G.R. No.

191109 July 18, 2012

REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION

AUTHORITY (PRA),Petitioner,
vs.
CITY OF PARANAQUE, Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, on pure
questions of law, assailing the January 8, 2010 Order1 of the Regional Trial Court, Branch 195,
Parafiaque City (RTC), which ruled that petitioner Philippine Reclamation Authority (PRA) is a
government-owned and controlled corporation (GOCC), a taxable entity, and, therefore, . not exempt
from payment of real property taxes. The pertinent portion of the said order reads:

In view of the finding of this court that petitioner is not exempt from payment of real property taxes,
respondent Parañaque City Treasurer Liberato M. Carabeo did not act xxx without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing
the warrants of levy on the subject properties.

WHEREFORE, the instant petition is dismissed. The Motion for Leave to File and Admit Attached
Supplemental Petition is denied and the supplemental petition attached thereto is not admitted.

The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential
Decree (P.D.) No. 1084 (Creating the Public Estates Authority, Defining its Powers and Functions,
Providing Funds Therefor and For Other Purposes) which took effect on February 4,

1977 to provide a coordinated, economical and efficient reclamation of lands, and the administration
and operation of lands belonging to, managed and/or operated by, the government with the object of
maximizing their utilization and hastening their development consistent with public interest.

On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by then President
Ferdinand Marcos, PEA was designated as the agency primarily responsible for integrating, directing
and coordinating all reclamation projects for and on behalf of the National Government.

On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380 transforming
PEA into PRA, which shall perform all the powers and functions of the PEA relating to reclamation
activities.

By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of
Manila Bay, including those located in Parañaque City, and was issued Original Certificates of Title
(OCT Nos. 180, 202, 206, 207, 289, 557, and 559) and Transfer Certificates of Title (TCT Nos.
104628, 7312, 7309, 7311, 9685, and 9686) over the reclaimed lands.

On February 19, 2003, then Parañaque City Treasurer Liberato M. Carabeo (Carabeo) issued
Warrants of Levy on PRA’s reclaimed properties (Central Business Park and Barangay San
Dionisio) located in Parañaque City based on the assessment for delinquent real property taxes
made by then Parañaque City Assessor Soledad Medina Cue for tax years 2001 and 2002.
On March 26, 2003, PRA filed a petition for prohibition with prayer for temporary restraining order
(TRO) and/or writ of preliminary injunction against Carabeo before the RTC.

On April 3, 2003, after due hearing, the RTC issued an order denying PRA’s petition for the issuance
of a temporary restraining order.

On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not to proceed with the public
auction of the subject reclaimed properties on April 7, 2003. In response, Carabeo sent a letter
stating that the public auction could not be deferred because the RTC had already denied PRA’s
TRO application.

On April 25, 2003, the RTC denied PRA’s prayer for the issuance of a writ of preliminary injunction
for being moot and academic considering that the auction sale of the subject properties on April 7,
2003 had already been consummated.

On August 3, 2009, after an exchange of several pleadings and the failure of both parties to arrive at
a compromise agreement, PRA filed a Motion for Leave to File and Admit Attached Supplemental
Petition which sought to declare as null and void the assessment for real property taxes, the levy
based on the said assessment, the public auction sale conducted on April 7, 2003, and the
Certificates of Sale issued pursuant to the auction sale.

On January 8, 2010, the RTC rendered its decision dismissing PRA’s petition. In ruling that PRA was
not exempt from payment of real property taxes, the RTC reasoned out that it was a GOCC under
Section 3 of P.D. No. 1084. It was organized as a stock corporation because it had an authorized
capital stock divided into no par value shares. In fact, PRA admitted its corporate personality and
that said properties were registered in its name as shown by the certificates of title. Therefore, as a
GOCC, local tax exemption is withdrawn by virtue of Section 193 of Republic Act (R.A.) No. 7160
Local Government Code (LGC) which was the prevailing law in 2001 and 2002 with respect to real
property taxation. The RTC also ruled that the tax exemption claimed by PRA under E.O. No. 654
had already been expressly repealed by R.A. No. 7160 and that PRA failed to comply with the
procedural requirements in Section 206 thereof.

Not in conformity, PRA filed this petition for certiorari assailing the January 8, 2010 RTC Order
based on the following GROUNDS

THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS LIABLE TO PAY REAL
PROPERTY TAX ON THE SUBJECT RECLAIMED LANDS CONSIDERING

THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF THE NATIONAL

GOVERNMENT AND IS, THEREFORE, EXEMPT FROM PAYMENT OF REAL PROPERTY TAX
UNDER SECTIONS 234(A) AND 133(O) OF REPUBLIC ACT 7160 OR THE LOCAL
GOVERNMENT CODE VIS-À-VIS MANILA INTERNATIONAL AIRPORT AUTHORITY V. COURT
OF APPEALS.

II

THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT RECLAIMED LANDS
ARE PART OF THE PUBLIC DOMAIN AND, HENCE, EXEMPT FROM REAL PROPERTY TAX.
PRA asserts that it is not a GOCC under Section 2(13) of the Introductory Provisions of the
Administrative Code. Neither is it a GOCC under Section 16, Article XII of the 1987 Constitution
because it is not required to meet the test of economic viability. Instead, PRA is a government
instrumentality vested with corporate powers and performing an essential public service pursuant to
Section 2(10) of the Introductory Provisions of the Administrative Code. Although it has a capital
stock divided into shares, it is not authorized to distribute dividends and allotment of surplus and
profits to its stockholders. Therefore, it may not be classified as a stock corporation because it lacks
the second requisite of a stock corporation which is the distribution of dividends and allotment of
surplus and profits to the stockholders.

It insists that it may not be classified as a non-stock corporation because it has no members and it is
not organized for charitable, religious, educational, professional, cultural, recreational, fraternal,
literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like
chambers as provided in Section 88 of the Corporation Code.

Moreover, PRA points out that it was not created to compete in the market place as there was no
competing reclamation company operated by the private sector. Also, while PRA is vested with
corporate powers under P.D. No. 1084, such circumstance does not make it a corporation but
merely an incorporated instrumentality and that the mere fact that an incorporated instrumentality of
the National Government holds title to real property does not make said instrumentality a GOCC.
Section 48, Chapter 12, Book I of the Administrative Code of 1987 recognizes a scenario where a
piece of land owned by the Republic is titled in the name of a department, agency or instrumentality.

Thus, PRA insists that, as an incorporated instrumentality of the National Government, it is exempt
from payment of real property tax except when the beneficial use of the real property is granted to a
taxable person. PRA claims that based on Section 133(o) of the LGC, local governments cannot tax
the national government which delegate to local governments the power to tax.

It explains that reclaimed lands are part of the public domain, owned by the State, thus, exempt from
the payment of real estate taxes. Reclaimed lands retain their inherent potential as areas for public
use or public service. While the subject reclaimed lands are still in its hands, these lands remain
public lands and form part of the public domain. Hence, the assessment of real property taxes made
on said lands, as well as the levy thereon, and the public sale thereof on April 7, 2003, including the
issuance of the certificates of sale in favor of the respondent Parañaque City, are invalid and of no
force and effect.

On the other hand, the City of Parañaque (respondent) argues that PRA since its creation
consistently represented itself to be a GOCC. PRA’s very own charter (P.D. No. 1084) declared it to
be a GOCC and that it has entered into several thousands of contracts where it represented itself to
be a GOCC. In fact, PRA admitted in its original and amended petitions and pre-trial brief filed with
the RTC of Parañaque City that it was a GOCC.

Respondent further argues that PRA is a stock corporation with an authorized capital stock divided
into 3 million no par value shares, out of which 2 million shares have been subscribed and fully paid
up. Section 193 of the LGC of 1991 has withdrawn tax exemption privileges granted to or presently
enjoyed by all persons, whether natural or juridical, including GOCCs.

Hence, since PRA is a GOCC, it is not exempt from the payment of real property tax.

THE COURT’S RULING

The Court finds merit in the petition.

Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a GOCC as
follows:

SEC. 2. General Terms Defined. – x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-
stock corporation, vested with functions relating to public needs whether governmental or proprietary
in nature, and owned by the Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at least fifty-one

(51) percent of its capital stock: x x x.

On the other hand, Section 2(10) of the Introductory Provisions of the Administrative Code defines a
government "instrumentality" as follows:

SEC. 2. General Terms Defined. –– x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. x x x

From the above definitions, it is clear that a GOCC must be "organized as a stock or non-stock
corporation" while an instrumentality is vested by law with corporate powers. Likewise, when the law
makes a government instrumentality operationally autonomous, the instrumentality remains part of
the National Government machinery although not integrated with the department framework.

When the law vests in a government instrumentality corporate powers, the instrumentality does not
necessarily become a corporation. Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality exercising not only governmental but
also corporate powers.

Many government instrumentalities are vested with corporate powers but they do not become stock
or non-stock corporations, which is a necessary condition before an agency or instrumentality is
deemed a GOCC. Examples are the Mactan International Airport Authority, the Philippine Ports
Authority, the University of the Philippines, and Bangko Sentral ng Pilipinas. All these government
instrumentalities exercise corporate powers but they are not organized as stock or non-stock
corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code.
These government instrumentalities are sometimes loosely called government corporate entities.
They are not, however, GOCCs in the strict sense as understood under the Administrative Code,
which is the governing law defining the legal relationship and status of government entities.2

Correlatively, Section 3 of the Corporation Code defines a stock corporation as one whose "capital
stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends
x x x." Section 87 thereof defines a non-stock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or officers." Further, Section 88 provides that non-
stock corporations are "organized for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry,
agriculture and like chambers."
Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it
has capital stock divided into shares; and (2) that it is authorized to distribute dividends and
allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot be
properly classified as a stock corporation. As for non-stock corporations, they must have members
and must not distribute any part of their income to said members.3

In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock corporation.
It cannot be considered as a stock corporation because although it has a capital stock divided into
no par value shares as provided in Section 74 of P.D. No. 1084, it is not authorized to distribute
dividends, surplus allotments or profits to stockholders. There is no provision whatsoever in P.D. No.
1084 or in any of the subsequent executive issuances pertaining to PRA, particularly, E.O. No.
525,5 E.O. No. 6546 and EO No. 7987 that authorizes PRA to distribute dividends, surplus allotments
or profits to its stockholders.

PRA cannot be considered a non-stock corporation either because it does not have members. A
non-stock corporation must have members.8 Moreover, it was not organized for any of the purposes
mentioned in Section 88 of the Corporation Code. Specifically, it was created to manage all
government reclamation projects.

Furthermore, there is another reason why the PRA cannot be classified as a GOCC. Section 16,
Article XII of the 1987 Constitution provides as follows:

Section 16. The Congress shall not, except by general law, provide for the formation, organization,
or regulation of private corporations. Government-owned or controlled corporations may be created
or established by special charters in the interest of the common good and subject to the test of
economic viability.

The fundamental provision above authorizes Congress to create GOCCs through special charters on
two conditions: 1) the GOCC must be established for the common good; and 2) the GOCC must
meet the test of economic viability. In this case, PRA may have passed the first condition of common
good but failed the second one - economic viability. Undoubtedly, the purpose behind the creation of
PRA was not for economic or commercial activities. Neither was it created to compete in the market
place considering that there were no other competing reclamation companies being operated by the
private sector. As mentioned earlier, PRA was created essentially to perform a public service
considering that it was primarily responsible for a coordinated, economical and efficient reclamation,
administration and operation of lands belonging to the government with the object of maximizing
their utilization and hastening their development consistent with the public interest. Sections 2 and 4
of P.D. No. 1084 reads, as follows:

Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated,
economical and efficient reclamation of lands, and the administration and operation of lands
belonging to, managed and/or operated by the government, with the object of maximizing their
utilization and hastening their development consistent with the public interest.

Section 4. Purposes. The Authority is hereby created for the following purposes:

(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other
means, or to acquire reclaimed land;

(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any
and all kinds of lands, buildings, estates and other forms of real property, owned, managed,
controlled and/or operated by the government.
 (c) To provide for, operate or administer such services as may be necessary for the efficient,
economical and beneficial utilization of the above properties.

The twin requirement of common good and economic viability was lengthily discussed in the case of
Manila International Airport Authority v. Court of Appeals,9 the pertinent portion of which reads:

Third, the government-owned or controlled corporations created through special charters are those
that meet the two conditions prescribed in Section 16, Article XII of the Constitution.

The first condition is that the government-owned or controlled corporation must be established for
the common good. The second condition is that the government-owned or controlled corporation
must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of
economic viability.

The Constitution expressly authorizes the legislature to create "government-owned or controlled

corporations" through special charters only if these entities are required to meet the twin conditions
of common good and economic viability. In other words, Congress has no power to create
government-owned or controlled corporations with special charters unless they are made to comply
with the two conditions of common good and economic viability. The test of economic viability
applies only to government-owned or controlled corporations that perform economic or commercial
activities and need to compete in the market place. Being essentially economic vehicles of the State
for the common good — meaning for economic development purposes — these government-owned
or controlled corporations with special charters are usually organized as stock corporations just like
ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and performing

governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every modern
State must provide its citizens. These instrumentalities need not be economically viable since the
government may even subsidize their entire operations. These instrumentalities are not the
"government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987
Constitution.

Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential government functions or public
services. However, when the legislature creates through special charters corporations that perform
economic or commercial activities, such entities — known as "government-owned or controlled
corporations" — must meet the test of economic viability because they compete in the market place.

This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines
and similar government-owned or controlled corporations, which derive their incometo meet
operating expenses solely from commercial transactions in competition with the private sector. The
intent of the Constitution is to prevent the creation of government-owned or controlled corporations
that cannot survive on their own in the market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:

MR. OPLE: Madam President, the reason for this concern is really that when the government
creates a corporation, there is a sense in which this corporation becomes exempt from the test of
economic performance. We know what happened in the past. If a government corporation loses,
then it makes its claim upon the taxpayers' money through new equity infusions from the government
and what is always invoked is the common good. That is the reason why this year, out of a budget of
P115 billion for the entire government, about P28 billion of this will go into equity infusions to support
a few government financial institutions. And this is all taxpayers' money which could have been
relocated to agrarian reform, to social services like health and education, to augment the salaries of
grossly underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good,"
this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC
TEST," together with the common good. 1âwphi1

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his
textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:

The second sentence was added by the 1986 Constitutional Commission. The significant addition,
however, is the phrase "in the interest of the common good and subject to the test of economic
viability." The addition includes the ideas that they must show capacity to function efficiently in
business and that they should not go into activities which the private sector can do better. Moreover,
economic viability is more than financial viability but also includes capability to make profit and
generate benefits not quantifiable in financial terms.

Clearly, the test of economic viability does not apply to government entities vested with corporate
powers and performing essential public services. The State is obligated to render essential public
services regardless of the economic viability of providing such service. The non-economic viability of
rendering such essential public service does not excuse the State from withholding such essential
services from the public.

However, government-owned or controlled corporations with special charters, organized essentially

for economic or commercial objectives, must meet the test of economic viability. These are the
government-owned or controlled corporations that are usually organized under their special charters
as stock corporations, like the Land Bank of the Philippines and the Development Bank of the
Philippines. These are the government-owned or controlled corporations, along with government-
owned or controlled corporations organized under the Corporation Code, that fall under the definition
of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code.
[Emphases supplied]

This Court is convinced that PRA is not a GOCC either under Section 2(3) of the Introductory
Provisions of the Administrative Code or under Section 16, Article XII of the 1987 Constitution. The
facts, the evidence on record and jurisprudence on the issue support the position that PRA was not
organized either as a stock or a non-stock corporation. Neither was it created by Congress to
operate commercially and compete in the private market. Instead, PRA is a government
instrumentality vested with corporate powers and performing an essential public service pursuant to
Section 2(10) of the Introductory Provisions of the Administrative Code. Being an incorporated
government instrumentality, it is exempt from payment of real property tax.

Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by
PRA. On the other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts PRA
from paying realty taxes and protects it from the taxing powers of local government units.

Sections 234(a) and 133(o) of the LGC provide, as follows:

SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the
real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person.

xxxx

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities, and local government units. [Emphasis supplied]

It is clear from Section 234 that real property owned by the Republic of the Philippines (the Republic)
is exempt from real property tax unless the beneficial use thereof has been granted to a taxable
person. In this case, there is no proof that PRA granted the beneficial use of the subject reclaimed
lands to a taxable entity. There is no showing on record either that PRA leased the subject reclaimed
properties to a private taxable entity.

This exemption should be read in relation to Section 133(o) of the same Code, which prohibits local
governments from imposing "taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities x x x." The Administrative Code allows real property owned by the
Republic to be titled in the name of agencies or instrumentalities of the national government. Such
real properties remain owned by the Republic and continue to be exempt from real estate tax.

Indeed, the Republic grants the beneficial use of its real property to an agency or instrumentality of
the national government. This happens when the title of the real property is transferred to an agency
or instrumentality even as the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption, unless "the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person."10

The rationale behind Section 133(o) has also been explained in the case of the Manila International
Airport Authority,11 to wit:

Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines and limitations as the
Congress may provide."

When local governments invoke the power to tax on national government instrumentalities, such
power is construed strictly against local governments. The rule is that a tax is never presumed and
there must be clear language in the law imposing the tax. Any doubt whether a person, article or
activity is taxable is resolved against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.

Another rule is that a tax exemption is strictly construed against the taxpayer claiming the
exemption. However, when Congress grants an exemption to a national government instrumentality
from local taxation, such exemption is construed liberally in favor of the national government
instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to
reduce the amount of money that has to be handled by government in the course of its operations.
For these reasons, provisions granting exemptions to government agencies may be construed
liberally, in favor of non tax-liability of such agencies.

There is, moreover, no point in national and local governments taxing each other, unless a sound
and compelling policy requires such transfer of public funds from one government pocket to another.

There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is when
the legislature clearly intended to tax government instrumentalities for the delivery of essential public
services for sound and compelling policy considerations. There must be express language in the law
empowering local governments to tax national government instrumentalities. Any doubt whether
such power exists is resolved against local governments.

Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the
Code, local governments cannot tax national government instrumentalities. As this Court held in
Basco v. Philippine Amusements and Gaming Corporation:

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner
control the operation of constitutional laws enacted by Congress to carry into execution the powers
vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.

"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on
the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United
States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision
can regulate a federal instrumentality in such a way as to prevent it from consummating its federal
responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool
for regulation." (U.S. v. Sanchez, 340 US 42)
The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which
has the inherent power to wield it. [Emphases supplied]

The Court agrees with PRA that the subject reclaimed lands are still part of the public domain,
owned by the State and, therefore, exempt from payment of real estate taxes.

Section 2, Article XII of the 1987 Constitution reads in part, as follows:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for
not more than twenty-five years, and under such terms and conditions as may provided by law. In
cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of waterpower, beneficial use may be the measure and limit of the grant.

Similarly, Article 420 of the Civil Code enumerates properties belonging to the State:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. [Emphases supplied]

Here, the subject lands are reclaimed lands, specifically portions of the foreshore and offshore areas
of Manila Bay. As such, these lands remain public lands and form part of the public domain. In the
case of Chavez v. Public Estates Authority and AMARI Coastal Development Corporation,12 the Court
held that foreshore and submerged areas irrefutably belonged to the public domain and were
inalienable unless reclaimed, classified as alienable lands open to disposition and further declared
no longer needed for public service. The fact that alienable lands of the public domain were
transferred to the PEA (now PRA) and issued land patents or certificates of title in PEA’s name did
not automatically make such lands private. This Court also held therein that reclaimed lands retained
their inherent potential as areas for public use or public service.

As the central implementing agency tasked to undertake reclamation projects nationwide, with
authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged
with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or
sold by PEA are not private lands, in the same manner that DENR, when it disposes of other
alienable lands, does not dispose of private lands but alienable lands of the public domain. Only
when qualified private parties acquire these lands will the lands become private lands. In the hands
of the government agency tasked and authorized to dispose of alienable of disposable lands of the
public domain, these lands are still public, not private lands.

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well
as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands.
Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are
transferred to PEA and issued land patents or certificates of title in PEA's name does not
automatically make such lands private.13

Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the Administrative Code of
1987, thus:

SEC 14. Power to Reserve Lands of the Public and Private Dominion of the Government.-

(1)The President shall have the power to reserve for settlement or public use, and for specific public
purposes, any of the lands of the public domain, the use of which is not otherwise directed by law.
The reserved land shall thereafter remain subject to the specific public purpose indicated until
otherwise provided by law or proclamation.

Reclaimed lands such as the subject lands in issue are reserved lands for public use. They are
properties of public dominion. The ownership of such lands remains with the State unless they are
withdrawn by law or presidential proclamation from public use.

Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila
Bay are part of the "lands of the public domain, waters x x x and other natural resources" and
consequently "owned by the State." As such, foreshore and submerged areas "shall not be
alienated," unless they are classified as "agricultural lands" of the public domain. The mere
reclamation of these areas by PEA does not convert these inalienable natural resources of the State
into alienable or disposable lands of the public domain. There must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or disposable and open to
disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or quasi-public use.

As the Court has repeatedly ruled, properties of public dominion are not subject to execution or
foreclosure sale.14Thus, the assessment, levy and foreclosure made on the subject reclaimed lands
by respondent, as well as the issuances of certificates of title in favor of respondent, are without
basis.

WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the Regional Trial Court,
Branch 195, Parañaque City, is REVERSED and SET ASIDE. All reclaimed properties owned by the
Philippine Reclamation Authority are hereby declared EXEMPT from real estate taxes. All real estate
tax assessments, including the final notices of real estate tax delinquencies, issued by the City of
Parañaque on the subject reclaimed properties; the assailed auction sale, dated April 7, 2003; and
the Certificates of Sale subsequently issued by the Parañaque City Treasurer in favor of the City of
Parañaque, are all declared VOID.

SO ORDERED.

JOSE CATRLA MENDOZA

Associate justice

WE CONCUR:

DIOSDADO M. PERALTA
Associate justice
Acting Chairperson
 MARIANO C. DEL CASTILLO* ROBERTO A. ABAD
Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

DIOSDADO M. PERALTA
Associate justice
Acting Chairperson, Third Division

CERTIFICATION

I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. No. 926, The Judiciary Act of 1948, as amended)

G.R. No. 185023 August 24, 2011

CITY OF PASIG, REPRESENTED BY THE CITY TREASURER and THE CITY

ASSESSOR, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The petition challenges
the 17 October 2008 Decision2 of the Court of Appeals in CA-G.R. SP No. 97498, affirming the 6
November 2006 Decision3 of the Regional Trial Court (RTC), National Capital Judicial Region, Pasig
City, Branch 155, in SCA No. 2901.

The Facts

Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land, with a total area of
18.4891 hectares, situated in Pasig City. The properties are covered by Transfer Certificate of Title
(TCT) Nos. 337158 and 469702 and Tax Declaration Nos. E-030-01185 and E-030-01186 under the
name of MPLDC. Portions of the properties are leased to different business establishments.
In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos), voluntarily surrendered
MPLDC to the Republic of the Philippines.

On 30 September 2002, the Pasig City Assessor’s Office sent MPLDC two notices of tax
delinquency for its failure to pay real property tax on the properties for the period 1979 to 2001
totaling ₱256,858,555.86. In a letter dated 29 October 2002, Independent Realty Corporation (IRC)
President Ernesto R. Jalandoni (Jalandoni) and Treasurer Rosario Razon informed the Pasig City
Treasurer that the tax for the period 1979 to 1986 had been paid, and that the properties were
exempt from tax beginning 1987.

In letters dated 10 July 2003 and 8 January 2004, the Pasig City Treasurer informed MPLDC and
IRC that the properties were not exempt from tax. In a letter dated 16 February 2004, MPLDC
General Manager Antonio Merelos (Merelos) and Jalandoni again informed the Pasig City Treasurer
that the properties were exempt from tax. In a letter dated 11 March 2004, the Pasig City Treasurer
again informed Merelos that the properties were not exempt from tax.

On 20 October 2005, the Pasig City Assessor’s Office sent MPLDC a notice of final demand for
payment of tax for the period 1987 to 2005 totaling ₱389,027,814.48. On the same day, MPLDC
paid ₱2,000,000 partial payment under protest.

On 9 November 2005, MPLDC received two warrants of levy on the properties. On 1 December
2005, respondent Republic of the Philippines, through the Presidential Commission on Good
Government (PCGG), filed with the RTC a petition for prohibition with prayer for issuance of a
temporary restraining order or writ of preliminary injunction to enjoin petitioner Pasig City from
auctioning the properties and from collecting real property tax.

On 2 December 2005, the Pasig City Treasurer offered the properties for sale at public auction.
Since there was no other bidder, Pasig City bought the properties and was issued the corresponding
certificates of sale.

On 19 December 2005, PCGG filed with the RTC an amended petition for certiorari, prohibition and
mandamus against Pasig City. PCGG prayed that: (1) the assessments for the payment of real
property tax and penalty be declared void; (2) the warrants of levy on the properties be declared
void; (3) the public auction be declared void; (4) the issuance of certificates of sale be declared void;
(5) Pasig City be prohibited from assessing MPLDC real property tax and penalty; (6) Pasig City be
prohibited from collecting real property tax and penalty from MPLDC; (7) Pasig City be ordered to
assess the actual occupants of the properties real property tax and penalty; and (8) Pasig City be
ordered to collect real property tax and penalty from the actual occupants of the properties.

The RTC’s Ruling

In its 6 November 2006 Decision, the RTC granted the petition for certiorari, prohibition and
mandamus. The RTC held:

The primordial issue to be resolved in the present case is whether or not respondent City of Pasig,
through the City Treasurer and the City Assessor, acted with grave abuse of discretion amounting to
lack or excess of jurisdiction when it assessed, levied and sold in public auction the "payanig"
properties for non-payment of real property taxes.

However, before dwelling on the merits of the main issue, certain matters need to be addressed by
the Court, to wit:
 1. Does the Court have jurisdiction over the instant petition?

2. Who owns the so-called "payanig" properties that were subjected to payment of real
property taxes by respondent?

The Court maintains that it is not precluded from assuming jurisdiction over the instant amended
petition which involves the legality of the assailed actions by respondent in assessing and collecting
real property tax on the properties owned by the Republic of the Philippines. It is a jurisprudential
doctrine that the issue is purely legal when the authority of the respondent to assess and collect real
property taxes on the subject properties is being questioned (Ty vs. Trampe, 250 SCRA 500).

xxxx

In the instant proceeding, there is no dispute that the properties are surrendered ill-gotten wealth of
former President Marcos. As such, the same assumes [sic] a public character and thus belongs [sic]
to the Republic of the Philippines. x x x

xxxx

Hence, upon the voluntary surrender by Jose Y. Campos, the controlling owner of Mid-Pasig and
Independent Realty Corporation, of the "payanig" properties to PCGG, a clear admission that these
properties were part of the ill-gotten wealth of former President Marcos was already evident. As
such, there was already constructive reconveyance to the State, which immediately placed these
reconveyed properties under the control and stewardship of the PCGG as representative of the
Republic of the Philippines. Under such special circumstance, these voluntary surrendered
properties had already belonged to the State.

xxxx

Premised on the foregoing, the "payanig" properties, being part of the recovered ill-gotten wealth of
President Marcos, and therefore are owned by the State itself, are exempt from payment of real
property taxes. It is only when the beneficial use of said properties has been granted to a taxable
person that the same may be subject to imposition of real property tax.

Furthermore, in real estate taxation, the unpaid tax attaches to the property and is chargeable
against the taxable person who had actual or beneficial use and possession of it regardless of
whether or not he is the owner (Testate Estate of Concordia T. Lim vs. City of Manila, 182 SCRA
482).

In the instant case, the taxable persons being referred to are the lessees occupying and/or doing
business therein and have beneficial use over portions within the "payanig" properties.

xxxx

Consequently, there can be no iota of doubt that respondent City of Pasig abused its discretion by
committing the acts sought to be annulled herein despite knowledge of the fact that ownership over
the subject properties belong to petitioner. But what is more appalling in the instant action is that
such abuse was capriciously committed by respondent City of Pasig against the sovereign State
itself from where that atxing local government unit derives its very existence. The spring cannot rise
higher than its source.
xxxx

In sum, the acts of respondent in assessing real property taxes on properties owned and controlled
by the Republic of the Philippines, in collecting taxes from Mid-Pasig in lieu of the actual occupants
or beneficial users of certain portions thereof, and in auctioning said properties in favor of
respondent, followed by the corresponding certificate of sale, are all unequivocally tainted with grave
abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, in the light of the foregoing, the instant Amended Petition is hereby GRANTED.

Accordingly, the following acts of respondent are hereby ANNULLED and SET ASIDE.

1. the assessment dated September 30, 2002 for the payment of real property taxes and
penalties made by the City of Pasig on two (2) parcels of land covered by TCT No. 337158
and TCT No. 469702 registered under the name of Mid-Pasig;

2. the warrants of levy dated November 8, 2005 issued thereon by the City of Pasig;

3. the subsequent public auction sale of subject properties held on December 2, 2005
followed by the issuance of the corresponding Certificate of Sale;

FURTHER, the City of Pasig is hereby PROHIBITED from further:

1. Assessing real property taxes and penalties charges [sic] on the said properties;

2. Collecting said taxes and penalty charges from the State;

3. Disposing or encumbering the subject properties or any portion thereof;

FURTHER, the City of Pasig is hereby COMMANDED:

1. To return or effect the refund of the amount of Two Million Pesos (Php 2,000,000.00) paid
under protest by Mid-Pasig Land Development Corporation on October 20, 2005, or credit
the same amount to any outstanding tax liability that said corporation may have with the City
of Pasig; and

2. To assess and collect from the actual occupants or beneficial users of the subject
properties, and not from the State, whatever real property taxes and penalties that may be
due on the respective areas occupied by them.

SO ORDERED.4

Pasig City appealed to the Court of Appeals.

The Court of Appeals’ Ruling

In its 31 March 2008 Decision,5 the Court of Appeals set aside the RTC’s 6 November 2006
Decision. The Court of Appeals held:
We find nothing in PCGG’s petition that supports its claim regarding Pasig City’s alleged grave
abuse of discretion. It is undisputed that the subject parcels of land are registered in the name of
Mid-Pasig, a private entity. Although the government, through the PCGG have [sic] sequestered
Mid-Pasig and all its assets including the subject parcels of land, the sequestration per se, did not
operate to convert Mid-Pasig and its properties to public property. "The power of the PCGG to
sequester property claimed to be ‘ill-gotten’ means to place or cause to be placed under its
possession or control said property, or any building or office wherein any such property and any
records pertaining thereto may be found, including ‘business enterprises and entities’ — for the
purpose of preventing the destruction, concealment or dissipation of, and otherwise conserving and
preserving the same — until it can be determined, through appropriate judicial proceedings, whether
the property was in truth ‘ill-gotten,’ i.e., acquired through or as a result of improper or illegal use of
or the conversion of funds belonging to the Government or any of its branches, instrumentalities,
enterprises, banks or financial institutions, or by taking undue advantage of official position,
authority, relationship, connection or influence, resulting in unjust enrichment of the ostensible owner
and great damage and prejudice to the State." x x x As such, prior to a valid court declaration the
"PCGG cannot perform acts of strict ownership of [sic] sequestered property. It is a mere
conservator." In view thereof and the fact that Mid-Pasig and its properties have not been validly
declared by the Sandiganbayan as "ill-gotten" wealth, the same are not yet public properties. The
PCGG even admitted that the transfer certificates of title covering the subject parcels of land in the
name of Mid-Pasig have not been cancelled due to an order of the Sandiganbayan. The trial court
also found that the subject parcels of land are the subject of litigation between Ortigas and Company
Limited Partnership and the PCGG in Civil Case No. 0093 pending before the Sandiganbayan.
These facts clearly show that the Sandiganbayan has not validly declared yet that the subject
parcels of land are "ill-gotten" wealth. If so, they cannot be claimed yet as properties of the State:
they remain properties of a private entity. Thus, Pasig City through its City Assessor and City
Treasurer did not act with grave abuse of discretion when it issued real property tax assessment on
the subject parcels of land.

Even admitting that the subject parcels of land are already owned by the State, we still see no grave
abuse of discretion on the part of Pasig City when it issued the challenged tax assessment, for it is
well settled that the test of exemptions from taxation is the use of the property for purposes
mentioned in the Constitution. The owner of the property does not matter. Even if he is not a tax-
exempt entity, as long as the property is being used for religious, charitable or educational purposes,
the property is exempt from tax. Conversely, even if the government owns the property, if the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person, the
property is subject to tax. Here, the PCGG admitted that portions of the subject properties were
leased to private entities engaged in commercial dealings. As well, the trial court found that lessees
occupy different areas of the subject parcels of land beginning 1992 until 2005. Therefore,
considering that portions of the subject parcels of land are used for commercial purposes, the duty
imposed by law to owners and administrators of real property to declare the same for tax purposes
and the fact that the tax declarations over the subject parcels of land are in the name of Mid-Pasig,
again, Pasig City did not act with grave abuse of discretion when it issued the challenged tax
assessment.

The foregoing snowball to one conclusion — the allegations in PCGG’s petition imputing grave
abuse of discretion on the part of Pasig City, acting through the City Assessor and City Treasurer, in
the assessment and collection of the taxes were made in order to justify the filing of the petition for
certiorari, prohibition and mandamus with the trial court.

The extraordinary remedies of certiorari, prohibition and mandamus may be resorted to only when
there is no other plain, available, speedy and adequate remedy in the course of law. Where
administrative remedies are available, petitions for the issuance of these peremptory writs do not lie
in order to give the administrative body the opportunity to decide the matter by itself correctly and to
prevent unnecessary and premature resort to courts.

Republic Act No. 7160 or the Local Government Code of 1991, clearly sets forth the administrative
remedies available to a taxpayer or real property owner who is not satisfied with the assessment or
reasonableness of the real property tax sought to be collected. The Supreme Court outlined said
remedies, to wit:

Should the taxpayer/real property owner question the excessiveness or reasonableness of the
assessment, Section 252 directs that the taxpayer should first pay the tax due before his protest can
be entertained. There shall be annotated on the tax receipts the words "paid under protest." It is only
after the taxpayer has paid the tax due that he may file a protest in writing within thirty days from
payment of the tax to the Provincial, City or Municipal Treasurer, who shall decide the protest within
sixty days from receipt. In no case is the local treasurer obliged to entertain the protest unless the
tax due has been paid.

If the local treasurer denies the protest or fails to act upon it within the 60-day period provided for in
Section 252, the taxpayer/real property owner may then appeal or directly file a verified petition with
the LBAA within sixty days from denial of the protest or receipt of the notice of assessment, as
provided in Section 226 of R.A. No. 7160[.]

And, if the taxpayer is not satisfied with the decision of the LBAA, he may elevate the same to the
CBAA, which exercises exclusive jurisdiction to hear and decide all appeals from the decisions,
orders and resolutions of the Local Boards involving contested assessments of real properties,
claims for tax refund and/or tax credits or overpayments of taxes. An appeal may be taken to the
CBAA by filing a notice of appeal within thirty days from receipt thereof.

From the Central Board Assessment Appeals, the dispute may then be taken to the Court of Tax
Appeals by filing a verified petition for review under Rule 42 of the Revised Rules of Court; to the
Court of tax Appeals en banc; and finally to the Supreme Court via a petition for review on certiorari
pursuant to Rule 45 of the Revised Rules of Court.

We are not convinced with PCGG’s stance that their recourse of filing the petition for certiorari,
prohibition and mandamus before the trial court is proper as they are questioning not merely the
correctness of the tax assessment but the actions of Pasig City, through its City Assessor and City
Treasurer, which were done in grave abuse of discretion amounting to lack or excess of jurisdiction.

The well-established rule is that allegations in the complaint and the character of the relief sought
determine the nature of an action. A perusal of the petition before the trial court plainly shows that
what is actually being assailed is the correctness of the assessments made by the City Assessor of
Pasig City on the subject parcels of land. PCGG claims, among others, that: 1) the subject parcels of
land are exempt from real property taxation as they are public property; 2) even if the subject parcels
of land are subject to tax, as the beneficial use thereof was granted to private persons and entities,
only the portion thereof used for commerce is subject to tax and the users thereof are the ones liable
to pay the tax; and 3) the right of Pasig City to collect the real property taxes pertaining to 1987 to
1998 has already prescribed. These claims essentially involve questions of fact, which are improper
in a petition for certiorari, prohibition and mandamus; hence, the petition should have been brought,
at the very first instance, to the Local Board Assessment Appeals, which has authority to rule on the
objections of any interested party who is not satisfied with the action of the assessor. Under the
doctrine of primacy of administrative remedies, an error in the assessment must be administratively
pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction.
Granting that the assessor’s authority and the legality of the assessment are indeed an issue, the
proper remedy is a suit for the refund of the real property tax after paying the same under protest. It
must be pointed out that in order for the trial court to resolve the instant petition, the issues of the
correctness of the tax assessment and collection must also necessarily be dealt with; hence, a
petition for certiorari, prohibition and mandamus is not the proper remedy. x x x [T]he resolution of
the issues raised in the instant case involve examination and determination of relevant and material
facts, i.e. facts relating to the ownership of the subject parcels of land, the portion of the subject
parcel of land used for commercial purposes and the identities of the lessees and the users thereof.
Since resolution of factual issues is not allowed in a petition for certiorari, prohibition and mandamus,
the trial court is precluded from entertaining the petition.

Finally, Section 252 of the R.A. No. 7160 requires payment under protest in assailing real property
tax assessment. Even an appeal shall not suspend the collection of the atx assessed without
prejudice to a later adjustment pending the outcome of the appeal. This principle is consistent with
the time-honored principle that taxes are the lifeblood of the nation. But the PCGG failed to pay the
tax assessment prior to questioning it before the trial court; hence, the trial court should have
dismissed PCGG’s petition in line with the Supreme Court pronouncement that a trial court has no
jurisdiction to entertain a similar petition absent payment under protest.

In conclusion and taking all the foregoing into account, we hold that the trial court had no jurisdiction
to take cognizance and decide PCGG petition for certiorari, prohibition and mandamus; the trial court
should have dismissed the petition.6

PCGG filed a motion for reconsideration. In its 17 October 2008 Decision, the Court of Appeals
reversed itself. The Court of Appeals held:

At the outset, although as a rule, administrative remedies must first be exhausted before ersort to
judicial action can prosper, there is a well-settled exception in cases where the controversy does not
involve questions of fact but only of law. We find that the Republic has shown a cause for the
application of the foregoing exception. Essentially, the Republic has raised a pure question of law —
whether or not the City of Pasig has the power to impose real property tax on the subject properties,
which are owned by the State. It bears stressing that the Republic did not raise any question
concerning the amount of the real property tax or the determination thereof. Thus, having no plain,
speedy, and adequate remedy in law, the Republic correctly resorted to judicial action via the
petition for certiorari, prohibition, and mandamus, to seek redress.

We are convinced that the subject properties were not sequestered by the government so as to
amount to a deprivation of property without due process of law; instead, they were voluntarily
surrendered to the State by Campos, a self-admitted crony of the then President Marcos. The
relinquishment of the subject properties to the State as ill-gotten wealth of Marcos, as recognized by
the Supreme Court, makes a judicial declaration that the same were ill-gotten unnecessary. By virtue
of said relinquishment, the State correctly exercised dominion over the subject properties.
Indubitably, the subject properties, being ill-gotten wealth, belong to the State. x x x By its nature, ill-
gotten wealth is owned by the State. As a matter of fact, the Republic continues to exercise
dominion over the subject properties.7

Hence, the present petition.

Issues
Pasig City raises as issues that the lower courts erred in granting PCGG’s petition for certiorari,
prohibition and mandamus and in ordering Pasig City to assess and collect real property tax from the
lessees of the properties.

The Court’s Ruling

The petition is partly meritorious.

As correctly found by the RTC and the Court of Appeals, the Republic of the Philippines owns the
properties. Campos voluntarily surrendered MPLDC, which owned the properties, to the Republic of
the Philippines. In Republic of the Philippines v. Sandiganbayan,8 the Court stated:

x x x Jose Y. Campos, "a confessed crony of former President Ferdinand E. Marcos," voluntarily
surrendered or turned over to the PCGG the properties, assets and corporations he held in trust for
the deposed President. Among the corporations he surrendered were the Independent Realty
Corporation and the Mid-Pasig Land Development Corporation.9

In Republic of the Philippines v. Sandiganbayan,10 the Court stated:

The antecedent facts are stated by the Solicitor General as follows:

xxxx

"3. Sometime in the later part of August 1987, defendant Jose D. Campos, Jr., having been served
with summons on August 5, 1987, filed with the respondent Court an undated ‘Manifestation and
Motion to Dismiss Complaint with Respect to Jose D. Campos’ praying that he be removed as party
defendant from the complaint on the grounds that he had ‘voluntarily surrendered or turned over any
share in his name on [sic] any of the corporations referred to, aside from disclaiming any interest,
ownership or right thereon to the Government of the Republic of the Philippines’ and that he was
‘entitled to the immunity granted by the Presidential Commission on Good Government pursuant to
Executive Order No. 14, under the Commission’s Resolution dated May 28, 1986 to Mr. Jose Y.
Campos and his family’ he ‘being a member of the immediate family of Jose Y. Campos.’

xxxx

In the instant case, the PCGG issued a resolution dated May 28, 1986, granting immunity from both
civil and criminal prosecutions to Jose Y. Campos and his family. The pertinent provisions of the
resolution read as follows:

"3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this Commission, his voluntary
surrender of the properties and assets disclosed and declared by him to belong to deposed
President Ferdinand E. Marcos to the Government of the Republic of the Philippines, his full,
complete and truthful disclosures, and his commitment to pay a sum of money as determined by the
Philippine Government, this Commission has decided and agreed:

xxxx

Undoubtedly, this resolution embodies a compromise agreement between the PCGG on one hand
and Jose Y. Campos on the other. Hence, in exchange for the voluntary surrender of the ill-gotten
properties acquired by the then President Ferdinand E. Marcos and his family which were in Jose
Campos’ control, the latter and his family were given full immunity in both civil and criminal
prosecutions. x x x

xxxx

By virtue of the PCGG’s May 28, 1986 resolution, Jose Campos, Jr. was given full immunity from
both civil and criminal prosecutions in exchange for the "full cooperation of Mr. Jose Y. Campos to
this Commission, his voluntary surrender of the properties and assets disclosed and declared by him
to belong to deposed President Ferdinand E. Marcos to the Government of the Republic of the
Philippines, his full, complete and truthful disclosures, and his commitment to pay a sum of money
as determined by the Philippine Government." In addition, Campos, Jr. had already waived and
surrendered to the Republic his registered equity interest in the Marcos/Romualdez corporations
involved in the civil case.11

Even as the Republic of the Philippines is now the owner of the properties in view of the voluntary
surrender of MPLDC by its former registered owner, Campos, to the State, such transfer does not
prevent a third party with a better right from claiming such properties in the proper forum. In the
meantime, the Republic of the Philippines is the presumptive owner of the properties for taxation
purposes.

Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the
Philippines are exempt from real property tax "except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person." Thus, the portions of the
properties not leased to taxable entities are exempt from real estate tax while the portions of the
properties leased to taxable entities are subject to real estate tax. The law imposes the liability to
pay real estate tax on the Republic of the Philippines for the portions of the properties leased to
taxable entities. It is, of course, assumed that the Republic of the Philippines passes on the real
estate tax as part of the rent to the lessees.

In Philippine Fisheries Development Authority v. Central Board of Assessment Appeals,12 the Court
held:

In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals, the Court
resolved the issue of whether the PFDA is a government-owned or controlled corporation or an
instrumentality of the national government. In that case, the City of Iloilo assessed real property
taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and operated by PFDA.
The Court held that PFDA is an instrumentality of the government and is thus exempt from
the payment of real property tax, thus:

The Court rules that the Authority is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property tax. However, said
exemption does not apply to the portions of the IFPC which the Authority leased to private
entities. With respect to these properties, the Authority is liable to pay property tax.
Nonetheless, the IFPC, being a property of public dominion cannot be sold at public auction to
satisfy the tax delinquency.

xxxx

This ruling was affirmed by the Court in a subsequent PFDA case involving the Navotas Fishing Port
Complex, which is also managed and operated by the PFDA. In consonance with the previous
ruling, the Court held in the subsequent PFDA case that the PFDA is a government
instrumentality not subject to real property tax except those portions of the Navotas Fishing
Port Complex that were leased to taxable or private persons and entities for their beneficial
use.

Similarly, we hold that as a government instrumentality, the PFDA is exempt from real property tax
imposed on the Lucena Fishing Port Complex, except those portions which are leased to private
persons or entities.13 (Emphasis supplied)

In Government Service Insurance System v. City Treasurer of the City of Manila,14 the Court held:

x x x The tax exemption the property of the Republic or its instrumentalities carries ceases
only if, as stated in Sec. 234(a) of the LGC of 1991, "beneficial use thereof has been granted,
for a consideration or otherwise, to a taxable person." GSIS, as a government instrumentality, is
not a taxable juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in a sense that
status with respect to the Katigbak property when it contracted its beneficial use to MHC,
doubtless a taxable person. Thus, the real estate tax assessment of Php 54,826,599.37
covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax
delinquency is concerned as assessed over said property.15 (Emphasis supplied)

In Manila International Airport Authority v. Court of Appeals,16 the Court held:

x x x Section 234(a) of the Local Government Code states that real property owned by the
Republic loses its tax exemption only if the "beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person." MIAA, as a government instrumentality, is not a
taxable person under Section 133(o) of the local Government Code. Thus, even if we assume that
the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact
does not make these real properties subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are
not exempt from real estate tax. For example, the land area occupied by hangars that MIAA
leases to private corporations is subject to real estate tax. In such a case, MIAA has granted
the beneficial use of such land area for a consideration to a taxable person and therefore
such land area is subject to real estate tax.17(Emphasis supplied)

In Lung Center of the Philippines v. Quezon City,18 the Court held:

x x x While portions of the hospital are used for the treatment of patients and the dispensation of
medical services to them, whether paying or non-paying, other portions thereof are being leased to
private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a
private individual for her business enterprise under the business name "Elliptical Orchids and
Garden Center." Indeed, the petitioner’s evidence shows that it collected ₱1,136,483.45 as rentals in
1991 and ₱1,679,999.28 for 1992 from the said lessees.

Accordingly, we hold that the portions of the land leased to private entities as well as those
parts of the hospital leased to private individuals are not exempt from such taxes. On the
other hand, the portions of the land occupied by the hospital and portions of the hospital used for its
patients, whether paying or non-paying, are exempt from real property taxes.19 (Emphasis supplied)

Article 420 of the Civil Code classifies as properties of public dominion those that are "intended for
public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads" and those that "are intended for some public service or for the development of
the national wealth." Properties of public dominion are not only exempt from real estate tax, they are
exempt from sale at public auction. In Heirs of Mario Malabanan v. Republic,20 the Court held that, "It
is clear that property of public dominion, which generally includes property belonging to the State,
cannot be x x x subject of the commerce of man."21

In Philippine Fisheries Development Authority v. Court of Appeals,22 the Court held:

x x x [T]he real property tax assessments issued by the City of Iloilo should be upheld only with
respect to the portions leased to private persons. In case the Authority fails to pay the real
property taxes due thereon, said portions cannot be sold at public auction to satisfy the tax
delinquency. In Chavez v. Public Estates Authorityit was held that reclaimed lands are lands of
the public dominion and cannot, without Congressional fiat, be subject of a sale, public or
private x x x.

In the same vein, the port built by the State in the Iloilo fishing complex is a property of the
public dominion and cannot therefore be sold at public auction. Article 420 of the Civil Code,
provides:

"Article 420. The following things are property of public dominion:

1. Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

2. Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth."

The Iloilo fishing port which was constructed by the State for public use and/or public service
falls within the term "port" in the aforecited provision. Being a property of public dominion
the same cannot be subject to execution or foreclosure sale. In like manner, the reclaimed land
on which the IFPC is built cannot be the object of a private or public sale without Congressional
authorization.23 (Emphasis supplied)

In Manila International Airport Authority,24 the Court held:

x x x [T]he Airport Lands and Buildings of MIAA are properties devoted to public use and thus are
properties of public dominion. Properties of public dominion are owned by the State or the Republic.
Article 420 of the Civil Code provides:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.

The term "ports x x x constructed by the Sate" includes airports and seaports. The Airport Lands and
Buildings of MIAA are intended for public use, and at the very least intended for public service.
Whether intended for public use or public service, the Airport Lands and Buildings are properties of
public dominion. As properties of public dominion, the the Airport lands and Buildings are owned by
the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government
Code.
xxxx

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public
use, are properties of public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes
public airports and seaports, as properties of public dominion and owned by the Republic. As
properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport
Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the local
Government Code. This Court has also repeatedly ruled that properties of public dominion are
not subject to execution or foreclosure sale.25 (Emphasis supplied) lawphi 1

In the present case, the parcels of land are not properties of public dominion because they are not
"intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the
State, banks, shores, roadsteads." Neither are they "intended for some public service or for the
development of the national wealth." MPLDC leases portions of the properties to different business
establishments. Thus, the portions of the properties leased to taxable entities are not only subject to
real estate tax, they can also be sold at public auction to satisfy the tax delinquency.

In sum, only those portions of the properties leased to taxable entities are subject to real estate tax
for the period of such leases. Pasig City must, therefore, issue to respondent new real property tax
assessments covering the portions of the properties leased to taxable entities. If the Republic of the
Philippines fails to pay the real property tax on the portions of the properties leased to taxable
entities, then such portions may be sold at public auction to satisfy the tax delinquency.

WHEREFORE, the petition is PARTIALLY GRANTED. The Court SETS ASIDE the 17 October
2008 Decision of the Court of Appeals in CA-G.R. SP No. 97498 and declares VOID the 30
September 2002 real property tax assessment issued by Pasig City on the subject properties of Mid-
Pasig Land Development Corporation, the 8 November 2005 warrants of levy on the properties, and
the 2 December 2005 auction sale. Pasig City is DIRECTEDto issue to respondent new real property
tax assessments covering only the portions of the properties actually leased to taxable entities, and
only for the period of such leases. Interests and penalties on such new real property tax assessment
shall accrue only after receipt of such new assessment by respondent.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA* JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

JOSE C. MENDOZA**
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 170532 April 30, 2009

THE PROVINCIAL ASSESSOR OF MARINDUQUE, Petitioner,

vs.
THE HONORABLE COURT OF APPEALS AND MARCOPPER MINING
CORPORATION, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

The Provincial Assessor of the Province of Marinduque (petitioner) assails by Petition

for Certiorari under Rule 65 of the Rules of Court the May 30, 2005 Decision1 of the Court of Appeals
(CA) which declared the Siltation Dam and Decant System of Marcopper Mining Corporation
(respondent) exempt from real property tax; and the September 29, 2005 CA Resolution2 which
denied petitioner’s motion for reconsideration.

Petitioner issued against respondent an Assessment Notice,3 dated March 28, 1994, for real
property taxes due on the latter's real properties, including its Siltation Dam and Decant System
(subject property) at Barangay Lamese, Sta. Cruz, Marinduque. The subject property is covered by
Tax Declaration No. 05-35697 dated November 17, 1993, and has a market value of
Php36,360,996.19.4

Respondent paid the tax demanded,5 but appealed the assessment before the Local Board of
Assessment Appeals (LBAA) on the ground that the subject property is exempt from real property
taxation under Section 234(e) of Republic Act (R.A.) No. 71606 or the Local Government Code of
1991, which provides:
Sec. 234. Exemptions from Real Property Tax. - The following are exempted from payment of the
real property tax:

xxx

(e) Machinery and equipment used for pollution control and environmental protection.

x x x x (Emphasis supplied)

Attached to its appeal is an Affidavit issued by its Chief Mining Engineer Ricardo Esquieres, Jr.
(Esquieres), stating that the subject property was constructed to comply with the condition imposed
by the Department of Environment and Natural Resources (DENR) that respondent prevent run-offs
and silt materials from contaminating the Mogpog and Boac Rivers; and describing the subject
property as a specialized combination of essential impervious earth materials with a special
provision for a spillway and a diversion canal. Esquieres explains that the subject property is
intended for the purpose of pollution control, sediment control, domestic and agricultural water
supply and flood control.7

Respondent also submitted a May 24, 1994 Certification issued by DENR Regional Technical
Director Carlos J. Magno that the subject property is a "Siltation

Dam structure intended primarily for pollution control of silted materials x x x."8

In a Decision9 dated November 10, 1995, the LBAA dismissed respondent's appeal for having been
filed out of time. It further held that the subject property is taxable as an improvement on the
principal real property, citing the ruling of the Court in Benguet Corporation v. Central Board of
Assessment Appeals10 that a tailings dam is a permanent improvement not exempt from real
property taxation.

Respondent appealed11 to the Central Board of Assessment Appeals (CBAA) which, in a

Decision12 dated December 21, 1998, held that respondent’s appeal with the LBAA is timely, but the
same lacked legal basis because the subject property was neither a machinery nor an equipment
but a permanent improvement, and therefore not tax exempt under Sec. 234(e) of R.A. No. 7160.
Citing the definition of machinery under Sec. 199 of R.A. No. 7160, viz.:

Sec. 199. Definition of Terms. – When used in this Title, the term:

xxxx

(o) Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or

apparatus which may or may not be attached, permanently or temporarily, to the real property. It
includes the physical facilities for production, the installations and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, and those not permanently attached to the
real property which are actually, directly, and exclusively used to meet the needs of the particular
industry, business or activity and which by their very nature and purpose are designed for, or
necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes."

the CBAA held that to be considered a "machinery," the subject property must either be a physical
facility for production; or a service facility; or one that is actually, directly and exclusively used to
meet the needs of the particular industry, business, or activity; and which by its very nature and
purpose is designed for, or necessary to a manufacturing, mining, logging, commercial, industrial or
agricultural purpose. The subject property does not produce anything nor operate as auxiliary to a
production process; thus, it is neither a physical facility for production nor a service facility. It is not
even necessary to the mining activity of respondent, because its purpose is merely to contain silt
and sediments.13

Moreover, the CBAA noted that based on an ocular inspection it conducted, the subject property had
not been actually used for pollution control, for it had been out of operation since 1993.14

Respondent filed a Petition/Motion for Partial Reconsideration,15 but the CBAA denied the same in its
July 27, 2000 Resolution.16

Respondent appealed17 to the CA on the sole issue of whether the subject property was tax exempt
under Sec. 234(e) of R.A. No. 7160.18

The CA reversed the LBAA and CBAA in its Decision dated May 30, 2005 herein assailed, the
dispositive portion of which reads:

THE FOREGOING DISQUISITIONS CONSIDERED, the instant petition for review is hereby
GRANTED, the assailed Decision and Resolution of the Central Board of Assessment Appeals,
dated December 21, 1998 and July 27, 2000, respectively are REVERSED and SET ASIDE. The
petitioner's siltation dam and decant system being exempt from real property tax as it is hereby
determined, the Municipal Treasurer of Sta. Cruz, Marinduque, is hereby directed to refund the tax
payments made by petitioner under protest, or in lieu thereof, to credit said payments in favor of
petitioner for any taxes it will be required to pay in the future.

SO ORDERED.19

The CA held that the concept of machinery under Section 199 of R.A. No. 7160 is broad enough to
include a "machinery, instrument, apparatus or device consisting of parts which, functioning
together, allows a person to perform a task more efficiently," such as the subject property. Not only
does it function as a machinery, but it is also actually and directly used for the mining business of
petitioner. The CA noted that it was constructed in compliance with a DENR requirement; thus, it "is
part and parcel of [respondent's] mining operations to protect the environment within which it
operates xxx [i]t is a device used for cleaning up after production, in order to clean the water which
must necessarily flow into the Mogpog and Boac Rivers."20

Thus, the CA held that the subject property was exempt from real property taxation under Section 91
of R.A. No. 7942 or the Philippine Mining Act of 1995,21 viz.:

Sec. 91. Incentives for Pollution Control Devices. – Pollution control devices acquired,
constructed or installed by contractors shall not be considered as improvements on the land
or building where they are placed, and shall not be subject to real property and other taxes or
assessments: Provided, however, That payment of mine wastes and tailings fees is not exempted.
(Emphasis supplied)

It qualifies as a pollution control device defined under DENR Administrative Order No. 95-23 as an
"infrastructure, machinery, equipment, and/or improvement used for impounding, treating or
neutralizing, precipitating, filtering, conveying and cleansing mine industrial waste and tailing, as well
as eliminating and reducing hazardous effects of solid particles, chemicals, liquids or other harmful
by-products and gases emitted from any facility utilized in mining operations for their disposal."22 The
definition "extends to all kinds of pollution control devices acquired, constructed, or installed on the
land or buildings of the mining corporation."23
Finally, the CA ruled that, contrary to the view of the CBAA, the non-operational state of the subject
property "does not remove it from the purview of the clear provisions of R.A. No. 7160 x x x and R.A.
No. 7942 x x x [i]n the absence of clear and convincing evidence that the siltation dam and decant
system was inutile to achieve its purpose prior to being damaged, and continued to be so x x x."24

Petitioner filed a Motion for Reconsideration,25 but the CA denied it in a Resolution26 dated
September 29, 2005.

Hence, the present petition, raising two main issues:

I. The propriety of the present action for certiorari under Rule 65 of the Rules of Court:

i. Whether or not there is available to Petitioner, the remedy of appeal or other plain,
speedy and adequate remedy in the ordinary course of law;

ii. Whether or not a petition for review on certiorari under Rule 45 of the Rules of
Court is the appropriate remedy;

iii. Whether or not, if available to the Petitioner, the remedy of appeal or other plain,
speedy and adequate remedy in the ordinary course of law were lost through the
fault of the Petitioner.

II. Whether or not the Respondent court committed grave abuse of discretion amounting to
lack or excess of jurisdiction when it rendered the Decision and its subsequent Resolution,
exempting the siltation dam and decant system of Respondent Marcopper from the real
property tax imposed by the Provincial Government of Marinduque.

i. Respondent Court of Appeals committed grave abuse of discretion amounting to

lack or excess of jurisdiction when it whimsically, arbitrarily and capriciously
disregarded by treating as though non-existent, the established and undisputed fact
that the Siltation Dam Decant System of Respondent Marcopper was damaged and
has not been in operation since 1993 up to, at the very least, the ocular inspection
conducted by the CBAA in November 1996, if not up to the present, given the failure
of Respondent Marcopper to claim otherwise;

ii. Respondent Court of Appeals committed grave abuse of discretion amounting to

lack or excess of jurisdiction when it whimsically, arbitrarily and capriciously
disregarded, by treating as though non-existent, the established and undisputed fact
that Respondent Marcopper does not have a certificate of tax exemption from the
DENR under the provisions of the Philippine Mining Act of 1995 so as to entitle it to
exemption from the realty tax imposed by the local government of Marinduque.

iii. Respondent Court of Appeals committed grave abuse of discretion amounting to

lack or excess of jurisdiction when, inspite of the non-operation during the relevant
years of the Siltation Dam and Decant System, the lack of certificate of tax
exemption therefor and the clear and unambiguous provisions of the Local
Government Code and the Philippine Mining Act of 1995, it declared the aforesaid
real property as a machinery and equipment or a pollution control device that is
exempt from realty tax.27 (Emphasis supplied)
Petitioner posits that the CA committed not only a reversible error in holding that the subject property
is tax exempt under Sec. 234(e) of R.A. No. 7160, but also a grave abuse of discretion in discarding
key factual findings of both the LBAA and the CBAA regarding the nature of the subject property --
which factual findings respondent did not even controvert. Petitioner points out that the CBAA found
that the subject property had not been used for pollution control because it had been out of operation
since 1993;28 and respondent admitted this in its Petition for Review before the CA where it
categorically stated that "[w]hat is not denied, however, which even the barangay resolutions state
was that the siltation dam was damaged in 1993 when a typhoon hit Marinduque. This naturally
affected the environment in the area for which reason Marcopper specifically wanted to repair the
dam."29 Yet, petitioner argues, the CA completely ignored such undisputed fact by holding that there
is "absence of clear and convincing evidence that the siltation dam and decant system was inutile to
achieve its purpose prior to being damaged, and continued to be so x x x."30

Petitioner further cites the finding of the CBAA that respondent did not obtain from the DENR a
certification of the tax exempt classification of the subject properties. This CBAA finding was not
controverted by respondent in its pleadings before the CA; yet, said court completely glossed over
this matter and declared the subject properties tax exempt.31

On the other hand, respondent contends that petitioner's mode of appeal from the CA Decision
should have been a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed within
fifteen (15) days from October 13, 2005, the day petitioner received notice of the CA Resolution
denying its motion for reconsideration. That petitioner filed instead a Petition for Certiorari on
December 12, 2005 -- the 60th day from receipt of the CA Resolution -- indicates that it resorted to a
special civil action for certiorari as a substitute for the appeal it had lost;32 worse, petitioner raised
factual issues which the Court cannot resolve for it is no trier of facts.33

The petition has merit.

On the proper mode of appeal

Previously, under Section 36 of Presidential Decree (P.D.) No. 464 or the Real Property Tax Code,
the proper mode of appeal from a decision rendered by the CBAA was by special civil action
for certiorari filed directly with the Court.34 However, with the passage of R.A. No. 7902,35 granting
the CA exclusive appellate jurisdiction over decisions of boards and commissions, the Court issued
Revised Administrative Circular No. 1-9536 which provides under paragraphs 137 and 538 that appeal
from a decision of the CBAA shall be by Petition for Review with the CA. Thus, from the final
judgment of the CA, appeal to the Court on questions of law is by Petition for Review
on Certiorari under Rule 45 of the Rules of Court.39 The availability of such remedy bars recourse to
a special civil action for certiorari even if one of the grounds invoked is grave abuse of discretion.40

Indeed, petitioner erred in its mode of appeal by Petition for Certiorari under Rule 65.41 Nonetheless,
in its Resolution42 of July 5, 2006, the Court gave due course to the petition for it involves not only
the power of taxation of a local government unit but also its stewardship of the environment. The
higher interest of public welfare dictates that the Court suspend its rules pro hac vice in order to
resolve the merits of the petition.43

On whether the subject property is exempt from real property taxation

It should be borne in mind that the protest and appeals filed by respondents before the LBAA,
CBAA, and CA refer to the Assessment Notice dated March 28, 1994 and effective January 1,
1995.44 No other assessment notice is under question.
The disputed assessment notice having taken effect on January 1, 1995, its validity is determined by
the provisions of Title II (Real Property Taxation) of R.A. No. 7160, effective January 1, 1992. R.A.
No. 7942 has no bearing on the matter, for this law came into effect only on April 14, 1995. Hence,
reference to R.A. No. 7942 by the CA and the respondent are all out of place.

Title II of R.A. No. 7160 governs the administration, appraisal, assessment, levy and collection of
real property tax. Section 234 thereof grants exemption from real property taxation based on
ownership, character or usage. As the Court explained in Mactan Cebu International Airport
Authority v. Marcos,45 to wit:

Section 234 of the LGC provides for the exemptions from payment of real property taxes and
withdraws previous exemptions therefrom granted to natural and juridical persons, including
government-owned and controlled corporations, except as provided therein.

xxxx

These exemptions are based on the ownership, character, and use of the property. Thus:

(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership
are real properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v)
a barangay, and (vi) registered cooperatives.

