Film Development Council of The Phil V SM

Title: Film Development Council of the Philippines v. SM Prime Holdings, Inc.
GR No. 197937
Date: April 3, 2013
Ponente: Villarama, J.
Parties:
Petitioner: Film Development Council of the Philippines
respondent: SM Prime Holdings
Facts:
Respondent SM Prime HOLDINGS, Inc. is the owner and operator of cinema houses at SM Cebu in Cebu City. The Local
Government Code (LGC) of 1991 provides that owners, proprietors and lessees of theaters and cinema houses are subject to
amusement tax (not more than 30% of the gross receipts from admission fees) as provided in Section 140, Book II, Title One.
R.A. No. 9167 created The Film Development Council of the Philippines, herein petitioner, has a mandate which includes the
development and implementation of an incentive and reward system for the producers based on merit to encourage the production
of quality films. Thus, the Cinema Evaluation Board (CEB) was established, its main function being to review and grade films.
According to Section 13 of R.A. No 9167, the producers of the films graded A or B shall be entitled to an incentive equivalent to
the amusement tax imposed and collected by highly urbanized and independent component cities in the Philippines pursuant to
Section 140 and 151 of the LGC, 100% of the amusement tax for films graded A and 65% for films graded B (the remaining 35%
shall accrue to the funds of the Council). On the other hand Section 14 of the same law mandates the remittance of the proceeds of
the tax collected by the LGUs to petitioner.
January 27, 2009, petitioner through the OSG sent a demand letter to respondent for the payment of amusement tax rewards due to
producers of 89 films graded A and B which were shown at SM cinemas from September 11, 20003 to November 4, 2008.
The city of Cebu petitioned in the Cebu RTC against the petitioner as it sought to seek invalid and unconstitutional Section 14 of
R.A. No. 9167 on grounds that: (1) it violates the basic policy on local autonomy; (2) it constitutes an undue limitation of the taxing
power of the LGUs; (3) it unduly deprives LGUs of the revenue from the amusement tax imposed on theatre owners and operators;
and (4) it amounts to technical malversation since revenue from the collection of amusement taxes that would otherwise accrue to
and form part of the general fund of the LGU concerned would now be directly awarded to a private entitythe producers of the
films-bypassing the budget process of the LGU and without the proper appropriation ordinance from the sanggunian.
Several more petitions were raised in court yielding conflicting decisions. The last of these was about the petitioner filing a comment
praying for the dismissal of the case filed by the City of Cebu while respondent filed a Motion to Dismiss arguing that petitioners
complaint merits outright dismissal considering that its claim had already been extinguished by respondents prior payment or
remittance of the subject amusement taxes to the City of Cebu.
Issue:
WON Section 13 and 14 of R.A. No. 9167 is unconstitutional as it conflicts with the provisions of the LGC- was left to be resolved
at the lower court
Ratio:
This case had failed in its procedural aspect. The court held that there are issues involving litis pendentia which first had to be
resolved before the constitutionality issues may be raised. Since there were so many cases filed at the same time regarding this
subject, the Court looked on to the technicalities of procedure.
The ponencia states It is evident that petitioners claim against the respondent hinges on the correct interpretation of the conflicting
provisions of the LGC of 1991 and R.A. No. 9167. There could be no doubt that a judgment in either case would constitute res
judicata to the other.
The Court also used the criterion of the consideration of the interest of justice enunciated in Roa v. Magsaysay in considering the
predicament of the respondent. In applying this standard, what was asked was which court would be in a better position to serve
the interests of justice, taking into account (a) the nature of the controversy, (b) the comparative accessibility of the court to the
parties and (c) other similar factors.
Therefore, considering all the factors in this case, there can be no doubt Civil Case in Cebu is the appropriate vehicle to determine
the rights of petitioner and respondent.
WHEREFORE, petition DENIED.

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Title: Film Development Council of the Philippines v. SM Prime Holdings, Inc.

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