http://www.scribd.com/doc/158235975/Taxation-Law-Case-Digest-Part-1 MACTAN CEBU (MCIAA) VS.

MARCOS GR 120082 SEPTEMBER 11, 1996 261 SCRA 667 FACTS: Mactan Cebu International Airport Authority (MCIAA) was created to principally undertake to economical, efficient and effective control, management and supervision of the Mactan International Airport and such other airports as may be established in the province of Cebu Section 14 of its charter excempts the Authority from payment of realty taxes but in 1994, the City Treasurer demanded payment for realty taxes on several parcels of land belonging to the other. MCIAA filed a petition in RTC contending that, by nature of its powers and functions, it has the same footing of an agency or instrumentality of the national government. The RTC dismissed the petition based on Section 193 & 234 of the local Government Code or R.A. 7160. Thus this petition. ISSUE: Whether or not the MCIAA is excempted from realty taxes? RULING: With the repealing clause of RA 7160 the tax exemption provided. All general and special in the charter of the MCIAA has been expressly repeated. It state laws, acts, City Charters, decrees, executive orders, proclamations and administrative regulations, or part of parts thereof which are inconsistent with any of the provisions of the Code are hereby repeated or modified accordingly. Therefore the SC affirmed the decision and order of the RTC and herein petitioner has to pay the assessed realty tax of its properties effective January 1, 1992 up to the present.

NAPOCOR V CITY OF CABANATUAN Facts: City of Cabanatuan filed a collection suit against NAPOCOR, a government-owned and controlled corporation demanding that the latter pay the assessed franchise tax due, plus surcharge and interest. It alleged that NAPOCORs exemption from local taxes has already been withdrawn by the Local Government Code. NAPOCOR submitted that it is not liable to pay an annual franchise because the citys taxing power is limited to private entities that are engaged in trade or occupation fo r profit, and that the NAPOCOR Charter, being a valid exercise of police power, should prevail over the LGC. Issue: Whether NAPOCOR is liable to pay annual franchise tax to the City of Cabanatuan Held: Yes. The power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges. Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits of an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities. Nothing prevents Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax. A franchise is a privilege conferred by government authority, which does not belong to citizens of the country generally as a matter of common right. It may be construed in two senses: the right vested in the individuals composing the corporation and the right and privileges conferred upon the corporation. A franchise tax is understood in the second sense; it is not levied on the corporation simply for existing as a corporation but on its exercise of the rights or privileges granted to it by the government. NAPOCOR is covered by the franchise tax because it exercises a franchise in the second sense and it is exercising its rights or privileges under this franchise within the territory of the City.

CITY GOVERNMENT OF QUEZON CITY V BAYANTEL

Facts: Section 234 of the Local Government Code withdrew any exemption from realty tax granted to or enjoyed by all persons, natural or juridical. Thereafter, Congress enacted Rep. Act No. 7633, amending Bayantels original franchise. It provided that the same, its successors or assigns shall be liable to pay the same taxes on their 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. Within the territorial boundary of Quezon City, Bayantel owned several real properties on which it maintained various telecommunications facilities. In 1993, the government of Quezon City, pursuant to the taxing power vested on local government units by Section 5, Article X of the 1987 Constitution, in relation to Section 232 of the LGC, enacted City Ordinance No. SP-91, S-93, otherwise known as the Quezon City Revenue Code (QCRC), imposing, under Section 5 thereof, a real property tax on all real properties in Quezon City, and, reiterating in its Section 6, the withdrawal of exemption from real property tax under Section 234 of the LGC. Furthermore, much like the LGC, the QCRC, under its Section 230, withdrew tax exemption privileges in general. Conformably with the Citys Revenue Code, new tax declarations for Bayantels real properti es in Quezon City were issued by the City Assessor. Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in the city from the roll of taxable real properties. With its request having been denied, Bayantel interposed an appeal with the Local Board of Assessment Appeals (LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay the real property taxes assessed against it by the Quezon City government. On account thereof, the Quezon City Treasurer sent out notices of delinquency , followed by the issuance of several warrants of levy against Bayantels properties preparatory to their sale at a public auction. Threatened with the imminent loss of its properties, Bayantel immediately withdrew its appeal with the LBAA and instead filed with the RTC of Quezon City a petition for prohibition with an urgent application for a temporary restraining order (TRO) and/or writ of preliminary injunction. In the eve of the public auction, the lower court issued a TRO, followed, after due hearing, by a writ of preliminary injunction. RTC: declared exempt from real estate taxation the properties of Bayantel in QC. Denied petitioner's motion for reconsideration having been denied . Petitioners elevated the case directly to the Supreme Court on pure questions of law. Petitioners: Bayantel had failed to avail itself of the administrative remedies provided for under the LGC, thus the trial court erred in giving due course to Bayantels petition for prohibition. The appeal mechanics under the LGC constitute Bayantels plain and speedy remedy in this case. Issue: Whether or not Bayantel's failure to appeal its case to the LBAA precludes its filing of a petition for prohibition. Held: NO.

With the reality that Bayantels real properties were already levied upon on account of its nonpayment of real estate taxes thereon, an appeal to the LBAA is not a speedy and adequate remedy within the context of the aforequoted Section 2 of Rule 65. This is not to mention of the auction sale of said properties already scheduled. Moreover, one of the recognized exceptions to the exhaustion- of-administrative remedies rule is when, as here, only legal issues are to be resolved. In fact, the Court, cognizant of the nature of the questions presently involved, gave due course to the instant petition. An appeal to the LBAA, to be properly considered, required prior payment under protest of the amount of P43,878,208.18, a figure which, in the light of the then prevailing Asian financial crisis, may have been difficult to raise up. Given this reality, an appeal to the LBAA may not be considered as a plain, speedy and adequate remedy. It is thus understandable why Bayantel opted to withdraw its earlier appeal with the LBAA and, instead, filed its petition for prohibition with urgent application for injunctive relief.

THE PROVINCE OF BULACAN VS COURT OF APPEALS

[G.R. No. 126232. November 27, 1998]

THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE CHAVEZ, and MANUEL DJ SIAYNGCO in their capacity as PROVINCIAL GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL LEGAL ADVISE, respectively, petitioners, vs. THE HONORABLE COURT OF APPEALS (FORMER SPECIAL 12TH DIVISION), PUBLIC CEMENT CORPORATION, respondents. DECISION ROMERO, J.: Before us is a petition for certiorari seeking the reversal of the decision of the Court of Appeals dated September 27, 1995 declaring petitioner without authority to levy taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands, as well as the August 26, 1996 resolution of the appellate court denying its motion for reconsideration. The facts are as follows: On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed Provincial Ordinance No. 3, known as "An ordinance Enacting the Revenue Code of the Bulacan Province," which was to take effect on July 1, 1992, section 21 of the ordinance provides as follows: Section 21. Imposition of Tax. There is hereby levied and collected a tax of 10% of the fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth and other quarry resources, such, but not limited to marble, granite, volcanic cinders, basalt, tuff and rock phosphate, extracted from public lands or from beds of seas, lakes, rivers, streams, creeks and other public waters within its territorial jurisdiction. (Italics ours) Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated November 11, 1993, assessed private respondent Republic Cement Corporation (hereafter Republic Cement) P2,524,692.13 for extracting limestone, shale and silica from several parcels of private land in the province during the third quarter of 1992 until the second quarter of 1993. Believing that the province, on the basis of above-said ordinance, had no authority to impose taxes on quarry resources extracted from private lands, Republic Cement formally contested the same on December 23, 1993. The same was, however, denied by the Provincial Treasurer on January 17, 1994. Republic Cement, consequently filed a petition for declaratory relief with the Regional Trial Court of Bulacan on February 14, 1994. The province filed a motion to dismiss Republic Cement's petition, which was granted by the trial court on May 13, 1993, which ruled that declaratory relief was improper, allegedly because a breach of the ordinance had been committed by Republic Cement. On July 11, 1994, Republic Cement filed a petition for certiorari with the Supreme Court seeking to reverse the trial court's dismissal of their petition. The Court, in a resolution dated July 27, 1994, referred the same to the Court of Appeals, where it was docketed as CA G.R. SP No. 34915. The appellate court required petitioners to file a comment, which they did on September 7, 1994. 3

In the interim, the Province of Bulacan issued a warrant of levy against Republic Cement, allegedly because of its unpaid tax liabilities. Negotiations between Republic Cement and petitioners resulted in an agreement and modus vivendi on December 12, 1994, whereby Republic Cement agreed to pay under protest P1,262,346.00, 50% of the tax assessed by petitioner, in exchange for the lifting of the warrant of levy. Furthermore, Republic Cement and petitioners agreed to limit the issue for resolution by the Court of Appeals to the question as to whether or not the provincial government could impose and/or assess taxes on quarry resources extracted by Republic Cement from private lands pursuant to Section 21 of the Provincial Ordinance No. 3. This agreement and modus vivendi were embodied in a joint manifestation and motion signed by Governor Roberto Pagdanganan, on behalf of the Province of Bulacan, by Provincial Treasurer Florence Chavez, and by Provincial Legal Officer Manuel Siayngco, as petitioner's counsel and filed with the Court of Appeals on December 13, 1994. In a resolution dated December 29, 1994, the appellate court approved the same and limited the issue to be resolved to the question whether or not the provincial government could impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. After due trial, the Court of Appeals, on September 27, 1995, rendered the following judgment: WHEREFORE, judgment is hereby rendered declaring the Province of Bulacan under its Provincial Ordinance No. 3 entitled "An Ordinance Enacting the Revenue Code of Bulacan Province" to be without legal authority to impose and assess taxes on quarry resources extracted by RCC from private lands, hence the interpretation of Respondent Treasurer of Chapter II, Article D, Section 21 of the Ordinance, and the assessment made by the Province of Bulacan against RCC is null and void. Petitioner's motion for reconsideration, as well as their supplemental motion for reconsideration, was denied by the appellate court on august 26, 1996, hence this appeal. Petitioner's claim that the Court of Appeals erred in: 1. NOT HAVING OUTRIGHTLY DISMISSED THE SUBJECT PETITION ON THE GROUND THAT THE SAME IS NOT THE APPROPRIATE REMEDY FROM THE TRIAL COURT'S GRANT OF THE PRIVATE RESPONDENTS' (HEREIN PETITIONER) MOTION TO DISMISS; NOT DISMISSING THE SUBJECT PETITION FOR BEING VIOLATIVE OF CIRCULAR 2-90 ISSUED BY THE SUPREME COURT; NOT DISMISSING THE PETITION FOR REVIEW ON THE GROUND THAT THE TRIAL COURT'S ORDER OF MAY 13, 1994 HAD LONG BECOME FINAL AND EXECUTORY; GOING BEYOND THE PARAMETERS OF ITS APPELLATE JURISDICTION IN RENDERING THE SEPTEMBER 27, 1995 DECISION; HOLDING THAT PRIVATE RESPONDENT (HEREIN PETITIONER) ARE ESTOPPED FROM RAISING THE PROCEDURAL ISSUE IN THE MOTION FOR RECONSIDERATION; THE INTERPRETATION OF SECTION 134 OF THE LOCAL GOVERNMENT CODE AS STATED IN THE SECOND TO THE LAST PARAGRAPH OF PAGE 5 OF ITS SEPTEMBER 27, 1995 DECISION; SUSTAINING THE ALLEGATIONS OF HEREIN RESPONDENT WHICH UNJUSTLY DEPRIVED PETITIONER THE POWER TO CREATE ITS OWN SOURCES OF REVENUE; DECLARING THAT THE ASSESSMENT MADE BY THE PROVINCE OF BULACAN AGAINST RCC AS NULL AND VOID WHICH IN EFFECT IS A COLLATERAL ATTACK ON PROVINCIAL ORDINANCE NO. 3; AND FAILING TO CONSIDER THE REGALIAN DOCTRINE IN FAVOR OF THE LOCAL GOVERNMENT.

2. 3. 4. 5. 6.

7. 8.

9.

The issues raised by petitioners are devoid of merit. The number and diversity of errors raised by appellants impel us, however, to discuss the points raised seriatim. In their first assignment of error, petitioners contend that instead of filing a petition for certiorari with the Supreme Court, Republic Cement should have appealed from the order of the trial court dismissing their petition. Citing Martinez vs. CA,[1] they allege that a motion to dismiss is a final order, the remedy against which is not a petition for certiorari, but an appeal, regardless of the questions sought to be raised on appeal, whether of fact or of law, whether involving jurisdiction or grave abuse of discretion of the trial court. Petitioners' argument is misleading. While it is true that the remedy against a final order is an appeal, and not a petition for certiorari, the petition referred to is a petition for certiorari under Rule 65. As stated in Martinez, the party aggrieved does not have the option to substitute the special civil action for certiorari under Rule 65 for the remedy of appeal. The existence and availability of the right of appeal are antithetical to the availment of the special civil action for certiorari. Republic Cement did not, however, file a petition for certiorari under Rule 65, but an appeal by certiorari under Rule 45. Even law students know that certiorari under Rule 45 is a mode of appeal, an appeal from the Regional Trial 4

Court being taken in either of two ways (a) by writ of error (involving questions of fact and law) and (b) by certiorari (limited only to issues of law), with an appeal by certiorari being brought to the Supreme Court, there being no provision of law for taking appeals by certiorari to the Court of Appeals.[2] It is thus clearly apparent that Republic Cement correctly contested the trial court's order of dismissal by filing an appeal by certiorari under Rule 45. In fact, petitioners, in their second assignment of error, admit that a petition for review on certiorari under Rule 45 is available to a party aggrieved by an order granting a motion to dismiss.[3] They claim, however, that Republic Cement could not avail of the same allegedly because the latter raised issues of fact, which is prohibited, Rule 45 providing that "(t)he petition shall raise only questions of law which must be distinctly set forth." [4] In this respect, petitioners claim that Republic Cement's petition should have been dismissed by the appellate court, Circular 2-90 providing: 4. Erroneous Appeals. - An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or inappropriate mode shall be dismissed. xxx xxx xxx

d) No transfer of appeals erroneously taken. -- No transfers of appeals erroneously taken to the Supreme Court or to the Court of Appeals to whichever of these Tribunals has appropriate appellate jurisdiction will be allowed; continued ignorance or wilful disregard of the law on appeals will not be tolerated. Petitioners even fault the Court for referring Republic Cement's petition to the Court of Appeals, claiming that the same should have been dismissed pursuant to Circular 2-90. Petitioners conveniently overlook the other provisions of Circular 2-90, specifically 4b) thereof, which provides: b) Raising factual issues in appeal by certiorari. - Although submission of issues of fact in an appeal by certiorari taken to the Supreme Court from the regional trial court is ordinarily proscribed, the Supreme Court nonetheless retains the option, in the exercise of its sound discretion and considering the attendant circumstances, either itself to take cognizance of and decide such issues or to refer them to the Court of Appeals for determination. As can be clearly adduced from the foregoing, when an appeal by certiorari under Rule 45 erroneously raises factual issues, the Court has the option to refer the petition to the Court of Appeals. The exercise by the Court of this option may not now be questioned by petitioners. As the trial court's order was properly appealed by Republic Cement, the trial court's May 13, 1994 order never became final and executory, rendering petitioner's third assignment of error moot and academic. Petitioners' fourth and fifth assignment of errors are likewise without merit. Petitioners assert that the Court of Appeals could only rule on the propriety of the trial court's dismissal of Republic Cement's petition for declaratory relief, allegedly because that was the sole relief sought by the latter in its petition for certiorari. Petitioners claim that the appellate court overstepped its jurisdiction when it declared null and void the assessment made by the Province of Bulacan against Republic Cement. Petitioners gloss over the fact that, during the proceedings before the Court of Appeals, they entered into an agreement and modus vivendi whereby they limited the issue for resolution to the question as to whether or not the provincial government could impose and/or assess taxes on stones, sand, gravel, earth and other quarry resources extracted by Republic Cement from private lands. This agreement and modus vivendi were approved by the appellate court on December 29, 1994. All throughout the proceedings, petitioners never questioned the authority of the Court of Appeals to decide this issue, an issue which it brought itself within the purview of the appellate court. Only when an adverse decision was rendered by the Court of Appeals did petitioners question the jurisdiction of the former. Petitioners are barred by the doctrine of estoppel from contesting the authority of the Court of Appeals to decide the instant case, as this Court has consistently held that "(a) party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction."[5] The Supreme Court frowns upon the undesirable practice of a party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction when adverse. [6] In a desperate attempt to ward off defeat, petitioners now repudiate the above-mentioned agreement and modus vivendi, claiming that the same was not binding in the Province of Bulacan, not having been authorized by theSangguniang Panlalawigan of Bulacan. While it is true that the Provincial Governor can enter into contract and obligate the province only upon authority of the sangguniang panlalawigan,[7] the same is inapplicable to the case at bar. The agreement and modus vivendi may have been signed by petitioner Roberto Pagdanganan, as Governor of the Province of Bulacan, without authorization from the sangguniang panlalawigan, but it was also signed by Manuel Siayngco, the Provincial Legal Officer, in his capacity as such, and as counsel of petitioners. It is a well-settled rule that all proceedings in court to enforce a remedy, to bring a claim, demand, cause of action or subject matter of a suit to hearing, trial, determination, judgment and execution are within the exclusive control of the attorney.[8] With respect to such matters of ordinary judicial procedure, the attorney needs no special authority to bind his client.[9] Such questions as what action or pleading to file, where and when to file it, what are its formal requirements, what should be the theory of the case, what defenses to raise, how may the claim or defense be proved, when to rest the case, as well as those affecting the competency of a witness, the sufficiency, relevancy, materiality or immateriality of certain evidence and the burden of proof are within the authority of the attorney to decide. [10] Whatever decision an 5

attorney makes on any of these procedural questions, even if it adversely affects a client's case, will generally bind a client. The agreement and modus vivendi signed by petitioner's counsel is binding upon petitioners, even if the Sanggunian had not authorized the same, limitation of issues being a procedural question falling within the exclusive authority of the attorney to decide. In any case, the remaining issues raised by petitioner are likewise devoid of merit, a province having no authority to impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. The pertinent provisions of the Local Government Code are as follows: Sec. 134. Scope of Taxing Powers. - Except as otherwise provided in this Code, the province may levy only the taxes, fees, and charges as provided in this Article. Sec. 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect not more than ten percent (10%) of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction. xxx xxx x x x (Italics supplied)

The appellate court, on the basis of Section 134, ruled that a province was empowered to impose taxes only on sand, gravel, and other quarry resources extracted from public lands, its authority to tax being limited by said provision only to those taxes, fees and charges provided in Article One, Chapter 2, Title One of Book II of the Local Government Code.[11] On the other hand, petitioners claim that Sections 129[12] and 186[13] of the Local Government Code authorizes the province to impose taxes other than those specifically enumerated under the Local Government Code. The Court of Appeals erred in ruling that a province can impose only the taxes specifically mentioned under the Local Government Code. As correctly pointed out by petitioners, Section 186 allows a province to levy taxes other than those specifically enumerated under the Code, subject to the conditions specified therein. This finding, nevertheless, affords cold comfort to petitioners as they are still prohibited from imposing taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. The tax imposed by the Province of Bulacan is an excise tax, being a tax upon the performance, carrying on, or exercise of an activity. [14] The Local Government Code provides: Section 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: xxx xxx xxx

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; xxx xxx xxx

A province may not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code. Unfortunately for petitioners, the National Internal Revenue Code provides: Section 151. - Mineral Products. (A) Rates of Tax. - There shall be levied, assessed and collected on minerals, mineral products and quarry resources, excise tax as follows: xxx xxx xxx

(2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based on the actual market value of the gross output thereof at the time of removal, in case of those locally extracted or produced; or the values used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax, in the case of importation. xxx xxx xxx

(B) [Definition of Terms]. - For purposes of this Section, the termxxx xxx xxx

(4) Quarry resources shall mean any common stone or other common mineral substances as the Director of the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate; Provided, That they contain no metal or metals or other valuable minerals in economically workable quantities. 6

It is clearly apparent from the above provision that the National Internal Revenue Code levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Code. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly empowered to do so under the Local Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the National Internal Revenue Code. Given the above disquisition, petitioners cannot claim that the appellate court unjustly deprived them of the power to create their sources of revenue, their assessment of taxes against Republic Cement being ultra vires, traversing as it does the limitations set by the Local Government Code. Petitioners likewise aver that the appellate court's declaration of nullity of its assessment against Republic Cement is a collateral attack on Provincial Ordinance No. 3, which is prohibited by public policy.[15] Contrary to petitioners' claim, the legality of the ordinance was never questioned by the Court of Appeals. Rather, what the appellate court questioned was petitioners' assessment of taxes on Republic Cement on the basis of Provincial Ordinance No. 3, not the ordinance itself. Furthermore, Section 21 of Provincial Ordinance No. 3 is practically only a reproduction of Section 138 of the Local Government Code. A cursory reading of both would show that both refer to ordinary sand, stone, gravel, earth and other quarry resources extracted from public lands. Even if we disregard the limitation set by Section 133 of the Local Government Code, petitioners may not impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands on the basis of Section 21 of Provincial Ordinance No. 3 as the latter clearly applies only to quarry resources extracted from public lands. Petitioners may not invoke the Regalian doctrine to extend the coverage of their ordinance to quarry resources extracted from private lands, for taxes, being burdens, are not to be presumed beyond what the applicable statute expressly and clearly declares, tax statutes being construed strictissimi juris against the government.[16] WHEREFORE, premises considered, the instant petition is DISMISSED for lack of merit and the decision of the Court of Appeals is hereby AFFIRMED in toto. Costs against petitioner. SO ORDERED. Narvasa, C.J. (Chairman), Kapunan, Purisima, and Pardo, JJ., concur.

FIRST PHILIPPINE INDUSTRIAL CORP. VS. CA Facts: Petitioner is a grantee of a pipeline concession under Republic Act No. 387. Sometime in January 1995, petitioner applied for mayors permit in Batangas. However, the Treasurer required petitioner to pay a local tax based on gross receipts amounting to P956,076.04. In order not to hamper its operations, petitioner paid the taxes for the first quarter of 1993 amounting to P239,019.01 under protest. On January 20, 1994, petitioner filed a letter-protest to the City Treasurer, claiming that it is exempt from local tax since it is engaged in transportation business. The respondent City Treasurer denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of Batangas for tax refund. Respondents assert that pipelines are not included in the term common carrier which refers solely to ordinary carriers or motor vehicles. The trial court dismissed the complaint, and such was affirmed by the Court of Appeals. Issue: Whether a pipeline business is included in the term common carrier so as to entitle the petitioner to the exemption Held: Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." The test for determining whether a party is a common carrier of goods is: (1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; (2) He must undertake to carry goods of the kind to which his business is confined; 7

(3) He must undertake to carry by the method by which his business is conducted and over his established roads; and (4) The transportation must be for hire. Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier.

[G.R. No. 152492. October 16, 2003]

PALMA DEVELOPMENT CORPORATION, petitioner, vs. MUNICIPALITY OF MALANGAS, ZAMBOANGA DEL SUR, respondent. DECISION PANGANIBAN, J.: In accordance with the Local Government Code of 1991, a municipal ordinance imposing fees on goods that pass through the issuing municipalitys territory is null and void.

The Case The Petition for Review[1] before us assails the August 31, 2001 Decision[2] and the February 6, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 56477. The dispositive portion of the challenged Decision reads as follows: UPON THE VIEW WE TAKE OF THIS CASE, THUS, the assailed Decision is VACATED and SET ASIDE, and this case is ordered REMANDED to the court a quo for the reception of evidence of the parties on the matter or point delineated in the final sentence above-stated.[4] The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts The facts are undisputed. Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to wholesalers in Zamboanga City. It uses the municipal port of Malangas, Zamboanga delSur as transshipment point for its goods. The port, as well as the surrounding roads leading to it, belong to and are maintained by the Municipality of Malangas, Zamboanga del Sur. On January 16, 1994, the municipality passed Municipal Revenue Code No. 09, Series of 1993, which was subsequently approved by the Sangguniang Panlalawigan of Zamboanga del Sur in Resolution No. 1330 dated August 4, 1994. Section 5G.01 of the ordinance reads: Section 5G.01. Imposition of fees. There shall be collected service fee for its use of the municipal road[s] or streets leading to the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance on all goods and all equipment harbored or sheltered in the premises of the wharf and other within the jurisdiction of this municipality in the following schedule: a) Vehicles and Equipment: 1. Automatic per unit 2. Ford Fiera 3. Trucks rate of fee P10.00 P10.00 P10.00 xxx b) Other Goods, Construction Material products: 1. Bamboo craft 2. Bangus/Kilo xxx 41. Rice and corn grits/sack 0.50[5] 9 P20.00 0.30 xxx xxx xxx xxx

Accordingly, the service fees imposed by Section 5G.01 of the ordinance was paid by petitioner under protest. It contended that under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, municipal governments did not have the authority to tax goods and vehicles that passed through their jurisdictions. Thereafter, before the Regional Trial Court (RTC) of Pagadian City, petitioner filed against the Municipality of Malangas on November 20, 1995, an action for declaratory relief assailing the validity of Section 5G.01 of the municipal ordinance. On the premise that the case involved the validity of a municipal ordinance, the RTC directed respondent to secure the opinion of the Office of the Solicitor General. The trial court likewise ordered that the opinions of the Departments of Finance and of Justice be sought. As these opinions were still unavailable as of October 17, 1996, petitioners counsel filed, without objection from respondent, a Manifestation seeking the submission of the case for the RTCs decision on a pure question of law. In due time, the trial court rendered its November 13, 1996 Decision declaring the entire Municipal Revenue Code No. 09 as ultra vires and, hence, null and void.

