Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

90639 February 21, 1990 TESTATE ESTATE OF CONCORDIA T. IM, plaintiff-appellant, vs. CIT! OF MANI A, "ESUS I. CA E"A, #$ %#& 'a(a'#)y a& C#)y Trea&urer o* Ma$#+a, NICO AS CATII , #$ %#& 'a(a'#)y a& C#)y A&&e&&or o* Ma$#+a, a$,-or GO.ERNMENT SER.ICE INSURANCE S!STEM, defendants-appellees. Melquiades P. De Leon for plaintiff-appellant.

The defendant #it( T easu e of Manila e-ui ed the plaintiff-appellant to pa( the eal estate ta*es due on the p ope ties fo the (ea s /&77, /&76 and the fi st -ua te of /&7& in the a!ount of P17,&1:.0&, befo e the titles could be t ansfe ed to the plaintiff-appellant. The latte paid the a!ount unde p otest. On @ul( //, /&7&, the plaintiff-appellants counsel sent a de!and lette e-uestin" the 3SIS to ei!bu se the ta*es paid unde p otest. The 3SIS efused. On Septe!be 1, /&7&, a de!and lette +as sent to the #it( T easu e of Manila to efund the a!ount but the latte also efused. On Ma ch /9, /&6:, the plaintiff filed an action befo e the t ial cou t fo a su! of !one( fo the efund o ei!bu se!ent of the eal estate ta*es paid unde p otest. Du in" the pendenc( of the case, the plaintiff-appellant ad!itted that the fo eclosed p ope ties had been sold, th ou"h the ad!inist at i*, to anothe pe son. 4%nd pa . of Plaintiffs Manifestation dated Dece!be %/, /&6/, Reco ds, p. /:8A TSN, Ma ch 9, /&6%, p. 075 ,fte t ial, the lo+e cou t dis!issed the co!plaint fo lacB of <u isdiction. It uled that the case involves a p otested action of the #it( ,ssesso +hich should have been flied befo e the 2ocal $oa d of ,ssess!ent ,ppeals of Manila 4citin" Section 0: of the Real P ope t( Ta* #ode CP.D. No. 919D5 in line +ith the p inciple that all ad!inist ative e!edies !ust fi st be e*hausted. The lo+e cou t also cited b( +a( of obiter dictum, the case of City of Baguio v. Busuego, /:: S#R, //1 4/&6:5 +he ein this #ou t uled that +hile the 3SIS !a( be e*e!pt f o! the pa(!ent of eal estate ta*, the e*e!ption does not cove p ope ties the beneficial use of +hich +as " anted to othe ta*able pe sons. This ulin" suppo ts the lo+e cou t>s vie+ that the ta* had attached to the sub<ect p ope ties fo the (ea s /&77, /&76 and fi st -ua te of /&7&. The lo+e cou t fu the stated that the plaintiff-appellant had assu!ed liabilit( fo the eal estate ta*es because of the p ovision in the Deed of Sale +ith the 3SIS thatE 'an( and all the ta*es, ... elative to the e*ecution and)o i!ple!entation of this Deed, ... shall be fo the account of and paid b( the V?ND??' 4?*hibit $, Table of ?*hibits, p. 85 Hence, this appeal aisin" seve al issues that can be su!!ed up into the follo+in"E 4/5 +hethe o not the t ial cou t has <u isdiction ove the action fo efund of eal estate ta*es paid unde p otestA 4%5 +hethe o not plaintiff-appellant has the i"ht to ecove A and 405 +hethe o not the plaintiff-appellant has pe sonalit( to sue.

