Pasig vs.

PCGG, 185023
DECISION
The Case
This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The petition challenges the 17 October
2008 Decision2 of the Court of Appeals in CA-G.R. SP No. 97498, affirming the 6 November 2006 Decision 3 of the
Regional Trial Court (RTC), National Capital Judicial Region, Pasig City, Branch 155, in SCA No. 2901.
The Facts
Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land, with a total area of 18.4891 hectares,
situated in Pasig City. The properties are covered by Transfer Certificate of Title (TCT) Nos. 337158 and 469702 and Tax
Declaration Nos. E-030-01185 and E-030-01186 under the name of MPLDC. Portions of the properties are leased to
different business establishments.
In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos), voluntarily surrendered MPLDC to the Republic of
the Philippines.
On 30 September 2002, the Pasig City Assessors Office sent MPLDC two notices of tax delinquency for its failure to pay
real property tax on the properties for the period 1979 to 2001 totaling P256,858,555.86. In a letter dated 29 October
2002, Independent Realty Corporation (IRC) President Ernesto R. Jalandoni (Jalandoni) and Treasurer
Rosario Razon informed the Pasig City Treasurer that the tax for the period 1979 to 1986 had been paid, and that the
properties were exempt from tax beginning 1987.
In letters dated 10 July 2003 and 8 January 2004, the Pasig City Treasurer informed MPLDC and IRC that the properties
were not exempt from tax. In a letter dated 16 February 2004, MPLDC General Manager Antonio Merelos (Merelos)
and Jalandoni again informed the Pasig City Treasurer that the properties were exempt from tax. In a letter dated 11
March 2004, the Pasig City Treasurer again informed Merelos that the properties were not exempt from tax.
On 20 October 2005, the Pasig City Assessors Office sent MPLDC a notice of final demand for payment of tax for the
period 1987 to 2005 totaling P389,027,814.48. On the same day, MPLDC paid P2,000,000 partial payment under
protest.
On 9 November 2005, MPLDC received two warrants of levy on the properties. On 1 December 2005, respondent
Republic of the Philippines, through the Presidential Commission on Good Government (PCGG), filed with the RTC a
petition for prohibition with prayer for issuance of a temporary restraining order or writ of preliminary injunction to
enjoin petitioner Pasig City from auctioning the properties and from collecting real property tax.
On 2 December 2005, the Pasig City Treasurer offered the properties for sale at public auction. Since there was no
other bidder, Pasig City bought the properties and was issued the corresponding certificates of sale.
On 19 December 2005, PCGG filed with the RTC an amended petition for certiorari, prohibition and mandamus against
Pasig City. PCGG prayed that: (1) the assessments for the payment of real property tax and penalty be declared void;
(2) the warrants of levy on the properties be declared void; (3) the public auction be declared void; (4) the issuance of
certificates of sale be declared void; (5) Pasig City be prohibited from assessing MPLDC real property tax and penalty;
(6) Pasig City be prohibited from collecting real property tax and penalty from MPLDC; (7) Pasig City be ordered to
assess the actual occupants of the properties real property tax and penalty; and (8) Pasig City be ordered to collect
real property tax and penalty from the actual occupants of the properties.
The RTCs Ruling
In its 6 November 2006 Decision, the RTC granted the petition for certiorari, prohibition and mandamus. The RTC held:
The primordial issue to be resolved in the present case is whether or not respondent City of Pasig, through the
City Treasurer and the City Assessor, acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it assessed, levied and sold in public auction thepayanig properties for non-payment of real
property taxes.
However, before dwelling on the merits of the main issue, certain matters need to be addressed by the Court,
to wit:
1.
Does the Court have jurisdiction over the instant petition?
2.
Who owns the so-called payanig properties that were subjected to payment of real property taxes by
respondent?
The Court maintains that it is not precluded from assuming jurisdiction over the instant amended petition
which involves the legality of the assailed actions by respondent in assessing and collecting real property tax
on the properties owned by the Republic of the Philippines. It is a jurisprudential doctrine that the issue is
purely legal when the authority of the respondent to assess and collect real property taxes on the subject
properties is being questioned (Ty vs. Trampe, 250 SCRA 500).
xxxx
In the instant proceeding, there is no dispute that the properties are surrendered ill-gotten wealth of former
President Marcos. As such, the same assumes [sic] a public character and thus belongs [sic] to the Republic of
the Philippines. x x x
xxxx
Hence, upon the voluntary surrender by Jose Y. Campos, the controlling owner of Mid-Pasig and Independent
Realty Corporation, of the payanigproperties to PCGG, a clear admission that these properties were part of the
ill-gotten wealth of former President Marcos was already evident. As such, there was already
constructive reconveyance to the State, which immediately placed these reconveyed properties under the
control and stewardship of the PCGG as representative of the Republic of the Philippines. Under such special
circumstance, these voluntary surrendered properties had already belonged to the State.
xxxx
Premised on the foregoing, the payanig properties, being part of the recovered ill-gotten wealth of President
Marcos, and therefore are owned by the State itself, are exempt from payment of real property taxes. It is only
when the beneficial use of said properties has been granted to a taxable person that the same may be subject
to imposition of real property tax.
Furthermore, in real estate taxation, the unpaid tax attaches to the property and is chargeable against the
taxable person who had actual or beneficial use and possession of it regardless of whether or not he is the
owner (Testate Estate of Concordia T. Lim vs. City of Manila, 182 SCRA 482).
In the instant case, the taxable persons being referred to are the lessees occupying and/or doing business
therein and have beneficial use over portions within the payanig properties.
xxxx
Consequently, there can be no iota of doubt that respondent City of Pasig abused its discretion by committing
the acts sought to be annulled herein despite knowledge of the fact that ownership over the subject properties
belong to petitioner. But what is more appalling in the instant action is that such abuse was capriciously

committed by respondent City of Pasig against the sovereign State itself from where that taxing local
government unit derives its very existence. The spring cannot rise higher than its source.
xxxx
In sum, the acts of respondent in assessing real property taxes on properties owned and controlled by the
Republic of the Philippines, in collecting taxes from Mid-Pasig in lieu of the actual occupants or beneficial users
of certain portions thereof, and in auctioning said properties in favor of respondent, followed by the
corresponding certificate of sale, are all unequivocally tainted with grave abuse of discretion amounting to lack
or excess of jurisdiction.
WHEREFORE, in the light of the foregoing, the instant Amended Petition is hereby GRANTED.
Accordingly, the following acts of respondent are hereby ANNULLED and SET ASIDE.
1. the assessment dated September 30, 2002 for the payment of real property taxes and penalties made by the
City of Pasig on two (2) parcels of land covered by TCT No. 337158 and TCT No. 469702 registered under the
name of Mid-Pasig;
2.
the warrants of levy dated November 8, 2005 issued thereon by the City of Pasig;
3.
the subsequent public auction sale of subject properties held on December 2, 2005 followed by the issuance
of the corresponding Certificate of Sale;
FURTHER, the City of Pasig is hereby PROHIBITED from further:
1.
Assessing real property taxes and penalties charges [sic] on the said properties;
2.
Collecting said taxes and penalty charges from the State;
3.
Disposing or encumbering the subject properties or any portion thereof;
FURTHER, the City of Pasig is hereby COMMANDED:
1.
To return or effect the refund of the amount of Two Million Pesos (Php 2,000,000.00) paid under protest by
Mid-Pasig Land Development Corporation on October 20, 2005, or credit the same amount to any outstanding
tax liability that said corporation may have with the City of Pasig; and
2.
To assess and collect from the actual occupants or beneficial users of the subject properties, and not from the
State, whatever real property taxes and penalties that may be due on the respective areas occupied by them.
SO ORDERED.4
Pasig City appealed to the Court of Appeals.
The Court of Appeals Ruling
In its 31 March 2008 Decision,5 the Court of Appeals set aside the RTCs 6 November 2006 Decision. The Court of
Appeals held:
We find nothing in PCGGs petition that supports its claim regarding Pasig Citys alleged grave abuse of
discretion. It is undisputed that the subject parcels of land are registered in the name of Mid-Pasig, a private
entity. Although the government, through the PCGG have [sic] sequestered Mid-Pasig and all its assets
including the subject parcels of land, the sequestration per se, did not operate to convert Mid-Pasig and its
properties to public property. The power of the PCGG to sequester property claimed to be ill-gotten means to
place or cause to be placed under its possession or control said property, or any building or office wherein any
such property and any records pertaining thereto may be found, including business enterprises and entities for
the purpose of preventing the destruction, concealment or dissipation of, and otherwise conserving and
preserving the same until it can be determined, through appropriate judicial proceedings, whether the
property was in truth ill-gotten, i.e., acquired through or as a result of improper or illegal use of or the
conversion of funds belonging to the Government or any of its branches, instrumentalities, enterprises, banks
or financial institutions, or by taking undue advantage of official position, authority, relationship, connection or
influence, resulting in unjust enrichment of the ostensible owner and great damage and prejudice to the State.
x x x As such, prior to a valid court declaration the PCGG cannot perform acts of strict ownership
of [sic] sequestered property. It is a mere conservator. In view thereof and the fact that Mid-Pasig and its
properties have not been validly declared by the Sandiganbayan as ill-gotten wealth, the same are not yet
public properties. The PCGG even admitted that the transfer certificates of title covering the subject parcels of
land in the name of Mid-Pasig have not been cancelled due to an order of the Sandiganbayan. The trial court
also found that the subject parcels of land are the subject of litigation between Ortigas and Company Limited
Partnership and the PCGG in Civil Case No. 0093 pending before the Sandiganbayan. These facts clearly show
that the Sandiganbayan has not validly declared yet that the subject parcels of land are ill-gotten wealth. If so,
they cannot be claimed yet as properties of the State: they remain properties of a private entity. Thus, Pasig
City through its City Assessor and City Treasurer did not act with grave abuse of discretion when it issued real
property tax assessment on the subject parcels of land.
Even admitting that the subject parcels of land are already owned by the State, we still see no grave abuse of
discretion on the part of Pasig City when it issued the challenged tax assessment, for it is well settled that the
test of exemptions from taxation is the use of the property for purposes mentioned in the Constitution. The
owner of the property does not matter. Even if he is not a tax-exempt entity, as long as the property is being
used for religious, charitable or educational purposes, the property is exempt from tax. Conversely, even if the
government owns the property, if the beneficial use thereof has been granted, for consideration or otherwise,
to a taxable person, the property is subject to tax. Here, the PCGG admitted that portions of the subject
properties were leased to private entities engaged in commercial dealings. As well, the trial court found that
lessees occupy different areas of the subject parcels of land beginning 1992 until 2005. Therefore, considering
that portions of the subject parcels of land are used for commercial purposes, the duty imposed by law to
owners and administrators of real property to declare the same for tax purposes and the fact that the tax
declarations over the subject parcels of land are in the name of Mid-Pasig, again, Pasig City did not act with
grave abuse of discretion when it issued the challenged tax assessment.
The foregoing snowball to one conclusion the allegations in PCGGs petition imputing grave abuse of discretion
on the part of Pasig City, acting through the City Assessor and City Treasurer, in the assessment and collection
of the taxes were made in order to justify the filing of the petition for certiorari, prohibition and mandamus
with the trial court.
The extraordinary remedies of certiorari, prohibition and mandamus may be resorted to only when there is no
other plain, available, speedy and adequate remedy in the course of law. Where administrative remedies are
available, petitions for the issuance of these peremptory writs do not lie in order to give the administrative
body the opportunity to decide the matter by itself correctly and to prevent unnecessary and premature resort
to courts.
Republic Act No. 7160 or the Local Government Code of 1991, clearly sets forth the administrative remedies
available to a taxpayer or real property owner who is not satisfied with the assessment or reasonableness of
the real property tax sought to be collected. The Supreme Court outlined said remedies, to wit:
Should the taxpayer/real property owner question the excessiveness or reasonableness of the assessment,
Section 252 directs that the taxpayer should first pay the tax due before his protest can be entertained. There

shall be annotated on the tax receipts the words paid under protest. It is only after the taxpayer has paid the
tax due that he may file a protest in writing within thirty days from payment of the tax to the Provincial, City or
Municipal Treasurer, who shall decide the protest within sixty days from receipt. In no case is the local
treasurer obliged to entertain the protest unless the tax due has been paid.
If the local treasurer denies the protest or fails to act upon it within the 60-day period provided for in Section
252, the taxpayer/real property owner may then appeal or directly file a verified petition with the LBAA within
sixty days from denial of the protest or receipt of the notice of assessment, as provided in Section 226 of R.A.
No. 7160[.]
And, if the taxpayer is not satisfied with the decision of the LBAA, he may elevate the same to the CBAA,
which exercises exclusive jurisdiction to hear and decide all appeals from the decisions, orders and resolutions
of the Local Boards involving contested assessments of real properties, claims for tax refund and/or tax credits
or overpayments of taxes. An appeal may be taken to the CBAA by filing a notice of appeal within thirty days
from receipt thereof.
From the Central Board Assessment Appeals, the dispute may then be taken to the Court of Tax Appeals by
filing a verified petition for review under Rule 42 of the Revised Rules of Court; to the Court of tax Appeals en
banc; and finally to the Supreme Court via a petition for review on certiorari pursuant to Rule 45 of the Revised
Rules of Court.
We are not convinced with PCGGs stance that their recourse of filing the petition for certiorari, prohibition and
mandamus before the trial court is proper as they are questioning not merely the correctness of the tax
assessment but the actions of Pasig City, through its City Assessor and City Treasurer, which were done in
grave abuse of discretion amounting to lack or excess of jurisdiction.
The well-established rule is that allegations in the complaint and the character of the relief sought determine
the nature of an action. A perusal of the petition before the trial court plainly shows that what is actually being
assailed is the correctness of the assessments made by the City Assessor of Pasig City on the subject parcels
of land. PCGG claims, among others, that: 1) the subject parcels of land are exempt from real property taxation
as they are public property; 2) even if the subject parcels of land are subject to tax, as the beneficial use
thereof was granted to private persons and entities, only the portion thereof used for commerce is subject to
tax and the users thereof are the ones liable to pay the tax; and 3) the right of Pasig City to collect the real
property taxes pertaining to 1987 to 1998 has already prescribed. These claims essentially involve questions
of fact, which are improper in a petition for certiorari, prohibition and mandamus; hence, the petition should
have been brought, at the very first instance, to the Local Board Assessment Appeals, which has authority to
rule on the objections of any interested party who is not satisfied with the action of the assessor. Under the
doctrine of primacy of administrative remedies, an error in the assessment must be administratively pursued
to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction.
Granting that the assessors authority and the legality of the assessment are indeed an issue, the proper
remedy is a suit for the refund of the real property tax after paying the same under protest. It must be pointed
out that in order for the trial court to resolve the instant petition, the issues of the correctness of the tax
assessment and collection must also necessarily be dealt with; hence, a petition for certiorari, prohibition and
mandamus is not the proper remedy. x x x [T]he resolution of the issues raised in the instant case involve
examination and determination of relevant and material facts, i.e. facts relating to the ownership of the subject
parcels of land, the portion of the subject parcel of land used for commercial purposes and the identities of the
lessees and the users thereof. Since resolution of factual issues is not allowed in a petition for certiorari,
prohibition and mandamus, the trial court is precluded from entertaining the petition.
Finally, Section 252 of the R.A. No. 7160 requires payment under protest in assailing real property tax
assessment. Even an appeal shall not suspend the collection of the atx assessed without prejudice to a later
adjustment pending the outcome of the appeal. This principle is consistent with the time-honored principle
that taxes are the lifeblood of the nation. But the PCGG failed to pay the tax assessment prior to questioning it
before the trial court; hence, the trial court should have dismissed PCGGs petition in line with the Supreme
Court pronouncement that a trial court has no jurisdiction to entertain a similar petition absent payment under
protest.
In conclusion and taking all the foregoing into account, we hold that the trial court had no jurisdiction to take
cognizance and decide PCGG petition for certiorari, prohibition and mandamus; the trial court should have
dismissed the petition.6
PCGG filed a motion for reconsideration. In its 17 October 2008 Decision, the Court of Appeals reversed itself. The
Court of Appeals held:
At the outset, although as a rule, administrative remedies must first be exhausted before ersort to judicial action can
prosper, there is a well-settled exception in cases where the controversy does not involve questions of fact but only of
law. We find that the Republic has shown a cause for the application of the foregoing exception. Essentially, the
Republic has raised a pure question of law whether or not the City of Pasig has the power to impose real property tax
on the subject properties, which are owned by the State. It bears stressing that the Republic did not raise any question
concerning the amount of the real property tax or the determination thereof. Thus, having no plain, speedy, and
adequate remedy in law, the Republic correctly resorted to judicial action via the petition for certiorari, prohibition, and
mandamus, to seek redress.
We are convinced that the subject properties were not sequestered by the government so as to amount to a
deprivation of property without due process of law; instead, they were voluntarily surrendered to the State by
Campos, a self-admitted crony of the then President Marcos. The relinquishment of the subject properties to
the State as ill-gotten wealth of Marcos, as recognized by the Supreme Court, makes a judicial declaration that
the same were ill-gotten unnecessary. By virtue of said relinquishment, the State correctly exercised dominion
over the subject properties. Indubitably, the subject properties, being ill-gotten wealth, belong to the State.
x x x By its nature, ill-gotten wealth is owned by the State. As a matter of fact, the Republic continues to
exercise dominion over the subject properties.7
Hence, the present petition.
Issues
Pasig City raises as issues that the lower courts erred in granting PCGGs petition for certiorari, prohibition and
mandamus and in ordering Pasig City to assess and collect real property tax from the lessees of the properties.