(b) Character Exemptions. Exempted from real property taxes on the basis of their character
are: (i) charitable institutions, (ii) houses and temples of prayer like churches, parsonages or
convents appurtenant thereto, mosques, and (iii) non-profit or religious cemeteries.

(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct
and exclusive use to which they are devoted are: (i) all lands, buildings and improvements
which are actually directly and exclusively used for religious, charitable or educational
purposes; (ii) all machineries and equipment actually, directly and exclusively used by local
water districts or by government-owned or controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric power; and (iii) all
machinery and equipment used for pollution control and environmental protection.

To help provide a healthy environment in the midst of the modernization of the country, all machinery
and equipment for pollution control and environmental protection may not be taxed by local
governments. (Emphasis supplied)

As held in Mactan, the exemption granted under Sec. 234(e) of R.A. No. 7160 to "[m]achinery and
equipment used for pollution control and environmental protection" is based on usage. The term
usage means direct, immediate and actual application of the property itself to the exempting
purpose.46 Section 199 of R.A. No. 7160 defines actual use as "the purpose for which the property is
principally or predominantly utilized by the person in possession thereof." It contemplates concrete,
as distinguished from mere potential, use. Thus, a claim for exemption under Sec. 234(e) of R.A. No.
7160 should be supported by evidence that the property sought to be exempt is actually, directly and
exclusively used for pollution control and environmental protection.47

The records yield no allegation or evidence by respondent that the subject property was actually,
directly and exclusively used for pollution control and environmental protection during the period
covered by the assessment notice under protest. Rather, the finding of the CBAA that said
property "apparently out of commission and not apt to its function as would control pollution and
protect the environment"48 stands undisputed; such finding is even admitted by respondent when, to
repeat, in its Petition for Review before the CA, it categorically stated that "[w]hat is not denied,
however, which even the barangay resolutions state was that the siltation dam was damaged in
1993when a typhoon hit Marinduque. This naturally affected the environment in the area for which
reason Marcopper specifically wanted to repair the dam."49

Moreover, Sec. 206 prescribes the evidentiary requirements for exemption from real property
taxation, viz.:

Sec. 206. Proof of Exemption of Real Property from Taxation. - Every person by or for whom real
property is declared, who shall claim tax exemption for such property under this Title shall file with
the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of
real property sufficient documentary evidence in support of such claim including corporate charters,
title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage
deeds, and similar documents. If the required evidence is not submitted within the period herein
prescribed, the property shall be listed as taxable in the assessment roll. However, if the property
shall be proven to be tax exempt, the same shall be dropped from the assessment roll. (Emphasis
supplied)

The burden is upon the taxpayer to prove, by clear and convincing evidence, that his claim for
exemption has legal and factual basis.50

As aptly pointed out by petitioner, there is no allegation nor evidence in respondent's pleadings that
it had complied with the procedural requirement under Sec. 206. There is nothing in the records that
would indicate that, within 30 days from its filing of Tax Declaration No. 05-35697 on November 17,
1993,51 respondent filed with the provincial assessor an application for exemption or any
documentary evidence of the exempt status of the subject property. 1avvphi 1

What respondent submitted along with its appeal before the LBAA are Affidavit of Esquieres,52 the
project design of the subject property,53 as well as a Certification54 dated May 24, 1994 issued by
Carlos J. Magno, Regional Technical Director of DENR Regional Office No. IV.

But far from proving that the subject property is tax exempt, the documents classify the subject
property as anything but machinery or equipment.

The DENR Certification classifies the subject property as a "structure intended primarily for pollution
control of silted materials in order to protect the environmental degredation of Maguila-guila,
Mangamu-Mogpog River system from getting turbid."55 That the subject property is a structure is
further underscored by the project design which describes the subject property as a "zoned earth
siltation dam"56 composed of a clay core consisting of clayey materials or impervious fill, a random fill
made up of heavily to intensely fractured metarock, and filters comprised of course tailings, river
sand deposits and course filter gravels.57

It is described in greater detail by respondent’s Chief Mining Engineer Ricardo Esquieres, Jr. in an
October 11, 1994 Affidavit58 attached to respondent’s appeal59 before the LBAA, thus:

7. The siltation dam and decant system was constructed sometime in August 1992. It is not only a
specialized combination of essential impervious earth materials which provide adequate strength
and detention of turbid streamwater. It also has special provisions like spillway and diversion canal
which also promote its integrity by providing a safe outlet of the impounded streamwater. Basically,
the zoned-earth dam is composed of a clay core, random fill and filter drains.
 1. Clay core – impervious central portion of the dam to be inclined with a width to heat ratio
greater than 1.0 and designed to be thick – thick enough to reduce seepage.

2. Random fill – relatively more permeable than the clay core and of greater strength. Placed
at the upstream face of the dam (to serve as armor or ballast against slope stablity).

3. Filters – designed to ensure that the dam structure is always in its full drained state, thus,
relieving any pore pressure that may develop behind the dam.60

Therefore, by design, composition and function, the subject property is a structure adhered to the
soil, and has neither a mechanical contrivance, instrument, tool, implement, appliances, apparatus,
nor paraphernalia that produces a mechanical effect or performs a mechanical work of any kind.61 It
meets none of the following features of a machinery as described in Section 199(o) of R.A. No.
7160:

(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances

or apparatus which may or may not be attached, permanently or temporarily, to the real property. It
includes the physical facilities for production, the installations and appurtenant service facilities,
those which are mobile, self-powered or self-propelled and those not permanently attached to the
real property which are actually, directly, and exclusively used to meet the needs of the particular
industry, business or activity and which by their very nature and purpose are designed for, or
necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes.

That a structure such as the subject property does not qualify as a machinery or equipment used for
pollution control as contemplated under R.A. No. 7160 is evident from the adoption of an expanded
definition of pollution control device in R.A. No. 7942. Under Section 3 (am) thereof, a pollution
control device now also refers to "infrastructure" or "improvement," and not just to machinery or
equipment. This new concept, however, cannot benefit respondent, for the assessment notice under
review pertains to real property tax assessed prior to the amendment of Sec. 234 (e) of R.A. No.
7160 by Sec. 91 in relation to Sec. 3 (am) of R.A. No. 7942. It is settled that tax laws are prospective
in application, unless expressly provided to apply retroactively.62 R.A. No. 7942 does not provide for
the retroactive application of its provisions.

In sum, the CA committed grave abuse of discretion in ignoring irrefutable evidence that the subject
property is not a machinery used for pollution control, but a structure adhering to the soil and
intended for pollution control, but has not been actually applied for that purpose during the period
under assessment.

WHEREFORE, the petition is GRANTED. The Decision dated May 30, 2005 and Resolution dated
September 29, 2005 are REVERSED and SET ASIDE. The Assessment Notice dated March 28,
1994 is declared VALID under the then applicable Republic Act No. 7160.

No costs.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

WE CONCUR:
G.R. No. 171586 January 25, 2010

NATIONAL POWER CORPORATION, Petitioner,

vs.
PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO, Respondent.

RESOLUTION

BRION, J.:

The petitioner National Power Corporation (Napocor) filed the present motion for reconsideration1 of
the Court’s Decision of July 15, 2009, in which we denied Napocor’s claimed real property tax
exemptions. For the resolution of the motion, we deem it proper to provide first a background of the
case.

BACKGROUND FACTS

The Province of Quezon assessed Mirant Pagbilao Corporation (Mirant) for unpaid real property
taxes in the amount of ₱1.5 Billion for the machineries located in its power plant in Pagbilao,
Quezon. Napocor, which entered into a Build-Operate-Transfer (BOT) Agreement (entitled Energy
Conversion Agreement) with Mirant, was furnished a copy of the tax assessment.

Napocor (nota bene, not Mirant) protested the assessment before the Local Board of Assessment
Appeals (LBAA), claiming entitlement to the tax exemptions provided under Section 234 of the Local
Government Code (LGC), which states:

Section 234. Exemptions from Real Property Tax. – The following are exempted from payment of the
real property tax:

xxxx

(c) All machineries and equipment that are actually, directly, and exclusively used by local water
districts and government-owned or –controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power;

xxxx

(e) Machinery and equipment used for pollution control and environmental protection.

xxxx

Assuming that it cannot claim the above tax exemptions, Napocor argued that it is entitled to certain
tax privileges, namely:

a. the lower assessment level of 10% under Section 218(d) of the LGC for government-owned and
controlled corporations engaged in the generation and transmission of electric power, instead of the
80% assessment level for commercial properties imposed in the assessment letter; and

b. an allowance for depreciation of the subject machineries under Section 225 of the LGC.
In the Court’s Decision of July 15, 2009, we ruled that Napocor is not entitled to any of these claimed
tax exemptions and privileges on the basis primarily of the defective protest filed by the Napocor. We
found that Napocor did not file a valid protest against the realty tax assessment because it did not
possess the requisite legal standing. When a taxpayer fails to question the assessment before the
LBAA, the assessment becomes final, executory, and demandable, precluding the taxpayer from
questioning the correctness of the assessment or from invoking any defense that would reopen the
question of its liability on the merits.2

Under Section 226 of the LGC,3 any owner or person having legal interest in the property may
appeal an assessment for real property taxes to the LBAA. Since Section 250 adopts the same
language in enumerating who may pay the tax, we equated those who are liable to pay the tax to the
same entities who may protest the tax assessment. A person legally burdened with the obligation to
pay for the tax imposed on the property has the legal interest in the property and the personality to
protest the tax assessment.

To prove that it had legal interest in the taxed machineries, Napocor relied on:.

1. the stipulation in the BOT Agreement that authorized the transfer of ownership to Napocor
after 25 years;

2. its authority to control and supervise the construction and operation of the power plant;
and

3. its obligation to pay for all taxes that may be incurred, as provided in the BOT Agreement.

Napocor posited that these indicated that Mirant only possessed naked title to the machineries.

We denied the first argument by ruling that legal interest should be one that is actual and material,
direct and immediate, not simply contingent or expectant.4 We disproved Napocor’s claim of control
and supervision under the second argument after reading the full terms of the BOT Agreement,
which, contrary to Napocor’s claims, granted Mirant substantial power in the control and supervision
of the power plant’s construction and operation.5

For the third argument, we relied on the Court’s rulings in Baguio v. Busuego6 and Lim v. Manila.7 In
these cases, the Court essentially declared that contractual assumption of tax liability alone is
insufficient to make one liable for taxes. The contractual assumption of tax liability must be
supplemented by an interest that the party assuming the liability had on the property; the person
from whom payment is sought must have also acquired the beneficial use of the property taxed. In
other words, he must have the use and possession of the property – an element that was missing in
Napocor’s case.

We further stated that the tax liability must be a liability that arises from law, which the local
government unit can rightfully and successfully enforce, not the contractual liability that is
enforceable only between the parties to the contract. In the present case, the Province of Quezon is
a third party to the BOT Agreement and could thus not exact payment from Napocor without violating
the principle of relativity of contracts.8 Corollarily, for reasons of fairness, the local government units
cannot be compelled to recognize the protest of a tax assessment from Napocor, an entity against
whom it cannot enforce the tax liability.

At any rate, even if the Court were to brush aside the issue of legal interest to protest, Napocor could
still not successfully claim exemption under Section 234 (c) of the LGC because to be entitled to the
exemption under that provision, there must be actual, direct, and exclusive use of machineries.
Napocor failed to satisfy these requirements.

THE MOTION FOR RECONSIDERATION

Although Napocor insists that it is entitled to the tax exemptions and privileges claimed, the primary
issue for the Court to resolve, however, is to determine whether Napocor has sufficient legal interest
to protest the tax assessment because without the requisite interest, the tax assessment stands, and
no claim of exemption or privilege can prevail.

Section 226 of the LGC, as mentioned, limits the right to appeal the local assessor’s action to the
owner or the person having legal interest in the property. Napocor posits that it is the beneficial
owner of the subject machineries, with Mirant retaining merely a naked title to secure certain
obligations. Thus, it argues that the BOT Agreement is a mere financing agreement and is similar to
the arrangement authorized under Article 1503 of the Civil Code, which declares:

Art. 1503. When there is a contract of sale of specific goods, the seller may, by the terms of the
contract, reserve the right of possession or ownership in the goods until certain conditions have
been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the
delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the
buyer.

Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his
agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the
goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer
on shipment of the goods, the seller's property in the goods shall be deemed to be only for the
purpose of securing performance by the buyer of his obligations under the contract.

xxxx

Pursuant to this arrangement, Mirant’s ownership over the subject machineries is merely a security
interest, given only for the purpose of ensuring the performance of Napocor’s obligations.

Napocor additionally contends that its contractual assumption liability (through the BOT Agreement)
for all taxes vests it with sufficient legal interest because it is actually, directly, and materially
affected by the assessment.

While its motion for reconsideration was pending, Napocor filed a Motion to Refer the Case to the
Court En Banc considering that "the issues raised have far-reaching consequences in the power
industry, the country’s economy and the daily lives of the Filipino people, and since it involves the
application of real property tax provision of the LGC against Napocor, an exempt government
instrumentality."9

Also, the Philippine Independent Power Producers Association, Inc. (PIPPA) filed a Motion for Leave
to Intervene and a Motion for Reconsideration-in-Intervention. PIPPA is a non-stock corporation
comprising of privately-owned power generating companies which includes TeaM Energy
Corporation (TeaM Energy), successor of Mirant. PIPPA is claiming interest in the case since any
decision here will affect the other members of PIPPA, all of which have executed similar BOT
agreements with Napocor.

THE COURT’S RULING

At the outset, we resolve to deny the referral of the case to the Court en banc. We do not find the
reasons raised by Napocor meritorious enough to warrant the attention of the members of the Court
en banc, as they are merely reiterations of the arguments it raised in the petition for review on
certiorari that it earlier filed with the Court.10

Who may appeal a real property tax assessment

Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a
legal owner who has legal title to the property.11 Given this definition, Napocor is clearly not vested
with the requisite interest to protest the tax assessment, as it is not an entity having the legal title
over the machineries. It has absolutely no solid claim of ownership or even of use and possession of
the machineries, as our July 15, 2009 Decision explained.

A BOT agreement is not a mere financing arrangement. In Napocor v. CBAA12 – a case strikingly
similar to the one before us, we discussed the nature of BOT agreements in the following manner:

The underlying concept behind a BOT agreement is defined and described in the BOT law as
follows:

Build-operate-and-transfer – A contractual arrangement whereby the project proponent undertakes

the construction, including financing, of a given infrastructure facility, and the operation and
maintenance thereof. The project proponent operates the facility over a fixed term during which it is
allowed to charge facility users appropriate tolls, fees, rentals, and charges not exceeding those
proposed in its bid or as negotiated and incorporated in the contract to enable the project proponent
to recover its investment, and operating and maintenance expenses in the project. The project
proponent transfers the facility to the government agency or local government unit concerned at the
end of the fixed term which shall not exceed fifty (50) years x x x x.

Under this concept, it is the project proponent who constructs the project at its own cost and
subsequently operates and manages it. The proponent secures the return on its investments from
those using the project’s facilities through appropriate tolls, fees, rentals, and charges not exceeding
those proposed in its bid or as negotiated. At the end of the fixed term agreed upon, the project
proponent transfers the ownership of the facility to the government agency. Thus, the government is
able to put up projects and provide immediate services without the burden of the heavy expenditures
that a project start up requires.
1avv phi 1

A reading of the provisions of the parties’ BOT Agreement shows that it fully conforms to this
concept. By its express terms, BPPC has complete ownership – both legal and beneficial – of
the project, including the machineries and equipment used, subject only to the transfer of
these properties without cost to NAPOCOR after the lapse of the period agreed upon. As
agreed upon, BPPC provided the funds for the construction of the power plant, including the
machineries and equipment needed for power generation; thereafter, it actually operated and still
operates the power plant, uses its machineries and equipment, and receives payment for these
activities and the electricity generated under a defined compensation scheme. Notably, BPPC – as
owner-user – is responsible for any defect in the machineries and equipment.

xxxx

That some kind of "financing" arrangement is contemplated – in the sense that the private sector
proponent shall initially shoulder the heavy cost of constructing the project’s buildings and structures
and of purchasing the needed machineries and equipment – is undeniable. The arrangement,
however, goes beyond the simple provision of funds, since the private sector proponent not only
constructs and buys the necessary assets to put up the project, but operates and manages it as well
during an agreed period that would allow it to recover its basic costs and earn profits. In other words,
the private sector proponent goes into business for itself, assuming risks and incurring costs for its
account. If it receives support from the government at all during the agreed period, these are pre-
agreed items of assistance geared to ensure that the BOT agreement’s objectives – both for the
project proponent and for the government – are achieved. In this sense, a BOT arrangement is sui
generis and is different from the usual financing arrangements where funds are advanced to a
borrower who uses the funds to establish a project that it owns, subject only to a collateral security
arrangement to guard against the nonpayment of the loan. It is different, too, from an arrangement
where a government agency borrows funds to put a project from a private sector-lender who is
thereafter commissioned to run the project for the government agency. In the latter case, the
government agency is the owner of the project from the beginning, and the lender-operator is merely
its agent in running the project.

If the BOT Agreement under consideration departs at all from the concept of a BOT project as
defined by law, it is only in the way BPPC’s cost recovery is achieved; instead of selling to facility
users or to the general public at large, the generated electricity is purchased by NAPOCOR which
then resells it to power distribution companies. This deviation, however, is dictated, more than
anything else, by the structure and usages of the power industry and does not change the BOT
nature of the transaction between the parties.

Consistent with the BOT concept and as implemented, BPPC – the owner-manager-operator of
the project – is the actual user of its machineries and equipment. BPPC’s ownership and use
of the machineries and equipment are actual, direct, and immediate, while NAPOCOR’s is
contingent and, at this stage of the BOT Agreement, not sufficient to support its claim for tax
exemption. Thus, the CTA committed no reversible error in denying NAPOCOR’s claim for tax
exemption. [Emphasis supplied.]

Given the special nature of a BOT agreement as discussed in the cited case, we find Article 1503
inapplicable to define the contract between Napocor and Mirant, as it refers only to ordinary
contracts of sale. We thus declared in Tatad v. Garcia13 that under BOT agreements, the private
corporations/investors are the owners of the facility or machinery concerned. Apparently, even
Napocor and Mirant recognize this principle; Article 2.12 of their BOT Agreement provides that "until
the Transfer Date, [Mirant] shall, directly or indirectly, own the Power Station and all the fixtures,
fitting, machinery and equipment on the Site x x x. [Mirant] shall operate, manage, and maintain the
Power Station for the purpose of converting fuel of Napocor into electricity."

Moreover, if Napocor truly believed that it was the owner of the subject machineries, it should have
complied with Sections 202 and 206 of the LGC which obligates owners of real property to:

a. file a sworn statement declaring the true value of the real property, whether taxable or
exempt;14 and

b. file sufficient documentary evidence supporting its claim for tax exemption.15

While a real property owner’s failure to comply with Sections 202 and 206 does not necessarily
negate its tax obligation nor invalidate its legitimate claim for tax exemption, Napocor’s omission to
do so in this case can be construed as contradictory to its claim of ownership of the subject
machineries. That it assumed liability for the taxes that may be imposed on the subject machineries
similarly does not clothe it with legal title over the same. We do not believe that the phrase "person
having legal interest in the property" in Section 226 of the LGC can include an entity that assumes
another person’s tax liability by contract.
A review of the provisions of the LGC on real property taxation shows that the phrase has been
repeatedly adopted and used to define an entity:

a. in whose name the real property shall be listed, valued, and assessed;16

b. who may be summoned by the local assessor to gather information on which to base the
market value of the real property;17

c. who may protest the tax assessment before the LBAA18 and may appeal the latter’s
decision to the CBAA;19

d. who may be liable for the idle land tax,20 as well as who may be exempt from the same;21

e. who shall be notified of any proposed ordinance imposing a special levy,22 as well as who
may object the proposed ordinance;23

f. who may pay the real property tax;24

g. who is entitled to be notified of the warrant of levy and against whom it may be enforced;25

h. who may stay the public auction upon payment of the delinquent tax, penalties and
surcharge;26 and

i. who may redeem the property after it was sold at the public auction for delinquent taxes.27

For the Court to consider an entity assuming another person’s tax liability by contract as a person
having legal interest in the real property would extend to it the privileges and responsibilities
enumerated above. The framers of the LGC certainly did not contemplate that the listing, valuation,
and assessment of real property can be made in the name of such entity; nor did they intend to
make the warrant of levy enforceable against it. Insofar as the provisions of the LGC are concerned,
this entity is a party foreign to the operation of real property tax laws and could not be clothed with
any legal interest over the property apart from its assumed liability for tax. The rights and obligations
arising from the BOT Agreement between Napocor and Mirant were of no legal interest to the tax
collector – the Province of Quezon – which is charged with the performance of independent duties
under the LGC.28

Some authorities consider a person whose pecuniary interests is or may be adversely affected by
the tax assessment as one who has legal interest in the property (hence, possessed of the requisite
standing to protest it), citing Cooley’s Law on Taxation.29 The reference to this foreign material,
however, is misplaced. The tax laws of the United States deem it sufficient that a person’s pecuniary
interests are affected by the tax assessment to consider him as a person aggrieved and who may
thus avail of the judicial or administrative remedies against it. As opposed to our LGC, mere
pecuniary interest is not sufficient; our law has required legal interest in the property taxed before
any administrative or judicial remedy can be availed. The right to appeal a tax assessment is a
purely statutory right; whether a person challenging an assessment bears such a relation to the real
property being assessed as to entitle him the right to appeal is determined by the applicable statute
– in this case, our own LGC, not US federal or state tax laws.