Ruling of the Court of Appeals The CA held that local government units already had revenue-raising powers as provided for under Sections 153 and 155 of RA No. 7160. It ruled as well that within the purview of these provisions -- and therefore valid -- is Section 5G.01, which provides for a service fee for the use of the municipal road or streets leading to the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance on all goods and all equipment harbored or sheltered in the premises of the wharf and other within the jurisdiction of this municipality. However, since both parties had submitted the case to the trial court for decision on a pure question of law without a full-blown trial on the merits, the CA could not determine whether the facts of the case were within the ambit of the aforecited sections of RA No. 7160. The appellate court ruled that petitioner still had to adduce evidence to substantiate its allegations that the assailed ordinance had imposed fees on the movement of goods within the Municipality of Malangas in the guise of a toll fee for the use of municipal roads and a service fee for police surveillance. Thus, the CA held that the absence of such evidence necessitated the remand of the case to the trial court. Hence, this Petition.[6]

Issues Petitioner raises the following issues for our consideration: 1. Whether or not the Court of Appeals erred when it ordered that the extant case be remanded to the lower court for reception of evidence. 2. Whether or not the Court of Appeals erred when it ruled that a full blown trial on the merits is necessary and that plaintiff-appellee, now petitioner, has to adduce evidence to substantiate its thesis that the assailed municipal ordinance, in fact, imposes fees on the movement of goods within the jurisdiction of the defendant and that this imposition is merely in the guise of a toll fee for the use of municipal roads and service fee for police surveillance. 3. Whether or not the Court of Appeals erred when it did not rule that the questioned municipal ordinance is contrary to the provisions of R.A. No. 7160 or the Local Government Code of the Philippines.[7] In brief, the issues boil down to the following: 1) whether Section 5G.01 of Municipal Revenue Code No. 09 is valid; and 2) whether the remand of the case to the trial court is necessary.

The Courts Ruling The Petition is meritorious.

First Issue: Validity of the Imposed Fees

10

Petitioner argues that while respondent has the power to tax or impose fees on vehicles using its roads, it cannot tax the goods that are transported by the vehicles. The provision of the ordinance imposing a service fee for police surveillance on goods is allegedly contrary to Section 133(e) of RA No. 7160, which reads: Section 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: xxx xxx xxx

e) Taxes, fees and charges and other impositions upon goods carried into and out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise; On the other hand, respondent maintains that the subject fees are intended for services rendered, the use of municipal roads and police surveillance. The fees are supposedly not covered by the prohibited impositions under Section 133(e) of RA No. 7160.[8] It further contends that it was empowered by the express mandate of Sections 153 and 155 of RA No. 7160 to enact Section 5G.01 of the ordinance. The pertinent provisions of this statute read as follows: Section 153. Service Fees and Charges. -- Local government units may impose and collect such reasonable fees and charges for services rendered. xxx xxx xxx

Section 155. Toll Fees or Charges. -- The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office personnel delivering mail, physically-handicapped, and disabled citizens who are sixty-five (65) years or older. When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public use. Respondent claims that there is no proof that the P0.50 fee for every sack of rice or corn is a fraudulent legislation enacted to subvert the limitation imposed by Section 133(e) of RA No. 7160. Moreover, it argues that allowing petitioner to use its roads without paying the P0.50 fee for every sack of rice or corn would contravene the principle of unjust enrichment. By express language of Sections 153 and 155 of RA No. 7160, local government units, through their Sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the use of any public road, pier or wharf funded and constructed by them. A service fee imposed on vehicles using municipal roads leading to the wharf is thus valid. However, Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of fees -- as well as all other taxes or charges in any form whatsoever -- on goods or merchandise. It is therefore irrelevant if the fees imposed are actually for police surveillance on the goods, because any other form of imposition on goods passing through the territorial jurisdiction of the municipality is clearly prohibited by Section 133(e). Under Section 131(y) of RA No. 7160, wharfage is defined as a fee assessed against the cargo of a vessel engaged in foreign or domestic trade based on quantity, weight, or measure received and/or discharged by vessel. It is apparent that a wharfage does not lose its basic character by being labeled as a service fee for police surveillance on all goods. Unpersuasive is the contention of respondent that petitioner would unjustly be enriched at the formers expense. Though the rules thereon apply equally well to the government,[9] for unjust enrichment to be deemed present, two conditions must generally concur: (a) a person is unjustly benefited, and (b) such benefit is derived at anothers expense or damage.[10] In the instant case, the benefits from the use of the municipal roads and the wharf were not unjustly derived by petitioner. Those benefits resulted from the infrastructure that the municipality was mandated by law to provide. [11] There is no unjust enrichment where the one receiving the benefit has a legal right or entitlement thereto, or when there is no causal relation between ones enrichment and the others impoverishment.[12]

Second Issue: Remand of the Case

11

Petitioner asserts that the remand of the case to the trial court for further reception of evidence is unnecessary, because the facts are undisputed by both parties. It has already been clearly established, without need for further evidence, that petitioner transports rice and corn on board trucks that pass through the municipal roads leading to the wharf. Under protest, it paid the service fees, a fact that respondent has readily admitted without qualification. Respondent, on the other hand, is silent on the issue of the remand of the case to the trial court. The former merely defends the validity of the ordinance, arguing neither for nor against the remand. We rule against the remand. Not only is it frowned upon by the Rules of Court;[13] it is also unnecessary on the basis of the facts established by the admissions of the parties. Besides, the fact sought to be established with the reception of additional evidence is irrelevant to the due settlement of the case. The pertinent portion of the assailed CA Decision reads: To be stressed is the fact that local government units now have the following common revenue raising powers under the Local Government Code: Section 153. Service Fees and Charges. -- Local government units may impose and collect such reasonable fees and charges for services rendered. xxx xxx xxx

Section 155. Toll Fees or Charges. -- The Sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office personnel delivering mail, physically-handicapped, and disabled citizens who are sixty-five (65) years or older. When public safety and welfare so requires, the Sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public use. x x x As we see it, the disputed municipal ordinance, which provides for a service fee for the use of the municipal road or streets leading to the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance on all goods and all equipment harbored or sheltered in the premises of the wharf and other within the jurisdiction of this municipality, seems to fall within the compass of the above cited provisions of R.A. No. 7160. As elsewhere indicated, the parties in this case, nonetheless, chose to submit the issue to the Trial Court on a pure question of law, without a full-blown trial on the merits: consequently, we are not prepared to say, at this juncture, that the facts of the case inevitably call for the application, and/or that these make out a clear-cut case within the ambit and purview, of the aforecited section. The plaintiff, thus, has to adduce evidence to substantiate its thesis that the assailed municipal ordinance, in fact, imposes fees on the movement of goods within the jurisdiction of the defendant, and that this imposition is merely in the guise of a toll fee for the use of municipal roads and service fee for police surveillance. Competent evidence upon this score must, thus, be presented.[14] We note that Section 5G.01 imposes two types of service fees: 1) one for the use of the municipal roads and 2) another for police surveillance on all goods and equipment sheltered in the premises of the wharf. The amount of service fees, however, is based on the type of vehicle that passes through the road and the type of goods being transported. While both parties admit that the service fees imposed are for the use of the municipal roads, petitioner maintains that the service fee for police surveillance on goods harbored on the wharf is in the guise of awharfage,[15] a prohibited imposition under Section 133(e) of RA No. 7160. Thus, the CA held that the case should be remanded to the trial court in order to resolve this factual dispute. The appellate court noted that under Section 155 of RA No. 7160, municipalities apparently now have the power to impose fees for the use of municipal roads. Nevertheless, a remand is still unnecessary even if the service fee charged against the goods are for police surveillance, because Section 133(e) of RA No. 7160 expressly prohibits the imposition of all other taxes, fees or charges in any form whatsoever upon the merchandise or goods that pass through the territorial jurisdiction of local government units. It is therefore immaterial to the instant case whether the service fee on the goods is for police surveillance or not, since the subject provision of the revenue ordinance is invalid. Reception of further evidence to establish this fact would not legalize the imposition of such fee in any way. Furthermore, neither party disputes any of the other material facts of the case. From their respective Briefs before the CA and their Memoranda before this Court, they do not dispute the fact that petitioner, from its principal place of business, transports rice and corn on board trucks bound for respondents wharf. The trucks traverse the municipal roads en route to the wharf, where the sacks of rice and corn are manually loaded into marine vessels bound for Zamboanga City. Likewise undisputed is the fact that respondent imposed and collected fees under the ordinance 12

from petitioner. The former admits that it has been collecting, in addition to the fees on vehicles, P0.50 for every sack of rice or corn that the latter has been shipping through the wharf.[16] The foregoing allegations are formal judicial admissions that are conclusive upon the parties making them. They require no further proof in accordance with Section 4 of Rule 129 of the Rules of Court, which reads: SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. Judicial admissions made by parties in the pleadings, in the course of the trial, or in other proceedings in the same case are conclusive. No further evidence is required to prove them. Moreover, they cannot be contradicted unless it is shown that they have been made through palpable mistake, or that they have not been made at all.[17] WHEREFORE, the Petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals are hereby SET ASIDE. The imposition of a service fee for police surveillance on all goods harbored or sheltered in the premises of the municipal port of Malangas under Sec. 5G.01 of the Malangas Municipal Revenue Code No. 09, series of 1993, is declared NULL AND VOID for being violative of Republic Act No. 7160. SO ORDERED. Puno, (Chairman), Sandoval-Gutierrez and Carpio-Morales, JJ., concur. Corona, J., on leave.

BATANGAS POWER CORPORATION VS. BATANGAS CITY

FACTS In the early 1990s, the country suffered from a crippling power crisis. The government, through the National Power Corporation (NPC), sought to attract investors in power plant operations by providing them with incentives, one of which was the NPCs assumption of their tax payments in the Build Operate and Transfer (BOT) Agreement. On June 29, 1993, Enron Power Development Corporation (Enron) and NPC entered into a Fast Track BOT Project. Enron agreed to supply a power station to NPC & transfer its plant to the latter after 10 years of operation. The BOT Agreement provided that NPC shall be responsible for the payment of all taxes imposed on the power station except income & permit fees. Subsequently, Enron assigned its obligation under the BOT Agreement to Batangas Power Corporation (BPC). On September 23, 1992, the BOI issued a certificate of registration to BPC as a pioneer enterprise entitled to a tax holiday of 6 years. On October 12, 1998, Batangas City sent a letter to BPC demanding payment of business taxes & penalties. BPC refused to pay citing its tax exemption as a pioneer enterprise for 6 years under Sec.133(g) of the LGC. The citys tax claim was modified and it demanded payment of business taxes for the years 1998-1999. BPC still refused to pay the tax, insisting that the 6-year tax holiday commenced from the date of its commercial operation on July 16, 1993, not from the date of its BOI registration in September 1992. In the alternative, BPC asserted that the city should collect the taxes from NPC since the latter assumed responsibility for their payment under the BOT Agreement. The NPC intervened that while it admitted assumption of the BPCs tax obligations under the BOT Agreement, it refused to pay BPCs business tax as it allegedly constituted an indirect tax on NPC which is a tax-exempt corporation under its Charter. BPC filed a petition for declaratory relief with the Makati RTC against Batangas City & NPC alleging that under the BOT Agreement, NPC is responsible for the payment of such taxes but since it is exempt from such, both the BPC and NPC arent liable for its payment. ISSUES 1. Whether BPCs 6-year tax holiday commenced on the day of its registration or on the date of its actual commercial 13

operation as certified by the BOI. 2. Whether NPCs tax exemption privileges under its Charter were withdrawn by Sec.193 of the LGC. HELD 1. Sec.133(g) of the LGC applies specifically to taxes imposed by the local government. The provision of the LGC should apply on the tax claim of Batangas City against the BPC. The 6-years tax claim should thus commence from the date of BPCs registration with the BOI on July 16, 1993 and end on July 15, 1999. 2. In the case of NPC vs. City of Cabanatuan, the removal of the blanket exclusion of government instrumentalities from local taxation is recognized as one of the most significant provisions of the 1991 LGC. Sec.193 of the LGC withdrew the sweeping tax privileges previously enjoined by the NPC under its Charter. The power to tax is no longer exclusively vested on Congress; local legislative bodies are now given authority to levy taxes, fees and other charges pursuant to Art.X, Sec.5 of the 1987 Constitution. The LGC effectively deals with the fiscal constraints faced by the LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws. When NPC assumed tax liabilities of the BPC under their 1992 BOT Agreement, the LGC which removed NPCs tax exemption privileges had already been in effect for 6 months. Thus, while the BPC remains to be the entity doing business in the city, it is the NPC that is ultimately liable to pay said taxes under the provisions of both the 1992 BOT Agreement & the 1991 LGC.

MANILA INTERNATIONAL AIRPORT AUTHORITY vs. COURT OF APPEALS G.R. No. 155650 July 20, 2006 Facts: MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. MIAAs real estate tax delinquency was estimated at P624 million. The City of Paraaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. Paranaques Contention: Section 193 of the Local Government Code expressly withdrew the tax exemption privileges of government-owned and-controlled corporations upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax. MIAAs contention: Airport Lands and Buildings are owned by the Republic. The government cannot tax itself. The reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor. Issue: 14

WON Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws? Yes. Ergo, the real estate tax assessments issued by the City of Paraaque, and all proceedings taken pursuant to such assessments, are void. Held: 1. MIAA is Not a Government-Owned or Controlled Corporation MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. MIAA is also not a non-stock corporation because it has no members. A non-stock corporation must have members. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. When the law vests in a government instrumentality corporate powers, the instrumentality does not 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. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order. 2. Airport Lands and Buildings of MIAA are Owned by the Republic a. Airport Lands and Buildings are of Public Dominion The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned by the State. The term ports includes seaports and airports. The MIAA Airport Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one intended for public use. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for 15

public use. Such fees are often termed users tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. b. Airport Lands and Buildings are Outside the Commerce of Man The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale. Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax. c. MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. n MIAAs case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance. d. Transfer to MIAA was Meant to Implement a Reorganization The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely toreorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAAs assets adverse to the Republic. e. Real Property Owned by the Republic is Not Taxable Sec 234 of the LGC provides that 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 following are exempted from payment of the real property 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.

16

LTO VS. CITY OF BUTUAN; POWER OF LGU

Facts: Relying on the fiscal autonomy granted to LGU's by the Constittuion and the provisons of the Local Government Code, the Sangguniang Panglunsod of the City of Butuan enacted an ordinance "Regulating the Operation of Tricyclesfor-Hire, providing mechanism for the issuance of Franchise, Registration and Permit, and Imposing Penalties for Violations thereof and for other Purposes." The ordinance provided for, among other things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a permit for the driving thereof. Petitioner LTO explains that one of the functions of the national government that, indeed, has been transferred to local government units is the franchising authority over tricycles-for-hire of the Land Transportation Franchising and Regulatory Board ("LTFRB") but not, it asseverates, the authority of LTO to register all motor vehicles and to issue to qualified persons of licenses to drive such vehicles. The RTC and CA ruled that the power to give registration and license for driving tricycles has been devolved to LGU's. Issue: Whether or not, the registration of tricycles was given to LGU's, hence the ordinance is a valid exercise of police power. Ruling: No, based on the-"Guidelines to Implement the Devolution of LTFRBs Franchising Authority over Tricycles-For-Hire to Local Government units pursuant to the Local Government Code"- the newly delegated powers to LGU's pertain to the franchising and regulatory powers exercised by the LTFRB and not to the functions of the LTO relative to the registration of motor vehicles and issuance of licenses for the driving thereof. Corollarily, the exercised of a police power must be through a valid delegation. In this case the police power of registering tricycles was not delegated to the LGUs , but remained in the LTO. Clearly unaffected by the Local Government Code are the powers of LTO under R.A. No.4136 requiring the registration of all kinds of motor vehicles "used or operated on or upon any public highway" in the country. The Commissioner of Land Transportation and his deputies are empowered at anytime to examine and inspect such motor vehicles to determine whether said vehicles are registered, or are unsightly, unsafe, improperly marked or equipped, or otherwise unfit to be operated on because of possible excessive damage to highways, bridges and other infrastructures. The LTO is additionally charged with being the central repository and custodian of all records of all motor vehicles. Adds the Court, the reliance made by respondents on the broad taxing power of local government units, specifically under Section 133 of the Local Government Code, is tangential. Police power and taxation, along with eminent domain, are inherent powers of sovereignty which the State might share with local government units by delegation given under a constitutional or a statutory fiat. All these inherent powers are for a public purpose and legislative in nature but the similarities just about end there. The basic aim of police power is public good and welfare. Taxation, in its case, focuses on the power of government to raise revenue in order to support its existence and carry out its legitimate objectives. Although correlative to each other in many respects, the grant of one does not necessarily carry with it the grant of the other. The two powers are, by tradition and jurisprudence, separate and distinct powers, varying in their respective concepts, character, scopes and limitations. To construe the tax provisions of Section 133 (1) of the LGC indistinctively would result in the repeal to that extent of LTO's regulatory power which evidently has not been intended. If it were otherwise, the law could have just said so in Section 447 and 458 of Book III of the Local Government Code in the same manner that the specific devolution of LTFRB's power on franchising of tricycles has been provided. Repeal by implication is not favored. The power over tricycles granted under Section 458(a)(3)(VI) of the Local Government Code to LGUs is the power to regulate their operation and to grant franchises for the operation thereof. The exclusionary clause contained in the tax provisions of Section 133 (1) of the Local Government Code must not be held to have had the effect of withdrawing the express power of LTO to cause the registration of all motor vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are essentially regulatory in nature, exercised pursuant to the police power of the State, whose basic objectives are to achieve road safety by insuring the road worthiness of these motor vehicles and the competence of 17

drivers prescribed by R. A. 4136. Not insignificant is the rule that a statute must not be construed in isolation but must be taken in harmony with the extant body of laws. LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant franchises for the operation thereof, and not to issue registration. Ergo, the ordinance being repugnant to a statute is void and ultra vires.

PETRON CORPORATION v. MAYOR TOBIAS M. TIANGCO and MUNICIPAL TREASURER MANUEL T. ENRIQUEZ of the MUNIPALITY OF NAVOTAS, METRO MANILA

While local government units are authorized to burden all such other class of goods with taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

In accordance to the New Navotas Revenue Code or Ordinance 92-03, petitioner Petron Corporation was assessed a total tax of P6,259,087.62. Petron filed a letter protest arguing that it is exempt from paying local business taxes as provided by Article 232 (h) of the Implementing Rules of the Local Government Code. The letter-protest was denied. A Complaint for Cancellation of Assessment was filed before the Regional Trial Court (RTC) of Malabon. The RTC dismissed the Complaint and required Petron to pay the assessed tax. A Motion for Reconsideration was filed but it was later denied by the court. Hence, the filing of this petition. ISSUE: Whether or not a local government unit is empowered under the Local Government Code (LGC) to impose business taxes on persons or entities engaged in the sale of petroleum HELD: Petition GRANTED. Section 133(h) of the LGC reads as follows: 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: xxx (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; Evidently, Section 133 prescribes the limitations on the capacity of local government units to exercise their taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local government units, namely: excise taxes on articles enumerated under the National Internal Revenue Code [(NIRC)], as amended; and taxes, fees or charges on petroleum products. The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the provision, a municipality is authorized to impose business taxes on a whole host of business activities. Suffice it to say, unless there is another provision of law which states otherwise, Section 143, broad in scope as it is, would undoubtedly cover the business of selling diesel fuels, or any other petroleum product for that matter. Section 133(h) provides two kinds of taxes which cannot be imposed by local government units: excise taxes on articles 18

enumerated under the NIRC, as amended; and taxes, fees or charges on petroleum products. There is no dou bt that among the excise taxes on articles enumerated under the NIRC are those levied on petroleum products, per Section 148 of the NIRC. The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically enumerates several types of business on which it may impose taxes, including manufacturers, wholesalers, distributors, dealers of any article of commerce of whatever nature; those engaged in the export or commerce of essential commodities; retailers; contractors and other independent contractors; banks and financial institutions; and peddlers engaged in the sale of any merchandise or article of commerce. This obviously broad power is further supplemented by paragraph (h) of Section 143 which authorizes the sanggunian to impose taxes on any other businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax. This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987 Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges, though the power is subject to such guidelines and limitations as the Congress may provide. There is no doubt that following the 1987 Constitution and the Code, the fiscal autonomy of local government units has received greater affirmation than ever. Previous decisions that have been skeptical of the viability, if not the wisdom of reposing fiscal autonomy to local government units have fallen by the wayside. Section 5(a) of the Code states that [a]ny provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. But somewhat conversely, Section 5(b) then proceeds to assert that [i]n case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer. And this latter qualification has to be respected as a constitutionally authorized limitation which Congress has seen fit to provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the power of local government units to impose taxes. Section 133(h) states that local government units shall not extend to the levy of xxx taxes, fees or charges on petroleum products. Respondents assert that the phrase taxes, fees or charges on petroleum products pertains to the imposition of direct or excise taxes on petroleum products, and not business taxes. If the phrase actually pertains to excise taxes, then it would be an exercise in utter redundancy, since the preceding phrase already prohibits the imposition of excise taxes on articles already subject to such taxes under the NIRC, such as petroleum products. There would be no sense on the part of the legislature to twice emphasize in the same sentence that excise taxes on petroleum products are beyond the pale of local government taxation. The Court concedes that a tax on a business is distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase taxes, fees or charges on petroleum products does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. It would have been a different matter had Congress, in crafting Section 133(h), barred excise taxes or direct taxes, or any category of taxes only, for then it would be understood that only such specified taxes on petroleum products could not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish. The language of Section 133(h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all taxes, fees and charges. The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to taxes, fees and charges pertains only to one class of articles of the many subjects of excise taxes, specifically, petroleum products. While local government units are authorized to burden all such other class of goods with taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

19

[G.R. No. 119122. August 8, 2000] PHILIPPINE BASKETBALL ASSOCIATION, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS, AND COMMISSIONER OF INTERNAL REVENUE, respondents. DECISION PURISIMA, J.: At bar is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a review of the decision[1] of the Court of Appeals in CA-G.R. SP No. 34095 which affirmed the decision of the Court of Tax Appeals in C.T.A. Case No. 4419. The facts that matter are as follows: On June 21, 1989, the petitioner received an assessment letter from the Commissioner of Internal Revenue (respondent Commissioner) for the payment of deficiency amusement tax computed thus: Deficiency Amusement Tax Total gross receipts 1987 15% tax due thereon Less: Tax paid Deficiency amusement tax Add:....75% surcharge 20% interest (2 years) Total Amount Due & Collectible P19,970,928.00 2,995,639.20 602,063.35 P 2,393,575.85 1,795,181.89 __1,675,503.10

P 5,864,260.84

On July 18, 1989, petitioner contested the assessment by filing a protest with respondent Commissioner who denied the same on November 6, 1989. On January 8, 1990, petitioner filed a petition for review[2] with the Court of Tax Appeals (respondent CTA) questioning the denial by respondent Commissioner of its tax protest. On December 24, 1993, respondent CTA dismissed petitioners petition, holding: "WHEREFORE, in all the foregoing, herein petition for review is hereby DISMISSED for lack of merit and the Petitioner is hereby ORDERED to PAY to the Respondent the amount of P5,864,260.84 as deficiency amusement tax for the year 1987 plus 20% annual delinquency interest from July 22, 1989 which is the due date appearing on the notice and demand of the Commissioner (i.e. 30 days from receipt of the assessment) until fully paid pursuant to the provisions of Sections 248 and 249 (c) (3) of the Tax Code, as amended."[3] Petitioner presented a motion for reconsideration[4] of the said decision but the same was denied by respondent CTA in a resolution[5] dated April 8, 1994. Thereafter and within the reglementary period for interposing appeals, petitioner appealed the CTA decision to the Court of Appeals. On November 21, 1994, the Court of Appeals rendered its questioned Decision,[6] affirming the decision of the CTA and dismissing petitioners appeal. Petitioner filed a Motion for Reconsideration of said decision but to no 20

avail. The same was denied by the Court of Appeals in a Resolution[7] dated January 31, 1995. Hence, this petition. Undaunted, petitioner found its way to this Court via the present petition, contending that: "1. Respondent Court of Appeals erred in holding that the jurisdiction to collect amusement taxes of PBA games is vested in the national government to the exclusion of the local governments. "2. Respondent Court of Appeals erred in holding that Section 13 of the Local Tax Code of 1973 limits local government units to theaters, cinematographs, concert halls, circuses and other places of amusement in the collection of the amusement tax. "3. Respondent Court of Appeals erred in holding that Revenue Regulations No. 8-88 dated February 19, 1988 is an erroneous interpretation of law. "4. Respondent Court of Appeals erred in giving retroactive effect to the revocation of Revenue Regulations 8-88. "5. Respondent Court of Appeals erred when it failed to consider the provisions of P.D. 851 the franchise of Petitioner, Section 8 of which provides that amusement tax on admission receipts of Petitioner is 5%. "6. Respondent Court of Appeals erred in holding that the cession of advertising and streamer spaces in the venue to a third person is subject to amusement taxes. "7. Respondent Court of Appeals erred in holding that the cession of advertising and streamer spaces inside the venue is embraced within the term gross receipts as defined in Section 123 (6) of the Tax Code. "8. Respondent Court of Appeals erred in holding that the amusement tax liability of Petitioner is subject to a 75% surcharge." The issues for resolution in this case may be simplified as follows: 1. Is the amusement tax on admission tickets to PBA games a national or local tax? Otherwise put, who between the national government and local government should petitioner pay amusement taxes? 2. Is the cession of advertising and streamer spaces to Vintage Enterprises, Inc. (VEI) subject to the payment of amusement tax? 3. If ever petitioner is liable for the payment of deficiency amusement tax, is it liable to pay a seventy-five percent (75%) surcharge on the deficiency amount due? Petitioner contends that PD 231, otherwise known as the Local Tax Code of 1973, transferred the power and authority to levy and collect amusement taxes from the sale of admission tickets to places of amusement from the national government to the local governments. Petitioner cited BIR Memorandum Circular No. 49-73 providing that the power to levy and collect amusement tax on admission tickets was transferred to the local governments by virtue of the Local Tax Code; and BIR Ruling No. 231-86 which held that "the jurisdiction to levy amusement tax on gross receipts from admission tickets to places of amusement was transferred to local governments under P.D. No. 231, as amended."[8] Further, petitioner opined that even assuming arguendo that respondent Commissioner revoked BIR Ruling No. 231-86, the reversal, modification or revocation cannot be given retroactive effect since even as late as 1988 (BIR Memorandum Circular No. 8-88), respondent Commissioner still recognized the jurisdiction of local governments to collect amusement taxes. The Court is not persuaded by petitioners asseverations. The laws on the matter are succinct and clear and need no elaborate disquisition. Section 13 of the Local Tax Code provides: "Sec. 13. Amusement tax on admission. -The province shall impose a tax on admission to be collected from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement xxx." The foregoing provision of law in point indicates that the province can only impose a tax on admission from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. The authority to tax professional basketball games is not therein included, as the same is expressly embraced in PD 1959, which amended PD 1456 thus: 21

