taxassignedcasesforrecit.docx

8/14/2019 taxassignedcasesforrecit.docx

1/21

1

G.R. No. 186242 December 23, 2009

GOVERNMENT SERVICE INSURANCE SYSTEM,Petitioner,vs.CITY TREASURER and CITY ASSESSOR of the CITY OF

MANILA,Respondents.

D E C I S I O N

VELASCO, JR., J.:

The Case

For review under Rule 45 of the Rules of Court on purequestion of law are the November 15, 2007 Decision

1and

January 7, 2009 Order2of the Regional Trial Court (RTC),Branch 49 in Manila, in Civil Case No. 02-104827, a suit tonullify the assessment of real property taxes on certainproperties belonging to petitioner Government Service

Insurance System (GSIS).

The Facts

Petitioner GSIS owns or used to own two (2) parcels ofland, one located at Katigbak 25th St., Bonifacio Drive,Manila (Katigbak property), and the other, at Concepcioncor. Arroceros Sts., also in Manila (Concepcion-Arrocerosproperty). Title to the Concepcion-Arroceros property wastransferred to this Court in 2005 pursuant to ProclamationNo. 8353dated April 27, 2005. Both the GSIS and theMetropolitan Trial Court (MeTC) of Manila occupy theConcepcion-Arroceros property, while the Katigbakproperty was under lease.

The controversy started when the City Treasurer of Manilaaddressed a letter

4dated September 13, 2002 to GSIS

President and General Manager Winston F. Garciainforming him of the unpaid real property taxes due on theaforementioned properties for years 1992 to 2002, brokendown as follows: (a) PhP 54,826,599.37 for the Katigbakproperty; and (b) PhP 48,498,917.01 for the Concepcion-Arroceros property. The letter warned of the inclusion ofthe subject properties in the scheduled October 30, 2002public auction of all delinquent properties in Manila shouldthe unpaid taxes remain unsettled before that date.

On September 16, 2002, the City Treasurer of Manilaissued separate Notices of Realty Tax Delinquency

5for the

subject properties, with the usual warning of seizureand/or sale. On October 8, 2002, GSIS, through its legalcounsel, wrote back emphasizing the GSIS exemption

from all kinds of taxes, including realty taxes, underRepublic Act No. (RA) 8291.

6

Two days after, GSIS filed a petition for certiorari andprohibition7with prayer for a restraining and injunctiverelief before the Manila RTC. In it, GSIS prayed for thenullification of the assessments thus made and thatrespondents City of Manila officials be permanentlyenjoined from proceedings against GSIS property. GSIS

would later amend its petition8to include the fact that: (a)the Katigbak property, covered by TCT Nos. 117685 and119465 in the name of GSIS, has, since November 1991,been leased to and occupied by the Manila HotelCorporation (MHC), which has contractually bound itself topay any realty taxes that may be imposed on the subjectproperty; and (b) the Concepcion-Arroceros property ispartly occupied by GSIS and partly occupied by the MeTCof 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 herebyrendered, DISMISSING the petition for lack of merit, anddeclaring the assessment conducted by the respondentsCity of Manila on the subject real properties of GSIS asvalid pursuant to law.

SO ORDERED.9

GSIS sought but was denied reconsideration per theassailed Order dated January 7, 2009.

Thus, the instant petition for review on pure question oflaw.

The Issues

1. Whether petitioner is exempt from thepayment of real property taxes from 1992 to2002;

2. Whether petitioner is exempt from thepayment of real property taxes on the propertyit leased to a taxable entity; and

3. Whether petitioners real properties are

exempt from warrants of levy and from tax salefor non-payment of real property taxes.

10

The Courts Ruling

The issues raised may be formulated in the followingwise:first, whether GSIS under its charter is exempt from

real property taxation; second, assuming that it is soexempt, whether GSIS is liable for real property taxes forits properties leased to a taxable entity; and third, whetherthe 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 presentcharter, RA 8291 or the GSIS Act of 1997, exempt theagency and its properties from all forms of taxes andassessments, inclusive of realty tax. Excepting,respondents counter that GSIS may not successfully resistthe citys notices and warrants of levy on the basis of itsexemption under RA 8291, real property taxation beinggoverned by RA 7160 or the Local Government Codeof

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) 18611was enactedabolishing the then pension systems under Act No. 1638,as amended, and establishing the GSIS to manage thepension system, life and retirement insurance, and otherbenefits of all government employees. Under what may beconsidered as its first charter, the GSIS was set up as anon-stock corporation managed by a board of trustees.Notably, Section 26 of CA 186 provided exemption fromany legal process and liens but only for insurance policiesand their proceeds, thus:

Section 26. Exemption from legal process and liens. Nopolicy of life insurance issued under this Act, or theproceeds thereof, when paid to any member thereunder,nor any other benefit granted under this Act, shall beliable to attachment, garnishment, or other process, or tobe seized, taken, appropriated, or applied by any legal orequitable process or operation of law to pay any debt or

liability of such member, or his beneficiary, or any otherperson who may have a right thereunder, either before or
http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt1http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt1http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt1http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt2http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt2http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt2http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt3http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt3http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt3http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt4http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt4http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt4http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt5http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt5http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt5http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt6http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt6http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt6http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt7http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt7http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt7http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt8http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt8http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt8http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt9http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt9http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt9http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt10http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt10http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt10http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt11http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt11http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt11http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt11http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt10http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt9http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt8http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt7http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt6http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt5http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt4http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt3http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt2http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt1


2/21

2

after payment; nor shall the proceeds thereof, when notmade payable to a named beneficiary, constitute a part ofthe estate of the member for payment of his debt. x x x

In 1977, PD 1146,12otherwise known as the RevisedGovernment Service Insurance Act of 1977, was issued,providing for an expanded insurance system forgovernment employees. Sec. 33 of PD 1146 provided for anew tax treatment for GSIS, thus:

Section 33. Exemption from Tax, Legal Process and Lien.Itis hereby declared to be the policy of the State that theactuarial solvency of the funds of the System shall bepreserved and maintained at all times and that thecontribution rates necessary to sustain the benefits underthis Act shall be kept as low as possible in order not toburden the members of the System and/or theiremployees. Taxes imposed on the System tend to impairthe actuarial solvency of its funds and increase thecontribution rate necessary to sustain the benefits under

this Act. Accordingly, notwithstanding any laws to thecontrary, the System, its assets, revenues including allaccruals thereto, and benefits paid, shall be exempt from

all taxes, assessments, fees, charges or duties of all kinds.These exemptions shall continue unless expressly andspecifically revoked and any assessment against theSystem as of the approval of this Act are herebyconsidered paid.

The benefits granted under this Act shall not be subject,among others, to attachment, garnishment, levy or otherprocesses. This, however, shall not apply to obligations ofthe member to the System, or to the employer, or whenthe 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 corporatestructure of GSIS, as established under CA 186, remainedunchanged. Sec. 34

13of PD 1146 pertinently provides that

the GSIS, as created by CA 186, shall implement theprovisions 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) oftheir power to tax, the scope and limitations thereof,14and

the exemptions from taxations. Of particular pertinence isthe general provision on withdrawal of tax exemptionprivileges in Sec. 193 of the LGC, and the special provisionon withdrawal of exemption from payment of realproperty taxes in the last paragraph of the succeeding Sec.234, thus:

SEC. 193. Withdrawal of Tax Exemption Privileges.Unlessotherwise provided in this Code, tax exemptions orincentives granted to, or presently enjoyed by all persons,whether natural or juridical, including government-ownedor -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 Exceptas provided herein, any exemption from payment of realproperty tax previously granted to, or presently enjoyedby, all persons, whether natural or juridical, including allgovernment-owned or controlled corporation are herebywithdrawn upon the effectivity of this Code.