GUTIERRE/, "R., J.: This is an appeal f o! the decision of the Re"ional T ial #ou t of Manila, $ anch %& dis!issin" a co!plaint fo a 'su! of !one( and)o ecove ( of eal estate ta*es paid unde p otest' +hich +as ce tified and elevated to this #ou t b( the #ou t of ,ppeals as a case involvin" pu e -uestions of la+. On .eb ua ( /0, /&1&, the late #onco dia 2i! obtained a eal estate loan f o! the defendant-appellee 3ove n!ent Se vice Insu ance S(ste! 43SIS5 in the a!ount of P678,966.89, secu ed b( a !o t"a"e constituted on t+o 4%5 pa cels of land fo !e l( cove ed b( T ansfe #e tificates of Title Nos. 19:78 and 10:71 4late chan"ed to T#T Nos. /%87/6 and /%87/&5 e"iste ed in Manila +ith a th ee-sto ( buildin" the eon and located on No. 6/: Nicano Re(es St. 4fo !e l( Mo a(ta5, Sa!paloc, Manila. ;hen 2i! failed to pa( the loan, the !o t"a"e +as e*t a<udiciall( fo eclosed and the sub<ect p ope ties sold at public auction. The 3SIS, bein" the hi"hest bidde , bou"ht the p ope ties. =pon 2i!>s failu e to e*e cise he i"ht of ede!ption, the titles to the p ope ties +e e consolidated in favo of the 3SIS in /&77. Ho+eve , pu suant to Resolution No. /66 of the $oa d of T ustees of the 3SIS dated Ma ch %&, /&7&, the estate of 2i!, th ou"h ? nestina # isolo"o @ose 4the ad!inist at i*5 +as allo+ed to epu chase the fo eclosed p ope ties. On ,p il //, /&7&, a Deed of ,bsolute Sale +as e*ecuted. 4?*hibit $, Table of ?*hibits, pp. 085

The plaintiff-appellant a "ues that the lo+e cou t has <u isdiction ove a co!plaint fo efund as +ell as fo ei!bu se!ent of the eal estate ta*es e oneousl( collected b( the #it( of Manila f o! it and paid unde p otest. The eco ds sho+ that the sub<ect p ope ties +e e leased to othe pe sons du in" the ti!e +hen 3SIS held thei titles, as +as the case du in" the o+ne ship of the late #onco dia 2i!. Ho+eve , the eal estate ta*es late assessed on the said p ope ties fo the (ea s /&77, /&76 and the fi st -ua te of /&7& +e e cha "ed a"ainst the plaintiffappellant even if the latte +as not the beneficial use of the pa cels of land. In eal estate ta*ation, the unpaid ta* attaches to the p ope t( and is cha "eable a"ainst the ta*able pe son +ho had actual o beneficial use and possession of it e"a dless of +hethe o not he is the o+ne . 4Sections 04a5 and /& of P.D. No. 919A P ovince of Nueva ?ci<a v. I!pe ial Minin" #o., Inc., //6 S#R, 10% C/&6%D5. Raisin" doubts on the validity of the imposition and collection of the real property ta fo the desi"nated pe iods befo e the title to the p ope ties !a( be t ansfe ed, the plaintiff-appellant paid unde p otest. This step +as taBen in acco dance +ith the p ovision of Section 1% of P.D. No. 919, +hich statesE Sec. 1%. Payment under protest. F 4a5 ;hen a ta*pa(e desi es fo an( eason to pa( his ta* unde p otest, he shall indicate the a!ount o po tion the eof he is contestin" and such p otest shall be annotated on the ta* eceipts b( + itin" the eon the +o ds paid unde p otest.> Ve bal p otest shall be confi !ed in + itin", +ith a state!ent of the " ound, the efo , +ithin thi t( da(s. The ta* !a( be paid unde p otest, and in such case it shall be the dut( of the P ovincial, #it( o Municipal T easu e s to annotate the " ound o " ounds the efo on the eceipt. 4b5 In case of pa(!ents !ade unde p otest, the a!ount o po tion of the ta* contested shall be held in t ust b( the t easu e and the diffe ence shall be t eated as evenue. 4c5 In the event that the p otest is finall( decided in favo of the "ove n!ent, the a!ount o po tion of the ta* held in t ust b( the t easu e shall acc ue to the evenue account, but if the protest shall be decided finally in favor of the protestant, the amount or portion of the ta protested against may either be refunded to the protestant or applied as ta credit to any other e isting or future ta liability of the said protestant. 4?!phasis Supplied5