"SEC. 44. Section 268 of this Code, as amended, is hereby further amended to read as follows: Sec. 268. Amusement taxes. -- There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai, race tracks and bowling alleys, a tax equivalent to: 1. Eighteen per centum in the case of cockpits; 2. Eighteen per centum in the case of cabarets, night or day clubs; 3. Fifteen per centum in the case of boxing exhibitions; 4. Fifteen per centum in the case of professional basketball games as envisioned in Presidential Decree No. 871. Provided, however, That the tax herein shall be in lieu of all other percentage taxes of whatever nature and description; 5. Thirty per centum in the case of Jai-Alai and race tracks; and 6. Fifteen per centum in the case of bowling alleys of their gross receipts, irrespective of whether or not any amount is charged or paid for admission. For the purpose of the amusement tax, the term gross receipts embraces all the receipts of the proprietor, lessee or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. (A person or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.) The taxes imposed herein shall be payable at the end of each quarter and it shall be the duty of the proprietor, lessee, or operator concerned, as well as any party liable, within twenty days after the end of each quarter, to make a true and complete return of the amount of the gross receipts derived during the preceding quarter and pay the tax due thereon. If the tax is not paid within the time prescribed above, the amount of the tax shall be increased by twenty-five per centum, the increment to be part of the tax. In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax, in case any payment has been made on the basis of the return before the discovery of the falsity or fraud, a surcharge of fifty per centum of its amount. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the falsity or fraud, in which case, the amount so assessed shall be collected in the same manner as the tax." (underscoring ours) From the foregoing it is clear that the "proprietor, lessee or operator of xxx professional basketball games" is required to pay an amusement tax equivalent to fifteen per centum (15%) of their gross receipts to the Bureau of Internal Revenue, which payment is a national tax. The said payment of amusement tax is in lieu of all other percentage taxes of whatever nature and description. While Section 13 of the Local Tax Code mentions "other places of amusement", professional basketball games are definitely not within its scope. Under the principle of ejusdem generis, where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned.[9] Thus, in determining the meaning of the phrase "other places of amusement", one must refer to the prior enumeration of theaters, cinematographs, concert halls and circuses with artistic expression as their common characteristic. Professional basketball games do not fall under the same category as theaters, cinematographs, concert halls and circuses as the latter basically belong to artistic forms of entertainment while the former caters to sports and gaming. A historical analysis of pertinent laws does reveal the legislative intent to place professional basketball games within the ambit of a national tax. The Local Tax Code, which became effective on June 28, 1973, allowed the province to collect a tax on admission from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. On January 6, 1976, the operation of petitioner was placed under the supervision and regulation of the Games and Amusement Board by virtue of PD 871, with the proviso (Section 8) that "xxx all professional basketball games conducted by the Philippine Basketball Association shall only be subject to amusement tax of five per cent of the gross receipts from the sale of admission tickets." Then, on June 11, 1978, PD 1456 came into effect, increasing the amusement tax to ten per cent, with a categorical referral to PD 871, to wit, "[t]en per centum in the case of professional basketball games as envisioned in Presidential Decree No. 871 xxx." Later in 1984, PD 1959 increased the rate of amusement tax to fifteen percent 22

by making reference also to PD 871. With the reference to PD 871 by PD 1456 and PD 1959, there is a recognition under the laws of this country that the amusement tax on professional basketball games is a national, and not a local, tax. Even up to the present, the category of amusement taxes on professional basketball games as a national tax remains the same. This is so provided under Section 125[10] of the 1997 National Internal Revenue Code. Section 140[11] of the Local Government Code of 1992 (Republic Act 7160), meanwhile, retained the areas (theaters, cinematographs, concert halls, circuses and other places of amusement) where the province may levy an amusement tax without including therein professional basketball games. Likewise erroneous is the stance of petitioner that respondent Commissioners issuance of BIR Ruling No. 23186[12] and BIR Revenue Memorandum Circular No. 8-88[13] -- both upholding the authority of the local government to collect amusement taxes -- should bind the government or that, if there is any revocation or modification of said rule, the same should operate prospectively. It bears stressing that the government can never be in estoppel, particularly in matters involving taxes. It is a wellknown rule that erroneous application and enforcement of the law by public officers do not preclude subsequent correct application of the statute, and that the Government is never estopped by mistake or error on the part of its agents.[14] Untenable is the contention that income from the cession of streamer and advertising spaces to VEI is not subject to amusement tax. The questioned proviso may be found in Section 1 of PD 1456 which states: "SECTION 1. Section 268 of the National Internal Revenue Code of 1977, as amended, is hereby further amended to read as follows: Sec. 268. Amusement taxes. -- There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai, race tracks and bowling alleys, a tax equivalent to: xxx.....xxx.....xxx of their gross receipts, irrespective of whether or not any amount is charged or paid for admission. For the purpose of the amusement tax, the term gross receipts embraces all the receipts of the proprietor, lessee or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. (A person, or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.)" (underscoring ours) The foregoing definition of gross receipts is broad enough to embrace the cession of advertising and streamer spaces as the same embraces all the receipts of the proprietor, lessee or operator of the amusement place. The law being clear, there is no need for an extended interpretation.[15] The last issue for resolution concerns the liability of petitioner for the payment of surcharge and interest on the deficiency amount due. Petitioner contends that it is not liable, as it acted in good faith, having relied upon the issuances of the respondent Commissioner. This issue must necessarily fail as the same has never been posed as an issue before the respondent court. Issues not raised in the court a quocannot be raised for the first time on appeal.[16] All things studiedly considered, the Court rules that the petitioner is liable to pay amusement tax to the national government, and not to the local government, in accordance with the rates prescribed by PD 1959. WHEREFORE, the Petition is DENIED, and the Decisions of the Court of Appeals and Court of Tax Appeals dated November 21, 1994 and December 24, 1993, respectively AFFIRMED. No pronouncement as to costs. SO ORDERED.

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LEPANTO CONSOLIDATED MINING COMPANY VS. AMBANLOC- LOCAL BUSINESS TAXATION

FACTS: Lepanto Consolidated Mining had a mining lease contract for a mining claim in Benguet. They used the sand and gravel mined to construct and maintain concrete structures needed in its mining operations such as a tailings dam, access roads, and offices. The provincial treasurer of Benguet then asked Lepanto Consolidated Mining to pay sand and gravel tax for the quarry materials extracted from the mining site. The counterargument was that the said tax applied only to commercial extractions and since Lepanto did not supply other users for some profit, the tax should not apply. ISSUE: Is Lepanto liable for the tax imposed by Benguet on the sand and gravel that it extracted from within the area of its mining claim used exclusively in its mining operations? HELD: YES. The CTA erred in applying the provision of the Local Government Code (Section 138) since the basis of Benguet province emanates from the Revised Benguet Revenue Code itself. This notwithstanding, the provincial revenue measure still did not distinguish between commercial and non-commercial extractions. In addition, the Petitioners argument that when a company is taxed on its main business it can no longer be taxable for engaging in an activity that is but part of, incidental to, and necessary to such main business, was held to be inapplicable. The Court said that the cases where the above principle has been applied involved business taxes and thus the incidental activities could not be treated as separate and distinct from the main business. Here the tax being imposed was an excise tax levied on the privilege of extracting gravel and sand.

QUEZON CITY VS. ABS-CBN BROADCASTING CORPORATION FACTS: ABS-CBN was granted a franchise which provides that it shall pay a 3% franchise tax and the said percentage tax shall be in lieu of all taxes on this franchise or earnings thereof. It thus filed a complaint against the imposition of local franchise tax. ISSUE: Does the in lieu of all taxes provision in ABS-CBNs franchise exempt it from payment of the local franchise tax? HELD: NO. The right to exemption from local franchise tax must be clearly established beyond reasonable doubt and cannot be made out of inference or implications. The uncertainty over whether the in lieu of all taxes provision pertains to exemption from local or national taxes, or both, should be construed against Respondent who has the burden to prove that it is in fact covered by the exemption claimed. Furthermore, the in lieu of all taxes clause in Respondents franchise has become ineffective with the abolition of the franchise tax on broadcasting companies with yearly gross receipts exceeding P10 million as they are now subject to the VAT.

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YAMANE VS BA LEPANTO CONDOMINIUM CORPORATION In 1998, BA Lepanto Condominium Corporation (Lepanto) received a tax assessment in the amount of P1.6 million from Luz Yamane, the City Treasurer of Makati, for business taxes. Lepanto protested the assessment as it averred that Lepanto, as a corporation, is not organized for profit; that it merely exists for the maintenance of the condominium. Yamane denied the protest. Lepanto then appealed the denial to the RTC of Makati. RTC Makati affirmed the decision of Yamane. Lepanto then filed a petition for review under Rule 42 with the Court of Appeals. The Court of Appeals reversed the RTC. Yamane now filed a petition for review under Rule 45 with the Supreme Court. Yamane avers that a.) Lepanto is liable for local taxation because its act of maintaining the condominium is an activity for profit because the end result of such activity is the betterment of the market value of the condominium which makes it easier to sell it; that Lepanto is earning profit from fees collected from condominium unit owners; and that b.) Lepantos petition for review of the decision of the RTC to the CA is erroneous because when the RTC decided on the appeal brought to it by Lepanto, the RTC was exercising its original jurisdiction and not its appellate jurisdiction; that as such, what Lepanto should have done is to file an ordinary appeal under Rule 41. ISSUE: Whether or not a RTC deciding an appeal from the decision of a city treasurer on tax protests is exercising original jurisdiction. Whether or not a condominium corporation organized solely for the maintenance of a condominium is liable for local taxation. HELD: 1. Yes. Although the LGC (Section 195) provides that the remedy of the taxpayer whose protest is denied by the local treasurer is to appeal with the court of competent jurisdiction or in this case the RTC (considering the amount of tax liability is P1.6 million), such appeal when decided by the RTC is still in the exercise of its original jurisdiction and not its appellate jurisdiction. This is because appellate jurisdiction is defined as the authority of a court higher in rank to reexamine the final order or judgment of a lower court which tried the case now elevated for judicial review. Here, the City Treasurer is not a lower court. The Supreme Court however clarifies that this ruling is only applicable to similar cases before the passage of Republic Act 9282 (effective April 2004). Under RA 9282, the Court of Tax Appeals (CTA), not CA, exercises exclusive appellate jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases whether originally decided or resolved by them in the exercise of their original or appellate jurisdiction. 2. No. Lepanto was not organized for profit. The fees it was collecting from the condominium unit owners redound to the owners themselves because the fees collected are being used for the maintenance of the condo. Further, it appears that the assessment issued by Yamane did not state the legal basis for the tax being imposed on Lepanto it merely states that Makati is authorized to collect business taxes under the Local Government Code (LGC) but no other reference specific reference to specific laws were cited.

ERICSSON TELECOMMUNICATIONS, INC., vs. CITY OF PASIG, represented by its City Mayor, Hon. Vicente P. Eusebio, et al (G.R. No. 176667; November 22, 2007) Facts: 1. Ericsson Telecommunications, Inc. is a corporation engaged in the design, engineering, and marketing of telecommunication facilities/system with principal address at Pasig City 2. It was assessed by the City Treasurer of Pasig City of business tax deficiency for the years 1998 and 1999 and also for 2000 and 2001 based on its gross revenues. 3. Petitioner filed a Protest arguing that that the local business tax on contractors should be based on gross receipts and not gross revenue. Issue: What should be the basis of the local business tax? gross receipts or gross revenue? Held: The basis should be gross receipts Paragraph e, Section 143 of the Local Government Code provides that The municipality may impose taxes on the following businesses: (e) On contractors and other independent contractors, in accordance with the following schedule: 25

With gross receipts for the preceding calendar year in the amount of: The above provision specifically refers to gross receipts.

Amount of Tax Per Annum

Section 131 of the Local Government Code defines gross sales or receipts as follows: "Gross Sales or Receipts" - include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and the deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax, and valueadded tax (VAT); The law is clear. Gross receipts include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged or leased, whether actual or constructive. Gross Revenue - covers money or its equivalent actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received. This is in consonance with the International Financial Reporting Standards, which defines revenue as the gross inflow of economic benefits (cash, receivables, and other assets) arising from the ordinary operating activities of an enterprise (such as sales of goods, sales of services, interest, royalties, and dividends), which is measured at the fair value of the consideration received or receivable In petitioner's case, its audited financial statements reflect income or revenue which accrued to it during the taxable period although not yet actually or constructively received or paid. This is because petitioner uses the accrual method of accounting, where income is reportable when all the events have occurred that fix the taxpayer's right to receive the income, and the amount can be determined with reasonable accuracy; the right to receive income, and not the actual receipt, determines when to include the amount in gross income. The imposition of local business tax based on petitioner's gross revenue will inevitably result in the constitutionally proscribed double taxation taxing of the same person twice by the same jurisdiction for the same thing inasmuch as petitioner's revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid.

ANGELES CITY VS. ANGELES ELECTRIC CORPORATION

ISSUE: Can an injunction be issued to enjoin the collection of local taxes? HELD: YES. The Local Government Code does not specifically prohibit an injunction enjoining the collection of taxes. This is different in the case of national taxes where the Tax Code expressly provides that no court shall have the authority to grant an injunction to restrain the collection on national internal revenue tax, fee or charge with the sole exception of when the CTA finds that the collection thereof may jeopardize the interest of the government and/or the taxpayer. Nevertheless, there must still be proof of the existence of the requirements for injunction to be issued under the Rules of Court (i.e., clear right to be protected and urgent necessity to prevent serious damage). DRILON VS LIM GR No. 112497, August 4, 1994 FACTS: Pursuant to Section 187 of the Local Government Code, the Secretary of Justice had, on appeal to him of four oil companies and a taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null and void for 26

non-compliance with the prescribed procedure in the enactment of tax ordinances and for containing certain provisions contrary to law and public policy. In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila revoked the Secretarys resolution and sustained the ordinance, holding inter alia that the procedural requirements had been observed. More importantly, it declared Section 187 of the Local Government Code as unconstitutional because of its vesture in the Secretary of Justice of the power of control over local governments in violation of the policy of local autonomy mandated in the Constitution and of the specific provision therein conferring on the President of the Philippines only the power of supervision over local governments. The court cited the familiar distinction between control and supervision, the first being the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for the latter, while the second is the power of a superior officer to see to it that lower officers perform their functions is accordance with law. ISSUES: The issues in this case are (1) whether or not Section 187 of the Local Government Code is unconstitutional; and (2) whether or not the Secretary of Justice can exercise control, rather than supervision, over the local government HELD: The judgment of the lower court is reversed in so far as its declaration that Section 187 of the Local Government Code is unconstitutional but affirmed the said lower courts finding that the procedural requirements in the enactment of the Manila Revenue Code have been observed. Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. An officer in control lays down the rules in the doing of an act. It they are not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. In the opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this, and so performed an act not of control but of mere supervision. Regarding the issue on the non-compliance with the prescribed procedure in the enactment of the Manila Revenue Code, the Court carefully examined every exhibit and agree with the trial court that the procedural requirements have indeed been observed. The only exceptions are the posting of the ordinance as approved but this omission does not affect its validity, considering that its publication in three successive issues of a newspaper of general circulation will satisfy due process. JARDINE DAVIES VS. JUDGE ALIPOSA DECISION CALLEJO, SR., J.: Pursuant to Republic Act No. 7160, otherwise known as the Local Government Code of 1991, the then Sangguniang Bayan of Makati enacted Municipal Ordinance No. 92-072, otherwise known as the Makati Revenue Code, which provides, inter alia, for the schedule of real estate, business and franchise taxes in the Municipality of Makati at rates higher than those in the Metro Manila Revenue Code. On May 10, 1993, the Philippine Racing Club, Inc. (PRCI for brevity), a taxpayer of Makati, appealed to the Department of Justice (DOJ for brevity) for the nullification of said ordinance, alleging that it was approved without previous public hearings, in violation of the Local Government Code and Article 276 of its Implementing Rules, and that some of the ordinances provisions were unconstitutional: (2) The in-lieu-of-all-taxes clause of the franchise of the Philippine Racing Club, Inc. exempts it from payment of the real property tax, annual business tax and other new taxes imposed by the ordinance here in question. To withdraw the exemption would impair the obligation of contract in violation of its constitutional right as franchise holder. 27

(3) The imposition of the franchise tax is not within the scope of the taxing powers of the Municipality of Makati (Sections 134, 137 and 142 of Republic Act No. 7160 and Articles 223, 226 and 231 of Rule XXX of the Implementing Rules and Regulations of the Local Government Code of 1991). and (4) The Municipality of Makati already shares 5 of the 25% franchise tax provided for in Section 8 of the franchise of the Philippine Racing Club, Inc. To allow the said municipality to impose another franchise tax and to base the tax on the gross annual receipts, as it does in the ordinance, would certainly be unjust, excessive, oppressive or confiscatory (Section 130 of Republic Act No. 7160 and Article 219 of Rule XXX of the Implementing Rules and Regulations).1[1] Although required by the DOJ to comment on the appeal, respondent Makati failed to do so. On July 5, 1993, the DOJ came out with a resolution2[2] declaring null and void and without legal effect the said ordinance for having been enacted in contravention of Section 187 of the Local Government Code of 1991 and its implementing rules and regulations.3[3] On August 19, 1993, respondent Makati sought a reconsideration of the ruling of the DOJ. Pending resolution of its motion, said respondent filed a petition ad cautelam4[4] with the Regional Trial Court (RTC) of Makati, entitled Hon. Jejomar C. Binay and the Municipality of Makati, Petitioners, v. Hon. Franklin M. Drilon, Department of Justice and Philippine Racing Club, Inc., Respondents, and docketed as Case No. 93-2844. The case was raffled to Branch 148 of the Makati RTC. Respondent Makati alleged, inter alia, that public hearings were conducted before the approval of the ordinance and hence the ordinance was valid. It prayed that after due proceedings judgment be rendered in its favor, thus: WHEREFORE, petitioners respectfully pray that this Honorable Court promulgate judgment: (a) (b) declaring null and void the DOJ Decision dated July 5, 1993; and allowing the full implementation of Makati Municipal Ordinance No. 92-072.

Petitioners pray for such further or other reliefs as this Honorable Court may deem just and equitable.5[5] In the meantime, respondent Makati continued to implement the ordinance. Petitioner Jardine Davies Insurance Brokers, Inc., a duly-organized corporation with principal place of business at No. 222 Sen. Gil J. Puyat Avenue, Makati, Metro Manila, was assessed and billed by Makati the amount of P63,822.47 for taxes, fees and charges under the ordinance for the second quarter of 1993. It was again billed by respondent Makati the same amount for the third quarter of 1993 and the same amount for the fourth quarter of 1993. Petitioner did not protest the assessment for its quarterly business taxes for the second, third and fourth quarters of 1993 based on said ordinance effective April 1, 1993. Petitioner, in fact, paid the said amounts on April 26, 1993 (for the second quarter), July 12, 1993 (for the third quarter) and October 19, 1993

1[1]

Original Records, pp. 16- 17. at 15.

2[2]Id. 3[3]

SECTION 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings. The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

28

(for the fourth quarter), respectively, without any protest. Respondent Makati issued the corresponding receipts in favor of petitioner.6[6] On January 30, 1994, petitioner wrote the municipal treasurer of Makati requesting that respondent Makati compute its business tax liabilities in accordance with the Metro Manila Revenue Code and not under the ordinance considering that said ordinance was already declared by the DOJ null and void. Petitioner likewise requested that respondent Makati credit the overpayment in the total amount of P27,854.91 for the second to fourth quarters of 1993 against its 1994 liabilities for 1994, or in the alternative, for Makati to refund the said amount to petitioner. In a Letter7[7] dated February 4, 1994, respondent Makati, through Maximo L. Paulino Jr., Acting Chief of its Municipal License Division, denied the request of petitioner for tax credit/refund. Respondent Makati insisted that the questioned ordinance code was valid and enforceable pending the final outcome of its petition ad cautelam with the Regional Trial Court of Makati. In the meantime, on October 26, 1993, the RTC rendered judgment in Case No. 93-2844 granting the petition of Makati and declaring the ordinance valid. On November 9, 1993, the DOJ issued a memorandum to the Chief State Counsel directing the latter to refrain from accepting any appeal or to act on pending appeals on the validity/constitutionality of the ordinance until the same shall have been finally resolved by courts of competent jurisdiction. When informed of the denial by respondent Makati of its letter-request, petitioner filed a complaint on March 7, 1994 with the RTC of Makati against respondents Makati and its Acting Municipal Treasurer. The case was raffled to Branch 150 of said court. Petitioner alleged in its complaint that in view of the resolution of the DOJ declaring the Makati Revenue Code null and void and without legal effect, the provisions of the Metro Manila Revenue Code continued to remain in full force and effect; however, petitioner was assessed and billed by respondent Makati for taxes, fees and charges for second, third and fourth quarters for 1993 beginning on April 4, 1993 up to October 14, 1994 at rates fixed in the ordinance despite the nullity thereof. Petitioner prayed that after due proceedings judgment be rendered as follows: 1. Declaring as NULL AND VOID Municipal Ordinance No. 92-072, (Makati Revenue Code) of the Municipality of Makati and ordering Defendants to refund or issue as tax credit in favor of Plaintiff the sum of P27,854.91 plus interest. 2. Assuming without admitting that the Municipal Ordinance No. 92-072 (Makati Revenue Code) is valid, declaring that the rates imposed by said ordinance accrue only on July 1, 1993 and ordering Defendants to refund or issue as tax credit in favor of Plaintiff the sum of P9,284.97.8[8] On May 18, 1994, respondents Makati and its Acting Municipal Treasurer filed a motion to dismiss9[9] the complaint on the ground of prematurity. They argued that petitioners cause of action was predicated on the appealed resolution of the DOJ, and unless and until nullified by final judgment of a competent court, the ordinance remained in full force and effect. On May 26, 1994, petitioner opposed the motion to dismiss of respondents, contending that its complaint was not predicated solely on the invalidity and unconstitutionality of the ordinance but also on its claim that the ordinance took effect only in July 1, 1993 but Makati applied the ordinance effective April 1, 1993. Petitioner further averred that under Section 166 of the Local Government Code, new taxes, fees or charges or charges provided for in the ordinance shall accrue on the first day of the quarter following the effectivity of the new ordinance. Hence, assuming that the tax ordinance was valid, the same should have been enforced only from the first (1st) day of the quarter following next the effectivity of the ordinance imposing such new levies or rates as provided for in Section 166 of the Local Government Code.

29

On August 29, 1994, the RTC issued an order granting the motion to dismiss of respondent and ordering the dismissal of the complaint. The trial court ruled that plaintiffs cause of action, if any, had prescribed. Citing Sections 187 and 195 of the Local Government Code of 1991, the trial court ratiocinated that petitioner failed to file an opposition or protest to the written notice of assessment of Makati for taxes, fees and charges at rates provided for in the ordinance within 60 days from the notice of said assessment as required by Section 195 of the Local Government Code. Hence, petitioner was barred from demanding a refund of its payment or that it be credited for said amounts. Petitioner received a copy of said order on October 7, 1994. On October 13, 1994, petitioner filed with the trial court a motion for reconsideration10[10] of the order of dismissal, arguing that the trial court erred in applying Section 195 of the Local Government Code of 1991 as its complaint did not involve an assessment for deficiency taxes but one for refund/tax credit. Petitioner further claimed that it was never served with any notice of assessment from respondents and hence there was no need for petitioner to protest. Petitioner argued that what was applicable was Section 196 of the Local Government Code in conjunction with Article 286 of its Implementing Rules and Regulations, both of which simply require the filing of a written claim for refund or tax credit within two years from the date of payment. On December 28, 1994, the trial court issued an order11[11] denying the motion for reconsideration of petitioner, a copy of which was served on petitioner on February 13, 1995. The trial court declared that Section 195 of the Local Government Code covers all kinds of assessments and not merely deficiency assessments for taxes, fees or charges. The trial court further ruled that the issue of the validity and constitutionality of the ordinance was still pending resolution by Branch 148 of the RTC in Civil Case No. 93-2844 and until declared null and void, otherwise by final judgment, the ordinance remained valid. Petitioner filed on February 20, 1995 a petition for review on certiorari under Rule 45 of the Rules of Court, contending that: RESPONDENT JUDGE ERRED IN HOLDING THAT THE INSTANT CASE IS NOT A CLAIM FOR REFUND UNDER SECTION 196 OF THE LGC IN RELATION TO ARTICLE 286 OF ITS IMPLEMENTING RULES, BUT A DEFICIENCY ASSESSMENT THAT HAS TO BE PROTESTED UNDER SECTION 195 OF THE SAME CODE. RESPONDENT JUDGE ERRED IN DISMISSING THE CASE ON THE GROUND OF PENDENCY OF ANOTHER ACTION CONTESTING THE LEGALITY OR CONSTITUTIONALITY OF THE MAKATI REVENUE CODE IS STILL BEING DETERMINED IN BRANCH 148 OF THE REGIONAL TRIAL COURT OF MAKATI.12[12] Anent the first assignment of errors, petitioner avers that its action in the RTC was one for a refund of its overpayments governed by Article 196 of the Local Government Code implemented by Article 286 of the Implementing Rules and Regulations of the Code and not one involving an assessment for deficiency taxes governed by Section 195 of the said Code. Petitioner contends that it was not mandated to first file a protest with respondents before instituting its action for a refund of its overpayments or for it to be credited for said overpayments. For its part, respondent Makati avers that petitioner was proscribed from filing its complaint with the RTC and for a refund of its alleged overpayment, petitioner having paid without any protest the taxes due to respondent Makati under the ordinance. It is further asserted by respondent Makati that until declared null and void by a competent court, the ordinance was valid and should be enforced. The petition has no merit. The Court agrees with petitioner that as a general precept, a taxpayer may file a complaint assailing the validity of the ordinance and praying for a refund of its perceived overpayments without first filing a protest to the payment of taxes due under the ordinance. This was our ruling in Ty v. Judge Trampe:13[13]

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. . . Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to fir st pay the tax under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench, however, the petitioners are 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 are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase. In this case, petitioner, relying on the resolution of the Secretary of Justice in The Philippine Racing Club, Inc. v. Municipality of Makati case, posited in its complaint that the ordinance which was the basis of respondent Makati for the collection of taxes from petitioner was null and void. However, the Court agrees with the contention of respondents that petitioner was proscribed from filing its complaint with the RTC of Makati for the reason that petitioner failed to appeal to the Secretary of Justice within 30 days from the effectivity date of the ordinance as mandated by Section 187 of the Local Government Code which reads: Sec. 187-Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings.- Theprocedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. In Reyes v. Court of Appeals,14[14] we ruled that failure of a taxpayer to interpose the requisite appeal to the Secretary of Justice is fatal to its complaint for a refund: Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seek relief in court. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. For this reason the courts construe these provisions of statutes as mandatory. A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people. Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. In the instant case, it is our view that the failure of petitioners to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause. Moreover, petitioner even paid without any protest the amounts of taxes assessed by respondents Makati and Acting Treasurer as provided for in the ordinance. Evidently, the complaint of petitioner with the Regional Trial Court was merely an afterthought. In view of our foregoing disquisitions, the Court no longer deems it necessary to resolve other issues posed by petitioner. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The order of the Regional Trial Court dismissing the complaint of petitioner is AFFIRMED. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing and Austria-Martinez, JJ., concur.