From the foregoing provisos, there can be no seriousdoubt about the Congress intention to withdraw, subject

to certain defined exceptions, tax exemptions grantedprior to the passage of RA 7160. The question that easily

comes to mind then is whether or not the full taxexemption heretofore granted to GSIS under PD 1146,

particular insofar as realty tax is concerned, was deemedwithdrawn. We answer in the affirmative.

In Mactan Cebu International Airport Authority v.Marcos,[15]the Court held that the express withdrawal bythe LGC of previously granted exemptions from realtytaxes applied to instrumentalities and government-ownedand controlled corporations (GOCCs), such as the Mactan-Cebu International Airport Authority. In City of Davao v.RTC, Branch XII, Davao City,16the Court, citing MactanCebu International Airport Authority, declared the GSISliable for real property taxes for the years 1992 to 1994(contested real estate tax assessment therein), its previousexemption under PD 1146 being considered withdrawnwith the enactment of the LGC in 1991.

Significantly, the Court, in City of Davao, stated theobservation that the GSIS tax-exempt status withdrawn in1992 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 ofthe GSIS charter, i.e., PD 1146, it was further amended andexpanded by RA 8291 which took effect on June 24,1997.18Under it, the full tax exemption privilege of GSISwas restored, the operative provision being Sec. 39thereof, a virtual replication of the earlier quoted Sec. 33of PD 1146. Sec. 39 of RA 8291 reads:

SEC. 39. Exemption from Tax, Legal Process and Lien.It ishereby declared to be the policy of the State that theactuarial solvency of the funds of the GSIS shall be

preserved and maintained at all times and thatcontribution rates necessary to sustain the benefits underthis Act shall be kept as low as possible in order not toburden the members of the GSIS and their employers.Taxes imposed on the GSIS tend to impair the actuarialsolvency of its funds and increase the contribution ratenecessary to sustain the benefits of this Act. Accordingly,notwithstanding, any laws to the contrary, the GSIS, itsassets, revenues including all accruals thereto, and

benefits paid, shall be exempt from all taxes,

assessments, fees, charges or duties of all kinds. Theseexemptions 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 ofthis provision are hereby deemed repealed, supersededand rendered ineffective and without legal force andeffect.

Moreover, these exemptions shall not be affected bysubsequent 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 guarantyof the national government to secure such solvency or

liability.

The funds and/or the properties referred to herein aswell 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 bodiesincluding Commission on Audit(COA) disallowances and from all financial obligations ofthe members, including his pecuniary accountabilityarising from or caused or occasioned by his exercise orperformance of his official functions or duties, or incurredrelative to or in connection with his position or workexcept when his monetary liability, contractual orotherwise, is in favor of the GSIS. (Emphasis ours.)
http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt12http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt12http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt12http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt13http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt13http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt13http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt14http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt14http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt14http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#_ftnhttp://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#_ftnhttp://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#_ftnhttp://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt16http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt16http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt16http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt17http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt17http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt17http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt18http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt18http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt18http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt18http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt17http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt16http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#_ftnhttp://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt14http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt13http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt12


3/21

3

The foregoing exempting proviso, couched as it were in anencompassing manner, brooks no other construction butthat GSIS is exempt from all forms of taxes. While notdeterminative of this case, it is to be noted thatprominently added in GSIS present charter is a paragraph

precluding any implied repeal of the tax-exempt clause soas to protect the solvency of GSIS funds. Moreover, an

express repeal by a subsequent law would not suffice toaffect the full exemption benefits granted the GSIS, unlessthe following conditionalities are met: (1) The repealingclause must expressly, specifically, and categoricallyrevoke or repeal Sec. 39; and (2) a provision is enacted tosubstitute or replace the exemption referred to herein asan essential factor to maintain or protect the solvency ofthe fund. These restrictions for a future express repeal,notwithstanding, do not make the proviso an irrepealablelaw, for such restrictions do not impinge or limit the carteblanchelegislative authority of the legislature to so amendit. The restrictions merely enhance other provisos in thelaw ensuring the solvency of the GSIS fund.1avvphi1

Given the foregoing perspectives, the following may beassumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyedtax exemption from real estate taxes, among other taxburdens, until January 1, 1992 when the LGC took effectand withdrew exemptions from payment of real estatetaxes privileges granted under PD 1146; (2) RA 8291restored in 1997 the tax exempt status of GSIS byreenacting under its Sec. 39 what was once Sec. 33 of P.D.1146;

19and (3) If any real estate tax is due to the City of

Manila, it is, following City of Davao, only for the interimperiod, 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 thereenactment of the full tax exemption clause under Sec.39 of RA 8291 in 1997, theponenciain City ofDavaoappeared to have failed to take stock of and fullyappreciate the all-embracing condoning proviso in the verysame Sec. 39 which, for all intents and purposes,considered as paid "any assessment against the GSIS as ofthe approval of this Act." If only to stress the point, wehereby reproduce the pertinent portion of said Sec. 39:

SEC. 39. Exemption from Tax, Legal Process and Lien.x xx Taxes imposed on the GSIS tend to impair the actuarialsolvency of its funds and increase the contribution ratenecessary to sustain the benefits of this Act. Accordingly,notwithstanding, any laws to the contrary, the GSIS, itsassets, revenues including all accruals thereto, andbenefits paid,shall be exempt from all taxes,assessments, fees, charges or duties of all kinds. Theseexemptions shall continue unless expressly andspecifically revokedand 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 ofthis provision are hereby deemed repealed, supersededand 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,

20a case likewise involving real estate tax

assessments by a Metro Manila city on the real propertiesadministered by MIAA, argues for the non-tax liability ofGSIS for real estate taxes. There, the Court held that MIAAdoes not qualify as a GOCC, not having been organizedeither as a stock corporation, its capital not being dividedinto shares, or as a non-stock corporation because it hasno members. MIAA is rather aninstrumentalityof the

National Government and, hence, outside the purview of

local taxation by force of Sec. 133 of the LGC providing incontext that "unless otherwise provided," localgovernments cannot tax national governmentinstrumentalities. And as the Court pronounced in ManilaInternational Airport Authority, the airport lands andbuildings MIAA administers belong to the Republic of thePhilippines, which makes MIAA a mere trustee of such

assets. No less than the Administrative Code of 1987recognizes a scenario where a piece of land owned by theRepublic is titled in the name of a department, agency, orinstrumentality. The following provision of the said Codesuggests as much:

Sec. 48. Official Authorized to Convey Real Property.Whenever real property of the Government is authorizedby law to be conveyed, the deed of conveyance shall beexecuted in behalf of the government by the following: x xx x

(2) For property belonging to the Republic of the

Philippines, but titled in the name of x x x any corporateagency or instrumentality, by the executive head of theagency or instrumentality.