The #ou t ules that the plaintiff-appellant co ectl( filed the action fo efund) ei!bu se!ent +ith the lo+e cou t as it is the cou ts +hich have <u isdiction to t ( cases involvin" the i"ht to ecove su!s of !one(. Section 0: of the Real P ope t( Ta* #ode is not applicable because +hat is -uestioned is the i!position of the ta* assessed and +ho should shoulde the bu den of the ta*. The e is no dispute ove the a!ount assessed on the p ope ties fo ta* pu poses. Section 0: pe tains to the ad!inist ative act of listin" and valuation of the p ope t( fo pu poses of eal estate ta*ation. It p ovidesE Section 0:. Local Board of !ssessment !ppeals F ,n( o+ne +ho is not satisfied +ith the action of the p ovincial o cit( assesso in the assess!ent of his p ope t( !a(, +ithin si*t( da(s f o! the date of eceipt b( hi! of the + itten notice of assess!ent as p ovided in this #ode, appeal to the $oa d of ,ssess!ent ,ppeals of the p ovince o cit( b( filin" +ith it a petition unde oath usin" the fo ! p esc ibed fo the pu pose, to"ethe +ith copies of the ta* decla ations and such affidavit o docu!ents sub!itted in suppo t of the appeal. In fu the suppo t of the conclusion that the lo+e cou t has <u isdiction to t ( the instant case, +e note Section 19 of the Real P ope t( Ta* #ode +hich p ovides that a 'cou t shall ente tain a suit assailin" the validit( of a ta* assessed' afte the ta*pa(e shall have paid unde p otest. The issue on the e*istence o non-e*istence of the appellant>s i"ht to ecove the a!ounts paid hin"es on the basic -uestion of the validit( of the ta* i!position. If the i!position is valid and in acco dance +ith la+, then the e is no i"ht to ecove . Othe +ise, the a!ounts paid !ust be efunded b( the espondent #it( T easu e of Manila actin" in his official capacit(. 4Sec. 1% CcD, PD 9195 The opinion of the lo+e cou t that the ulin" in City of Baguio v. Busuego, supra <ustifies the i!position of the ta* on plaintiff-appellant is e oneous. The facts in that case a e diffe ent f o! those in the case at ba . It +as sho+n that $usue"o pu chased, b( +a( of install!ent, a pa cel of land and buildin" +ithin a housin" p o<ect of the 3SIS. In a #ont act to Sell +ith the 3SIS, he a" eed toE 4/5 the delive ( of the possession of the p ope ties to hi! pendin" the full pa(!ent of the p ice althou"h the title e!ained +ith the 3SISA and 4%5 his liabilit( to pa( and shoulde all ta es and assessments on the lot and building or improvements thereon during the term of the contract to sell. Despite the ta* e*e!ption en<o(ed b( the 3SIS, the ealt( ta* liabilit( i!posed on the pu chase +as held to be valid on the basis of the cont actual obli"ation that he ente ed into and the fact that beneficial use had been "iven to hi!.