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Yamane vs Lepanto Taxation Tax Remedies Local Taxation Original & Appellate Jurisdiction in Tax Cases In 1998, BA Lepanto Condominium Corporation (Lepanto) received a tax assessment in the amount of P1.6 million from Luz Yamane, the City Treasurer of Makati, for business taxes. Lepanto protested the assessment as it averred that Lepanto, as a corporation, is not organized for profit; that it merely exists for the maintenance of the condominium. Yamane denied the protest. Lepanto then appealed the denial to the RTC of Makati. RTC Makati affirmed the decision of Yamane. Lepanto then filed a petition for review under Rule 42 with the Court of Appeals. The Court of Appeals reversed the RTC. Yamane now filed a petition for review under Rule 45 with the Supreme Court. Yamane avers that a.) Lepanto is liable for local taxation because its act of maintaining the condominium is an activity for profit because the end result of such activity is the betterment of the market value of the condominium which makes it easier to sell it; that Lepanto is earning profit from fees collected from condominium unit owners; and that b.) Lepantos petition for review of the decision of the RTC to the CA is erroneous because when the RTC decided on the appeal brought to it by Lepanto, the RTC was exercising its original jurisdiction and not its appellate jurisdiction; that as such, what Lepanto should have done is to file an ordinary appeal under Rule 41. ISSUE: Whether or not a RTC deciding an appeal from the decision of a city treasurer on tax protests is exercising original jurisdiction. Whether or not a condominium corporation organized solely for the maintenance of a condominium is liable for local taxation. HELD: 1. Yes. Although the LGC (Section 195) provides that the remedy of the taxpayer whose protest is denied by the local treasurer is to appeal with the court of competent jurisdiction or in this case the RTC (considering the amount of tax liability is P1.6 million), such appeal when decided by the RTC is still in the exercise of its original jurisdiction and not its appellate jurisdiction. This is because appellate jurisdiction is defined as the authority of a court higher in rank to reexamine the final order or judgment of a lower court which tried the case now elevated for judicial review . Here, the City Treasurer is not a lower court. The Supreme Court however clarifies that this ruling is only applicable to similar cases before the passage of Republic Act 9282 (effective April 2004). Under RA 9282, the Court of Tax Appeals (CTA), not CA, exercises exclusive appellate jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases whether originally decided or resolved by them in the exercise of their original or appellate jurisdiction. 2. No. Lepanto was not organized for profit. The fees it was collecting from the condominium unit owners redound to the owners themselves because the fees collected are being used for the maintenance of the condo. Further, it appears that the assessment issued by Yamane did not state the legal basis for the tax being imposed on Lepanto it merely states that Makati is authorized to collect business taxes under the Local Government Code (LGC) but no other reference specific reference to specific laws were cited.

CALTEX vs CBAA G.R. No. L-50466 May 31, 1982 CALTEX (PHILIPPINES) INC., petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents.

AQUINO, J.: This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located on leased land. The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor described the said equipment and machinery in this manner: 32

A gasoline service station is a piece of lot where a building or shed is erected, a water tank if there is any is placed in one corner of the lot, car hoists are placed in an adjacent shed, an air compressor is attached in the wall of the shed or at the concrete wall fence. The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more or less, a few meters away from the shed. This is done to prevent conflagration because gasoline and other combustible oil are very inflammable. This underground tank is connected with a steel pipe to the gasoline pump and the gasoline pump is commonly placed or constructed under the shed. The footing of the pump is a cement pad and this cement pad is imbedded in the pavement under the shed, and evidence that the gasoline underground tank is attached and connected to the shed or building through the pipe to the pump and the pump is attached and affixed to the cement pad and pavement covered by the roof of the building or shed. The building or shed, the elevated water tank, the car hoist under a separate shed, the air compressor, the underground gasoline tank, neon lights signboard, concrete fence and pavement and the lot where they are all placed or erected, all of them used in the pursuance of the gasoline service station business formed the entire gasoline service-station. As to whether the subject properties are attached and affixed to the tenement, it is clear they are, for the tenement we consider in this particular case are (is) the pavement covering the entire lot which was constructed by the owner of the gasoline station and the improvement which holds all the properties under question, they are attached and affixed to the pavement and to the improvement. The pavement covering the entire lot of the gasoline service station, as well as all the improvements, machines, equipments and apparatus are allowed by Caltex (Philippines) Inc. ... The underground gasoline tank is attached to the shed by the steel pipe to the pump, so with the water tank it is connected also by a steel pipe to the pavement, then to the electric motor which electric motor is placed under the shed. So to say that the gasoline pumps, water pumps and underground tanks are outside of the service station, and to consider only the building as the service station is grossly erroneous. (pp. 5860, Rollo). The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt. It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in good condition as when received, ordinary wear and tear excepted. The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed therein. Caltex retains the ownership thereof during the term of the lease. The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty. The realty tax on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are personalty. The assessor appealed to the Central Board of Assessment Appeals. The Board, which was composed of Secretary of Finance Cesar Virata as chairman, Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of Local Government and Community Development Jose Roo, held in its decision of June 3, 1977 that the said machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974, and that the definitions of real property and personal property in articles 415 and 416 of the Civil Code are not applicable to this case. The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) in its resolution of January 12, 1978, denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on April 2, 1979. On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a declaration that t he said machines and equipment are personal property not subject to realty tax (p. 16, Rollo). The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate jurisdiction over this case is not correct. When Republic act No. 1125 created the Tax Court in 1954, there was as yet no Central Board of Assessment Appeals. Section 7(3) of that law in providing that the Tax Court had jurisdiction to review by appeal decisions of provincial or city boards of assessment appeals had in mind the local boards of assessment appeals but not the Central Board of Assessment Appeals which under the Real Property Tax Code has appellate jurisdiction over decisions of the said local boards of assessment appeals and is, therefore, in the same category as the Tax Court. 33

Section 36 of the Real Property Tax Code provides that the decision of the Central Board of Assessment Appeals shall become final and executory after the lapse of fifteen days from the receipt of its decision by the appellant. Within that fifteen-day period, a petition for reconsideration may be filed. The Code does not provide for the review of the Board's decision by this Court. Consequently, the only remedy available for seeking a review by this Court of the decision of the Central Board of Assessment Appeals is the special civil action of certiorari, the recourse resorted to herein by Caltex (Philippines), Inc. The issue is whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax. This issue has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code. Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the Real Property Tax Code which provides: SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted. The Code contains the following definitions in its section 3: k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes. m) Machinery shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached to the real estate. It includes the physical facilities available for production, as well as the installations and appurtenant service facilities, together with all other equipment designed for or essential to its manufacturing, industrial or agricultural purposes (See sec. 3[f], Assessment Law). We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. Caltex invokes the rule that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709). That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real property by destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of cement and installed by the lessee on leased land should be regarded as real property for purposes of execution of a judgment against the lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff's action. (Compare with Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as realty). Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas station and pavement (which are indubitably taxable realty) should be subject to the realty tax. This question is different from the issue raised in the Davao Saw Mill case. Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633). This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The steel towers were considered personalty because they were attached to square metal frames by means of bolts and could be moved from place to place when unscrewed and dismantled. Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company which were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501). 34

The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is imposition of the realty tax on Caltex's gas station and equipment. WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The petition for certiorari is dismissed for lack of merit. No costs. SO ORDERED. Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur. Concepcion, Jr. and Abad Santos, JJ., took no part. MIAA VS PARANAQUE MANILA INTERNATIONAL AIRPORT AUTHORITY vs. COURT OF APPEALS G.R. No. 155650 July 20, 2006 Facts: MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. MIAAs real estate tax delinquency was estimated at P624 million. The City of Paraaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. Paranaques Contention: Section 193 of the Local Government Code expressly withdrew the tax exemption privileges of government-owned and-controlled corporations upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax. MIAAs contention: Airport Lands and Buildings are owned by the Republic. The government cannot tax itself. The reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor. Issue: WON Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws? Yes. Ergo, the real estate tax assessments issued by the City of Paraaque, and all proceedings taken pursuant to such assessments, are void. Held: 1. MIAA is Not a Government-Owned or Controlled Corporation MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. MIAA is also not a non-stock corporation because it has no members. A non-stock corporation must have members. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. When the law vests in a government instrumentality corporate powers, the instrumentality does not 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. Thus, MIAA exercises the governmental 35

powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order. 2. Airport Lands and Buildings of MIAA are Owned by the Republic a. Airport Lands and Buildings are of Public Dominion The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned by the State. The term ports includes seaports and airports. The MIAA Airport Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one intended for public use. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed users tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. b. Airport Lands and Buildings are Outside the Commerce of Man The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale. Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax. c. MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. n MIAAs case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance. d. Transfer to MIAA was Meant to Implement a Reorganization The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely toreorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAAs assets adverse to the Republic. e. Real Property Owned by the Republic is Not Taxable Sec 234 of the LGC provides that 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 following are exempted from payment of the real property 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 36

MIAA VS. CITY OF PASAY MIAA VS. CITY OF PASAY April 02, 2009 G.R. No. 163072 FACTS:

Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903),3otherwise known as the Revised Charter of the Manila International Airport Authority, issued by then President Ferdinand E. Marcos. The NAIA Complex is located along the border between Pasay City and Paraaque City. MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. The Court of Appeals upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. ISSUE: The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax. RULING:

The Supreme Court held thatthe 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 areproperty of public dominion: (1) Thoseintended for public use, such as roads, canals, rivers, torrents,portsand bridges constructed by the State, banks, shores, roadsteads, andothers of similar character; (2) Those which belong to the State, without being for public use, and areintended for some public serviceor for the development of the national wealth. The term "portsx x xconstructed by the State" includesairportsand 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 areproperties of public dominion. As properties of public dominion, 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.

LUNG CENTER OF THE PHIL. VS QC CALLEJO, SR., J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the Decision 1 dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which affirmed the decision of the Central Board of Assessment Appeals holding that the lot owned by the petitioner and its hospital building constructed thereon are subject to assessment for purposes of real property tax. The Antecedents The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January 16, 1981 by virtue of Presidential Decree No. 1823.2 It is the registered owner of a parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon Avenue corner Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters and is covered by Transfer Certificate of Title (TCT) No. 261320 of the Registry of Deeds of Quezon City. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their 37

professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from the government. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City.3 Accordingly, Tax Declaration Nos. C-021-01226 (16-2518) and C-021-01231 (15-2518-A) were issued for the land and the hospital building, respectively.4 On August 25, 1993, the petitioner filed a Claim for Exemption5 from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The petitioners request was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City (QC-LBAA, for brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the petitioner liable for real property taxes.6 The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of Quezon City (CBAA, for brevity)7 which ruled that the petitioner was not a charitable institution and that its real properties were not actually, directly and exclusively used for charitable purposes; hence, it was not entitled to real property tax exemption under the constitution and the law. The petitioner sought relief from the Court of Appeals, which rendered judgment affirming the decision of the CBAA.8 Undaunted, the petitioner filed its petition in this Court contending that: A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX EXEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE PURPOSES. B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS CHARTER, PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION. The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the 1987 Constitution. It asserts that its character as a charitable institution is not altered by the fact that it admits paying patients and renders medical services to them, leases portions of the land to private parties, and rents out portions of the hospital to private medical practitioners from which it derives income to be used for operational expenses. The petitioner points out that for the years 1995 to 1999, 100% of its out-patients were charity patients and of the hospitals 282-bed capacity, 60% thereof, or 170 beds, is allotted to charity patients. It asserts that the fact that it receives subsidies from the government attests to its character as a charitable institution. It contends that the "exclusivity" required in the Constitution does not necessarily mean "solely." Hence, even if a portion of its real estate is leased out to private individuals from whom it derives income, it does not lose its character as a charitable institution, and its exemption from the payment of real estate taxes on its real property. The petitioner cited our ruling in Herrera v. QC-BAA9 to bolster its pose. The petitioner further contends that even if P.D. No. 1823 does not exempt it from the payment of real estate taxes, it is not precluded from seeking tax exemption under the 1987 Constitution. In their comment on the petition, the respondents aver that the petitioner is not a charitable entity. The petitioners real property is not exempt from the payment of real estate taxes under P.D. No. 1823 and even under the 1987 Constitution because it failed to prove that it is a charitable institution and that the said property is actually, directly and exclusively used for charitable purposes. The respondents noted that in a newspaper report, it appears that graft charges were filed with the Sandiganbayan against the director of the petitioner, its administrative officer, and Zenaida Rivera, the proprietress of the Elliptical Orchids and Garden Center, for entering into a lease contract over 7,663.13 square meters of the property in 1990 for only P20,000 a month, when the monthly rental should be P357,000 a month as determined by the Commission on Audit; and that instead of complying with the directive of the COA for the cancellation of the contract for being grossly prejudicial to the government, the petitioner renewed the same on March 13, 1995 for a monthly rental of only P24,000. They assert that the petitioner uses the subsidies granted by the government for charity patients and uses the rest of its income from the property for the benefit of paying patients, among other purposes. They aver that the petitioner failed to adduce substantial evidence that 100% of its out-patients and 170 beds in the hospital are reserved for indigent patients. The respondents further assert, thus: 13. That the claims/allegations of the Petitioner LCP do not speak well of its record of service. That before a patient is admitted for treatment in the Center, first impression is that it is pay-patient and required to pay a certain 38

amount as deposit. That even if a patient is living below the poverty line, he is charged with high hospital bills. And, without these bills being first settled, the poor patient cannot be allowed to leave the hospital or be discharged without first paying the hospital bills or issue a promissory note guaranteed and indorsed by an influential agency or person known only to the Center; that even the remains of deceased poor patients suffered the same fate. Moreover, before a patient is admitted for treatment as free or charity patient, one must undergo a series of interviews and must submit all the requirements needed by the Center, usually accompanied by endorsement by an influential agency or person known only to the Center. These facts were heard and admitted by the Petitioner LCP during the hearings before the Honorable QC-BAA and Honorable CBAA. These are the reasons of indigent patients, instead of seeking treatment with the Center, they prefer to be treated at the Quezon Institute. Can such practice by the Center be called charitable?10 The Issues The issues for resolution are the following: (a) whether the petitioner is a charitable institution within the context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt from real property taxes. The Courts Ruling The petition is partially granted. On the first issue, we hold that the petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the elements which should be considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the methods of administration, the nature of the actual work performed, the character of the services rendered, the indefiniteness of the beneficiaries, and the use and occupation of the properties.11 In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds and hearts under the influence of education or religion, by assisting them to establish themselves in life or otherwise lessening the burden of government.12 It may be applied to almost anything that tend to promote the well-doing and well-being of social man. It embraces the improvement and promotion of the happiness of man.13 The word "charitable" is not restricted to relief of the poor or sick.14 The test of a charity and a charitable organization are in law the same. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or private advantage. Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to the provisions of the decree, is to be administered by the Office of the President of the Philippines with the Ministry of Health and the Ministry of Human Settlements. It was organized for the welfare and benefit of the Filipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines. The raison detre for the creation of the petitioner is stated in the decree, viz: Whereas, for decades, respiratory diseases have been a priority concern, having been the leading cause of illness and death in the Philippines, comprising more than 45% of the total annual deaths from all causes, thus, exacting a tremendous toll on human resources, which ailments are likely to increase and degenerate into serious lung diseases on account of unabated pollution, industrialization and unchecked cigarette smoking in the country;lavvph!l.net Whereas, the more common lung diseases are, to a great extent, preventable, and curable with early and adequate medical care, immunization and through prompt and intensive prevention and health education programs; Whereas, there is an urgent need to consolidate and reinforce existing programs, strategies and efforts at preventing, treating and rehabilitating people affected by lung diseases, and to undertake research and training on the cure and prevention of lung diseases, through a Lung Center which will house and nurture the above and related activities and provide tertiary-level care for more difficult and problematical cases; Whereas, to achieve this purpose, the Government intends to provide material and financial support towards the establishment and maintenance of a Lung Center for the welfare and benefit of the Filipino people.15 The purposes for which the petitioner was created are spelled out in its Articles of Incorporation, thus: SECOND: That the purposes for which such corporation is formed are as follows:

39

1. To construct, establish, equip, maintain, administer and conduct an integrated medical institution which shall specialize in the treatment, care, rehabilitation and/or relief of lung and allied diseases in line with the concern of the government to assist and provide material and financial support in the establishment and maintenance of a lung center primarily to benefit the people of the Philippines and in pursuance of the policy of the State to secure the well-being of the people by providing them specialized health and medical services and by minimizing the incidence of lung diseases in the country and elsewhere. 2. To promote the noble undertaking of scientific research related to the prevention of lung or pulmonary ailments and the care of lung patients, including the holding of a series of relevant congresses, conventions, seminars and conferences; 3. To stimulate and, whenever possible, underwrite scientific researches on the biological, demographic, social, economic, eugenic and physiological aspects of lung or pulmonary diseases and their control; and to collect and publish the findings of such research for public consumption; 4. To facilitate the dissemination of ideas and public acceptance of information on lung consciousness or awareness, and the development of fact-finding, information and reporting facilities for and in aid of the general purposes or objects aforesaid, especially in human lung requirements, general health and physical fitness, and other relevant or related fields; 5. To encourage the training of physicians, nurses, health officers, social workers and medical and technical personnel in the practical and scientific implementation of services to lung patients; 6. To assist universities and research institutions in their studies about lung diseases, to encourage advanced training in matters of the lung and related fields and to support educational programs of value to general health; 7. To encourage the formation of other organizations on the national, provincial and/or city and local levels; and to coordinate their various efforts and activities for the purpose of achieving a more effective programmatic approach on the common problems relative to the objectives enumerated herein; 8. To seek and obtain assistance in any form from both international and local foundations and organizations; and to administer grants and funds that may be given to the organization; 9. To extend, whenever possible and expedient, medical services to the public and, in general, to promote and protect the health of the masses of our people, which has long been recognized as an economic asset and a social blessing; 10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the people in any and all walks of life, including those who are poor and needy, all without regard to or discrimination, because of race, creed, color or political belief of the persons helped; and to enable them to obtain treatment when such disorders occur; 11. To participate, as circumstances may warrant, in any activity designed and carried on to promote the general health of the community; 12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and supplies by purchase, donation, or otherwise and to dispose of and distribute the same in such manner, and, on such basis as the Center shall, from time to time, deem proper and best, under the particular circumstances, to serve its general and non-profit purposes and objectives;lavvphil.net 13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of properties, whether real or personal, for purposes herein mentioned; and 14. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the powers herein set forth and to do every other act and thing incidental thereto or connected therewith.16 Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks of life including those who are poor and the needy without discrimination. After all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity.17 As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is 40

intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.18 In Congregational Sunday School, etc. v. Board of Review,19 the State Supreme Court of Illinois held, thus: [A]n institution does not lose its charitable character, and consequent exemption from taxation, by reason of the fact that those recipients of its benefits who are able to pay are required to do so, where no profit is made by the institution and the amounts so received are applied in furthering its charitable purposes, and those benefits are refused to none on account of inability to pay therefor. The fundamental ground upon which all exemptions in favor of charitable institutions are based is the benefit conferred upon the public by them, and a consequent relief, to some extent, of the burden upon the state to care for and advance the interests of its citizens.20 As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association of South Dakota v. Baker:21 [T]he fact that paying patients are taken, the profits derived from attendance upon these patients being exclusively devoted to the maintenance of the charity, seems rather to enhance the usefulness of the institution to the poor; for it is a matter of common observation amongst those who have gone about at all amongst the suffering classes, that the deserving poor can with difficulty be persuaded to enter an asylum of any kind confined to the reception of objects of charity; and that their honest pride is much less wounded by being placed in an institution in which paying patients are also received. The fact of receiving money from some of the patients does not, we think, at all impair the character of the charity, so long as the money thus received is devoted altogether to the charitable object which the institution is intended to further.22 The money received by the petitioner becomes a part of the trust fund and must be devoted to public trust purposes and cannot be diverted to private profit or benefit.23 Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its character as a charitable institution simply because the gift or donation is in the form of subsidies granted by the government. As held by the State Supreme Court of Utah in Yorgason v. County Board of Equalization of Salt Lake County:24 Second, the government subsidy payments are provided to the project. Thus, those payments are like a gift or donation of any other kind except they come from the government. In both Intermountain Health Care and the present case, the crux is the presence or absence of material reciprocity. It is entirely irrelevant to this analysis that the government, rather than a private benefactor, chose to make up the deficit resulting from the exchange between St. Marks Tower and the tenants by making a contribution to the landlord, just as it would have been irrelevant in Intermountain Health Care if the patients income supplements had come from private individuals rather than the government. Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government rather than private charitable contributions does not dictate the denial of a charitable exemption if the facts otherwise support such an exemption, as they do here.25 In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the government for 1991 and 1992 for its patients and for the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its operations. Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken.26 As held in Salvation Army v. Hoehn:27 An intention on the part of the legislature to grant an exemption from the taxing power of the state will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for it is a well settled principle that, when a special privilege or exemption is claimed under a statute, charter or act of incorporation, it is to be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force to a claim of exemption from taxation . 28 Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the petitioner shall enjoy the tax exemptions and privileges:

41

SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation organized primarily to help combat the high incidence of lung and pulmonary diseases in the Philippines, all donations, contributions, endowments and equipment and supplies to be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and benefit of the Lung Center, shall be exempt from income and gift taxes, the same further deductible in full for the purpose of determining the maximum deductible amount under Section 30, paragraph (h), of the National Internal Revenue Code, as amended. The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to equipment purchases made by, or for the Lung Center.29 It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges under Section 2: It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies the exclusion of all others. The rule is expressed in the familiar maxim, expressio unius est exclusio alterius. The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of the rule is the principle that what is expressed puts an end to that which is implied. Expressium facit cessare tacitum. Thus, where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to other matters. ... The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation. They are based on the rules of logic and the natural workings of the human mind. They are predicated upon ones own voluntary act and not upon that of others. They proceed from the premise that the legislature would not have made specified enumeration in a statute had the intention been not to restrict its meaning and confine its terms to those expressly mentioned.30 The exemption must not be so enlarged by construction since the reasonable presumption is that the State has granted in express terms all it intended to grant at all, and that unless the privilege is limited to the very terms of the statute the favor would be intended beyond what was meant.31 Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus: (3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt from taxation.32 The tax exemption under this constitutional provision covers property taxes only.33 As Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: ". . . what is exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes."34 Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160 (otherwise known as the Local Government Code of 1991) as follows: SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: ... (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes.35 We note that under the 1935 Constitution, "... all lands, buildings, and improvements used exclusively for charitable purposes shall be exempt from taxation."36 However, under the 1973 and the present Constitutions, for "lands, buildings, and improvements" of the charitable institution to be considered exempt, the same should not only be "exclusively" used for charitable purposes; it is required that such property be used "actually" and "directly" for such purposes.37 42

In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on our ruling in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on September 30, 1961 before the 1973 and 1987 Constitutions took effect.38 As this Court held in Province of Abra v. Hernando:39 Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation." The present Constitution added "charitable institutions, mosques, and non-profit cemeteries" and required that for the exemption of "lands, buildings, and improvements," they should not only be "exclusively" but also "actually" and "directly" used for religious or charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have sufficed were the words "actually" as well as "directly" not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation. Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a privilege exclusively."40 If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.41 The words "dominant use" or "principal use" cannot be substituted for the words "used exclusively" without doing violence to the Constitutions and the law.42 Solely is synonymous with exclusively.43 What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes.44 The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes. 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 petitioners evidence shows that it collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 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.45 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. IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City Assessor is hereby DIRECTED to determine, after due hearing, the precise portions of the land and the area thereof which are leased to private persons, and to compute the real property taxes due thereon as provided for by law. SO ORDERED. Davide, Jr., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio Morales, Azcuna, and Tinga, JJ., concur.

Footnotes
*

On official leave. On leave.