21

While perhaps not of governing sway in all fours inasmuchas what were involved in Manila International AirportAuthority, e.g., airfields and runways, are properties of thepublic dominion and, hence, outside the commerce ofman, the rationale underpinning the disposition in thatcase is squarely applicable to GSIS, both MIAA and GSISbeing similarly situated. First, while created under CA 186as a non-stock corporation, a status that has remainedunchanged even when it operated under PD 1146 and RA8291, GSIS is not, in the context of the afore quoted Sec.

193 of the LGC, a GOCC following the teaching of ManilaInternational Airport Authority, for, like MIAA, GSIS capital

is not divided into unit shares. Also, GSIS has no membersto speak of. And by members, the reference is to thosewho, under Sec. 87 of the Corporation Code, make up thenon-stock corporation, and not to the compulsorymembers of the system who are government employees.Its management is entrusted to a Board of Trustees whosemembers are appointed by the President.

Second, the subject properties under GSISs name arelikewise owned by the Republic. The GSIS is but a meretrustee of the subject properties which have either beenceded to it by the Government or acquired for theenhancement of the system. This particular propertyarrangement is clearly shown by the fact that the disposalor conveyance of said subject properties are either doneby or through the authority of the President of thePhilippines. Specifically, in the case of the Concepcion-Arroceros property, it was transferred, conveyed, andceded to this Court on April 27, 2005 through apresidential proclamation, Proclamation No. 835.Pertinently, the text of the proclamation announces thatthe Concepcion-Arroceros property was earlier ceded tothe GSIS on October 13, 1954 pursuant to ProclamationNo. 78 for office purposes and had since been titled toGSIS which constructed an office building thereon. Thus,

the transfer on April 27, 2005 of the Concepcion-Arrocerosproperty to this Court by the President throughProclamation No. 835. This illustrates the nature of thegovernment ownership of the subject GSIS properties, asindubitably shown in the last clause of PresidentialProclamation No. 835:

WHEREAS, by virtue of the Public Land Act(Commonwealth Act No. 141, as amended), PresidentialDecree No. 1455, and the Administrative Code of 1987,the President is authorized to transfer any governmentproperty that is no longer needed by the agency to which

it belongs to other branches or agencies of the

government. (Emphasis ours.)
http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt19http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt19http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt19http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt20http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt20http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt20http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt21http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt21http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt21http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt21http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt20http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt19


4/21

4

Third, GSIS manages the funds for the life insurance,retirement, survivorship, and disability benefits of allgovernment employees and their beneficiaries. Thisundertaking, to be sure, constitutes an essential and vitalfunction which the government, through one of itsagencies or instrumentalities, ought to perform if socialsecurity services to civil service employees are to be

delivered with reasonable dispatch. It is no wonder,therefore, that the Republic guarantees the fulfillment ofthe obligations of the GSIS to its members (governmentemployees and their beneficiaries) when and as theybecome due. This guarantee was first formalized underSec. 2422of CA 186, then Sec. 823of PD 1146, and finally inSec. 8

24of RA 8291.

Second Core Issue: Beneficial Use Doctrine Applicable

The foregoing notwithstanding, the leased Katigbakproperty 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, exemptsfrom real estate taxes real property owned by theRepublic, unless the beneficial use of the property is, forconsideration, transferred to a taxable person.

SEC. 234. Exemptions from Real Property Tax.Thefollowing are exempted from payment of the real propertytax:

(a) Real property owned by the Republic of the Philippinesor any of its political subdivisions except whenthebeneficial use thereof has been granted, for

consideration or otherwise, to a taxable person.

This exemption, however, must be read in relation withSec. 133(o) of the LGC, which prohibits LGUs fromimposing taxes or fees of any kind on the nationalgovernment, its agencies, and instrumentalities:

SEC. 133. Common Limitations on the Taxing Powers ofLocal Government Units.Unless otherwise providedherein, the exercise of the taxing powers of provinces,cities, municipalities, and barangays shall not extend tothe levy of the following:

x x x x

(o) Taxes, fees or charges of any kinds on the NationalGovernment, its agencies and instrumentalities, and localgovernment units. (Emphasis supplied.)

Thus read together, the provisions allow the Republic togrant the beneficial use of its property to an agency orinstrumentality of the national government. Such grantdoes not necessarily result in the loss of the taxexemption. The tax exemption the property of theRepublic or its instrumentality carries ceases only if, asstated in Sec. 234(a) of the LGC of 1991, "beneficial usethereof has been granted, for a consideration or

otherwise, to a taxable person." GSIS, as a governmentinstrumentality, is not a taxable juridical person under Sec.133(o) of the LGC. GSIS, however, lost in a sense thatstatus with respect to the Katigbak property when itcontracted its beneficial use to MHC, doubtless a taxableperson. Thus, the real estate tax assessment of PhP54,826,599.37 covering 1992 to 2002 over the subjectKatigbak property is valid insofar as said tax delinquency isconcerned 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 ofthe Katigbak property, or MHC, as the lessee thereof, is

liable to pay the accrued real estate tax, need not detainus long. MHC ought to pay.

As we declared in Testate Estate of Concordia T. Lim, "theunpaid tax attaches to the property and is chargeableagainst the taxable person who had actual or beneficialuse and possession of it regardless of whether or not he isthe owner." Of the same tenor is the Courtsholding in thesubsequent Manila Electric Company v. Barlis

25and later

in Republic v. City of Kidapawan.26Actual use refers to thepurpose for which the property is principally orpredominantly utilized by the person in possessionthereof.27

Being in possession and having actual use of the Katigbakproperty since November 1991, MHC is liable for the realtytaxes assessed over the Katigbak property from 1992 to2002.

The foregoing is not all. As it were,MHC has obligated

itself under the GSIS-MHC Contract of Lease to shouldersuch assessment. Stipulation l8 of the contract pertinentlyreads:

18. By law, the Lessor, [GSIS], is exempt from taxes,assessments and levies. Should there be any change in thelaw or the interpretation thereof or any othercircumstances which would subject the Leased Property toany kind of tax, assessment or levy which would constitutea charge against the Lessor or create a lien against theLeased Property, the Lessee agrees and obligates itself toshoulder and pay such tax, assessment or levy as it

becomes due.28(Emphasis ours.)

As a matter of law and contract, therefore, MHC standsliable to pay the realty taxes due on the Katigbak property.Considering, however, that MHC has not been impleadedin the instant case, the remedy of the City of Manila is toserve the realty tax assessment covering the subjectKatigbak property to MHC and to pursue other availableremedies in case of nonpayment, for said property cannotbe levied upon as shall be explained below.

