REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION DESTINY CABLE, INC., CTA AC NO . 18 2 Petitioner, (Civil Case No. 14-612) Members: -versus- CASTANEDA, JR.,Chairperson, CASANOVA, and MANAHAN, JJ. THE CITY OF MAKATI AND HON . NELIA A. BARLIS, IN HER CAPACITY AS CITY TREASURER, Promulgated: Respondents. MAR 1 4 2018 /' / / ;: K /""· x------------------------------------------------------------------------------------------x DECISION CASTANEDA, JR., } .: THE CASE This is a Petition for Review filed by Destiny Cable, Inc. on February 10, 2017, praying for the reversal and setting aside of the Decision 1 dated September 21, 2016 (assailed Decision) and the Order2 dated January 5, 2017 (assailed Order) of the Regional Trial Court (RTC) of Makati City - Branch 66 in Civil Case No. 14-612 entitled "Destiny Ca ble, I nc. vs. The City of Makati and Hon. Nelia A. Ba rlis in her capacity as City Treasurer". ~ 1 Annex "A", CTA Docket, pp. 40-45. 2 Annex " B", CTA Docket, p. 46 . DECISION CTA AC NO. 182 Page 2 of 21 In the assailed Decision, the RTC dismissed petitioner's Complaint for lack of merit and ordered it to pay its local business tax (LBT) assessment for calendar years (CYs) 2009, 2010, and 2011 in the aggregate amount of P25,069,245.92. The dispositive portion of the assailed Decision reads: "WHEREFORE, premises considered, the instant Complaint is hereby DISMISSED for lack of merit. Herein plaintiff is hereby directed to pay its taxes as assessed and embodied in the Notice of Assessment dated August 15, 2013 in the amount of Php25,069,245.92. SO ORDERED."3 4 Petitioner filed a Motion for Reconsideration , with respondents' 5 6 Comment/Opposition and petitioner's Reply , seeking the reversal of the assailed Decision. In the Order7 dated January 5, 2017, the RTC held that it has squarely passed upon and resolved the issues at hand. Hence, it is not inclined to reconsider its Decision. THE FACTS The facts, as culled from the assailed Decision of the RTC, are as follows: Plaintiff is a domestic corporation engaged in the business of providing cable/community antennae television (CATV) systems and networks and multi-media training systems and other related services in the Philippines and other countries. On May 12, 2012, plaintiff and Sky Cable Corporation (Sky Cable) executed two Deeds of Sale and Assignment. Under the first Deed of Assignment, plaintiff assigned, transferred and conveyed to Sky Cable all its rights, obligations, title and interests to ~ 3 See Note 1, p. 45. 4 RTC Docket, Vol. II, pp. 740-764. 5 RTC Docket, Vol. II, pp. 767-773. 6 RTC Docket, Vol. II, pp. 778-793. 7 RTC Docket, Vol. II, p. 794. DECISION CTA AC NO. 182 Page 3 of 21 all the assets, permits, licenses and intellectual property used in connection with or pertaining to the plaintiff's cable television business. In the second Deed of Assignment plaintiff assigned, transferred and conveyed to Sky Cable all its rights, obligations, title and interest under all the subscription contracts and various other contracts relating to its cable television business to Sky Cable. On July 13, 2012, plaintiff likewise filed with the Department of Labor and Employment (DOLE) NCR an Establishment Termination Report wherein it notified DOLE of the termination of its 163 employees in view of the cessation of its operations. On April 1, 2014, Sky Cable handed to plaintiff a copy of defendant City Treasurer's Final Notice of Assessment dated March 20, 2014, which demanded payment of plaintiff's deficiency taxes, fees and charges in the amount of Php25,069,245.92 within five days from receipt of the said Final Notice. The Final Notice states that plaintiff failed to file a protest against the defendants' Notice of Assessment dated August 15, 2013 which was allegedly received by the plaintiff on August 22, 2013. On April 24, 2014, plaintiff wrote to defendant City Treasurer requesting for the withdrawal and cancellation of the Final Notice on the ground that the assessment for deficiency taxes, fees and charges in the amount of Php25,069,245.92 is null and void, because plaintiff was not served the Assessment Notice referred to in the Final Notice. On May 8, 2014, plaintiff received a copy of defendant City Treasurer's letter dated April 30, 2014 which denied plaintiff's request for withdrawal and cancellation of the assessment for deficiency taxes, fees and charges, hence this Complaint. THE RTC'S DECISION J'L- DECISION CTA AC NO. 182 Page 4 of 21 The RTC held that petitioner's acts and/or inaction effectively clothed Mr. Renie Garfin with apparent authority to receive documents for and on its behalf, and that it had also ratified the previous act of Mr. Garfin in receiving the Letter of Authority (LOA). The RTC ruled that respondents' position finds support