**

Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Fermin A. Martin, Jr. and Salvador J. Valdez, Jr. concurring. SECTION 1. CREATION OF THE LUNG CENTER OF THE PHILIPPINES. There is hereby created a trust, under the name and style of Lung Center of the Philippines, which, subject to the provisions of this Decree, shall be administered, according to the Articles of Incorporation, By-Laws and Objectives of the Lung Center of the Philippines, Inc., duly registered (reg. No. 85886) with the Securities and Exchange Commission of the Republic of the Philippines, by the Office of the President, in coordination with the Ministry of Human Settlements and the Ministry of Health.
2

43

Annex "C," Rollo, p. 49. Annexes "2" & "2-A," id. at 93-94. Annex "D," id. at 50-52. Annex "E," id. at 53-55. Annexes "4" & "5," id. at 100-109. Annex "A," id. at 33-41. 3 SCRA 187 (1961). Rollo, pp. 83-84.

10

See Workmens Circle Educational Center of Springfield v. Board of Assessors of City of Springfield, 51 N.E.2d 313 (1943).
11 12

Congregational Sunday School & Publishing Society v. Board of Review, 125 N.E. 7 (1919), citing Jackson v. Philipps, 14 Allen (Mass.) 539.
13

Bader Realty & Investment Co. v. St. Louis Housing Authority, 217 S.W.2d 489 (1949). Board of Assessors of Boston v. Garland School of Homemaking, 6 N.E.2d 379. Rollo, pp. 119-120. Id. at 123-125. Scripps Memorial Hospital v. California Employment Commission, 24 Cal.2d 669, 151 P.2d 109 (1944). Sisters of Third Order of St. Frances v. Board of Review of Peoria County, 83 N.E. 272. See note 12. Id. at 10. 167 N.W. 148 (1918), citing State v. Powers, 10 Mo. App. 263, 74 Mo. 476. Id. at 149. See Obrien v. Physicians Hospital Association, 116 N.E. 975 (1917). 714 P.2d 653 (1986). Id. at 660-661. Commissioner of Internal Revenue v. Court of Appeals, 298 SCRA 83 (1998). 188 S.W.2d. 826 (1945). Id. at 829. Rollo, p. 120. (Underscoring supplied.) Malinias v. COMELEC, 390 SCRA 480 (2002). St. Louis Young Mens Christian Association v. Gehner, 47 S.W.2d 776 (1932). Underscoring supplied.

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15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

44

33

Commissioner of Internal Revenue v. Court of Appeals, supra. Ibid. Citing II RECORDS OF THE CONSTITUTIONAL COMMISSION 90. Underscoring supplied.

34

35

36

Article VI, Section 22, par. (3) of the 1935 Constitution provides that, "Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation."
37

Article VIII, Section 17, par. (3) of the 1973 Constitution provides that, "Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and non-profit cemeteries, and all lands, buildings, and improvements actually, directly, and exclusively used for religious or charitable purposes shall be exempt from taxation."
38

3 SCRA 186 (1961). 107 SCRA 105 (1981). Young Mens Christian Association of Omaha v. Douglas County, 83 N.W. 924 (1900). St. Louis Young Mens Christian Association v. Gehner, supra. See State ex rel Koeln v. St. Louis Y.M.C.A., 168 S.W. 589 (1914). Lodge v. Nashville, 154 S.W. 141. Christian Business College v. Kalamanzoo, 131 N.W. 553.

39

40

41

42

43

44

See Young Mens Christian Association of Omaha v. Douglas County, supra; Martin v. City of New Orleans, 58 Am. 194 (1886).
45

LRTA VS CBAA DECISION PANGANIBAN, J.: The Light Rail Transit Authority and the Metro Transit Organization function as service-oriented business entities, which provide valuable transportation facilities to the paying public. In the absence, however, of any express grant of exemption in their favor, they are subject to the payment of real property taxes.
The Case

In the Petition for Review before us, the Light Rail Transit Authority (LRTA) challenges the November 15, 1996 Decisioni[1] of the Court of Appeals (CA) in CA-GR SP No. 38137, which disposed as follows: "WHEREFORE, premises considered, the appealed decision (dated October 15, 1994) of the Central Board of Assessment Appeals is hereby AFFIRMED, with costs against the petitioner."ii[2] The affirmed ruling of the Central Board of Assessment Appeals (CBAA) upheld the June 26, 1992 Resolution of the Board of Assessment Appeals of Manila, which had declared petitioner's carriageways and passenger terminals as improvements subject to real property taxes.
The Facts

The undisputed facts are quoted by the Court of Appeals (CA) from the CBAA ruling, as follows:iii[3] "1. The LRTA is a government-owned and controlled corporation created and organized under Executive Order No. 603, dated July 12, 1980 'x x x primarily responsible for the construction, operation, maintenance and/or lease of light rail transit system in the Philippines, giving due regard to the [reasonable requirements] of the public transportation of the country' (LRTA vs. The Hon. Commission on Audit, GR No. No. 88365); 45

"2. x x x [B]y reason of x x x Executive Order 603, LRTA acquired real properties x x x constructed structural improvements, such as buildings, carriageways, passenger terminal stations, and installed various kinds of machinery and equipment and facilities for the purpose of its operations; "3. x x x [F]or x x x an effective maintenance, operation and management, it entered into a Contract of Management with the Meralco Transit Organization (METRO) in which the latter undertook to manage, operate and maintain the Light Rail Transit System owned by the LRTA subject to the specific stipulations contained in said agreement, including payments of a management fee and real property taxes (Add'l Exhibit "I", Records) "4. That it commenced its operations in 1984, and that sometime that year, Respondent-Appellee City Assessor of Manila assessed the real properties of [petitioner], consisting of lands, buildings, carriageways and passenger terminal stations, machinery and equipment which he considered real propert[y] under the Real Property Tax Code, to commence with the year 1985; "5. That [petitioner] paid its real property taxes on all its real property holdings, except the carriageways and passenger terminal stations including the land where it is constructed on the ground that the same are not real properties under the Real Property Tax Code, and if the same are real propert[y], these x x x are for public use/purpose, therefore, exempt from realty taxation, which claim was denied by the Respondent-Appellee City Assessor of Manila; and "6. x x x [Petitioner], aggrieved by the action of the Respondent-Appellee City Assessor, filed an appeal with the Local Board of Assessment Appeals of Manila x x x. Appellee, herein, after due hearing, in its resolution dated June 26, 1992, denied [petitioner's] appeal, and declared that carriageways and passenger terminal stations are improvements, therefore, are real propert[y] under the Code, and not exempt from the payment of real property tax. "A motion for reconsideration filed by [petitioner] was likewise denied."
The CA Ruling

The Court of Appeals held that petitioner's carriageways and passenger terminal stations constituted real property or improvements thereon and, as such, were taxable under the Real Property Tax Code. The appellate court emphasized that such pieces of property did not fall under any of the exemptions listed in Section 40 of the aforementioned law. The reason was that they were not owned by the government or any government-owned corporation which, as such, was exempt from the payment of real property taxes. True, the government owned the real property upon which the carriageways and terminal stations were built. However, they were still taxable, because beneficial use had been transferred to petitioner, a taxable entity. The CA debunked the argument of petitioner that carriageways and terminals were intended for public use. The former agreed, instead, with the CBAA. The CBAA had concluded that since petitioner was not engaged in purely governmental or public service, the latter's endeavors were proprietary. Indeed, petitioner was deemed as a profit-oriented endeavor, serving as it did, only the paying public. Hence, this Petition.iv[4]
The Issues

In its Memorandum,v[5] petitioner urges the Court to resolve the following matters: "I The Honorable Court of Appeals erred in not holding that the carriageways and terminal stations of petitioner are not improvements for purposes of the Real Property Tax Code. "II The Honorable Court of Appeals erred in not holding that being attached to national roads owned by the national government, subject carriageways and terminal stations should be considered property of the national government. "III The Honorable Court of Appeals erred in not holding that payment of charges or fares in the operation of the light rail transit system does not alter the nature of the subject carriageways and terminal stations as devoted for public use. "IV 46

The Honorable Court of Appeals erred in failing to consider the view advanced by the Department of Finance, which takes charge of the overall collection of taxes, that subject carriageways and terminal stations are not subject to realty taxes. "V The Honorable Court of Appeals erred in failing to consider that payment of the realty taxes assessed is not warranted and should the legality of the questioned assessment be upheld, the amount of the realty taxes assessed would far exceed the annual earnings of petitioner, a government corporation." The foregoing all point to one main issue: whether petitioner's carriageways and passenger terminal stations are subject to real property taxes.
The Court's Ruling

The Petition has no merit.

Main Issue: May Real Property Taxes be Assessed and Collected?

The Real Property Tax Code,vi[6] the law in force at the time of the assailed assessment in 1984, mandated that "there shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property such as lands, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted."vii[7] Petitioner does not dispute that its subject carriageways and stations may be considered real property under Article 415 of the Civil Code. However, it resolutely argues that the same are improvements, not of its properties, but of the governmentowned national roads to which they are immovably attached. They are thus not taxable as improvements under the Real Property Tax Code. In essence, it contends that to impose a tax on the carriageways and terminal stations would be to impose taxes on public roads. The argument does not persuade. We quote with approval the solicitor general's astute comment on this matter: "There is no point in clarifying the concept of industrial accession to determine the nature of the property when what is fundamentally important for purposes of tax classification is to determine the character of the property subject [to] tax. The character of tax as a property tax must be determined by its incidents, and form the natural and legal effect thereof. It is irrelevant to associate the carriageways and/or the passenger terminals as accessory improvements when the view of taxability is focused on the character of the property. The latter situation is not a novel issue as it has already been resolved by this Honorable Court in the case of City of Manila vs. IAC (GR No. 71159, November 15, 1989) wherein it was held: 'The New Civil Code divides the properties into property for public and patrimonial property (Art. 423), and further enumerates the property for public use as provincial road, city streets, municipal streets, squares, fountains, public waters, public works for public service paid for by said [provinces], cities or municipalities; all other property is patrimonial without prejudice to provisions of special laws. (Art. 424, Province of Zamboanga v. City of Zamboanga, 22 SCRA 1334 [1968]) xxx '...while the following are corporate or proprietary property in character, viz: 'municipal water works, slaughter houses, markets, stables, bathing establishments, wharves, ferries and fisheries.' Maintenance of parks, golf courses, cemeteries and airports, among others, are also recognized as municipal or city activities of a proprietary character (Dept. of Treasury v. City of Evansville; 60 NE 2nd 952)' "The foregoing enumeration in law does not specify or include carriageway or passenger terminals as inclusive of properties strictly for public use to exempt petitioner's properties from taxes. Precisely, the properties of petitioner are not exclusively considered as public roads being improvements placed upon the public road, and this separability nature of the structure in itself physically distinguishes it from a public road. Considering further that carriageways or passenger terminals are elevated structures which are not freely accessible to the public, viz-a-viz roads which are public improvements openly utilized by the public, the former are entirely different from the latter. "The character of petitioner's property, be it an improvements as otherwise distinguished by petitioner, needs no further classification when the law already classified it as patrimonial property that can be subject to tax. This is in line with the 47

old ruling that if the public works is not for such free public service, it is not within the purview of the first paragraph of Art. 424 if the New Civil Code."viii[8] Though the creation of the LRTA was impelled by public service -- to provide mass transportation to alleviate the traffic and transportation situation in Metro Manila -- its operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives.ix[9] Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation. True, petitioner's carriageways and terminal stations are anchored, at certain points, on public roads. However, it must be emphasized that these structures do not form part of such roads, since the former have been constructed over the latter in such a way that the flow of vehicular traffic would not be impeded. These carriageways and terminal stations serve a function different from that of the public roads. The former are part and parcel of the light rail transit (LRT) system which, unlike the latter, are not open to use by the general public. The carriageways are accessible only to the LRT trains, while the terminal stations have been built for the convenience of LRTA itself and its customers who pay the required fare.
Basis of Assessment Is Actual Use of Real Property

Under the Real Property Tax Code, real property is classified for assessment purposes on the basis of actual use,x[10] which is defined as "the purpose for which the property is principally or predominantly utilized by the person in possession of the property."xi[11] Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public-use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations. We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profitearning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom.
Petitioner Not Exempt from Payment of Real Property Taxes

In any event, there is another legal justification for upholding the assailed CA Decision. Under the Real Property Tax Code, real property "owned by the Republic of the Philippines or any of its political subdivisions and any governmentowned or controlled corporation so exempt by its charter, provided, however, that this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person."xii[12] Executive Order No. 603, the charter of petitioner, does not provide for any real estate tax exemption in its favor. Its exemption is limited to direct and indirect taxes, duties or fees in connection with the importation of equipment not locally available, as the following provision shows: "ARTICLE 4 TAX AND DUTY EXEMPTIONS Sec. 8. Equipment, Machineries, Spare Parts and Other Accessories and Materials. - The importation of equipment, machineries, spare parts, accessories and other materials, including supplies and services, used directly in the operations of the Light Rails Transit System, not obtainable locally on favorable terms, out of any funds of the authority including, as stated in Section 7 above, proceeds from foreign loans credits or indebtedness, shall likewise be exempted from all direct and indirect taxes, customs duties, fees, imposts, tariff duties, compensating taxes, wharfage fees and other charges and restrictions, the provisions of existing laws to the contrary notwithstanding." Even granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity. Taxation is the rule and exemption is the exception. Any claim for tax exemption is strictly construed against the claimant.xiii[13] LRTA has not shown its eligibility for exemption; hence, it is subject to the tax. WHEREFORE, the Petition is hereby DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against the petitioner. 48

SO ORDERED. Melo, (Chairman), Vitug, and Purisima, JJ., concur. Gonzaga-Reyes, J., no part.

i[1] Penned by Justice Ramon Mabutas Jr., with the concurrence of Justices Minerva P. Gonzaga-Reyes (Division chairperson and now a member of this Court) and Salvador J. Valdez (member). ii[2]Rollo, p. 43. iii[3] CA Decision, pp. 2-3; rollo, pp. 29-30. iv[4] This Petition was deemed submitted for decision on October 13, 1999, upon receipt by the Court of the Explanation filed by Attys. Melchor R. Monsod and Jose A. Perello Jr. of the Office of the City Legal Officer of Manila, who clarified that they were adopting as memorandum their February 28, 1998 Comment. Received by the Court on November 3, 1998 was Petitioner LRTA's Memorandum signed by Government Corporate Counsel Jun Valerio, Assistant Government Corporate Counsel Antonio M. Brillantes, and Government Corporate Attorney IV Isabelo G. Gumaru. On September 30, 1998, the Office of the Solicitor General filed a "Manifestation and Motion for Leave to Adopt Comment as Memorandum for the Central Board of Assessment Appeals." The OSG's May 2, 1997 Comment was signed by Assistant Solicitor General Mariano M. Martinez and Solicitors Luis F. Simon and Brigido Artemon M. Luna. v[5]Rollo, pp. 151-152; original written entirely in upper case. vi[6] Presidential Decree No. 464. See also the Local Government Code of 1991 or Republic Act No. 7160, which took effect on January 1, 1992. vii[7]Ibid., 38. This is identical to 232 of the Local Government Code (LGC), which reads: "Section 232. Power to Levy Real Property Tax. A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted." viii[8] Comment of the Office of the Solicitor General, pp. 8-10; rollo, pp. 70-72. ix[9]See Section 4 of Executive Order No. 603, the LRTA charter, which provides: "ARTICLE 2 CORPORATE POWERS "Sec. 4. General Powers. - The Authority, through the Board of Directors, may undertake such action as are expedient for or conducive to the attainment of the purposes and objectives of the Authority, or of any purpose reasonably incidental to or consequential upon any of these purposes. As such, the Authority shall have the following general powers:
49

(1) To have continuous succession under its corporate name, until otherwise provided by law; (2) To prescribe, amend, and/or repeal its by-laws; (3) To adopt and use a seal and alter it at its pleasure; (4) To sue and be sued; (5) To contract any obligation or enter into, assign or accept the assignment of, and vary or rescind any agreement, contract of obligation necessary or incidental to the proper management of the Authority; (6) To borrow funds from any source, private or public, foreign or domestic, and to issue bonds and other evidence of indebtedness, the payment of which shall be guaranteed by the National Government, subject to pertinent borrowing law; (7) To acquire, receive, take, and hold by bequest, devise, gift, purchase or lease, either absolutely or in trust for any of its purposes, from foreign and domestic sources, any asset, grant or property, real or personal, subject to such limitations as are provided in existing laws; to convey or dispose of such assets, grants, or properties, movable and immovable; and invest and/or reinvest such proceeds and deal with and expand its assets and income in such a manner as will best promote its objectives; (8) To improve, develop or alter any property held by it; (9) To carry on any business, either alone or in partnership with any other person or persons; (10) To employ an agent or contractor or perform such things as the Authority may perform; (11) To exercise the right of eminent domain, whenever the Authority deems it necessary for the attainment of its objectives; (12) To prescribe rules and regulations in the conduct of its general business as well as to fix and implement the terms and conditions of its related activities; (13) To determine the fares payable by persons traveling on the light rail system, in consultation with the Board of Transportation; (14) To establish, operate, and maintain branches or field offices when required by the exigencies of its business; (15) To determine its organizational structure and the number, positions and salaries of its personnel, subject to pertinent organization and compensation law; and (16) To exercise such powers and perform such duties as may be necessary to carry out the business and purposes for which the Authority was established or which, from time to time may be declared by the Board of Directors to be necessary, useful, incidental or auxiliary to accomplish such purposes; and generally, to exercise all powers of an Authority under the Corporation Law that are not inconsistent with the provisions of this Order, or with orders pertaining to government corporate budgeting, organization, borrowing, or compensation." x[10] 19 of the Real Property Tax Code reads: "Real property shall be classified for assessment on the basis of its actual use, regardless of where located and whoever uses it." See also 198 (b) of the LGC, an identical proviso which reads: "Real property shall be classified for assessment purposes on the basis of its actual use." xi[11]See 3 (a) of the Real Property Tax Code and 199 (b) of the LGC. xii[12] Section 40 (a) of the Real Property Code and Section 234 (a) of the Local Government Code. Thus, petitioner will not find solace under the Local Government Code either, for the reasons discussed above. xiii[13] Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667, September 11, 1996.
50

TESTATE ESTATE OF CONCORDIA T. LIM vs CITY OF MANILA, GUTIERREZ, JR., J.: This is an appeal from the decision of the Regional Trial Court of Manila, Branch 29 dismissing a complaint for a "sum of money and/or recovery of real estate taxes paid under protest" which was certified and elevated to this Court by the Court of Appeals as a case involving pure questions of law. On February 13, 1969, the late Concordia Lim obtained a real estate loan from the defendant-appellee Government Service Insurance System (GSIS) in the amount of P875,488.54, secured by a mortgage constituted on two (2) parcels of land formerly covered by Transfer Certificates of Title Nos. 64075 and 63076 (later changed to TCT Nos. 125718 and 125719) registered in Manila with a three-story building thereon and located on No. 810 Nicanor Reyes St. (formerly Morayta), Sampaloc, Manila. When Lim failed to pay the loan, the mortgage was extrajudicially foreclosed and the subject properties sold at public auction. The GSIS, being the highest bidder, bought the properties. Upon Lim's failure to exercise her right of redemption, the titles to the properties were consolidated in favor of the GSIS in 1977. However, pursuant to Resolution No. 188 of the Board of Trustees of the GSIS dated March 29, 1979, the estate of Lim, through Ernestina Crisologo Jose (the administratrix) was allowed to repurchase the foreclosed properties. On April 11, 1979, a Deed of Absolute Sale was executed. (Exhibit B, Table of Exhibits, pp. 3-5) The defendant City Treasurer of Manila required the plaintiff-appellant to pay the real estate taxes due on the properties for the years 1977, 1978 and the first quarter of 1979 in the amount of P67,960.39, before the titles could be transferred to the plaintiff-appellant. The latter paid the amount under protest. On July 11, 1979, the plaintiff-appellants counsel sent a demand letter requesting the GSIS to reimburse the taxes paid under protest. The GSIS refused. On September 6, 1979, a demand letter was sent to the City Treasurer of Manila to refund the amount but the latter also refused. On March 14, 1980, the plaintiff filed an action before the trial court for a sum of money for the refund or reimbursement of the real estate taxes paid under protest. During the pendency of the case, the plaintiff-appellant admitted that the foreclosed properties had been sold, through the administratrix, to another person. (2nd par. of Plaintiffs Manifestation dated December 21, 1981, Records, p. 105; TSN, March 4, 1982, p. 37) After trial, the lower court dismissed the complaint for lack of jurisdiction. It ruled that the case involves a protested action of the City Assessor which should have been flied before the Local Board of Assessment Appeals of Manila (citing Section 30 of the Real Property Tax Code [P.D. No. 464]) in line with the principle that all administrative remedies must first be exhausted. The lower court also cited by way of obiter dictum, the case of City of Baguio v. Busuego, 100 SCRA 116 (1980) wherein this Court ruled that while the GSIS may be exempt from the payment of real estate tax, the exemption does not cover properties the beneficial use of which was granted to other taxable persons. This ruling supports the lower court's view that the tax had attached to the subject properties for the years 1977, 1978 and first quarter of 1979. The lower court further stated that the plaintiff-appellant had assumed liability for the real estate taxes because of the provision in the Deed of Sale with the GSIS that: "any and all the taxes, ... relative to the execution and/or implementation of this Deed, ... shall be for the account of and paid by the VENDEE" (Exhibit B, Table of Exhibits, p. 5) Hence, this appeal raising several issues that can be summed up into the following: (1) whether or not the trial court has jurisdiction over the action for refund of real estate taxes paid under protest; (2) whether or not plaintiff-appellant has the right to recover; and (3) whether or not the plaintiff-appellant has personality to sue. The plaintiff-appellant argues that the lower court has jurisdiction over a complaint for refund as well as for reimbursement of the real estate taxes erroneously collected by the City of Manila from it and paid under protest. The records show that the subject properties were leased to other persons during the time when GSIS held their titles, as was the case during the ownership of the late Concordia Lim. However, the real estate taxes later assessed on the said properties for the years 1977, 1978 and the first quarter of 1979 were charged against the plaintiff-appellant even if the latter was not the beneficial user of the parcels of land. 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. (Sections 3(a) and 19 of P.D. No. 464; 51

Province of Nueva Ecija v. Imperial Mining Co., Inc., 118 SCRA 632 [1982]). Raising doubts on the validity of the imposition and collection of the real property tax for the designated periods before the title to the properties may be transferred, the plaintiff-appellant paid under protest. This step was taken in accordance with the provision of Section 62 of P.D. No. 464, which states: Sec. 62. Payment under protest. (a) When a taxpayer desires for any reason to pay his tax under protest, he shall indicate the amount or portion thereof he is contesting and such protest shall be annotated on the tax receipts by writing thereon the words paid under protest.' Verbal protest shall be confirmed in writing, with a statement of the ground, therefor, within thirty days. The tax may be paid under protest, and in such case it shall be the duty of the Provincial, City or Municipal Treasurers to annotate the ground or grounds therefor on the receipt. (b) In case of payments made under protest, the amount or portion of the tax contested shall be held in trust by the treasurer and the difference shall be treated as revenue. (c) In the event that the protest is finally decided in favor of the government, the amount or portion of the tax held in trust by the treasurer shall accrue to the revenue account, but if the protest shall be decided finally in favor of the protestant, the amount or portion of the tax protested against may either be refunded to the protestant or applied as tax credit to any other existing or future tax liability of the said protestant. (Emphasis Supplied) The Court rules that the plaintiff-appellant correctly filed the action for refund/reimbursement with the lower court as it is the courts which have jurisdiction to try cases involving the right to recover sums of money. Section 30 of the Real Property Tax Code is not applicable because what is questioned is the imposition of the tax assessed and who should shoulder the burden of the tax. There is no dispute over the amount assessed on the properties for tax purposes. Section 30 pertains to the administrative act of listing and valuation of the property for purposes of real estate taxation. It provides: Section 30. Local Board of Assessment Appeals Any owner who is not satisfied with the action of the provincial or city assessor in the assessment of his property may, within sixty days from the date of receipt by him of the written notice of assessment as provided in this Code, appeal to the Board of Assessment Appeals of the province or city by filing with it a petition under oath using the form prescribed for the purpose, together with copies of the tax declarations and such affidavit or documents submitted in support of the appeal. In further support of the conclusion that the lower court has jurisdiction to try the instant case, we note Section 64 of the Real Property Tax Code which provides that a "court shall entertain a suit assailing the validity of a tax assessed" after the taxpayer shall have paid under protest. The issue on the existence or non-existence of the appellant's right to recover the amounts paid hinges on the basic question of the validity of the tax imposition. If the imposition is valid and in accordance with law, then there is no right to recover. Otherwise, the amounts paid must be refunded by the respondent City Treasurer of Manila acting in his official capacity. (Sec. 62 [c], PD 464) The opinion of the lower court that the ruling in City of Baguio v. Busuego, supra justifies the imposition of the tax on plaintiff-appellant is erroneous. The facts in that case are different from those in the case at bar. It was shown that Busuego purchased, by way of installment, a parcel of land and building within a housing project of the GSIS. In a Contract to Sell with the GSIS, he agreed to: (1) the delivery of the possession of the properties to him pending the full payment of the price although the title remained with the GSIS; and (2) his liability to pay and shoulder all taxes and assessments on the lot and building or improvements thereon during the term of the contract to sell. Despite the tax exemption enjoyed by the GSIS, the realty tax liability imposed on the purchaser was held to be valid on the basis of the contractual obligation that he entered into and the fact that beneficial use had been given to him. The instant case does not present a similar contractual stipulation. The contract here which is alleged to include the condition that the buyer shall shoulder the taxes is a Contract of Sale. In the Busuego case, there was merely a Contract to Sell for the duration of which the party who shall be liable for the taxes about to be due is the buyer as per agreement. In the case at bar, what was assumed by the vendee was the liability for taxes and other expenses "relative to the execution and/or implementation" of the Deed of Absolute Sale "including among others, documentation, documentary and science stamps, expenses for registration and transfer of titles ... " This clause was stipulated for the purpose of clarifying which of the parties should bear the costs of execution and implementation of the sale and to comply with Article 1487 of the Civil Code which states: 52