The instant case does not p esent a si!ila cont actual stipulation. The cont act he e +hich is alle"ed to include the condition that the bu(e shall shoulde the ta*es is a #ont act of Sale. In the Busuego case, the e +as !e el( a #ont act to Sell for the duration of "hich the pa t( +ho shall be liable fo the ta*es about to be due is the bu(e as pe a" ee!ent. In the case at ba , +hat +as assu!ed b( the vendee +as the liabilit( fo ta*es and othe e*penses ' elative to the e*ecution and)o i!ple!entation' of the Deed of ,bsolute Sale 'includin" a!on" othe s, docu!entation, docu!enta ( and science sta!ps, e*penses fo e"ist ation and t ansfe of titles ... ' This clause +as stipulated fo the pu pose of cla if(in" +hich of the pa ties should bea the costs of e*ecution and i!ple!entation of the sale and to co!pl( +ith , ticle /967 of the #ivil #ode +hich statesE ,RT. /967 F The e*penses fo the e*ecution and e"ist ation of the sale shall be bo ne b( the vendo , unless the e is a stipulation to the cont a (. Mo eove , the ta*es !entioned in the clause he e efe to those necessa ( to the co!pletion of the sale and acc uin" afte the !aBin" of such sale on ,p il //, /&&: such as docu!enta ( sta!p ta* and capital "ains ta*. In the Busuego case, the assu!ption b( the vendee of the liabilit( fo eal estate ta*es p ospectivel( due +as in ha !on( +ith the ta* polic( that the use of the p ope t( bea s the ta*. In the instant case, the inte p etation that the plaintiffappellant assu!ed a liabilit( fo ove due eal estate ta*es fo the pe iods p io to the cont act of sale is incon" uent +ith the said polic( because the e +as no i!!ediate t ansfe of possession of the p ope ties p evious to full pa(!ent of the epu chase p ice. The facts of the case const ain us to ule that the plaintiff-appellant is not liable to pa( the eal p ope t( ta* due fo the (ea s /&77, /&76 and fi st -ua te of /&7&. The clause in the Deed of Sale cannot be inte p eted to include ta*es fo the pe iods p io to ,p il //, /&7&, the date of epu chase. To i!pose the eal p ope t( ta* on the estate +hich +as neithe the o+ne no the beneficial use of the p ope t( du in" the desi"nated pe iods +ould not onl( be cont a ( to la+ but also un<ust. If plaintiff-appellant intended to assu!e the liabilit( fo ealt( ta*es fo the p io pe iods, the cont act should have specificall( stated ' eal estate ta*es' due fo the (ea s /&77,/&76 and fi st -ua te of /&7&. The pa(!ents !ade b( the plaintiff-appellant cannot be const ued to be an ad!ission of a ta* liabilit( since the( +e e paid unde p otest and +e e done onl( in co!pliance +ith one of the e-ui e!ents fo the consu!!ation of the sale as di ected b( the #it( T easu e of Manila.

Hence, the ta* assessed and collected f o! the plaintiff-appellants is not valid and a efund b( the #it( "ove n!ent is in o de . The #ou t ules, ho+eve , that the plaintiff-appellant is not entitled to a ei!bu se!ent f o! the espondent 3SIS becauseE 4/5 the 3SIS is e*e!pt f o! pa(!ent of the eal p ope t( ta* unde Sec. 00 of the Revised #ha te of the 3SISA and 4%5 the ta* should be based on 'actual use' of the p ope t(. Section 9: of the Real P ope t( Ta* #ode suppo ts the vie+ that not even the 3SIS is liable to pa( eal p ope t( ta* on public land leased to othe pe sons. Section 9: p ovidesE Sec. 9:. # emption from $eal Property %a . F The e*e!ption shall be as follo+sE 4a5 Real p ope t( o+ned b( the Republic of the Philippines o an( of its political subdivisions and an( "ove n!ent o+ned co po ation so e*e!pt b( its cha te E P ovided, ho+eve , That this e*e!ption shall not appl( to eal p ope t( of the abovena!ed entities the beneficial use of +hich has been " anted, fo conside ation o othe +ise, to a ta*able pe son. In fact, if the e is an(one liable the la+ and applicable <u isp udence point to the lessees of land o+ned b( the "ove n!ent-o+ned and cont olled co po ations. 4P ovince of Nueva ?ci<a v. I!pe ial Minin" #o., Inc., supra5 In this case, the #ou t can onl( decla e the non-liabilit( of a i"ht to a efund. ;e cannot ule on the liabilit( of the lessees +hose Identities a e not even clea because the( +e e neve i!pleaded. The contention of the plaintiff-appellant that the espondent 3SIS is liable to ei!bu se the ta* because the latte alle"edl( failed to e*e cise its clai! to the ta* e*e!ption p ivile"e is +ithout !e it. The e*e!ption is e*plicitl( " anted b( la+ and need not be applied fo . Re"a din" the issue on the e*istence of the pe sonalit( to sue, the plaintiffappellant asse ts that since it +as the one +hich paid unde p otest the a!ount of P17,&1:.0& as eal p ope t( ta*, then it is the eal pa t( in inte est to sue fo efund. The lo+e cou t, notin" the t ansfe of the title to the p ope ties to a thi d pe son, uled that assu!in" a "uendo that the e is a i"ht to seeB ecove (, the subse-uent sale '!ust have included the ta*' and 'as such all the c edits includin" the ta*es that +e e paid +as 4sic5 t ansfe ed al ead( to the bu(e .' It uled that plaintiff-appellant had no pe sonalit( to sue and the i"ht of action !ust be bet+een the subse-uent bu(e and the plaintiff-appellant. The #ou t finds that the

