjudged in G.R. Nos. 109791 and 143214, as evidenced by official receipts. Furthermore, the City of Iloilo’s act of issuing the garnishment notice itself, instead of seeking a writ of execution from the court, violated the rules on execution of judgments. The garnishment was also defective for lacking a prior notice of assessment as required by the Local Government Code. The Supreme Court denied the petition and affirmed the CA Decision.