ART. 1487 The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary. Moreover, the taxes mentioned in the clause here refer to those necessary to the completion of the sale and accruing after the making of such sale on April 11, 1990 such as documentary stamp tax and capital gains tax. In the Busuego case, the assumption by the vendee of the liability for real estate taxes prospectively due was in harmony with the tax policy that the user of the property bears the tax. In the instant case, the interpretation that the plaintiffappellant assumed a liability for overdue real estate taxes for the periods prior to the contract of sale is incongruent with the said policy because there was no immediate transfer of possession of the properties previous to full payment of the repurchase price. The facts of the case constrain us to rule that the plaintiff-appellant is not liable to pay the real property tax due for the years 1977, 1978 and first quarter of 1979. The clause in the Deed of Sale cannot be interpreted to include taxes for the periods prior to April 11, 1979, the date of repurchase. To impose the real property tax on the estate which was neither the owner nor the beneficial user of the property during the designated periods would not only be contrary to law but also unjust. If plaintiff-appellant intended to assume the liability for realty taxes for the prior periods, the contract should have specifically stated "real estate taxes" due for the years 1977,1978 and first quarter of 1979. The payments made by the plaintiff-appellant cannot be construed to be an admission of a tax liability since they were paid under protest and were done only in compliance with one of the requirements for the consummation of the sale as directed by the City Treasurer of Manila. Hence, the tax assessed and collected from the plaintiff-appellants is not valid and a refund by the City government is in order. The Court rules, however, that the plaintiff-appellant is not entitled to a reimbursement from the respondent GSIS because: (1) the GSIS is exempt from payment of the real property tax under Sec. 33 of the Revised Charter of the GSIS; and (2) the tax should be based on "actual use" of the property. Section 40 of the Real Property Tax Code supports the view that not even the GSIS is liable to pay real property tax on public land leased to other persons. Section 40 provides: Sec. 40. Exemption from Real Property Tax. The exemption shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government owned corporation so exempt by its charter: Provided, however, That this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person. In fact, if there is anyone liable the law and applicable jurisprudence point to the lessees of land owned by the government-owned and controlled corporations. (Province of Nueva Ecija v. Imperial Mining Co., Inc., supra) In this case, the Court can only declare the non-liability of a right to a refund. We cannot rule on the liability of the lessees whose Identities are not even clear because they were never impleaded. The contention of the plaintiff-appellant that the respondent GSIS is liable to reimburse the tax because the latter allegedly failed to exercise its claim to the tax exemption privilege is without merit. The exemption is explicitly granted by law and need not be applied for. Regarding the issue on the existence of the personality to sue, the plaintiff-appellant asserts that since it was the one which paid under protest the amount of P67,960.39 as real property tax, then it is the real party in interest to sue for refund. The lower court, noting the transfer of the title to the properties to a third person, ruled that assuming arguendo that there is a right to seek recovery, the subsequent sale "must have included the tax" and "as such all the credits including the taxes that were paid was (sic) transfered already to the buyer." It ruled that plaintiff-appellant had no personality to sue and the right of action must be between the subsequent buyer and the plaintiff-appellant. The Court finds that the above ruling and the facts on which it is based are not sufficiently supported by the records of the case. The evidence merely shows an admission of a subsequent sale of the properties by the plaintiff-appellant, nothing more. WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE. The defendants appellees City of Manila, the City Treasurer and City Assessor of Manila are hereby ordered to refund to the TESTATE ESTATE OF CONCORDIA LIM, through administratrix ERNESTINA CRISOLOGO-JOSE, the amount of P67,960.39 as real estate taxes paid under protest. SO ORDERED. 53

Fernan, C.J. (Chairman), Feliciano, Bidin and Cortes, JJ., concur. LOPEZ VS CITY OF MANILA DECISION QUISUMBING, J.: This petition for review on certiorari, assails the Orderxiii[1] of the Regional Trial Court of Manila, Branch 39, promulgated on October 24, 1996, dismissing Civil Case No. 96-77510 which sought the declaration of nullity of City of Manila Ordinance No. 7894, filed by petitioner Jaime C. Lopez. The facts as found by the trial court are as follows: Section 219 of Republic Act 7160 (R.A. 7160) or the Local Government Code of 1991 requires the conduct of the general revision of real property as follows: General Revision of Assessmentsxiii[2] and Property Classification -- The provincial, city or municipal assessor shall undertake a general revision of real property assessments within two (2) years after the effectivity of this Code and every three (3) years thereafter. Although R.A. 7160 took effect on January 1, 1992, the revision of real property assessments prescribed therein was not yet enforced in the City of Manila. However, the process of real property valuation had already been started and done by the former city assessor. In 1992, the schedule of real property values in the city was prepared and submitted to the City Council of Manila, but for unknown reason, was not acted upon. Nevertheless, despite the inaction of the City Council, there was a continuous update of the fair market values of the real properties within the city. Until the year 1995, the basis for collection of real estate taxes in the City of Manila was the old, year-1979, real estate market values. Mrs. Lourdes Laderas, the newly appointed City Assessor of Manila, received Memorandum Circular No. 04-95 dated March 20, 1995, from the Bureau of Local Government Finance, Department of Finance. This memorandum relates to the failure of most of the cities and municipalities of Metropolitan Manila, including the City of Manila, to conduct the general revision of real property. For this purpose, Mrs. Laderas embarked in a working dialogue with the Office of the City Mayor and the City Council for the completion of the task. After obtaining the necessary funds from the City Council, the City Assessor began the process of general revision based on the updated fair market values of the real properties. In the year 1995, the increase in valuation of real properties compared to the year-1979 market values ranges from 600% to 3,330%, but the City Assessors office initially fixed the general average of increase to 1,700%. Mrs. Laderas felt that the increase may have adverse reactions from the public, hence, she ended up reducing the increase in the valuation of real properties to 1,020%. In September 1995, the City Assessors Office submitted the proposed schedule of fair market values to the City Council for its appropriate action. The Council acting on the proposed schedule, conducted public hearings as required by law. The proposed ordinance was subjected to the regular process in the enactment of ordinances pursuant to the City Charter of Manila. The first reading was held on September 12, 1995, the second on October 28, 1995, and the third on December 12, 1995. In between these dates, public hearings on the general revision, which included the schedule of values of real properties, were had, viz.; on September 28, 1995, October 5, 12 and 19, 1995 and November 27 and 29, 1995. The proposed ordinance with the schedule of fair market values of real properties was published in the Manila Standard on October 28, 1995, and the Balita on November 1, 1995. On December 12, 1995, the City Council enacted Manila Ordinance No. 7894, entitled: An Ordinance Prescribed as the Revised Schedule of Fair Market Values of Real Properties of the City of Manila. The ordinance was approved by the City Mayor on December 27, 1995, and made effective on Jan. 01, 1996. Thereafter, notices of the revised assessments were distributed to the real property owners of Manila pursuant to Sec. 223 of R.A. 7160.xiii[3] With the implementation of Manila Ordinance No. 7894, the tax on the land owned by the petitioner was increased by five hundred eighty percent (580%). With respect to the improvement on petitioners property, the tax increased by two hundred fifty percent (250%). 54

As a consequence of these increases, petitioner Jaime C. Lopez, filed on March 18, 1996, a special proceeding for the declaration of nullity of the City of Manila Ordinance No. 7894 with preliminary injunction and prayer for temporary restraining order (TRO). The petition alleged that Manila Ordinance No. 7894 appears to be unjust, excessive, oppressive or confiscatory. The case was originally raffled to the Regional Trial Court of Manila, Branch 5, which issued the TRO on April 10, 1996. On the same date, Manila Ordinance No. 7905xiii[4] took effect, reducing by fifty percent (50%) the assessment levelsxiii[5] (depending on the use of property, e.g., residential, commercial) for the computation of tax due. The new ordinance amended the assessment levels provided by Section 74,xiii[6] paragraph (A) of Manila Ordinance No. 7794. Moreover, Section 2 of Manila Ordinance No. 7905xiii[7] provides that the amendment embodied therein shall take effect retroactively to January 1, 1996. The same provision indicates the maximum realty tax increases, as follows: Sec. 2 - x x x Provided, however, that the tax increase on residential lands and improvements shall in no case exceed by two hundred percent (200%) of the tax levied thereon in calendar year 1995 and the tax increase on commercial and industrial land, buildings and other structures shall not exceed by three hundred percent (300%) of the tax imposed thereon in calendar year 1995; Provided further, that the tax on all lands and improvements shall in no case be lower than the tax imposed thereon in calendar year 1995. As a result, Manila Ordinance No. 7905 reduced the tax increase of petitioners residential land to one hundred fifty-five percent (155%), while the tax increase for residential improvement was eighty-two percent (82%). The maximum tax increase on classified commercial estates is three hundred percent (300%) but the tax increase on commercial land was only, two hundred eighty-eight percent (288%), and seventy-two percent (72%) on commercial portion of the improvement. On April 12, 1996, respondent filed a motion for inhibition of the presiding judge of RTC, Branch 5, alleging that Judge Amelia Andrade had shown markedly indulgent attitude towards the petitioner. Hence, Judge Andrade inhibited herself and directed the forwarding of the case record to the Clerk of Court for its re-raffle to another branch of the court. Despite the amendment brought about by Manila Ordinance No. 7905, the controversy proceeded and the case was reraffled to Branch 39 of the court which acted on the motions submitted by the parties for resolution, viz.: 1) application for preliminary injunction by the petitioner, and 2) motion to dismiss by the respondent. The reason relied upon by the City of Manila for the dismissal of the petition was for failure of the petitioner to exhaust administrative remedies. On May 9, 1996, the court directed the issuance of a writ of injunction and denied, in the meanwhile, the motion to dismiss by the respondent. The reason for the denial of the respondents motion to dismiss was not detailed to avoid a repetition of the unfortunate situation in RTC-Manila, Branch 5, wherein the counsel for the respondent assumed bias on the part of Judge Andrade. On May 22, 1996, the respondent filed the instant motion for reconsideration on the denial of its motion to dismiss. The movant-respondent aside from reiterating the basic ground alleged in its motion to dismiss underscored the additional premise, which is the happening of a supervening event, i.e., the enactment and approval of the City Mayor of Manila Ordinance No. 7905. On October 24, 1996, the trial court granted the motion to dismiss filed by the respondent. The dismissal order was justified by petitioners failure to exhaust the administrative remedies and that the petition had become moot and academic when Manila Ordinance No. 7894 was repealed by Manila Ordinance No. 7905. Notwithstanding, the trial court likewise resolved all other interlocking issues. The dispositive portion of the trial courts order is as follows: WHEREFORE, finding the motion dated May 19, 1996 filed by the herein respondent on May 22, 1996 sufficiently well-taken, the order dated May 9, 1996 is hereby set aside. Let the petition filed by the herein petitioner on March 8, 1996 be, as it is, hereby DISMISSED. The order of preliminary injunction dated May 9, 1996, is also set aside and the writ of injunction likewise issued pursuant thereto, dissolved. SO ORDERED.xiii[8] The petitioner filed a motion for reconsideration, but it was denied for lack of merit. Hence, the petitioner now comes before this Court raising in his petition the following issues: 55

I. DID THE RESPONDENT TRIAL COURT IN CIVIL CASE NO. 96-77510 ERR IN HOLDING THAT THE PETITIONER FAILED TO EXHAUST ALL ADMINISTRATIVE REMEDIES, AND THEREFORE, THE PETITION OUGHT TO BE DISMISSED? AND; II. DID THE RESPONDENT COURT ERR IN FAILING TO CORRECTLY APPLY SECTIONS 212 AND 221 OF THE LOCAL GOVERNMENT CODE OF 1991? Petitioner contends that when the trial court ruled that it has jurisdiction over the case, the question of whether he needs to resort to the exhaustion of administrative remedies becomes moot and academic. He claims that resort to administrative remedies on constitutionality of law is merely permissive as provided by Sec. 187 of R.A. 7160, viz.: x x x Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal. x x x (emphasis supplied) Petitioner further asserts that the question of the constitutionality of the city ordinance may be raised on appeal, either to the Secretary of Justice or the Regional Trial Court, both having concurrent jurisdiction over the case, in accordance with Batas Pambansa Blg. 129. He states that at the time he instituted this complaint, it was premature to resort to the remedies provided by R.A. 7160 because he has not received the formal notice of assessment yet, hence, he could not be expected to pay under protest and elevate the exorbitant assessment to the Board of Assessment Appeals. On the other hand, respondent argues that the adjustment of the fair market values of real properties in the City of Manila was long overdue, being updated only after fifteen (15) years. According to the respondent, petitioner filed the case, merely to take advantage of the situation to gain political mileage and help advance his mayoralty bid. As a general rule, where the law provides for the remedies against the action of an administrative board, body, or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. Therefore, where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts.xiii[9] This rule, however, admits certain exceptions.xiii[10] With regard to questions on the legality of a tax ordinance, the remedies available to the taxpayer are provided under Sections 187, 226, and 252 of R.A. 7160. Section 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality or legality of tax ordinance on appeal within thirty (30) days from effectivity thereof, to the Secretary of Justice. The petitioner after finding that his assessment is unjust, confiscatory, or excessive, must have brought the case before the Secretary of Justice for questions of legality or constitutionality of the city ordinance. Under Section 226 of R.A. 7160, an owner of real property who is not satisfied with the assessment of his property may, within sixty (60) days from notice of assessment, appeal to the Board of Assessment Appeals.xiii[11] Should the taxpayer question the excessiveness of the amount of tax, he must first pay the amount due, in accordance with Section 252 of R.A. 7160. Then, he must request the annotation of the phrase paid under protest and accordingly appeal to the Board of Assessment Appeals by filing a petition under oath together with copies of the tax declarations and affidavits or documents to support his appeal.xiii[12] The rule is well-settled that courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulations of activities coming under the special technical knowledge and training of such agencies.xiii[13] Furthermore, the crux of petitioners cause of action is the determination of whether or not the tax is excessive, oppressive or confiscatory. This issue is essentially a question of fact and thereby, precludes this Court from reviewing the same.xiii[14] We have carefully scrutinized the record of this case and we found no cogent reason to depart from the findings made by the trial court on this point. As correctly found by the trial court, the petition does not fall under any of the exceptions to excuse compliance with the rule on exhaustion of administrative remedies, to wit: One of the reasons for the doctrine of exhaustion is the separation of powers which enjoins upon the judiciary a becoming policy of non-interference with matters coming primarily within the competence of other department. x x x

56

There are however a number of instances when the doctrine may be dispensed with and judicial action validly resorted to immediately. Among these exceptional cases are: (1) when the question raised is purely legal, (2) when the administrative body is in estoppel; (3) when the act complained of is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved is small; (6) when irreparable damage will be suffered; (7) when there is no other plain, speedy and adequate remedy; (8) when strong public interest is involved; (9) when the subject of controversy is private land; and (10) in quo-warranto proceeding (citation omitted). In the courts opinion, however, the instant petition does not fall within any of the exceptions above-mentioned. x x x x x x Instant petition involves not only questions of law but more importantly the questions of facts which therefore needed the reception of evidence contrary to the position of the respondent before the hearing of its motion for reconsideration Now, on the second exception on the rule of exhaustion of administrative remedies, supra, there is no showing that administrative bodies, viz., The Secretary of Justice, the City Treasurer, Board of Assessment Appeals, and the Central Board of Assessment Appeals are in estoppel. On the third exception, it does not appear that Ordinance No. 7894 or the amendatory Ordinance No. 7905 are patently illegal. Re the fourth exception, in the light of circumstances as pointed elsewhere herein, the matter does not need a compelling judicial intervention. On the fifth exception, the claim of the petitioner is not small. Re the sixth exception, the court does not see any irreparable damage that the petitioner will suffer if he had paid or will pay under protest as per the ordinance. He could always ask for a refund of the excess amount he paid under protest or be credited thereof if the administrative bodies mentioned in the law (R.A. 7180xiii[15]) will find that his position is meritorious. Re the seventh exception, the court is of the opinion that administrative relief provided for in the law are plain, speedy and adequate. On the eight exception, while the controversy involves public interest, judicial intervention as the petitioner would like this court to do should be avoided as demonstrated herein below in the discussion of the third issue. The ninth and tenth exception obviously are not applicable in the instant case.xiii[16] Proceeding to the second issue, petitioner contends that the respondent court failed to apply correctly Sections 212 and 221 of R.A. 7160. The pertinent provisions are set forth below: Sec. 212 Preparation of Schedule of Fair Market Values -- Before any general revision of property assessment is made pursuant to the provisions of this Title, there shall be prepared a schedule of fair market values by the provincial, city and the municipal assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in their respective local government units [LGU] for enactment by ordinance of the sanggunian concerned. The schedule of fair market values shall be published in a newspaper of general circulation in the province, city or municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or municipal hall and in two other conspicuous public places therein. Sec. 221. Date of Effectivity of Assessment or Reassessment -- All assessments or reassessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of the succeeding year: Provided, however, That the reassessment of real property due to its partial or total destruction, or to a major change in its actual use, or to any great and sudden inflation or deflation of real property values, or to the gross illegality of the assessment when made or to any other abnormal cause, shall be made within ninety (90) days from the date any such cause or causes occurred, and shall take effect at the beginning of the quarter next following assessment. The petitioner claims that the effectivity date of Manila Ordinance No. 7894 and the schedule of the fair market values is January 1, 1996. He contends that Sec. 212 of the R.A. 7160 prohibits the general revision of real property assessment before the approval of the schedule of the fair market values. Thus, the alleged revision of real property assessment in 1995 is illegal. Based on the evidence presented by the parties, the steps to be followed for the mandatory conduct of General Revision of Real Property assessments, pursuant to the provision of Sec. 219 of R.A. No. 7160 are as follows: 1. 2. The preparation of Schedule of Fair Market Values. The enactment of Ordinances: a) b) c) levying an annual ad valorem tax on real property and an additional tax accruing to the SEF. fixing the assessment levels to be applied to the market values of real properties; providing necessary appropriation to defray expenses incident to general revision of real property assessments; and 57

d)

adopting the Schedule of Fair Market Values prepared by the assessors.xiii[17]

The preparation of fair market values as a preliminary step in the conduct of general revision was set forth in Section 212 of R.A. 7160, to wit: (1) The city or municipal assessor shall prepare a schedule of fair market values for the different classes of real property situated in their respective Local Government Units for the enactment of an ordinance by the sanggunian concerned. (2) The schedule of fair market values shall be published in a newspaper of general circulation in the province, city or municipality concerned or the posting in the provincial capitol or other places as required by law. It was clear from the records that Mrs. Lourdes Laderas, the incumbent City Assessor, prepared the fair market values of real properties and in preparation thereof, she considered the fair market values prepared in the calendar year 1992. Upon that basis, the City Assessors Office updated the schedule for the year 1995. In fact, the initial schedule of fair market values of real properties showed an increase in real estate costs, which ranges from 600% - 3,330% over the values determined in the year 1979. However, after a careful study on the movement of prices, Mrs. Laderas eventually lowered the average increase to 1,020%. Thereafter, the proposed ordinance with the schedule of the fair market values of real properties was published in the Manila Standard on October 28, 1995 and the Balita on November 1, 1995.xiii[18] Under the circumstances of this case, there was compliance with the requirement provided under Sec. 212 of R.A. 7160. Thereafter, on January 1, 1996, the Sanggunian approved Manila Ordinance No. 7894. The schedule of values of real properties in the City of Manila, which formed an integral part of the ordinance, was likewise approved on the same date. When Manila Ordinance No. 7894 took effect on January 1, 1996, the existing assessment levels to be multiplied by the market value of the property in computing the assessed value (taxable value) subject to tax were those enumerated in Section 74 paragraph (A) of Manila Ordinance Number 7794. Coming down to specifics, we find it desirable to lay down the procedure in computing the real property tax. With the introduction of assessment levels, tax rates could be maintained, although tax payments can be made either higher or lower depending on their percentage (assessment level) applied to the fair market value of property to derive its assessed value which is subject to tax. Moreover, classes and values of real properties can be given proper consideration, like assigning lower assessment levels to residential properties and higher levels to properties used in business.xiii[19] The procedural steps in computing the real property tax are as follows: 1) Ascertain the assessment level of the property 2) Multiply the market value by the applicable assessment level of the property 3) Find the tax rate which corresponds to the class (use) of the property and multiply the assessed value by the applicable tax rates.xiii[20] For easy reference, the computation of real property tax is cited below: Market Value Multiplied by Assessment Level Assessed Value Multiplied by Rate of Tax Real Property Tax Pxxx ( x %) Pxxx ( x %) P xx =====

On April 10, 1996, Manila Ordinance No. 7905 was enacted and approved to take effect, retroactively to January 1, 1996. As a result of this new ordinance, the assessment levels applicable to the market values of real properties were lowered into half. A comparative evaluation between the old and the new assessment levels is as follows: Assessment Levels Ordinance 7794 Ordinance 7905 Old New (1) On Lands: Class Residential Commercial Industrial (2) On Buildings and other structures: (a) Residential Fair Market Value 58

20% 50% 50%

10% 25% 25%

Over Not Over P 175,000.00 175,000.00 P 300,000.00 300,000.00 500,000.00 500,000.00 750,000.00 750,000.00 1,000,000.00 1,000,000.00 2,000,000.00 2,000,000.00 5,000,000.00 5,000,000.00 10,000,000.00 10,000,000.00 (b) Commercial/Industrial Fair Market Value Over 300,000.00 300,000.00 500,000.00 750,000.00 1,000,000.00 2,000,000.00 5,000,000.00 10,000,000.00 (3) On Machineries: Class Residential Commercial Industrial Not Over

0% 10% 20% 25% 30% 35% 40% 50% 60% 30%

0% 5% 10% 12.5% 15% 17.5% 20% 25%

30% 500,000.00 750,000.00 1,000,000.00 2,000,000.00 5,000,000.00 10,000,000.00 35% 40% 50% 60% 70% 75% 80% 25% 30% 35% 37.5% 40% 17.5% 20%

15%

50% 80% 66%

25% 40% 40%

(4) On special classes - The assessment levels for all lands, buildings, machineries and other improvements shall be as follows: Actual Use Cultural Scientific Hospital Local Water Districts GOCC engaged in the supply and and distribution of water and/or degeneration and transmission of electric power

15% 15% 15% 15%

7.5% 7.5% 7.5% 7.5%

10%

5%

Despite the favorable outcome of Manila Ordinance No. 7905, the petitioner insists that since it was approved on April 10, 1996, it cannot be implemented in the year 1996. Using Section 221 of R.A. 7160 as basis for his argument, petitioner claims that the assessments or reassessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of the succeeding year. Contrarily, the trial court viewed that Manila Ordinance No. 7905 affects the resulting tax imposed on the market values of real properties as specified in Manila Ordinance No. 7894. Therefore, this supervening circumstance has rendered the petition, moot and academic, for failure of the petitioner to amend his cause of action. The trial court said: A mere cursory reading of his petition that he questioned fair market values and the assessment levels and the resulting tax based thereon as imposed by Ordinance No. 7894. The petitioner, however, failed to amend his petition. Thus, it is clear that the petition has become moot and academic. As correctly stated by the respondent, the facts, viz., the tax rates on level prescribed by Ordinance 7894 upon which the petition was anchored no longer exist because the tax rates in Ordinance No. 7894 have been amended, otherwise, impliedly repealed by Ordinance No. 7905. If only for this, the petition could be dismissed but this court followed the advice of the Supreme Court in the case of National Housing Authority vs. Court of Appeals, et. al. (121 SCRA 777) that the case may be decided in its totality resolving all interlocking issues in order to render justice to all concerned and end litigation once and for all.xiii[21] Although, we are in full accord with the ruling of the trial court, it is likewise necessary to stress that Manila Ordinance No. 7905 is favorable to the taxpayers when it specifically states that the reduced assessment levels shall be applied retroactively to January 1, 1996. The reduced assessment levels multiplied by the schedule of fair market values of real 59

properties, provided by Manila Ordinance No. 7894, resulted to decrease in taxes. To that extent, the ordinance is likewise, a social legislation intended to soften the impact of the tremendous increase in the value of the real properties subject to tax. The lower taxes will ease, in part, the economic predicament of the low and middle-income groups of taxpayers. In enacting this ordinance, the due process of law was considered by the City of Manila so that the increase in realty tax will not amount to the confiscation of the property. WHEREFORE, the instant petition is hereby DENIED, and the assailed Order of Regional Trial Court of Manila, Branch 39 in Civil Case No. 96-77510 is hereby AFFIRMED. COSTS against the petitioner. SO ORDERED. Bellosillo, (Chairman), Puno, Mendoza, and Buena, JJ., concur.