Third Core Issue: GSIS Properties Exempt from Levy

In light of the foregoing disquisition, the issue of thepropriety of the threatened levy of subject properties by

the City of Manila to answer for the demanded realty taxdeficiency is now moot and academic. A valid tax levypresupposes a corresponding tax liability. Nonetheless, itwill not be remiss to note that it is without doubt that thesubject GSIS properties are exempt from any attachment,garnishment, execution, levy, or other legal processes. Thisis the clear import of the third paragraph of Sec. 39, RA8291, which we quote anew for clarity:

SEC. 39. Exemption from Tax, Legal Process and Lien.x xx.

x x x x

The funds and/or the properties referred to herein aswell 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 bodiesincluding Commission on Audit(COA) disallowances and from all financial obligations ofthe members, including his pecuniary accountabilityarising from or caused or occasioned by his exercise orperformance of his official functions or duties, or incurredrelative to or in connection with his position or workexcept when his monetary liability, contractual orotherwise, is in favor of the GSIS. (Emphasis ours.)
http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt22http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt22http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt22http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt23http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt23http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt23http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt24http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt24http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt25http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt25http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt25http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt26http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt26http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt26http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt27http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt27http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt27http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt28http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt28http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt28http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt28http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt27http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt26http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt25http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt24http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt23http://lawphil.net/judjuris/juri2009/dec2009/gr_186242_2009.html#fnt22


5/21

5

The Court would not be indulging in pure speculativeexercise to say that the underlying legislative intent behindthe above exempting proviso cannot be other than toisolate GSIS funds and properties from legal processes thatwill either impair the solvency of its fund or hamper itsoperation that would ultimately require an increase in thecontribution rate necessary to sustain the benefits of the

system. Throughout GSIS life under three differentcharters, the need to ensure the solvency of GSIS fund hasalways been a legislative concern, a concern expressed inthe tax-exempting provisions.

Thus, even granting arguendothat GSIS liability for realtytaxes attached from 1992, when RA 7160 effectively liftedits tax exemption under PD 1146, to 1996, when RA 8291restored the tax incentive, the levy on the subjectproperties to answer for the assessed realty taxdelinquencies cannot still be sustained. The simple reason:The governing law, RA 8291, in force at the time of thelevy prohibits it. And in the final analysis, the proscriptionagainst the levy extends to the leased Katigbak property,the beneficial use doctrine, notwithstanding.

Summary

In sum, the Court finds that GSIS enjoys under its charterfull tax exemption. Moreover, as an instrumentality of thenational government, it is itself not liable to pay real estatetaxes assessed by the City of Manila against its Katigbakand Concepcion-Arroceros properties. Following the"beneficial use" rule, however, accrued real property taxesare due from the Katigbak property, leased as it is to ataxable entity. But the corresponding liability for thepayment thereof devolves on the taxable beneficial user.

The Katigbak property cannot in any event be subject of apublic auction sale, notwithstanding its realty taxdelinquency. This means that the City of Manila has tosatisfy its tax claim by serving the accrued realty taxassessment on MHC, as the taxable beneficial user of theKatigbak property and, in case of nonpayment, throughmeans other than the sale at public auction of the leasedproperty.

WHEREFORE, the instant petition is hereby GRANTED.TheNovember 15, 2007 Decision and January 7, 2009 Order ofthe Regional Trial Court, Branch 49, Manilaare REVERSEDand SET ASIDE. Accordingly, the realproperty tax assessments issued by the City of Manila tothe Government Service Insurance System on the subjectproperties are declared VOID, except that the realproperty tax assessment pertaining to the leased Katigbakproperty shall be valid if served on the Manila HotelCorporation, as lessee which has actual and beneficial usethereof. The City of Manila is permanently restrained fromlevying on or selling at public auction the subjectproperties to satisfy the payment of the real property taxdelinquency.

No pronouncement as to costs.

SO ORDERED.

PRESBITERO J. VELASCO, JR.Associate Justice

[G.R. No. 185023 : August 24, 2011]

CITY OF PASIG, REPRESENTED BY THE CITY TREASURER

AND THE CITY ASSESSOR, VS. PETITIONER, REPUBLIC OF

THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL

COMMISSION ON GOOD GOVERNMENT, RESPONDENT.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition[1]

for review on certiorari under Rule 45 ofthe Rules of Court. The petition challenges the 17 October2008 Decision[2]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) ownedtwo parcels of land, with a total area of 18.4891 hectares,situated in Pasig City. The properties are covered byTransfer Certificate of Title (TCT) Nos. 337158 and 469702and Tax Declaration Nos. E-030-01185 and E-030-01186under the name of MPLDC. Portionsof the properties areleased to different business establishments.

In 1986, the registered owner of MPLDC, Jose Y. Campos(Campos), voluntarily surrendered MPLDC to the Republicof the Philippines.

On 30 September 2002, the Pasig City Assessor's Officesent MPLDC two notices of tax delinquency for its failureto pay real property tax on the properties for the period1979 to 2001 totaling P256,858,555.86. In a letter dated29 October 2002, Independent Realty Corporation (IRC)President Ernesto R. Jalandoni (Jalandoni) and TreasurerRosario Razon informed the Pasig City Treasurer that thetax for the period 1979 to 1986 had been paid, and thatthe properties were exempt from tax beginning 1987.

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

On 20 October 2005, the Pasig City Assessor's Office sentMPLDC a notice of final demand for payment of tax for theperiod 1987 to 2005 totaling P389,027,814.48. On thesame day, MPLDC paid P2,000,000 partial payment underprotest.

On 9 November 2005, MPLDC received two warrants oflevy on the properties. On 1 December 2005, respondent

Republic of the Philippines, through the PresidentialCommission on Good Government (PCGG), filed with theRTC a petition for prohibition with prayer for issuance of atemporary restraining order or writ of preliminaryinjunction to enjoin petitioner Pasig City from auctioningthe properties and from collecting real property tax.

On 2 December 2005, the Pasig City Treasurer offered theproperties for sale at public auction. Since there was noother bidder, Pasig City bought the properties and wasissued the corresponding certificates of sale.

On 19 December 2005, PCGG filed with the RTC anamended petition for certiorari, prohibition and

mandamus against Pasig City. PCGG prayed that: (1) theassessments for the payment of real property tax and


6/21

6

penalty be declared void; (2) the warrants of levy on theproperties be declared void; (3) the public auction bedeclared void; (4) the issuance of certif icates of sale bedeclared void; (5) Pasig City be prohibited from assessingMPLDC real property tax and penalty; (6) Pasig City beprohibited from collecting real property tax and penaltyfrom 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 taxand penalty from the actual occupants of the properties.

The RTC's Ruling

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

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

However, before dwelling on the merits of the main issue,certain matters need to be addressed by the Court, to wit:

1. Does the Court have jurisdiction over the instantpetition?

2. Who owns the so-called "payanig" propertiesthat were subjected to payment of real propertytaxes by respondent?

The Court maintains that it is not precluded from assuming

jurisdiction over the instant amended petition whichinvolves the legality of the assailed actions by respondentin assessing and collecting real property tax on theproperties owned by the Republic of the Philippines. It is ajurisprudential doctrine that the issue is purely legal whenthe authority of the respondent to assess and collect realproperty taxes on the subject properties is beingquestioned (Ty vs. Trampe, 250 SCRA 500).

x x x x

In the instant proceeding, there is no dispute that theproperties are surrendered ill-gotten wealth of formerPresident Marcos. As such, the same assumes [sic] a public

character and thus belongs [sic] to the Republic of thePhilippines. x x x

x x x x

Hence, upon the voluntary surrender by Jose Y. Campos,the controlling owner of Mid-Pasig and IndependentRealty Corporation, of the "payanig" properties to PCGG, aclear admission that these properties were part of the ill-gotten wealth of former President Marcos was alreadyevident. As such, there was already constructivereconveyance to the State, which immediately placedthese reconveyed properties under the control andstewardship of the PCGG as representative of the Republic

of the Philippines. Under such special circumstance, thesevoluntary surrendered properties had already belonged tothe State.

x x x x

Premised on the foregoing, the "payanig" properties, beingpart of the recovered ill-gotten wealth of PresidentMarcos, and therefore are owned by the State itself, areexempt from payment of real property taxes. It is onlywhen the beneficial use of said properties has beengranted to a taxable person that the same may be subjectto imposition of real property tax.

