01.

Title

- FILM DEVELOPMENT COUNCIL OF PHILIPPINES v. COLON HERITAGE REALTY

Promulgation Date

- November 03, 2020

02.

Ponente of the case

- PERLAS-BERNABE, J

Session in Court

- EN BANC

03.

Nature of the filed Petition

- Urgent Motion for Clarification filed by respondent SM Prime Holdings, Inc

-Motion for reconsideration filed by petitioner Film Development Council of the Philippines

-Motion for partial reconsideration filed by respondent City of Cebu

-Manifestation filed by respondent Colon Heritage Realty Corporation

Nature of the Case

- Doctrine of operative fact in relation to the declaration of Sections 13 and 14 of RA 9167 as

04.
Court with original jurisdiction

- Regional Trial Court

Court where the case has been filed

- Regional Trial Court of Cebu City, Branch 5

05. Major Field of Law

- Taxation Law

Ruling of All Courts

- The operative fact doctrine equally applies to the non-remittance by proprietors since the law
produced legal effects prior to the declaration of the nullity of Sections 13 and 14 of RA 9167.

It is a well-settled rule that an unconstitutional act is not a law; it confers no rights; it imposes no
duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at
all. Applying this principle, the logical conclusion would be to order the return of all the amounts
remitted to FDCP and given to the producers of graded films, by all of the covered cities, which
actually amounts to hundreds of millions, if not billions. In fact, just for Cebu City, the aggregate
deficiency claimed by FDCP is ONE HUNDRED [FIFTY-NINE] MILLION THREE
HUNDRED [SEVENTY-SEVEN] THOUSAND NINE HUNDRED EIGHTY-EIGHT PESOS
AND [FIFTY-FOUR] CENTAVOS (P159,377,988.54). Again, this amount represents the
unpaid amounts to FDCP by eight cinema operators or proprietors in only one covered city.

The decision now on appeal reflects the orthodox view that an unconstitutional act, for that
matter an executive order or a municipal ordinance likewise suffering from that infirmity, cannot
be the source of any legal rights or duties. Nor can it justify any official act taken under it. Its
repugnancy to the fundamental law once judicially declared results in its being to all intents and
purposes a mere scrap of paper. As the new Civil Code puts it: "When the courts declare a law to
be inconsistent with the Constitution, the former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws of the Constitution." It is understandable why it should be so, the
Constitution being supreme and paramount. Any legislative or executive act contrary to its terms
cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to be complied with. This
is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to
obedience and respect. Parties may have acted under it and may have changed their positions.
What could be more fitting than that in a subsequent litigation regard be had to what has been
done while such legislative or executive act was in operation and presumed to be valid in all
respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact
must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is
the governmental organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to such
adjudication.

Therefore, in applying the doctrine of operative fact, courts ought to examine with particularity
the effects of the already accomplished acts arising from the unconstitutional statute, and
determine, on the basis of equity and fair play, if such effects should be allowed to stand. It
should not operate to give any unwarranted advantage to parties, but merely seeks to protect
those who, in good faith, relied on the invalid law.

In the Main Decision, the Court, in applying the doctrine of operative fact, held that FDCP arid
the producers of graded films need not return the amounts already received from LGUs because
they merely complied with the provisions of RA 9167 which were in effect at that time50
(Disposition 1 above). Clearly, this disposition squarely hews with the practicality and fairness
thrust of the operative fact doctrine because, as observed by the Court, to command the return of
the amounts received pursuant to Sections 13 and 14 of RA 9167 which were then existing
"would certainly impose a heavy, and possibly crippling, financial burden upon them who
merely, and presumably in good faith, complied with the legislative fiat subject of this
case."Accordingly, contrary to Cebu City's position, the Court's holding on this score must stand.

WHEREFORE, the motion for reconsideration dated August 5, 2015 of petitioner Film
Development Council of the Philippines and the motion for partial reconsideration dated
September 16, 2015 of respondent City of Cebu are DENIED with FINALITY for lack of merit.

On the other hand, the Manifestation (with a Motion for Partial Reconsideration or Motion to
Remand Trial Proceedings to determine Respondent's Full Payment and Compliance with the
Decision) dated August 24, 2015 of respondent Colon Heritage Realty Corporation (CHRC) is
PARTLY GRANTED. Accordingly, Civil Case No. CEB-35601 is hereby REMANDED to the
Regional Trial Court of Cebu City, Branch 5 to determine whether the amusement taxes for the
covered period have been paid by CHRC in accordance with this Resolution.