The Courts Ruling

The petition is partly meritorious.
As correctly found by the RTC and the Court of Appeals, the Republic of the Philippines owns the properties. Campos
voluntarily surrendered MPLDC, which owned the properties, to the Republic of the Philippines. In Republic of the
Philippines v. Sandiganbayan,8the Court stated:
x x x Jose Y. Campos, a confessed crony of former President Ferdinand E. Marcos, voluntarily surrendered or
turned over to the PCGG the properties, assets and corporations he held in trust for the deposed President.
Among the corporations he surrendered were the Independent Realty Corporation and the Mid-Pasig Land
Development Corporation.9
In Republic of the Philippines v. Sandiganbayan,10 the Court stated:
The antecedent facts are stated by the Solicitor General as follows:
xxxx
3. Sometime in the later part of August 1987, defendant Jose D. Campos, Jr., having been served with
summons on August 5, 1987, filed with the respondent Court an undated Manifestation and Motion to Dismiss
Complaint with Respect to Jose D. Campos praying that he be removed as party defendant from the complaint
on the grounds that he had voluntarily surrendered or turned over any share in his name on [sic] any of the
corporations referred to, aside from disclaiming any interest, ownership or right thereon to the Government of
the Republic of the Philippines and that he was entitled to the immunity granted by the Presidential
Commission on Good Government pursuant to Executive Order No. 14, under the Commissions Resolution
dated May 28, 1986 to Mr. Jose Y. Campos and his family he being a member of the immediate family of Jose Y.
Campos.
xxxx
In the instant case, the PCGG issued a resolution dated May 28, 1986, granting immunity from both civil and
criminal prosecutions to Jose Y. Campos and his family. The pertinent provisions of the resolution read as
follows:
3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this Commission, his voluntary surrender of
the properties and assets disclosed and declared by him to belong to deposed President Ferdinand E. Marcos to
the Government of the Republic of the Philippines, his full, complete and truthful disclosures, and his
commitment to pay a sum of money as determined by the Philippine Government, this Commission has
decided and agreed:
xxxx
Undoubtedly, this resolution embodies a compromise agreement between the PCGG on one hand and Jose Y.
Campos on the other. Hence, in exchange for the voluntary surrender of the ill-gotten properties acquired by
the then President Ferdinand E. Marcos and his family which were in Jose Campos control, the latter and his
family were given full immunity in both civil and criminal prosecutions. x x x
xxxx
By virtue of the PCGGs May 28, 1986 resolution, Jose Campos, Jr. was given full immunity from both civil and
criminal prosecutions in exchange for the full cooperation of Mr. Jose Y. Campos to this Commission, his
voluntary surrender of the properties and assets disclosed and declared by him to belong to deposed President
Ferdinand E. Marcos to the Government of the Republic of the Philippines, his full, complete and truthful
disclosures, and his commitment to pay a sum of money as determined by the Philippine Government. In
addition, Campos, Jr. had already waived and surrendered to the Republic his registered equity interest in the
Marcos/Romualdez corporations involved in the civil case.11
Even as the Republic of the Philippines is now the owner of the properties in view of the voluntary surrender of MPLDC
by its former registered owner, Campos, to the State, such transfer does not prevent a third party with a better right
from claiming such properties in the proper forum. In the meantime, the Republic of the Philippines is the presumptive
owner of the properties for taxation purposes.
Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the Philippines are exempt
from real property tax except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person. Thus, the portions of the properties not leased to taxable entities are exempt from
real estate tax while the portions of the properties leased to taxable entities are subject to real estate tax. The law
imposes the liability to pay real estate tax on the Republic of the Philippines for the portions of the properties leased to
taxable entities. It is, of course, assumed that the Republic of the Philippines passes on the real estate tax as part of
the rent to the lessees.
In Philippine Fisheries Development Authority v. Central Board of Assessment Appeals,12 the Court held:
In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals, the Court resolved the
issue of whether the PFDA is a government-owned or controlled corporation or an instrumentality of the
national government. In that case, the City of Iloilo assessed real property taxes on the Iloilo Fishing
Port Complex (IFPC), which was managed and operated by PFDA. The Court held that PFDA is an
instrumentality of the government and is thus exempt from the payment of real property tax,
thus:

The Court rules that the Authority is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property tax. However, said
exemption does not apply to the portions of the IFPC which the Authority leased to private
entities. With respect to these properties, the Authority is liable to pay property tax.
Nonetheless, the IFPC, being a property of public dominion cannot be sold at public auction to satisfy
the tax delinquency.
xxxx
This ruling was affirmed by the Court in a subsequent PFDA case involving the Navotas Fishing Port Complex, which is
also managed and operated by the PFDA. In consonance with the previous ruling, the Court held in the subsequent
PFDA case that the PFDA is a government instrumentality not subject to real property tax except those
portions of the Navotas Fishing Port Complex that were leased to taxable or private persons and entities
for their beneficial use.
Similarly, we hold that as a government instrumentality, the PFDA is exempt from real property tax
imposed on the Lucena Fishing Port Complex, except those portions which are leased to private persons
or entities.13 (Emphasis supplied)
In Government Service Insurance System v. City Treasurer of the City of Manila,14 the Court held:
x x x The tax exemption the property of the Republic or its instrumentalities carries ceases only if,
as stated in Sec. 234(a) of the LGC of 1991, beneficial use thereof has been granted, for a
consideration or otherwise, to a taxable person. GSIS, as a government instrumentality, is not a taxable
juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in a sense that status with respect to
the Katigbak property when it contracted its beneficial use to MHC, doubtless a taxable person.
Thus, the real estate tax assessment of Php 54,826,599.37 covering 1992 to 2002 over the
subject Katigbak property is valid insofar as said tax delinquency is concerned as assessed over
said property.15 (Emphasis supplied)
In Manila International Airport Authority v. Court of Appeals,16 the Court held:
x x x Section 234(a) of the Local Government Code states that real property owned by the Republic
loses its tax exemption only if the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person. MIAA, as a government instrumentality, is not a taxable person under
Section 133(o) of the local Government Code. Thus, even if we assume that the Republic has granted to MIAA
the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to
real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not
exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to
private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial
use of such land area for a consideration to a taxable person and therefore such land area is
subject to real estate tax.17 (Emphasis supplied)
In Lung Center of the Philippines v. Quezon City,18 the Court held:
x x x While portions of the hospital are used for the treatment of patients and the dispensation of medical
services to them, whether paying or non-paying, other portions thereof are being leased to private individuals
for their clinics and a canteen. Further, a portion of the land is being leased to a private individual for her
business enterprise under the business name Elliptical Orchids and Garden Center. Indeed, the 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. On the other hand, the
portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying
or non-paying, are exempt from real property taxes.19 (Emphasis supplied)
Article 420 of the Civil Code classifies as properties of public dominion those that are intended for public use, such as
roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads and those that
are intended for some public service or for the development of the national wealth. Properties of public dominion are
not only exempt from real estate tax, they are exempt from sale at public auction. In Heirs of Mario Malabanan v.
Republic,20 the Court held that, It is clear that property of public dominion, which generally includes property belonging
to the State, cannot be x x x subject of the commerce of man.21
In Philippine Fisheries Development Authority v. Court of Appeals,22 the Court held:
x x x [T]he real property tax assessments issued by the City of Iloilo should be upheld only with respect to the
portions leased to private persons.In case the Authority fails to pay the real property taxes due
thereon, said portions cannot be sold at public auction to satisfy the tax delinquency. In Chavez v.
Public Estates Authority it was held that reclaimed lands are lands of the public dominion and cannot,
without Congressional fiat, be subject of a sale, public or private x x x.
In the same vein, the port built by the State in the Iloilo fishing complex is a property of the public
dominion and cannot therefore be sold at public auction. Article 420 of the Civil Code, provides:
Article 420. The following things are property of public dominion:
1.
2.

Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores,roadsteads, and others of similar character;
Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.

The Iloilo fishing port which was constructed by the State for public use and/or public service falls
within the term port in the aforecitedprovision. Being a property of public dominion the same
cannot be subject to execution or foreclosure sale. In like manner, the reclaimed land on which the IFPC
is built cannot be the object of a private or public sale without Congressional authorization. 23 (Emphasis
supplied)
In Manila International Airport Authority,24 the Court held:
x x x [T]he Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of
public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the
State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or
for the development of the national wealth.
The term ports x x x constructed by the Sate includes airports and seaports. The Airport Lands and Buildings of
MIAA are intended for public use, and at the very least intended for public service. Whether intended for public
use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public
dominion, the the Airport lands and Buildings are owned by the Republic and thus exempt from real estate tax
under Section 234(a) of the Local Government Code.
xxxx
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are
properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions ports x x x constructed by the State, which includes public airports and seaports, as
properties of public dominion and owned by the Republic. As properties of public dominion owned by the
Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real
estate tax under Section 234(a) of the local Government Code. This Court has also repeatedly ruled that
properties of public dominion are not subject to execution or foreclosure sale.25 (Emphasis supplied)
In the present case, the parcels of land are not properties of public dominion because they are not
intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the
State, banks, shores, roadsteads. Neither are they intended for some public service or for the
development of the national wealth. MPLDC leases portions of the properties to different business
establishments. Thus, the portions of the properties leased to taxable entities are not only subject to
real estate tax, they can also be sold at public auction to satisfy the tax delinquency.
In sum, only those portions of the properties leased to taxable entities are subject to real estate tax for
the period of such leases. Pasig City must, therefore, issue to respondent new real property tax
assessments covering the portions of the properties leased to taxable entities. If the Republic of the
Philippines fails to pay the real property tax on the portions of the properties leased to taxable entities,
then such portions may be sold at public auction to satisfy the tax delinquency.
WHEREFORE, the petition is PARTIALLY GRANTED. The Court SETS ASIDE the 17 October 2008 Decision of the
Court of Appeals in CA-G.R. SP No. 97498 and declares VOID the 30 September 2002 real property tax assessment
issued by Pasig City on the subject properties of Mid-Pasig Land Development Corporation, the 8 November 2005
warrants of levy on the properties, and the 2 December 2005 auction sale. Pasig City is DIRECTED to issue to
respondent new real property tax assessments covering only the portions of the properties actually leased to taxable
entities, and only for the period of such leases. Interests and penalties on such new real property tax assessment shall
accrue only after receipt of such new assessment by respondent.
SO ORDERED.
GSIS vs. city treasurer, 186242.
DECISION
For review under Rule 45 of the Rules of Court on pure question of law are the November 15, 2007
Decision[1] and January 7, 2009 Order[2] of the Regional Trial Court (RTC), Branch 49 in Manila, in Civil Case No. 02104827, a suit to nullify the assessment of real property taxes on certain properties belonging to petitioner
Government Service Insurance System (GSIS).
The Facts
Petitioner GSIS owns or used to own two (2) parcels of land, one located at Katigbak 25 th St., Bonifacio Drive,
Manila (Katigbak property), and the other, at Concepcion cor. Arroceros Sts., also in Manila (Concepcion-Arroceros
property). Title to the Concepcion-Arroceros property was transferred to this Court in 2005 pursuant to Proclamation
No. 835[3] dated April 27, 2005. Both the GSIS and the Metropolitan Trial Court (MeTC) of Manila occupy the
Concepcion-Arroceros property, while the Katigbak property was under lease.
The controversy started when the City Treasurer of Manila addressed a letter[4] dated September 13, 2002 to
GSIS President and General Manager Winston F. Garcia informing him of the unpaid real property taxes due on the
aforementioned properties for years 1992 to 2002, broken down as follows: (a) PhP 54,826,599.37 for the Katigbak
property; and (b) PhP 48,498,917.01 for the Concepcion-Arroceros property. The letter warned of the inclusion of the
subject properties in the scheduled October 30, 2002 public auction of all delinquent properties in Manila should the
unpaid taxes remain unsettled before that date.

On September 16, 2002, the City Treasurer of Manila issued separate Notices of Realty Tax Delinquency[5] for
the subject properties, with the usual warning of seizure and/or sale. On October 8, 2002, GSIS, through its legal
counsel, wrote back emphasizing the GSIS exemption from all kinds of taxes, including realty taxes, under Republic Act
No. (RA) 8291.[6]
Two days after, GSIS filed a petition for certiorari and prohibition[7] with prayer for a restraining and injunctive
relief before the Manila RTC. In it, GSIS prayed for the nullification of the assessments thus made and
that respondents City of Manila officials be permanently enjoined from proceedings against GSIS property. GSIS would
later amend its petition[8] to include the fact that: (a) the Katigbak property, covered by TCT Nos. 117685 and 119465
in the name of GSIS, has, since November 1991, been leased to and occupied by the Manila Hotel Corporation (MHC),
which has contractually bound itself to pay any realty taxes that may be imposed on the subject property; and (b) the
Concepcion-Arroceros property is partly occupied by GSIS and partly occupied by the MeTC of Manila.
The Ruling of the RTC
By Decision of November 15, 2007, the RTC dismissed GSIS petition, as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, DISMISSING the petition
for lack of merit, and declaring the assessment conducted by the respondents City of Manila on the
subject real properties of GSIS as valid pursuant to law.
SO ORDERED.[9]
GSIS sought but was denied reconsideration per the assailed Order dated January 7, 2009.
Thus, the instant petition for review on pure question of law.
The Issues
1. Whether petitioner is exempt from the payment of real property taxes from 1992 to 2002;
2. Whether petitioner is exempt from the payment of real property taxes on the property it leased to a
taxable entity; and
3. Whether petitioners real properties are exempt from warrants of levy and from tax sale for nonpayment of real property taxes.[10]
The Courts Ruling
The issues raised may be formulated in the following wise: first, whether GSIS under its charter is exempt from
real property taxation; second, assuming that it is so exempt, whether GSIS is liable for real property taxes for its
properties leased to a taxable entity; and third, whether the properties of GSIS are exempt from levy.
In the main, it is petitioners posture that both its old charter, Presidential Decree No. (PD) 1146, and present
charter, RA 8291 or the GSIS Act of 1997, exempt the agency and its properties from all forms of taxes and
assessments, inclusive of realty tax. Excepting, respondents counter that GSIS may not successfully resist the citys
notices and warrants of levy on the basis of its exemption under RA 8291, real property taxation being governed by RA
7160 or the Local Government Code of 1991 (LGC, hereinafter).
The petition is meritorious.
First Core Issue: GSIS Exempt from Real Property Tax
Full tax exemption granted through PD 1146
In 1936, Commonwealth Act No. (CA) 186[11] was enacted abolishing the then pension systems under Act No.
1638, as amended, and establishing the GSIS to manage the pension system, life and retirement insurance, and other
benefits of all government employees. Under what may be considered as its first charter, the GSIS was set up as a
non-stock corporation managed by a board of trustees. Notably, Section 26 of CA 186 provided exemption from any
legal process and liens but only for insurance policies and their proceeds, thus:
Section 26. Exemption from legal process and liens. No policy of life insurance issued under
this Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefit granted
under this Act, shall be liable to attachment, garnishment, or other process, or to be seized, taken,
appropriated, or applied by any legal or equitable process or operation of law to pay any debt or
liability of such member, or his beneficiary, or any other person who may have a right thereunder,
either before or after payment; nor shall the proceeds thereof, when not made payable to a named
beneficiary, constitute a part of the estate of the member for payment of his debt. x x x
In 1977, PD 1146,[12] otherwise known as the Revised Government Service Insurance Act of 1977, was issued,
providing for an expanded insurance system for government employees. Sec. 33 of PD 1146 provided for a new tax
treatment for GSIS, thus:
Section 33. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy
of the State that the actuarial solvency of the funds of the System shall be preserved and maintained
at all times and that the contribution rates necessary to sustain the benefits under this Act shall be
kept as low as possible in order not to burden the members of the System and/or their
employees. Taxes imposed on the System tend to impair the actuarial solvency of its funds and
increase the contribution rate necessary to sustain the benefits under this Act. Accordingly,
notwithstanding any laws to the contrary, the System, its assets, revenues including all accruals
thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or

duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and
any assessment against the System as of the approval of this Act are hereby considered paid.
The benefits granted under this Act shall not be subject, among others, to attachment,
garnishment, levy or other processes. This, however, shall not apply to obligations of the member to
the System, or to the employer, or when the benefits granted herein are assigned by the member with
the authority of the System. (Emphasis ours.)
A scrutiny of PD 1146 reveals that the non-stock corporate structure of GSIS, as established under CA 186,
remained unchanged. Sec. 34[13] of PD 1146 pertinently provides that the GSIS, as created by CA 186, shall implement
the provisions of PD 1146.
RA 7160 lifted GSIS tax exemption
Then came the enactment in 1991 of the LGC or RA 7160, providing the exercise of local government units
(LGUs) of their power to tax, the scope and limitations thereof, [14] and the exemptions from taxations. Of particular
pertinence is the general provision on withdrawal of tax exemption privileges in Sec. 193 of the LGC, and the special
provision on withdrawal of exemption from payment of real property taxes in the last paragraph of the succeeding Sec.
234, thus:
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or -controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
SEC. 234. Exemption from Real Property Tax. x x x Except as provided herein, any exemption
from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether
natural or juridical, including all government-owned or controlled corporation are hereby withdrawn
upon the effectivity of this Code.
From the foregoing provisos, there can be no serious doubt about the Congress intention to withdraw, subject
to certain defined exceptions, tax exemptions granted prior to the passage of RA 7160. The question that easily comes
to mind then is whether or not the full tax exemption heretofore granted to GSIS under PD 1146, particular insofar as
realty tax is concerned, was deemed withdrawn. We answer in the affirmative.
In Mactan Cebu International Airport Authority v. Marcos,[15] the Court held that the express withdrawal by the
LGC of previously granted exemptions from realty taxes applied to instrumentalities and government-owned and
controlled corporations (GOCCs), such as the Mactan-Cebu International Airport Authority. In City of Davao v. RTC,
Branch XII, Davao City,[16] the Court, citing Mactan Cebu International Airport Authority, declared the GSIS liable for real
property taxes for the years 1992 to 1994 (contested real estate tax assessment therein), its previous exemption
under PD 1146 being considered withdrawn with the enactment of the LGC in 1991.
Significantly, the Court, in City of Davao, stated the observation that the GSIS tax-exempt status withdrawn in
1992 by the LGC was restored in 1997 by RA 8291. [17]
Full tax exemption reenacted through RA 8291
Indeed, almost 20 years to the day after the issuance of the GSIS charter, i.e., PD 1146, it was further
amended and expanded by RA 8291 which took effect on June 24, 1997. [18] Under it, the full tax exemption privilege of
GSIS was restored, the operative provision being Sec. 39 thereof, a virtual replication of the earlier quoted Sec. 33 of
PD 1146. Sec. 39 of RA 8291 reads:
SEC. 39. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of
the State that the actuarial solvency of the funds of the GSIS shall be preserved and maintained at all
times and that contribution rates necessary to sustain the benefits under this Act shall be kept as low
as possible in order not to burden the members of the GSIS and their employers. Taxes imposed on the
GSIS tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to
sustain the benefits of this Act.Accordingly, notwithstanding, any laws to the contrary, the GSIS, its
assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all
taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue
unless expressly and specifically revoked and any assessment against the GSIS as of the
approval of this Act are hereby considered paid.Consequently, all laws, ordinances, regulations,
issuances, opinions or jurisprudence contrary to or in derogation of this provision are hereby deemed
repealed, superseded and rendered ineffective and without legal force and effect.
Moreover, these exemptions shall not be affected by subsequent laws to the contrary
unless this section is expressly, specifically and categorically revoked or repealed by law
and a provision is enacted to substitute or replace the exemption referred to herein as an
essential factor to maintain or protect the solvency of the fund, notwithstanding and
independently of the guaranty of the national government to secure such solvency or liability.
The funds and/or the properties referred to herein as well as the benefits, sums or
monies corresponding to the benefits under this Act shall be exempt from attachment,
garnishment, execution, levy or other processes issued by the courts, quasi-judicial
agencies or administrative bodies including Commission on Audit (COA) disallowances and from all
financial obligations of the members, including his pecuniary accountability arising from or caused or
occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in
connection with his position or work except when his monetary liability, contractual or otherwise, is in
favor of the GSIS. (Emphasis ours.)
The foregoing exempting proviso, couched as it were in an encompassing manner, brooks no other
construction but that GSIS is exempt from all forms of taxes. While not determinative of this case, it is to be noted that