In light of our ruling above, PIPPA’s motion to intervene and motion for reconsideration-in-
intervention is already mooted. PIPPA as an organization of independent power producers is not an
interested party insofar as this case is concerned. Even if TeaM Energy, as Mirant’s successor, is
included as one of its members, the motion to intervene and motion for reconsideration-in-
intervention can no longer be entertained, as it amounts to a protest against the tax assessment that
was filed without the complying with Section 252 of the LGC, a matter that we shall discuss below.
Most importantly, our Decision has not touched or affected at all the contractual stipulations between
Napocor and its BOT partners for the former’s assumption of the tax liabilities of the latter.

Payment under protest is required before an appeal to the LBAA can be made

Apart from Napocor’s failure to prove that it has sufficient legal interest, a further review of the
records revealed another basis for disregarding Napocor’s protest against the assessment.

The LBAA dismissed Napocor’s petition for exemption for its failure to comply with Section 252 of
the LGC30requiring payment of the assailed tax before any protest can be made. Although the CBAA
ultimately dismissed Napocor’s appeal for failure to meet the requirements for tax exemption, it
agreed with Napocor’s position that "the protest contemplated in Section 252 (a) is applicable only
when the taxpayer is questioning the reasonableness or excessiveness of an assessment. It
presupposes that the taxpayer is subject to the tax but is disputing the correctness of the amount
assessed. It does not apply where, as in this case, the legality of the assessment is put in issue on
account of the taxpayer’s claim that it is exempt from tax." The CTA en banc agreed with the CBAA’s
discussion, relying mainly on the cases of Ty v. Trampe31 and Olivarez v. Marquez.32

We disagree. The cases of Ty and Olivarez must be placed in their proper perspective.

The petitioner in Ty v. Trampe questioned before the trial court the increased real estate taxes
imposed by and being collected in Pasig City effective from the year 1994, premised on the legal
question of whether or not Presidential Decree No. 921 (PD 921) was repealed by the LGC. PD 921
required that the schedule of values of real properties in the Metropolitan Manila area shall be
prepared jointly by the city assessors in the districts created therein; while Section 212 of the LGC
stated that the schedule shall be prepared by the provincial, city or municipal assessors of the
municipalities within the Metropolitan Manila Area for the different classes of real property situated in
their respective local government units for enactment by ordinance of the Sanggunian concerned.
The private respondents assailed Ty’s act of filing a prohibition petition before the trial court
contending that Ty should have availed first the administrative remedies provided in the LGC,
particularly Sections 252 (on payment under protest before the local treasurer) and 226 (on appeals
to the LBAA).

The Court, through former Chief Justice Artemio Panganiban, declared that Ty correctly filed a
petition for prohibition before the trial court against the assailed act of the city assessor and
treasurer. The administrative protest proceedings provided in Section 252 and 226 will not apply.
The protest contemplated under Section 252 is required where there is a question as to the
reasonableness or correctness of the amount assessed. Hence, if a taxpayer disputes the
reasonableness of an increase in a real property tax assessment, he is required to "first pay the tax"
under protest. Otherwise, the city or municipal treasurer will not act on his protest. Ty however was
questioning the very authority and power of the assessor, acting solely and independently, to impose
the assessment and of the treasurer to collect the tax. These were not questions merely of amounts
of the increase in the tax but attacks on the very validity of any increase. Moreover, Ty was raising a
legal question that is properly cognizable by the trial court; no issues of fact were involved. In
enumerating the power of the LBAA, Section 229 declares that "the proceedings of the Board shall
be conducted solely for the purpose of ascertaining the facts x x x." Appeals to the LBAA (under
Section 226) are therefore fruitful only where questions of fact are involved.
Olivarez v. Marquez, on the other hand, involved a petition for certiorari, mandamus, and prohibition
questioning the assessment and levy made by the City of Parañaque. Olivarez was seeking the
annulment of his realty tax delinquency assessment. Marquez assailed Olivarez’ failure to first
exhaust administrative remedies, particularly the requirement of payment under protest. Olivarez
replied that his petition was filed to question the assessor’s authority to assess and collect realty
taxes and therefore, as held in Ty v. Trampe, the exhaustion of administrative remedies was not
required. The Court however did not agree with Olivarez’s argument. It found that there was nothing
in his petition that supported his claim regarding the assessor’s alleged lack of authority. What
Olivarez raised were the following grounds: "(1) some of the taxes being collected have already
prescribed and may no longer be collected as provided in Section 194 of the Local Government
Code of 1991; (2) some properties have been doubly taxed/assessed; (3) some properties being
taxed are no longer existent; (4) some properties are exempt from taxation as they are being used
exclusively for educational purposes; and (5) some errors are made in the assessment and
collection of taxes due on petitioners’ properties, and that respondents committed grave abuse of
discretion in making the improper, excessive and unlawful the collection of taxes against the
petitioner." The Olivarez petition filed before the trial court primarily involved the correctness of the
assessments, which is a question of fact that is not allowed in a petition for certiorari, prohibition,
and mandamus. Hence, we declared that the petition should have been brought, at the very first
instance, to the LBAA, not the trial court.

Like Olivarez, Napocor, by claiming exemption from realty taxation, is simply raising a question of
the correctness of the assessment. A claim for tax exemption, whether full or partial, does not
question the authority of local assessor to assess real property tax. This may be inferred from
Section 206 which states that:

SEC. 206. Proof of Exemption of Real Property from Taxation. - Every person by or for whom real
property is declared, who shall claim tax exemption for such property under this Title shall file with
the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of
real property sufficient documentary evidence in support of such claim including corporate charters,
title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage
deeds, and similar documents. If the required evidence is not submitted within the period herein
prescribed, the property shall be listed as taxable in the assessment roll. However, if the property
shall be proven to be tax exempt, the same shall be dropped from the assessment roll. [Emphasis
provided]

By providing that real property not declared and proved as tax-exempt shall be included in the
assessment roll, the above-quoted provision implies that the local assessor has the authority to
assess the property for realty taxes, and any subsequent claim for exemption shall be allowed only
when sufficient proof has been adduced supporting the claim. Since Napocor was simply
questioning the correctness of the assessment, it should have first complied with Section 252,
particularly the requirement of payment under protest. Napocor’s failure to prove that this
requirement has been complied with thus renders its administrative protest under Section 226 of the
LGC without any effect. No protest shall be entertained unless the taxpayer first pays the tax.

It was an ill-advised move for Napocor to directly file an appeal with the LBAA under Section 226
without first paying the tax as required under Section 252. Sections 252 and 226 provide successive
administrative remedies to a taxpayer who questions the correctness of an assessment. Section
226, in declaring that "any owner or person having legal interest in the property who is not satisfied
with the action of the provincial, city, or municipal assessor in the assessment of his property may x
x x appeal to the Board of Assessment Appeals x x x," should be read in conjunction with Section
252 (d), which states that "in the event that the protest is denied x x x, the taxpayer may avail of the
remedies as provided for in Chapter 3, Title II, Book II of the LGC [Chapter 3 refers to Assessment
Appeals, which includes Sections 226 to 231]. The "action" referred to in Section 226 (in relation to a
protest of real property tax assessment) thus refers to the local assessor’s act of denying the protest
filed pursuant to Section 252. Without the action of the local assessor, the appellate authority of the
LBAA cannot be invoked. Napocor’s action before the LBAA was thus prematurely filed.

For the foregoing reasons, we DENY the petitioner’s motion for reconsideration.

SO ORDERED.

ARTURO D. BRION
Associate Justice

G.R. No. 169234 October 2, 2013

CAMP JOHN HAY DEVELOPMENT CORPORATION, Petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, REPRESENTED BY ITS CHAIRMAN HON.
CESAR S. GUTIERREZ, ADELINA A. TABANGIN, IN HER CAPACITY AS CHAIRMAN OF THE
BOARD OF TAX (ASSESSMENT) APPEALS OF BAGUIO CITY, AND HON. ESTRELLA B.
TANO, IN HER CAPACITY AS THE CITY ASSESSOR OF THE CITY OF BAGUIO, Respondents.

DECISION

PEREZ, J.:

A claim for tax exemption, whether full or partial, does not deal with the authority of local assessor to
assess real property tax. Such claim questions the correctness of the assessment and compliance
with the Q applicable provisions of Republic Act (RA) No. 7160 or the Local Government Code
(LGC) of 1991, particularly as to requirement of payment under protest, is mandatory.

Before the Court is a Petition for Review on Certiorari seeking tore verse and set aside the 27 July
2005 Decision1of the Court of Tax Appeals(CTA) En Banc in C.T.A. E.B. No. 48 which affirmed the
Resolutions dated 23 May 2003 and 8 September 2004 issued by the Central Board of Assessment
Appeals (CBAA) in CBAA Case No. L-37 remanding the case to the Local Board of Assessment
Appeals (LBAA) of Baguio City for further proceedings.

The facts

The factual antecedents of the case as found by the CTA En Banc areas follows:

In a letter dated 21 March 2002, respondent City Assessor of Baguio City notified petitioner Camp
John Hay Development Corporation about the issuance against it of thirty-six (36) Owner’s Copy of
Assessment of Real Property (ARP), with ARP Nos. 01-07040-008887 to 01-07040-008922covering
various buildings of petitioner and two (2) parcels of land owned by the Bases Conversion
Development Authority (BCDA) in the John Hay Special Economic Zone (JHSEZ), Baguio City,
which were leased out to petitioner.

In response, petitioner questioned the assessments in a letter dated 3April 2002 for lack of legal
basis due to the City Assessor’s failure to identify the specific properties and its corresponding
assessed values. The City Assessor replied in a letter dated 11 April 2002 that the subject ARPs
(with an additional ARP on another building bringing the total number of ARPs to thirty-seven [37])
against the buildings of petitioner located within the JHSEZ were issued on the basis of the
approved building permits obtained from the City Engineer’s Office of Baguio City and pursuant to
Sections 201 to 206 of RA No. 7160 or the LGC of 1991.

Consequently, on 23 May 2002, petitioner filed with the Board of Tax Assessment Appeals (BTAA)
of Baguio City an appeal under Section 2262 of the LGC of 1991 challenging the validity and
propriety of the issuances of the City Assessor. The appeal was docketed as Tax Appeal Case No.
2002-003. Petitioner claimed that there was no legal basis for the issuance of the assessments
because it was allegedly exempted from paying taxes, national and local, including real property
taxes, pursuant to RA No. 7227, otherwise known as the Bases Conversion and Development Act of
1992.3

The Ruling of the BTAA

In a Resolution dated 12 July 2002,4 the BTAA cited Section 7,5 Rule V of the Rules of Procedure
Before the LBAA, and enjoined petitioner to first comply therewith, particularly as to the payment
under protest of the subject real property taxes before the hearing of its appeal. Subsequently, the
BTAA dismissed petitioner’s Motion for Reconsideration in the 20 September 2002 Resolution 6 for
lack of merit.

Aggrieved, petitioner elevated the case before the CBAA through a Memorandum on Appeal
docketed as CBAA Case No. L-37.

The Ruling of the CBAA

The CBAA denied petitioner’s appeal in a Resolution dated 23 May 2003,7 set aside the BTAA’s
order of deferment of hearing, and remanded the case to the LBAA of Baguio City for further
proceedings subject to a full and up-to-date payment of the realty taxes on subject properties as
assessed by the respondent City Assessor of Baguio City, either in cash or in bond.

Citing various cases it previously decided,8 the CBAA explained that the deferment of hearings by
the LBAA was merely in compliance with the mandate of the law. The governing provision in this
case is Section 231, not Section 226, of RA No. 7160 which provides that "appeal on assessments
of real property made under the provisions of this Code shall, in no case, suspend the collection of
the corresponding realty taxes on the property involved as assessed by the provincial or city
assessor, without prejudice to subsequent adjustment depending upon the final outcome of the
appeal." In addition, as to the issue raised pertaining to the propriety of the subject assessments
issued against petitioner, allegedly claimed to be a tax-exemptentity, the CBAA expressed that it has
yet to acquire jurisdiction over it since the same has not been resolved by the LBAA.

On 8 September 2004, the CBAA denied petitioner’s Motion for Reconsideration for lack of merit.9

Undaunted by the pronouncements in the abovementioned Resolutions, petitioner appealed to the

CTA En Banc by filing a Petition for Review under Section 11 of RA No. 1125, as amended by
Section 9 of RA No. 9282, on 24 November 2004, docketed as C.T.A. EB No. 48, and raised the
following issues for its consideration: (1) whether or not respondent City Assessor of the City of
Baguio has legal basis to issue against petitioner the subject assessments with serial nos. 01-
07040-008887 to 01-07040-008922for real property taxation of the buildings of the petitioner, a tax-
exemptentity, or land owned by the BCDA under lease to the petitioner; and (2)whether or not the
CBAA, in its Resolutions dated 23 May 2003 and 8September 2004, has legal basis to order the
remand of the case to the LBAA of Baguio City for further proceedings subject to a full and up-to-
date payment, in cash or bond, of the realty taxes on the subject properties as assessed by the City
Assessor of the City of Baguio.10
 The Ruling of the CTA En Banc

In the assailed Decision dated 27 July 2005,11 the CTA En Banc found that petitioner has indeed
failed to comply with Section 252 of RA No. 7160or the LGC of 1991. Hence, it dismissed the
petition and affirmed the subject Resolutions of the CBAA which remanded the case to the LBAA for
further proceedings subject to compliance with said Section, in relation to Section 7, Rule V of the
Rules of Procedure before the LBAA.

Moreover, adopting the CBAA’s position, the court a quo ruled that it could not resolve the issue on
whether petitioner is liable to pay real property tax or whether it is indeed a tax-exempt entity
considering that the LBAA has not decided the case on the merits. To do otherwise would not only
be procedurally wrong but legally wrong. It therefore concluded that before a protest may be
entertained, the tax should have been paid first without prejudice to subsequent adjustment
depending upon the final outcome of the appeal and that the tax or portion thereof paid under
protest, shall be held in trust by the treasurer concerned.

Consequently, this Petition for Review wherein petitioner on the ground of lack of legal basis seeks
to set aside the 27 July 2005 Decision, and to nullify the assessments of real property tax issued
against it by respondent City Assessor of Baguio City.12

The Issue

The Issue before the Court is whether or not respondent CTA En Banc erred in dismissing for lack of
merit the petition in C.T.A. EB No. 48, and accordingly affirmed the order of the CBAA to remand the
case to the LBAA of Baguio City for further proceedings subject to a full and up-to-date payment of
realty taxes, either in cash or in bond, on the subject properties assessed by the City Assessor of
Baguio City.

In support of the present petition, petitioner posits the following grounds: (a) Section 225 (should be
Section 252) of RA No. 7160 or the LGC of 1991 does not apply when the person assessed is a tax-
exemptentity; and (b) Under the doctrine of operative fact, petitioner is not liable for the payment of
the real property taxes subject of this petition.13

Our Ruling

The Court finds the petition unmeritorious and therefore rules against petitioner.

Section 252 of RA No. 7160, also known as the LGC of 199114, categorically provides:

SEC. 252. Payment Under Protest. – (a) No protest shall be entertained unless the taxpayer first
pays the tax. There shall be annotated on the tax receipts the words "paid under protest." The
protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city
treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who
shall decide the protest within sixty (60) days from receipt.

(b) The tax or a portion thereof paid under protest, shall beheld in trust by the treasurer
concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or
portion of the tax protested shall be refunded to the protestant, or applied as tax credit
against his existing or future tax liability.
 (d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed
in subparagraph (a), the tax payer may avail of the remedies as provided for in Chapter 3,
Title Two, Book II of this Code. (Emphasis and underlining supplied)

Relevant thereto, the remedies referred to under Chapter 3, Title Two, Book II of RA No. 7160 or the
LGC of 1991 are those provided for under Sections 226 to 231. Significant provisions pertaining to
the procedural and substantive aspects of appeal before the LBAA and CBAA, including its effect on
the payment of real property taxes, follow:

SEC. 226. Local Board of Assessment Appeals. – Any owner or person having legal interest in the
property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written notice
of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition
under oath in the form prescribed for the purpose, together with copies of the tax declarations and
such affidavits or documents submitted in support of the appeal.

SEC. 229. Action by the Local Board of Assessment Appeals. – (a)The Board shall decide the
appeal within one hundred twenty (120) days from the date of receipt of such appeal. The Board,
after hearing, shall render its decision based on substantial evidence or such relevant evidence on
record as a reasonable mind might accept as adequate to support the conclusion.

(b) In the exercise of its appellate jurisdiction, the Board shall have the powers to summon
witnesses, administer oaths, conduct ocular inspection, take depositions, and issue
subpoena and subpoena duces tecum. The proceedings of the Board shall be conducted
solely for the purpose of ascertaining the facts without necessarily adhering to technical rules
applicable in judicial proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person having
legal interest therein and the provincial or city assessor with a copy of the decision of the
Board. In case the provincial or city assessor concurs in the revision or the assessment, it
shall be his duty to notify the owner of the property or the person having legal interest therein
of such fact using the form prescribed for the purpose. The owner of the property or the
person having legal interest therein or the assessor who is not satisfied with the decision of
the Board may, within thirty (30) days after receipt of the decision of said Board, appeal to
the Central Board of Assessment Appeals, as here in provided. The decision of the Central
Board shall be final and executory.

SEC. 231. Effect of Appeal on the Payment of Real Property Tax. – Appeal on assessments of real
property made under the provisions of this Code shall, in no case, suspend the collection of the
corresponding realty taxes on the property involved as assessed by the provincial or city assessor,
without prejudice to subsequent adjustment depending upon the final outcome of the appeal.
(Emphasis supplied)

The above-quoted provisions of RA No. 7160 or the LGC of 1991,clearly sets forth the administrative
remedies available to a taxpayer or real property owner who does not agree with the assessment of
the real property tax sought to be collected.

The language of the law is clear. No interpretation is needed. The elementary rule in statutory
construction is that if a statute is clear, plain and free from ambiguity, it must be given its literal
meaning and applied without attempted interpretation. Verba legis non est recedendum. From the
words of a statute there should be no departure.15
To begin with, Section 252 emphatically directs that the taxpayer/real property owner questioning the
assessment should first pay the tax due before his protest can be entertained. As a matter of fact,
the words "paid under protest" shall be annotated on the tax receipts. Consequently, only after such
payment has been made by the taxpayer may he file a protest in writing (within thirty (30) days from
said payment of tax) to the provincial, city, or municipal treasurer, who shall decide the protest within
sixty (60)days from its receipt. In no case is the local treasurer obliged to entertain the protest unless
the tax due has been paid.

Secondly, within the period prescribed by law, any owner or person having legal interest in the
property not satisfied with the action of the provincial, city, or municipal assessor in the assessment
of his property may file an appeal with the LBAA of the province or city concerned, as provided in
Section 226 of RA No. 7160 or the LGC of 1991. Thereafter, within thirty (30) days from receipt, he
may elevate, by filing a notice of appeal, the adverse decision of the LBAA with the CBAA, which
exercises exclusive jurisdiction to hear and decide all appeals from the decisions, orders, and
resolutions of the Local Boards involving contested assessments of real properties, claims for tax
refund and/or tax credits, or overpayments of taxes.16

Significantly, in Dr. Olivares v. Mayor Marquez,17 this Court had the occasion to extensively discuss
the subject provisions of RA No. 7160 or the LGC of 1991, in relation to the impropriety of the direct
recourse before the courts on issue of the correctness of assessment of real estate taxes. The
pertinent articulations follow:

x x x A perusal of the petition before the RTC plainly shows that what is actually being assailed is the
correctness of the assessments made by the local assessor of Parañaque on petitioners’ properties.
The allegations in the said petition purportedly questioning the assessor’s authority to assess and
collect the taxes were obviously made in order to justify the filing of the petition with the RTC. In fact,
there is nothing in the said petition that supports their claim regarding the assessor’s alleged lack of
authority. What petitioners raise are the following:

(1) some of the taxes being collected have already prescribed and may no longer be
collected as provided in Section 194 of the Local Government Code of 1991; (2) some
properties have been doubly taxed/assessed; (3) some properties being taxed are no longer
existent;

(4)some properties are exempt from taxation as they are being used exclusively for
educational purposes; and (5) some errors are made in the assessment and collection of
taxes due on petitioners’ properties, and that respondents committed grave abuse of
discretion in making the "improper, excessive and unlawful the collection of taxes against the
petitioners."

Moreover, these arguments essentially involve questions of fact. Hence, the petition should have
been brought, at the very first instance, to the LBAA.

Under the doctrine of primacy of administrative remedies, an error in the assessment must be
administratively pursued to the exclusion of ordinary courts whose decisions would be void for lack
of jurisdiction. But an appeal shall not suspend the collection of the tax assessed without prejudice to
a later adjustment pending the outcome of the appeal.