above ulin" and the facts on +hich it is based a e not sufficientl( suppo ted b( the eco ds of the case. The evidence !e el( sho+s an ad!ission of a subse-uent sale of the p ope ties b( the plaintiff-appellant, nothin" !o e. ;H?R?.OR?, IN VI?; O. TH? .OR?3OIN3, the <ud"!ent appealed f o! is he eb( R?V?RS?D and S?T ,SID?. The defendants appellees #it( of Manila, the #it( T easu e and #it( ,ssesso of Manila a e he eb( o de ed to efund to the T?ST,T? ?ST,T? O. #ON#ORDI, 2IM, th ou"h ad!inist at i* ?RN?STIN, #RISO2O3O-@OS?, the a!ount of P17,&1:.0& as eal estate ta*es paid unde p otest. SO ORD?R?D.

0 U$,er )%e be$e*#'#a+ u&e ru+e, )%e +#ab#+#)y *or (ay1e$) o* rea+ (ro(er)y )a2e& ,e3o+3e& o$ )%e )a2ab+e be$e*#'#a+ u&er. I$ Te&)a)e E&)a)e o* Co$'or,#a T. #1 3. C#)y o* Ma$#+a, The late #onco dia 2i! +as the o+ne of ce tain pa cels of land. The #it( T easu e of Manila e-ui ed he to pa( the eal estate p ope ties due on said p ope ties fo the (ea s /&77, /&76 and the fi st -ua te /&7&, du in" +hich ti!e the titles +e e not in 2i!Gs na!e. The Sup e!e #ou t held that 2i! +as not liable to pa( ealt( ta*es fo those ta*able pe iods. HIn eal estate ta*ation, the unpaid ta* attaches to the p ope t( and is cha "eable a"ainst the ta*able pe son +ho had actual o beneficial use and possession of it e"a dless of +hethe o not he is the o+ne .I Mo eove , HCtDo i!pose the eal p ope t( ta* on the estate +hich +as neithe the o+ne no the beneficial use of the p ope t( du in" the desi"nated pe iods +ould not onl( be cont a ( to la+ but also un<ust.I In this case, the Sup e!e #ou t found that 2i! +as not the ta*able beneficial use . Neithe +as 3SIS 4unde +hose na!e the titles +e e e"iste ed du in" the sub<ect ta*able pe iods5. Ho+eve , the Hi"h #ou t could onl( ule on the non-liabilit( of 2i! and 3SIS. It held that it could not ule on the liabilit( of the lessees +hose identities as the ta*able beneficial use s of the pa cels of land +e e not even clea because the( +e e neve i!pleaded.