prominently added in GSIS present charter is a paragraph precluding any implied repeal of the tax-exempt clause so as
to protect the solvency of GSIS funds. Moreover, an express repeal by a subsequent law would not suffice to affect the
full exemption benefits granted the GSIS, unless the following conditionalities are met: (1) The repealing clause
must expressly, specifically, and categorically revoke or repeal Sec. 39; and (2) a provision is enacted to
substitute or replace the exemption referred to herein as an essential factor to maintain or protect the solvency of
the fund. These restrictions for a future express repeal, notwithstanding, do not make the proviso an irrepealable law,
for such restrictions do not impinge or limit the carte blanche legislative authority of the legislature to so amend it. The
restrictions merely enhance other provisos in the law ensuring the solvency of the GSIS fund.
Given the foregoing perspectives, the following may be assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS
enjoyed tax exemption from real estate taxes, among other tax burdens, until January 1, 1992 when the LGC took
effect and withdrew exemptions from payment of real estate taxes privileges granted under PD 1146; (2) RA 8291
restored in 1997 the tax exempt status of GSIS by reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146;
[19]
and (3) If any real estate tax is due to the City of Manila, it is, following City of Davao, only for the interim period, or
from 1992 to 1996, to be precise.
Real property taxes assessed and due from GSIS considered paid
While recognizing the exempt status of GSIS owing to the reenactment of the full tax exemption clause under
Sec. 39 of RA 8291 in 1997, the ponencia in City of Davao appeared to have failed to take stock of and fully appreciate
the all-embracing condoning proviso in the very same Sec. 39 which, for all intents and purposes, considered as
paid any assessment against the GSIS as of the approval of this Act. If only to stress the point, we hereby
reproduce the pertinent portion of said Sec. 39:
SEC. 39. Exemption from Tax, Legal Process and Lien. x x x Taxes imposed on the GSIS tend to
impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the
benefits of this Act. Accordingly, notwithstanding, any laws to the contrary, the GSIS, its
assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes,
assessments, fees, charges or duties of all kinds. These exemptions shall continue unless
expressly and specifically revoked and any assessment against the GSIS as of the approval of
this Act are hereby considered paid. Consequently, all laws, ordinances, regulations, issuances,
opinions or jurisprudence contrary to or in derogation of this provision are hereby deemed repealed,
superseded and rendered ineffective and without legal force and effect. (Emphasis added.)
GSIS an instrumentality of the National Government
Apart from the foregoing consideration, the Courts fairly recent ruling in Manila International Airport Authority
v. Court of Appeals,[20] a case likewise involving real estate tax assessments by a Metro Manila city on the real
properties administered by MIAA, argues for the non-tax liability of GSIS for real estate taxes. There, the Court held
that MIAA does not qualify as a GOCC, not having been organized either as a stock corporation, its capital not being
divided into shares, or as a non-stock corporation because it has no members. MIAA is rather an instrumentality of
the National Government and, hence, outside the purview of local taxation by force of Sec. 133 of the LGC providing in
context that unless otherwise provided, local governments cannot tax national government instrumentalities. And
as the Court pronounced in Manila International Airport Authority, the airport lands and buildings MIAA administers
belong to the Republic of the Philippines, which makes MIAA a mere trustee of such assets. No less than the
Administrative Code of 1987 recognizes a scenario where a piece of land owned by the Republic is titled in the name of
a department, agency, or instrumentality. The following provision of the said Code suggests as much:
Sec. 48. Official Authorized to Convey Real Property.Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf
of the government by the following: x x x x
(2) For property belonging to the Republic of the Philippines, but titled in the name of x x x any
corporate agency or instrumentality, by the executive head of the agency or instrumentality. [21]
While perhaps not of governing sway in all fours inasmuch as what were involved in Manila International
Airport Authority, e.g., airfields and runways, are properties of the public dominion and, hence, outside the commerce
of man, the rationale underpinning the disposition in that case is squarely applicable to GSIS, both MIAA and GSIS
being similarly situated. First, while created under CA 186 as a non-stock corporation, a status that has remained
unchanged even when it operated under PD 1146 and RA 8291, GSIS is not, in the context of the afore quoted Sec.
193 of the LGC, a GOCC following the teaching of Manila International Airport Authority, for, like MIAA, GSIS capital is
not divided into unit shares. Also, GSIS has no members to speak of. And by members, the reference is to those who,
under Sec. 87 of the Corporation Code, make up the non-stock corporation, and not to the compulsory members of the
system who are government employees. Its management is entrusted to a Board of Trustees whose members are
appointed by the President.
Second, the subject properties under GSISs name are likewise owned by the Republic. The GSIS is but a mere
trustee of the subject properties which have either been ceded to it by the Government or acquired for the
enhancement of the system. This particular property arrangement is clearly shown by the fact that the disposal or
conveyance of said subject properties are either done by or through the authority of the President of
the Philippines. Specifically, in the case of the Concepcion-Arroceros property, it was transferred, conveyed, and ceded
to this Court on April 27, 2005 through a presidential proclamation, Proclamation No. 835.Pertinently, the text of the
proclamation announces that the Concepcion-Arroceros property was earlier ceded to the GSIS on October 13, 1954
pursuant to Proclamation No. 78 for office purposes and had since been titled to GSIS which constructed an office
building thereon. Thus, the transfer on April 27, 2005 of the Concepcion-Arroceros property to this Court by the
President through Proclamation No. 835. This illustrates the nature of the government ownership of the subject GSIS
properties, as indubitably shown in the last clause of Presidential Proclamation No. 835:
WHEREAS, by virtue of the Public Land Act (Commonwealth Act No. 141, as amended),
Presidential Decree No. 1455, and the Administrative Code of 1987, the President is authorized to

transfer any government property that is no longer needed by the agency to which it
belongs to other branches or agencies of the government. (Emphasis ours.)
Third, GSIS manages the funds for the life insurance, retirement, survivorship, and disability benefits of all
government employees and their beneficiaries. This undertaking, to be sure, constitutes an essential and vital function
which the government, through one of its agencies or instrumentalities, ought to perform if social security services to
civil service employees are to be delivered with reasonable dispatch. It is no wonder, therefore, that the Republic
guarantees the fulfillment of the obligations of the GSIS to its members (government employees and their
beneficiaries) when and as they become due. This guarantee was first formalized under Sec. 24 [22] of CA 186, then Sec.
8[23] of PD 1146, and finally in Sec. 8[24] of RA 8291.
Second Core Issue: Beneficial Use Doctrine Applicable
The foregoing notwithstanding, the leased Katigbak property shall be taxable pursuant to the beneficial use
principle under Sec. 234(a) of the LGC.
It is true that said Sec. 234(a), quoted below, exempts from real estate taxes real property owned by the
Republic, unless the beneficial use of the property is, for consideration, transferred to a taxable person.
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment
of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial usethereof has been granted, for consideration or
otherwise, to a taxable person.
This exemption, however, must be read in relation with Sec. 133(o) of the LGC, which prohibits LGUs from
imposing taxes or fees of any kind on the national government, its agencies, and instrumentalities:
SEC. 133. Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its agencies
and instrumentalities, and local government units. (Emphasis supplied.)
Thus read together, the provisions allow the Republic to grant the beneficial use of its property to an agency or
instrumentality of the national government. Such grant does not necessarily result in the loss of the tax exemption.
The tax exemption the property of the Republic or its instrumentality carries ceases only if, as stated in Sec. 234(a) of
the LGC of 1991, beneficial use thereof has been granted, for a consideration or otherwise, to a taxable person. GSIS,
as a government instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC. GSIS,
however, lost in a sense that status with respect to the Katigbak property when it contracted its
beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax assessment of PhP
54,826,599.37 covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax
delinquency is concerned as assessed over said property.

Taxable entity having beneficial use of leased

property liable for real property taxes thereon
The next query as to which between GSIS, as the owner of the Katigbak property, or MHC, as the lessee
thereof, is liable to pay the accrued real estate tax, need not detain us long. MHC ought to pay.
As we declared in Testate Estate of Concordia T. Lim, 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. Of the same tenor is the Courts holding in the subsequent Manila Electric
Company v. Barlis[25] and later in Republic v. City of Kidapawan.[26]Actual use refers to the purpose for which the
property is principally or predominantly utilized by the person in possession thereof. [27]
Being in possession and having actual use of the Katigbak property since November 1991, MHC is
liable for the realty taxes assessed over the Katigbak property from 1992 to 2002.
The foregoing is not all. As it were, MHC has obligated itself under the GSIS-MHC Contract of Lease to shoulder
such assessment. Stipulation l8 of the contract pertinently reads:
18. By law, the Lessor, [GSIS], is exempt from taxes, assessments and levies. Should there be
any change in the law or the interpretation thereof or any other circumstances which would subject the
Leased Property to any kind of tax, assessment or levy which would constitute a charge against the
Lessor or create a lien against the Leased Property, the Lessee agrees and obligates itself to
shoulder and pay such tax, assessment or levy as it becomes due.[28] (Emphasis ours.)
As a matter of law and contract, therefore, MHC stands liable to pay the realty taxes due on the Katigbak
property.Considering, however, that MHC has not been impleaded in the instant case, the remedy of the City

of Manila is to serve the realty tax assessment covering the subject Katigbak property to MHC and to pursue other
available remedies in case of nonpayment, for said property cannot be levied upon as shall be explained below.
Third Core Issue: GSIS Properties Exempt from Levy
In light of the foregoing disquisition, the issue of the propriety of the threatened levy of subject properties by
the City ofManila to answer for the demanded realty tax deficiency is now moot and academic. A valid tax levy
presupposes a corresponding tax liability. Nonetheless, it will not be remiss to note that it is without doubt that the
subject GSIS properties are exempt from any attachment, garnishment, execution, levy, or other legal processes. This
is the clear import of the third paragraph of Sec. 39, RA 8291, which we quote anew for clarity:
SEC. 39. Exemption from Tax, Legal Process and Lien. x x x.
xxxx
The funds and/or the properties referred to herein as well as the benefits, sums or
monies corresponding to the benefits under this Act shall be exempt from attachment,
garnishment, execution, levy or other processes issued by the courts, quasi-judicial
agencies or administrative bodies including Commission on Audit (COA) disallowances and from all
financial obligations of the members, including his pecuniary accountability arising from or caused or
occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in
connection with his position or work except when his monetary liability, contractual or otherwise, is in
favor of the GSIS. (Emphasis ours.)
The Court would not be indulging in pure speculative exercise to say that the underlying legislative intent
behind the above exempting proviso cannot be other than to isolate GSIS funds and properties from legal processes
that will either impair the solvency of its fund or hamper its operation that would ultimately require an increase in the
contribution rate necessary to sustain the benefits of the system. Throughout GSIS life under three different charters,
the need to ensure the solvency of GSIS fund has always been a legislative concern, a concern expressed in the taxexempting provisions.
Thus, even granting arguendo that GSIS liability for realty taxes attached from 1992, when RA 7160 effectively
lifted its tax exemption under PD 1146, to 1996, when RA 8291 restored the tax incentive, the levy on the subject
properties to answer for the assessed realty tax delinquencies cannot still be sustained. The simple reason: The
governing law, RA 8291, in force at the time of the levy prohibits it. And in the final analysis, the proscription against
the levy extends to the leased Katigbak property, the beneficial use doctrine, notwithstanding.
Summary
In sum, the Court finds that GSIS enjoys under its charter full tax exemption. Moreover, as an
instrumentality of the national government, it is itself not liable to pay real estate taxes assessed by the
City of Manila against its Katigbak and Concepcion-Arroceros properties. Following the beneficial use
rule, however, accrued real property taxes are due from the Katigbak property, leased as it is to a
taxable entity. But the corresponding liability for the payment thereof devolves on the taxable beneficial
user. The Katigbak property cannot in any event be subject of a public auction sale, notwithstanding its realty tax
delinquency. This means that the City of Manila has to satisfy its tax claim by serving the accrued realty tax
assessment on MHC, as the taxable beneficial user of the Katigbak property and, in case of nonpayment, through
means other than the sale at public auction of the leased property.

WHEREFORE, the instant petition is hereby GRANTED. The November 15, 2007 Decision and January 7, 2009
Order of the Regional Trial Court, Branch 49, Manila are REVERSED and SET ASIDE. Accordingly, the real property tax
assessments issued by the City of Manila to the Government Service Insurance System on the subject properties are
declared VOID, except that the real property tax assessment pertaining to the leased Katigbak property shall be valid
if served on the Manila Hotel Corporation, as lessee which has actual and beneficial use thereof. The City of Manila is
permanently restrained from levying on or selling at public auction the subject properties to satisfy the payment of the
real property tax delinquency.
No pronouncement as to costs.
SO ORDERED.
Vizarra vs. Rodriguez 509 SCRA 504 (auction sale void due lack of notice)
DECISION
In this Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure, petitioners assail the
Decision[2]dated 30 April 2001 of the Court of Appeals, Eighth Division, in CA-G.R. CV No. 38286 which
affirmed in toto the Decision[3]dated 27 July 1991 of the Regional Trial Court (RTC) of Marinduque, Branch 38, in Civil
Case No. 84-2.
The antecedent facts involve two separate cases principally involving the same parcels of land and the same parties or
their predecessors-in-interest. The first case, terminated way back in 1977, involved an action for recovery of
possession of real property where it was eventually ruled that respondent Conchita R. Rodriguez (Conchita) is the
owner of a parcel of land located inBangwain, Torrijos, Marinduque, one of the subject properties of this petition. The
second case, now before us for review, concerns a subsequent trial court decision, rendered in 1991, and enjoining
petitioners from appropriating the fruits thereof, otherwise exercising acts of ownership over the land previously
awarded to Conchita and another property owned in common by respondents and which was usurped by petitioners.
[4]
Said decision likewise nullified a purported sale of the subject parcels of land in favor of petitioners. It is the
incidents surrounding this sale, arising as it did from a levy and auction by the Provincial Assessor ofMarinduque for
non-payment of real property taxes, that provide this petition with some academic interest.
The details follow.

The first case stemmed from a Complaint[5] filed on 31 August 1962 before the then Court of First Instance (CFI)
of Boac,Marinduque by Manuel Vizarra (Manuel) against Conchita. The complaint, docketed as Civil Case No. 1245, was
for recovery of possession of real property. Manuel narrated in his complaint that he was the owner of an unregistered
parcel of land located at Barrio Bangwain, Torrijos, Marinduque. At the time of the institution of the
complaint, the subject lot had not yet been surveyed but the alleged boundaries were embodied in Tax Declaration No.
5206 in his name. [6]
Manuel further asserted that in 1937, he and Conchitas late husband, Atty. Clemente Rodriguez (Atty. Rodriguez),
allegedly entered into a bilateral written agreement allowing the latter to enter the land for purposes of locating
mineral deposits therein.Subsequently, but prior to the Japanese occupation period, Atty. Rodriguez had started to
raise cattle on the western portion of the land instead, and had even constructed a fence on the southern side of
Manuels land. Atty. Rodriguez died during the Japanese occupation, but his widow illicitly retained possession of the
land and appropriated the fruits of the fruit-bearing trees.[7]
Answering the complaint, Conchita asserted ownership over the 57,000 square meter (sq. m.) property, which was
then covered by Tax Declaration No. 4570[8] in the name of her deceased father,
Vicente Rosales. She added that on 12 April 1950, Manuel had ceased to be the lawful owner of most of the land
described in Tax Declaration No. 5206[9] when he voluntarily subdivided the land described under Tax Declaration
No. 5206 between him and his seven (7) children,[10] who were then in possession of their respective shares of the
land.[11]
The dispute was referred by the CFI to court-appointed commissioners who then submitted a report ascertaining,
among others, that the boundaries of the land were:
On the northern part of the land is the property of Manuel Vizarra, on the West-brook; East Brook and on the
South is Bangwain river.[12]
That particular conclusion proved material to the disposition of the first complaint. For on 19 November 1963, Manuel
caused the consolidation of the eight (8) tax declarations of the Vizarras into a single Tax Declaration No. 8494 in his
name. Notably, the boundaries as stated in the new tax declaration were different from those ascertained by the
commissioners.[13]
On 16 November 1977, the CFI of Marinduque ruled in favor of Conchita, finding that the latter was indeed the true
owner of the disputed land. The CFI noted the disparity of the boundaries of the tax declarations Manuel initially
presented in court and, how by sleigh-of-the-hand improvisation, the location of the land, as indicated in the 1963 tax
declaration, was changed in order to encompass Conchitas property.[14]
After the decision of the CFI became final and executory, a writ of execution,[15] and, subsequently, an alias writ of
execution[16]were issued ordering petitioners to refrain from entering the disputed property. In the interim, Manuel died
and was substituted by his heirs, including the present petitioners.
Then in 1984, Conchita, joined by her daughter Evelyn, filed an action for injunction and damages with a prayer for a
writ of preliminary injunction before the RTC of Boac, Marinduque, Branch 38. The second case, docketed as Civil Case
No. 84-2, saw respondents asserting absolute ownership over two (2) parcels of land,[17] one of which was the subject
property in the first case, located at Bangwain, Torrijos, Marinduque. Even as Conchitasownership was acknowledged
by the CFI in the 1977 decision over one of the parcels of land, it was alleged that petitioners, along with twenty other
persons, repeatedly entered the subject properties, harvested coconuts to be processed into copra and appropriated
the fruits to themselves.[18]
Petitioners, on the other hand, narrated that the subject properties were actually purchased by petitioner spouses
Antonio and BrendaVizarra from the provincial government of Marinduque in a public auction sale conducted on 24
April 1979, which became final one year after. They presented in court the Final Bill of Sale executed on 14 May 1980,
evidencing their claim over the subject properties.[19] It appeared that the auction sale was conducted at the instance
of the Provincial Assessor of Marinduque, for real estate tax delinquency. Interestingly, the auction sale resulted from
the failure of Manuel to pay the real property taxes, even though the CFI had ruled that it was Conchita Rodriguez who
had actually owned one of the subject properties.[20]
On 27 July 1991, the RTC rendered its assailed decision, finding that the parcels of land in dispute were owned by
respondentConchita. In doing so, it established the following scenario:
(a) In 1963, Manuel subdivided the property described in Tax Declaration No. 5206 into eight (8) unequal parts,
between himself and his children. Afterwards, but prior to the rendition of the CFI decision in 1977, Manuel
consolidated anew the subdivided properties into one tax declaration (Tax Declaration No. 8494).The boundaries as
stated in this new tax declaration, however. had been altered to encompass the properties of Conchita, Parcel No. I,
subject of Civil Case No. 1245, and Parcel No. II. [21]
(b) Tax Declaration No. 8494 was later replaced by Tax Declaration No. 195 and subsequently, Tax Declaration No. 176,
all in Manuels name, and again improperly encompassing Conchitas properties. Manuel did not pay for the taxes on
the properties subject of the tax declarations, prompting the provincial government of Marinduque to send notices of
auction sale to sell the lot under Tax Declaration No. 176. The properties were then purchased at the auction sale by
petitioners Antonio and Brenda Vizarra (Brenda), Antonio being a grandson of Manuel.[22]
(c) However, the properties covered by Tax Declaration No. 176 and subsequently sold on auction by the provincial
government include the same property which the CFI had determined in 1977 as that of Conchita Rodriguez. Moreover,
the same property and the other property also subject of this case were declared in the name of Conchitas daughter,
Evelyn, in Tax Declaration No. 10178 and Tax Declaration No. 9792. [23] The RTC considered the foregoing as
an indicium of the bad faith attending the acts of Manuel and petitioners in seeking to obtain ownership over the
subject properties.
Petitioners appealed the RTC Decision to the Court of Appeals. The Court of Appeals agreed with the conclusions and
affirmed intoto the judgment of the RTC. Hence, this petition.