Even assuming that the assessor’s authority is indeed an issue, it must be pointed out that in order
for the court a quo to resolve the petition, the issues of the correctness of the tax assessment and
collection must also necessarily be dealt with.
 xxxx

In the present case, the authority of the assessor is not being questioned. Despite petitioners’
protestations, the petition filed before the court a quo primarily involves the correctness of the
assessments, which are questions of fact, that are not allowed in a petition for certiorari, prohibition
and mandamus. The court a quo is therefore precluded from entertaining the petition, and it
appropriately dismissed the petition.18 (Emphasis and underlining supplied)

By analogy, the rationale of the mandatory compliance with the requirement of "payment under
protest" similarly provided under Section 64of the Real Property Tax Code (RPTC)19 was earlier
emphasized in Meralcov. Barlis,20wherein the Court held:

We find the petitioner’s arguments to be without merit. The trial court has no jurisdiction to entertain
a Petition for Prohibition absent petitioner’s payment under protest, of the tax assessed as required
by Sec.64 of the RPTC. Payment of the tax assessed under protest, is a condition sine qua non
before the trial court could assume jurisdiction over the petition and failure to do so, the RTC has no
jurisdiction to entertain it.

The restriction upon the power of courts to impeach tax assessment without a prior payment, under
protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation
and as such their collection cannot be curtailed by injunction or any like action; otherwise, the state
or, in this case, the local government unit, shall be crippled in dispensing the needed services to the
people, and its machinery gravely disabled.

xxxx

There is no merit in petitioner’s argument that the trial court could take cognizance of the petition as
it only questions the validity of the issuance of the warrants of garnishment on its bank deposits and
not the tax assessment. Petitioner MERALCO in filing the Petition for Prohibition before the RTC
was in truth assailing the validity of the tax assessment and collection. To resolve the petition, it
would not only be the question of validity of the warrants of garnishments that would have to be
tackled, but in addition the issues of tax assessment and collection would necessarily have to be
dealt with too. As the warrants of garnishment were issued to collect back taxes from petitioner, the
petition for prohibition would be for no other reason than to forestall the collection of back taxes on
the basis of tax assessment arguments. This, petitioner cannot do without first resorting to the
proper administrative remedies, or as previously discussed, by paying under protest the tax
assessed, to allow the court to assume jurisdiction over the petition.

xxxx

It cannot be gainsaid that petitioner should have addressed its arguments to respondent at the first
opportunity - upon receipt of the3 September 1986 notices of assessment signed by Municipal
Treasurer Norberto A. San Mateo. Thereafter, it should have availed of the proper administrative
remedies in protesting an erroneous tax assessment, i.e., to question the correctness of the
assessments before the Local Board of Assessment Appeals (LBAA), and later, invoke the appellate
jurisdiction of the Central Board of Assessment Appeals(CBAA).

Under the doctrine of primacy of administrative remedies, an error in the assessment must be
administratively pursued to the exclusion of ordinary courts whose decisions would be void for lack
of jurisdiction. But an appeal shall not suspend the collection of the tax assessed without prejudice to
a later adjustment pending the outcome of the appeal. The failure to appeal within the statutory
period shall render the assessment final and unappealable.
Petitioner having failed to exhaust the administrative remedies available to it, the assessment
attained finality and collection would be in order. (Emphasis and underscoring supplied)

From the foregoing jurisprudential pronouncements, it is clear that the requirement of "payment
under protest" is a condition sine qua non before a protest or an appeal questioning the correctness
of an assessment of real property tax may be entertained.

Moreover, a claim for exemption from payment of real property taxes does not actually question the
assessor’s authority to assess and collect such taxes, but pertains to the reasonableness or
correctness of the assessment by the local assessor, a question of fact which should be resolved, at
the very first instance, by the LBAA. This may be inferred from Section 206 of RA No. 7160 or the
LGC of 1991which states that:

SEC. 206. Proof of Exemption of Real Property from Taxation. – Every person by or for whom real
property is declared, who shall claim tax exemption for such property under this Title shall file with
the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of
real property sufficient documentary evidence in support of such claim including corporate charters,
title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage
deeds, and similar documents.

If the required evidence is not submitted within the period herein prescribed, the property shall be
listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt,
the same shall be dropped from the assessment roll. (Emphasis supplied)

In other words, by providing that real property not declared and proved as tax-exempt shall be
included in the assessment roll, the above-quoted provision implies that the local assessor has the
authority to assess the property for realty taxes, and any subsequent claim for exemption shall be
allowed only when sufficient proof has been adduced supporting the claim.21

Therefore, if the property being taxed has not been dropped from the assessment roll, taxes must be
paid under protest if the exemption from taxation is insisted upon.

In the case at bench, records reveal that when petitioner received the letter dated 21 March 2002
issued by respondent City Assessor, including copies of ARPs (with ARP Nos. 01-07040-008887 to
01-07040-008922) attached thereto, it filed its protest through a letter dated 3 April 2002seeking
clarification as to the legal basis of said assessments, without payment of the assessed real property
taxes. Afterwards, respondent City Assessor replied thereto in a letter dated 11 April 2002 which
explained the legal basis of the subject assessments and even included an additional ARP against
another real property of petitioner. Subsequently, petitioner then filed before the BTAA its appeal
questioning the validity and propriety of the subject ARPs.

Clearly from the foregoing factual backdrop, petitioner considered the11 April 2002 letter as the
"action" referred to in Section 226 which speaks of the local assessor’s act of denying the protest
filed pursuant to Section252. However, applying the above-cited jurisprudence in the present case, it
is evident that petitioner’s failure to comply with the mandatory requirement of payment under
protest in accordance with Section 252 of the LGC of 1991 was fatal to its appeal. Notwithstanding
such failure to comply therewith, the BTAA elected not to immediately dismiss the case but instead
took cognizance of petitioner’s appeal subject to the condition that payment of the real property tax
should first be made before proceeding with the hearing of its appeal, as provided for under Section
7, Rule V of the Rules of Procedure Before the LBAA. Hence, the BTAA simply recognized the
importance of the requirement of "payment under protest" before an appeal may be entertained,
pursuant to Section 252, and in relation with Section231 of the same Code as to non-suspension of
collection of the realty tax pending appeal.

Notably, in its feeble attempt to justify non-compliance with the provision of Section 252, petitioner
contends that the requirement of paying the tax under protest is not applicable when the person
being assessed is a tax-exempt entity, and thus could not be deemed a "taxpayer" within the
meaning of the law. In support thereto, petitioner alleges that it is exempted from paying taxes,
including real property taxes, since it is entitled to the tax incentives and exemptions under the
provisions of RA No. 7227 and Presidential Proclamation No. 420, Series of 1994,22 as stated in and
confirmed by the lease agreement it entered into with the BCDA.23

This Court is not persuaded.

First, Section 206 of RA No. 7160 or the LGC of 1991, as quoted earlier, categorically provides that
every person by or for whom real property is declared, who shall claim exemption from payment of
real property taxes imposed against said property, shall file with the provincial, city or municipal
assessor sufficient documentary evidence in support of such claim. Clearly, the burden of proving
exemption from local taxation is upon whom the subject real property is declared; thus, said person
shall be considered by law as the taxpayer thereof. Failure to do so, said property shall be listed as
taxable in the assessment roll.

In the present case, records show that respondent City Assessor of Baguio City notified petitioner, in
the letters dated 21 March 200224 and 11April 2002,25 about the subject ARPs covering various
buildings owned by petitioner and parcels of land (leased out to petitioner) all located within the
JHSEZ, Baguio City. The subject letters expressed that the assessments were based on the
approved building permits obtained from the City Engineer’s Office of Baguio City and pursuant to
Sections 201 to 206 of RA No. 7160 or the LGC of 1991 which pertains to whom the subject real
properties were declared.

Noticeably, these factual allegations were neither contested nor denied by petitioner. As a matter of
fact, it expressly admitted ownership of the various buildings subject of the assessment and
thereafter focused on the argument of its exemption under RA No. 7227. But petitioner did not
present any documentary evidence to establish that the subject properties being tax exempt have
already been dropped from the assessment roll, in accordance with Section 206. Consequently, the
City Assessor acted in accordance with her mandate and in the regular performance of her official
function when the subject ARPs were issued against petitioner herein, being the owner of the
buildings, and therefore considered as the person with the obligation to shoulder tax liability thereof,
if any, as contemplated by law.

It is an accepted principle in taxation that taxes are paid by the person obliged to declare the same
for taxation purposes. As discussed above, the duty to declare the true value of real property for
taxation purposes is imposed upon the owner, or administrator, or their duly authorized
representatives. They are thus considered the taxpayers. Hence, when these persons fail or refuse
to make a declaration of the true value of their real property within the prescribed period, the
provincial or city assessor shall declare the property in the name of the defaulting owner and assess
the property for taxation. In this wise, the taxpayer assumes the character of a defaulting owner, or
defaulting administrator, or defaulting authorized representative, liable to pay back taxes. For that
reason, since petitioner herein is the declared owner of the subject buildings being assessed for real
property tax, it is therefore presumed to be the person with the obligation to shoulder the burden of
paying the subject tax in the present case; and accordingly, in questioning the reasonableness or
correctness of the assessment of real property tax, petitioner is mandated by law to comply with the
requirement of payment under protest of the tax assessed, particularly Section 252 of RA No. 7160
or the LGC of 1991.

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception. The law does not look with favor on tax exemptions and the entity that would seek to be
thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.26 Thus applying the rule of strict construction of laws granting tax exemptions, and
the rule that doubts should be resolved in favor of provincial corporations, this Court holds that
petitioner is considered a taxable entity in this case.

Second, considering that petitioner is deemed a taxpayer within the meaning of law, the issue on
whether or not it is entitled to exemption from paying taxes, national and local, including real
property taxes, is a matter which would be better resolved, at the very instance, before the LBAA, for
the following grounds: (a) petitioner’s reliance on its entitlement for exemption under the provisions
of RA No. 7227 and Presidential Proclamation No. 420, was allegedly confirmed by Section
18,27 Article XVI of the Lease Agreement dated 19 October 1996 it entered with the BCDA. However,
it appears from the records that said Lease Agreement has yet to be presented nor formally offered
before any administrative or judicial body for scrutiny; (b) the subject provision of the Lease
Agreement declared a condition that in order to be allegedly exempted from the payment of taxes,
petitioner should have first paid and remitted 5% of the gross income earned by it within ninety (90)
days from the close of the calendar year through the JPDC. Unfortunately, petitioner has neither
established nor presented any evidence to show that it has indeed paid and remitted 5% of said
gross income tax; (c) the right to appeal is a privilege of statutory origin, meaning a right granted
only by the law, and not a constitutional right, natural or inherent. Therefore, it follows that petitioner
may avail of such opportunity only upon strict compliance with the procedures and rules prescribed
by the law itself, i.e. RA No. 7160 or the LGC of 1991; and (d) at any rate, petitioner’s position of
exemption is weakened by its own admission and recognition of this Court’s previous ruling that the
tax incentives granted in RA No. 7227 are exclusive only to the Subic Special Economic and Free
Port Zone; and thus, the extension of the same to the JHSEZ (as provided in the second sentence of
Section 3 of Presidential Proclamation No. 420)28 finds no support therein and therefore declared null
and void and of no legal force and effect.29 Hence, petitioner needs more than mere arguments
and/or allegations contained in its pleadings to establish and prove its exemption, making prior
proceedings before the LBAA a necessity.

With the above-enumerated reasons, it is obvious that in order for a complete determination of
petitioner’s alleged exemption from payment of real property tax under RA No. 7160 or the LGC of
1991, there are factual issues needed to be confirmed. Hence, being a question of fact, petitioner
cannot do without first resorting to the proper administrative remedies, or as previously discussed,
by paying under protest the tax assessed in compliance with Section 252 thereof.

Accordingly, the CBAA and the CTA En Banc correctly ruled that real property taxes should first be
paid before any protest thereon may be considered. It is without a doubt that such requirement of
"payment under protest" is a condition sine qua non before an appeal may be entertained. Thus,
remanding the case to the LBAA for further proceedings subject to a full and up-to-date payment,
either in cash or surety, of realty tax on the subject properties was proper.

To reiterate, the restriction upon the power of courts to impeach tax assessment without a prior
payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are the
lifeblood of the nation and as such their collection cannot be curtailed by injunction or any like action;
otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the
needed services to the people, and its machinery gravely disabled.30 The right of local government
units to collect taxes due must always be upheld to avoid severe erosion. This consideration is
consistent with the State policy to guarantee the autonomy of local governments and the objective of
RA No. 7160 or the LGC of 1991 that they enjoy genuine and meaningful local autonomy to
empower them to achieve their fullest development as self-reliant communities and make them
effective partners in the attainment of national goals.31

All told, We go back to what was at the outset stated, that is, that a claim for tax exemption, whether
full or partial, does not question the authority of local assessor to assess real property tax, but
merely raises a question of the reasonableness or correctness of such assessment, which requires
compliance with Section 252 of the LGC of 1991. Such argument which may involve a question of
fact should be resolved at the first instance by the LBAA.

The CTA En Bane was correct in dismissing the petition in C.T.A. EB No. 48, and affirming the
CBAA's position that it cannot delve on the issue of petitioner's alleged non-taxability on the ground
of exemption since the LBAA has not decided the case on the merits. This is in compliance with the
procedural steps prescribed in the law.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Tax Appeals En
Bane in C.T.A. EB No. 48 is AFFIRMED. The case is remanded to the Local Board of Assessment
Appeals of Baguio City for further proceedings. No costs.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:

G.R. No. 180884 June 27, 2008

EMERLINDA S. TALENTO, in her capacity as the Provincial Treasurer of the Province of

Bataan, petitioner,
vs.
HON. REMIGIO M. ESCALADA, JR., Presiding Judge of the Regional Trial Court of Bataan, Branch
3, and PETRON CORPORATION, respondents.

DECISION

YNARES-SANTIAGO, J.:

The instant petition for certiorari under Rule 65 of the Rules of Court assails the November 5, 2007
Order1 of the Regional Trial Court of Bataan, Branch 3, in Civil Case No. 8801, granting the petition
for the issuance of a writ of preliminary injunction filed by private respondent Petron Corporation
(Petron) thereby enjoining petitioner Emerlinda S. Talento, Provincial Treasurer of Bataan, and her
representatives from proceeding with the public auction of Petron's machineries and pieces of
equipment during the pendency of the latter's appeal from the revised assessment of its properties.

The facts of the case are as follows:

On June 18, 2007, Petron received from the Provincial Assessor's Office of Bataan a notice of
revised assessment over its machineries and pieces of equipment in Lamao, Limay, Bataan. Petron
was given a period of 60 days within which to file an appeal with the Local Board of Assessment
Appeals (LBAA).2 Based on said revised assessment, petitioner Provincial Treasurer of Bataan
issued a notice informing Petron that as of June 30, 2007, its total liability is
P1,731,025,403.06,3 representing deficiency real property tax due from 1994 up to the first and
second quarters of 2007.

On August 17, 2007, Petron filed a petition4 with the LBAA (docketed as LBAA Case No. 2007-01)
contesting the revised assessment on the grounds that the subject assessment pertained to
properties that have been previously declared; and that the assessment covered periods of more
than 10 years which is not allowed under the Local Government Code (LGC). According to Petron,
the possible valid assessment pursuant to Section 222 of the LGC could only be for the years 1997
to 2006. Petron further contended that the fair market value or replacement cost used by petitioner
included items which should be properly excluded; that prompt payment of discounts were not
considered in determining the fair market value; and that the subject assessment should take effect
a year after or on January 1, 2008. In the same petition, Petron sought the approval of a surety bond
in the amount of P1,286,057,899.54.5

On August 22, 2007, Petron received from petitioner a final notice of delinquent real property tax
with a warning that the subject properties would be levied and auctioned should Petron fail to settle
the revised assessment due.6

Consequently, Petron sent a letter7 to petitioner stating that in view of the pendency of its
appeal8 with the LBAA, any action by the Treasurer's Office on the subject properties would be
premature. However, petitioner replied that only Petron's payment under protest shall bar the
collection of the realty taxes due,9 pursuant to Sections 231 and 252 of the LGC.

With the issuance of a Warrant of Levy10 against its machineries and pieces of equipment, Petron
filed on September 24, 2007, an urgent motion to lift the final notice of delinquent real property tax
and warrant of levy with the LBAA. It argued that the issuance of the notice and warrant is premature
because an appeal has been filed with the LBAA, where it posted a surety bond in the amount of
P1,286,057,899.54.11

On October 3, 2007, Petron received a notice of sale of its properties scheduled on October 17,
2007.12Consequently, on October 8, 2007, Petron withdrew its motion to lift the final notice of
delinquent real property tax and warrant of levy with the LBAA.13 On even date, Petron filed with the
Regional Trial Court of Bataan the instant case (docketed as Civil Case No. 8801) for prohibition
with prayer for the issuance of a temporary restraining order (TRO) and preliminary injunction.14

On October 15, 2007, the trial court issued a TRO for 20 days enjoining petitioner from proceeding
with the public auction of Petron's properties.15 Petitioner thereafter filed an urgent motion for the
immediate dissolution of the TRO, followed by a motion to dismiss Petron's petition for prohibition.

On November 5, 2007, the trial court issued the assailed Order granting Petron's petition for
issuance of writ of preliminary injunction, subject to Petron's posting of a P444,967,503.52 bond in
addition to its previously posted surety bond of P1,286,057,899.54, to complete the total amount
equivalent to the revised assessment of P1,731,025,403.06. The trial court held that in scheduling
the sale of the properties despite the pendency of Petron's appeal and posting of the surety bond
with the LBAA, petitioner deprived Petron of the right to appeal. The dispositive portion thereof,
reads:

WHEREFORE, the writ of preliminary injunction prayed for by plaintiff is hereby GRANTED
and ISSUED, enjoining defendant Treasurer, her agents, representatives, or anybody acting
in her behalf from proceeding with the scheduled public auction of plaintiff's real properties,
 or any disposition thereof, pending the determination of the merits of the main action, to be
effective upon posting by plaintiff to the Court of an injunction bond in the amount of Four
Hundred Forty Four Million Nine Hundred Sixty Seven Thousand Five Hundred Three and
52/100 Pesos (P444,967,503.52) and the approval thereof by the Court.

Defendant's Urgent Motion for the Immediate Dissolution of the Temporary Restraining
Order dated October 23, 2007 is hereby DENIED.

SO ORDERED.16

From the said Order of the trial court, petitioner went directly to this Court via the instant petition for
certiorari under Rule 65 of the Rules of Court.

The question posed in this petition, i.e., whether the collection of taxes may be suspended by reason
of the filing of an appeal and posting of a surety bond, is undoubtedly a pure question of law. Section
2(c) of Rule 41 of the Rules of Court provides:

SEC. 2. Modes of Appeal. -

(c) Appeal by certiorari. - In all cases when only questions of law are raised or involved, the
appeal shall be to the Supreme Court by petition for review on certiorari under Rule
45. (Emphasis supplied)

Thus, petitioner resorted to the erroneous remedy when she filed a petition for certiorari under Rule
65, when the proper mode should have been a petition for review on certiorari under Rule 45.
Moreover, under Section 2, Rule 45 of the same Rules, the period to file a petition for review is 15
days from notice of the order appealed from. In the instant case, petitioner received the questioned
order of the trial court on November 6, 2007, hence, she had only up to November 21, 2007 to file
the petition. However, the same was filed only on January 4, 2008, or 43 days late. Consequently,
petitioner's failure to file an appeal within the reglementary period rendered the order of the trial court
final and executory.

The perfection of an appeal in the manner and within the period prescribed by law is mandatory.
Failure to conform to the rules regarding appeal will render the judgment final and executory and
beyond the power of the Court's review. Jurisprudence mandates that when a decision becomes
final and executory, it becomes valid and binding upon the parties and their successors in interest.
Such decision or order can no longer be disturbed or reopened no matter how erroneous it may
have been.17

Petitioner's resort to a petition under Rule 65 is obviously a play to make up for the loss of the right
to file an appealvia a petition under Rule 45. However, a special civil action under Rule 65 can not
cure petitioner's failure to timely file a petition for review on certiorari under Rule 45 of the Rules of
Court. Rule 65 is an independent action that cannot be availed of as a substitute for the lost remedy
of an ordinary appeal, including that under Rule 45, especially if such loss or lapse was occasioned
by one's own neglect or error in the choice of remedies.18

Moreover, even if we assume that a petition under Rule 65 is the proper remedy, the petition is still
dismissible.

We note that no motion for reconsideration of the November 5, 2007 order of the trial court was filed
prior to the filing of the instant petition. The settled rule is that a motion for reconsideration is a sine
qua non condition for the filing of a petition for certiorari. The purpose is to grant the public
respondent an opportunity to correct any actual or perceived error attributed to it by the re-
examination of the legal and factual circumstances of the case. Petitioner's failure to file a motion for
reconsideration deprived the trial court of the opportunity to rectify an error unwittingly committed or
to vindicate itself of an act unfairly imputed. Besides, a motion for reconsideration under the present
circumstances is the plain, speedy and adequate remedy to the adverse judgment of the trial court.19

Petitioner also blatantly disregarded the rule on hierarchy of courts. Although the Supreme Court,
Regional Trial Courts, and the Court of Appeals have concurrent jurisdiction to issue writs of
certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence
does not give the petitioner unrestricted freedom of choice of court forum. Recourse should have
been made first with the Court of Appeals and not directly to this Court.20

True, litigation is not a game of technicalities. It is equally true, however, that every case must be
presented in accordance with the prescribed procedure to ensure an orderly and speedy
administration of justice.21 The failure therefore of petitioner to comply with the settled procedural
rules justifies the dismissal of the present petition.

