Angeles Electric Corporation was granted a legislative franchise under Republic Act No.

(RA) 4079 2 to

 Presidential Decree No. (PD) 551 reduced the franchise tax of electric franchise holders. Section 1 of PD
551 provided that:

SECTION 1. Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax
payable by all grantees of franchises to generate, distribute and sell electric current for light, heat and
power shall be two percent (2%) of their gross receipts received from the sale of electric current and
from transactions incident to the generation, distribution and sale of electric current.

RA 7160 or the Local Government Code (LGC) of 1991 was passed into law, conferring upon
provinces and cities the power, among others, to impose tax on businesses enjoying franchise. In
accordance with the LGC, the Sangguniang Panlungsod of Angeles City enacted on December 23,
1993 Tax Ordinance No. 33, S-93, otherwise known as the Revised Revenue Code of Angeles City
(RRCAC).

a petition seeking the reduction of the tax rates and a review of the provisions of the Revised
Revenue Code of Angeles City RRCAC was filed with the Sangguniang Panlungsod by Metro
Angeles Chamber of Commerce and Industry Inc. (MACCI) of which AEC is a member. There being
no action taken by the Sangguniang Panlungsod on the matter, MACCI elevated the petition 5 to the
Department of Finance, which referred the same to the Bureau of Local Government Finance
(BLGF). In the petition, MACCI alleged that the RRCAC is oppressive, excessive, unjust and
confiscatory; that it was published only once, simultaneously on January 22, 1994; and that no public
hearings were conducted prior to its enactment. Acting on the petition, the BLGF issued a First
Indorsement6 to the City Treasurer of Angeles City, instructing the latter to make representations
with the Sangguniang Panlungsod for the appropriate amendment of the RRCAC in order to ensure
compliance with the provisions of the LGC, and to make a report on the action taken within five days.

 AEC has been paying the local franchise tax to the Office of the City Treasurer on a quarterly basis,
in addition to the national franchise tax it pays every quarter to the Bureau of Internal Revenue
(BIR).

On January 22, 2004, the City Treasurer issued a Notice of Assessment 7 to AEC for payment of business
tax, license fee and other charges for the period 1993 to 2004 in the total amount of ₱94,861,194.10.
Within the period prescribed by law, AEC protested the assessment claiming that:

(a) pursuant to RA 4079, it is exempt from paying local business tax;

(b) since it is already paying franchise tax on business, the payment of business tax would result in
double taxation;

(c) the period to assess had prescribed because under the LGC, taxes and fees can only be assessed and
collected within five (5) years from the date they become due; and
(d) the assessment and collection of taxes under the RRCAC cannot be made retroactive to 1993 or prior
to its effectivity.8

On February 17, 2004, the City Treasurer denied the protest for lack of merit and requested AEC to
settle its tax liabilities.9

Aggrieved, AEC appealed the denial of its protest to the RTC of Angeles City via a Petition for Declaratory
Relief.

City Treasurer levied on the real properties of AEC. 11 A Notice of Auction Sale12 was published and posted
announcing that a public auction of the levied properties of AEC would be held

This prompted AEC to file with the RTC, where the petition for declaratory relief was pending, an Urgent
Motion for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction 13 to enjoin
Angeles City and its City Treasurer from levying, annotating the levy, seizing, confiscating, garnishing,
selling and disposing at public auction the properties of AEC.

Angeles City and its City Treasurer filed an Answer with Counterclaim 14 to which AEC filed a Reply

After due notice and hearing, the RTC issued a Temporary Restraining Order (TRO) granting the issuance
of a Writ of Preliminary Injunction, conditioned upon the filing of a bond in the amount of
₱10,000,000.00. Upon AEC’s posting of the required bond, the RTC issued a Writ of Preliminary
Injunction

Angeles City and its City Treasurer filed a "Motion for Dissolution of Preliminary Injunction and Motion
for Reconsideration of the Order

Issue:

RTC gravely abused its discretion in issuing the writ of preliminary injunction enjoining Angeles City and
its City Treasurer from levying, selling, and disposing the properties of AEC. All other matters pertaining
to the validity of the tax assessment and AEC’s tax exemption must therefore be left for the
determination of the RTC where the main case is pending decision.