Furthermore, in real estate taxation, the unpaid tax

attaches to the property and is chargeable against thetaxable person who had actual or beneficial use andpossession of it regardless of whether or not he is theowner (Testate Estate of Concordia T. Lim vs. City ofManila, 182 SCRA 482).

In the instant case, the taxable persons being referred to

are the lessees occupying and/or doing business thereinand have beneficial use over portions within the "payanig"properties.

x x x x

Consequently, there can be no iota of doubt thatrespondent City of Pasig abused its discretion bycommitting the acts sought to be annulled herein despiteknowledge of the fact that ownership over the subjectproperties belong to petitioner. But what is more appallingin the instant action is that such abuse was capriciouslycommitted by respondent City of Pasig against thesovereign State itself from where that atxing local

government unit derives its very existence. The springcannot rise higher than its source.

x x x x

In sum, the acts of respondent in assessing real propertytaxes on properties owned and controlled by the Republicof the Philippines, in collecting taxes from Mid-Pasig in lieuof the actual occupants or beneficial users of certainportions thereof, and in auctioning said properties in favorof respondent, followed by the corresponding certificateof sale, are all unequivocally tainted with grave abuse ofdiscretion amounting to lack or excess of jurisdiction.

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

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

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

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

3. the subsequent public auction sale of subjectproperties held on December 2, 2005 followedby the issuance of the corresponding Certificateof Sale;

FURTHER, the City of Pasig is hereby PROHIBITED fromfurther:

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

2. Collecting said taxes and penalty charges fromthe State;

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

FURTHER, the City of Pasig is hereby COMMANDED:

1. To return or effect the refund of the amount ofTwo Million Pesos (Php 2,000,000.00) paid underprotest by Mid-Pasig Land DevelopmentCorporation on October 20, 2005, or credit thesame amount to any outstanding tax liability thatsaid corporation may have with the City of Pasig;and

2. To assess and collect from the actual occupantsor beneficial users of the subject properties, and

not from the State, whatever real property taxes


7/21

7

and penalties that may be due on the respectiveareas 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 setaside the RTC's 6 November 2006 Decision. The Court ofAppeals held:

We find nothing in PCGG's petition that supports its claimregarding Pasig City's alleged grave abuse of discretion. Itis undisputed that the subject parcels of land areregistered 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 thesubject parcels of land, the sequestrationper se, did not

operate to convert Mid-Pasig and its properties to publicproperty. "The power of the PCGG to sequester propertyclaimed 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 takingundue 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 courtdeclaration the "PCGG cannot perform acts of strictownership of [sic] sequestered property. It is a mereconservator." In view thereof and the fact that Mid-Pasigand its properties have not been validly declared by theSandiganbayan as "ill-gotten" wealth, the same are not yetpublic properties. The PCGG even admitted that thetransfer certificates of title covering the subject parcels ofland in the name of Mid-Pasig have not been cancelleddue to an order of the Sandiganbayan. The trial court also

found that the subject parcels of land are the subject oflitigation between Ortigas and Company LimitedPartnership and the PCGG in Civil Case No. 0093 pendingbefore the Sandiganbayan. These facts clearly show thatthe Sandiganbayan has not validly declared yet that thesubject parcels of land are "ill-gotten" wealth. If so, theycannot be claimed yet as properties of the State: theyremain properties of a private entity. Thus, Pasig Citythrough its City Assessor and City Treasurer did not actwith grave abuse of discretion when it issued real propertytax assessment on the subject parcels of land.

Even admitting that the subject parcels of land are alreadyowned by the State, we still see no grave abuse of

discretion on the part of Pasig City when it issued thechallenged tax assessment, for it is well settled that thetest of exemptions from taxation is the use of the propertyfor purposes mentioned in the Constitution. The owner ofthe property does not matter. Even if he is not a tax-exempt entity, as long as the property is being used forreligious, charitable or educational purposes, the propertyis exempt from tax. Conversely, even if the governmentowns the property, if the beneficial use thereof has beengranted, for consideration or otherwise, to a taxableperson, the property is subject to tax. Here, the PCGGadmitted that portions of the subject properties wereleased 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 until2005. Therefore, considering that portions of the subject

parcels of land are used for commercial purposes, the dutyimposed by law to owners and administrators of realproperty to declare the same for tax purposes and the factthat the tax declarations over the subject parcels of landare in the name of Mid-Pasig, again, Pasig City did not actwith grave abuse of discretion when it issued thechallenged tax assessment.

The foregoing snowball to one conclusion -- the allegationsin PCGG's petition imputing grave abuse of discretion onthe part of Pasig City, acting through the City Assessor andCity Treasurer, in the assessment and collection of thetaxes were made in order to justify the filing of thepetition for certiorari, prohibition and mandamus with thetrial court.

The extraordinary remedies of certiorari, prohibition andmandamus may be resorted to only when there is no otherplain, available, speedy and adequate remedy in thecourse of law. Where administrative remedies areavailable, petitions for the issuance of these peremptory

writs do not lie in order to give the administrative bodythe opportunity to decide the matter by itself correctlyand to prevent unnecessary and premature resort tocourts.

Republic Act No. 7160 or the Local Government Code of1991, clearly sets forth the administrative remediesavailable to a taxpayer or real property owner who is notsatisfied with the assessment or reasonableness of the realproperty tax sought to be collected. The Supreme Courtoutlined 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 disputemay then be taken to the Court of Tax Appeals by filing averified petition for review under Rule 42 of the RevisedRules of Court; to the Court of tax Appeals en banc; andfinally to the Supreme Court via a petition for review oncertiorari pursuant to Rule 45 of the Revised Rules ofCourt.

We are not convinced with PCGG's stance that theirrecourse of filing the petition for certiorari, prohibitionand mandamus before the trial court is proper as they arequestioning not merely the correctness of the taxassessment but the actions of Pasig City, through its CityAssessor and City Treasurer, which were done in grave

abuse of discretion amounting to lack or excess ofjurisdiction.


8/21

8

The well-established rule is that allegations in thecomplaint and the character of the relief sought determinethe nature of an action. A perusal of the petition beforethe trial court plainly shows that what is actually beingassailed is the correctness of the assessments made by theCity Assessor of Pasig City on the subject parcels of land.

PCGG claims, among others, that: 1) the subject parcels ofland are exempt from real property taxation as they arepublic property; 2) even if the subject parcels of land aresubject to tax, as the beneficial use thereof was granted toprivate persons and entities, only the portion thereof usedfor commerce is subject to tax and the users thereof arethe ones liable to pay the tax; and 3) the right of Pasig Cityto collect the real property taxes pertaining to 1987 to1998 has already prescribed. These claims essentiallyinvolve questions of fact, which are improper in a petitionfor certiorari, prohibition and mandamus; hence, thepetition should have been brought, at the very firstinstance, to the Local Board Assessment Appeals, whichhas 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 administrativelypursued to the exclusion of ordinary courts whosedecisions would be void for lack of jurisdiction.