CALLANTA VS OMBUDSMAN DECISION PANGANIBAN, J.: May officials and employees of the Office of the City Assessor reduce the new assessed values of real properties upon requests of the affected property owners? To forestall the practice of initially setting unreasonably high reassessment values only to eventually change them to unreasonably lower values upon requests of property owners, the law gives no such authority to the city assessor or his subalterns. Seemingly innocuous occasions for mischief and veiled opportunities for graft should be excised from the public system. Built-in checks should be zealously observed so that the ingenious and shrewd cannot circumvent them and the audacious cannot violate them with impunity. Statement of the Case Before us is a petition for certiorari under Rule 65 of the Rules of Court seeking to set aside the Ombudsmans amended Resolutionxiii[2] dated October 28, 1993, which dismissed from government service Petitioners Callanta, Delos-Reyes and Concon and suspended the other petitioners from holding office for three (3) months without pay. Also challenged is the ombudsmans Orderxiii[3] dated April 18, 1994, denying petitioners motion for reconsideration and urgent motion to stop the execution of the amended Resolution. The Facts The parties do not dispute the findings of fact of the deputy ombudsmanxiii[4] for the Visayas, as approved by the ombudsman and which this Court finds substantiated by the records. The pertinent portions are as follows: It is alleged that a general revision of assessment was conducted by the Office of the City Assessor in 1988 and sometime thereafter. Notices of assessment together with the new tax declarations were subsequently sent to the property owners. Thereafter, respondents, without the authority of the Local Board of Assessment Appeals, reassessed the values of certain properties, in contravention of Sec. 30 of P.D. 464. The said assessment resulted in the reduction of assessed values of the properties x x x. xxx xxx xxx

The extent of participation of the individual respondents in the adjustments [reductions] referred to above, could be summarized as follows, to wit: 1. Antonio P. Callanta approved and ordered the adjustments of the revised assessments reducing both the market and assessed values of real properties under Tax Declaration Nos. x x x. 2. Ma. Almicar Edera [, Jacinto Pahamtang, Segundino Lucero, Antonio V. Abellana, Nicolas Abarri and Apolinario Salares, Jr.] - conducted the adjustments of the revised assessments reducing both the market and assessed values of real properties under Tax Declaration Nos. x x x. 3. Gilberto delos Reyes [and Cesar Q. Concon]

60

- approved for and in behalf of the City Assessor the adjustments of the revised assessments reducing both the market and assessed values of real properties under Tax Declaration Nos. x x x. xxx xxx xxx

10. Shirley Palmero - recommended the approval of the adjustment of the revised assessment reducing both the market and assessed value of real property under Tax Declaration No. GR-04-028-05093 and conducted similar aforesaid adjustments on real properties under Tax Declaration Nos. x x x.xiii[5] In several similarly worded letter-complaints dated December 19, 1991, the City of Cebu simultaneously filed criminal and administrative charges against the above-enumerated officers and staff of the City Assessors Office for violations of Section 106 of the Real Property Tax Code[,] for gross negligence or willful under-assessment of real properties within the citys taxing jurisdiction and for violation of Sec. 3 (e) of R.A. 3019, otherwise known as the Anti -Graft and Corrupt Practices Act[,] for the act of causing undue injury to the City Government by giving private persons unwarranted benefits, advantages or preferences in the discharge of their official and administrative functions through manifest partiality, evident bad faith or gross inexcusable negligence by reassessing the real properties of taxpayers without any authority whatsoever, thereby resulting in the reduction of tax assessments to the prejudice of the city government x x x. Specifically, the administrative charges were for dishonesty and/or serious irregularities in the performance of duties/public functions. The deputy ombudsman summarized the defenses of petitioners in this wise: Respondents [herein petitioners], in their joint counter-affidavit, denied the charges filed against them. They explained that the acts complained of were done within the bounds of their official duties and functions, citing as their legal basis, Sec. 22 of P.D. 464. That Sec. 30 of P.D. 464 which is the basis of the complaints does not prohibit the Assessor from either correcting from whatever error or flaw he and his deputies may have made. Respondents further alleged that they have not derived any benefit from the adjustments nor caused injury to any party particularly the City Government of Cebu. They explained that the general revision of real property assessments for the City of Cebu has not been completed nor has the City Assessor certified its completion to the Secretary of Justice, thus taxes under these revised tax declarations are not yet due, has [sic] not yet accrued, are not yet collectible and therefore, cannot serve as basis for alleged injury.xiii[6] The deputy ombudsman, ruling purely on the administrative aspect of the cases, held in the assailed amended Resolution that while the city assessor had not yet submitted a certification to the secretary of finance stating that the general revision of property assessments has been completed, thus forestalling the effectivity of [the] assessments and the accrual of taxes thereunder, the city government of Cebu already acquired a vested interest on the taxes by reason of the property owners failure to question the same to the Local Board of Assessment Appeals (LBAA) within sixty (60) days from receipt of their notices of assessment, as provided under Sec. 30xiii[7] of PD 464, as amended. He opined that approval by the secretary of finance is not necessary for the assessments to take effect, and the taxes thereunder to accrue and become payable. In addition, even if no law expressly prohibits the local assessor or his authorized deputies from making corrections or adjustments in assessments, the unrestricted exercise of such authority in all stages of the appraisal and assessment process would open the floodgates to corruption. Besides, the questioned assessments were done pursuant to the general revision; hence, requests for readjustment are effectively petitions for reappraisal and reassessment which are not allowed under the law. Section 30 of PD 464, as amended, provides the remedy for questioning assessments of real properties and the reassessments requested by the property owners and granted by the assessor is not included therein. The deputy ombudsman thus concluded that the unauthorized and improper corrections/adjustments made by petitioners resulting in decreased fair market values of the real properties involved adversely affected the city government. Such acts allegedly constituted willful or gross negligence amounting to intentional violation and gross disregard of Sec. 106xiii[8] of PD 464, as amended. Finding that the readjustments were made pursuant to the direct orders of Petitioner Antonio P. Callanta, who was then officer-in-charge of the Office of the City Assessor, and of Petitioners Gilberto delos Reyes and Cesar Concon who acted on behalf of Callanta in approving the reduced assessments, the deputy ombudsman resolved that the three violated Sec. 4, par. (c)xiii[9] of RA 6713 (the Code of Conduct and Ethical Standards for Public Officials and Employees) for performing acts contrary to law, specifically PD 464, amounting to gross neglect of duty and/or grave misconduct. The penalty of dismissal with forfeiture of accrued benefits was meted upon them. As regards Petitioners Edira, Pahamtang, Lucero, Abellana, Abarri, Salares Jr. and Palmero, the deputy ombudsman found them guilty only of negligence in the performance of their functions for making the adjustments without taking into account the revised assessments previously made. The penalty of suspension for three (3) months without pay was imposed on them.

61

Ombudsman Conrado M. Vasquez approved the findings and recommendations of the deputy ombudsman for the Visayas on December 8, 1993. Petitioners filed a motion for reconsideration as well as a motion to stop the execution of the ombudsmans decision by the city government of Cebu. Both motions were denied for lack of merit.xiii[10] Hence, this petition.xiii[11] Issues Petitioners present the following assignment of errors: First - The Ombudsman gravely erred in resolving that the assessor acted illegally and in grave misconduct by adjusting/correcting the valuations of the tax declarations subject of the complaints. Second - It is gravely erroneous for both respondents to assume that taxes for the subject tax declarations had accrued and become payable, thereby making petitioners liable for causing undue injury to the city government of Cebu. Third - The Ombudsman manifestly overlooked certain relevant facts not disputed by the parties and which if properly considered would justify a different conclusion. Fourth - It is both gravely erroneous and a grave abuse in the exercise of discretion for the Ombudsman to hold liable the rest of the petitioners aside from Mr. Callanta, the city assessor who alone promulgated the act/policy. Fifth - The Ombudsman and Mayor Osmea [of Cebu City] had clearly acted with undue haste amounting to grave abuse of discretion and violation of existing laws and regulations in effecting the dismissal of herein petitioners.xiii[12] In his Memorandumxiii[13] dated March 18, 1997, the ombudsman encapsulates the issues, which we adopt, as follows: Whether or not petitioners violated the law by their acts of accommodating requests for reconsideration of the revised assessments; In the affirmative, whether or not the violations were injurious/prejudicial to Cebu City; and Whether or not the acts of petitioners constitute grave misconduct and/or negligence which warrants [sic] their dismissal/suspension from service. The Courts Ruling The petition is partly meritorious. First Issue: Authority of the City Assessor to Reconsider Real Property Assessments Petitioners anchor the validity of their acts upon the absence of a specific provision of law expressly prohibiting the assessor from making adjustments or corrections in the assessment of real properties, and upon the long-standing practice of the city assessors office in making such adjustments/corrections believed in good faith to be sanctioned under Sec. 22, PD 464xiii[14] (now Sec. 220 of RA 7160), which reads: Sec. 22. Valuation of Real Property. Upon the discovery of real property or during the general revision of property assessments as provided in Section twenty-one of this Code or at any time when requested by the person in whose name the property is declared, the provincial or city assessor or his authorized deputy shall make an appraisal and assessment in accordance with Section five hereof of the real property listed and described in the declaration irrespective of any previous assessment or taxpayers valuation thereon: Provided, however, That the assessment of real property shall not be increased oftener once every five years in the absence of new improvements increasing the value of said property or of any change in its use, except as otherwise provided in this Code. Public respondents, on the other hand, insist that petitioners have no legal authority to act upon requests for reconsideration or appeals of property owners, a power which is explicitly vested upon the LBAA under Sec. 30 of the Real Property Tax Code, as amended, which provides: Sec. 30. Local Board of Assessment Appeals. Any owner who is not satisfied with the action of the provincial or city assessor in the assessment of his property may, within sixty days from the date of receipt by him of the written notice of assessment as provided in this Code, appeal to the Board of Assessment Appeals of the province or city, by filing with it a petition under oath using the form prescribed for the purpose, together with the copies of the tax declarations and such affidavit or documents submitted in support of the appeal. 62

We find no merit in the contentions of petitioners. Enlightening is the following disquisition by the counselxiii[15] for the ombudsman on the above-cited legal provisions: The instances referred to [under Sec. 22] are as follows: 1.) upon the discovery of real property; 2.) during the general revision of property assessments as provided in Section 21 of the Code; and 3.) at anytime [sic] when requested by the person in whose name the property is declared. It is not disputed that the assessment/valuation involved herein were conducted by virtue of the 1988 general revision of property assessments under No. 2 instance above. After an assessment has been conducted, the assessor shall within thirty days issue a written notice of such new or revised assessment to the person in whose name the property is declared. (Section 27, PD 464). If the owner is not satisfied with the action of the assessor in the assessment of his property, he may appeal within sixty days from receipt of the notice of assessment to the Local Board of Assessment Appeals pursuant to Section 30 of P.D. 464 which provides: xxx xxx xxx

Under the aforecited procedure, the issuance of a notice of assessment by the local assessor shall be his last action on a particular assessment. On the side of the property owner, it is this last action which gives him [the] right to appeal to the Local Board of Assessment Appeals. The above procedure also, does not grant the property owner the remedy of filing a motion for reconsideration before the local assessor. The act of herein petitioners in providing the corresponding notices of assessment the chance for the property owners concerned to file a motion for reconsideration and for acting on the motions filed is not in accordance with law and in excess of their authority and therefore constitutes ultra vires acts.xiii[16] Applying the above, we agree with the following conclusions of the deputy ombudsman: x x x The appraisal and assessment done pursuant to the 1988 general revision work were within the purview of the second instance (i.e. during the general revision x x x as set forth in said Sec. 22[)]. But to make the same appraisal and assessment upon the request of the property owners who were not satisfied with the result of the first valuation of their property is grossly out of context in the application of the third instance allowed by Sec. 22. [W]hat the property owners involved were actually asking were practically a reappraisal and reassessment of the properties (because an appraisal and assessment had already been made under the second instance and their request was prompted by the receipt of the written notice of such valuation), the allowance for which is nowhere to be discerned in the provisions of Sec. 22 x x x.xiii[17] To repeat, Sec. 22 clearly provides three (3) occasions when assessments of real properties may be made by the local assessor. In the case at bar, the second instance gave rise to the revised assessed values for which the property owners subsequently sought reconsideration. Sec. 30 of the same Code is equally clear that the aggrieved owners should have brought their appeals before the LBAA. Unfortunately, despite the advice to this effect contained in their respective notices of assessment, the owners chose to bring their requests for a review/readjustment before the city assessor, a remedy not sanctioned by the law. To allow this procedure would indeed invite corruption in the system of appraisal and assessment. It conveniently courts a graft-prone situation where values of real property may be initially set unreasonably high, and then subsequently reduced upon the request of a property owner. In the latter instance, allusions of a possible covert, illicit trade-off cannot be avoided, and in fact can conveniently take place. Such occasion for mischief must be prevented and excised from our system. In this case, based on a listxiii[18] of properties submitted by petitioners comparing their (1) previous assessed values (old values), (2) assessed values under the general revision (revised values), and (3) the unauthorized adjusted values (unauthorized values), the Court observes that the old values of some properties were increased b y more than 1,000% (or 10 times) in the general revision, but were reduced to only about half under the unauthorized adjustments.xiii[19] The large discrepancies seem to indicate a tendency to overvalue initially and thereafter to reduce the increases upon request of the property owner affected. To avoid this dubious, suspicious, bribable and compromising situation, the law itself specifically provided an appellate body -- the LBAA -- before which property owners may seek relief. Neither habit nor good faith can amend this appellate procedure provided under the law. Indeed, the long-standing practice adverted to by petitioners does not justify a continuance of their acts. We cannot sanction such compromising situations. Henceforth, whenever the local assessor sends a notice to the owner or lawful possessor of real property of its revised assessed value, the former shall thereafter no longer have any jurisdiction to 63

entertain any request for a review or readjustment. The appropriate forum where the aggrieved party may bring his appeal is the LBAA, as provided by law. Second Issue: Injury or Prejudice to the City Government of Cebu In order to determine whether the city government of Cebu was prejudiced by the acts of petitioners, we need to determine the date when the revised assessments became due and payable. Petitioners argue that at the time the complaint was filed, the general revision of property values undertaken by their office was not yet finished or completed for the entire city; hence, the revised values were not yet effective and payments thereon were not yet due and payable. No certification has yet been submitted to the secretary of finance as required under Sec. 23 of PD 464. Therefore, it was premature for the city government of Cebu to claim prejudice or injury caused by the questioned readjustments. Public respondents, on the other hand, aver that the city government acquired a vested interest in the taxes accruing from the revised values, because such values became final and effective upon the property owners failure to appeal to the LBAA within the reglementary period provided by law. The following provisions of PD 464, which is the law applicable to the instant case, are relevant in determining when the revised assessments on real properties became effective: Sec. 23. Certification of Revised Values to the Secretary of Finance. -- When the provincial or city assessor shall have finished a general revision of property assessments for any province, municipality or city, he shall so certify to the Secretary of Finance and the assessments shall become effective and taxes shall accrue and be payable thereunder in accordance with the provisions of this Code. Sec. 24. Date of Effectivity of Assessment or Reassessment. -- All assessments or reassessments made after the first day of January of any year shall take effect on the first day of January of the succeeding year: x x x. [underscoring ours] Petitioners solely invoke Sec. 23 and ignore Sec. 24. This Court believes both sections should be construed together. While, at first glance, Sec. 23 seems to impose the certification to the secretary of finance as a condition sine qua non before the revised values may become effective, the second part of the section, which we underscored above, gives a contrary understanding. We hold that the dominant provision is Sec. 24, the specific provision on the effectivity of assessments or reassessments. This section is clear and unequivocal. The assessments take effect on the first day of January of the succeeding year after the revision is made. While Sec. 23 requires the local assessor to certify to the finance secretary that the general revision has been finished, such certification is, however, not the operative act for the effectivity of the new assessments. This interpretation is bolstered by the fact that under the Local Government Code of 1991,xiii[20] Title Two, Book II of which has replaced the Real Property Tax Code, there is no longer any provision requiring such certification. The general revision of property values was commenced by the city assessor of Cebu in 1988. Subsequently, the notices of the new assessments and the new tax declarations were sent to the property owners. The nature of an assessment has been explained this wise: An assessment fixes and determines the tax liability of a taxpayer. As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay the amount assessed and demanded.xiii[21] In the same vein, we have said that the assessment is deemed made when the notice to this effect is released, mailed or sent to the taxpayer for the purpose of giving effect to said assessment.xiii[22] With respect to real property taxes, the obligation to pay arises on the first day of January of the year following the assessment. Corollarily, on the same date, the right of the local government to collect said taxes also arises. And where the taxpayer fails to question such assessment within the reglementary period provided by law, the local governments right becomes absolutexiii[23] upon the expiration of such period with respect to that taxpayers property. Thus, petitioners unauthorized reduction of the assessed values ineluctably resulted in the local governments deprivation of the corresponding revenues. Lost or reduced revenues undeniably translate into damages or injury within the contemplation of the law. The city government of Cebu, therefore, had every legal right to feel aggrieved and to institute this proceeding against petitioners. Third Issue: Penalties Imposed Too Harsh Under the Circumstances 64

Lastly, petitioners contend that the city assessor alone should be held responsible for the acts questioned, since, as head of the office, he laid down the policies and issued the orders, while his deputies and the employees under him merely followed his instructions. In the instant controversy, the other petitioners acted only upon the orders of Petitioner Callanta, which did not appear to be unlawful or erroneous on its face. They aver that they merely followed in good faith a procedure long practised by the office. They deny acting with evident bad faith or gross negligence, since they honestly believed that they had the authority to act on the requests for reconsideration. This is bolstered by the absence of any findings of corruption on their part. These averments of petitioners are impressed with some merit. In grave misconduct, the elements of corruption, clear intent to violate the law or flagrant disregard of established rule must be manifest.xiii[24] From the evidence on record, we do not find any of these elements. In the words of the deputy ombudsman himself: No proof, however, can be obtained from the evidence presented that would strongly indicate that private respondents knowingly induced or caused the respondent public officers to commit the offense defined in Sec. 3 (e), R.A. 3019 as amended, nor is there any sufficient showing that said private respondents had directly or indirectly given any gift, present, share, percentage or benefit to the respondents [sic] public officers or any other person in connection with the questioned transaction subject of the instant cases. x x xxiii[25] Without evidence showing that petitioners received any gift, money or other payoff or that they were induced by offers of such, we cannot impute any taint of direct corruption to the questioned acts of petitioners. Any indication of intent to violate the law or of flagrant disregard of established rule is meanwhile negated by the petitioners belief in good faith that their acts were sanctioned under the third instance provided in Sec. 22 of PD 464, as buttressed by the long-standing adherence of local assessors to the questioned procedure. Gross negligence, on the other hand, is flagrant and palpable disregard or breach of duty. It is the conscious pursuit of a course of conduct which would naturally and reasonably cause injury.xiii[26] As discussed above, we can hardly characterize the acts of petitioners as grossly negligent. Where the charges on which the removal of the public officer is sought are misconduct in office, gross negligence, corruption, etc, the ground for dismissal should be established. But Petitioners Callanta, Delos Reyes and Concon, as public officers occupying exalted positions in the civil service, must, in accordance with the Constitution,xiii[27] and the Ethical Standards Law, exemplify the ideals of integrity, efficiency, and particularly proficiency in the law. They must ever be prudent to act always in accordance with law, and not to perform or authorize legally doubtful acts that may stain the integrity of their office. Their act alone of initially authorizing multifold increases in the assessed values, only to scale them down to as much as fifty per cent upon requests of the affected property owners, is already indicative of misconduct or malfeasance, if not incompetence in their offices, for which they should be penalized. Considering that they are senior officials who had failed to live up to the standards and ideals expected of their rank and stature, Petitioners Callanta, Delos Reyes, and Concon are hereby imposed the penalty of suspension from office for one (1) year.xiii[28] The defense of the other petitioners that they were merely following the orders of their superiors does not totally exculpate them from liability. They should likewise be aware of the limits of the functions of their office. Public officials and employees are required to follow only the lawful orders of their superiors which are issued within the cope of their authority.xiii[29] In our jurisdiction, the rule of law, and not of men, governs. Nowhere in our statutes is blind obedience required of junior personnel to the commands and directives of their superiors. In indiscreetly following the orders of their superiors, Petitioners Edira, Pahamtang, Abellana, Salares, Jr., and Palmero had breached their accountability to the public. They deserve to be reprimanded. Epilogue The Court notes that the solicitor generals Manifestation and Motionxiii[30] dated September 20, 1994, which was adverse to the ombudsman. The chief government lawyer thus declined to file a comment on the formers behalf. Hence, the ombudsman had to defend his findings and conclusions in the assailed Resolution through his own counsel. We must commend the chief graft-buster for his vigilance and effort to close gaps that provide clandestine opportunities for corruption. His drive to eliminate existing systems of procedure in government that covertly allow graft and corrupt practices -- which he describes as predominantly in the form of leeway to bargain -- is exemplary. Similar approaches to curb and arrest the most serious and prevalent problem in the bureaucracy are imperative. Indeed, what we need now is not only to punish the wrongdoers or reward the outstanding civil servants, but also to plug the hidden gaps and potholes of corruption as well as to insist on strict compliance with existing legal procedures in order to abate any occasion for graft or circumvention of the law. WHEREFORE, the petition is PARTLY GRANTED. The challenged amended Resolution is hereby Modifiedas follows:. Petitioners Antonio P. Callanta, Gilberto M. delos Reyes and Cesar Q. Concon are SUSPENDEDfor one (1) year; while Petitioners Almicar Edira, Jacinto Pahamtang, Antonio V. Abellana, Apolinario Salares Jr. and Shirley 65

Palmero REPRIMANDED. All petitioners are WARNEDthat a repetition of the same or similar acts in the future will be dealt with more severely. SO ORDERED. Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco, and Martinez, concur. xiii[1] Spelled Edera in the assailed Resolution of the ombudsman. But as one of the petitioners herein, she is presumed to have used the correct spelling of her surname. Hence, this Decision shall refer to her as Edira.

MERALCO VS BARLIS RESOLUTION DE LEON, JR., J.: Submitted for resolution is petitioners Motion for Reconsideration of our Decision promulgated on May 18, 2001 affirming the Decision of the Court of Appeals dated August 11, 1993 and its Resolution dated February 28, 1994. The said Decision of the Court of Appeals declared as void the June 17, 1991 Order of the Regional Trial Court (RTC) of Makati City, Branch 66, denying respondent Municipal Treasurers Motion to Dismiss the petitioners Petition fo r Prohibition. In our Decision, we ruled, among others that the RTC had no jurisdiction to entertain petitioners Petition for Prohibition to enjoin respondent Municipal Treasurer of Muntinlupa from garnishing petitioners bank deposits to the extent of it s unpaid real estate taxes inasmuch as petitioner did not comply with the legal requirement of paying under protest the taxes assessed against it as provided for in Section 64 of the Real Property Tax Code. We also held that the petitioner had no cause of action since its failure to question the notice of assessment before the Local Board of Assessment Appeals (LBAA) prior to the filing of the suit in the RTC was tantamount to a failure to exhaust administrative remedies. In urging us to reconsider our Decision, petitioner questions our finding that what was sent to it by former Municipal Treasurers Norberto A. San Mateo and Eduardo A. Alon were the tax assessment notices contemplated by law and not mere collection notices. As movant-petitioner puts it, having received mere collection notices, how could petitioner avail of the proper administrative remedies in protesting an erroneous tax assessment before the LBAA?xiii[1] Petitioners argument merits our attention. Anent movant-petitioners allegation that the September 3, 1986 and October 31, 1989 notices were actually tax collection notices and not tax assessment notices as we found them to be, a second and more careful examination of the said notices leads us to concede that petitioner indeed has a point. We reproduce hereunder a sample of one of the notices sent to petitioner.xiii[2] ______________Patalastas G/Gng. MANILA ELECTRIC COMPANY Ortigas Avenue, Pasig Metro Manila Mahal na G./Gng. Ipinababatid po namin sa inyo na ayon sa talaan ng aming tanggapan, ang buwis sa mga ari-arian ng nakatala sa inyong pangalan ay hindi pa nakakabayad tulad ng nasasaad sa ibaba: Tax Decl. No. B-009-05501 B-009-05502 Loca- Assessment tion Sucat P86,874,490 Sucat P81,082,860 P75,291,220 Year 1976-78 Tax Due Penalty Total

B-009- 05503 Sucat

6,515,586.75 +1,563,740.82 1977-78 4,054,143.00 +972,994.32 1978 1,882,280.50 -

P8,079,327.57 P5,027,137.32 66

+451,747.32 TOTAL

P2,334,027.82 -- P15,440,492.71

Inaasahan po namin na di ninyo ipagwawalang bahala ang patalastas na ito at ang pagbabayad na nabanggit na buwis sa lalong madaling panahon. Ipinaaala-ala po lamang ang sino mang magpabaya o magkautang ng buwis ng maluwat ay isusubasta (Auction Sale) ng Pamahalaan ang inyong ari-arian ng sangayon sa batas. Subalit kung kayo po naman ay bayad na, ipakita po lamang ang katibayan ng pagbabayad (Official Receipt) at ipagwalang bahala ang patalastas na ito. (Underscoring supplied) It is apparent why the foregoing cannot qualify as a notice of tax assessment. A notice of assessment as provided for in the Real Property Tax Code should effectively inform the taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of properties. The September 3, 1986 and October 31, 1989 notices do not contain the essential information that a notice of assessment must specify, namely, the value of a specific property or proportion thereof which is being taxed, nor does it state the discovery, listing, classification and appraisal of the property subject to taxation. In fact, the tenor of the notices bespeaks an intention to collect unpaid taxes, thus the reminder to the taxpayer that the failure to pay the taxes shall authorize the government to auction off the properties subject to taxes or, in the words of the notice, Ipinaaala-ala po lamang, ang sino mang magpabaya o magkautang ng buwis ng maluwat ay isusubasta (Auction Sale) ng pamahalaan ang inyong ari-arian ng naaayon sa batas. The petitioner is also correct in pointing out that the last paragraph of the said notices that inform the taxpayer that in case payment has already been made, the notices may be disregarded is an indication that it is in fact a notice of collection. Furthermore, even the Bureau of Local Government Finance (BLGF), upon whose recommendation former Municipal Treasurer Alon relied in the collection of back taxes against petitioner, deemed the September 3, 1986 notice as a collection letter. Hence, The Bureau should be informed of any recent action taken by MERALCO on the collection letter dated September 3, 1986 of that Office and whether NAPOCOR was also advised thereof and its reaction thereon, if any, for our record and reference.xiii[3] We therefore take this opportunity to correct that portion of our decision that declare the September 3, 1986 and October 31, 1989 notices to be tax assessment notices, to wit: From the tone and content of the notices, the 3 September 1986 notices sent by Former Municipal Treasurer Norberto A. San Mateo to petitioner MERALCO are the notices of assessment required by the law as it merely informed the petitioner that it has yet to pay the taxes in accordance with the reassessed values of the real property mentioned therein. The 31 October 1989 notices sent by Municipal Treasurer Eduardo A. Alon to MERALCO is likewise of the same character. Only the letter dated 20 November 1989 sent by Municipal Treasurer Eduardo A. Alon to petitioner MERALCO could qualify as the actual notice of collection since it is an unmistakable demand for payment of back taxes. We now hold that the September 3, 1986 and October 31, 1989 notices were actually notices of collection only as contended by petitioner. In the instant Motion for Reconsideration, movant-petitioner also asseverates that contrary to the ruling of this Court that it is taking diverse positions,xiii[4] it allegedly never admitted in its pleadings that the properties subject to tax were assessed and declared for taxation purposes as of November, 1985. In petitioners Petition for Prohibition before the trial court, it alleged, among others, that: 14. Respondent cannot levy additional real estate taxes without a prior reappraisal of the property and an amendment of the tax declaration by the Assessor. Assuming arguendo that there was such a re-appraisal made and new tax declarations issued, such re-appraisal shall operate prospectively and not retroactively as was done in this case;xiii[5] (Underscoring supplied.) The pertinent allegations in petitioners Petition for Review on Certiorari before this Court is of similar content, thus: The ancilliary issue is the question: whether the Regional Trial Court has the jurisdiction to prohibit the collection of real estate taxes which purport to be due to under-declaration and undervaluation of the property by the original owner (MERALCO) when no new assessment was made and served on the new owner (NAPOCOR), especially when the 67

supposed undervaluation and underdeclaration was discovered after the sale of the property to the new owner.;xiii[6] (Underscoring supplied.); and At the very outset, the courts error is evident. The Court, in its Decision stated that the controversy is about the municipal treasurers right to assess realty taxes. But in justifying its conclusion, the court, in its Resolution, cited a provision authorizing the municipal deputy assessor to assess realty for tax purposes. Assuming arguendo that respondent Alon can issue assessments, the Court of Appeals decision is still erroneous as it proceeded from wrong premises. The respondent court believes the case involves a taxpayer questioning an assessment made by Respondent Treasurer and therefore Section 64 of the Realty Property Tax Code prevents the filing of the PETITION FOR PROHIBITION without first paying the tax assessed under protest. The respondent court is gravely in error for the following reasons: xxx xxx x x x.

