G.R. No. 197937, April 3, 2013
FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES, Petitioner, vs. SM PRIME HOLDINGS, INC., Respondent.

FACTS

Respondent SM Prime Holdings, Inc. owns and operates cinema houses in Cebu City. Under the Local Government Code (R.A. No. 7160), local governments may levy an amusement tax on such establishments. Cebu City enacted City Tax Ordinance No. LXIX pursuant to this authority. Later, Congress passed R.A. No. 9167, creating petitioner Film Development Council of the Philippines (FDCP). This law established a Cinema Evaluation Board (CEB) to grade films. Films graded “A” or “B” are entitled to an incentive equivalent to a percentage of the amusement tax collected on them. Section 14 of R.A. No. 9167 mandates that the amusement tax on these graded films be deducted and withheld by cinema proprietors and remitted directly to the FDCP, which then rewards the producers. The FDCP sent a demand letter to SM Prime for unpaid amusement tax rewards totaling ₱76,836,807.08 for graded films shown from 2003 to 2008. In May 2009, the City of Cebu filed a petition for declaratory relief (Civil Case No. CEB-35529) before the RTC of Cebu City, seeking to declare Section 14 of R.A. No. 9167 invalid and unconstitutional, arguing it violates local autonomy, unduly limits local taxing power, deprives LGUs of revenue, and amounts to technical malversation. The Cebu City RTC issued a TRO enjoining the FDCP from collecting the amusement tax incentive. Subsequently, on October 16, 2009, the FDCP filed a collection suit (Civil Case No. 72238) against SM Prime in the RTC of Pasig City for the same amount. SM Prime moved to dismiss the Pasig case on the ground of litis pendentia, citing the pending Cebu case. The Pasig RTC granted the motion to dismiss, prompting the FDCP’s appeal to the Supreme Court.

ISSUE

Whether the Pasig RTC correctly dismissed the FDCP’s collection suit against SM Prime on the ground of litis pendentia.

RULING

No. The Supreme Court reversed the orders of the Pasig RTC and remanded the case for further proceedings. The elements of litis pendentia are: (1) identity of parties, or at least such parties as represent the same interests in both actions; (2) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (3) identity of the two cases such that a judgment in one would constitute res judicata in the other. The Court found the first element lacking. The parties in the two cases are not identical. The Cebu case is between the City of Cebu and the FDCP. SM Prime is not a party to that case; it is the FDCP’s adversary in the Pasig collection case. While SM Prime may have an interest in the outcome of the Cebu case, it does not represent the same interests as the City of Cebu. The City of Cebu is asserting its own governmental and fiscal interests as a local government unit. SM Prime, as a cinema operator, is a taxpayer caught between two claiming entities. Their interests are separate and distinct. Therefore, the pendency of the declaratory relief case in Cebu does not bar the collection case in Pasig.