in the case of 8 Yu Chick, Mack Yueng and Ding Moon vs. King Li Po , where the Supreme Court held that one who clothes another with apparent authority as his agent and holds him out to the public as such, cannot be permitted to deny the authority of such person to act as his agent in good faith and in the honest belief that he is what he appears to be. The RTC ruled: Defendants deny that Mr. Garfin informed them of his authority as there was no actual encounter between him and the representative of defendants since they did not see each other at the time. Defendants therefore had every reason to believe that sending communications to the plaintiff thru Mr. Garfin was a valid service to plaintiff itself, hence, defendants' reliance on said representation is fair and reasonable under the given circumstances: XXX XXX XXX Clearly, Mr. Garfin did not meet the defendants' representative or messenger, as it was merely handed to him by the security guard. Moreover, there is nothing on record to show that plaintiff officially retired its business permit with the city government of Makati, hence the latter may fairly assume that plaintiff was still operating its business at the time the LoA and other notices were issued to the plaintiff. In fact, plaintiff has not filed its sworn statement in connection with its retirement of business in accordance with Section 145 of R.A. 7160. It is noteworthy that when defendants issued the LoA, it was Mr. Garfin who received the same. Instead of repudiating or disowning the authority of Mr. Garfin to ~ 8 G.R. No. L-22450, December 3, 1924. DECISION CTA AC NO. 182 Page 5 of 21 receive such documents from defendants, plaintiff even complied partially with the LoA by submitting some required documents. The action on the part of the plaintiff led defendants to believe and hold that Mr. Garfin was in fact authorized to receive such documents from defendants. Hence, this court fully agrees with defendants that all the foregoing acts and/or inaction on the part of plaintiff has effectively clothed Mr. Garfin with apparent authority to receive documents for and on its behalf, and that it had also ratified the previous act or (sic) Mr. Garfin in receiving the LoA. Defendants' position finds support in the Supreme Court ruling wherein it held that one who clothes another with apparent authority as his agent and holds him out to the public as such, cannot be permitted to deny the authority of such person to act as his agent in good faith and in the honest belief that he is what he appears to be. The doctrine of apparent authority provides that a corporation will be estopped from denying the agent's authority if it knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, and it holds him out to the public as possessing the power to do these acts. Thus, the RTC held that the LOA and other notices, including the August 15, 2013 Notice of Assessment, have been validly served upon petitioner through Mr. Renario Garfin. Since there is nothing on record to show that petitioner filed a written protest before the Office of the City Treasurer within sixty (60) days from receipt of the assessment, the RTC dismissed petitioner's Complaint. PETITIONER'S ARGUMENTS Petitioner appeals the assailed Decision on the following grounds: 1. The Assessment Notice is null and void for having been issued in violation of Section 171 of the Local J;z- DECISION CTA AC NO. 182 Page 6 of 21 Government Code, in relation to Article 259 of its Implementing Rules and Regulations; and 2. The assessment is null and void for having been issued in violation of petitioner's right to due process. As to petitioner's first argument, the provisions it cited state: SEC. 171. Examination of Books of Accounts and Pertinent Records of Businessmen by Local Treasurer. - The provincial, city, municipal or barangay treasurer may, by himself or through any of his deputies duly authorized in writing, examine the books, accounts, and other pertinent records of any person, partnership, corporation, or association subject to local taxes, fees and charges in order to ascertain, assess, and collect the correct amount of the tax, fee, or charge. Such examination shall be made during regular business hours, only once for every tax period, and shall be certified to by the examining official. Such certificate shall be made of record in the books of accounts of the taxpayer examined. In case the examination herein authorized is made by a duly authorized deputy of the local treasurer, the written authority of the deputy concerned shall specifically state the name, address, and business of the taxpayer whose books, accounts, and pertinent records are to be examined, the date and place of such examination and the procedure to be followed in conducting the same.