Granting that the assessor's authority and the legality ofthe assessment are indeed an issue, the proper remedy isa suit for the refund of the real property tax after payingthe same under protest. It must be pointed out that inorder for the trial court to resolve the instant petition, theissues of the correctness of the tax assessment andcollection must also necessarily be dealt with; hence, apetition for certiorari, prohibition and mandamus is not

the proper remedy. x x x [T]he resolution of the issuesraised in the instant case involve examination anddetermination of relevant and material facts, i.e. factsrelating to the ownership of the subject parcels of land,the portion of the subject parcel of land used forcommercial purposes and the identities of the lessees andthe users thereof. Since resolution of factual issues is notallowed in a petition for certiorari, prohibition andmandamus, the trial court is precluded from entertainingthe petition.

Finally, Section 252 of the R.A. No. 7160 requires paymentunder protest in assailing real property tax assessment.Even an appeal shall not suspend the collection of the atxassessed without prejudice to a later adjustment pendingthe outcome of the appeal. This principle is consistent withthe time-honored principle that taxes are the lifeblood ofthe nation. But the PCGG failed to pay the tax assessmentprior to questioning it before the trial court; hence, thetrial court should have dismissed PCGG's petition in linewith the Supreme Court pronouncement that a trial courthas no jurisdiction to entertain a similar petition absentpayment under protest.

In conclusion and taking all the foregoing into account, wehold that the trial court had no jurisdiction to takecognizance and decide PCGG petition for certiorari,prohibition and mandamus; the trial court should havedismissed the petition.[6]

PCGG filed a motion for reconsideration. In its 17 October2008 Decision, the Court of Appeals reversed itself. TheCourt of Appeals held:

At the outset, although as a rule, administrative remediesmust first be exhausted before ersort to judicial action canprosper, there is a well-settled exception in cases wherethe controversy does not involve questions of fact but onlyof law. We find that the Republic has shown a cause forthe application of the foregoing exception. Essentially, theRepublic has raised a pure question of law -- whether or

not the City of Pasig has the power to impose realproperty tax on the subject properties, which are owned

by the State. It bears stressing that the Republic did notraise any question concerning the amount of the realproperty tax or the determination thereof. Thus, having noplain, speedy, and adequate remedy in law, the Republiccorrectly resorted to judicial action via the petition forcertiorari, prohibition, and mandamus, to seek redress.

We are convinced that the subject properties were notsequestered by the government so as to amount to adeprivation of property without due process of law;instead, they were voluntarily surrendered to the State byCampos, a self-admitted crony of the then PresidentMarcos. The relinquishment of the subject properties tothe State as ill-gotten wealth of Marcos, as recognized bythe Supreme Court, makes a judicial declaration that thesame were ill-gotten unnecessary. By virtue of saidrelinquishment, the State correctly exercised dominionover the subject properties. Indubitably, the subjectproperties, being ill-gotten wealth, belong to the State. x xx By its nature, ill-gotten wealth is owned by the State. Asa 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 ingranting PCGG's petition for certiorari, prohibition andmandamus and in ordering Pasig City to assess and collectreal property tax from the lessees of the properties.

The Court's Ruling

The petition is partly meritorious.

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

x x x Jose Y. Campos, "a confessed crony of formerPresident Ferdinand E. Marcos," voluntarily surrendered orturned over to the PCGG the properties, assets andcorporations he held in trust for the deposed President.Among the corporations he surrendered were theIndependent Realty Corporation and the Mid-Pasig Land

Development Corporation.

[9]

In Republic of the Philippines v. Sandiganbayan,[10]theCourt stated:

The antecedent facts are stated by the Solicitor General asfollows:

x x x x

"3. Sometime in the later part of August 1987, defendantJose D. Campos, Jr., having been served with summons onAugust 5, 1987, filed with the respondent Court anundated `Manifestation and Motion to Dismiss Complaint

with Respect to Jose D. Campos' praying that he beremoved as party defendant from the complaint on thegrounds that he had `voluntarily surrendered or turnedover any share in his name on [sic] any of the corporationsreferred to, aside from disclaiming any interest, ownershipor right thereon to the Government of the Republic of thePhilippines' and that he was `entitled to the immunitygranted by the Presidential Commission on GoodGovernment pursuant to Executive Order No. 14, underthe Commission's Resolution dated May 28, 1986 to Mr.Jose Y. Campos and his family' he `being a member of theimmediate family of Jose Y. Campos.'

x x x x

In the instant case, the PCGG issued a resolution dated


9/21

9

May 28, 1986, granting immunity from both civil andcriminal 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 theproperties and assets disclosed and declared by him to

belong to deposed President Ferdinand E. Marcos to theGovernment of the Republic of the Philippines, his full,complete and truthful disclosures, and his commitment topay a sum of money as determined by the PhilippineGovernment, this Commission has decided and agreed:

x x x x

Undoubtedly, this resolution embodies a compromiseagreement between the PCGG on one hand and Jose Y.Campos on the other. Hence, in exchange for thevoluntary surrender of the ill-gotten properties acquiredby the then President Ferdinand E. Marcos and his familywhich were in Jose Campos' control, the latter and his

family were given full immunity in both civil and criminalprosecutions. x x x

x x x x

By virtue of the PCGG's May 28, 1986 resolution, JoseCampos, Jr. was given full immunity from both civil andcriminal prosecutions in exchange for the "full cooperationof Mr. Jose Y. Campos to this Commission, his voluntarysurrender of the properties and assets disclosed anddeclared by him to belong to deposed President FerdinandE. Marcos to the Government of the Republic of thePhilippines, his full, complete and truthful disclosures, andhis commitment to pay a sum of money as determined bythe Philippine Government." In addition, Campos, Jr. hadalready waived and surrendered to the Republic hisregistered equity interest in the Marcos/Romualdezcorporations involved in the civil case.[11]

Even as the Republic of the Philippines is now the owner ofthe properties in view of the voluntary surrender ofMPLDC by its former registered owner, Campos, to theState, such transfer does not prevent a third party with abetter right from claiming such properties in the properforum. In the meantime, the Republic of the Philippines isthe presumptive owner of the properties for taxationpurposes.

Section 234(a) of Republic Act No. 7160 states thatproperties owned by the Republic of the Philippines areexempt from real property tax "except when thebeneficial use thereof has been granted, for

consideration or otherwise, to a taxable person." Thus,the portions of the properties not leased to taxableentities are exempt from real estate tax while the portionsof the properties leased to taxable entities are subject toreal estate tax. The law imposes the liability to pay realestate tax on the Republic of the Philippines for theportions of the properties leased to taxable entities. It is,of course, assumed that the Republic of the Philippinespasses on the real estate tax as part of the rent to the

lessees.

In Philippine Fisheries Development Authority v. CentralBoard of Assessment Appeals,

[12]the Court held:

In the 2007 case of Philippine Fisheries DevelopmentAuthority v. Court of Appeals,

[ ]the Court resolved the issue

of whether the PFDA is a government-owned or controlledcorporation or an instrumentality of the nationalgovernment. In that case, the City of Iloilo assessed realproperty 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 publicauction to satisfy the tax delinquency.

x x x x

This ruling was affirmed by the Court in a subsequentPFDA case involving the Navotas Fishing Port Complex,which is also managed and operated by the PFDA. Inconsonance with the previous ruling, the Court held in thesubsequent 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 Treasurerof the City of Manila,[14]the Court held:

x x x The tax exemption the property of the Republic orits 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, isnot a taxable juridical person under Sec. 133(o) of theLGC. GSIS, however, lost in a sense that status withrespect 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 ofAppeals,

[16]the Court held:

x x x Section 234(a) of the Local Government Code statesthat real property owned by the Republic loses its taxexemption only if the "beneficial use thereof has been

granted, for consideration or otherwise, to a taxable

person."MIAA, as a government instrumentality, is not ataxable person under Section 133(o) of the localGovernment Code. Thus, even if we assume that theRepublic has granted to MIAA the beneficial use of theAirport Lands and Buildings, such fact does not make thesereal properties subject to real estate tax.