Petitioners come before the Court questioning essentially the findings of facts of both RTC and CA on the ownership of
the subject parcels of land. Petitioners maintain that the land they entered were not the properties of Conchita and
aver that they had bought the same in good faith.
Brenda likewise admits having received two (2) notices of delinquency sale of different datesthe first one addressed to
her husband Antonio Vizarra (Antonio) and Concepcion Rodriguez (referring to respondent Conchita), in the alternative;
and the second notice addressed to her uncle, Antero Vizarra (Antero) and Concepcion Rodriguez, in the alternative.
However, she states that the respondents did not forward the notices to Conchita Rodriguez in the belief that the latter
was furnished copies of the same by the provincial assessors office. It is further claimed that petitioners had consulted
Atty. Eduardo Mirafuente (Atty. Mirafuente), the CFI clerk of court, regarding the propriety of bidding therein. Atty.
Mirafuente had said that the property to be auctioned off covered the same land litigated in Civil Case No. 1245, but
he nonetheless gave them the go-signal to participate in the bidding. [24]
As a rule, questions of facts are not to be entertained in this jurisdiction. Both the RTC and the Court of Appeals are in
agreement as to the particulars of the case. In such a circumstance, the rule is that their findings on the facts will not
be disturbed.[25] The Court is not a trier of facts and does not normally undertake the re-examination of the evidence
presented by the contending parties during the trial of the case considering that the findings of facts of the Court of
Appeals are conclusive and binding on the Court.[26]
The fundamental issue of this case concerns the identity of the land in dispute. Petitioners would have us believe that
the land they had bought at the auction sale did not cover the same land that the CFI of Marinduque adjudicated to
respondent Conchita way back in 1977.
The Court is not persuaded.
The evidence on record reveals that the questioned auction sale included the land adjudicated to respondent Conchita
by the CFI of Marinduque in Civil Case 1245.
Notably, before the CFI, Manuel, petitioners predecessor-in-interest, presented two apparently different and conflicting
tax declaration certificates i.e., Tax Declaration Nos. 5206 and 8494 bearing totally different boundaries. The CFI of
Marinduque had observed in its ruling that this was part of Manuels scheme to acquire the ownership of a parcel of
land which did not belong to him. The CFI decision, not having been contested by Manuel or his heirs, has long become
final and executory and is thus binding and conclusive on the petitioners with regard to the ownership of Parcel No. I. [27]
Petitioners attempted once more to take the same property when they were furnished a copy of the notice of
delinquency sale by the provincial assessors office of the land in question and Parcel No. II both covered by Tax
Declaration No. 176. In evident bad faith Brenda admitted in open court that Antero did not want to pay the
delinquency tax as the land included therein, denominated as Parcel No. I, had already been adjudicated to Conchita.
Petitioners Antonio and Brenda had known that they bid for the land owned by Conchita and that it was undeniably the
land subject of Civil Case No. 1245 which was adjudicated to Conchita. Brenda herself testified as follows:
Q: And your uncle Antero Vizarra also told you that he is not interested in paying the back taxes
because that portion of the land of Manuel Vizarra was lost to Conchita Rodriguez or
Concepcion Rodriguez in Civil Case No. 1245 and that Mrs. Rodriguez is in possession of the
land publicly and that she should pay the taxes, do you remember having told Antero in that
manner?
A: My uncle told me that they would not pay the taxes because they lost the case to Mrs. Rodriguez, sir.
And the possession of the property was in the hands of Mrs. Rodriguez.
Q: And because of those inquiry of Atty. Mirafuente, it was clear to your mind that the subject matter of
the auction sale is that property which was lost to Conchita Rodriguez in Civil Case No. 1245, is
it not?
A: Yes, sir.[28]
Moreover, by Brendas own admission, the addressees of the first letter sent by the provincial assessors office were her
husband, Antonio Vizarra and Concepcion Rodriguez, in the alternative. The second notice of delinquency was also
telling. It was addressed this time to Antero Vizarra and in the alternative, Concepcion Rodriguez. Thus, by the act of
sending the notices of delinquency sale to the two parties, the provincial assessor of Marinduque recognized that there
was a single parcel of land claimed by two persons. The only explanation why the provincial assessor sent the notice to
the two addressees was he was unsure as to who between the two addressees was the owner of the land. [29]

Parenthetically, when the provincial assessor failed to serve a separate notice to Conchita the true and lawful owner
that her land was to be auctioned off due to non-payment of real estate taxes, he violated Section 73 [30] of Presidential
Decree No. 464, otherwise known as the Real Property Tax Code, which provides that a copy of the notice shall
forthwith be sent by registered mail, or by messenger or through the barrio captain to the delinquent taxpayer, at his
address shown on the tax record cards or at his residence. The auction sale, therefore, was null and void for noncompliance with the provisions of the Real Property Tax Code on mandatory notice. [31]
In any event, the auctioneer in an auction sale does not warrant that the buyer shall, from the time of the sale, have
and enjoy the legal and peaceful possession of the property sold. [32]
We agree with the findings of the Court of Appeals that there was indeed bad faith imputable to the petitioners. In
ruling so, the Court of Appeals said:
The general picture of this case readily shows the bad faith of the defendant-appellees right from the
very start when Manuel Vizarra unscrupulously sub-divided and re-consolidated ownership of the
property through various tax declarations together with the unexplained non-payment of real estate tax
due thereon. Along with this, there is the RTCs finding that the defendants-appellants did not give the
notice of the delinquency sale to the plaintiffs-appellees despite their knowledge that the property of
the plaintiffs-appellees were about to be auctioned off. Finally, the fact that during the public auction

sale, there was only one bidder, which by no coincidence happened to be Antonio Vizarra, there could
be no clearer showing of defendants-appellants bad faith in purchasing the said property. [33]
Good faith, or the lack of it, is, in the last analysis, a question of intention. But in ascertaining the intention by which
one is actuated on a given occasion, courts are necessarily controlled by the evidence as to the conduct and outward
acts by which the inward may, with safety, be determined. So it is that the honesty of intention, the honest lawful
intent, which constitutes good faith implies a freedom from knowledge and circumstances which ought to put a person
on inquiry.[34]
In this case, there was clearly bad faith in the purported acquisition of petitioner spouses Antonio and Brenda Vizarra
of the subject properties. Petitioners went to great lengths in a bid to mislead this Court and the lower courts that the
parcels of land they now have title to were not the properties of Conchita. But they slipped in one instance as they
admitted that the properties they purchased at the auction sale included the same land that their grandfather lost to
Conchita in Civil Case No. 1245.
We disagree, however, with the pronouncement of the RTC and the Court of Appeals that petitioners had the obligation
to convey the notice of delinquency to respondents. Rather, the responsibility lies with the provincial assessors office
to furnish copies of the notices to the parties concerned. Thus, the provincial assessor should have given a copy of the
two (2) notices of delinquency sale to Conchita. Absent any ample evidence that the provincial assessor did so and
that he observed the requisites set out in Section 73 [35]of Presidential Decree No. 464, the auction sale of the disputed
parcels of land is truly null and void for non-observance of the statutory requirement of the Real Property Tax Code.
The foregoing notwithstanding, the Court finds that the award of the RTC and the Court of Appeals for actual and
compensatory damages improper.

Respondent Conchita stated in open court that petitioners entered the subject property everytime the harvest of
coconuts are due.She further claimed that in 1979, the year before petitioners entered the land and appropriated to
themselves the fruits thereof, the harvest of the land was not less than 2,000 kilos. She also testified on the amount of
money that could be yielded from the harvest from 1980 to 1986. [36]
The claims, however, are markedly self-serving, with nary a document to support them.
The rule is that evidence should be taken of the damages claimed and the court should determine who are entitled to
such indemnity. The power of courts to grant damages and attorneys fees demands factual, legal and equitable
justifications, its basis cannot be left to speculation or conjecture. [37]
However, there is no question that respondents suffered pecuniary loss due to the acts of petitioners and thus,
respondents are entitled to damages. As borne out by the records of the case, petitioners have continuously entered
the land and appropriated the fruits to themselves to the prejudice of the rightful owner from 20 May 1980 to the
present.[38] Hence, it is but equitable that respondents be remunerated for their loss of the earnings due to the acts of
petitioners. Since there is no sufficient evidence to prove actual and compensatory damages, the Court hereby awards
temperate damages instead, which are more than nominal but less than compensatory damages, considering that
respondent had indeed suffered some pecuniary loss but the amount cannot be proved with certainty. [39] The amount
of P90,000.00 is sufficient and reasonable under the circumstances. In consonance therewith, the award of nominal
damages is hereby deleted.
The Court also cancels the award for moral damages as there was no indication that respondents had suffered
emotional hurt and injury.
Finding bad faith and fraudulent acts on the part of petitioners, the Court hereby imposes an increased amount
of P50,000.00 as exemplary damages.
WHEREFORE, in view of the foregoing, the Decision dated 30 April 2001 of the Court of Appeals, Eighth Division, in CAG.R. CV No. 38286 is AFFIRMED with MODIFICATION as follows:
1.
2.
3.

The award of nominal and moral damages is hereby DELETED;

Petitioners are ordered to jointly and severally pay respondents P90,000.00 as temperate damages,
in lieu of the award of actual and compensatory damages which is hereby DELETED;
Petitioners are likewise ordered to jointly and severally pay respondents P50,000.00 as exemplary
damages.

Costs against petitioners.

SO ORDERED.
Rep vs Imperial Credit Corp 555 SCRA 314 (tax dec.)
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Court, assailing the Decision[1] of the
Court of Appeals in CA-G.R. CV No. 78240. The Court of Appeals Decision affirmed the Decision of the Regional Trial
Court (RTC), Branch 74, Antipolo City which granted respondents application for land registration in LRC Case No.
00-2493.
The following factual antecedents are matters of record.
Herein respondent Imperial Credit Corporation is a corporation duly organized and existing under the laws of the
Philippines. On 07 March 1966, respondent purchased from a certain Jose Tajon a parcel of land situated in Barrio
Colaique (now Barangay San Roque), Antipolo City, Rizal for the sum of P17,986.00 as evidenced by a Deed of Sale
with Mortgage. Upon full payment of the balance of P1,909.00 through judicial consignation, ownership of the

property was consolidated in the name of respondent and the mortgage constituted thereon released in December
1997. The property was thereafter privately surveyed under PSU-178075 and approved on 25 January 2000.
On 14 February 2000, respondent filed before the RTC of Antipolo City an application for registration of a parcel of
land, as shown on Plan PSU-178075 containing an area of 8,993 square meters. The application was docketed as
LRC Case No. 00-2493 and raffled off to Branch 74 of said RTC. The application alleged, among others, that
respondent subrogated former owner Jose Tajon, who has been in open, continuous, exclusive and notorious
possession and occupation of the parcel of land, being a part of the alienable and disposable lands of the public
domain, under a bona fide claim of ownership since 12 June 1945, by virtue of Deed of Sale with Mortgage
executed on 07 March 1966,
After respondent presented evidence establishing the jurisdiction facts, the RTC issued an order of general default
against the whole world allowing respondent to present its evidence ex parte.
At the hearing, Ricardo Santos, respondents legal researcher and duly authorized attorney-in-fact, testified on the
fact of respondents actual possession through its caretaker, Teodisia Palapus, who had been overseeing said
property since its acquisition from Jose Tajon. Palapus also corroborated Santos testimony and added that except
for some trespassers, no one else had laid possessory claim on the property. Aside from the transfer documents,
the other documentary evidence submitted consisted of a 1993 tax declaration, the tracing cloth plan, survey
description, a certification from the Land Management Sector in lieu of the geodetic engineers certificate and the
report by the Community Environment and Natural Resources Office that the property falls within the alienable and
disposable zone.
On 21 November 2002, the RTC rendered judgment granting respondents application for registration. The
dispositive portion of the Decision reads:
WHEREFORE, from the evidence presented both testimonial and documentary, the Court is satisfied that the
applicant has a registerable title over the parcel of land applied for and after affirming the order of general default
against the whole world, hereby adjudicates the parcel of land more specifically identified in Plan Psu 178075
containing an area of EIGHT THOUSAND NINE HUNDRED NINETY THREE (8,993) SQUARE METERS in favor of the
applicant IMPERIAL CREDIT CORPORATION with business address at Unit 3-C-2, JMT Corporate Condominium, ADB
Ave., Ortigas Center, Pasig City, Metro Manila.
Once this decision becomes final, let an Order issue directing the Administrator of the Land Registration Authority,
Quezon City, to issue the corresponding Decree of Registration.
SO ORDERED.[2]
Petitioner Republic of the Philippines, through the Office of the Solicitor General (OSG), seasonably appealed from
the RTCs Decision to the Court of Appeals, contending that respondent failed to present incontrovertible evidence
that respondent and its predecessor-in-interest have been in open continuous, exclusive and notorious possession
and occupation of the property since 12 June 1945 or earlier.
The Court of Appeals rendered a Decision on 02 June 2006, dismissing the appeal by the OSG.
Hence, the instant petition, assigning the lone error, to wit:
THE COURT OF APPEALS ERRED IN AFFIRMING THE RTC DECISION WHICH GRANTED RESPONDENTS APPLICATION
FOR ORIGINAL REGISTRATION OF TITLE, HOLDING AS BASIS THEREOF PARAGRAPHS (2) AND (4) OF SECTION 14 OF
PD 1529 (THE PROPERTY REGISTRATION DECREE).[3]
Petitioner argues that contrary to the Court of Appeals ruling that respondent was able to prove its claim under
paragraphs (2) and (4) of Section 14, Presidential Decree (P.D.) No. 1529, respondents application for registration
was actually based on paragraph (1) of Section 14, P.D. No. 1529, the conditions under which were not sufficiently
established by respondents evidence. Although petitioner concedes that respondent was able to show that the
land applied for has been declassified from the forest or timber zone and is an alienable public agricultural land,
respondents evidence failed to satisfy the requirement under paragraph (1) of Section 14, P.D. No. 1529, that is,
respondents possession and occupation of the property for the length of time and in the manner required by law.
The petition is meritorious.
Under the Regalian doctrine, the State is the source of any asserted right to ownership of land. This is premised on
the basic doctrine that all lands not otherwise appearing to be clearly within private ownership are presumed to
belong to the State. Any applicant for confirmation of imperfect title bears the burden of proving that he is
qualified to have the land titled in his name.[4]
The reckoning date under the Public Land Act for the acquisition of ownership of public lands is June 12, 1945 or
earlier, and that evidence of possession from that date or earlier is essential for a grant of an application for
judicial confirmation of imperfect title.[5]
While a tax declaration by itself is not sufficient to prove ownership, it may serve as sufficient basis for inferring
possession.[6] However,
WHEREFORE, the instant petition for review on certiorari is GRANTED and the Decision of the Court of Appeals in
CA-G.R. CV No. 78240 is REVERSED and SET ASIDE.
SO ORDERED.

PFDA vs CA 534 SCRA 490 (govt instrmntlty exempt from realty tax)
This is a petition for review[1] of the decision and resolution of the Court of Appeals (CA), dated July 19,
2001 andSeptember 19, 2001, respectively, in CA-G.R. CV No. 42472, entitled Philippine Fisheries Development
Authority v. TheMunicipality of Navotas, Metro Manila, et al.
The facts appear as follows:
The controversy arose when respondent Municipality of Navotas assessed the real estate taxes allegedly due from
petitioner Philippine Fisheries Development Authority (PFDA) for the period 1981-1990 on properties under its
jurisdiction, management and operation located inside the Navotas Fishing Port Complex (NFPC).
The assessed taxes had remained unpaid despite the demands made by the municipality which prompted it, through
Municipal Treasurer Florante M. Barredo, to give notice to petitioner on October 29, 1990 that the NFPC will be sold at
public auction on November 30, 1990 in order that the municipality will be able to collect on petitioners delinquent
realty taxes which, as of June 30, 1990, amounted to P23,128,304.51, inclusive of penalties.
Petitioner sought the deferment of the auction sale claiming that the NFPC is owned by the Republic of the Philippines,
and pursuant to Presidential Decree (P.D.) No. 977, it (PFDA) is not a taxable entity.
In view of the refusal of PFDA to pay the assessed realty taxes, the matter was referred to the Department of
Finance (DOF). On July 14, 1990 the DOF stated that:
This Department takes cognizance of the allegations of [the Office of the Mayor of Navotas]
that PFDA has leased its properties to beneficial users, such as businessmen, private persons and
entities who are taxable persons. For this reason, it is imperative that the Municipality should conduct
an ocular inspection on the real properties (land and building owned by PFDA) in order to identify the
properties actually leased and the taxable persons enjoying the beneficial use thereof. The ocular
inspection is necessary for reason that the real properties, the use of which has been granted to
taxable persons, for consideration or otherwise, are subject to the payment of real property taxes
which must be paid by the grantees pursuant to the provisions of the Real Property Tax Code, as
amended.
Therefore, it is imperative to determine who the actual users of the properties concerned [are].
If used by a non-taxable person other than PFDA itself, it remains to be non-taxable. Otherwise, if said
properties are being used by taxable persons, same becomes taxable properties. For this purpose, it is
also incumbent upon PFDA to furnish the Municipality copies of the deed of lease or other relevant
documents showing the leased properties and their beneficial users for proper assessment. [2]
Notwithstanding the DOFs instruction, respondent Municipality proceeded to publish the notice of sale of NFPC
in theNovember 2, 1990 issue of Balita, a local newspaper.
On November 19, 1990, petitioner instituted Civil Case No. 1524 in the Regional Trial Court (RTC) of Malabon, Metro
Manila against respondent Municipality, its Municipal Treasurer and the Chairman of the Public Auction Sale
Committee. Petitioner asked the RTC to enjoin the auction of the NFPC on the ground that the properties comprising
the NFPC are owned by the Republic of thePhilippines and are, thus, exempt from taxation. According to petitioner,
only a small portion of NFPC which had been leased to private parties may be subjected to real property tax which
should be paid by the latter.
Respondent Municipality, on the other hand, insisted that: 1) the real properties within NFPC are owned entirely by
petitioner which, despite the opportunity given, had failed to submit proof to the Municipal Assessor that the
properties are indeed owned by the Republic of the Philippines; 2) if the properties in question really belong to the
government, then the complaint should have been instituted in the name of the Republic of the Philippines,
represented by the Office of the Solicitor General; and 3) the complaint is fatally defective because of non-compliance
with a condition precedent, which is, payment of the disputed tax assessment under protest.
On December 8, 1990, the RTC issued a writ of preliminary injunction enjoining respondent Municipality from
proceeding with the public auction.
On February 19, 1993, however, the RTC dismissed the case and dissolved the writ of preliminary injunction, thus:
[T]he plaintiff [petitioner] failed to present convincing evidence to support its claim of realty tax
exemption and ownership of the property by the Republic of the Philippines as mandated by Sec. 9 of
P.D. 464. Notwithstanding receipt of the notices of tax assessments from the defendants [public
respondent], the plaintiff did not avail of the remedies under the law by raising on appeal the said tax
assessments to the Local Board of Assessment Appeals, then to the Central Board of Assessment
Appeals and ultimately, to the Court of Tax Appeals. Instead, the plaintiff continuously ignored the
notices of tax assessments on the pretext that the properties inside the NFPC are exempt from
payment of real estate taxes as they are owned by the Republic of the Philippines. Assailing the
validity of the tax assessments of the NFPC properties is not the proper recourse for the plaintiff but to
pay first the tax assessments under protest and then raise the same on appeal to the Local Board of
Assessment Appeals, then to the Central Board of Assessment Appeals, then ultimately, to the Court of
Tax Appeals pursuant to the Real Property Tax Code.
The plaintiff failed in this regard, hence the Municipality, exercising its power to assess and collect
taxes on real properties within its jurisdiction, did the right thing, that is, to schedule the NFPC
properties for public auction. Furthermore, while the plaintiff is insisting that the NFPC properties are
owned by the Republic of the Philippines, and is therefore exempt from payment of real estate taxes,
yet it admitted that there are those lessees who leased portion[s] of the complex, and [it was] even
willing to submit [a] list of these lessees for proper tax assessments.
...

WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant [public
respondent Municipality of Navotas] and against the plaintiff, ordering:
1.
The DISMISSAL of this case;
2.
The preliminary injunction previously issued in this case DISSOLVED; and
3.
The plaintiff to pay the defendant [public respondent] Municipality the sum
of P13,767.00 as actual damages.
SO ORDERED.[3]
The CA affirmed the ruling of the RTC in a Decision dated July 19, 2001, the pertinent portions of which read:
The thrust of appellant PFDAs arguments has shoved to the fore the fact that the 67-hectare land on
which the NFPC Navotas Fishing Port Complex stands was reclaimed from the sea which explains why it
was bounded on the North by the Manila Bay, on the East by Roxas Boulevard, on the South by the
Manila Bay and on the West, by the breakwater. Even the Municipalitys counsel, Atty. Victorino Landas;
Assessor, Arturo Coronel; and Treasurer, Florante Barredo have admitted that much, as pointed out by
PFDA.[4] Such being the origin of the land, its ownership by the State as property of public
dominion[5] can hardly be disputed.
The reclaimed land; breakwaters; piers; wharves and quaywalls; and, fish market building forming part
of the Navotas Fish Port were furthermore certified by the Undersecretary of Public Works and
Highways[6] as belonging to the national government since they were built using the proceeds of the
loan agreement entered into by and between the Republic of the Philippines and the Asian
Development Bank on December 12, 1971.[7]
On August 11, 1976, the Philippine Fish Marketing Authority (PFMA) was created as a body corporate
by P.D. No. 977 to carry out
the policy of the Government to promote the development of the fishing industry and improve
efficiency in the handling, preserving, marketing and distribution of fish and fishery/aquatic products
through the establishment and operation of fish markets and the efficient operation of fishing ports
harbors and other marketing facilities.[8]
...
The PFMA was furthermore extended exemption from the payment of income tax in this tenor:
The authority shall be exempted from the payment of income tax.
The foregoing exemption may, however, be entirely or partly lifted by the President of the
Philippines, upon recommendation of the Secretary of Finance, not earlier than five years from the
approval of this Decree, if the President shall find the authority to be self-sustaining and financially
capable to pay such tax after providing for debt service requirements of the authority and its projected
capital and operating expenditures.[9]
Meanwhile, harbor operations at the Navotas Fishing Port Complex (NFPC) commenced on January 15,
1997 while the market operation started on April 3, 1977.
On February 8, 1982, P.D. No. 977 was amended by Executive Order No. 772. Insofar as material to the
case at bar, the salient features of the amendments introduced by the E.O. are:
(a) The creation of the Philippine Fisheries Development Authority (PFDA) to replace the Philippine Fish
Marketing Authority (PFMA).
...
(b)

The capitalization of the PFDA has included the Navotas Fishing Port Complex (NFPC).

...
(c)

The NFPC has been transferred to the exclusive jurisdiction, control, administration, and
supervision of the PFDA.

...
There can, therefore, [be] no escaping the conclusion that the appellant PFDA became the owner of
the Navotas Fishing Port Complex as of February 8, 1982. It cannot be any sooner because under P.D.
No. 977, the NFPC was not made part of the capital of the Philippine Fish Marketing Authority (PFMA),
PFDAs predecessor, as only the Navotas Fish Landing was made part of such capital while the Navotas
Fishing Port and Fish Market were transferred merely to the exclusive jurisdiction, control,
administration, and supervision of the PFMA. It was not then altogether clear if the Navotas Fishing Port
Complex (NFPC) was conveyed to the PFMA.
...
Indeed, it is quite true that a property continues to be part of the public domain, and not available for
alienation, private appropriation or ownership, until it is withdrawn from being such by the Government
through the Executive Department or the Legislative,[10] and that it is not for the President to convey
valuable real property of the Government on his own sole will as any such conveyance requires
executive and legislative concurrence.[11]

But the stark reality is that at the time E.O. No, 772 was issued on February 8, 1982, President Marcos
was exercising both executive and legislative powers. [12] Hence, his conveyance of the NFPC to form
part of the capital of PFDA cannot but be valid.
The fact that the PFDA has up to now no certificate of title to the NFPC nor has the PFDA declared it for
tax purposes is of no consequence. Such a certificate is merely an evidence of ownership and not the
title itself,[13] while a tax declaration does not prove nor disprove ownership. What is significant is that
the PFDA has openly declared and represented that it owns, maintains and operates the NFPC when it
leased a portion thereof to the Frabelle Fishing Corporation on March 13, 1989.
All told, the PFDA being the owner of the NFPC beginning February 8, 1982 is liable for the
realty taxes due thereon, its tax exemption being only from the payment of income tax. [14]
WHEREFORE, the appealed decision is AFFIRMED, without pronouncement as to costs.
SO ORDERED.[15]
Petitioner filed a motion for reconsideration but the same was denied by the CA.
Petitioner now raises the following arguments:
One, the CA acknowledged that the property in question is a reclaimed land. As such, it is a property of public
dominion (Art. 420, Civil Code) and is owned by the State. Notwithstanding this, the CA erroneously ruled that the
government had validly transferred ownership of the land to PFDA in 1982 when P.D. No. 977 was amended by E.O. No.
772 by virtue of which the property became part of the assets of PFDA (Sec. 5 of E.O. No. 772);
Two, as a reclaimed land, the port complex should be considered a reserved land. In NDC v. Cebu City,[16] the Supreme
Court held that a reserved land is a public land that has been withheld or kept back from sale or disposition. The land
remains an absolute property of the government. As its title remains with the State, the reserved land is tax exempt;
Three, in Government v. Cabangis[17] and Lampria v. Director of Lands,[18] this Court declared that the land reclaimed
from the sea, as a result of the construction by the government of a breakwater fronting the place where it is situated,
belongs to the State in accordance with Article 5 of the Law of Waters of 1866;
Four, petitioner merely operates the area or the NFPC complex in favor of the Republic of the Philippines. Section 4.A of
P.D. No. 977, as amended by E.O. No. 772, provides that PFDA shall:
[M]anage, administer, operate, improve and modernize, coordinate and otherwise govern the
activities, operation and facilities in the fishing ports, markets and landings that may hereinafter be
placed under, or transferred to the Authority, and such other fish markets, fishing ports/harbors and
infrastructure facilities as may be established under this Decree; to investigate, prepare, adopt,
implement and execute a comprehensive plan for the overall development of fishing port and market
complexes and update such plan as may be necessary from time to time; to construct or authorize the
construction in the land area under its jurisdiction, of infrastructure facilities, factory buildings,
warehouses, cold storage and ice plants, and other structures related to the fishing industry or
necessary and useful in the conduct of its business or in the attainment of the purpose and objectives
of this Decree; to acquire, hold and dispose real and personal property in the exercise of its functions
and powers.
Lastly, the NFPC property is intended for public use and public service. As such, it is owned by the State, hence,
exempt from real property tax.
The issue is whether petitioner is liable to pay real property tax.
Local government units, pursuant to the fiscal autonomy granted by the provisions of Republic Act No. 7160 or
the 1991 Local Government Code, can impose realty taxes on juridical persons [19] subject to the limitations enumerated
in Section 133 of the Code:
SEC. 133. Common Limitations on the Taxing Power 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:
(o)

taxes, fees, charges of any kind on the national government, its agencies and
instrumentalities, and local government units.

Nonetheless, the above exemption does not apply when the beneficial use of the government property has been
granted to a taxable person. Section 234 (a) of the Code states that real property owned by the Republic of the
Philippines or any of its political subdivisions is exempted from payment of the real property tax except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
Thus, as a rule, petitioner PFDA, being an instrumentality [20] of the national government, is exempt from real
property tax but the exemption does not extend to the portions of the NFPC that were leased to taxable or private
persons and entities for their beneficial use.
This is in consonance with the ruling in Philippine Fisheries Development Authority v. Court of Appeals [21] where
this Court held that:
On the basis of the parameters set in the MIAA [Manila International Airport Authority v. Court
of Appeals][22] case, the Authority should be classified as an instrumentality of the national
government. As such, it is generally exempt from payment of real property tax, except those portions
which have been leased to private entities.
In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as among the
instrumentalities of the national government [23]

Indeed, the Authority is not a GOCC[24] but an instrumentality of the government. The Authority
has a capital stock but it is not divided into shares of stocks. [25] Also, it has no stockholders or voting
shares. Hence, it is not a stock corporation. Neither it is a non-stock corporation because it has no
members.
The real property tax assessments issued by the City of Iloilo should be upheld only with
respect to the portions leased to private persons. In case the Authority fails to pay the real property
taxes due thereon, said portions cannot be sold at public auction to satisfy the tax delinquency.
The port built by the State in the Iloilo fishing complex is a property of public dominion and
cannot therefore be sold at public auction. Article 420 of the Civil Code provides:
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
(2) Those which belong to the State, without being for public use, and are intended
for some public service or for the development of national wealth.
The Iloilo [F]ishing [P]ort [Complex/IFPC] which was constructed by the State for public use and/or
public service falls within the term port in the aforecited provision. Being a property of public dominion
the same cannot be subject to execution or foreclosure sale. [26]Whether there are improvements in the
fishing port complex that should not be construed to be embraced within the term port involves
evidentiary matters that cannot be addressed in the present case. As for now, considering that the
Authority is a national government instrumentality, any doubt on whether the entire IFPC may be
levied upon to satisfy the tax delinquency should be resolved against the City of Iloilo.
Similarly, for the same reason, the NFPC cannot be sold at public auction in satisfaction of the tax delinquency
assessments made by the Municipality of Navotas on the entire complex.
Additionally, the land on which the NFPC property sits is a reclaimed land, which belongs to the State.
In Chavez v. Public Estates Authority,[27] the Court declared that reclaimed lands are lands of the public domain and
cannot, without Congressional fiat, be subject of a sale, public or private. [28]
In light of the above, petitioner is only liable to pay the amount of P62,841,947.79 representing the total taxes due as
of December 31, 2001 from PFDA-owned properties that were leased, as shown in the Summary of Realty Taxes Due
Properties Owned and/or Managed by PFDA as per Realty Tax Order of Payment dated September 16, 2002. [29]
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals, dated July 19,
2001 andSeptember 19, 2001, respectively, in CA-G.R. CV No. 42472 are SET ASIDE. The Realty Tax Order of Payment
issued by respondent Municipality of Navotas on September 16, 2002 is declared VOID EXCEPT as to the amount
of P62,841,947.79 representing the total taxes due as of December 31, 2001 on the properties leased by petitioner to
private parties. RespondentMunicipality of Navotas is DIRECTED to refrain from levying on the Navotas Fishing Port
Complex (NFPC) to satisfy the payment of the real property tax delinquency.
No costs.
SO ORDERED.
PPA vs Iloilo, G.R. 109791, 14 July 2003((PPA , a gocc, not tax exmpt)
Before us is a petition for review on certiorari assailing the Decision of the Regional Trial Court of Iloilo City, Branch 39,
dated February 26, 1993 in Civil Case No. 18477, a case for collection of a sum of money. Seeking to raise questions
purely of law, petitioner Philippine Ports Authority (PPA) would want us to set aside the ruling ordering it to pay real
property and business taxes to respondent City of Iloilo.
The factual antecedents are summarized by the trial court:
This is an action for the "recovery of sum of money" filed by [respondent] City of Iloilo, a public corporation organized
under the laws of the Republic of the Philippines, represented by the Hon. Rodolfo T. Ganzon as City Mayor, against
petitioner, Philippine Ports Authority (PPA), a government corporation created by P.D. 857.
[Respondent] seeks to collect from [petitioner] real property taxes as well as business taxes, computed from the last
quarter of 1984 up to fourth quarter of 1988.
[Respondent] alleges that [petitioner] is engaged in the business of arrastre and stevedoring services and the leasing
of real estate for which it should be obligated to pay business taxes. It further alleges that [petitioner] is the declared
and registered owner of a warehouse which is used in the operation of its business and is also thereby subject to real
property taxes.
It demands the aggregate amount of P510,888.86 in realty and business taxes as of December 1988 (real property tax
last quarter of 1984 to 1988; business tax- 1984 to 1988) including its corresponding interests and penalty charges.
On July 19, 1989, [petitioner] filed a motion to dismiss but [it] was denied by this court. A motion for reconsideration
was filed, but the same was still denied, after which [petitioner] filed its answer.
During the pre-trial conference, the following factual and legal issues were defined and clarified.
Factual Issues:
1. Whether or not [petitioner] is engaged in business;

2. Whether or not the assessment of tax by [respondent] is accurate as of 4th quarter of 1988 from the year 1984; real
property tax in the amount of P180,953.93 and business tax in the amount of P329,934.93 as of December 31, 1988.
Legal Issues:
1. Whether or not Philippine Ports Authority is exempt from the payment of real property tax and business tax;
2. Whether by filing a motion to dismiss, [petitioner] impliedly admitted the allegations in the complaint;
3. Whether Philippine Ports Authority is engaged in business. If in the negative, whether or not it is exempt from
payment of business taxes.
During trial, [respondent] presented two witnesses, namely: Mrs. Rizalina F. Tulio and Mr. Leoncio Macrangala.
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After [respondent] had rested its case, [petitioner] did not present any evidence. Instead, its counsel asked the court to
give him time to file a memorandum, as said counsel is convinced that the issues involved in this case are purely legal
issues.
He has no quarrel as regards the computation of the real property and business taxes made by [respondent]. He is
convinced, however, that the issue in this case involves a question of law and that [petitioner] is not liable to pay any
kind of taxes to the City of Iloilo.1
The court a quo rendered its decision holding petitioner liable for real property taxes from the last quarter of 1984 to
December 1986, and for business taxes with respect to petitioners lease of real property from the last quarter of 1984
up to 1988. It, however, held that respondent may not collect business taxes on petitioners arrastre and stevedoring
services, as these form part of petitioners governmental functions. The dispositive portion of said decision states:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter to pay the plaintiff, as follows:
1. the amount of P98,519.16 as real property tax, from [the] last quarter of 1984 up to December 1986;
2. the amount of P3,828.07, as business tax, for leasing of real estate from [the] last quarter of 1984 up to 1988.2
Petitioner now seeks a review of the case, contending that the court a quo decided a question of substance which has
not been decided by us in that:
(i) It decreed a property of public dominion (port facility) as subject to realty taxes just because the mentioned
property is being administered by what it perceived to be a taxable government corporation. And,
(ii) It declared that petitioner PPA is subject to "business taxes" for leasing to private persons or entities real estate
without considering that petitioner PPA is not engaged in "business."3
In its Comment, respondent in addition raises the issue of whether or not petitioner may change its theory on appeal.
It points out that petitioner never raised the issue that the subject property is of public dominion during the trial nor
did it mention it in the memorandum it filed with the lower court. It further contends that such change of theory
patently contradicts petitioners admission in its pleadings and is disallowed under applicable jurisprudence.4
The records show that the theory of petitioner before the trial court was different from that of the present petition. In
fact, even while at the trial court stage, petitioner was not consistent in its theory.5 Initially in its pleadings therein, it
argued that as a government-owned corporation, it is exempt from paying real property taxes by virtue of its specific
exemption in its charter,6 Section 40 of the Real Property Tax Code and Executive Order No. 93. Subsequently, in the
memorandum it filed with the trial court, it omitted its earlier argument and changed its theory by alleging that it is a
government instrumentality, which, according to applicable jurisprudence, may not be taxed by the local government.
After obtaining an adverse decision from the trial court, it adopts yet another stance on appeal before us, contesting
the taxability of its warehouse. It argued for the first time that since "ports constructed by the State" are considered
under the Civil Code as properties of public dominion, its warehouse, which it insists to be part of its port, should be
treated likewise. To support this, it invokes Article 420 of the Civil Code, which provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character;
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[Emphasis supplied]
Insisting that the subject warehouse is considered as part of its port, it points to Section 3 (e) of its charter quoted
hereunder:
e) "port" means a place where ships may anchor or tie up for the purpose of shelter, repair, loading or discharge of
cargo, or for other such activities connected with water-borne commerce, and including all the land and water areas
and the structures, equipment and facilities related to these functions. [Emphasis supplied]
A perusal of the records shows that this thesis was never presented nor discussed at the trial stage.
As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court
will not be permitted to change theory on appeal.7 Points of law, theories, issues and arguments not brought to the

attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot
be raised for the first time at such late stage. Basic considerations of due process underlie this rule.8 It would be unfair
to the adverse party who would have no opportunity to present further evidence material to the new theory, which it
could have done had it been aware of it at the time of the hearing before the trial court.9 To permit petitioner in this
case to change its theory on appeal would thus be unfair to respondent, and offend the basic rules of fair play, justice
and due process.10
Petitioner however cites an exception to the rule, as enunciated in Lianga Lumber Co. v. Lianga Timber Co., Inc.,11
wherein we said:
[I]n the interest of justice and within the sound discretion of the appellate court, a party may change his theory on
appeal only when the factual bases thereof would not require presentation of any further evidence by the adverse
party in order to enable it to properly meet the issue raised in the new theory.
Petitioner contends that its new theory falls under the aforecited exception, as the issue does not involve any disputed
evidentiary matter.
Contrary to petitioners claim, we find that the new issue raised is not a purely legal question. It must be emphasized
that the enumeration of properties of public dominion under Article 420 of the Civil Code specifically states "ports
constructed by the State." Thus, in order to consider the port in the case at bar as falling under the said classification,
the fact that the port was constructed by the State must first be established by sufficient evidence. This fact proved
crucial in Santos v. Moreno,12 where the issue raised was whether the canals constructed by private persons were of
public or private ownership. We ruled that the canals were privately owned, thus:
Under Art. 420, canals constructed by the State and devoted and devoted to public use are of public ownership.
Conversely, canals constructed by private persons within private lands and devoted exclusively for private use must
be of private ownership.
In the case at bar, no proof was adduced to establish that the port was constructed by the State. Petitioner cannot
have us automatically conclude that its port qualified as "property of public dominion." It would be unfair to
respondent, which would be deprived of its opportunity to present evidence to disprove the factual basis of the new
theory. It is thus clear that the Lianga exception cannot apply in the case at bar.
Moreover, as correctly pointed out by respondent, we cannot ignore the fact that petitioners new position runs
contrary to its own admission in the pleadings filed in the trial court. Under paragraph 3 of respondents complaint
quoted hereunder, the fact of petitioners ownership of the property was specifically alleged as follows:
III
Defendant is likewise the declared and registered owner of a warehouse standing on Lot No. 1065 situated at Bgy.
Concepcion, City Proper, declared under Tax Declaration No. 56325. Xerox copy of the said Tax Declaration is hereto
attached as annex "D" and formns] an integral part of herein complaint;13
In its Answer, referring to the abovecited complaint, petitioner stated, "Paragraph 3 is admitted."14 Notably, this
admission was never questioned nor put at issue during the trial.
Now before us, petitioner contradicts its earlier admission by claiming that the subject warehouse is a property of
public dominion. This inconsistency is made more apparent by looking closely at what public dominion means.
Tolentino explains this in this wise:
Private ownership is defined elsewhere in the Code; but the meaning of public dominion is nowhere defined. From the
context of various provisions, it is clear that public dominion does not carry the idea of ownership; property of public
dominion is not owned by the State, but pertains to the State, which as territorial sovereign exercises certain judicial
prerogatives over such property. The ownership of such property, which has the special characteristics of a collective
ownership for the general use and enjoyment, by virtue of their application to the satisfaction of collective needs, is in
the social group, whether national, provincial, or municipal. Their purpose is not to serve the State as a juridical
person, but the citizens; they are intended for the common and public welfare, and so they cannot be the object of
appropriation, either by the State or by private persons.15 [Emphasis supplied]
Following the above, properties of public dominion are owned by the general public and cannot be declared to be
owned by a public corporation, such as petitioner.
As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants and to indicate fairly the
nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary to, or
inconsistent, with his pleadings.16 Unless a party alleges palpable mistake or denies such admission, judicial
admissions cannot be controverted.17 Petitioner is thus bound by its admission of ownership of the subject property
and is barred from claiming otherwise.
We also note that petitioner failed to raise the issue of ownership during the pre-trial. In its petition, it insists that to
determine liability for real property tax, the ownership of the property must first be ascertained.18 In the pre-trial
order, however, to which petitioner did not object, nowhere was the issue of ownership included in the stipulated
factual or legal issues.19
We have ruled that a pre-trial is primarily intended to make certain that all issues necessary to the disposition of a
case are properly raised. Thus to obviate the element of surprise, parties are expected to disclose at the pre-trial
conference all issues of law and fact which they intend to raise at the trial. Consequently, the determination of issues
at a pre-trial conference bars the consideration of other questions on appeal.20 Hence, in the case at bar, the fact that
the issue of ownership is outside of what has been delimited during the pre-trial further justifies the disallowance of
petitioners new theory.

Therefore, on the basis of the foregoing considerations and in the absence of compelling reasons to rule otherwise, we
hold that petitioner may not be permitted to change its theory at this stage. Well-settled is the rule that questions that
were not raised in the lower court cannot be raised for the first time on appeal.21
In any case, granting that petitioners present theory is allowed at this stage, we nevertheless find it untenable.
Concededly, "ports constructed by the State" are properties of the public dominion, as Article 420 of the Civil Code
enumerates these as properties "intended for public use." It must be stressed however that what is being taxed in the
present case is petitioners warehouse, which, although located within the port, is distinct from the port itself. In Light
Rail Transit Authority v. Central Board of Assessment Appeals et al.,22 petitioner therein similarly sought an exemption
from real estate taxes on its passenger terminals, arguing that said properties are considered as part of the "public
roads," which are classified as property of public dominion in the Civil Code.23 We ruled therein that:
[T]he properties of petitioner are not exclusively considered as public roads being improvements placed upon the
public road, and this [separable] 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, vis--vis roads which are public improvements openly utilized by the public, the former are entirely different
from the latter.
Using the same reasoning, the warehouse in the case at bar may not be held as part of the port, considering its
separable nature as an improvement upon the port, and the fact that it is not open for use by everyone and freely
accessible to the public. In the same way that we ruled in one case that the exemption of public property from taxation
does not extend to improvements made thereon by homesteaders or occupants at their own expense,24 we likewise
uphold the taxability of the warehouse in the instant case, it being a mere improvement built on an alleged property of
public dominion, assuming petitioners port to be so. Moreover, petitioner may not invoke the definition of "port" in its
charter to expand the meaning of "ports constructed by the State" in the Civil Code to include improvements built
thereon. It must be noted that the charter itself limited the use of said definition only for the interpretation of
Presidential Decree (P.D.) No. 857, its by-laws, regulations and rules,25 and not of other statutes such as the Civil
Code. Given these parameters, therefore, petitioners move to present its new theory, even if allowed, would
nonetheless prove to be futile.
The trial court correctly ruled that for the assessed period of 1984 to 1988, petitioners exemption from real property
taxes was withdrawn by P.D. No. 1931, at least for the period of 1984 to 1986.
Originally, petitioner was exempt from real property taxes on the basis of the Real Property Tax Code26 then
governing, which provided:
SECTION 40. Exemptions 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 governmentowned corporation so exempt by its charter: Provided; however, That this exemption shall not apply to real property of
the above-named entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable
person.
Petitioners charter, P.D. 857,27 further specifically exempted it from real property taxes:
SECTION 25. Exemption from Realty Taxes The Authority shall be exempt from the payment of real property taxes
imposed by the Republic of the Philippines, its agencies, instrumentalities or political subdivisions; Provided, That no
tax exemptions shall be extended to any subsidiaries of the Authority that may be organized; Provided, finally, That
investments in fixed assets shall be deductible for income tax purposes.
It can thus be seen from the foregoing that petitioner, as a government-owned or controlled corporation, enjoyed an
exemption from real property taxes.
On June 11, 1984, however, P.D. 1931 effectively withdrew all tax exemption privileges granted to government-owned
or controlled corporations as stated in Section 1 thereof, which reads:
Sec. 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the payment of
duties, taxes, fees, imposts and other charges heretofore granted in favor of government-owned or controlled
corporations including their subsidiaries, are hereby withdrawn.
Under the same law, the exemption can be restored in special cases through an application for restoration with the
Secretary of Finance,28 which, notably, petitioner did not avail.
Subsequently, Executive Order (E.O.) No. 93 was enacted on December 17, 1986 restoring tax exemptions provided
under certain laws, one of which is the Real Property Tax Code. The pertinent portion of said law provides:
SECTION 1. The provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives
granted to government and private entities are hereby withdrawn, except:
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e) those conferred under four basic codes namely:

(i) the Tariff and Customs Code, as amended;
(ii) the National Internal Revenue Code, as amended;
(iii) the Local Tax Code, as amended;
(iv) the Real Property Tax Code, as amended;
[Emphasis supplied]

The abovecited laws, therefore, indicate that petitioners tax exemption from real property taxes was withdrawn by
P.D. 1931 effective June 11, 1984, but was subsequently restored by virtue of E.O. 93, starting December 17, 1986.29
Hence, petitioner is liable for real property taxes on its warehouse, computed from the last quarter of 1984 up to
December 1986.
Petitioner, however, seeks to be excused from liability for taxes by invoking the pronouncement in Basco v. PAGCOR30
(Basco) quoted hereunder:
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it
in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government,
PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or
subject to control by a mere Local government. [Emphasis supplied]
Petitioner points out that its exercise of regulatory functions as decreed by its charter31 places it within the category
of an "agency or instrumentality of the government," which, according to Basco, is beyond the reach of local taxation.
Reliance in the abovecited case is unavailing considering that P.D. 1931 was never raised therein, and given that the
issue in said case focused on the constitutionality of P.D. 1869, the charter of PAGCOR. The said decision did not
absolutely prohibit local governments from taxing government instrumentalities. In fact we stated therein:
The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may
provide by law. Since P.D. 1869 remains an "operative" law until "amended, repealed or revoked"its "exemption
clause" remains an exemption to the exercise of the power of local governments to impose taxes and fees.32
Furthermore, in the more recent case of Mactan Cebu International Airport Authority v. Marcos,33 where the Basco
case was similarly invoked for tax exemption, we stated: "[N]othing can prevent Congress from decreeing that even
instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where it is
done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom." The fact that tax
exemptions of government-owned or controlled corporations have been expressly withdrawn by the present Local
Government Code34 clearly attests against petitioners claim of absolute exemption of government instrumentalities
from local taxation.
Petitioner also contends that the term "government-owned or controlled corporations" referred in P.D. 1931 covers only
those not performing governmental functions. This argument is without legal basis for it reads into the law a distinction
that is not there. It runs contrary to the clear intent of the law to withdraw from all units of the government, including
government-owned or controlled corporations, their exemptions from taxes. Had it been otherwise, the law would have
said so.35
Moreover, the trial court correctly pointed out that if indeed petitioner were not subject to local taxation, petitioners
charter would not have specifically provided for its exemption from the payment of real property tax. Its exemption
therein therefore proves that it was only an exception to the general rule of taxability of petitioner. Given that said
privilege was withdrawn by subsequent law, petitioners claim for exemption from real property taxes for the entire
assessed period fails.
We affirm the finding of the lower court on petitioners liability for business taxes for the lease of its building to private
corporations. During the trial, petitioner did not present any evidence to refute respondents proof of petitioners
income from the lease of its property. Neither did it present any proof of exemption from business taxes. Instead, it
emphasized its charter provisions defining its functions as governmental in nature. It averred that it allowed port users
to occupy certain premises within the port area only to ensure order and convenience in discharging its governmental
functions. It hence claimed that it is not engaged in business, as the act of leasing out its property was not motivated
by profit, but by its duty to manage and control port operations.
The argument is unconvincing. As admitted by petitioner, it leases out its premises to private persons for
"convenience" and not necessarily as part of its governmental function of administering port operations. In fact, its
charter classifies such act of leasing out port facilities as one of petitioners corporate powers.36 Any income or profit
generated by an entity, even of a corporation organized without any intention of realizing profit in the conduct of its
activities, is subject to tax.37 What matters is the established fact that it leased out its building to ten private entities
from which it regularly earned substantial income. Thus, in the absence of any proof of exemption therefrom,
petitioner is liable for the assessed business taxes.
In closing, we reiterate that in taxing government-owned or controlled corporations, the State ultimately suffers no
loss. In National Power Corp. v. Presiding Judge, RTC, Br. XXV,38 we elucidated:
Actually, the State has no reason to decry the taxation of NAPOCORs properties, as and by way of real property taxes.
Real property taxes, after all, form part and parcel of the financing apparatus of the Government in development and
nation-building, particularly in the local government level.
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To all intents and purposes, real property taxes are funds taken by the State with one hand and given to the other. In
no measure can the government be said to have lost anything.
Finally, we find it appropriate to restate that the primary reason for the withdrawal of tax exemption privileges granted
to government-owned and controlled corporations and all other units of government was that such privilege resulted in
serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, hence resulting in the
need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other
charges due from them.39
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
No pronouncement as to costs.

SO ORDERED.
Angeles Univ. vs City GR 189999 27 June 2012 (A-D-E used.)
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
which seeks to reverse and set aside the Decision [1] dated July 28, 2009 and Resolution[2] dated October 12, 2009 of
the Court of Appeals (CA) in CA-G.R. CV No. 90591. The CA reversed the Decision[3] dated September 21, 2007 of the
Regional Trial Court of Angeles City, Branch 57 in Civil Case No. 12995 declaring petitioner exempt from the payment
of building permit and other fees and ordering respondents to refund the same with interest at the legal rate.
The factual antecedents:
Petitioner Angeles University Foundation (AUF) is an educational institution established on May 25, 1962 and
was converted into a non-stock, non-profit education foundation under the provisions of Republic Act (R.A.) No.
6055[4] on December 4, 1975.
Sometime in August 2005, petitioner filed with the Office of the City Building Official an application for a
building permit for the construction of an 11-storey building of the Angeles University Foundation Medical Center in its
main campus located at MacArthur Highway, Angeles City, Pampanga. Said office issued a Building Permit Fee
Assessment in the amount of P126,839.20.An Order of Payment was also issued by the City Planning and Development
Office, Zoning Administration Unit requiring petitioner to pay the sum of P238,741.64 as Locational Clearance Fee.[5]
In separate letters dated November 15, 2005 addressed to respondents City Treasurer Juliet G. Quinsaat and
Acting City Building Official Donato N. Dizon, petitioner claimed that it is exempt from the payment of the building
permit and locational clearance fees, citing legal opinions rendered by the Department of Justice (DOJ). Petitioner also
reminded the respondents that they have previously issued building permits acknowledging such exemption from
payment of building permit fees on the construction of petitioners 4-storey AUF Information Technology Center building
and the AUF Professional Schools building on July 27, 2000 and March 15, 2004, respectively. [6]
Respondent City Treasurer referred the matter to the Bureau of Local Government Finance (BLGF) of the
Department of Finance, which in turn endorsed the query to the DOJ. Then Justice Secretary Raul M. Gonzalez, in his
letter-reply dated December 6, 2005, cited previous issuances of his office (Opinion No. 157, s. 1981 and Opinion No.
147, s. 1982) declaring petitioner to be exempt from the payment of building permit fees. Under the 1st Indorsement
dated January 6, 2006, BLGF reiterated the aforesaid opinion of the DOJ stating further that xxx the Department of
Finance, thru this Bureau, has no authority to review the resolution or the decision of the DOJ.[7]
Petitioner wrote the respondents reiterating its request to reverse the disputed assessments and invoking the
DOJ legal opinions which have been affirmed by Secretary Gonzalez. Despite petitioners plea, however, respondents
refused to issue the building permits for the construction of the AUF Medical Center in the main campus and renovation
of a school building located at Marisol Village.Petitioner then appealed the matter to City Mayor Carmelo F. Lazatin but no
written response was received by petitioner.[8]
Consequently, petitioner paid under protest[9] the following:
Medical Center (new construction)
Building Permit and Electrical Fee
Locational Clearance Fee
Fire Code Fee

P 217,475.20
283,741.64
144,690.00
Total - P 645,906.84

School Building (renovation)

Building Permit and Electrical Fee
Locational Clearance Fee
Fire Code Fee

P 37,857.20
6,000.57
5,967.74
Total - P 49,825.51

Petitioner likewise paid the following sums as required by the City Assessors Office:
Real Property Tax Basic Fee
SEF
Locational Clearance Fee

P 86,531.10
43,274.54
1,125.00
Total P130,930.64[10]
[GRAND TOTAL - P 826,662.99]