Petitioners contention:

the collection of taxes cannot be enjoined by the RTC, citing Valley Trading Co., Inc. v. Court of First
Instance of Isabela, Branch II, 23 wherein the lower court’s denial of a motion for the issuance of a writ
of preliminary injunction to enjoin the collection of a local tax was upheld. Petitioner further reasons
that since the levy and auction of the properties of a delinquent taxpayer are proper and lawful acts
specifically allowed by the LGC, these cannot be the subject of an injunctive writ. Petitioner likewise
insists that AEC must first pay the tax before it can protest the assessment. Finally, petitioner contends
that the tax exemption claimed by AEC has no legal basis because RA 4079 has been expressly repealed
by the LGC.

Respondents Arguments
no grave abuse of discretion on the part of the RTC in issuing the writ of preliminary injunction because
it was issued after due notice and hearing, and was necessary to prevent the petition from becoming
moot. proceedings to invalidate a warrant of distraint and levy to restrain the collection of taxes do not
violate the prohibition against injunction to restrain the collection of taxes because the proceedings are
directed at the right of the City Treasurer to collect the tax by distraint or levy. As to its tax liability, AEC
maintains that it is exempt from paying local business tax. In any case, AEC counters that the issue of
whether it is liable to pay the assessed local business tax is a factual issue that should be determined by
the RTC and not by the Supreme Court via a petition for certiorari under Rule 65 of the Rules of Court.

Court Ruling:

We find the petition bereft of merit.

The LGC does not specifically prohibit an injunction enjoining the collection of taxes

the National Internal Revenue Code of 1997 (NIRC) expressly provides that no court shall have the
authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or
charge imposed by the code.

The situation, however, is different in the case of the collection of local taxes as there is no express
provision in the LGC prohibiting courts from issuing an injunction to restrain local governments from
collecting taxes.

petitioner’s reliance on the above-cited case to support its view that the collection of taxes cannot be
enjoined is misplaced. The lower court’s denial of the motion for the issuance of a writ of preliminary
injunction to enjoin the collection of the local tax was upheld in that case, not because courts are
prohibited from granting such injunction, but because the circumstances required for the issuance of
writ of injunction were not present.

Two requisites must exist to warrant the issuance of a writ of preliminary injunction, namely: (1) the
existence of a clear and unmistakable right that must be protected; and (2) an urgent and paramount
necessity for the writ to prevent serious damage

auction sale will push thru, petitioner will not only lose control and operation of its facility, but its
employees will also be denied access to equipments vital to petitioner’s operations, and since only the
petitioner has the capability to operate Petersville sub station, there will be a massive power failure or
blackout which will adversely affect business and economy, if not lives and properties in Angeles City
and surrounding communities.

The purpose of injunction is to prevent injury and damage from being incurred, otherwise, it will render
any judgment in this case ineffectual.

"As an extraordinary remedy, injunction is calculated to preserve or maintain the status quo of things
and is generally availed of to prevent actual or threatened acts, until the merits of the case can be
heard"
It appearing that the two essential requisites of an injunction have been satisfied, as there exists a
right on the part of the petitioner to be protected, its right[s] of ownership and possession of the
properties subject of the auction sale, and that the acts (conducting an auction sale) against which
the injunction is to be directed, are violative of the said rights of the petitioner,

this rule finds no application in the instant case where the disputed tax assessment is not yet due
and demandable. Considering that AEC was able to appeal the denial of its protest within the period
prescribed under Section 195 of the LGC, the collection of business taxes 41 through levy at this time
is, to our mind, hasty, if not premature. 42 The issues of tax exemption, double taxation, prescription
and the alleged retroactive application of the RRCAC, raised in the protest of AEC now pending with
the RTC, must first be resolved before the properties of AEC can be levied. In the meantime, AEC’s
rights of ownership and possession must be respected.