However, portions of the Airport Lands and Buildings thatMIAA 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 issubject 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](Emphasissupplied)

In Lung Center of the Philippines v. Quezon City,[18]theCourt held:

x x x While portions of the hospital are used for thetreatment of patients and the dispensation of medicalservices to them, whether paying or non-paying, otherportions thereof are being leased to private individuals for

their clinics and a canteen. Further, a portion of the land isbeing leased to a private individual for her business


10/21

10

enterprise under the business name "Elliptical Orchids andGarden Center." Indeed, the petitioner's evidence showsthat it collected P1,136,483.45 as rentals in 1991 andP1,679,999.28 for 1992 from the said lessees.

Accordingly, we hold that the portions of the land leasedto private entities as well as those parts of the hospital

leased to private individuals are not exempt from suchtaxes. On the other hand, the portions of the landoccupied by the hospital and portions of the hospital usedfor its patients, whether paying or non-paying, are exemptfrom real property taxes.

[19](Emphasis supplied)

Article 420 of the Civil Code classifies as properties ofpublic dominion those that are "intended for public use,such as roads, canals, rivers, torrents, ports and bridgesconstructed by the State, banks, shores, roadsteads" andthose that "are intended for some public service or for thedevelopment of the national wealth." Properties of publicdominion are not only exempt from real estate tax, theyare exempt from sale at public auction. In Heirs of Mario

Malabanan v. Republic,[20]the Court held that, "It is clearthat property of public dominion, which generally includesproperty belonging to the State, cannot be x x x subject ofthe commerce of man."[21]

In Philippine Fisheries Development Authority v. Court ofAppeals,

[22]the Court held:

x x x [T]he real property tax assessments issued by the Cityof Iloilo should be upheld only with respect to the portionsleased to private persons. In case the Authority fails topay the real property taxes due thereon, said portions

cannot be sold at public auction to satisfy the tax

delinquency. In Chavez v. Public Estates Authorityit washeld that reclaimed lands are lands of the publicdominion 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 ofthe Civil Code, provides:

"Article 420. The following things are property of publicdominion:

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

2. Those which belong to the State, without beingfor public use, and are intended for some publicservice or for the development of the nationalwealth."

The Iloilo fishing port which was constructed by the State

for public use and/or public service falls within the term

"port" in the aforecited provision. Being a property of

public dominion the same cannot be subject to execution

or foreclosure sale. In like manner, the reclaimed land onwhich the IFPC is built cannot be the object of a private orpublic sale without Congressionalauthorization.

[23](Emphasis supplied)

In Manila International Airport Authority,[24]

the Courtheld:

x x x [T]he Airport Lands and Buildings of MIAA areproperties devoted to public use and thus are propertiesof public dominion. Properties of public dominion areowned by the State or the Republic. Article 420 of the CivilCode provides:

Art. 420. The following things are property of publicdominion:

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

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

The term "ports x x x constructed by the Sate" includesairports and seaports. The Airport Lands and Buildings ofMIAA are intended for public use, and at the very leastintended for public service. Whether intended for publicuse or public service, the Airport Lands and Buildings areproperties of public dominion. As properties of publicdominion, the the Airport lands and Buildings are ownedby the Republic and thus exempt from real estate tax

under Section 234(a) of the Local Government Code.

x x x x

Under Article 420 of the Civil Code, the Airport Lands andBuildings of MIAA, being devoted to public use, areproperties of public dominion and thus owned by the Stateor the Republic of the Philippines. Article 420 specificallymentions "ports x x x constructed by the State," whichincludes public airports and seaports, as properties ofpublic dominion and owned by the Republic. As propertiesof public dominion owned by the Republic, there is nodoubt whatsoever that the Airport Lands and Buildings areexpressly exempt from real estate tax under Section

234(a) of the local Government Code. This Court has alsorepeatedly ruled that properties of public dominion are

not subject to execution or foreclosure sale.[25]

(Emphasissupplied)

In the present case, the parcels of land are not propertiesof public dominion because they are not "intended forpublic use, such as roads, canals, rivers, torrents, ports andbridges constructed by the State, banks, shores,roadsteads." Neither are they "intended for some publicservice or for the development of the national wealth."MPLDC leases portions of the properties to differentbusiness establishments. Thus, the portions of theproperties leased to taxable entities are not only subjectto real estate tax, they can also be sold at public auction tosatisfy the tax delinquency.

In sum, only those portions of the properties leased totaxable entities are subject to real estate tax for the periodof such leases. Pasig City must, therefore, issue torespondent new real property tax assessments coveringthe portions of the properties leased to taxable entities. Ifthe Republic of the Philippines fails to pay the realproperty tax on the portions of the properties leased totaxable entities, then such portions may be sold at publicauction to satisfy the tax delinquency.

WHEREFORE, the petition is PARTIALLY GRANTED. TheCourt SETS ASIDEthe 17 October 2008 Decision of theCourt of Appeals in CA-G.R. SP No. 97498 anddeclares VOIDthe 30 September 2002 real property taxassessment issued by Pasig City on the subject propertiesof Mid-Pasig Land Development Corporation, the 8November 2005 warrants of levy on the properties, andthe 2 December 2005 auction sale. Pasig Cityis DIRECTEDto issue to respondent new real property taxassessments covering only the portions of the propertiesactually leased to taxable entities, and only for the periodof such leases. Interests and penalties on such new realproperty tax assessment shall accrue only after receipt ofsuch new assessment by respondent.


11/21

11

G.R. No. 191109 July 18, 2012

REPUBLIC OF THE PHILIPPINES, represented by the

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

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 ofthe 1997 Rules of Civil Procedure, on pure questions oflaw, assailing the January 8, 2010 Order1of the RegionalTrial Court, Branch 195, Parafiaque City (RTC), which ruledthat petitioner Philippine Reclamation Authority (PRA) is agovernment-owned and controlled corporation (GOCC), ataxable entity, and, therefore, . not exempt from paymentof real property taxes. The pertinent portion of the saidorder reads:

In view of the finding of this court that petitioner is notexempt from payment of real property taxes, respondentParaaque City Treasurer Liberato M. Carabeo did not actxxx without or in excess of jurisdiction, or with grave abuseof discretion amounting to lack or in excess of jurisdictionin issuing the warrants of levy on the subject properties.

WHEREFORE, the instant petition is dismissed. The Motionfor Leave to File and Admit Attached SupplementalPetition is denied and the supplemental petition attachedthereto is not admitted.

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

1977 to provide a coordinated, economical and efficientreclamation of lands, and the administration andoperation of lands belonging to, managed and/or operatedby, the government with the object of maximizing theirutilization and hastening their development consistentwith public interest.