By reason of the above payments, petitioner was issued the corresponding Building Permit, Wiring Permit, Electrical
Permit and Sanitary Building Permit. On June 9, 2006, petitioner formally requested the respondents to refund the fees
it paid under protest.Under letters dated June 15, 2006 and August 7, 2006, respondent City Treasurer denied the
claim for refund.[11]
On August 31, 2006, petitioner filed a Complaint[12] before the trial court seeking the refund of P826,662.99 plus
interest at the rate of 12% per annum, and also praying for the award of attorneys fees in the amount of P300,000.00
and litigation expenses.
In its Answer,[13] respondents asserted that the claim of petitioner cannot be granted because its structures are not
among those mentioned in Sec. 209 of the National Building Code as exempted from the building permit
fee. Respondents argued that R.A. No. 6055 should be considered repealed on the basis of Sec. 2104 of the National
Building Code. Since the disputed assessments are regulatory in nature, they are not taxes from which petitioner is
exempt. As to the real property taxes imposed on petitioners property located in Marisol Village, respondents pointed
out that said premises will be used as a school dormitory which cannot be considered as a use exclusively for
educational activities.
Petitioner countered that the subject building permit are being collected on the basis of Art. 244 of
the Implementing Rules and Regulations of the Local Government Code, which impositions are really taxes considering
that they are provided under the chapter on Local Government Taxation in reference to the revenue raising power of

local government units (LGUs). Moreover, petitioner contended that, as held in Philippine Airlines, Inc. v. Edu,[14] fees
may be regarded as taxes depending on the purpose of its exaction. In any case, petitioner pointed out that the Local
Government Code of 1991 provides in Sec. 193 that non-stock and non-profit educational institutions like petitioner
retained the tax exemptions or incentives which have been granted to them. Under Sec. 8 of R.A. No. 6055 and
applicable jurisprudence and DOJ rulings, petitioner is clearly exempt from the payment of building permit fees. [15]
On September 21, 2007, the trial court rendered judgment in favor of the petitioner and against the respondents. The
dispositive portion of the trial courts decision[16] reads:
WHEREFORE, premises considered, judgment is rendered as follows:
a. Plaintiff is exempt from the payment of building permit and other fees Ordering the
Defendants to refund the total amount of Eight Hundred Twenty Six Thousand Six Hundred
Sixty Two Pesos and 99/100 Centavos (P826,662.99) plus legal interest thereon at the rate of
twelve percent (12%) per annum commencing on the date of extra-judicial demand or June 14,
2006, until the aforesaid amount is fully paid.
b. Finding the Defendants liable for attorneys fees in the amount of Seventy Thousand
Pesos (Php70,000.00), plus litigation expenses.
c. Ordering the Defendants to pay the costs of the suit.
SO ORDERED.[17]
Respondents appealed to the CA which reversed the trial court, holding that while petitioner is a tax-free entity, it is not
exempt from the payment of regulatory fees. The CA noted that under R.A. No. 6055, petitioner was granted exemption
only from income tax derived from its educational activities and real property used exclusively for educational
purposes. Regardless of the repealing clause in the National Building Code, the CA held that petitioner is still not exempt
because a building permit cannot be considered as the other charges mentioned in Sec. 8 of R.A. No. 6055 which refers
to impositions in the nature of tax, import duties, assessments and other collections for revenue purposes, following
the ejusdem generisrule. The CA further stated that petitioner has not shown that the fees collected were excessive and
more than the cost of surveillance, inspection and regulation. And while petitioner may be exempt from the payment of
real property tax, petitioner in this case merely alleged that the subject property is to be used actually, directly and
exclusively for educational purposes, declaring merely that such premises is intended to house the sports and other
facilities of the university but by reason of the occupancy of informal settlers on the area, it cannot yet utilize the same
for its intended use. Thus, the CA concluded that petitioner is not entitled to the refund of building permit and related
fees, as well as real property tax it paid under protest.
Petitioner filed a motion for reconsideration which was denied by the CA.
Hence, this petition raising the following grounds:
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED A QUESTION OF SUBSTANCE
IN A WAY NOT IN ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF THE HONORABLE
COURT AND HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
NECESSITATING THE HONORABLE COURTS EXERCISE OF ITS POWER OF SUPERVISION CONSIDERING
THAT:
I. IN REVERSING THE TRIAL COURTS DECISION DATED 21 SEPTEMBER 2007, THE COURT OF APPEALS
EFFECTIVELY WITHDREW THE PRIVILEGE OF EXEMPTION GRANTED TO NON-STOCK, NON-PROFIT
EDUCATIONAL FOUNDATIONS BY VIRTUE OF RA 6055 WHICH WITHDRAWAL IS BEYOND THE
AUTHORITY OF THE COURT OF APPEALS TO DO.
A. INDEED, RA 6055 REMAINS VALID AND IS IN FULL FORCE AND EFFECT. HENCE, THE COURT OF
APPEALS ERRED WHEN IT RULED IN THE QUESTIONED DECISION THAT NON-STOCK, NONPROFIT EDUCATIONAL FOUNDATIONS ARE NOT EXEMPT.
B. THE COURT OF APPEALS APPLICATION OF THE PRINCIPLE OF EJUSDEM GENERIS IN RULING IN
THE QUESTIONED DECISION THAT THE TERM OTHER CHARGES IMPOSED BY THE
GOVERNMENT UNDER SECTION 8 OF RA 6055 DOES NOT INCLUDE BUILDING PERMIT AND
OTHER RELATED FEES AND/OR CHARGES IS BASED ON ITS ERRONEOUS AND
UNWARRANTED ASSUMPTION THAT THE TAXES, IMPORT DUTIES AND ASSESSMENTS AS
PART OF THE PRIVILEGE OF EXEMPTION GRANTED TO NON-STOCK, NON-PROFIT
EDUCATIONAL FOUNDATIONS ARE LIMITED TO COLLECTIONS FOR REVENUE PURPOSES.
C. EVEN ASSUMING THAT THE BUILDING PERMIT AND OTHER RELATED FEES AND/OR CHARGES
ARE NOT INCLUDED IN THE TERM OTHER CHARGES IMPOSED BY THE GOVERNMENT UNDER
SECTION 8 OF RA 6055, ITS IMPOSITION IS GENERALLY A TAX MEASURE AND THEREFORE,
STILL COVERED UNDER THE PRIVILEGE OF EXEMPTION.
II. THE COURT OF APPEALS DENIAL OF PETITIONER AUFS EXEMPTION FROM REAL PROPERTY TAXES
CONTAINED IN ITS QUESTIONED DECISION AND QUESTIONED RESOLUTION IS CONTRARY TO
APPLICABLE LAW AND JURISPRUDENCE.[18]
Petitioner stresses that the tax exemption granted to educational stock corporations which have converted into nonprofit foundations was broadened to include any other charges imposed by the Government as one of the incentives
for such conversion.These incentives necessarily included exemption from payment of building permit and related fees
as otherwise there would have been no incentives for educational foundations if the privilege were only limited to
exemption from taxation, which is already provided under the Constitution.
Petitioner further contends that this Court has consistently held in several cases that the primary purpose of
the exaction determines its nature. Thus, a charge of a fixed sum which bears no relation to the cost of inspection and
which is payable into the general revenue of the state is a tax rather than an exercise of the police power. The
standard set by law in the determination of the amount that may be imposed as license fees is such that is
commensurate with the cost of regulation, inspection and licensing. But in this case, the amount representing the
building permit and related fees and/or charges is such an exorbitant amount as to warrant a valid imposition; such
amount exceeds the probable cost of regulation. Even with the alleged criteria submitted by the respondents (e.g.,
character of occupancy or use of building/structure, cost of construction, floor area and height), and the construction
by petitioner of an 11-storey building, the costs of inspection will not amount to P645,906.84, presumably for the
salary of inspectors or employees, the expenses of transportation for inspection and the preparation and reproduction
of documents. Petitioner thus concludes that the disputed fees are substantially and mainly for purposes of revenue
rather than regulation, so that even these fees cannot be deemed charges mentioned in Sec. 8 of R.A. No. 6055, they
should properly be treated as tax from which petitioner is exempt.
In their Comment, respondents maintain that petitioner is not exempt from the payment of building permit and related
fees since the only exemptions provided in the National Building Code are public buildings and traditional indigenous
family dwellings. Inclusio unius est exclusio alterius. Because the law did not include petitioners buildings from those
structures exempt from the payment of building permit fee, it is therefore subject to the regulatory fees imposed under
the National Building Code.

Respondents assert that the CA correctly distinguished a building permit fee from those other charges mentioned in
Sec. 8 of R.A. No. 6055. As stated by petitioner itself, charges refer to pecuniary liability, as rents, and fees against
persons or property.Respondents point out that a building permit is classified under the term fee. A fee is generally
imposed to cover the cost of regulation as activity or privilege and is essentially derived from the exercise of police
power; on the other hand, impositions for services rendered by the local government units or for conveniences
furnished, are referred to as service charges.
Respondents also disagreed with petitioners contention that the fees imposed and collected are exorbitant and
exceeded the probable expenses of regulation. These fees are based on computations and assessments made by the
responsible officials of the City Engineers Office in accordance with the Schedule of Fees and criteria provided in
the National Building Code. The bases of assessment cited by petitioner (e.g. salary of employees, expenses of
transportation and preparation and reproduction of documents) refer to charges and fees on business and occupation
under Sec. 147 of the Local Government Code, which do not apply to building permit fees. The parameters set by
the National Building Code can be considered as complying with the reasonable cost of regulation in the assessment
and collection of building permit fees. Respondents likewise contend that the presumption of regularity in the
performance of official duty applies in this case. Petitioner should have presented evidence to prove its allegations that
the amounts collected are exorbitant or unreasonable.
For resolution are the following issues: (1) whether petitioner is exempt from the payment of building permit and
related fees imposed under the National Building Code; and (2) whether the parcel of land owned by petitioner which
has been assessed for real property tax is likewise exempt.
R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted to non-stock, nonprofit educational foundations. Section 8 of said law provides:
SECTION 8. The Foundation shall be exempt from the payment of all taxes, import duties,
assessments, and other charges imposed by the Government onall income derived from
or property, real or personal, used exclusively for the educational activities of the
Foundation.(Emphasis supplied.)
On February 19, 1977, Presidential Decree (P.D.) No. 1096 was issued adopting the National Building Code of the
Philippines. The said Code requires every person, firm or corporation, including any agency or instrumentality of the
government to obtain a building permit for any construction, alteration or repair of any building or structure.[19]Building
permit refers to a document issued by the Building Official x x x to an owner/applicant to proceed with the construction,
installation, addition, alteration, renovation, conversion, repair, moving, demolition or other work activity of a
specific project/building/structure or portions thereof after the accompanying principal plans, specifications and other
pertinent documents with the duly notarized application are found satisfactory and substantially conforming with the
National Building Code of the Philippines x x x and its Implementing Rules and Regulations (IRR). [20]Building permit fees
refers to the basic permit fee and other charges imposed under the National Building Code.
Exempted from the payment of building permit fees are: (1) public buildings and (2) traditional indigenous family
dwellings.[21]Not being expressly included in the enumeration of structures to which the building permit fees do not
apply, petitioners claim for exemption rests solely on its interpretation of the term other charges imposed by the
National Government in the tax exemption clause of R.A. No. 6055.
A charge is broadly defined as the price of, or rate for, something, while the word fee pertains to a charge fixed
by law for services of public officers or for use of a privilege under control of government. [22] As used in the Local
Government Code of 1991 (R.A. No. 7160), charges refers to pecuniary liability, as rents or fees against persons or
property, while fee means a charge fixed by law or ordinance for the regulation or inspection of a business or activity.
[23]

That charges in its ordinary meaning appears to be a general term which could cover a specific fee does not
support petitioners position that building permit fees are among those other charges from which it was expressly
exempted. Note that the other charges mentioned in Sec. 8 of R.A. No. 6055 is qualified by the words imposed by
the Government on all x x x property used exclusively for the educational activities of the foundation. Building permit
fees are not impositions on property but on the activity subject of government regulation. While it may be argued that
the fees relate to particular properties, i.e., buildings and structures, they are actually imposed on certain activities the
owner may conduct either to build such structures or to repair, alter, renovate or demolish the same. This is evident
from the following provisions of the National Building Code:
Section 102. Declaration of Policy
It is hereby declared to be the policy of the State to safeguard life, health, property, and public
welfare, consistent with theprinciples of sound environmental management and control; and tothis
end, make it the purpose of this Code to provide for allbuildings and structures, a framework of
minimum standards and requirements to regulate and control their location, site, design quality of
materials, construction, use, occupancy, and maintenance.
Section 103. Scope and Application
(a) The provisions of this Code shall apply to the design,location, sitting, construction, alteration,
repair,conversion, use, occupancy, maintenance, moving, demolitionof, and addition to public and
private buildings andstructures, except traditional indigenous family dwellingsas defined herein.
xxxx
Section 301. Building Permits
No person, firm or corporation, including any agency orinstrumentality of the government
shall erect, construct, alter, repair, move, convert or demolish any building or structure or causethe
same to be done without first obtaining a building permittherefor from the Building Official assigned in
the place where thesubject building is located or the building work is to be done. (Italics supplied.)
That a building permit fee is a regulatory imposition is highlighted by the fact that in processing an application for a
building permit, the Building Official shall see to it that the applicant satisfies and conforms with approved standard
requirements on zoning and land use, lines and grades, structural design, sanitary and sewerage, environmental health,
electrical and mechanical safety as well as with other rules and regulations implementing the National Building Code.
[24]
Thus, ancillary permits such as electrical permit, sanitary permit and zoning clearance must also be secured and the
corresponding fees paid before a building permit may be issued. And as can be gleaned from the implementing rules and
regulations of the National Building Code, clearances from various government authorities exercising and enforcing
regulatory functions affecting buildings/structures, like local government units, may be further required before a building
permit may be issued.[25]
Since building permit fees are not charges on property, they are not impositions from which petitioner is
exempt.
As to petitioners argument that the building permit fees collected by respondents are in reality taxes because
the primary purpose is to raise revenues for the local government unit, the same does not hold water.
A charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to
be a tax rather than an exercise of the police power.[26] In this case, the Secretary of Public Works and Highways who is

mandated to prescribe and fix the amount of fees and other charges that the Building Official shall collect in
connection with the performance of regulatory functions,[27] has promulgated and issued the Implementing Rules and
Regulations[28] which provide for the bases of assessment of such fees, as follows:
1.
Character of occupancy or use of building
2.
Cost of construction 10,000/sq.m (A,B,C,D,E,G,H,I), 8,000 (F), 6,000 (J)
3.
Floor area
4.
Height
Petitioner failed to demonstrate that the above bases of assessment were arbitrarily determined or unrelated
to the activity being regulated. Neither has petitioner adduced evidence to show that the rates of building permit fees
imposed and collected by the respondents were unreasonable or in excess of the cost of regulation and inspection.
In Chevron Philippines, Inc. v. Bases Conversion Development Authority,[29] this Court explained:
In distinguishing tax and regulation as a form of police power, the determining factor is the
purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be
deemed a tax even though the measure results in some form of regulation. On the other hand, if the
purpose is primarily to regulate, then it is deemed a regulation and an exercise of the
police power of the state, even though incidentally, revenue is generated. Thus, in Gerochi v.
Department of Energy, the Court stated:
The conservative and pivotal distinction between these two (2) powers rests in
the purpose for which the charge is made. If generation of revenue is the primary
purpose and regulation is merely incidental, the imposition is a tax; but if regulation is
the primary purpose, the fact that revenue is incidentally raised does not make
the imposition a tax.[30](Emphasis supplied.)
Concededly, in the case of building permit fees imposed by the National Government under the National
Building Code, revenue is incidentally generated for the benefit of local government units. Thus:
Section 208. Fees
Every Building Official shall keep a permanent record and accurate account of all fees and
other charges fixed and authorized by the Secretary to be collected and received under this Code.
Subject to existing budgetary, accounting and auditing rules and regulations, the Building
Official is hereby authorized to retain not more than twenty percent of his collection for the operating
expenses of his office.
The remaining eighty percent shall be deposited with the provincial, city or municipal treasurer
and shall accrue to the General Fund of the province, city or municipality concerned.
Petitioners reliance on Sec. 193 of the Local Government Code of 1991 is likewise misplaced. Said provision
states:
SECTION 193. Withdrawal of Tax Exemption Privileges. -- Unless otherwise provided in this
Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions, are hereby withdrawn upon the effectivity of this Code. (Emphasis
supplied.)
Considering that exemption from payment of regulatory fees was not among those incentives granted to petitioner
under R.A. No. 6055, there is no such incentive that is retained under the Local Government Code of
1991. Consequently, no reversible error was committed by the CA in ruling that petitioner is liable to pay the subject
building permit and related fees.
Now, on petitioners claim that it is exempted from the payment of real property tax assessed against its real property
presently occupied by informal settlers.
Section 28(3), Article VI of the 1987 Constitution provides:
xxxx
(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.
x x x x (Emphasis supplied.)
Section 234(b) of the Local Government Code of 1991 implements the foregoing constitutional provision by
declaring that -SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment
of the real property tax:
xxxx
(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;
x x x x (Emphasis supplied.)
In Lung Center of the Philippines v. Quezon City,[31] this Court held that only portions of the hospital actually, directly
and exclusively used for charitable purposes are exempt from real property taxes, while those portions leased to
private entities and individuals are not exempt from such taxes. We explained the condition for the tax exemption
privilege of charitable and educational institutions, as follows:
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 andEXCLUSIVELY 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. 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. The words dominant use or
principal use cannot be substituted for the words used exclusively without doing violence to the
Constitutions and the law. Solely is synonymous with exclusively.
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.
[32]
(Emphasis and underscoring supplied.)
Petitioner failed to discharge its burden to prove that its real property is actually, directly and exclusively used for
educational purposes. While there is no allegation or proof that petitioner leases the land to its present occupants, still
there is no compliance with the constitutional and statutory requirement that said real property is actually, directly and

exclusively used for educational purposes. The respondents correctly assessed the land for real property taxes for the
taxable period during which the land is not being devoted solely to petitioners educational activities. Accordingly, the
CA did not err in ruling that petitioner is likewise not entitled to a refund of the real property tax it paid under protest.
WHEREFORE, the petition is DENIED. The Decision dated July 28, 2009 and Resolution dated October 12, 2009 of the
Court of Appeals in CA-G.R. CV No. 90591 are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
NPC vs Quezon GR 171586 25 Jan 2010 (A-D-E used.)
RESOLUTION
The petitioner National Power Corporation (Napocor) filed the present motion for reconsideration[1] of the
Courts Decision of July 15, 2009, in which we denied Napocors claimed real property tax exemptions. For the resolution
of the motion, we deem it proper to provide first a background of the case.
BACKGROUND FACTS
The Province of Quezon assessed Mirant Pagbilao Corporation (Mirant) for unpaid real property taxes in the
amount of P1.5 Billion for the machineries located in its power plant in Pagbilao, Quezon. Napocor, which entered into
a Build-Operate-Transfer (BOT) Agreement (entitled Energy Conversion Agreement) with Mirant, was furnished a copy
of the tax assessment.
Napocor (nota bene, not Mirant) protested the assessment before the Local Board of Assessment Appeals
(LBAA), claiming entitlement to the tax exemptions provided under Section 234 of the Local Government Code (LGC),
which states:
Section 234. Exemptions from Real Property Tax. The following are exempted from payment of
the real property tax:
xxxx
(c) All machineries and equipment that are actually, directly, and exclusively used by
local water districts and government-owned or controlled corporations engaged in the
supply and distribution of water and/or generation and transmission of electric power;
xxxx
(e) Machinery and equipment used for pollution control and environmental
protection.
xxxx
Assuming that it cannot claim the above tax exemptions, Napocor argued that it is entitled to certain tax privileges,
namely:
a.
b.

the lower assessment level of 10% under Section 218(d) of the LGC for government-owned and
controlled corporations engaged in the generation and transmission of electric power, instead of the 80%
assessment level for commercial properties imposed in the assessment letter; and
an allowance for depreciation of the subject machineries under Section 225 of the LGC.