2. There was no assessment issued by the respondent treasurer. xxx xxx x x x.

In striking down Petitioners arguments, the Honorable Court of Appeals ruled that [a] remedy is also made available by law to the private respondent [Petitioner herein] where he disagrees with the assessment levied upon it. Again, the respondent Court acted on the misguided premise that an assessment was issued in this case, and that Petitioner is the taxpayer for purposes of real property taxes. As discussed above, the Petitioner cannot be considered a taxpayer for purposes of appealing a realty tax assessment over the Napocor Plants. Neither was there any assessment served on the Petitioner. Considering the same, no appeal or other remedy is available to the Petitioner save for the petition for prohibition.xiii[7] (Underscoring supplied.) As there has been no apparent admission by petitioner that it had received the 1985 tax assessment notices allegedly sent by respondent Municipal Treasurer, and because we have found that the records are bereft of evidence showing actual receipt by petitioner of the real property tax declaration allegedly sent by the Municipal Assessor, We are thus compelled to declare that a question of fact has been raised before this Court: On the one hand, said respondent claims that, aside from the September 3, 1986 and October 31, 1989 notices, he had transmitted to petitioner tax assessment notices in the form of real property tax declarations in November of 1985. On the other hand, petitioner denies having received any tax assessment notice from said respondent prior to receipt of the notices of collection. Whether or not a tax assessment had been made and sent to the petitioner prior to the collection of back taxes by respondent Municipal Treasurer is of vital importance in determining the applicability of Section 64 of the Real Property Tax Code inasmuch as payment under protest is required only when there has in fact been a tax assessment, the validity of which is being questioned. Concomitantly, the doctrine of exhaustion of administrative remedies finds no application where no tax assessment has been made. Ordinarily, in the light of the foregoing facts, we would remand this case to the trial court pursuant to the basic tenet that this Court is not a trier of facts. Under the present circumstances, however, a remand of this case to the trial court would be a superfluity. The Petition for Review on Certiorari of petitioner before us raises the same grounds which petitioner relies upon in its Petition for Prohibition before the trial court that the respondent Municipal Treasurer arbitrarily and despotically issued the writ of garnishment against petitioners funds, to wit: 1) The petitioner is not the taxpayer contemplated by the Real Property Tax Code for purposes of an assessment; 2) There was no assessment made prior to the collection of back taxes thereby rendering irregular the collection of taxes by the respondent; and 3) Respondent cannot garnish petitioners funds for the satisfaction of delinquent taxes. His remedy is merely to levy upon the real property subject of the tax pursuant to the legal principle that unpaid real property taxes constitute a lien upon the real property subject to back taxes. By the parties own doing, all the issues that bear upon the propriety of the issuance of the warrants of garnishment against petitioners bank deposits for the collection of back taxes have been raised before this Court in its Petition for Review on Certiorari and properly resolved in favor of respondent Municipal Treasurer. In resolving all those issues presented before us by petitioner, we have, in effect, resolved petitioners amended petition for prohibition filed before the trial court. In other words, we have already decided that said respondent did not act arbitrarily and despotically in garnishing petitioners funds. 68

Hence, should the trial court find that there has indeed been a prior assessment, petitioners pe tition for prohibition would be dismissed for failure to pay under protest and to exhaust administrative remedies. However, a finding by the trial court that there was no tax assessment made prior to the collection of taxes would render inapplicable the requirement of paying under protest and exhausting administrative remedies by first appealing to the LBAA before the trial court takes cognizance of petitioners petition for prohibition. Unfortunately therefore, even if the trial court can assume jurisdicti on over the said petition for prohibition, there is nothing substantial left for it to do. Finally, petitioners insistence that its petition for prohibition before the trial court should be allowed as it does not question the validity of a tax assessment but only the arbitrary garnishment of its funds should be given scant consideration. As we have said, to resolve the petition for prohibition, it would not only be the question of the validity of the warrants of garnishment that would have to be tackled, but in addition the issues of tax assessment and collection would have to be dealt with too. We would like to stress here that despite petitioners representations, its Amended Petition for Prohibition does in fact assail the validity of the tax assessment made on its properties. The following allegations in petitioners Amended Petition for Prohibition before the RTC should make this glaringly clear: 13. Respondent based his claim that petitioner was delinquent in the payment of its real estate taxes on t he flimsy ground that there was a big discrepancy in the valuation reported by petitioner to the Municipal Assessor in 1974 and the selling price of the machineries and equipment when petitioner sold them to National Power Corporation in 1978. Naturally in times of rising cost, especially of imported machinery and equipment like those installed at the Sucat power plants, the prices of articles several years after a lapse of time from their acquisition will be very much higher. Following respondents theory, he should assess himself delinquency taxes for his own house and lot because, for sure, the values of his house and lot today is many times more than when he bought it. xxx xxx xxx

18. The allegedly delinquent real estate taxes claimed by respondent as shown in the annex to the Notices of Garnishment, Annexes E, F and G were arrived at by respondent taxing the same property twice and in one case, even three times; by evaluating the property based on selling price of the machineries and equipment rather than the actual acquisition cost thereof; by taxing as undeclared machineries, items that were already declared by petitioner in 1974 and by including the value of the land and other tax-exempt property in the computation of said alleged deficiency tax.xiii[8] WHEREFORE, the instant Motion for Reconsideration is hereby DENIED with finality. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

TALUSAN VS TAYUG

DECISION PANGANIBAN, J.: For purposes of real property taxation, the registered owner of a property is deemed the taxpayer and, hence, the only one entitled to a notice of tax delinquency and the resultant proceedings relative to an auction sale. Petitioners, who allegedly acquired the property through an unregistered deed of sale, are not entitled to such notice, because they are not the registered owners. Moral lessons: real property buyers must register their purchases as soon as possible and, equally important, they must pay their taxes on time.
The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the November 20, 1997 Decisionxiii[1] of the Court of Appeals (CA) in CA-GR CV No. 41586. The dispositive portion of the challenged Decision is hereunder reproduced as follows: WHEREFORE, premises considered, the appealed decision (dated February 4, 1993) of the Regional Trial Court (Branch 7) in Baguio City in Civil Case No. 1456-R is hereby AFFIRMED, with costs against plaintiffs/appellants.
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Also assailed is the April 27, 1998 CA Resolutionxiii[2]which denied petitioners Motion for Reconsideration. The questioned CA ruling affirmed the Decisionxiii[3] of Branch 7 of the Regional Trial Court (RTC) of Baguio City in Civil Case No. 1456-R. The RTC, in turn, dismissed an action for the annulment of the auction sale of a condominium unit, covered by Condominium Certificate of Title No. 651 and located in Building IV, Europa Condominium Villas, Baguio City.
The Facts

The CA summarized the antecedents of this case in this wise:xiii[4] On June 28, 1988, [herein petitioners] filed a complaint wherein they alleged, inter alia, that: --They bought the subject property covered by Condominium Certificate of Title No. 651, from its former owner, Elias Imperial, as evidenced by a Deed of Absolute Sale: --On October 15, 1985, [herein Respondent] Juan D. Hernandez, x x x sued x x x in his capacity as City Treasurer of Baguio City, wrote a letter to the former owner Elias Imperial informing him that the above described property would be sold at public auction on December 9, 1985, x x x to satisfy the delinquent real estate taxes, penalties and cost of sale, and demanded payment of the sum of P4,039.80, representing total taxes due and penalties thereon; --Elias Imperial and his entire family emigrated to Australia in 1974. Elias Imperial never authorized a certain Dante Origan x x x to receive any letter or mail matter for and on his behalf; --[Respondent] Hernandez sold the above-described property to [Respondent] Tayag for P4,400.00 without any notice to the former owner thereof, [or] to [petitioners], and without compliance with the provisions of PD No. 464, as evidenced by the Certificate of Sale; --A final bill of sale was later issued in favor of the [Respondent] Hermenegildo Tayag. The assessed value alone of the said property is P37,310.00 and the fair market value of the same is more than P300,000.00 and both [respondents] knew these; --The bid price of P4,400 is so unconscionably low and shocking to the conscience, thus, the sale for the alleged
unpaid taxes in the sum of P4,039.79, including penalties is null and void ab initio; --[Petitioners] have been in actual possession of the Unit in question, since they bought the same from its former owners, and their possession is open, public, continuous, adverse and in the concept of owners, while [Respondent] Hermegildo Tayag has never been in possession of the said property; --[Petitioners] through intermediaries offered to pay to the [respondents] the sum of P4,400 plus all interests and expenses which [they] might have incurred x x x but said offer was rejected without any just [or] lawful cause. There is a need to issue a writ of preliminary injunction to preserve the status quo. They asked for: moral damages of not less than P50,000.00; exemplary damages of not less than P20,000.00; attorneys fee of P30,000.00, plus appearance fee of P2,000.00 for every appearance; and litigation expenses of not less than P5,000.00 to prosecute the case. (pages 3-8 of the Record) On July 14, 1988, [Respondent] Hermenegildo Tayag filed his [A]nswer with [C]ounterclaim (pages 28-32 of the Record), wherein he substantially denied the allegations in the complaint and, at the same time, raised the following affirmative defenses, among others: --(T)he ownership of the Condominium unit registered under Condominium Certificate of Title No. 651, Baguio City, has been consolidated in his name by virtue of the decision of the Regional Trial Court of Baguio, Branch 6, on September 16, 1987 x x x . The said decision has [become] final and executory as evidenced by the Certificate of Finality issued on October 8, 1987; --[Petitioners have] no cause of action against him, he being a buyer in good faith in a regular and lawful public bidding in which any person is qualified to participate. 70

--The lower court has no jurisdiction over [petitioners] claim because the [petitioners] pray for the annulment of the Certificate of the Sale and the Final Bill of Sale, which was affirmed by virtue of the decision of the Regional Trial Court of Baguio, Branch 6, on September 16, 1987 x x x. The said decision has [become] final and executory as evidenced by the Certificate of Finality issued on October 8, 1987; --The public auction sale complied with the requirements of Presidential Decree No. 464 hence, the same is lawful and valid: --[Respondent] Tayag is not bound by the alleged [D]eed of [S]ale in favor of the [petitioners] by Elias [I]mperial, because it was not registered and recorded with the Registry of Deeds of Baguio City. [Respondent] Tayag then prayed for the award in his favor, of: moral damages of at least P50,000.00; exemplary damages; attorneys fees in the sum of P10,000.00; and, expenses of litigation. [Respondent] Hernandez likewise filed an [A]nswer on July 18. 1988, wherein he denied the material averments in the complaint and stated that no irregularity or illegality was committed in the conduct of the proceedings with respect to the delinquent real property of Elias Imperial and the actuations of the defendant herein were all within the limits of his authority and in accordance with the provisions of the law pertaining to delinquent real property, particularly, P.D. 464 otherwise known as the Real Property Tax Code and therefore, no damages may be imputed against him. He also claimed, by way of affirmative defenses, that: --The complaint states no cause of action against the [respondent] herein: --[Petitioners] have not complied with x x x Section 83 of P.D. No. 464 x x x thus, the case cannot prosper; --Granting that a Deed of Sale was actually issued in favor of the plaintiffs [because of] the fact that it is unregistered, t he same does not bind third persons including defendant herein. In their Complaint, petitioners alleged that on December 7, 1981, they had acquired the condominium from Elias Imperial, the original registered owner, for P100,000. The sale was purportedly evidenced by a Deed of Sale which, however, had not and thenceforth never been registered with the Register of Deeds. Petitioners also averred that on December 9, 1985, Baguio City Treasurer Juan Hernandez sold the property at a public auction due to nonpayment of delinquent real estate taxes thereon. The property was sold to Respondent Herminigildo Tayag for P4,400 which represented the unpaid taxes. Thus, petitioners filed a Complaint seeking the annulment of the auction sale. They cited irregularities in the proceedings and noncompliance with statutory requirements. Dismissing the Complaint, Branch 7 of the RTC of Baguio City cited the December 16, 1987 judgment of Branch 6 of the same court in LRC Adm. Case No.207-R. This earlier Branch 6 Decision had consolidated ownership of the condominium unit in favor of Respondent Tayag. The Branch 7 Decision also cited the May 31, 1988 Order of Branch 5 of the same court which had granted a Petition for the Cancellation of Condominium Certificate of Title No. 651 in the name of Elias Imperial and directed the Register of Deeds to issue a new Certificate of Title in the name of Respondent Tayag. According to the trial court, the Decision in LRC Adm. Case No. 207-R had already upheld the legality of the questioned auction sale. Hence, to rule again on the same issue would amount to passing upon a judgment made by a coequal court, contrary to the principle of conclusiveness of judgment.
Ruling of the CA

The appellate court affirmed the trial courts ruling and ratiocination. The CA explained that LRC Adm. Case No. 207-R had already ruled on the validity of the auction sale of the subject condominium unit. It further sustained the validity of that sale, because the city treasurer complied with the requirements of notice, publication and posting. It added that [i]f [petitioners] never received the notices sent to Elias Imperial, then they have only themselves to blame for failing to register the deed of sale between them and the former owner x x x. Rejecting petitioners contention that the purchase price was inadequate, the CA ruled that such inadequacy could not nullify the auction sale. It likewise held that petitioners had not established bad faith on the part of respondents in conducting the auction sale. Finally, it agreed with the latters contention that the former were remiss in causing the registration of the sale in their favor of the subject property and they likewise did not fulfill their obligation to pay taxes. It [is] thus clear x x x they should only have themselves to blame. Laws exist to be followed, failing in which the price must be paid. 71

Hence, this recourse.xiii[5]

The Issues

Petitioners assigned the following alleged errors for the consideration of this Court:xiii[6] I. FIRST ASSIGNMENT OF ERROR

The Honorable Court of Appeals grievously erred in failing to consider that the petitioners were deprived of their right to due process in this case due to the gross and inexcusable negligence of their former counsel who failed to inform them of the decision in this case and protect their interest. II. SECOND ASSIGNMENT OF ERROR

The Honorable Court of Appeals grievously erred in failing to nullify the auction sale of the subject property of petitioners due to alleged tax delinquency when there was no compliance with the mandatory requirement of Section 46 of P.D. 464 that such notice of delinquency of the payment of the property tax should be published. III. THIRD ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in failing to consider the lack of personal notice of the sale for public auction of the subject property to its owner which nullifies the said proceeding. IV. FOURTH ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in holding that the decision of the trial court in the petition for the consolidation of the title case filed by the private respondent in LRC Admin. Case 207 is a bar to this proceeding. V. FIFTH ASSIGNMENT OF ERROR The Honorable Court of Appeals erred in not nullifying the auction sale of subject property on equitable considerations. We deem it appropriate to simplify the issues in this wise: (1) whether the RTC Decision in LRC Adm. Case No. 207-R is a bar to this proceeding; and (2) whether the auction sale of the subject condominium unit should be annulled on the grounds of (a) non-publication of the notice of delinquency for the payment of property tax, (b) lack of personal notice of the sale or public auction of the subject property and (c) equitable considerations. As a preliminary matter, we shall also consider petitioners submission that they were deprived of due process because of their counsels failure to inform them immediately of the receipt of the CA Decision.
Preliminary Matter: Negligence of Petitioners Former Counsel

Petitioners aver that their former counsel informed them of the CA Decision only on February 5, 1998, more than two months after he had received a copy on December 3, 1997. According to petitioners, their former counsels negligence effectively deprived them of their right to due process. We disagree. Notwithstanding its late filing, their Motion for Reconsideration was accepted and considered by the CA. Hence, this issue has become moot, a fact which petitioners themselves admitted in their Memorandum: As a matter of fact, in the very resolution of the Court of Appeals of April 27, 1998 (Annex C to Petition) denying the motion for reconsideration, wherein the matter of inexcusable negligence of counsel in not informing petitioners immediately of the decision of the court a quo, were among the grounds thereof, it was held that the issues raised therein had already been considered in the Decision of November 20, 1997. The Court of Appeals obviously considered that the Motion for Reconsideration was validly filed by petitioners so that the Court of Appeals favorably considered the plea of petitioners to be afforded due process by acting on the Motion for Reconsideration. Otherwise, it could have just denied said Motion for late filing or simply noted the same without action.xiii[7] Moreover, petitioners themselves declared in their Reply Memorandumxiii[8] that this matter is no longer in issue: At any rate this issue was raised in the Motion for Reconsideration of the Decision of the appellate court and obviously it was favorably considered as the said Court denied the merit of said Motion by stating that the issues raised have already been treated in the Decision, instead of outrightly denying the same for late filing. Hence, this is no longer in issue in this proceeding.xiii[9]
First Issue:

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Bar by Earlier Judgment

Petitioners contend that the Decision in LRC Adm. Case No. 207-R, rendered by the Regional Trial Court of Baguio City (Branch 6), did not preclude the filing of a separate action to annul the auction sale. Citing Tiongco v. Philippine Veterans Bank,xiii[10] they aver that this RTC Branch had no jurisdiction to rule on the validity of that sale. Hence, its Decision in the LRC case cannot bar the present proceedings. Petitioners reliance on Tiongco is misplaced, considering that its factual incidents are different from those of the present controversy. In that case, the trial court was acting on a Petition for the Surrender of Certificates of Title. In LRC Adm. Case No. 207-R, the trial court was faced with a Petition for Consolidation of Ownership. It had jurisdiction to rule on all matters necessary for the determination of the issue of ownership, including the validity of the auction sale. Indeed, this Court in several casesxiii[11]has previously declared that a petition for the surrender of the owners duplicate certificate involves contentious questions which should be threshed out in an ordinary case, because the land registration court has no jurisdiction to try them. Presidential Decree (PD) 1529, however, intended to avoid a multiplicity of suits and to promote the expeditious termination of cases. In more recent cases,xiii[12] therefore, the Court declared that this Decree had eliminated the distinction between general jurisdiction vested in the regional trial court and the latters limited jurisdiction when acting merely as a land registration court. Land registration courts, as such, can now hear and decide even controversial and contentious cases, as well as those involving substantial issues.xiii[13] Thus, petitioners err in contending that the RTC is, in a land registration case, barred from ruling on the validity of the auction sale. That court now has the authority to act not only on applications for original registration, but also on all petitions filed after the original registration of title. Coupled with this authority is the power to hear and determine all questions arising upon such applications or petitions.xiii[14] Especially where the issue of ownership is ineluctably tied up with the question of registration, the land registration court commits no error in assuming jurisdiction.xiii[15] It is equally important to consider that a land registration courts decision ordering the confirmation and the registration of title, being the result of a proceeding in rem, binds the whole world.xiii[16] Thus, the trial courts ruling consolidating the ownership and the title of the property in the name of herein respondent is valid and binding not only on petitioners, but also on everyone else who may have any claim thereon.
Second Issue: Validity of the Auction sale

Petitioners contend that the auction sale was invalid, because several requisites regarding notice and publication were not satisfied. We are not convinced. It has been held that matters of notice and publication in tax sales are factual questions that cannot be determined by this Court.xiii[17] Moreover, a recourse under Rule 45 of the Rules of Court, as in this case, generally precludes the determination of factual issues. This Court will not, as a rule, inquire into the evidence relied upon by the lower courts to support their findings.xiii[18] In this case, the CA had already ruled on the question of compliance with the requirements of notice and publication in this wise: In the case at bench, it cannot be denied that the requirements of notice, publication and posting have been complied with by the public defendant prior to the auction sale wherein the subject condominium unit was sold. x x x Ergo, there was nothing irregular in the questioned public auction -- thus, the validity of the same must be upheld in accordance with the aforementioned cases.xiii[19] The CA ruling notwithstanding, we shall proceed to discuss these factual issues in order to assure petitioners of a complete adjudication of their case, and not a mere disposition of procedural technicalities.
The Non-Publication of Notice of Real Property Tax Delinquency

Petitioners assert that the tax sale should be annulled because of noncompliance with the requirement of publication prescribed in Section 65 of PD 464. In this regard, we note that unlike land registration proceedings which are in rem, cases involving an auction sale of land for the collection of delinquent taxes are in personam. Thus, notice by publication, though sufficient in proceedings in rem, does not as a rule satisfy the requirement of proceedings in personam.xiii[20]As such, mere publication of the notice of delinquency would not suffice, considering that the procedure in tax sales is in personam. It was, therefore, still 73

incumbent upon the city treasurer to send the notice of tax delinquency directly to the taxpayer in order to protect the interests of the latter. In the present case, the notice of delinquency was sent by registered mail to the permanent address of the registered owner in Manila. In that notice, the city treasurer of Baguio City directed him to settle the charges immediately and to protect his interest in the property. Under the circumstances, we hold that the notice sent by registered mail adequately protected the rights of the taxpayer, who was the registered owner of the condominium unit. For purposes of the real property tax, the registered owner of the property is deemed the taxpayer. Hence, only the registered owner is entitled to a notice of tax delinquency and other proceedings relative to the tax sale. Not being registered owners of the property, petitioners cannot claim to have been deprived of such notice. In fact, they were not entitled to it.
Lack of Personal Notice of the Sale or of the Public Auction of the Subject Property

Petitioners also contend that the registered owner was not given personal notice of the public auction. They cite Section 73 of PD 464, the pertinent portion of which is reproduced hereunder: x x x. Copy of the notices shall forthwith be sent either by registered mail or by messenger, or through messenger, or through the barrio captain, to the delinquent taxpayer, at the address shown in the tax rolls or property tax records of the municipality or city where the property is located, or at his residence, if known to said treasurer or barrio captain . x x x. (Underscoring supplied by petitioners in their Memorandum) According to petitioners, the notice of public auction should have been sent to the address appearing in the tax roll or property records of the City of Baguio. That address is Unit No. 5, Baden #4105, Europa Condominium Villas, Baguio City; not the known address or residence of the registered owner at 145 Ermin Garcia Street, Cubao, Quezon City. They contend that notice may be sent to the residence of the taxpayer, only when the tax roll does not show any address of the property. The above-cited provision, however, shows that the determination of the taxpayers address to which the notice may be sent is the treasurers discretionary prerogative. In this case, the city treasurer deemed it best to send the notice of public auction to the residence of the taxpayer. The former validly exercised this option, inasmuch as the address of the latter was known to him. Moreover, it was more practical and favorable to the registered owner that the notice of delinquency be sent to his permanent residence in Manila, because he was using the subject condominium unit merely as a vacation house and not as a residence. This Court in Pecson v. Court of Appealsxiii[21]made a clear and categorical ruling on the matter, when it declared as follows: Under the said provisions of law, notices of the sale of the public auction may be sent to the delinquent taxpayer, either (I) at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or (ii) at his residence, if known to such treasurer or barrio captain. (emphasis supplied) To reiterate, for purposes of the collection of real property taxes, the registered owner of the property is considered the taxpayer. Although petitioners have been in possession of the subject premises by virtue of an unregistered deed of sale, such transaction has no binding effect with respect to third persons who have no knowledge of it. The importance of registration and its binding effect is stated in Section 51 of the Property Registration Decree or PD 1529, which reads: Sec. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms, deeds, mortgages, leases or other voluntary instrument as are sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will purporting to convey or effect registered land, shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Registry of Deeds to make registration. The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the Office of the Register of Deeds for the province or the city where the land lies. Thus, insofar as third persons are concerned, it is the registration of the deed of sale that can validly transfer or convey a persons interest in a property.xiii[22] In the absence of registration, the registered owner whose name appears on the 74

certificate of title is deemed the taxpayer to whom the notice of auction sale should be sent. Petitioners, therefore, cannot claim to be taxpayers. For this reason, the annulment of the auction sale may not be invoked successfully.
The Annulment of the Auction Sale on Equitable Considerations

As correctly pointed out by respondents, equitable considerations will not find application, if the statutes or rules of procedure explicitly provide for the requisites and standards by which the matters at bench can be resolved. While it may be assumed that both petitioners and Respondent Tayag are innocent purchasers of the subject property, it is a well-settled principle that between two purchasers, the one who has registered the sale in ones favor has a preferred right over the other whose title has not been registered, even if the latter is in actual possession of the subject property.xiii[23] Likewise, we cannot help but point out the fact that petitioners brought this misfortune upon themselves. They neither registered the Deed of Sale after its execution nor moved for the consolidation of ownership of title to the property in their name. Worse, they failed to pay the real property taxes due. Although they had been in possession of the property since 1981, they did not take the necessary steps to protect and legitimize their interest. Indeed, petitioners suit is now barred by laches.xiii[24] The law helps the vigilant, but not those who sleep on their rights, for time is a means of obliterating actions. Verily, time runs against the slothful and the contemners of their own rights.xiii[25] WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners. SO ORDERED. Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur. *Spelled Hermenigildo in the Petition.

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