Finally, we find that the trial court correctly granted respondent's petition for issuance of a writ of
preliminary injunction. Section 3, Rule 58, of the Rules of Court, provides:

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be

granted by the court when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the acts complained of, or in the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or

(c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

The requisites for the issuance of a writ of preliminary injunction are: (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.22

The urgency and paramount necessity for the issuance of a writ of injunction becomes relevant in
the instant case considering that what is being enjoined is the sale by public auction of the properties
of Petron amounting to at least P1.7 billion and which properties are vital to its business operations.
If at all, the repercussions and far-reaching implications of the sale of these properties on the
operations of Petron merit the issuance of a writ of preliminary injunction in its favor.

We are not unaware of the doctrine that taxes are the lifeblood of the government, without which it
can not properly perform its functions; and that appeal shall not suspend the collection of realty
taxes. However, there is an exception to the foregoing rule, i.e., where the taxpayer has shown a
clear and unmistakable right to refuse or to hold in abeyance the payment of taxes. In the instant
case, we note that respondent contested the revised assessment on the following grounds: that the
subject assessment pertained to properties that have been previously declared; that the assessment
covered periods of more than 10 years which is not allowed under the LGC; that the fair market
value or replacement cost used by petitioner included items which should be properly excluded; that
prompt payment of discounts were not considered in determining the fair market value; and that the
subject assessment should take effect a year after or on January 1, 2008. To our mind, the
resolution of these issues would have a direct bearing on the assessment made by petitioner.
Hence, it is necessary that the issues must first be passed upon before the properties of respondent
is sold in public auction.

In addition to the fact that the issues raised by the respondent would have a direct impact on the
validity of the assessment made by the petitioner, we also note that respondent has posted a surety
bond equivalent to the amount of the assessment due. The Rules of Procedure of the LBAA,
particularly Section 7, Rule V thereof, provides:

Section 7. Effect of Appeal on Collection of Taxes. - An appeal shall not suspend the
collection of the corresponding realty taxes on the real property subject of the appeal as
assessed by the Provincial, City or Municipal Assessor, without prejudice to the subsequent
adjustment depending upon the outcome of the appeal. An appeal may be entertained but
the hearing thereof shall be deferred until the corresponding taxes due on the real property
subject of the appeal shall have been paid under protest or the petitioner shall have given a
surety bond, subject to the following conditions:

(1) the amount of the bond must not be less than the total realty taxes and penalties due as
assessed by the assessor nor more than double said amount;

(2) the bond must be accompanied by a certification from the Insurance Commissioner (a)
that the surety is duly authorized to issue such bond; (a) that the surety bond is approved by
and registered with said Commission; and (c) that the amount covered by the surety bond is
within the writing capacity of the surety company; and

(3) the amount of the bond in excess of the surety company's writing capacity, if any, must
be covered by Reinsurance Binder, in which case, a certification to this effect must likewise
accompany the surety bond.

Corollarily, Section 11 of Republic Act No. 9282,23 which amended Republic Act No. 1125 (The Law
Creating the Court of Tax Appeals) provides:

Section 11. Who may Appeal; Mode of Appeal; Effect of Appeal; -

xxxx

No appeal taken to the Court of Appeals from the Collector of Internal Revenue x x x shall
suspend the payment, levy, distraint, and/or sale of any property for the satisfaction of his tax
liability as provided by existing law. Provided, however, That when in the opinion of the
Court the collection by the aforementioned government agencies may jeopardize the interest
of the Government and/or the taxpayer the Court at any stage of the processing may
suspend the collection and require the taxpayer either to deposit the amount claimed or to
file a surety bond for not more than double the amount with the Court.

WHEREFORE, in view of all the foregoing, the instant petition is DISMISSED.

SO ORDERED.
 CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

MINITA V. CHICO-NAZARIO *CONCHITA CARPIO MORALES

Associate Justice Associate Justice

RUBEN T. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO
Chief Justice

G.R. No. 180200 November 25, 2013

DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner,

vs.
JESSIE E. CANTOS, Respondent.

DECISION

DEL CASTILLO, J.:

"It is of the utmost importance x x x that the modes adopted to enforce the taxes levied should be
interfered with as little as possible. Any delay in the proceedings of the officers, upon whom the duty
is devolved of collecting the taxes, may derange the operations of government, and thereby cause
serious detriment to the public."1

This Petition for Review on Certiorari2 assails the July 24, 2007 Decision3 of the Court of Appeals
(CA) in CA-G.R. CR No. 29009 which affirmed the July 7, 2003 Decision4 of the Regional Trial Court
(RTC), Branch XI, Balayan, Batangas in Civil Case No. 4051 dismissing petitioner Digital
Telecommunications, Philippines, Inc.’s (petitioner) Petition for Indirect Contempt/Prohibition against
respondent Jessie E. Cantos (respondent) as Provincial Treasurer of Batangas. Also assailed is the
October 11, 2007 CA Resolution5 denying petitioner’s Motion for Reconsideration.

Factual Antecedents

By virtue of Republic Act (RA) No. 7678,6 petitioner was granted a legislative franchise to install,
operate and maintain telecommunications systems throughout the Philippines on February 17, 1994.

Upon seeking the renewal of its Mayor’s Permit to operate and provide telecommunications service
in Balayan, Batangas, petitioner was informed by then Mayor Benjamin E. Martinez, Jr. that its
business operation would be restrained should it fail to pay the assessed real property taxes on or
before October 5, 1998. And as petitioner failed to pay, the Chief of the Permit and License Division
of Balayan, Batangas, Mr. Francisco P. Martinez, issued on October 6, 1998 a Cease and Desist
Order enjoining petitioner from further operating its business.

Petitioner thus promptly filed a case for Annulment of the Cease and Desist Order before the RTC of
Balayan, Batangas against the Mayor and the Chief of the Permit and License Division. The case
was docketed as Civil Case No. 3514 and raffled to Branch IX of said court.

In a Decision7 dated July 15, 1999, Branch IX ruled in favor of petitioner and declared that the
issuance of the Cease and Desist Order was without legal basis. It held that the enjoinment of
petitioner’s business operation is not one of the remedies available to enforce collection of real
property taxes under existing laws. The RTC also ruled that petitioner is only liable to pay real
property taxes on properties not used in connection with the operation of its franchise. In arriving at
such conclusion, the RTC relied on Section 5 of RA 7678, which provides that:

Sec. 5. Tax Provisions. - The grantee shall be liable to pay the same taxes on its real estate,
buildings, and personal property exclusive of this franchise as other persons or corporations are now
or hereafter may be required by law to pay. In addition thereto, the grantee shall pay to the Bureau
of Internal Revenue each year, within thirty (30) days after the audit and approval of the accounts, a
franchise tax as may be prescribed by law of all gross receipts of the telephone or other
telecommunications businesses transacted under this franchise by the grantee; provided, that the
grantee shall continue to be liable for income taxes payable under Title II of the National Internal
Revenue Code pursuant to Section 2 of Executive Order No. 72 unless the latter enactment is
amended or repealed, in which case the amendment or repeal shall be applicable thereto.

The grantee shall file the return with and pay the tax due thereon to the Commissioner of Internal
Revenue or his duly authorized representative in accordance with the National Internal Revenue
Code and the return shall be subject to audit by the Bureau of Internal Revenue. (Boldfacing and
underscoring supplied)
and construed the phrase "exclusive of this franchise" in the first sentence as limiting petitioner’s
exemption from paying real property tax only to properties used in furtherance of its legislative
franchise to provide telecommunications services.

The dispositive portion of Branch IX’s Decision reads:

WHEREFORE, the Cease and Desist Order dated October 6, 1998 is hereby declared null and void
for lack of legal basis. The Court further declares that real properties of plaintiff [Digital]
Telecommunications Philippines, Inc. (DIGITEL) which are used in the operation of its franchise are
exempt from the payment of real property taxes, but those not used in connection thereto are subject
to aforesaid taxes.

SO ORDERED.8

The then Mayor attempted to set aside the above Decision by filing a Petition for Certiorari before
the CA. But his efforts were in vain as the CA outrightly dismissed the Petition.9 The dismissal
became final and executory as shown in an Entry of Judgment dated February 2, 2000.10

In June 2002, respondent, in his capacity as Provincial Treasurer of the Province of Batangas,
issued seven Warrants of Levy11 certifying that several real properties of petitioner situated in the
Municipalities of Ibaan, San Juan, Sto. Tomas, Cuenca, Nasugbu, Balayan, and Lemery, all in the
Province of Batangas, are delinquent in the payment of real property taxes. Hence, the properties
would be advertised and sold at public auction within 30 days from petitioner’s receipt of the
warrants.

On July 1, 2002, petitioner wrote respondent to request the lifting of the Warrants of Levy and to
refrain from proceeding with the public sale of its property located in Balayan, Batangas.12 It invoked
the final Decision in Civil Case No. 3514 decreeing petitioner’s exemption from the payment of real
property tax which it claimed to be binding upon respondent. But since the warrants remained
unlifted, petitioner filed with the RTC a Petition for Indirect Contempt and Prohibition with prayer for
the issuance of a Writ of Preliminary Injunction and/or Temporary Restraining Order (TRO)13 on July
5, 2002. The case was docketed as Civil Case No. 4051.

Proceedings before the Regional Trial Court

For his defense, respondent averred that he cannot be held liable for contempt or for having
disobeyed the Decision in Civil Case No. 3514 since the same relates to an action in personam and,
therefore, binds only the parties impleaded therein and their successors in interest.14 He also
asserted that petitioner’s claim for tax exemption could not be collaterally presented and resolved in
a contempt proceeding and that petitioner should have resorted instead to the remedies provided
under the Local Government Code (LGC) in order to prevent the public sale of its delinquent
properties.

On July 25, 2002, the RTC granted15 petitioner’s prayer for TRO. Respondent, however, manifested
that when said TRO was served upon him, he had already effected the public auction of petitioner’s
real properties.16 Thus, petitioner filed a Very Urgent Manifestation and Motion17 to recall and nullify
the auction sale and to order respondent and his counsel to explain why they should not be held in
contempt for their blatant defiance of the TRO. It also thereafter asserted that respondent is bound
by the final Decision rendered in Civil Case No. 3514 under the principle of res judicata.18 It
maintained that respondent has a shared interest with the defendants in Civil Case No. 3514 in that
they are all interested in the levy, imposition and collection of real property tax and that the Province
of Batangas, including respondent, is estopped from denying privity because of the Province’s active
participation in both proceedings by virtue of the representation of the same counsel. Petitioner
likewise contended that the declaration in Civil Case No. 3514 that it is exempt from real property tax
for properties used in the operation of its franchise is considered in rem and binds the property itself.

On August 14, 2002, the RTC issued an Order19 denying petitioner’s prayer for the issuance of a Writ
of Preliminary Injunction. It held that the issuance of the writ prayed for had already become moot
and academic since the public auction sale sought to be enjoined was already consummated. It
further noted that the writ as a provisional remedy is unavailing to petitioner’s case as it should have
availed of the remedy provided under Section 260 of the LGC in order to stop the scheduled auction
sale, that is, to pay the delinquent tax and interest due thereon under protest.

Petitioner filed a Joint Motion for Reconsideration and Motion to Declare Null and Void the Sale
Conducted on July 25, 200220 which was, however, denied in an Order21 dated September 3, 2002.
When petitioner elevated the denial to the CA via a Petition for Certiorari,22 the same was dismissed
in a Resolution23 dated November 18, 2002.

Meanwhile, acting on petitioner’s Motion for Judgment on the Pleadings,24 the RTC rendered its
Decision25 dated July 7, 2003 dismissing petitioner’s Petition for Indirect Contempt and Prohibition
against respondent (Civil Case No. 4051). The RTC ruled that since respondent was not a party in
Civil Case No. 3514, he had no duty to render obedience to the Decision therein. Furthermore, there
being no identity of causes of action between Civil Case No. 3514 and Civil Case No. 4051, the
former being an action in personam, the Decision in said case binds only the parties impleaded
therein and their successors in interest, which do not include the respondent. The said court refused
to rule on petitioner’s claim for exemption from payment of realty taxes ratiocinating that any case
pertaining thereto should be filed directly with the local government unit concerned.

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, the instant petition is dismissed, with costs against the
petitioner.

IT IS SO ORDERED.26

As petitioner’s Motion for Reconsideration27 was denied by the RTC in a Resolution28 dated
September 17, 2004, it appealed to the CA.29

Proceedings before the Court of Appeals

In a Decision30 dated July 24, 2007, the CA found no merit in the appeal. First, it noted that the
dismissal of the case for indirect contempt by the RTC amounted to an acquittal from which an
appeal is not allowed. In any case, respondent’s act of issuing the warrants of levy did not constitute
indirect contempt in Civil Case No. 3514 since the final Decision issued in said case was not
directed against him but to the Mayor and the Chief of the Permit and License Division of Balayan,
Batangas. The CA also concurred with the trial court’s ruling that petitioner’s claim for tax exemption
could not be presented and resolved in an indirect contempt case and opined that the correct
remedy is for petitioner to file an independent action for annulment of sale against the Province of
Batangas and there invoke its exemption from real property taxes.

The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the assailed Decision dated July 7, 2003 and the Resolution
dated September 17, 2004, rendered by the Regional Trial Court, Branch XI, Balayan, Batangas in
Civil Case No. 4051 are AFFIRMED.

SO ORDERED.31

Petitioner’s Motion for Reconsideration32 was denied by the CA in a Resolution33 dated October 11,
2007.

Issues

Petitioner, thence, filed this Petition on the following grounds:

(a) The Honorable Court of Appeals erred in ruling that Civil Case No. 4051 is simply a case for
indirect contempt so much [so] that its dismissal by the lower court would amount to acquittal from
which an appeal would not lie;

(b) The Honorable Court of Appeals erred in ruling that respondent, not being a party to Civil Case
No. 3514, cannot be held in contempt for refusing to abide by the decision there[in];

(c) The Honorable Court of Appeals erred in ruling that the claim of Digitel for real property tax
exemption cannot be presented and resolved in the indirect contempt case; and

(d) The Honorable Court of Appeals erred in ruling that the "proper remedy is for Digitel to file an
independent action for annulment of sale against the Province of Batangas, invoking its exemption
from payment of real property taxes.34

Petitioner takes exception to the CA’s ruling that an appeal will not lie since the RTC Decision
essentially amounts to respondent’s acquittal. It posits that the CA can still take cognizance of the
appeal since the same is also a Petition for Prohibition. It is well within the authority of the said court
to rule on the claim for tax exemption like in the case of The City Government of Quezon City v.
Bayan Telecommunications, Inc.35 wherein the claim for realty tax exemption of another
telecommunications company, Bayantel, was resolved through a Petition for Prohibition. Petitioner
likewise insists that respondent cannot defy the final ruling in Civil Case No. 3514 and also the
pronouncement of this Court in Digital Telecommunications Philippines, Inc. v. Province of
Pangasinan36 that petitioner is exempted from paying real property tax. Also, in consonance with said
rulings, the sale by public auction of petitioner’s properties is void ab initio, the same having been
made under a mistaken premise that petitioner’s properties are not exempt from realty taxes. Thus,
an independent action to annul the sale of the properties, contrary to the CA’s intimation, is not the
proper remedy. Petitioner therefore prays for the nullification and setting aside of the auction sale
conducted by respondent against its real properties.

Our Ruling

The Petition has no merit.

Respondent is not guilty of indirect contempt.

At the outset, the Court shall address the issue on double jeopardy as discussed by petitioner in its
Memorandum.
In his Comment, respondent reiterated the CA’s ruling that the RTC Decision amounts to an
acquittal, hence, an appeal does not lie. Arguing against it, petitioner contends that the rule on
double jeopardy will not bar it from pursuing its appeal because this is not a criminal case and
respondent is not tried as an accused.

The Court is not persuaded. Indeed, contempt is not a criminal offense.37 However, a charge for
contempt of court partakes of the nature of a criminal action.38 Rules that govern criminal
prosecutions strictly apply to a prosecution for contempt.39 In fact, Section 11 of Rule 7140 of the
Rules of Court provides that the appeal in indirect contempt proceedings may be taken as in criminal
cases. This Court has held that an alleged contemner should be accorded the same rights as that of
an accused.41 Thus, the dismissal of the indirect contempt charge against respondent amounts to an
acquittal, which effectively bars a second prosecution.42

Be that as it may, respondent is not guilty of indirect contempt. "Contempt of court is defined as a
disobedience to the court by acting in opposition to its authority, justice, and dignity. It signifies not
only a willful disregard or disobedience of the court’s order, but such conduct which tends to bring
the authority of the court and the administration of law into disrepute or, in some manner, to impede
the due administration of justice. It is a defiance of the authority, justice, or dignity of the court which
tends to bring the authority and administration of the law into disrespect or to interfere with or
prejudice party-litigants or their witnesses during litigation."43

In this case, the acts of respondent in issuing the Warrants of Levy and in effecting the public
auction sale of petitioner’s real properties, were neither intended to undermine the authority of the
court nor resulted to disobedience to the lawful orders of Branch IX. He merely performed a
ministerial function which he is bound to perform under Sections 176 and 177 of RA 7160,44 viz:

Section 176. Levy on Real Property. - After the expiration of the time required to pay the delinquent
tax, fee, or charge, real property may be levied on before, simultaneously, or after the distraint of
personal property belonging to the delinquent taxpayer. To this end, the provincial, city or municipal
treasurer, as the case may be, shall prepare a duly authenticated certificate showing the name of the
taxpayer and the amount of the tax, fee, or charge, and penalty due from him. Said certificate shall
operate with the force of a legal execution throughout the Philippines. Levy shall be effected by
writing upon said certificate the description of the property upon which levy is made. At the same
time, written notice of the levy shall be mailed to or served upon the assessor and the Register of
Deeds of the province or city where the property is located who shall annotate the levy on the tax
declaration and certificate of title of the property, respectively, and the delinquent taxpayer or, if he
be absent from the Philippines, to his agent or the manager of the business in respect to which the
liability arose, or if there be none, to the occupant of the property in question.

In case the levy on real property is not issued before or simultaneously with the warrant of distraint
on personal property, and the personal property of the taxpayer is not sufficient to satisfy his
delinquency, the provincial, city or municipal treasurer, as the case may be, shall within thirty (30)
days after execution of the distraint, proceed with the levy on the taxpayer's real property. .

A report on any levy shall, within ten (10) days after receipt of the warrant, be submitted by the
levying officer to the sanggunian concerned.

Section 177. Penalty for Failure to Issue and Execute Warrant. - Without prejudice to criminal
prosecution under the Revised Penal Code and other applicable laws, any local treasurer who fails
to issue or execute the warrant of distraint or levy after the expiration of the time prescribed, or who
is found guilty of abusing the exercise thereof by competent authority shall be automatically
dismissed from the service after due notice and hearing.
Noteworthy at this point is that there is nothing in the records which would show that petitioner
availed of the tax exemption or submitted the requirements to establish that it is exempted from
paying real property taxes. Section 206 of RA 7160 outlines the requirements for real property tax
exemption, viz.:

Sec. 206. Proof of Exemption of Real Property from Taxation. - Every person by or for whom real
property is declared, who shall claim tax exemption for such property under this Title shall file with
the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of
real property sufficient documentary evidence in support of such claim including corporate charters,
title of ownership, articles of incorporation, by-laws, contracts, affidavits, certifications and mortgage
deeds, and similar documents.

If the required evidence is not submitted within the period herein prescribed, the property shall be
listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt,
the same shall be dropped from the assessment roll.

Neither did petitioner avail of the remedy of paying the assessed real property tax under protest as
prescribed in Section 25245 of RA 7160. Suffice it to say that the availment of these remedies could
have prevented respondent’s issuance of the Warrants of Levy and the conduct of the subsequent
public auction sale of petitioner’s properties. Due to petitioner’s non-availment of these remedies,
respondent therefore remained duty bound to perform such acts, otherwise, he may be subjected to
the penalties prescribed for non-performance of his ministerial duties as provincial treasurer.

Respondent is not bound by the Decision in Civil Case No. 3514.

Petitioner avers that respondent blatantly defied a final and binding Decision rendered in Civil Case
No. 3514 declaring it exempt from paying taxes on its real properties. It argues that there is a shared
identity of interest between the defendants in Civil Case No. 3514 and respondent. Therefore,
respondent is barred by the Decision in the said case under the principle of res judicata.