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

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

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

On February 19, 2003, then Paraaque City TreasurerLiberato M. Carabeo (Carabeo) issued Warrants of Levy onPRAs reclaimed properties (Central Business Park and

Barangay San Dionisio) located in Paraaque City based onthe assessment for delinquent real property taxes made bythen Paraaque City Assessor Soledad Medina Cue for taxyears 2001 and 2002.

On March 26, 2003, PRA filed a petition for prohibitionwith prayer for temporary restraining order (TRO) and/or

writ of preliminary injunction against Carabeo before theRTC.

On April 3, 2003, after due hearing, the RTC issued anorder denying PRAs petition for the issuance of a

temporary restraining order.

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

On April 25, 2003, the RTC denied PRAs prayer for the

issuance of a writ of preliminary injunction for being mootand academic considering that the auction sale of thesubject properties on April 7, 2003 had already beenconsummated.

On August 3, 2009, after an exchange of several pleadingsand the failure of both parties to arrive at a compromiseagreement, PRA filed a Motion for Leave to File and AdmitAttached Supplemental Petition which sought to declareas null and void the assessment for real property taxes, thelevy based on the said assessment, the public auction saleconducted on April 7, 2003, and the Certificates of Saleissued pursuant to the auction sale.

On January 8, 2010, the RTC rendered its decisiondismissing PRAs petition. In ruling that PRA was notexempt from payment of real property taxes, the RTCreasoned out that it was a GOCC under Section 3 of P.D.

No. 1084. It was organized as a stock corporation becauseit had an authorized capital stock divided into no par valueshares. In fact, PRA admitted its corporate personality andthat said properties were registered in its name as shownby the certificates of title. Therefore, as a GOCC, local taxexemption is withdrawn by virtue of Section 193 ofRepublic Act (R.A.) No. 7160 Local Government Code (LGC)which was the prevailing law in 2001 and 2002 withrespect to real property taxation. The RTC also ruled thatthe tax exemption claimed by PRA under E.O. No. 654 hadalready been expressly repealed by R.A. No. 7160 and thatPRA failed to comply with the procedural requirements inSection 206 thereof.

Not in conformity, PRA filed this petition for certiorariassailing the January 8, 2010 RTC Order based on thefollowing GROUNDS

I

THE TRIAL COURT GRAVELY ERRED IN FINDING THATPETITIONER IS LIABLE TO PAY REAL PROPERTY TAX ON THESUBJECT RECLAIMED LANDS CONSIDERING

THAT PETITIONER IS AN INCORPORATEDINSTRUMENTALITY OF THE NATIONAL GOVERNMENT ANDIS, THEREFORE, EXEMPT FROM PAYMENT OF REAL

PROPERTY TAX UNDER SECTIONS 234(A) AND 133(O) OFREPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODEVIS--VIS MANILA INTERNATIONAL AIRPORT AUTHORITYV. COURT OF APPEALS.

II

THE TRIAL COURT GRAVELY ERRED IN FAILING TOCONSIDER THAT RECLAIMED LANDS ARE PART OF THEPUBLIC DOMAIN AND, HENCE, EXEMPT FROM REALPROPERTY TAX.

PRA asserts that it is not a GOCC under Section 2(13) of

the Introductory Provisions of the Administrative Code.Neither is it a GOCC under Section 16, Article XII of the
http://www.lawphil.net/judjuris/juri2012/jul2012/gr_191109_2012.html#fnt1http://www.lawphil.net/judjuris/juri2012/jul2012/gr_191109_2012.html#fnt1http://www.lawphil.net/judjuris/juri2012/jul2012/gr_191109_2012.html#fnt1http://www.lawphil.net/judjuris/juri2012/jul2012/gr_191109_2012.html#fnt1


12/21

12

1987 Constitution because it is not required to meet thetest of economic viability. Instead, PRA is a governmentinstrumentality vested with corporate powers andperforming an essential public service pursuant to Section2(10) of the Introductory Provisions of the AdministrativeCode. Although it has a capital stock divided into shares, itis not authorized to distribute dividends and allotment of

surplus and profits to its stockholders. Therefore, it maynot be classified as a stock corporation because it lacks thesecond requisite of a stock corporation which is thedistribution of dividends and allotment of surplus andprofits to the stockholders.

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

Moreover, PRA points out that it was not created tocompete in the market place as there was no competingreclamation company operated by the private sector. Also,while PRA is vested with corporate powers under P.D. No.1084, such circumstance does not make it a corporationbut merely an incorporated instrumentality and that themere fact that an incorporated instrumentality of theNational Government holds title to real property does notmake said instrumentality a GOCC. Section 48, Chapter 12,Book I of the Administrative Code of 1987 recognizes ascenario where a piece of land owned by the Republic istitled in the name of a department, agency orinstrumentality.

Thus, PRA insists that, as an incorporated instrumentalityof the National Government, it is exempt from payment ofreal property tax except when the beneficial use of thereal property is granted to a taxable person. PRA claimsthat based on Section 133(o) of the LGC, localgovernments cannot tax the national government whichdelegate to local governments the power to tax.

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

On the other hand, the City of Paraaque (respondent)argues that PRA since its creation consistently representeditself to be a GOCC. PRAs very own charter (P.D. No. 1084)declared it to be a GOCC and that it has entered intoseveral thousands of contracts where it represented itselfto be a GOCC. In fact, PRA admitted in its original and

amended petitions and pre-trial brief filed with the RTC ofParaaque City that it was a GOCC.

Respondent further argues that PRA is a stock corporationwith an authorized capital stock divided into 3 million nopar value shares, out of which 2 million shares have beensubscribed and fully paid up. Section 193 of the LGC of1991 has withdrawn tax exemption privileges granted toor presently enjoyed by all persons, whether natural orjuridical, including GOCCs.

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

THE COURTS RULING

The Court finds merit in the petition.

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

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

(13) Government-owned or controlled corporation refersto any agency organized as a stock or non-stockcorporation, vested with functions relating to public needswhether governmental or proprietary in nature, andowned by the Government directly or through itsinstrumentalities either wholly, or, where applicable as inthe case of stock corporations, to the extent of at leastfifty-one

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

On the other hand, Section 2(10) of the Introductory

Provisions of the Administrative Code defines agovernment "instrumentality" as follows:

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

(10) Instrumentality refers to any agency of the NationalGovernment, not integrated within the departmentframework, vested with special functions or jurisdiction bylaw, endowed with some if not all corporate powers,administering special funds, and enjoying operationalautonomy, usually through a charter. x x x

From the above definitions, it is clear that a GOCC must be"organized as a stock or non-stock corporation" while aninstrumentality is vested by law with corporate powers.Likewise, when the law makes a governmentinstrumentality operationally autonomous, theinstrumentality remains part of the National Governmentmachinery although not integrated with the departmentframework.

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

powers.

Many government instrumentalities are vested withcorporate powers but they do not become stock or non-stock corporations, which is a necessary condition beforean agency or instrumentality is deemed a GOCC. Examplesare the Mactan International Airport Authority, thePhilippine Ports Authority, the University of thePhilippines, and Bangko Sentral ng Pilipinas. All thesegovernment instrumentalities exercise corporate powersbut they are not organi

taxassignedcasesforrecit.docx

Documents

Transcript of taxassignedcasesforrecit.docx