In the Courts Decision of July 15, 2009, we ruled that Napocor is not entitled to any of these claimed tax
exemptions and privileges on the basis primarily of the defective protest filed by the Napocor. We found that Napocor
did not file a valid protest against the realty tax assessment because it did not possess the requisite legal
standing. When a taxpayer fails to question the assessment before the LBAA, the assessment becomes final,
executory, and demandable, precluding the taxpayer from questioning the correctness of the assessment or from
invoking any defense that would reopen the question of its liability on the merits. [2]
Under Section 226 of the LGC,[3] any owner or person having legal interest in the property may appeal
an assessment for real property taxes to the LBAA. Since Section 250 adopts the same language in enumerating who
may pay the tax, we equated those who are liable to pay the tax to the same entities who may protest the tax
assessment. A person legally burdened with the obligation to pay for the tax imposed on the property has the legal
interest in the property and the personality to protest the tax assessment.
To prove that it had legal interest in the taxed machineries, Napocor relied on:.
1.
the stipulation in the BOT Agreement that authorized the transfer of ownership to Napocor after 25 years;
2.
its authority to control and supervise the construction and operation of the power plant; and
3.
its obligation to pay for all taxes that may be incurred, as provided in the BOT Agreement.
Napocor posited that these indicated that Mirant only possessed naked title to the machineries.
We denied the first argument by ruling that legal interest should be one that is actual and material,
direct and immediate, not simply contingent or expectant.[4] We disproved Napocors claim of control and
supervision under the second argument after reading the full terms of the BOT Agreement, which, contrary to
Napocors claims, granted Mirant substantial power in the control and supervision of the power plants construction and
operation.[5]
For the third argument, we relied on the Courts rulings in Baguio v. Busuego[6] and Lim v. Manila.[7] In these
cases, the Court essentially declared that contractual assumption of tax liability alone is insufficient to make one liable
for taxes. The contractual assumption of tax liability must be supplemented by an interest that the party assuming the
liability had on the property; the person from whom payment is sought must have also acquired the beneficial use of
the property taxed. In other words, he must have the use and possession of the property an element that was missing
in Napocors case.

We further stated that the tax liability must be a liability that arises from law, which the local government unit
can rightfully and successfully enforce, not the contractual liability that is enforceable only between the parties to the
contract. In the present case, the Province of Quezon is a third party to the BOT Agreement and could thus not exact
payment from Napocor without violating the principle of relativity of contracts. [8] Corollarily, for reasons of fairness, the
local government units cannot be compelled to recognize the protest of a tax assessment from Napocor, an entity
against whom it cannot enforce the tax liability.
At any rate, even if the Court were to brush aside the issue of legal interest to protest, Napocor could still not
successfully claim exemption under Section 234 (c) of the LGC because to be entitled to the exemption under that
provision, there must beactual, direct, and exclusive use of machineries. Napocor failed to satisfy these
requirements.
THE MOTION FOR RECONSIDERATION
Although Napocor insists that it is entitled to the tax exemptions and privileges claimed, the primary issue for
the Court to resolve, however, is to determine whether Napocor has sufficient legal interest to protest the tax
assessment because without the requisite interest, the tax assessment stands, and no claim of exemption or
privilege can prevail.
Section 226 of the LGC, as mentioned, limits the right to appeal the local assessors action to the owner or the
person having legal interest in the property. Napocor posits that it is the beneficial owner of the subject machineries,
with Mirant retaining merely a naked title to secure certain obligations. Thus, it argues that the BOT Agreement is a
mere financing agreement and is similar to the arrangement authorized under Article 1503 of the Civil Code, which
declares:
Art. 1503. When there is a contract of sale of specific goods, the seller may, by the terms of
the contract, reserve the right of possession or ownership in the goods until certain conditions have
been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery
of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his
agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the
goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer
on shipment of the goods, the seller's property in the goods shall be deemed to be only for
the purpose of securing performance by the buyer of his obligations under the contract.
xxxx
Pursuant to this arrangement, Mirants ownership over the subject machineries is merely a security interest, given only
for the purpose of ensuring the performance of Napocors obligations.
Napocor additionally contends that its contractual assumption liability (through the BOT Agreement) for all
taxes vests it with sufficient legal interest because it is actually, directly, and materially affected by the assessment.
While its motion for reconsideration was pending, Napocor filed a Motion to Refer the Case to the Court En
Banc considering that the issues raised have far-reaching consequences in the power industry, the countrys economy
and the daily lives of the Filipino people, and since it involves the application of real property tax provision of the LGC
against Napocor, an exempt government instrumentality.[9]
Also, the Philippine Independent Power Producers Association, Inc. (PIPPA) filed a Motion for Leave to
Intervene and aMotion for Reconsideration-in-Intervention. PIPPA is a non-stock corporation comprising of privatelyowned power generating companies which includes TeaM Energy Corporation (TeaM Energy), successor of
Mirant. PIPPA is claiming interest in the case since any decision here will affect the other members of PIPPA, all of
which have executed similar BOT agreements with Napocor.
THE COURTS RULING
At the outset, we resolve to deny the referral of the case to the Court en banc. We do not find the reasons raised by
Napocor meritorious enough to warrant the attention of the members of the Court en banc, as they are merely
reiterations of the arguments it raised in the petition for review on certiorari that it earlier filed with the Court.[10]
Who may appeal a real property tax assessment
Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a legal owner
who has legal title to the property.[11] Given this definition, Napocor is clearly not vested with the requisite interest to
protest the tax assessment, as it is not an entity having the legal title over the machineries. It has absolutely no solid
claim of ownership or even of use and possession of the machineries, as our July 15, 2009 Decision explained.
A BOT agreement is not a mere financing arrangement. In Napocor v. CBAA[12] a case strikingly similar to the
one before us, we discussed the nature of BOT agreements in the following manner:
The underlying concept behind a BOT agreement is defined and described in the BOT law as
follows:
Build-operate-and-transfer A contractual arrangement whereby the project
proponent undertakes the construction, including financing, of a given infrastructure
facility, and the operation and maintenance thereof. The project proponent operates
the facility over a fixed term during which it is allowed to charge facility users
appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or
as negotiated and incorporated in the contract to enable the project proponent to
recover its investment, and operating and maintenance expenses in the project. The
project proponent transfers the facility to the government agency or local
government unit concerned at the end of the fixed term which shall not exceed
fifty (50) years x x x x.

Under this concept, it is the project proponent who constructs the project at its own cost and
subsequently operates and manages it. The proponent secures the return on its investments from
those using the projects facilities through appropriate tolls, fees, rentals, and charges not exceeding
those proposed in its bid or as negotiated. At the end of the fixed term agreed upon, the project
proponent transfers the ownership of the facility to the government agency. Thus, the
government is able to put up projects and provide immediate services without the burden of the heavy
expenditures that a project start up requires.
A reading of the provisions of the parties BOT Agreement shows that it fully conforms to this
concept. By its express terms, BPPC has complete ownership both legal and beneficial of the
project, including the machineries and equipment used, subject only to the transfer of
these properties without cost to NAPOCOR after the lapse of the period agreed upon. As
agreed upon, BPPC provided the funds for the construction of the power plant, including the
machineries and equipment needed for power generation; thereafter, it actually operated and still
operates the power plant, uses its machineries and equipment, and receives payment for these
activities and the electricity generated under a defined compensation scheme. Notably, BPPC as
owner-user is responsible for any defect in the machineries and equipment.
xxxx
That some kind of financing arrangement is contemplated in the sense that the private sector
proponent shall initially shoulder the heavy cost of constructing the projects buildings and structures
and of purchasing the needed machineries and equipment is undeniable. The arrangement, however,
goes beyond the simple provision of funds, since the private sector proponent not only constructs and
buys the necessary assets to put up the project, but operates and manages it as well during an agreed
period that would allow it to recover its basic costs and earn profits. In other words, the private sector
proponent goes into business for itself, assuming risks and incurring costs for its account. If it receives
support from the government at all during the agreed period, these are pre-agreed items of assistance
geared to ensure that the BOT agreements objectives both for the project proponent and for the
government are achieved. In this sense, a BOT arrangement is sui generis and is different from
the usual financing arrangements where funds are advanced to a borrower who uses the funds to
establish a project that it owns, subject only to a collateral security arrangement to guard against the
nonpayment of the loan. It is different, too, from an arrangement where a government agency borrows
funds to put a project from a private sector-lender who is thereafter commissioned to run the project
for the government agency. In the latter case, the government agency is the owner of the project from
the beginning, and the lender-operator is merely its agent in running the project.
If the BOT Agreement under consideration departs at all from the concept of a BOT project as defined
by law, it is only in the way BPPCs cost recovery is achieved; instead of selling to facility users or to the
general public at large, the generated electricity is purchased by NAPOCOR which then resells it to
power distribution companies. This deviation, however, is dictated, more than anything else, by the
structure and usages of the power industry and does not change the BOT nature of the transaction
between the parties.
Consistent with the BOT concept and as implemented, BPPC the owner-manager-operator
of the project is the actual user of its machineries and equipment. BPPCs ownership and
use of the machineries and equipment are actual, direct, and immediate, while NAPOCORs
is contingent and, at this stage of the BOT Agreement, not sufficient to support its claim
for tax exemption.Thus, the CTA committed no reversible error in denying NAPOCORs claim for tax
exemption. [Emphasis supplied.]
Given the special nature of a BOT agreement as discussed in the cited case, we find Article 1503 inapplicable
to define the contract between Napocor and Mirant, as it refers only to ordinary contracts of sale. We thus declared
in Tatad v. Garcia[13] that under BOT agreements, the private corporations/investors are the owners of the
facility or machinery concerned. Apparently, even Napocor and Mirant recognize this principle; Article 2.12 of their
BOT Agreement provides that until the Transfer Date, [Mirant] shall, directly or indirectly, own the Power Station and all
the fixtures, fitting, machinery and equipment on the Site x x x.[Mirant] shall operate, manage, and maintain the
Power Station for the purpose of converting fuel of Napocor into electricity.
Moreover, if Napocor truly believed that it was the owner of the subject machineries, it should have complied
with Sections 202 and 206 of the LGC which obligates owners of real property to:
a.

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

b.

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

While a real property owners failure to comply with Sections 202 and 206 does not necessarily negate its tax obligation
nor invalidate its legitimate claim for tax exemption, Napocors omission to do so in this case can be construed as
contradictory to its claim of ownership of the subject machineries. That it assumed liability for the taxes that may be
imposed on the subject machineries similarly does not clothe it with legal title over the same. We do not believe
that the phrase person having legal interest in the property in Section 226 of the LGC can include an
entity that assumes another persons tax liability by contract.
A review of the provisions of the LGC on real property taxation shows that the phrase has been repeatedly
adopted and used to define an entity:
a.
in whose name the real property shall be listed, valued, and assessed; [16]
b.
who may be summoned by the local assessor to gather information on which to base the market value of
the real property;[17]
c.
who may protest the tax assessment before the LBAA[18] and may appeal the latters decision to the
CBAA;[19]

d.
e.
f.
g.
h.
i.

who may be liable for the idle land tax,[20] as well as who may be exempt from the same;[21]
who shall be notified of any proposed ordinance imposing a special levy, [22] as well as who may object the
proposed ordinance;[23]
who may pay the real property tax;[24]
who is entitled to be notified of the warrant of levy and against whom it may be enforced; [25]
who may stay the public auction upon payment of the delinquent tax, penalties and surcharge; [26] and
who may redeem the property after it was sold at the public auction for delinquent taxes. [27]

For the Court to consider an entity assuming another persons tax liability by contract as a person having legal interest
in the real property would extend to it the privileges and responsibilities enumerated above. The framers of the LGC
certainly did not contemplate that the listing, valuation, and assessment of real property can be made in the name of
such entity; nor did they intend to make the warrant of levy enforceable against it. Insofar as the provisions of the LGC
are concerned, this entity is a party foreign to the operation of real property tax laws and could not be clothed with
any legal interest over the property apart from its assumed liability for tax. The rights and obligations arising from the
BOT Agreement between Napocor and Mirant were of no legal interest to the tax collector
the Province of Quezon which is charged with the performance of independent duties under the LGC. [28]
Some authorities consider a person whose pecuniary interests is or may be adversely affected by the tax
assessment as one who has legal interest in the property (hence, possessed of the requisite standing to protest it),
citing Cooleys Law on Taxation.[29] The reference to this foreign material, however, is misplaced. The tax laws of the
United States deem it sufficient that a personspecuniary interests are affected by the tax assessment to consider him
as a person aggrieved and who may thus avail of the judicial or administrative remedies against it. As opposed to our
LGC, mere pecuniary interest is not sufficient; our law has required legal interest in the property taxed before any
administrative or judicial remedy can be availed. The right to appeal a tax assessment is a purely statutory right;
whether a person challenging an assessment bears such a relation to the real property being assessed as to entitle
him the right to appeal is determined by the applicable statute in this case, our own LGC, not US federal or state tax
laws.
In light of our ruling above, PIPPAs motion to intervene and motion for reconsideration-in-intervention is already
mooted. PIPPA as an organization of independent power producers is not an interested party insofar as this case is
concerned. Even if TeaM Energy, as Mirants successor, is included as one of its members, the motion to intervene and
motion for reconsideration-in-intervention can no longer be entertained, as it amounts to a protest against the tax
assessment that was filed without the complying with Section 252 of the LGC, a matter that we shall discuss
below. Most importantly, our Decision has not touched or affected at all the contractual stipulations between Napocor
and its BOT partners for the formers assumption of the tax liabilities of the latter.
Payment under protest is required before an appeal to
the LBAA can be made
Apart from Napocors failure to prove that it has sufficient legal interest, a further review of the records
revealed another basis for disregarding Napocors protest against the assessment.
The LBAA dismissed Napocors petition for exemption for its failure to comply with Section 252 of the
LGC[30] requiring payment of the assailed tax before any protest can be made. Although the CBAA ultimately dismissed
Napocors appeal for failure to meet the requirements for tax exemption, it agreed with Napocors position that the
protest contemplated in Section 252 (a) is applicable only when the taxpayer is questioning the reasonableness or
excessiveness of an assessment. It presupposes that the taxpayer is subject to the tax but is disputing the correctness
of the amount assessed. It does not apply where, as in this case, the legality of the assessment is put in issue on
account of the taxpayers claim that it is exempt from tax. The CTA en banc agreed with the CBAAs discussion, relying
mainly on the cases of Ty v. Trampe[31] and Olivarez v. Marquez.[32]
We disagree. The cases of Ty and Olivarez must be placed in their proper perspective.
The petitioner in Ty v. Trampe questioned before the trial court the increased real estate taxes imposed by and
being collected in Pasig City effective from the year 1994, premised on the legal question of whether or not
Presidential Decree No. 921 (PD 921) was repealed by the LGC. PD 921 required that the schedule of values of real
properties in the Metropolitan Manila area shall be prepared jointly by the city assessors in the districts created
therein; while Section 212 of the LGC stated that the schedule shall be prepared by the provincial, city or municipal
assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in
their respective local government units for enactment by ordinance of the Sanggunian concerned.The private
respondents assailed Tys act of filing a prohibition petition before the trial court contending that Ty should have availed
first the administrative remedies provided in the LGC, particularly Sections 252 (on payment under protest before the
local treasurer) and 226 (on appeals to the LBAA).
The Court, through former Chief Justice Artemio Panganiban, declared that Ty correctly filed a petition for
prohibition before the trial court against the assailed act of the city assessor and treasurer. The administrative protest
proceedings provided in Section 252 and 226 will not apply. The protest contemplated under Section 252 is
required where there is a question as to thereasonableness or correctness of the amount
assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real property tax assessment, he is
required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. Ty
however was questioning the very authority and power of the assessor, acting solely and independently, to impose the
assessment and of the treasurer to collect the tax. These were not questions merely of amounts of the increase in the
tax but attacks on the very validity of any increase. Moreover, Ty was raising a legal question that is properly
cognizable by the trial court; no issues of fact were involved. In enumerating the power of the LBAA, Section 229
declares that the proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts x x
x. Appeals to the LBAA (under Section 226) are therefore fruitful only where questions of fact are involved.
Olivarez v. Marquez, on the other hand, involved a petition for certiorari, mandamus, and prohibition
questioning the assessment and levy made by the City of Paraaque. Olivarez was seeking the annulment of his realty
tax delinquency assessment.Marquez assailed Olivarez failure to first exhaust administrative remedies, particularly the
requirement of payment under protest.Olivarez replied that his petition was filed to question the assessors authority to

assess and collect realty taxes and therefore, as held in Ty v. Trampe, the exhaustion of administrative remedies was
not required. The Court however did not agree with Olivarezs argument. It found that there was nothing in his petition
that supported his claim regarding the assessors alleged lack of authority.What Olivarez raised were the following
grounds: (1) some of the taxes being collected have already prescribed and may no longer be collected as provided in
Section 194 of the Local Government Code of 1991; (2) some properties have been doubly taxed/assessed; (3) some
properties being taxed are no longer existent; (4) some properties are exempt from taxation as they are being
used exclusively for educational purposes; and (5) some errors are made in the assessment and collection of taxes due
on petitioners properties, and that respondents committed grave abuse of discretion in making the improper,
excessive and unlawful the collection of taxes against the petitioner. The Olivarez petition filed before the trial
court primarily involved the correctness of the assessments, which is a question of fact that is not allowed in a
petition for certiorari, prohibition, and mandamus. Hence, we declared that the petition should have been brought, at
the very first instance, to the LBAA, not the trial court.
Like Olivarez, Napocor, by claiming exemption from realty taxation, is simply raising a question of the
correctness of the assessment. A claim for tax exemption, whether full or partial, does not question the
authority of local assessor to assess real property tax. This may be inferred from Section 206 which states that:
SEC. 206. Proof of Exemption of Real Property from Taxation. - Every person by or for whom
real property is declared, who shall claim tax exemption for such property under this Title shall file with
the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of real
property sufficient documentary evidence in support of such claim including corporate charters, title of
ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage deeds,
and similar documents. If the required evidence is not submitted within the period herein
prescribed, the property shall be listed as taxable in the assessment roll. However, if the
property shall be proven to be tax exempt, the same shall be dropped from the assessment
roll. [Emphasis provided]
By providing that real property not declared and proved as tax-exempt shall be included in the assessment roll, the
above-quoted provision implies that the local assessor has the authority to assess the property for realty taxes, and
any subsequent claim for exemption shall be allowed only when sufficient proof has been adduced supporting the
claim. Since Napocor was simply questioning the correctness of the assessment, it should have first complied with
Section 252, particularly the requirement of payment under protest. Napocors failure to prove that this requirement
has been complied with thus renders its administrative protest under Section 226 of the LGC without any effect. No
protest shall be entertained unless the taxpayer first pays the tax.
It was an ill-advised move for Napocor to directly file an appeal with the LBAA under Section 226 without first paying
the tax as required under Section 252. Sections 252 and 226 provide successive administrative remedies to a taxpayer
who questions the correctness of an assessment. Section 226, in declaring that any owner or person having legal
interest in the property who is not satisfied with the action of the provincial, city, or municipal assessor in the
assessment of his property may x x x appeal to the Board of Assessment Appeals x x x, should be read in conjunction
with Section 252 (d), which states that in the event that the protest is denied x x x, the taxpayer may avail of the
remedies as provided for in Chapter 3, Title II, Book II of the LGC [Chapter 3 refers to Assessment Appeals, which
includes Sections 226 to 231]. The action referred to in Section 226 (in relation to a protest of real property tax
assessment) thus refers to the local assessors act of denying the protest filed pursuant to Section 252. Without the
action of the local assessor, the appellate authority of the LBAA cannot be invoked. Napocors action before the LBAA
was thus prematurely filed.
For the foregoing reasons, we DENY the petitioners motion for reconsideration.
SO ORDERED.