The contention is specious. "Res judicata means ‘a matter adjudged; a thing judicially acted upon or
decided; a thing or matter settled by judgment.’"46 For res judicata to apply there must among others
be, between the first and the second actions, identity of the parties, identity of subject matter, and
identity of causes of action.47 Here, there is no identity of parties between Civil Case No. 3514 and
the instant case. "Identity of parties exists ‘where the parties in both actions are the same, or there is
privity between them, or they are successors-in-interest by title subsequent to the commencement of
the action, litigating for the same thing and under the same title and in the same capacity.’"48 In Civil
Case No. 3514, the action was directed against Benjamin E. Martinez, Jr. and Francisco P. Martinez
in their capacities as Mayor and Chief of the Permit and License Division of the Municipality of
Balayan, Batangas, respectively. On the other hand, respondent, in the instant case, is being sued in
his capacity as Provincial Treasurer of the Province of Batangas. While the defendants in both cases
similarly sought to enforce the tax obligation of petitioner, they were sued under different capacities.
Moreover, there is no identity in the causes of action between the two cases. In Civil Case No. 3514,
the propriety of the municipal officials’ closure/stoppage of petitioner’s business operation in
Balayan, Batangas was the one in question while what is involved in this case is respondent’s act of
issuing Warrants of Levy and proceeding with the auction sale of the real properties of petitioner.
Clearly, the principle of res judicata does not apply. The RTC and the CA are therefore correct in
ruling that respondent, not being a party thereto, is not bound by the Decision rendered in Civil Case
No. 3514.

Petitioner’s reliance on the rulings in Civil Case No. 3514 and Digital Telecommunications
Philippines, Inc. v. Province of Pangasinan is misplaced.
In support of its prayer to annul the auction sale of its real properties, petitioner heavily relies on the
Decision rendered in Civil Case No. 3514 declaring that it is exempt from paying real property tax. In
addition, it invokes Digital Telecommunications Philippines, Inc. v. Province of Pangasinan49 wherein
it was ruled that petitioner’s real properties located within the territorial jurisdiction of Pangasinan
that are actually, directly and exclusively used in its franchise are exempt from realty tax.

As in Civil Case No. 3514, this Court’s Third Division in Digital Telecommunications Philippines, Inc.
v. Province of Pangasinan50 has interpreted the phrase "exclusive of this franchise" in the first
sentence of Section 5 of RA 7678 as limiting petitioner’s exemption from realty tax to real properties
used in the pursuit of its legislative franchise. It was then held that RA 7678 exempted petitioner’s
1âwphi 1

properties that are actually, directly, and exclusively used in the conduct and operation of its
franchise from real property tax.

But this ruling has already been abandoned.

In the later case of Digital Telecommunications Philippines, Inc. v. City Government of

Batangas,51 the Court en banc speaking thru Senior Associate Justice Antonio T. Carpio pronounced:

Nowhere in the language of the first sentence of Section 5 of RA 7678 does it expressly or even
impliedly provide that petitioner’s real properties that are actually, directly and exclusively used in its
telecommunications business are exempt from payment of realty tax. On the contrary the first
sentence of Section 5 specifically states that the petitioner, as the franchisee shall pay the ‘same
taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons
or corporations are now or hereafter may be required by law to pay.’

The heading of Section 5 is ‘Tax Provisions,’ not Tax Exemptions. To reiterate, the phrase
‘exemption from real estate tax’ or other words conveying exemption from realty tax do not appear in
the first sentence of Section 5. The phrase ‘exclusive of this franchise’ in the first sentence of
Section 5 merely qualifies the phrase personal property to exclude petitioner’s legislative franchise,
which is an intangible personal property. Petitioner’s franchise is subject to tax in the second
sentence of Section 5 which imposes the ‘franchise tax.’ Thus, there is no grant of tax exemption in
the first sentence of Section 5.

The interpretation of the phrase exclusive of this franchise in the Bayantel and Digitel cases goes
against the basic principle in construing tax exemptions. In PLDT v. City of Davao the Court held that
‘tax exemptions should be granted only by clear and unequivocal provision of law on the basis of
language too plain to be mistaken. They cannot be extended by mere implication or inference.’

Tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a
specific provision of law conferring on the taxpayer in clear and plain terms, exemption from a
common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer.52

As things now stand, petitioner s real properties, whether used in the furtherance of its franchise or
not, are subject to real property tax. Hence, its reliance on the rulings in Civil Case No. 3514 and
Digital Telecommunications Philippines Inc. v. Province of Pangasinan53 becomes unavailing.

WHEREFORE, the Petition is DENIED. The assailed Decision dated July 24, 2007 and the
Resolution dated October 11, 2007 of the Court of Appeals in CA-GR. CR No. 29009 are
AFFIRMED.

SO ORDERED.
MARIANO C. DEL CASTILLO

G.R. No. 171033 August 3, 2010

CITY MAYOR, CITY TREASURER, CITY ASSESSOR, ALL OF QUEZON CITY, and ALVIN
EMERSON S. YU,Petitioners,
vs.
RIZAL COMMERCIAL BANKING CORPORATION, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated December 6, 2005, of the
Regional Trial Court (RTC), National Capital Judicial Region, Branch 101, Quezon City, in SP. Civil
Action Q-04-53522 for Mandamus with Prayer for Issuance of a Temporary Restraining Order and a
Writ of Preliminary Injunction.

The procedural and factual antecedents are as follows:

The facts are undisputed. The spouses Roberto and Monette Naval obtained a loan from respondent
Rizal Commercial Banking Corporation, secured by a real estate mortgage of properties covered by
Transfer Certificate of Title (TCT) Nos. N-167986, N-167987, and N-167988. In 1998, the real estate
mortgage was later foreclosed and the properties were sold at public auction with respondent as the
highest bidder. The corresponding Certificates of Sale were issued in favor of respondent on August
4, 1998. However, the certificates of sale were allegedly registered only on February 10, 2004.

Meanwhile, on May 30, 2003, an auction sale of tax delinquent properties was conducted by the City
Treasurer of Quezon City. Included in the properties that were auctioned were two (2) townhouse
units covered by TCT Nos. N-167986 and N-167987 and the parcel of land covered by TCT No. N-
167988. For these delinquent properties, Alvin Emerson S. Yu was adjudged as the highest bidder.
Upon payment of the tax delinquencies, he was issued the corresponding Certificate of Sale of
Delinquent Property.

On February 10, 2004, the Certificate of Sale of Delinquent Property was registered with the Office
of the Register of Deeds of Quezon City.

On June 10, 2004, respondent tendered payment for all of the assessed tax delinquencies, interest,
and other costs of the subject properties with the Office of the City Treasurer, Quezon City.
However, the Office of the City Treasurer refused to accept said tender of payment.

Undeterred, on June 15, 2004, respondent filed before the Office of the City Treasurer a Petition2 for
the acceptance of its tender of payment and for the subsequent issuance of the certificate of
redemption in its favor. Nevertheless, respondent’s subsequent tender of payment was also denied.

Consequently, respondent filed a Petition for Mandamus with Prayer for Issuance of a Temporary
Restraining Order and a Writ of Preliminary Injunction3 before the RTC. Petitioners contended,
among other things, that it had until February 10, 2005, or one (1) year from the date of registration
of the certificate of sale on February 10, 2004, within which to redeem the subject properties,
pursuant to Section 78 of Presidential Decree (P.D.) No. 464 or the Real Property Tax Code.
After the parties filed their respective pleadings, the RTC initially denied the petition in the
Order4 dated December 6, 2004. In denying the petition, the RTC opined that respondent’s reliance
on Section 78 of P.D. No. 464 as basis of the reckoning period in counting the one (1) year period
within which to redeem the subject properties was misplaced, since P.D. No. 464 has been
expressly repealed by Republic Act (R.A.) No. 7160, or the Local Government Code.

Aggrieved, respondent filed a Motion for Reconsideration5 questioning the Order, arguing that:

A.

The Honorable Court committed grave error when it summarily denied the petition for Mandamus
filed by herein petitioner during the hearing on the Motion for Issuance of Temporary Restraining
Order and/or Issuance of a Writ of Preliminary Injunction without conducting a hearing or trial on
petition for mandamus. The order of the court effectively denied petitioner its right to due process.

B.

The principal action subject of the petition for mandamus is the annulment of the auction sale.
Alternatively, petitioner sought the right to consign the redemption price, inclusive of interests on the
basis that it was exercising the right of redemption within the period provided by law. The Honorable
Court ruled only on the repeal of Presidential Decree No. 464 and not the issues/grounds raised in
the temporary restraining order/writ of preliminary injunction nor on the issues raised in the petition
for mandamus, contrary to law.

C.

The Honorable Court committed grave error when it sustained the validity of the actions of the City
Treasurer with respect to the auction sale of the properties subject of the petition and its unlawful
refusal to accept the redemption price of the properties subject of the auction sale contrary to the
provisions of Quezon City Ordinance No. 91-93, in relation to Presidential Decree No. 464 and the
Local Government Code and DOF Assessment Regulations No. 7-85.

D.

The Honorable Court committed grave error when it denied petitioner its right to consign the
payment of the redemption price of the properties sold in auction sale without a determination of the
factual issues of the case, contrary to due process.

E.

The legal and factual question of the validity of the notice of the auction sale cannot be summarily
dismissed without hearing and ruling on the allegation of lack of notice and fraud raised by petitioner
in its petition for mandamus.6

On December 6, 2005, the RTC rendered a Decision7 granting the petition, the decretal portion of
which reads:

WHEREFORE, premises considered, the above-captioned petition for mandamus is hereby granted.
Accordingly, the public respondents are ordered to accept the petitioner’s tender of redemption
payment, to issue the corresponding certificate of redemption in the name of the petitioner and to
cancel the certificate of tax sale issued to the private respondent.

SO ORDERED.8

In granting the petition, the RTC ratiocinated that the counting of the one (1) year redemption period
of tax delinquent properties sold at public auction should start from the date of registration of the
certificate of sale or the final deed of sale in favor of the purchaser, so that the delinquent registered
owner or third parties interested in the redemption may be notified that the delinquent property had
been sold, and that they have one (1) year from said constructive notice of the sale within which to
redeem the property. The RTC was also of the opinion that Section 261, R.A. No. 7160 did not
amend Section 78 of P.D. No. 464.

Hence, the petition raising the following arguments:

The regional trial court, branch 101, quezon city, decided a question [of] law contrary to law and
jurisprudence when it decided that section 78 of p.d. 464 was not repealed by republic act no. 7160
known as the local government code of 1991.

II

The regional trial court, branch 101, quezon city, decided a question [of] law contrary to law and
jurisprudence when it raised the following issues which do not conform to the petition and answer
filed by the parties:

a. whether or not the respondent is entitled to the protection of all the provisions of quezon
city tax ordinance number sp-91-93, otherwise known as quezon city revenue code of 1993,
including section 14 thereof, promulgated pursuant to r.a. 7160;

b. whether the period of redemption in a realty tax sale in quezon city [h]as to be reckoned
from the date of ANNOTATION OF THE CERTIFICATE OF sale pursuant to paragraph 7,
section 14 of quezon city tax ordinance no. sp-91-93 or from the date of sale pursuant to
section 261 of r.a. 7160.9

Petitioners argue that the RTC erred when it ruled that P.D. No. 464 was not repealed by R.A. No.
7160 and when it concluded that the phrase "from the date of sale" as appearing in Section 261 of
R.A. No. 7160 means that the counting of the one (1) year redemption period of tax delinquent
properties sold at public action shall commence from the date of registration of the certificate of sale.

Petitioners insist that, since Section 14 (a), Paragraph 7 of the Quezon City Revenue Code of 1993
was not initially alleged in respondent’s petition and was not used as basis for its filing, the RTC
erred when it took cognizance of it when it rendered the assailed decision.

Conversely, respondent argues, among other things, that the RTC did not rule that P.D. No. 464 was
not repealed by R.A. No. 7160, it merely made reference to Section 78 of P.D. No. 464. Respondent
maintains that it has not altered its cause of action when it cited Section 14 (a), paragraph 7 of the
Quezon City Revenue Code of 1993 for the first time in its memorandum and that its failure to invoke
the said provision in the petition for mandamus does not preclude respondent from invoking it in the
later part of the proceedings. Ultimately, respondent contends that the RTC correctly ruled that it had
timely exercised its right to redeem the subject properties.

Section 78 of P.D. No. 464 provides for a one-year redemption period for properties foreclosed due
to tax delinquency, thus:

Sec. 78. Redemption of real property after sale. – Within the term of one year from the date of the
registration of the sale of the property, the delinquent taxpayer or his representative, or in his
absence, any person holding a lien or claim over the property, shall have the right to redeem the
same by paying the provincial or city treasurer or his deputy the total amount of taxes and penalties
due up to the date of redemption, the costs of sale and the interest at the rate of twenty per
centum on the purchase price, and such payment shall invalidate the sale certificate issued to the
purchaser and shall entitle the person making the same to a certificate from the provincial or city
treasurer or his deputy, stating that he had redeemed the property.10

From the foregoing, the owner or any person holding a lien or claim over a tax delinquent property
sold at public auction has one (1) year from the date of registration of sale to redeem the property.
However, since the passing of R.A. No. 7160, such is no longer controlling. The issue of whether or
not R.A No. 7160 or the Local Government Code, repealed P.D. No. 464 or the Real Property Tax
Code has long been laid to rest by this Court. Jurisdiction thrives to the effect that R.A. No. 7160
repealed P.D. No. 464.11 From January 1, 1992 onwards, the proper basis for the computation of the
real property tax payable, including penalties or interests, if applicable, must be R. A. No. 7160. Its
repealing clause, Section 534, reads:

SECTION 534. Repealing Clause. –

xxxx

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section
3, a (3) and b (2) of Republic Act No. 5447 regarding the Special Education Fund; Presidential
Decree No. 144 as amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No.
231 as amended; Presidential Decree No. 436 as amended by Presidential Decree No. 558; and
Presidential Decrees Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and
rendered of no force and effect.

Inasmuch as the crafter of the Local Government Code clearly worded the above-cited Section to
repeal P.D. No. 464, it is a clear showing of their legislative intent that R.A. No. 7160 was to
supersede P.D. No. 464. As such, it is apparent that in case of sale of tax delinquent properties, R.A.
No. 7160 is the general law applicable. Consequently, as regards redemption of tax delinquent
properties sold at public auction, the pertinent provision is Section 261 of R.A. No. 7160, which
provides:

Section 261. Redemption of Property Sold. – Within one (1) year from the date of sale, the owner of
the delinquent real property or person having legal interest therein, or his representative, shall have
the right to redeem the property upon payment to the local treasurer of the amount of delinquent tax,
including the interest due thereon, and the expenses of sale from the date of delinquency to the date
of sale, plus interest of not more than two percent (2%) per month on the purchase price from the
date of sale to the date of redemption. Such payment shall invalidate the certificate of sale issued to
the purchaser and the owner of the delinquent real property or person having legal interest therein
shall be entitled to a certificate of redemption which shall be issued by the local treasurer or his
deputy.
From the date of sale until the expiration of the period of redemption, the delinquent real property
shall remain in the possession of the owner or person having legal interest therein who shall remain
in the possession of the owner or person having legal interest therein who shall be entitled to the
income and other fruits thereof.

The local treasurer or his deputy, upon receipt from the purchaser of the certificate of sale, shall
forthwith return to the latter the entire amount paid by him plus interest of not more than two percent
(2%) per month. Thereafter, the property shall be free from all lien of such delinquent tax, interest
due thereon and expenses of sale.12

From the foregoing, the owner of the delinquent real property or person having legal interest therein,
or his representative, has the right to redeem the property within one (1) year from the date of sale
upon payment of the delinquent tax and other fees. Verily, the period of redemption of tax delinquent
properties should be counted not from the date of registration of the certificate of sale, as previously
provided by Section 78 of P.D. No. 464, but rather on the date of sale of the tax delinquent property,
as explicitly provided by Section 261 of R.A. No. 7160.

Nonetheless, the government of Quezon City, pursuant to the taxing power vested on local
government units by Section 5, Article X of the 1987 Constitution13 and R.A. No. 7160, enacted City
Ordinance No. SP-91, S-93, otherwise known as the Quezon City Revenue Code of 1993, providing,
among other things, the procedure in the collection of delinquent taxes on real properties within the
territorial jurisdiction of Quezon City. Section 14 (a), Paragraph 7, the Code provides:

7) Within one (1) year from the date of the annotation of the sale of the property at the proper
registry, the owner of the delinquent real property or person having legal interest therein, or his
representative, shall have the right to redeem the property by paying to the City Treasurer the
amount of the delinquent tax, including interest due thereon, and the expenses of sale plus interest
of two percent (2) per month on the purchase price from the date of sale to the date of redemption.
Such payment shall invalidate the certificate of sale issued to the purchaser and the owner of the
delinquent real property or person having legal interest therein shall be entitled to a certificate of
redemption which shall be issued by the City Treasurer.

xxxx

Verily, the ordinance is explicit that the one-year redemption period should be counted from the date
of the annotation of the sale of the property at the proper registry. At first glance, this provision runs
counter to that of Section 261 of R.A. No. 7160 which provides that the one year redemption period
shall be counted from the date of sale of the tax delinquent property. There is, therefore, a need to
reconcile these seemingly conflicting provisions of a general law and a special law.

A general statute is one which embraces a class of subjects or places and does not omit any subject
or place naturally belonging to such class. A special statute, as the term is generally understood, is
one which relates to particular persons or things of a class or to a particular portion or section of the
state only.14 In the present case, R.A. No. 7160 is to be construed as a general law, while City
Ordinance No. SP-91, S-93 is a special law, having emanated only from R.A. No. 7160 and with
limited territorial application in Quezon City only.

A general law and a special law on the same subject should be accordingly read together and
harmonized, if possible, with a view to giving effect to both. Where there are two acts, one of which
is special and particular and the other general which, if standing alone, would include the same
matter and thus conflict with the special act, the special must prevail, since it evinces the legislative
intent more clearly than that of the general statute and must be taken as intended to constitute an
exception to the rule.15 More so, when the validity of the law is not in question.

In giving effect to these laws, it is also worthy to note that in cases involving redemption, the law
protects the original owner. It is the policy of the law to aid rather than to defeat the owner’s right.
Therefore, redemption should be looked upon with favor and where no injury will follow, a liberal
construction will be given to our redemption laws, specifically on the exercise of the right to
redeem.16

To harmonize the provisions of the two laws and to maintain the policy of the law to aid rather than
to defeat the owner’s right to redeem his property, Section 14 (a), Paragraph 7 of City Ordinance No.
SP-91, S-93 should be construed as to define the phrase "one (1) year from the date of sale" as
appearing in Section 261 of R.A. No. 7160, to mean "one (1) year from the date of the annotation of
the sale of the property at the proper registry."

Consequently, the counting of the one (1) year redemption period of property sold at public auction
for its tax delinquency should be counted from the date of annotation of the certificate of sale in the
proper Register of Deeds. Applying the foregoing to the case at bar, from the date of registration of
the Certificate of Sale of Delinquent Property on February 10, 2004, respondent had until February
10, 2005 to redeem the subject properties. Hence, its tender of payment of the subject properties’
tax delinquencies and other fees on June 10, 2004, was well within the redemption period, and it
was manifest error on the part of petitioners to have refused such tender of payment. 1avv phi 1

Finally, respondent’s failure to cite Section 14 (a), Paragraph 7, City Ordinance No. SP-91, S-93 in
its petition for mandamus does not preclude it from invoking the said provision in the later part of the
judicial proceeding.

The issues in every case are limited to those presented in the pleadings. The object of the pleadings
is to draw the lines of battle between the litigants and to indicate fairly the nature of the claims or
defenses of both parties.17Points of law, theories, issues and arguments should be brought to the
attention of the trial court to give the opposing party an opportunity to present further evidence
material to these matters during judicial proceedings before the lower court. Otherwise, it would be
too late to raise these issues during appeal. A party cannot, on appeal, change fundamentally the
nature of the issue in the case. When a party deliberately adopts a certain theory and the case is
decided upon that theory in the court below, he will not be permitted to change the same on appeal,
because to permit him to do so would be unfair to the adverse party.18

As early as in its Memorandum to Serve as Draft Resolution,19 respondent had brought Section 14
(a), Paragraph 7 of City Ordinance No. SP-91, S-93, or the Quezon City Revenue Code of 1993, to
the attention of petitioners. Respondent also reiterated the applicability of the provision to his claim
of redemption in its motion for reconsideration of the Order initially denying the petition for
mandamus. Petitioners were given every opportunity to counter respondent’s allegations, which it in
fact did by filing an Opposition20 to the motion for reconsideration. Since the inception of the petition
in the lower court, respondent has not changed its preposition that the one (1) year redemption
period shall be counted from the date of registration of the certificate of sale and not from the date of
sale of the subject properties. Citing the appropriate provision of the Quezon City Revenue Code of
1993 did not alter this, but on the contrary, even buttressed its claim.

Furthermore, petitioners cannot feign ignorance of a law that it has promulgated in the exercise of its
local autonomy. Nor can it be allowed to deny the applicability of Section 14 (a), Paragraph 7 of the
Quezon City Revenue Code of 1993, while at the same time invoking that it has strictly adhered to
the Quezon City Revenue Code when it conducted the public auction of the tax delinquent
properties.

WHEREFORE, premises considered, the petition is DENIED. Subject to the above disquisitions, the
Decision of the RTC in SP. Civil Action Q-04-53522, dated December 6, 2005, is AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR: