G.R. No. L-50466 May 31, 1982 CALTEX (PHILIPPINES) INC., petitioner, vs.

CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents. AQUINO, J.: This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located on leased land. The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor described the said equipment and machinery in this manner: A gasoline service station is a piece of lot where a building or shed is erected, a water tank if there is any is placed in one corner of the lot, car hoists are placed in an adjacent shed, an air compressor is attached in the wall of the shed or at the concrete wall fence. The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more or less, a few meters away from the shed. This is done to prevent conflagration because gasoline and other combustible oil are very inflammable. This underground tank is connected with a steel pipe to the gasoline pump and the gasoline pump is commonly placed or constructed under the shed. The footing of the pump is a cement pad and this cement pad is imbedded in the pavement under the shed, and evidence that the gasoline underground tank is attached and connected to the shed or building through the pipe to the pump and the pump is attached and affixed to the cement pad and pavement covered by the roof of the building or shed. The building or shed, the elevated water tank, the car hoist under a separate shed, the air compressor, the underground gasoline tank, neon lights signboard, concrete fence and pavement and the lot where they are all placed or erected, all of them used in the pursuance of the gasoline service station business formed the entire gasoline servicestation. As to whether the subject properties are attached and affixed to the tenement, it is clear they are, for the tenement we consider in this particular case are (is) the pavement covering the entire lot which was constructed by the owner of the gasoline station and the improvement which holds all the properties under question, they are attached and affixed to the pavement and to the improvement. The pavement covering the entire lot of the gasoline service station, as well as all the improvements, machines, equipments and apparatus are allowed by Caltex (Philippines) Inc. ... The underground gasoline tank is attached to the shed by the steel pipe to the pump, so with the water tank it is connected also by a steel pipe to the pavement, then to the electric motor which electric motor is placed under the shed. So to say that the gasoline pumps, water pumps and underground tanks are outside of the service station, and to consider only the building as the service station is grossly erroneous. (pp. 58-60, Rollo). The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt. It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in good condition as when received, ordinary wear and tear excepted. The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed therein. Caltex retains the ownership thereof during the term of the lease. The city assessor of Pasay City characterized the said items of gas station equipment and machinery as

taxable realty. The realty tax on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are personalty. The assessor appealed to the Central Board of Assessment Appeals. The Board, which was composed of Secretary of Finance Cesar Virata as chairman, Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of Local Government and Community Development Jose Roo, held in its decision of June 3, 1977 that the said machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974, and that the definitions of real property and personal property in articles 415 and 416 of the Civil Code are not applicable to this case. The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) in its resolution of January 12, 1978, denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on April 2, 1979. On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a declaration that t he said machines and equipment are personal property not subject to realty tax (p. 16, Rollo). The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate jurisdiction over this case is not correct. When Republic act No. 1125 created the Tax Court in 1954, there was as yet no Central Board of Assessment Appeals. Section 7(3) of that law in providing that the Tax Court had jurisdiction to review by appeal decisions of provincial or city boards of assessment appeals had in mind the local boards of assessment appeals but not the Central Board of Assessment Appeals which under the Real Property Tax Code has appellate jurisdiction over decisions of the said local boards of assessment appeals and is, therefore, in the same category as the Tax Court. Section 36 of the Real Property Tax Code provides that the decision of the Central Board of Assessment Appeals shall become final and executory after the lapse of fifteen days from the receipt of its decision by the appellant. Within that fifteen-day period, a petition for reconsideration may be filed. The Code does not provide for the review of the Board's decision by this Court. Consequently, the only remedy available for seeking a review by this Court of the decision of the Central Board of Assessment Appeals is the special civil action of certiorari, the recourse resorted to herein by Caltex (Philippines), Inc. The issue is whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax. This issue has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code. Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the Real Property Tax Code which provides: SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted. The Code contains the following definitions in its section 3: k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes. m) Machinery shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached to the real estate. It includes the physical facilities available for production, as well as the installations and appurtenant service facilities, together with all other equipment designed for or essential to its manufacturing, industrial or agricultural purposes (See sec. 3[f], Assessment Law).

We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. Caltex invokes the rule that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709). That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real property by destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of cement and installed by the lessee on leased land should be regarded as real property forpurposes of execution of a judgment against the lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff's action. (Compare with Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as realty). Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas station and pavement (which are indubitably taxable realty) should be subject to the realty tax. This question is different from the issue raised in the Davao Saw Mill case. Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633). This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The steel towers were considered personalty because they were attached to square metal frames by means of bolts and could be moved from place to place when unscrewed and dismantled. Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company which were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501). The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is imposition of the realty tax on Caltex's gas station and equipment. WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The petition for certiorari is dismissed for lack of merit. No costs. SO ORDERED. Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur. Concepcion, Jr. and Abad Santos, JJ., took no part.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 155650 July 20, 2006 MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF PARAAQUE, respondents. DECISION CARPIO, J.: The Antecedents Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.5 On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Paraaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due. On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down as follows: TAX DECLARATIONTAXABLE YEARTAX DUEPENALTYTOTALE-016-013701992200119,558,160.0011,201,083.2030,789,243.20E-016-0137419922001111,689,424.9068,149,479.59179,838,904.49E-016-013751992200120,276,058.0012,371,832.0032,647,890.00E-016-013761992200158,144,028.0035,477,712.0093,621,740.00E-016-013771992200118,134,614.6511,065,188.5929,199,803.24E-016-0137819922001111,107,950.4067,794,681.59178,902,631.99E-016-01379199220014,322,340.002,637,360.006,959,700.00E-016-01380199220017,776,436.004,744,944.0012,521,380.00*E-016-013-85199820016,444,810.002,900,164.509,344,974.50*E-016-013871998200134,876,800.005,694,560.0050,571,360.00*E-016-013961998200175,240.0033,858.00109,098.00GRAND TOTALP392,435,861.95P232,070,863.47P 624,506,725.421992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75 #9476101 for P28,676,480.00

#9476103 for P49,115.006

On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants of

levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax. On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878. On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.7 Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La Huerta; and in the main lobby of the Paraaque City Hall. The City of Paraaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines. The notices announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of Paraaque City. A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents the City of Paraaque, City Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City Assessor of Paraaque ("respondents") from auctioning the Airport Lands and Buildings. On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction. On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO. On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the hearing, MIAA, respondent City of Paraaque, and the Solicitor General subsequently submitted their respective Memoranda. MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments. MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor. Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the

express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax. Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax. The Issue This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of Paraaque, and all proceedings taken pursuant to such assessments, are void. In such event, the other issues raised in this petition become moot. The Court's Ruling We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments. First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. 1. MIAA is Not a Government-Owned or Controlled Corporation Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents claim that the deletion of the phrase "any government-owned or controlled so exempt by its charter" in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of government-owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax. There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows: SEC. 2. General Terms Defined. x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied) A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter9provides: SECTION 10. Capital. The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of: (a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets

and other properties; (b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted into the equity of the National Government in the Authority. Thereafter, the Government contribution to the capital of the Authority shall be provided in the General Appropriations Act. Clearly, under its Charter, MIAA does not have capital stock that is divided into shares. Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.11 This prevents MIAA from qualifying as a non-stock corporation. Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows: SEC. 2. General Terms Defined. x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied) When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,12 police authority13 and the levying of fees and charges.14 At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."15 Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA into a "separate and autonomous body"16 will make its operation more "financially viable."17 Many government instrumentalities are vested with corporate powers but they do not become stock or nonstock corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock

corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. However, they are not government-owned or controlled corporations in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities. A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states: 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: x x x x (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units.(Emphasis and underscoring supplied) Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide."18 When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies.19 There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation: The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579) This doctrine emanates from the "supremacy" of the National Government over local governments.

"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied) Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. 20 2. Airport Lands and Buildings of MIAA are Owned by the Republic a. Airport Lands and Buildings are of Public Dominion The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides: ARTICLE 419. Property is either of public dominion or of private ownership. ARTICLE 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied) ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines,

constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user's tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A user's tax is more equitable a principle of taxation mandated in the 1987 Constitution.21 The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both international and domestic air traffic,"22 are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines. b. Airport Lands and Buildings are Outside the Commerce of Man The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus: According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces." The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the commerce of
man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: "Communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied) 23 Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man: xxx Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties. While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease, and the town officials should see to it that the town plazas should ever be kept open to the public and free from encumbrances or illegal private constructions.24 (Emphasis supplied) The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.25 Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for nonpayment of real estate tax. Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from

public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands,"27 provide: SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public fishponds, working men's village and other improvements for the public benefit. SECTION 88. The tract or tracts of land reserved under the provisions of Section eightythree shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this Act or by proclamation of the President. (Emphasis and underscoring supplied) Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines. The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states: SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. (1) The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation; x x x x. (Emphasis supplied) There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man. c. MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus: 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: (1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer. (2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied) In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.28 d. Transfer to MIAA was Meant to Implement a Reorganization

The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides: SECTION 3. Creation of the Manila International Airport Authority. x x x x The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. (Emphasis supplied) SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied) SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory Provisions. The Manila International Airport including the Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished. x x x x. The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation. The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus: WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air traffic, is required to provide standards of airport accommodation and service comparable with the best airports in the world; WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future air traffic and other demands of aviation in Metro Manila; WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and service within the context of a financially viable operation, will best be achieved by a separate and autonomous body; and WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is given continuing authority to reorganize the National Government, which authority includes the creation of new entities, agencies and instrumentalities of the Government[.] (Emphasis supplied) The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings.

At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic. e. Real Property Owned by the Republic is Not Taxable Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines." Section 234(a) provides: SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; x x x. (Emphasis supplied) This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies andinstrumentalities x x x." The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. 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 ataxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:

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.29 3. Refutation of Arguments of Minority The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon the effectivity of the Code. Section 193 provides: 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 effectivity of this Code. (Emphasis supplied) The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real

estate tax. Thus, the minority declares: It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision. The term "All persons" encompasses the two classes of persons recognized under our laws, natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in the original) The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAA's claim of exemption." The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) states: 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: x x x x (o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. (Emphasis and underscoring supplied) By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned by the Republic. The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by local governments. The minority insists that the juridical persons exempt from local taxation are limited to the three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states: x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied) The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This theory will result in gross absurdities. It will make the national government, which itself is a juridical person, subject to tax by local governments since the national government is not included in the enumeration of exempt entities in Section 193. Under this theory, local governments can impose any kind of local tax, and not only real estate tax, on the national government. Under the minority's theory, many national government instrumentalities with juridical personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas, 30 Philippine Rice Research Institute,31Laguna Lake Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development Authority,34Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine National Railways.39

The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between national government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting local governments from imposing any kind of tax on the national government, its agencies and instrumentalities. Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this Code." This means that unless the Local Government Code grants an express authorization, local governments have no power to tax the national government, its agencies and instrumentalities. Clearly, the rule is local governments have no power to tax the national government, its agencies and instrumentalities. As an exception to this rule, local governments may tax the national government, its agencies and instrumentalities only if the Local Government Code expressly so provides. The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides: SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. x x x. (Emphasis supplied) Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is when the government gives the beneficial use of the real property to a taxable entity. The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person. The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the later provisions prevail over Section 133. Thus, the minority asserts: x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied) The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has any one presenteda persuasive argument that there is such a conflict. The minority's assumption of an irreconcilable conflict in the statutory provisions is an egregious error for two reasons. First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its subordination to other provisions of the Code when Section 193 states "[u]nless otherwise provided in this Code." By its own words, Section 193 admits the superiority of other provisions of the Local Government Code that limit the exercise of the taxing power in Section 193. When a provision of law grants a power but withholds such power on certain matters, there is no conflict between the grant of power and the withholding of power. The grantee of the power simply cannot exercise the power on matters withheld from its power. Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units."

Section 133 limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power to tax. Section 133 states that the taxing powers of local governments "shall not extend to the levy" of any kind of tax on the national government, its agencies and instrumentalities. There is no clearer limitation on the taxing power than this. Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section 133 logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the "common limitations" on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in Section 133, then local governments can impose any kind of tax on the national government, its agencies and instrumentalities a gross absurdity. Local governments have no power to tax the national government, its agencies and instrumentalities, except as otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating "[u]nless otherwise provided in this Code." This exception which is an exception to the exemption of the Republic from real estate tax imposed by local governments refers to Section 234(a) of the Code. The exception to the exemption in Section 234(a) subjects real property owned by the Republic, whether titled in the name of the national government, its agencies or instrumentalities, to real estate tax if the beneficial use of such property is given to a taxable entity. The minority also claims that the definition in the Administrative Code of the phrase "government-owned or controlled corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions of the Administrative Code admits that its definitions are not controlling when it provides: SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning: x x x x The minority then concludes that reliance on the Administrative Code definition is "flawed." The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute may require a different meaning than that defined in the Administrative Code. However, this does not automatically mean that the definition in the Administrative Code does not apply to the Local Government Code. Section 2 of the Administrative Code clearly states that "unless the specific words x x x of a particular statute shall require a different meaning," the definition in Section 2 of the Administrative Code shall apply. Thus, unless there is specific language in the Local Government Code defining the phrase "government-owned or controlled corporation" differently from the definition in the Administrative Code, the definition in the Administrative Code prevails. The minority does not point to any provision in the Local Government Code defining the phrase "government-owned or controlled corporation" differently from the definition in the Administrative Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase "governmentowned or controlled corporation." The Administrative Code, however, expressly defines the phrase "government-owned or controlled corporation." The inescapable conclusion is that the Administrative Code definition of the phrase "government-owned or controlled corporation" applies to the Local Government Code. The third whereas clause of the Administrative Code states that the Code "incorporates in a unified document the major structural, functional and procedural principles and rules of governance." Thus, the Administrative Code is the governing law defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a different status and relationship for a specific government unit or entity, the provisions of the Administrative Code prevail. The minority also contends that the phrase "government-owned or controlled corporation" should apply only to corporations organized under the Corporation Code, the general incorporation law, and not to corporations created by special charters. The minority sees no reason why government corporations with special charters should have a capital stock. Thus, the minority declares: I submit that the definition of "government-owned or controlled corporations" under the Administrative Code refer to those corporations owned by the government or its instrumentalities

which are created not by legislative enactment, but formed and organized under the Corporation Code through registration with the Securities and Exchange Commission. In short, these are GOCCs without original charters. x x x x It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares. The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations. It will also result in gross absurdities. First, the Administrative Code definition of the phrase "government-owned or controlled corporation" does not distinguish between one incorporated under the Corporation Code or under a special charter. Where the law does not distinguish, courts should not distinguish. Second, Congress has created through special charters several government-owned corporations organized as stock corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines. The special charter40 of the Land Bank of the Philippines provides: SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied) Likewise, the special charter41 of the Development Bank of the Philippines provides: SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall be Five Billion Pesos to be divided into Fifty Million common shares with par value of P100 per share. These shares are available for subscription by the National Government. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid for by the Government with the net asset values of the Bank remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis supplied) Other government-owned corporations organized as stock corporations under their special charters are the Philippine Crop Insurance Corporation,42 Philippine International Trading Corporation,43 and the Philippine National Bank44 before it was reorganized as a stock corporation under the Corporation Code. All these government-owned corporations organized under special charters as stock corporations are subject to real estate tax on real properties owned by them. To rule that they are not government-owned or controlled corporations because they are not registered with the Securities and Exchange Commission would remove them from the reach of Section 234 of the Local Government Code, thus exempting them from real estate tax. Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides: SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. (Emphasis and underscoring supplied) The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of

common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good meaning for economic development purposes these government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations. In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987 Constitution. Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial activities, such entities known as "government-owned or controlled corporations" must meet the test of economic viability because they compete in the market place. This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their income to meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers. Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows: MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers' money which could have been relocated to agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common
good," this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good.45 Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary: The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the interest of the common good and subject to the test of economic viability." The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.46 (Emphasis supplied) Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services

regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public. However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the governmentowned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code. The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. MIAA does not compete in the market place because there is no competing international airport operated by the private sector. MIAA performs an essential public service as the primary domestic and international airport of the Philippines. The operation of an international airport requires the presence of personnel from the following government agencies: 1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out those without visas or travel documents, or those with hold departure orders; 2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations; 3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious diseases into the country; 4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country; 5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure; 6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and 7. The MIAA, to provide the proper premises such as runway and buildings for the government personnel, passengers, and airlines, and to manage the airport operations. All these agencies of government perform government functions essential to the operation of an international airport. MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative fees47 and not income from commercial transactions. MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code, which provides: SEC. 2. General Terms Defined. x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied) The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as MIAA renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is outside the scope of the phrase "government-owned or controlled corporations" under Section 16, Article XII of the 1987 Constitution.

The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit conditions for the creation of "government-owned or controlled corporations." The Administrative Code defines what constitutes a "government-owned or controlled corporation." To belittle this phrase as "clarificatory or illustrative" is grave error. To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the 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. (Emphasis supplied) The term "ports x x x constructed by the State" 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 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. 4. Conclusion Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Paraaque. 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. WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City of Paraaque. We declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has

leased to private parties. We also declareVOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila International Airport Authority. No costs. SO ORDERED. Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., J.J., concur. x-------------------------------------------------------------------------------x DISSENTING OPINION

TINGA, J. :
The legally correct resolution of this petition would have had the added benefit of an utterly fair and equitable result a recognition of the constitutional and statutory power of the City of Paraaque to impose real property taxes on the Manila International Airport Authority (MIAA), but at the same time, upholding a statutory limitation that prevents the City of Paraaque from seizing and conducting an execution sale over the real properties of MIAA. In the end, all that the City of Paraaque would hold over the MIAA is a limited lien, unenforceable as it is through the sale or disposition of MIAA properties. Not only is this the legal effect of all the relevant constitutional and statutory provisions applied to this case, it also leaves the room for negotiation for a mutually acceptable resolution between the City of Paraaque and MIAA. Instead, with blind but measured rage, the majority today veers wildly off-course, shattering statutes and judicial precedents left and right in order to protect the precious Ming vase that is the Manila International Airport Authority (MIAA). While the MIAA is left unscathed, it is surrounded by the wreckage that once was the constitutional policy, duly enacted into law, that was local autonomy. Make no mistake, the majority has virtually declared war on the seventy nine (79) provinces, one hundred seventeen (117) cities, and one thousand five hundred (1,500) municipalities of the Philippines.1 The icing on this inedible cake is the strained and purposely vague rationale used to justify the majority opinion. Decisions of the Supreme Court are expected to provide clarity to the parties and to students of jurisprudence, as to what the law of the case is, especially when the doctrines of long standing are modified or clarified. With all due respect, the decision in this case is plainly so, so wrong on many levels. More egregious, in the majority's resolve to spare the Manila International Airport Authority (MIAA) from liability for real estate taxes, no clear-cut rule emerges on the important question of the power of local government units (LGUs) to tax government corporations, instrumentalities or agencies. The majority would overturn sub silencio, among others, at least one dozen precedents enumerated below: 1) Mactan-Cebu International Airport Authority v. Hon. Marcos,2 the leading case penned in 1997 by recently retired Chief Justice Davide, which held that the express withdrawal by the Local Government Code of previously granted exemptions from realty taxes applied to instrumentalities and governmentowned or controlled corporations (GOCCs) such as the Mactan-Cebu International Airport Authority (MCIAA). The majority invokes the ruling in Basco v. Pagcor,3 a precedent discredited in Mactan, and a vanguard of a doctrine so noxious to the concept of local government rule that the Local Government Code was drafted precisely to counter such philosophy. The efficacy of several rulings that expressly rely on Mactan, such as PHILRECA v. DILG Secretary,4City Government of San Pablo v. Hon. Reyes5 is now put in question. 2) The rulings in National Power Corporation v. City of Cabanatuan,6 wherein the Court, through Justice Puno, declared that the National Power Corporation, a GOCC, is liable for franchise taxes under the Local Government Code, and succeeding cases that have relied on it such as Batangas Power Corp. v. Batangas City7 The majority now states that deems instrumentalities as defined under the Administrative Code of 1987 as purportedly beyond the reach of any form of taxation by LGUs, stating "[l]ocal governments are devoid of power to tax the national government, its agencies and instrumentalities."8 Unfortunately, using the definition employed by the majority, as provided by Section 2(d) of the Administrative Code, GOCCs are

also considered as instrumentalities, thus leading to the astounding conclusion that GOCCs may not be taxed by LGUs under the Local Government Code. 3) Lung Center of the Philippines v. Quezon City,9 wherein a unanimous en banc Court held that the Lung Center of the Philippines may be liable for real property taxes. Using the majority's reasoning, the Lung Center would be properly classified as an instrumentality which the majority now holds as exempt from all forms of local taxation.10 4) City of Davao v. RTC,11 where the Court held that the Government Service Insurance System (GSIS) was liable for real property taxes for the years 1992 to 1994, its previous exemption having been withdrawn by the enactment of the Local Government Code.12 This decision, which expressly relied on Mactan, would be directly though silently overruled by the majority. 5) The common essence of the Court's rulings in the two Philippine Ports Authority v. City of Iloilo, 13 cases penned by Justices Callejo and Azcuna respectively, which relied in part on Mactan in holding the Philippine Ports Authority (PPA) liable for realty taxes, notwithstanding the fact that it is a GOCC. Based on the reasoning of the majority, the PPA cannot be considered a GOCC. The reliance of these cases on Mactan, and its rationale for holding governmental entities like the PPA liable for local government taxation is mooted by the majority. 6) The 1963 precedent of Social Security System Employees Association v. Soriano, 14 which declared the Social Security Commission (SSC) as a GOCC performing proprietary functions. Based on the rationale employed by the majority, the Social Security System is not a GOCC. Or perhaps more accurately, "no longer" a GOCC. 7) The decision penned by Justice (now Chief Justice) Panganiban, Light Rail Transit Authority v. Central Board of Assessment.15 The characterization therein of the Light Rail Transit Authority (LRTA) as a "service-oriented commercial endeavor" whose patrimonial property is subject to local taxation is now rendered inconsequential, owing to the majority's thinking that an entity such as the LRTA is itself exempt from local government taxation16, irrespective of the functions it performs. Moreover, based on the majority's criteria, LRTA is not a GOCC. 8) The cases of Teodoro v. National Airports Corporation17 and Civil Aeronautics Administration v. Court of Appeals.18 wherein the Court held that the predecessor agency of the MIAA, which was similarly engaged in the operation, administration and management of the Manila International Agency, was engaged in the exercise of proprietary, as opposed to sovereign functions. The majority would hold otherwise that the property maintained by MIAA is actually patrimonial, thus implying that MIAA is actually engaged in sovereign functions. 9) My own majority in Phividec Industrial Authority v. Capitol Steel,19 wherein the Court held that the Phividec Industrial Authority, a GOCC, was required to secure the services of the Office of the Government Corporate Counsel for legal representation.20 Based on the reasoning of the majority, Phividec would not be a GOCC, and the mandate of the Office of the Government Corporate Counsel extends only to GOCCs. 10) Two decisions promulgated by the Court just last month (June 2006), National Power Corporation v. Province of Isabela21 and GSIS v. City Assessor of Iloilo City.22 In the former, the Court pronounced that "[a]lthough as a general rule, LGUs cannot impose taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, this rule admits of an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities." Yet the majority now rules that the exceptions in the LGC no longer hold, since "local governments are devoid of power to tax the national government, its agencies and instrumentalities."23 The ruling in the latter case, which held the GSIS as liable for real property taxes, is now put in jeopardy by the majority's ruling. There are certainly many other precedents affected, perhaps all previous jurisprudence regarding local government taxation vis-a-vis government entities, as well as any previous definitions of GOCCs, and previous distinctions between the exercise of governmental and proprietary functions (a distinction laid down by this Court as far back as 191624). What is the reason offered by the majority for overturning or

modifying all these precedents and doctrines? None is given, for the majority takes comfort instead in the pretense that these precedents never existed. Only children should be permitted to subscribe to the theory that something bad will go away if you pretend hard enough that it does not exist. I. Case Should Have Been Decided Following Mactan Precedent The core issue in this case, whether the MIAA is liable to the City of Paraaque for real property taxes under the Local Government Code, has already been decided by this Court in the Mactan case, and should have been resolved by simply applying precedent. Mactan Explained A brief recall of the Mactan case is in order. The Mactan-Cebu International Airport Authority (MCIAA) claimed that it was exempt from payment of real property taxes to the City of Cebu, invoking the specific exemption granted in Section 14 of its charter, Republic Act No. 6958, and its status as an instrumentality of the government performing governmental functions.25 Particularly, MCIAA invoked Section 133 of the Local Government Code, precisely the same provision utilized by the majority as the basis for MIAA's exemption. Section 133 reads: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (emphasis and underscoring supplied). However, the Court in Mactan noted that Section 133 qualified the exemption of the National Government, its agencies and instrumentalities from local taxation with the phrase "unless otherwise provided herein." It then considered the other relevant provisions of the Local Government Code, particularly the following: SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemption or incentives granted to, or enjoyed by all persons, whether natural or juridical, including government-owned and 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.26 SECTION 232. Power to Levy Real Property Tax. A province or city or a municipality within the Metropolitan Manila area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted.27 SECTION 234. Exemptions from Real Property Tax. -- The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person: (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; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned and controlled corporations engaged in the distribution of water and/or generation and transmission of electric power; (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and environmental protection. 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 corporations are hereby withdrawn upon the effectivity of this Code.28 Clearly, Section 133 was not intended to be so absolute a prohibition on the power of LGUs to tax the National Government, its agencies and instrumentalities, as evidenced by these cited provisions which "otherwise provided." But what was the extent of the limitation under Section 133? This is how the Court, correctly to my mind, defined the parameters in Mactan: The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of exceptions or provisos in these sections, as shown by the following clauses: (1) "unless otherwise provided herein" in the opening paragraph of Section 133; (2) "Unless otherwise provided in this Code" in Section 193; (3) "not hereafter specifically exempted" in Section 232; and (4) "Except as provided herein" in the last paragraph of Section 234 initially hampers a ready understanding of the sections. Note, too, that the aforementioned clause in Section 133 seems to be inaccurately worded. Instead of the clause "unless otherwise provided herein," with the "herein" to mean, of course, the section, it should have used the clause "unless otherwise provided in this Code." The former results in absurdity since the section itself enumerates what are beyond the taxing powers of local government units and, where exceptions were intended, the exceptions are explicitly indicated in the next. For instance, in item (a) which excepts income taxes "when levied on banks and other financial institutions"; item (d) which excepts "wharfage on wharves constructed and maintained by the local government unit concerned"; and item (1) which excepts taxes, fees and charges for the registration and issuance of licenses or permits for the driving of "tricycles." It may also be observed that within the body itself of the section, there are exceptions which can be found only in other parts of the LGC, but the section interchangeably uses therein the clause, "except as otherwise provided herein" as in items (c) and (i), or the clause "except as provided in this Code" in item (j). These clauses would be obviously unnecessary or mere surplusages if the opening clause of the section were "Unless otherwise provided in this Code" instead of "Unless otherwise provided herein." In any event, even if the latter is used, since under Section 232 local government units have the power to levy real property tax, except those exempted therefrom under Section 234, then Section 232 must be deemed to qualify Section 133. Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person," as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or judicial persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including

government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234.29 The Court in Mactan acknowledged that under Section 133, instrumentalities were generally exempt from all forms of local government taxation, unless otherwise provided in the Code. On the other hand, Section 232 "otherwise provided" insofar as it allowed LGUs to levy an ad valorem real property tax, irrespective of who owned the property. At the same time, the imposition of real property taxes under Section 232 is in turn qualified by the phrase "not hereinafter specifically exempted." The exemptions from real property taxes are enumerated in Section 234, which specifically states that only real properties owned "by the Republic of the Philippines or any of its political subdivisions" are exempted from the payment of the tax. Clearly, instrumentalities or GOCCs do not fall within the exceptions under Section 234.30 Mactan Overturned the Precedents Now Relied Upon by the Majority But the petitioners in Mactan also raised the Court's ruling in Basco v. PAGCOR,31 decided before the enactment of the Local Government Code. The Court in Basco declared the PAGCOR as exempt from local taxes, justifying the exemption in this wise: Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers xxx 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 subjected to control by a mere Local government. "The states have no power by taxation or otherwise, to retard impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government." (McCulloch v. Marland, 4 Wheat 316, 4 L Ed. 579) This doctrine emanates from the "supremacy" of the National Government over local governments. "Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied) Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activates or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42). The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.32 Basco is as strident a reiteration of the old guard view that frowned on the principle of local autonomy, especially as it interfered with the prerogatives and privileges of the national government. Also consider the following citation from Maceda v. Macaraig,33 decided the same year as Basco. Discussing the rule of construction of tax exemptions on government instrumentalities, the sentiments are of a similar vein.

Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the case of exemptions in favor of a government political subdivision or instrumentality. The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions, even more obvious than with reference to the affirmative or levying provisions of tax statutes, is to minimize differential treatment and foster impartiality, fairness, and equality of treatment among tax payers. The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies. In the case of property owned by the state or a city or other public corporations, the express exemption should not be construed with the same degree of strictness that applies to exemptions contrary to the policy of the state, since as to such property "exemption is the rule and taxation the exception."34 Strikingly, the majority cites these two very cases and the stodgy rationale provided therein. This evinces the perspective from which the majority is coming from. It is admittedly a viewpoint once shared by this Court, and en vogue prior to the enactment of the Local Government Code of 1991. However, the Local Government Code of 1991 ushered in a new ethos on how the art of governance should be practiced in the Philippines, conceding greater powers once held in the private reserve of the national government to LGUs. The majority might have private qualms about the wisdom of the policy of local autonomy, but the members of the Court are not expected to substitute their personal biases for the legislative will, especially when the 1987 Constitution itself promotes the principle of local autonomy. Article II. Declaration of Principles and State Policies xxx Sec. 25. The State shall ensure the autonomy of local governments. Article X. Local Government xxx Sec. 2. The territorial and political subdivisions shall enjoy local autonomy. Section 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials, and all other matters relating to the organization and operation of the local units. xxx Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. xxx The Court in Mactan recognized that a new day had dawned with the enactment of the 1987 Constitution and the Local Government Code of 1991. Thus, it expressly rejected the contention of the MCIAA that Basco was applicable to them. In doing so, the language of the Court was dramatic, if only to emphasize how monumental the shift in philosophy was with the enactment of the Local Government Code: Accordingly, the position taken by the [MCIAA] is untenable. Reliance on Basco v. Philippine Amusement and Gaming Corporation is unavailing since it was decided before the effectivity of the [Local Government Code]. Besides, nothing 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.35 (emphasis supplied) The Court Has Repeatedly Reaffirmed Mactan Over the Precedents Now Relied Upon By the Majority Since then and until today, the Court has been emphatic in declaring the Basco doctrine as dead. The notion that instrumentalities may be subjected to local taxation by LGUs was again affirmed in National Power Corporation v. City of Cabanatuan,36 which was penned by Justice Puno. NPC or Napocor, invoking its continued exemption from payment of franchise taxes to the City of Cabanatuan, alleged that it was an instrumentality of the National Government which could not be taxed by a city government. To that end, Basco was cited by NPC. The Court had this to say about Basco. xxx[T]he doctrine in Basco vs. Philippine Amusement and Gaming Corporation relied upon by the petitioner to support its claim no longer applies. To emphasize, the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local government units to tax instrumentalities of the National Government was in effect. However, as this Court ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos, nothing prevents Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax. In enacting the LGC, Congress exercised its prerogative to tax instrumentalities and agencies of government as it sees fit. Thus, after reviewing the specific provisions of the LGC, this Court held that MCIAA, although an instrumentality of the national government, was subject to real property tax.37 In the 2003 case of Philippine Ports Authority v. City of Iloilo,38 the Court, in the able ponencia of Justice Azcuna, affirmed the levy of realty taxes on the PPA. Although the taxes were assessed under the old Real Property Tax Code and not the Local Government Code, the Court again cited Mactan to refute PPA's invocation of Basco as the basis of its exemption. [Basco] 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. Furthermore, in the more recent case of Mactan Cebu International Airport Authority v. Marcos, 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 Code clearly attests against petitioner's claim of absolute exemption of government instrumentalities from local taxation.39 Just last month, the Court in National Power Corporation v. Province of Isabela 40 again rejected Basco in emphatic terms. Held the Court, through Justice Callejo, Sr.: Thus, the doctrine laid down in the Basco case is no longer true. In the Cabanatuan case, the Court noted primarily that the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local government units to tax instrumentalities of the National Government was in effect. It further explained that in enacting the LGC, Congress empowered the LGUs to impose certain taxes even on instrumentalities of the National Government.41 The taxability of the PPA recently came to fore in Philippine Ports Authority v. City of Iloilo 42 case, a decision also penned by Justice Callejo, Sr., wherein the Court affirmed the sale of PPA's properties at public auction for failure to pay realty taxes. The Court again reiterated that "it was the intention of

Congress to withdraw the tax exemptions granted to or presently enjoyed by all persons, including government-owned or controlled corporations, upon the effectivity" of the Code.43 The Court in the second Public Ports Authority case likewise cited Mactan as providing the "raison d'etre for the withdrawal of the exemption," namely, "the State policy to ensure autonomy to local governments and the objective of the [Local Government Code] that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities. . . . "44 Last year, the Court, in City of Davao v. RTC,45 affirmed that the legislated exemption from real property taxes of the Government Service Insurance System (GSIS) was removed under the Local Government Code. Again, Mactan was relied upon as the governing precedent. The removal of the tax exemption stood even though the then GSIS law46 prohibited the removal of GSIS' tax exemptions unless the exemption was specifically repealed, "and a provision is enacted to substitute the declared policy of exemption from any and all taxes as an essential factor for the solvency of the fund."47 The Court, citing established doctrines in statutory construction and Duarte v. Dade48 ruled that such proscription on future legislation was itself prohibited, as "the legislature cannot bind a future legislature to a particular mode of repeal."49 And most recently, just less than one month ago, the Court, through Justice Corona in Government Service Insurance System v. City Assessor of Iloilo50 again affirmed that the Local Government Code removed the previous exemption from real property taxes of the GSIS. Again Mactan was cited as having "expressly withdrawn the [tax] exemption of the [GOCC].51 Clearly then, Mactan is not a stray or unique precedent, but the basis of a jurisprudential rule employed by the Court since its adoption, the doctrine therein consistent with the Local Government Code. Corollarily, Basco, the polar opposite of Mactan has been emphatically rejected and declared inconsistent with the Local Government Code. II. Majority, in Effectively Overturning Mactan, Refuses to Say Why Mactan Is Wrong The majority cites Basco in support. It does not cite Mactan, other than an incidental reference that it is relied upon by the respondents.52 However, the ineluctable conclusion is that the majority rejects the rationale and ruling in Mactan. The majority provides for a wildly different interpretation of Section 133, 193 and 234 of the Local Government Code than that employed by the Court in Mactan. Moreover, the parties in Mactan and in this case are similarly situated, as can be obviously deducted from the fact that both petitioners are airport authorities operating under similarly worded charters. And the fact that the majority cites doctrines contrapuntal to the Local Government Code as in Basco and Maceda evinces an intent to go against the Court's jurisprudential trend adopting the philosophy of expanded local government rule under the Local Government Code. Before I dwell upon the numerous flaws of the majority, a brief comment is necessitated on the majority's studied murkiness vis--vis the Mactan precedent. The majority is obviously inconsistent with Mactan and there is no way these two rulings can stand together. Following basic principles in statutory construction, Mactan will be deemed as giving way to this new ruling. However, the majority does not bother to explain why Mactan is wrong. The interpretation in Mactan of the relevant provisions of the Local Government Code is elegant and rational, yet the majority refuses to explain why this reasoning of the Court in Mactan is erroneous. In fact, the majority does not even engage Mactan in any meaningful way. If the majority believes that Mactan may still stand despite this ruling, it remains silent as to the viable distinctions between these two cases. The majority's silence on Mactan is baffling, considering how different this new ruling is with the ostensible precedent. Perhaps the majority does not simply know how to dispense with the ruling in Mactan. If Mactan truly deserves to be discarded as precedent, it deserves a more honorable end than death by amnesia or ignonominous disregard. The majority could have devoted its discussion in explaining why it thinks Mactan is wrong, instead of pretending that Mactan never existed at all. Such an approach might not have won the votes of the minority, but at least it would provide some degree of intellectual clarity for the parties, LGUs

and the national government, students of jurisprudence and practitioners. A more meaningful debate on the matter would have been possible, enriching the study of law and the intellectual dynamic of this Court. There is no way the majority can be justified unless Mactan is overturned. The MCIAA and the MIAA are similarly situated. They are both, as will be demonstrated, GOCCs, commonly engaged in the business of operating an airport. They are the owners of airport properties they respectively maintain and hold title over these properties in their name.53 These entities are both owned by the State, and denied by their respective charters the absolute right to dispose of their properties without prior approval elsewhere.54 Both of them are not empowered to obtain loans or encumber their properties without prior approval the prior approval of the President.55 III. Instrumentalities, Agencies And GOCCs Generally Liable for Real Property Tax I shall now proceed to demonstrate the errors in reasoning of the majority. A bulwark of my position lies with Mactan, which will further demonstrate why the majority has found it inconvenient to even grapple with the precedent that is Mactan in the first place. Mactan held that the prohibition on taxing the national government, its agencies and instrumentalities under Section 133 is qualified by Section 232 and Section 234, and accordingly, the only relevant exemption now applicable to these bodies is as provided under Section 234(o), or on "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." It should be noted that the express withdrawal of previously granted exemptions by the Local Government Code do not even make any distinction as to whether the exempt person is a governmental entity or not. As Sections 193 and 234 both state, the withdrawal applies to "all persons, including [GOCCs]", thus encompassing the two classes of persons recognized under our laws, natural persons56 and juridical persons.57 The fact that the Local Government Code mandates the withdrawal of previously granted exemptions evinces certain key points. If an entity was previously granted an express exemption from real property taxes in the first place, the obvious conclusion would be that such entity would ordinarily be liable for such taxes without the exemption. If such entities were already deemed exempt due to some overarching principle of law, then it would be a redundancy or surplusage to grant an exemption to an already exempt entity. This fact militates against the claim that MIAA is preternaturally exempt from realty taxes, since it required the enactment of an express exemption from such taxes in its charter. Amazingly, the majority all but ignores the disquisition in Mactan and asserts that government instrumentalities are not taxable persons unless they lease their properties to a taxable person. The general rule laid down in Section 232 is given short shrift. In arriving at this conclusion, several leaps in reasoning are committed. Majority's Flawed Definition of GOCCs. The majority takes pains to assert that the MIAA is not a GOCC, but rather an instrumentality. However, and quite grievously, the supposed foundation of this assertion is an adulteration. The majority gives the impression that a government instrumentality is a distinct concept from a government corporation.58 Most tellingly, the majority selectively cites a portion of Section 2(10) of the Administrative Code of 1987, as follows: Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate

powers, administering special funds, and enjoying operational autonomy, usually through a charter. xxx59 (emphasis omitted) However, Section 2(10) of the Administrative Code, when read in full, makes an important clarification which the majority does not show. The portions omitted by the majority are highlighted below: (10)Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and governmentowned or controlled corporations.60 Since Section 2(10) makes reference to "agency of the National Government," Section 2(4) is also worth citing in full: (4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. (emphasis supplied)61 Clearly then, based on the Administrative Code, a GOCC may be an instrumentality or an agency of the National Government. Thus, there actually is no point in the majority's assertion that MIAA is not a GOCC, since based on the majority's premise of Section 133 as the key provision, the material question is whether MIAA is either an instrumentality, an agency, or the National Government itself. The very provisions of the Administrative Code provide that a GOCC can be either an instrumentality or an agency, so why even bother to extensively discuss whether or not MIAA is a GOCC? Indeed as far back as the 1927 case of Government of the Philippine Islands v. Springer, 62 the Supreme Court already noted that a corporation of which the government is the majority stockholder "remains an agency or instrumentality of government."63 Ordinarily, the inconsequential verbiage stewing in judicial opinions deserve little rebuttal. However, the entire discussion of the majority on the definition of a GOCC, obiter as it may ultimately be, deserves emphatic refutation. The views of the majority on this matter are very dangerous, and would lead to absurdities, perhaps unforeseen by the majority. For in fact, the majority effectively declassifies many entities created and recognized as GOCCs and would give primacy to the Administrative Code of 1987 rather than their respective charters as to the definition of these entities. Majority Ignores the Power Of Congress to Legislate and Define Chartered Corporations First, the majority declares that, citing Section 2(13) of the Administrative Code, a GOCC must be "organized as a stock or non-stock corporation," as defined under the Corporation Code. To insist on this as an absolute rule fails on bare theory. Congress has the undeniable power to create a corporation by legislative charter, and has been doing so throughout legislative history. There is no constitutional prohibition on Congress as to what structure these chartered corporations should take on. Clearly, Congress has the prerogative to create a corporation in whatever form it chooses, and it is not bound by any traditional format. Even if there is a definition of what a corporation is under the Corporation Code or the Administrative Code, these laws are by no means sacrosanct. It should be remembered that these two statutes fall within the same level of hierarchy as a congressional charter, since they all are legislative enactments. Certainly, Congress can choose to disregard either the Corporation Code or the Administrative Code in defining the corporate structure of a GOCC, utilizing the same extent of legislative powers similarly vesting it the putative ability to amend or abolish the Corporation Code or the Administrative Code. These principles are actually recognized by both the Administrative Code and the Corporation Code. The definition of GOCCs, agencies and instrumentalities under the Administrative Code are laid down in the section entitled "General Terms Defined," which qualifies: Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning: (emphasis supplied)

xxx Similar in vein is Section 6 of the Corporation Code which provides: SEC. 4. Corporations created by special laws or charters. Corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable. (emphasis supplied) Thus, the clear doctrine emerges the law that governs the definition of a corporation or entity created by Congress is its legislative charter. If the legislative enactment defines an entity as a corporation, then it is a corporation, no matter if the Corporation Code or the Administrative Code seemingly provides otherwise. In case of conflict between the legislative charter of a government corporation, on one hand, and the Corporate Code and the Administrative Code, on the other, the former always prevails. Majority, in Ignoring the Legislative Charters, Effectively Classifies Duly Established GOCCs, With Disastrous and Far Reaching Legal Consequences Second, the majority claims that MIAA does not qualify either as a stock or non-stock corporation, as defined under the Corporation Code. It explains that the MIAA is not a stock corporation because it does not have any capital stock divided into shares. Neither can it be considered as a non-stock corporation because it has no members, and under Section 87, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees or officers. This formulation of course ignores Section 4 of the Corporation Code, which again provides that corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter, and not the Corporation Code. That the MIAA cannot be considered a stock corporation if only because it does not have a stock structure is hardly a plausible proposition. Indeed, there is no point in requiring a capital stock structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares. Admittedly, there are GOCCs established in such a manner, such as the National Power Corporation (NPC), which is provided with authorized capital stock wholly subscribed and paid for by the Government of the Philippines, divided into shares but at the same time, is prohibited from transferring, negotiating, pledging, mortgaging or otherwise giving these shares as security for payment of any obligation.64 However, based on the Corporation Code definition relied upon by the majority, even the NPC cannot be considered as a stock corporation. Under Section 3 of the Corporation Code, stock corporations are defined as being "authorized to distribute to the holders of its shares dividends or allotments of the surplus profits on the basis of the shares held."65 On the other hand, Section 13 of the NPC's charter states that "the Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion."66 Can the holder of the shares of NPC, the National Government, receive its surplus profits on the basis of its shares held? It cannot, according to the NPC charter, and hence, following Section 3 of the Corporation Code, the NPC is not a stock corporation, if the majority is to be believed. The majority likewise claims that corporations without members cannot be deemed non-stock corporations. This would seemingly exclude entities such as the NPC, which like MIAA, has no ostensible members. Moreover, non-stock corporations cannot distribute any part of its income as dividends to its members, trustees or officers. The majority faults MIAA for remitting 20% of its gross operating income to the national government. How about the Philippine Health Insurance Corporation, created with the "status of a taxexempt government corporation attached to the Department of Health" under Rep. Act No. 7875. 67 It too cannot be considered as a stock corporation because it has no capital stock structure. But using the criteria of the majority, it is doubtful if it would pass muster as a non-stock corporation, since the PHIC or

Philhealth, as it is commonly known, is expressly empowered "to collect, deposit, invest, administer and disburse" the National Health Insurance Fund.68 Or how about the Social Security System, which under its revised charter, Republic Act No. 8282, is denominated as a "corporate body."69The SSS has no capital stock structure, but has capital comprised of contributions by its members, which are eventually remitted back to its members. Does this disqualify the SSS from classification as a GOCC, notwithstanding this Court's previous pronouncement in Social Security System Employees Association v. Soriano?70 In fact, Republic Act No. 7656, enacted in 1993, requires that all GOCCs, whether stock or nonstock,71 declare and remit at least fifty percent (50%) of their annual net earnings as cash, stock or property dividends to the National Government.72 But according to the majority, non-stock corporations are prohibited from declaring any part of its income as dividends. But if Republic Act No. 7656 requires even non-stock corporations to declare dividends from income, should it not follow that the prohibition against declaration of dividends by non-stock corporations under the Corporation Code does not apply to government-owned or controlled corporations? For if not, and the majority's illogic is pursued, Republic Act No. 7656, passed in 1993, would be fatally flawed, as it would contravene the Administrative Code of 1987 and the Corporation Code. In fact, the ruinous effects of the majority's hypothesis on the nature of GOCCs can be illustrated by Republic Act No. 7656. Following the majority's definition of a GOCC and in accordance with Republic Act No. 7656, here are but a few entities which are not obliged to remit fifty (50%) of its annual net earnings to the National Government as they are excluded from the scope of Republic Act No. 7656: 1) Philippine Ports Authority73 has no capital stock74, no members, and obliged to apply the balance of its income or revenue at the end of each year in a general reserve.75 2) Bases Conversion Development Authority76 - has no capital stock,77 no members. 3) Philippine Economic Zone Authority78 - no capital stock,79 no members. 4) Light Rail Transit Authority80 - no capital stock,81 no members. 5) Bangko Sentral ng Pilipinas82 - no capital stock,83 no members, required to remit fifty percent (50%) of its net profits to the National Treasury.84 6) National Power Corporation85 - has capital stock but is prohibited from "distributing to the holders of its shares dividends or allotments of the surplus profits on the basis of the shares held;"86 no members. 7) Manila International Airport Authority no capital stock87, no members88, mandated to remit twenty percent (20%) of its annual gross operating income to the National Treasury.89 Thus, for the majority, the MIAA, among many others, cannot be considered as within the coverage of Republic Act No. 7656. Apparently, President Fidel V. Ramos disagreed. How else then could Executive Order No. 483, signed in 1998 by President Ramos, be explained? The issuance provides: WHEREAS, Section 1 of Republic Act No. 7656 provides that: "Section 1. Declaration of Policy. - It is hereby declared the policy of the State that in order for the National Government to realize additional revenues, government-owned and/or controlled corporations, without impairing their viability and the purposes for which they have been established, shall share a substantial amount of their net earnings to the National Government." WHEREAS, to support the viability and mandate of government-owned and/or controlled corporations [GOCCs], the liquidity, retained earnings position and medium-term plans and programs of these GOCCs were considered in the determination of the reasonable dividend rates of such corporations on their 1997 net earnings. WHEREAS, pursuant to Section 5 of RA 7656, the Secretary of Finance recommended the adjustment on the percentage of annual net earnings that shall be declared by the Manila International Airport Authority [MIAA] and Phividec Industrial Authority [PIA] in the interest of national economy and general welfare. NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Philippines, by virtue of the powers vested in

me by law, do hereby order: SECTION 1. The percentage of net earnings to be declared and remitted by the MIAA and PIA as dividends to the National Government as provided for under Section 3 of Republic Act No. 7656 is adjusted from at least fifty percent [50%] to the rates specified hereunder: 1. Manila International Airport Authority - 35% [cash] 2. Phividec Industrial Authority - 25% [cash] SECTION 2. The adjusted dividend rates provided for under Section 1 are only applicable on 1997 net earnings of the concerned government-owned and/or controlled corporations. Obviously, it was the opinion of President Ramos and the Secretary of Finance that MIAA is a GOCC, for how else could it have come under the coverage of Republic Act No. 7656, a law applicable only to GOCCs? But, the majority apparently disagrees, and resultantly holds that MIAA is not obliged to remit even the reduced rate of thirty five percent (35%) of its net earnings to the national government, since it cannot be covered by Republic Act No. 7656. All this mischief because the majority would declare the Administrative Code of 1987 and the Corporation Code as the sole sources of law defining what a government corporation is. As I stated earlier, I find it illogical that chartered corporations are compelled to comply with the templates of the Corporation Code, especially when the Corporation Code itself states that these corporations are to be governed by their own charters. This is especially true considering that the very provision cited by the majority, Section 87 of the Corporation Code, expressly says that the definition provided therein is laid down "for the purposes of this [Corporation] Code." Read in conjunction with Section 4 of the Corporation Code which mandates that corporations created by charter be governed by the law creating them, it is clear that contrary to the majority, MIAA is not disqualified from classification as a non-stock corporation by reason of Section 87, the provision not being applicable to corporations created by special laws or charters. In fact, I see no real impediment why the MIAA and similarly situated corporations such as the PHIC, the SSS, the Philippine Deposit Insurance Commission, or maybe even the NPC could at the very least, be deemed as no stock corporations (as differentiated from non-stock corporations). The point, stripped to bare simplicity, is that entity created by legislative enactment is a corporation if the legislature says so. After all, it is the legislature that dictates what a corporation is in the first place. This is better illustrated by another set of entities created before martial law. These include the Mindanao Development Authority,90 the Northern Samar Development Authority,91 the Ilocos Sur Development Authority,92 the Southeastern Samar Development Authority93 and the Mountain Province Development Authority.94 An examination of the first section of the statutes creating these entities reveal that they were established "to foster accelerated and balanced growth" of their respective regions, and towards such end, the charters commonly provide that "it is recognized that a government corporation should be created for the purpose," and accordingly, these charters "hereby created a body corporate."95 However, these corporations do not have capital stock nor members, and are obliged to return the unexpended balances of their appropriations and earnings to a revolving fund in the National Treasury. The majority effectively declassifies these entities as GOCCs, never mind the fact that their very charters declare them to be GOCCs. I mention these entities not to bring an element of obscurantism into the fray. I cite them as examples to emphasize my fundamental pointthat it is the legislative charters of these entities, and not the Administrative Code, which define the class of personality of these entities created by Congress. To adopt the view of the majority would be, in effect, to sanction an implied repeal of numerous congressional charters for the purpose of declassifying GOCCs. Certainly, this could not have been the intent of the crafters of the Administrative Code when they drafted the "Definition of Terms" incorporated therein. MIAA Is Without Doubt, A GOCC Following the charters of government corporations, there are two kinds of GOCCs, namely: GOCCs which are stock corporations and GOCCs which are no stock corporations (as distinguished from non-stock corporation). Stock GOCCs are simply those which have capital stock while no stock GOCCs are those

which have no capital stock. Obviously these definitions are different from the definitions of the terms in the Corporation Code. Verily, GOCCs which are not incorporated with the Securities and Exchange Commission are not governed by the Corporation Code but by their respective charters. For the MIAA's part, its charter is replete with provisions that indubitably classify it as a GOCC. Observe the following provisions from MIAA's charter: SECTION 3. Creation of the Manila International Airport Authority.There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, That any subsidiary that may be organized shall have the prior approval of the President. The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. xxx SECTION 5. Functions, Powers, and Duties. The Authority shall have the following functions, powers and duties: xxx (d) To sue and be sued in its corporate name; (e) To adopt and use a corporate seal; (f) To succeed by its corporate name; (g) To adopt its by-laws, and to amend or repeal the same from time to time; (h) To execute or enter into contracts of any kind or nature; (i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable, or any interest therein; (j) To exercise the power of eminent domain in the pursuit of its purposes and objectives; xxx (o) To exercise all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order. xxx SECTION 16. Borrowing Power. The Authority may, after consultation with the Minister of Finance and with the approval of the President of the Philippines, as recommended by the Minister of Transportation and Communications, raise funds, either from local or international sources, by way of loans, credits or securities, and other borrowing instruments, with the power to create pledges, mortgages and other voluntary liens or encumbrances on any of its assets or properties. All loans contracted by the Authority under this Section, together with all interests and other sums payable in respect thereof, shall constitute a charge upon all the revenues and assets of the Authority and shall rank equally with one another, but shall have priority over any other claim or charge on the revenue and assets of the Authority: Provided, That this provision shall not be construed as a prohibition or restriction on the power of the Authority to create pledges, mortgages, and other voluntary liens or encumbrances on any assets or property of the Authority.

Except as expressly authorized by the President of the Philippines the total outstanding indebtedness of the Authority in the principal amount, in local and foreign currency, shall not at any time exceed the net worth of the Authority at any given time. xxx The President or his duly authorized representative after consultation with the Minister of Finance may guarantee, in the name and on behalf of the Republic of the Philippines, the payment of the loans or other indebtedness of the Authority up to the amount herein authorized. These cited provisions establish the fitness of MIAA to be the subject of legal relations. 96 MIAA under its charter may acquire and possess property, incur obligations, and bring civil or criminal actions. It has the power to contract in its own name, and to acquire title to real or personal property. It likewise may exercise a panoply of corporate powers and possesses all the trappings of corporate personality, such as a corporate name, a corporate seal and by-laws. All these are contained in MIAA's charter which, as conceded by the Corporation Code and even the Administrative Code, is the primary law that governs the definition and organization of the MIAA. In fact, MIAA itself believes that it is a GOCC represents itself as such. It said so itself in the very first paragraph of the present petition before this Court.97 So does, apparently, the Department of Budget and Management, which classifies MIAA as a "government owned & controlled corporation" on its internet website.98 There is also the matter of Executive Order No. 483, which evinces the belief of the thenpresident of the Philippines that MIAA is a GOCC. And the Court before had similarly characterized MIAA as a government-owned and controlled corporation in the earlier MIAA case, Manila International Airport Authority v. Commission on Audit.99 Why then the hesitance to declare MIAA a GOCC? As the majority repeatedly asserts, it is because MIAA is actually an instrumentality. But the very definition relied upon by the majority of an instrumentality under the Administrative Code clearly states that a GOCC is likewise an instrumentality or an agency. The question of whether MIAA is a GOCC might not even be determinative of this Petition, but the effect of the majority's disquisition on that matter may even be more destructive than the ruling that MIAA is exempt from realty taxes. Is the majority ready to live up to the momentous consequences of its flawed reasoning? Novel Proviso in 1987 Constitution Prescribing Standards in the Creation of GOCCs Necessarily Applies only to GOCCs Created After 1987. One last point on this matter on whether MIAA is a GOCC. The majority triumphantly points to Section 16, Article XII of the 1987 Constitution, which mandates that the creation of GOCCs through special charters be "in the interest of the common good and subject to the test of economic viability." For the majority, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. But this test of "economic viability" is new to the constitutional framework. No such test was imposed in previous Constitutions, including the 1973 Constitution which was the fundamental law in force when the MIAA was created. How then could the MIAA, or any GOCC created before 1987 be expected to meet this new precondition to the creation of a GOCC? Does the dissent seriously suggest that GOCCs created before 1987 may be declassified on account of their failure to meet this "economic viability test"? Instrumentalities and Agencies Also Generally Liable For Real Property Taxes Next, the majority, having bludgeoned its way into asserting that MIAA is not a GOCC, then argues that MIAA is an instrumentality. It cites incompletely, as earlier stated, the provision of Section 2(10) of the Administrative Code. A more convincing view offered during deliberations, but which was not adopted by

the ponencia, argued that MIAA is not an instrumentality but an agency, considering the fact that under the Administrative Code, the MIAA is attached within the department framework of the Department of Transportation and Communications.100Interestingly, Executive Order No. 341, enacted by President Arroyo in 2004, similarly calls MIAA an agency. Since instrumentalities are expressly defined as "an agency not integrated within the department framework," that view concluded that MIAA cannot be deemed an instrumentality. Still, that distinction is ultimately irrelevant. Of course, as stated earlier, the Administrative Code considers GOCCs as agencies,101 so the fact that MIAA is an agency does not exclude it from classification as a GOCC. On the other hand, the majority justifies MIAA's purported exemption on Section 133 of the Local Government Code, which similarly situates "agencies and instrumentalities" as generally exempt from the taxation powers of LGUs. And on this point, the majority again evades Mactan and somehow concludes that Section 133 is the general rule, notwithstanding Sections 232 and 234(a) of the Local Government Code. And the majority's ultimate conclusion? "By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities."102 The Court's interpretation of the Local Government Code in Mactan renders the law integrally harmonious and gives due accord to the respective prerogatives of the national government and LGUs. Sections 133 and 234(a) ensure that the Republic of the Philippines or its political subdivisions shall not be subjected to any form of local government taxation, except realty taxes if the beneficial use of the property owned has been granted for consideration to a taxable entity or person. On the other hand, Section 133 likewise assures that government instrumentalities such as GOCCs may not be arbitrarily taxed by LGUs, since they could be subjected to local taxation if there is a specific proviso thereon in the Code. One such proviso is Section 137, which as the Court found in National Power Corporation,103 permits the imposition of a franchise tax on businesses enjoying a franchise, even if it be a GOCC such as NPC. And, as the Court acknowledged in Mactan, Section 232 provides another exception on the taxability of instrumentalities. The majority abjectly refuses to engage Section 232 of the Local Government Code although it provides the indubitable general rule that LGUs "may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted." The specific exemptions are provided by Section 234. Section 232 comes sequentially after Section 133(o),104 and even if the sequencing is irrelevant, Section 232 would fall under the qualifying phrase of Section 133, "Unless otherwise provided herein." It is sad, but not surprising that the majority is not willing to consider or even discuss the general rule, but only the exemptions under Section 133 and Section 234. After all, if the majority is dead set in ruling for MIAA no matter what the law says, why bother citing what the law does say. Constitution, Laws and Jurisprudence Have Long Explained the Rationale Behind the Local Taxation Of GOCCs. This blithe disregard of precedents, almost all of them unanimously decided, is nowhere more evident than in the succeeding discussion of the majority, which asserts that the power of local governments to tax national government instrumentalities be construed strictly against local governments. The Maceda case, decided before the Local Government Code, is cited, as is Basco. This section of the majority employs deliberate pretense that the Code never existed, or that the fundamentals of local autonomy are of limited effect in our country. Why is it that the Local Government Code is barely mentioned in this section of the majority? Because Section 5 of the Code, purposely omitted by the majority provides for a different rule of interpretation than that asserted: Section 5. Rules of Interpretation. In the interpretation of the provisions of this Code, the following rules shall apply: (a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case

of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local government unit concerned; (b) In case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer. Any tax exemption, incentive or relief granted by any local government unit pursuant to the provisions of this Code shall be construed strictly against the person claiming it; xxx Yet the majority insists that "there is no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another."105 I wonder whether the Constitution satisfies the majority's desire for "a sound and compelling policy." To repeat: Article II. Declaration of Principles and State Policies xxx Sec. 25. The State shall ensure the autonomy of local governments. Article X. Local Government xxx Sec. 2. The territorial and political subdivisions shall enjoy local autonomy. xxx Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. Or how about the Local Government Code, presumably an expression of sound and compelling policy considering that it was enacted by the legislature, that veritable source of all statutes: SEC. 129. Power to Create Sources of Revenue. - Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government units. Justice Puno, in National Power Corporation v. City of Cabanatuan,106 provides a more "sound and compelling policy considerations" that would warrant sustaining the taxability of government-owned entities by local government units under the Local Government Code. Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed in the Mactan case, "the original reasons for the withdrawal of tax exemption privileges granted to government-owned or controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises." With the added burden of devolution, it is even more imperative for government entities to share in the requirements of development, fiscal or otherwise, by paying taxes or other charges due from them.107 I dare not improve on Justice Puno's exhaustive disquisition on the statutory and jurisprudential shift brought about the acceptance of the principles of local autonomy: In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives. Taxation assumes even greater significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to

levy taxes, fees and other charges pursuant to Article X, section 5 of the 1987 Constitution, viz: "Section 5. Each Local Government unit shall have the power to create its own sources of revenue, to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local Governments." This paradigm shift results from the realization that genuine development can be achieved only by strengthening local autonomy and promoting decentralization of governance. For a long time, the country's highly centralized government structure has bred a culture of dependence among local government leaders upon the national leadership. It has also "dampened the spirit of initiative, innovation and imaginative resilience in matters of local development on the part of local government leaders." 35 The only way to shatter this culture of dependence is to give the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate their own sources for the purpose. To achieve this goal, section 3 of Article X of the 1987 Constitution mandates Congress to enact a local government code that will, consistent with the basic policy of local autonomy, set the guidelines and limitations to this grant of taxing powers, viz: "Section 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials, and all other matters relating to the organization and operation of the local units." To recall, prior to the enactment of the Rep. Act No. 7160, also known as the Local Government Code of 1991 (LGC), various measures have been enacted to promote local autonomy. These include the Barrio Charter of 1959, the Local Autonomy Act of 1959, the Decentralization Act of 1967 and the Local Government Code of 1983. Despite these initiatives, however, the shackles of dependence on the national government remained. Local government units were faced with the same problems that hamper their capabilities to participate effectively in the national development efforts, among which are: (a) inadequate tax base, (b) lack of fiscal control over external sources of income, (c) limited authority to prioritize and approve development projects, (d) heavy dependence on external sources of income, and (e) limited supervisory control over personnel of national line agencies. Considered as the most revolutionary piece of legislation on local autonomy, the LGC effectively deals with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws such as the imposition of taxes on forest products, forest concessionaires, mineral products, mining operations, and the like. The LGC likewise provides enough flexibility to impose tax rates in accordance with their needs and capabilities. It does not prescribe graduated fixed rates but merely specifies the minimum and maximum tax rates and leaves the determination of the actual rates to the respective sanggunian.108 And the Court's ruling through Justice Azcuna in Philippine Ports Authority v. City of Iloilo109, provides especially clear and emphatic rationale: 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 NPC's 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. xxxxxxxxx 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.110 How does the majority counter these seemingly valid rationales which establish the soundness of a policy consideration subjecting national instrumentalities to local taxation? Again, by simply ignoring that these doctrines exist. It is unfortunate if the majority deems these cases or the principles of devolution and local autonomy as simply too inconvenient, and relies instead on discredited precedents. Of course, if the majority faces the issues squarely, and expressly discusses why Basco was right and Mactan was wrong, then this entire endeavor of the Court would be more intellectually satisfying. But, this is not a game the majority wants to play. Mischaracterization of My Views on the Tax Exemption Enjoyed by the National Government Instead, the majority engages in an extended attack pertaining to Section 193, mischaracterizing my views on that provision as if I had been interpreting the provision as making "the national government, which itself is a juridical person, subject to tax by local governments since the national government is not included in the enumeration of exempt entities in Section 193."111 Nothing is farther from the truth. I have never advanced any theory of the sort imputed in the majority. My main thesis on the matter merely echoes the explicit provision of Section 193 that unless otherwise provided in the Local Government Code (LGC) all tax exemptions enjoyed by all persons, whether natural or juridical, including GOCCs, were withdrawn upon the effectivity of the Code. Since the provision speaks of withdrawal of tax exemptions of persons, it follows that the exemptions theretofore enjoyed by MIAA which is definitely a person are deemed withdrawn upon the advent of the Code. On the other hand, the provision does not address the question of who are beyond the reach of the taxing power of LGUs. In fine, the grant of tax exemption or the withdrawal thereof assumes that the person or entity involved is subject to tax. Thus, Section 193 does not apply to entities which were never given any tax exemption. This would include the national government and its political subdivisions which, as a general rule, are not subjected to tax in the first place.112 Corollarily, the national government and its political subdivisions do not need tax exemptions. And Section 193 which ordains the withdrawal of tax exemptions is obviously irrelevant to them. Section 193 is in point for the disposition of this case as it forecloses dependence for the grant of tax exemption to MIAA on Section 21 of its charter. Even the majority should concede that the charter section is now ineffectual, as Section 193 withdraws the tax exemptions previously enjoyed by all juridical persons. With Section 193 mandating the withdrawal of tax exemptions granted to all persons upon the effectivity of the LGC, for MIAA to continue enjoying exemption from realty tax, it will have to rely on a basis other than Section 21 of its charter. Lung Center of the Philippines v. Quezon City113 provides another illustrative example of the jurisprudential havoc wrought about by the majority. Pursuant to its charter, the Lung Center was organized as a trust administered by an eponymous GOCC organized with the SEC.114 There is no doubt it is a GOCC, even by the majority's reckoning. Applying the Administrative Code, it is also considered as an agency, the term encompassing even GOCCs. Yet since the Administrative Code definition of "instrumentalities" encompasses agencies, especially those not attached to a line department such as the Lung Center, it also follows that the Lung Center is an instrumentality, which for the majority is exempt from all local government taxes, especially real estate taxes. Yet just in 2004, the Court unanimously held that the Lung Center was not exempt from real property taxes. Can the majority and Lung Center be reconciled? I do not see how, and no attempt is made to demonstrate otherwise. Another key point. The last paragraph of Section 234 specifically asserts that any previous exemptions from realty taxes granted to or enjoyed by all persons, including all GOCCs, are thereby withdrawn. The majority's interpretation of Sections 133 and 234(a) however necessarily implies that all instrumentalities, including GOCCs, can never be subjected to real property taxation under the Code. If that is so, what then is the sense of the last paragraph specifically withdrawing previous tax exemptions to all persons, including

GOCCs when juridical persons such as MIAA are anyway, to his view, already exempt from such taxes under Section 133? The majority's interpretation would effectively render the express and emphatic withdrawal of previous exemptions to GOCCs inutile. Ut magis valeat quam pereat. Hence, where a statute is susceptible of more than one interpretation, the court should adopt such reasonable and beneficial construction which will render the provision thereof operative and effective, as well as harmonious with each other.115 But, the majority seems content rendering as absurd the Local Government Code, since it does not have much use anyway for the Code's general philosophy of fiscal autonomy, as evidently seen by the continued reliance on Basco or Maceda. Local government rule has never been a grant of emancipation from the national government. This is the favorite bugaboo of the opponents of local autonomythe fallacy that autonomy equates to independence. Thus, the conclusion of the majority is that under Section 133(o), MIAA as a government instrumentality is beyond the reach of local taxation because it is not subject to taxes, fees or charges of any kind. Moreover, the taxation of national instrumentalities and agencies by LGUs should be strictly construed against the LGUs, citing Maceda and Basco. No mention is made of the subsequent rejection of these cases in jurisprudence following the Local Government Code, including Mactan. The majority is similarly silent on the general rule under Section 232 on real property taxation or Section 5 on the rules of construction of the Local Government Code. V. MIAA, and not the National Government Is the Owner of the Subject Taxable Properties Section 232 of the Local Government Code explicitly provides that there are exceptions to the general rule on rule property taxation, as "hereafter specifically exempted." Section 234, certainly "hereafter," provides indubitable basis for exempting entities from real property taxation. It provides the most viable legal support for any claim that an governmental entity such as the MIAA is exempt from real property taxes. To repeat: SECTION 234. Exemptions from Real Property Tax. -- The following are exempted from payment of the real property tax: xxx (f) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person: The majority asserts that the properties owned by MIAA are owned by the Republic of the Philippines, thus placing them under the exemption under Section 234. To arrive at this conclusion, the majority employs four main arguments. MIAA Property Is Patrimonial And Not Part of Public Dominion The majority claims that the Airport Lands and Buildings are property of public dominion as defined by the Civil Code, and therefore owned by the State or the Republic of the Philippines. But as pointed out by Justice Azcuna in the first PPA case, if indeed a property is considered part of the public dominion, such property is "owned by the general public and cannot be declared to be owned by a public corporation, such as [the PPA]." Relevant on this point are the following provisions of the MIAA charter: Section 3. Creation of the Manila International Airport Authority. xxx The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. xxx Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. Section 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities,

runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. Clearly, it is the MIAA, and not either the State, the Republic of the Philippines or the national government that asserts legal title over the Airport Lands and Buildings. There was an express transfer of ownership between the MIAA and the national government. If the distinction is to be blurred, as the majority does, between the State/Republic/Government and a body corporate such as the MIAA, then the MIAA charter showcases the remarkable absurdity of an entity transferring property to itself. Nothing in the Civil Code or the Constitution prohibits the State from transferring ownership over property of public dominion to an entity that it similarly owns. It is just like a family transferring ownership over the properties its members own into a family corporation. The family exercises effective control over the administration and disposition of these properties. Yet for several purposes under the law, such as taxation, it is the corporation that is deemed to own those properties. A similar situation obtains with MIAA, the State, and the Airport Lands and Buildings. The second Public Ports Authority case, penned by Justice Callejo, likewise lays down useful doctrines in this regard. The Court refuted the claim that the properties of the PPA were owned by the Republic of the Philippines, noting that PPA's charter expressly transferred ownership over these properties to the PPA, a situation which similarly obtains with MIAA. The Court even went as far as saying that the fact that the PPA "had not been issued any torrens title over the port and port facilities and appurtenances is of no legal consequence. A torrens title does not, by itself, vest ownership; it is merely an evidence of title over properties. xxx It has never been recognized as a mode of acquiring ownership over real properties."116 The Court further added: xxx The bare fact that the port and its facilities and appurtenances are accessible to the general public does not exempt it from the payment of real property taxes. It must be stressed that the said port facilities and appurtenances are the petitioner's corporate patrimonial properties, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. The petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its proprietary interests xxx The petitioner is even empowered to invest its funds in such government securities approved by the Board of Directors, and derives its income from rates, charges or fees for the use by vessels of the port premises, appliances or equipment. xxx Clearly then, the petitioner is a profit-earning corporation; hence, its patrimonial properties are subject to tax.117 There is no doubt that the properties of the MIAA, as with the PPA, are in a sense, for public use. A similar argument was propounded by the Light Rail Transit Authority in Light Rail Transit Authority v. Central Board of Assessment,118 which was cited in Philippine Ports Authority and deserves renewed emphasis. The Light Rail Transit Authority (LRTA), a body corporate, "provides valuable transportation facilities to the paying public."119 It claimed that its carriage-ways and terminal stations are immovably attached to government-owned national roads, and to impose real property taxes thereupon would be to impose taxes on public roads. This view did not persuade the Court, whose decision was penned by Justice (now Chief Justice) Panganiban. It was noted: Though the creation of the LRTA was impelled by public service to provide mass transportation to alleviate the traffic and transportation situation in Metro Manila its operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives. Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation. xxx Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations.

We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom.120 xxx Even granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity.121 There is no substantial distinction between the properties held by the PPA, the LRTA, and the MIAA. These three entities are in the business of operating facilities that promote public transportation. The majority further asserts that MIAA's properties, being part of the public dominion, are outside the commerce of man. But if this is so, then why does Section 3 of MIAA's charter authorize the President of the Philippines to approve the sale of any of these properties? In fact, why does MIAA's charter in the first place authorize the transfer of these airport properties, assuming that indeed these are beyond the commerce of man? No Trust Has Been Created Over MIAA Properties For The Benefit of the Republic The majority posits that while MIAA might be holding title over the Airport Lands and Buildings, it is holding it in trust for the Republic. A provision of the Administrative Code is cited, but said provision does not expressly provide that the property is held in trust. Trusts are either express or implied, and only those situations enumerated under the Civil Code would constitute an implied trust. MIAA does not fall within this enumeration, and neither is there a provision in MIAA's charter expressly stating that these properties are being held in trust. In fact, under its charter, MIAA is obligated to retain up to eighty percent (80%) of its gross operating income, not an inconsequential sum assuming that the beneficial owner of MIAA's properties is actually the Republic, and not the MIAA. Also, the claim that beneficial ownership over the MIAA remains with the government and not MIAA is ultimately irrelevant. Section 234(a) of the Local Government Code provides among those exempted from paying real property taxes are "[r]eal property owned by the [Republic] except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." In the context of Section 234(a), the identity of the beneficial owner over the properties is not determinative as to whether the exemption avails. It is the identity of the beneficial user of the property owned by the Republic or its political subdivisions that is crucial, for if said beneficial user is a taxable person, then the exemption does not lie. I fear the majority confuses the notion of what might be construed as "beneficial ownership" of the Republic over the properties of MIAA as nothing more than what arises as a consequence of the fact that the capital of MIAA is contributed by the National Government.122 If so, then there is no difference between the State's ownership rights over MIAA properties than those of a majority stockholder over the properties of a corporation. Even if such shareholder effectively owns the corporation and controls the disposition of its assets, the personality of the stockholder remains separately distinct from that of the corporation. A brief recall of the entrenched rule in corporate law is in order: The first consequence of the doctrine of legal entity regarding the separate identity of the corporation and its stockholders insofar as their obligations and liabilities are concerned, is spelled out in this general rule deeply entrenched in American jurisprudence: Unless the liability is expressly imposed by constitutional or statutory provisions, or by the charter, or by special agreement of the stockholders, stockholders are not personally liable for debts of the corporation either at law or equity. The reason is that the corporation is a legal entity or artificial person, distinct from the members who compose it, in their individual capacity; and when it contracts a debt, it is the debt of the legal entity or artificial person the corporation and not the debt of the individual members. (13A Fletcher Cyc. Corp. Sec. 6213)

The entirely separate identity of the rights and remedies of a corporation itself and its individual stockholders have been given definite recognition for a long time. Applying said principle, the Supreme Court declared that a corporation may not be made to answer for acts or liabilities of its stockholders or those of legal entities to which it may be connected, or vice versa. (Palay Inc. v. Clave et. al. 124 SCRA 638) It was likewise declared in a similar case that a bonafide corporation should alone be liable for corporate acts duly authorized by its officers and directors. (Caram Jr. v. Court of Appeals et.al. 151 SCRA, p. 372)123 It bears repeating that MIAA under its charter, is expressly conferred the right to exercise all the powers of a corporation under the Corporation Law, including the right to corporate succession, and the right to sue and be sued in its corporate name.124 The national government made a particular choice to divest ownership and operation of the Manila International Airport and transfer the same to such an empowered entity due to perceived advantages. Yet such transfer cannot be deemed consequence free merely because it was the State which contributed the operating capital of this body corporate. The majority claims that the transfer the assets of MIAA was meant merely to effect a reorganization. The imputed rationale for such transfer does not serve to militate against the legal consequences of such assignment. Certainly, if it was intended that the transfer should be free of consequence, then why was it effected to a body corporate, with a distinct legal personality from that of the State or Republic? The stated aims of the MIAA could have very well been accomplished by creating an agency without independent juridical personality. VI. MIAA Performs Proprietary Functions Nonetheless, Section 234(f) exempts properties owned by the Republic of the Philippines or its political subdivisions from realty taxation. The obvious question is what comprises "the Republic of the Philippines." I think the key to understanding the scope of "the Republic" is the phrase "political subdivisions." Under the Constitution, political subdivisions are defined as "the provinces, cities, municipalities and barangays."125 In correlation, the Administrative Code of 1987 defines "local government" as referring to "the political subdivisions established by or in accordance with the Constitution." Clearly then, these political subdivisions are engaged in the exercise of sovereign functions and are accordingly exempt. The same could be said generally of the national government, which would be similarly exempt. After all, even with the principle of local autonomy, it is inherently noxious and selfdefeatist for local taxation to interfere with the sovereign exercise of functions. However, the exercise of proprietary functions is a different matter altogether. Sovereign and Proprietary Functions Distinguished Sovereign or constituent functions are those which constitute the very bonds of society and are compulsory in nature, while ministrant or proprietary functions are those undertaken by way of advancing the general interests of society and are merely optional.126 An exhaustive discussion on the matter was provided by the Court in Bacani v. NACOCO:127 xxx This institution, when referring to the national government, has reference to what our Constitution has established composed of three great departments, the legislative, executive, and the judicial, through which the powers and functions of government are exercised. These functions are twofold: constituent and ministrant. The former are those which constitute the very bonds of society and are compulsory in nature; the latter are those that are undertaken only by way of advancing the general interests of society, and are merely optional. President Wilson enumerates the constituent functions as follows: "'(1) The keeping of order and providing for the protection of persons and property from violence and robbery. '(2) The fixing of the legal relations between man and wife and between parents and children. '(3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for debt or for crime.

'(4) The determination of contract rights between individuals. '(5) The definition and punishment of crime. '(6) The administration of justice in civil cases. '(7) The determination of the political duties, privileges, and relations of citizens. '(8) Dealings of the state with foreign powers: the preservation of the state from external danger or encroachment and the advancement of its international interests.'" (Malcolm, The Government of the Philippine Islands, p. 19.) The most important of the ministrant functions are: public works, public education, public charity, health and safety regulations, and regulations of trade and industry. The principles determining whether or not a government shall exercise certain of these optional functions are: (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do these things which by its very nature it is better equipped to administer for the public welfare than is any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.) From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private corporations under the Corporation Law.128 The Court in Bacani rejected the proposition that the National Coconut Corporation exercised sovereign functions: Does the fact that these corporations perform certain functions of government make them a part of the Government of the Philippines? The answer is simple: they do not acquire that status for the simple reason that they do not come under the classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it was organized with the purpose of "adjusting the coconut industry to a position independent of trade preferences in the United States" and of providing "Facilities for the better curing of copra products and the proper utilization of coconut by-products," a function which our government has chosen to exercise to promote the coconut industry, however, it was given a corporate power separate and distinct from our government, for it was made subject to the provisions of our Corporation Law in so far as its corporate existence and the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other private corporations, and in this sense it is an entity different from our government. As this Court has aptly said, "The mere fact that the Government happens to be a majority stockholder does not make it a public corporation" (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). "By becoming a stockholder in the National Coal Company, the Government divested itself of its sovereign character so far as respects the transactions of the corporation. . . . Unlike the Government, the corporation may be sued without its consent, and is subject to taxation. Yet the National Coal Company remains an agency or instrumentality of government." (Government of the Philippine Islands vs. Springer, 50 Phil., 288.) The following restatement of the entrenched rule by former SEC Chairperson Rosario Lopez bears noting: The fact that government corporations are instrumentalities of the State does not divest them with immunity from suit. (Malong v. PNR, 138 SCRA p. 63) It is settled that when the government engages in a particular business through the instrumentality of a corporation, it divests itself pro hoc vice of its sovereign character so as to subject itself to the rules governing private corporations, (PNB v. Pabolan 82 SCRA 595) and is to be treated like any other corporation. (PNR v. Union de Maquinistas Fogonero y Motormen, 84 SCRA 223) In the same vein, when the government becomes a stockholder in a corporation, it does not exercise sovereignty as such. It acts merely as a corporator and exercises no other power in the management of the

affairs of the corporation than are expressly given by the incorporating act. Nor does the fact that the government may own all or a majority of the capital stock take from the corporation its character as such, or make the government the real party in interest. (Amtorg Trading Corp. v. US 71 F2d 524, 528)129 MIAA Performs Proprietary Functions No Matter How Vital to the Public Interest The simple truth is that, based on these accepted doctrinal tests, MIAA performs proprietary functions. The operation of an airport facility by the State may be imbued with public interest, but it is by no means indispensable or obligatory on the national government. In fact, as demonstrated in other countries, it makes a lot of economic sense to leave the operation of airports to the private sector. The majority tries to becloud this issue by pointing out that the MIAA does not compete in the marketplace as there is no competing international airport operated by the private sector; and that MIAA performs an essential public service as the primary domestic and international airport of the Philippines. This premise is false, for one. On a local scale, MIAA competes with other international airports situated in the Philippines, such as Davao International Airport and MCIAA. More pertinently, MIAA also competes with other international airports in Asia, at least. International airlines take into account the quality and conditions of various international airports in determining the number of flights it would assign to a particular airport, or even in choosing a hub through which destinations necessitating connecting flights would pass through. Even if it could be conceded that MIAA does not compete in the market place, the example of the Philippine National Railways should be taken into account. The PNR does not compete in the marketplace, and performs an essential public service as the operator of the railway system in the Philippines. Is the PNR engaged in sovereign functions? The Court, in Malong v. Philippine National Railways,130 held that it was not.131 Even more relevant to this particular case is Teodoro v. National Airports Corporation, 132 concerning the proper appreciation of the functions performed by the Civil Aeronautics Administration (CAA), which had succeeded the defunction National Airports Corporation. The CAA claimed that as an unincorporated agency of the Republic of the Philippines, it was incapable of suing and being sued. The Court noted: Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concession rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management. These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. And if it has the power to sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should have the power to prosecute and defend suits for and against the National Airports Corporation, having acquired all the properties, funds and choses in action and assumed all the liabilities of the latter. To deny the National Airports Corporation's creditors access to the courts of justice against the Civil Aeronautics Administration is to say that the government could impair the obligation of its corporations by the simple expedient of converting them into unincorporated agencies. 133 xxx Eventually, the charter of the CAA was revised, and it among its expanded functions was "[t]o administer, operate, manage, control, maintain and develop the Manila International Airport."134 Notwithstanding this expansion, in the 1988 case of CAA v. Court of Appeals135 the Court reaffirmed the ruling that the CAA was engaged in "private or non-governmental functions."136 Thus, the Court had already ruled that the predecessor agency of MIAA, the CAA was engaged in private or non-governmental functions. These are more precedents ignored by the majority. The following observation from the Teodoro case very well applies to MIAA. The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it was created, like the National Airports Corporation, not to maintain a necessary function of

government, but to run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the convenience of the traveling public. It is engaged in an enterprise which, far from being the exclusive prerogative of state, may, more than the construction of public roads, be undertaken by private concerns.137 If the determinative point in distinguishing between sovereign functions and proprietary functions is the vitality of the public service being performed, then it should be noted that there is no more important public service performed than that engaged in by public utilities. But notably, the Constitution itself authorizes private persons to exercise these functions as it allows them to operate public utilities in this country138 If indeed such functions are actually sovereign and belonging properly to the government, shouldn't it follow that the exercise of these tasks remain within the exclusive preserve of the State? There really is no prohibition against the government taxing itself,139 and nothing obscene with allowing government entities exercising proprietary functions to be taxed for the purpose of raising the coffers of LGUs. On the other hand, it would be an even more noxious proposition that the government or the instrumentalities that it owns are above the law and may refuse to pay a validly imposed tax. MIAA, or any similar entity engaged in the exercise of proprietary, and not sovereign functions, cannot avoid the adverseeffects of tax evasion simply on the claim that it is imbued with some of the attributes of government. VII. MIAA Property Not Subject to Execution Sale Without Consent Of the President. Despite the fact that the City of Paraaque ineluctably has the power to impose real property taxes over the MIAA, there is an equally relevant statutory limitation on this power that must be fully upheld. Section 3 of the MIAA charter states that "[a]ny portion [of the [lands transferred, conveyed and assigned to the ownership and administration of the MIAA] shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines."140 Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the collection of delinquent real property taxes. While the Local Government Code withdrew all previous local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other hand shielding its properties from any form of sale or disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It simply means that the LGU has to find another way to collect the taxes due from MIAA, thus paving the way for a mutually acceptable negotiated solution.141 There are several other reasons this statutory limitation should be upheld and applied to this case. It is at this juncture that the importance of the Manila Airport to our national life and commerce may be accorded proper consideration. The closure of the airport, even by reason of MIAA's legal omission to pay its taxes, will have an injurious effect to our national economy, which is ever reliant on air travel and traffic. The same effect would obtain if ownership and administration of the airport were to be transferred to an LGU or some other entity which were not specifically chartered or tasked to perform such vital function. It is for this reason that the MIAA charter specifically forbids the sale or disposition of MIAA properties without the consent of the President. The prohibition prevents the peremptory closure of the MIAA or the hampering of its operations on account of the demands of its creditors. The airport is important enough to be sheltered by legislation from ordinary legal processes. Section 3 of the MIAA charter may also be appreciated as within the proper exercise of executive control by the President over the MIAA, a GOCC which despite its separate legal personality, is still subsumed within the executive branch of government. The power of executive control by the President should be upheld so long as such exercise does not contravene the Constitution or the law, the President having the corollary duty to faithfully execute the Constitution and the laws of the land.142 In this case, the exercise of executive control is precisely recognized and authorized by the legislature, and it should be upheld even if

it comes at the expense of limiting the power of local government units to collect real property taxes. Had this petition been denied instead with Mactan as basis, but with the caveat that the MIAA properties could not be subject of execution sale without the consent of the President, I suspect that the parties would feel little distress. Through such action, both the Local Government Code and the MIAA charter would have been upheld. The prerogatives of LGUs in real property taxation, as guaranteed by the Local Government Code, would have been preserved, yet the concerns about the ruinous effects of having to close the Manila International Airport would have been averted. The parties would then be compelled to try harder at working out a compromise, a task, if I might add, they are all too willing to engage in. 143 Unfortunately, the majority will cause precisely the opposite result of unremitting hostility, not only to the City of Paraaque, but to the thousands of LGUs in the country. VIII. Summary of Points My points may be summarized as follows: 1) Mactan and a long line of succeeding cases have already settled the rule that under the Local Government Code, enacted pursuant to the constitutional mandate of local autonomy, all natural and juridical persons, even those GOCCs, instrumentalities and agencies, are no longer exempt from local taxes even if previously granted an exemption. The only exemptions from local taxes are those specifically provided under the Local Government Code itself, or those enacted through subsequent legislation. 2) Under the Local Government Code, particularly Section 232, instrumentalities, agencies and GOCCs are generally liable for real property taxes. The only exemptions therefrom under the same Code are provided in Section 234, which include real property owned by the Republic of the Philippines or any of its political subdivisions. 3) The subject properties are owned by MIAA, a GOCC, holding title in its own name. MIAA, a separate legal entity from the Republic of the Philippines, is the legal owner of the properties, and is thus liable for real property taxes, as it does not fall within the exemptions under Section 234 of the Local Government Code. 4) The MIAA charter expressly bars the sale or disposition of MIAA properties. As a result, the City of Paraaque is prohibited from seizing or selling these properties by public auction in order to satisfy MIAA's tax liability. In the end, MIAA is encumbered only by a limited lien possessed by the City of Paraaque. On the other hand, the majority's flaws are summarized as follows: 1) The majority deliberately ignores all precedents which run counter to its hypothesis, including Mactan. Instead, it relies and directly cites those doctrines and precedents which were overturned by Mactan. By imposing a different result than that warranted by the precedents without explaining why Mactan or the other precedents are wrong, the majority attempts to overturn all these ruling sub silencio and without legal justification, in a manner that is not sanctioned by the practices and traditions of this Court. 2) The majority deliberately ignores the policy and philosophy of local fiscal autonomy, as mandated by the Constitution, enacted under the Local Government Code, and affirmed by precedents. Instead, the majority asserts that there is no sound rationale for local governments to tax national government instrumentalities, despite the blunt existence of such rationales in the Constitution, the Local Government Code, and precedents. 3) The majority, in a needless effort to justify itself, adopts an extremely strained exaltation of the Administrative Code above and beyond the Corporation Code and the various legislative charters, in order to impose a wholly absurd definition of GOCCs that effectively declassifies innumerable existing GOCCs, to catastrophic legal consequences. 4) The majority asserts that by virtue of Section 133(o) of the Local Government Code, all national government agencies and instrumentalities are exempt from any form of local taxation, in contravention of several precedents to the contrary and the proviso under Section 133, "unless otherwise provided herein [the Local Government Code]." 5) The majority erroneously argues that MIAA holds its properties in trust for the Republic of the

Philippines, and that such properties are patrimonial in character. No express or implied trust has been created to benefit the national government. The legal distinction between sovereign and proprietary functions, as affirmed by jurisprudence, likewise preclude the classification of MIAA properties as patrimonial. IX. Epilogue If my previous discussion still fails to convince on how wrong the majority is, then the following points are well-worth considering. The majority cites the Bangko Sentral ng Pilipinas (Bangko Sentral) as a government instrumentality that exercises corporate powers but not organized as a stock or non-stock corporation. Correspondingly for the majority, the Bangko ng Sentral is exempt from all forms of local taxation by LGUs by virtue of the Local Government Code. Section 125 of Rep. Act No. 7653, The New Central Bank Act, states: SECTION 125. Tax Exemptions. The Bangko Sentral shall be exempt for a period of five (5) years from the approval of this Act from all national, provincial, municipal and city taxes, fees, charges and assessments. The New Central Bank Act was promulgated after the Local Government Code if the BSP is already preternaturally exempt from local taxation owing to its personality as an "government instrumentality," why then the need to make a new grant of exemption, which if the majority is to be believed, is actually a redundancy. But even more tellingly, does not this provision evince a clear intent that after the lapse of five (5) years, that the Bangko Sentral will be liable for provincial, municipal and city taxes? This is the clear congressional intent, and it is Congress, not this Court which dictates which entities are subject to taxation and which are exempt. Perhaps this notion will offend the majority, because the Bangko Sentral is not even a government owned corporation, but a government instrumentality, or perhaps "loosely", a "government corporate entity." How could such an entity like the Bangko Sentral , which is not even a government owned corporation, be subjected to local taxation like any mere mortal? But then, see Section 1 of the New Central Bank Act: SECTION 1. Declaration of Policy. The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy. Apparently, the clear legislative intent was to create a government corporation known as the Bangko Sentral ng Pilipinas. But this legislative intent, the sort that is evident from the text of the provision and not the one that needs to be unearthed from the bowels of the archival offices of the House and the Senate, is for naught to the majority, as it contravenes the Administrative Code of 1987, which after all, is "the governing law defining the status and relationship of government agencies and instrumentalities" and thus superior to the legislative charter in determining the personality of a chartered entity. Its like saying that the architect who designed a school building is better equipped to teach than the professor because at least the architect is familiar with the geometry of the classroom. Consider further the example of the Philippine Institute of Traditional and Alternative Health Care (PITAHC), created by Republic Act No. 8243 in 1997. It has similar characteristics as MIAA in that it is established as a body corporate,144 and empowered with the attributes of a corporation,145 including the power to purchase or acquire real properties.146 However the PITAHC has no capital stock and no members, thus following the majority, it is not a GOCC. The state policy that guides PITAHC is the development of traditional and alternative health care,147 and its objectives include the promotion and advocacy of alternative, preventive and curative health care modalities that have been proven safe, effective and cost effective.148 "Alternative health care modalities" include "other forms of non-allophatic, occasionally non-indigenous or imported healing methods" which include, among others "reflexology, acupuncture, massage, acupressure" and chiropractics.149

Given these premises, there is no impediment for the PITAHC to purchase land and construct thereupon a massage parlor that would provide a cheaper alternative to the opulent spas that have proliferated around the metropolis. Such activity is in line with the purpose of the PITAHC and with state policy. Is such massage parlor exempt from realty taxes? For the majority, it is, for PITAHC is an instrumentality or agency exempt from local government taxation, which does not fall under the exceptions under Section 234 of the Local Government Code. Hence, this massage parlor would not just be a shelter for frazzled nerves, but for taxes as well. Ridiculous? One might say, certainly a decision of the Supreme Court cannot be construed to promote an absurdity. But precisely the majority, and the faulty reasoning it utilizes, opens itself up to all sorts of mischief, and certainly, a tax-exempt massage parlor is one of the lesser evils that could arise from the majority ruling. This is indeed a very strange and very wrong decision. I dissent. DANTE O. TINGA Associate Justice Footnotes 1 Dated 16 September 1983. 2 Dated 26 July 1987. 3 Section 3, MIAA Charter. 4 Section 22, MIAA Charter. 5 Section 3, MIAA Charter. 6 Rollo, pp. 22-23. 7 Under Rule 45 of the 1997 Rules of Civil Procedure. 8 330 Phil. 392 (1996). 9 MIAA Charter as amended by Executive Order No. 298. See note 2. 10 Batas Pambansa Blg. 68. 11 Section 11 of the MIAA Charter provides: Contribution to the General Fund for the Maintenance and Operation of other Airports. Within thirty (30) days after the close of each quarter, twenty percentum (20%) of the gross operating income, excluding payments for utilities of tenants and concessionaires and terminal fee collections, shall be remitted to the General Fund in the National Treasury to be used for the maintenance and operation of other international and domestic airports in the country. Adjustments in the amount paid by the Authority to the National Treasury under this Section shall be made at the end of each year based on the audited financial statements of the Authority. 12 Section 5(j), MIAA Charter. 13 Section 6, MIAA Charter. 14 Section 5(k), MIAA Charter. 15 Section 5(o), MIAA Charter. 16 Third Whereas Clause, MIAA Charter. 17 Id.

18 Constitution, Art. X, Sec. 5. 19 274 Phil. 1060, 1100 (1991) quoting C. Dallas Sands, 3 Statutes and Statutory Construction 207. 20 274 Phil. 323, 339-340 (1991). 21 Constitution, Art. VI, Sec. 28(1). 22 First Whereas Clause, MIAA Charter. 23 30 Phil. 602, 606-607 (1915). 24 102 Phil. 866, 869-870 (1958). 25 PNB v. Puruganan, 130 Phil. 498 (1968). See also Martinez v. CA, 155 Phil. 591 (1974). 26 MIAA Charter, Sec.16. 27 Chavez v. Public Estates Authority, 433 Phil. 506 (2002). 28 Section 3, MIAA Charter. 29 G.R. No. 144104, 29 June 2004, 433 SCRA 119, 138. 30 Republic Act No. 7653, 14 June 1993, Sec. 5. 31 Executive Order No. 1061, 5 November 1985, Sec. 3(p). 32 Republic Act No. 4850, 18 July 1966, Sec. 5. 33 Presidential Decree No. 977, 11 August 1976, Section 4(j). 34 Republic Act No. 7227, 13 March 1992, Sec. 3. 35 Presidential Decree No. 857, 23 December 1975, Sec. 6(b)(xvi). 36 Republic Act No. 4663, 18 June 1966, Sec. 7(m). 37 Republic Act No. 4567, 19 June 1965, Sec. 7(m). 38 Republic Act No. 7621, 26 June 1992, Sec. 7(m). 39 Republic Act No. 4156, 20 June 1964. Section 4(b). 40 Republic Act No. 3844, 8 August 1963, as amended by Republic Act No. 7907, 23 February 1995. 41 Executive Order No. 81, 3 December 1986. 42 Republic Act No. 8175, 29 December 1995. 43 Presidential Decree No. 252, 21 July 1973, as amended by Presidential Decree No. 1071, 25 January 1977 and Executive Order No. 1067, 25 November 1985. 44 Executive Order No. 80, 3 December 1986. 45 III Records, Constitutional Commission 63 (22 August 1986). 46 2003 ed., 1181. 47 Manila International Airport Authority v. Airspan Corporation, G.R. No. 157581, 1 December 2004, 445 SCRA 471.

TINGA, J.
1 Per Department of Interior and Local Government. See also "Summary" from the National

Statistical Coordination Board, http://www.nscb.gov.ph/activestats /psgc/NSCB_PSGC_SUMMARY_DEC04.pdf. 2 330 Phil. 392 (1996). 3 G.R. No. 91649, 14 May 1991, 197 SCRA 52. 4 451 Phil. 683, 698 (2003). 5 364 Phil. 843, 855 (1999). 6 449 Phil. 233 (2003). 7 G.R. No. 152675 & 152771, 28 April 2004. 8 Decision, p. 24. 9 G.R. No. 144104, 29 June 2004, 433 SCRA 119. 10 Supra note 8. 11 G.R. No. 127383, 18 August 2005, 467 SCRA 280. Per the author of this Dissenting Opinion. 12 Nonetheless, the Court noted therein GSIS's exemption from real property taxes was reenacted in 1997, and the GSIS at present is exempt from such taxes under the GSIS Act of 1997. Id., at 299. 13 G.R. No. 109791, 14 July 2003, 406 SCRA 88, and G.R. No. 143214, 11 November 2004, 442 SCRA 175, respectively. 14 118 Phil. 1354 (1963). 15 396 Phil. 860 (2000). 16 Supra note 8. 17 91 Phil 203 (1952). 18 G.R. No. L-51806, 8 November 1988, 167 SCRA 28. 19 G.R. No. 155692, 23 October 2003, 414 SCRA 327. 20 Id. at 333, citing Section 10, Book IV, Title III, Chapter 3, Administrative Code of 1987. 21 G.R. No. 165827, 16 June 2006. 22 G.R. No. 147192, 27 June 2006. 23 Supra note 8. 24 See Mendoza v. De Leon, 33 Phil. 508 (1916). 25 Mactan, supra note 2, at 397-398. 26 Section 193, Rep. Act No. 7160. 27 Section 232, Rep. Act No. 7160. 28 Section 234, Rep. Act No. 7160. Emphasis supplied. 29 Id. at 411-413. 30 See City of Davao v. RTC, supra note 11, at 293. 31 Supra note 3. 32 Id. at 63-65.

33 G.R. No. 88921, 31 May 1991, 197 SCRA 771. 34 Id. at 799. 35 Mactan, supra note 2, at 419-420. 36 Supra note 6. 37 Id. at 250-251. 38 G.R. No. 109791, 14 July 2003, 406 SCRA 88. 39 Id. at 99-100. 40 Supra note 21. 41 Id. 42 G.R. No. 143214, 11 November 2004, 442 SCRA 175. 43 Id., at 184. 44 Id. at 185-186, citing MCIAA v. Marcos, supra note 2. 45 Supra note 11. 46 P.D. No. 1981. See City of Davao v. RTC, supra note 40, at 289. 47 Id. at 287-288. 48 32 Phil. 36, 49; cited in City of Davao v. RTC, supra note 40 at 296-297. 49 Id. 50 Supra note 22. 51 Id. 52 Decision, p. 6. 53 MIAA's Charter (E.O No. 903, as amended) provides: Section 3. Creation of the Manila International Airport Authority. xxx The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. xxx Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. Section 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. On the other hand, MCIAA's charter (Rep. Act No. 6958) provides: Section 15. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interest and privileges relating to airport works or air operations, including all equipment which are necessary for the operation of air navigation, aerodrome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, That

the operational control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach control office and the area control center shall be retained by the Air Transportation Office. xxx 54 See Section 3, E.O. 903 (as amended), infra note 140; and Section Section 4(c), Rep. Act No. 6958, which qualifies the power of the MCIAA to sell its properties, providing that "any asset located in the Mactan International Airport important to national security shall not be subject to alienation or mortgage by the Authority nor to transfer to any entity other than the National Government." 55 See Section 16, E.O. 903 (as amended) and Section 13, Rep. Act No. 6958. 56 See Articles 40 to 43, Civil Code. 57 See Articles 44 to 47, Civil Code. 58 This is apparent from such assertions as "When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers." See Decision, p. 9-10. 59 Decision, p. 9. 60 See Section 2(10), E.O. 292. 61 See Section 2(4), E.O No. 292. 62 50 Phil. 259 (1927). 63 Id., at 288. 64 See Sec. 5, Rep. Act No. 6395. 65 Section 3, Corporation Code. 66 See Section 13, Rep. Act No. 6395. 67 See Section 1, Rep. Act No. 7875. 68 See Section 16(i), Rep. Act No. 7875. 69 See Section 3, Rep. Act 8282. 70 Supra note 14. 71 See Section 2(b), Rep. Act No. 7656, which defines GOCCs as "corporations organized as a stock or non-stock corporation xxx" 72 See Rep. Act No. 7656, the pertinent provisions of which read: c. 3. Dividends.All government-owned or -controlled corporations shall declare and remit at least fifty percent (50%) of their annual net earnings as cash, stock or property dividends to the National Government. This section shall also apply to those governmentowned or -controlled corporations whose profit distribution is provided by their respective charters or by special law, but shall exclude those enumerated in Section 4 hereof: Provided, That such dividends accruing to the National Government shall be received by the National Treasury and recorded as income of the General Fund. Sec. 4. Exemptions.The provisions of the preceding section notwithstanding, government-owned or -controlled corporations created or organized by law to administer real or personal properties or funds held in trust for the use and the benefit of its members, shall not be covered by this Act such as, but not limited to: the Government Service Insurance System, the Home Development Mutual Fund, the Employees Compensation Commission, the Overseas Workers Welfare Administration, and the Philippine Medical Care Commission.

73 See Pres. Decree No. 857 (as amended). 74 See Section 10, Pres. Decree No. 857. 75 See Section 11, Pres. Decree No. 857. 76 See Rep. Act No. 7227. 77 See Section 6, Rep. Act No. 7227. 78 See Rep. Act No. 7916. 79 See Section 47, Rep. Act No. 7916 in relation to Section 5, Pres. Decree No. 66. 80 See Executive Order No. 603, as amended. 81 See Article 6, Section 15 of Executive Order No. 603, as amended. 82 See Rep. Act No. 7653. If there is any doubt whether the BSP was intended to be covered by Rep. Act No. 7656, see Section 2(b), Rep. Act No. 7656, which states that "This term [GOCCs shall also include financial institutions, owned or controlled by the National Government, but shall exclude acquired asset corporations, as defined in the next paragraphs, state universities, and colleges." 83 See Section 2, Rep. Act No. 7653. 84 See Sections 43 & 44, Rep. Act No. 7653. 85 See Rep. Act No. 6395. 86 Supra note 35. 87 See Decision, p. 10. 88 Id. at 10-11. 89 Id. 90 See Rep. Act No. 3034. 91 See Rep. Act No. 4132. 92 See Rep. Act No. 6070. 93 See Rep. Act No. 5920. 94 See Rep. Act No. 4071. 95 See e.g., Sections 1 & 2, Rep. Act No. 6070. Section 1. Declaration of Policy. It is hereby declared to be the policy of the Congress to foster the accelerated and balanced growth of the Province of Ilocos Sur, within the context of national plans and policies for social and economic development, through the leadership, guidance, and support of the government. To achieve this end, it is recognized that a government corporation should be created for the purpose of drawing up the necessary plans of provincial development; xxx Sec. 2. Ilocos Sur Development Authority created. There is hereby created a body corporate to be known as the Ilocos Sur Development Authority xxx. The Authority shall execute the powers and functions herein vested and conferred upon it in such manner as will in its judgment, aid to the fullest possible extent in carrying out the aims and purposes set forth below." 96 See Art. 37, Civil Code, which provides in part, "Juridical capacity, which is the fitness to be the subject of legal relations"

97 See rollo, p. 18. "Petitioner [MIAA] is a government-owned and controlled corporation with original charter as it was created by virtue of Executive Order No. 903 issued by then President Ferdinand E. Marcos on July 21, 1983, as amended by Executive Order No. 298 issued by President Corazon C. Aquino on July 26, 1987, and with office address at the MIAA Administration Bldg Complex, MIAA Road, Pasay City." (emphasis supplied). 98 See "Department of Budget and Management Web Linkages," http://www.dbm. gov.ph/web_linkages.htm (Last visited 25 February 2005). 99 G.R. No. 104217, 5 December 1994, 238 SCRA 714; per Quiazon, J.. "Petitioner MIAA is a government-owned and controlled corporation for the purpose, among others, of encouraging and promoting international and domestic air traffic in the Philippines as a means of making the Philippines a center of international trade and tourism and accelerating the development of the means of transportation and communications in the country". Id. at 716. 100 See Section 23, Chapter 6, Title XV, Book IV, Administrative Code of 1987. 101 Supra note 60. 102 Supra note 8. 103 Supra note 6. 104 Assuming that there is conflict between Section 133(o), Section 193, Section 232 and Section 234 of the Local Government Code, the rule in statutory construction is, "If there be no such ground for choice between inharmonious provisions or sections, the latter provision or section, being the last expression of the legislative will, must, in construction, vacate the former to the extent of the repugnancy. It has been held that in case of irreconcilable conflict between two provisions of the same statute, the last in order of position is frequently held to prevail, unless it clearly appears that the intent of the legislature is otherwise." R. Agpalo, Statutory Construction (3rd ed., 1995), p. 201; citing Lichauco & Co. v. Apostol, 44 Phil. 138 (1922); Cuyegkeng v. Cruz, 108 Phil. 1147 (1960); Montenegro v. Castaeda, 91 Phil. 882 (1952). 105 Decision, p. 12. 106 Supra note 6. 107 Id. at 261-262. 108 Id., at 248-250. 109 Supra note 38. 110 Id, at 102; citing National Power Corp. v. Presiding Judge, RTC, Br. XXV, 190 SCRA 477 (1990). 111 Decision, p. 25. 112 "Unless otherwise expressed in the tax law, the government and its political subdivisions are exempt therefrom." J. Vitug and E. Acosta, Tax Law and Jurisprudence (2nd ed., 2000), at 36. 113 Supra note 9. 114 See P.D. No. 1423. 115 R. Agpalo, Statutory Construction (3rd ed., 1995), at 199; citing Javellana v. Tayo, G.R. No. 18919, 29 December 1982, 6 SCRA 1042 (1962); Radiola-Toshiba Phil., Inc. v. IAC, 199 SCRA 373 (1991). 116 PPA v. City of Iloilo, supra note 42. 117 Id., at 186-187.

118 Supra note 15. 119 Id. at 869. 120 Id. at 871. 121 Id. at 872. 122 See Section 10, E.O. No. 903. 123 R. Lopez, I The Corporation Code of the Philippines Annotated, pp. 15-16 (1994). 124 See Section 5, E.O. No. 903. 125 See Section 1, Article X of the Constitution, which reads: "The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities and barangays xxx" 126 Romualdez-Yap v. CSC, G.R. No. 104226, 12 August 1993, 225 SCRA 285, 294. 127 100 Phil. 468. (1956) 128 Id., at 471-473. 129 Lopez, supra note 123 at 67. 130 G.R. No. L-49930, 7 August 1985, 138 SCRA 63. 131 "Did the State act in a sovereign capacity or in a corporate capacity when it organized the PNR for the purpose of engaging in transportation? Did it act differently when it organized the PNR as successor of the Manila Railroad Company? xxx We hold that in the instant case the State divested itself of its sovereign capacity when it organized the PNR which is no different from its predecessor, the Manila Railroad Company." Id, at 66. 132 Supra note 17. 133 Id., at 206. 134 Section 32(24), Rep. Act No. 776. See CAA v. Court of Appeals, supra note 18, at 36. 135 Supra note 18. 136 Id., at 36. 137 Teodoro v. National Airports Commission, supra note 17, at 207. 138 See Article XII, Section 11, Const. 139 Vitug & Acosta, supra note 112, at 35; citing Bisaya Land Transportation Co., Inc. v. Collector of Internal Revenue, L-11812, 29 May 1959, 105 Phil. 1338. 140 See Section 3, E.O. 903, as amended. 141 Indeed, last 4 February 2005, the MIAA filed a Manifestation before this Court stating that its new General Manager had been conferring with the newly elected local government of Paraaque with the end of settling the case at mutually acceptable terms. See rollo, pp. 315-316. While this Manifestation was withdrawn a few weeks later, see rollo, pp. 320-322, it still stands as proof that the parties are nevertheless willing to explore an extrajudicial settlement of this case. 142 See Section 17, Article VII, Constitution. "The President shall have control of all the executive departments. He shall ensure that the laws be faithfully executed." 143 See note 141. 144 See Section 5, Rep. Act No. 8423.

145 See Section 6(s), Rep. Act No. 8423. 146 See Section 6(r), Rep. Act No. 8423. 147 See Section 2, Rep. Act No. 8423. 148 See Section 3(b), Rep. Act No. 8423. 149 See Section 4(d), Rep. Act No. 8423.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 163072 April 2, 2009 MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, vs. CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, Respondents. DECISION CARPIO, J.: This is a petition for review on certiorari1 of the Decision2 dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. The Facts

Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Paraaque City. On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. MIAAs real property tax delinquency for its real properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows: TAX DECLA-RATIONTAXABLE YEARTAX DUEPENALTYTOTALA7-183-0834619972001243,522,855.00123,351,728.18366,874,583.18A7-183-0522419922001113,582,466.0071,159,414.98184,741,880.98A7-191-008431992200154,454,800.0034,115,932.2088,570,732.20A7-191-00140199220011,632,960.001,023,049.442,656,009.44A7-191-00139199220016,068,448.003,801,882.859,870,330.85A7-183-054091992200159,129,520.0037,044,644.2896,174,164.28A7-183-054101992200120,619,720.0012,918,254.5833,537,974.58A7-183-05413199220017,908,240.004,954,512.3612,862,752.36A7-183-054121992200118,441,981.2011,553,901.1329,995,882.33A7-183-0541119922001109,946,736.0068,881,630.13178,828,366.13A7-183-05245199220017,440,000.004,661,160.0012,101,160.00GRAND TOTALP642,747,726.20P373,466,110.13P1,016,213,836.33On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid. On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay from imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties. On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition. The Court of Appeals Ruling The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals and educational institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon the effectivity of the Local Government Code. The Issue The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax. The Courts Ruling The petition is meritorious. In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the Local Government Code which read: 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. SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person; (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; (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; (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and environment protection. 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 corporations are hereby withdrawn upon the effectivity of this Code. The Court of Appeals held that as a government-owned corporation, MIAAs tax exemption under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992. In Manila International Airport Authority v. Court of Appeals6 (2006 MIAA case), this Court already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Paraaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands and buildings located in Paraaque City. The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case involved airport lands and buildings located in Paraaque City while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court held: To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the 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 bridgesconstructed 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 State" 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 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.7 (Emphasis in the original) The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes x x x government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a "government-owned or controlled corporation." Obviously, the term government "instrumentality" is broader than the term "government-owned or controlled corporation." Section 2(10) provides: SEC. 2. General Terms Defined. x x x (10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the Introductory Provisions of the Administrative Code of 1987: SEC. 2. General Terms Defined. x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. The fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation." A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case: A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. x x x Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. xxx MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. x x x When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."9 Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.10 Under Section 133(o)11of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties. Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real property tax under Section 234(a) of the Local Government Code. However, under the same provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to real property tax.12 In this case, only those portions of the NAIA Pasay properties which are leased to taxable persons like private parties are subject to real property tax by the City of Pasay. WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the Manila International Airport Authority EXEMPT from real property tax imposed by the City of Pasay. We declare VOID all the real property tax assessments, including the final notices of real property tax delinquencies, issued by the City of Pasay on the NAIA Pasay properties of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties. No costs. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice LEONARDO A. QUISUMBING Associate JusticeCONSUELO YNARES-SANTIAGO Associate JusticeMA. ALICIA AUSTRIA-MARTINEZ Associate JusticeRENATO C. CORONA Associate JusticeCONCHITA CARPIO MORALES Associate JusticeDANTE O. TINGA Associate JusticeMINITA V. CHICO-NAZARIO Associate JusticePRESBITERO J. VELASCO, JR.

Associate JusticeANTONIO EDUARDO B. NACHURA Associate JusticeTERESITA J. LEONARDO-DE CASTRO Associate JusticeARTURO D. BRION Associate JusticeDIOSDADO M. PERALTA Associate JusticeC E R T I F I C A T I O N Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. REYNATO S. PUNO Chief Justice

EN BANC

[G.R. No. 144104. June 29, 2004]

LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of Quezon City, respondents. DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the Decision[1] dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which affirmed the decision of the Central Board of Assessment Appeals holding that the lot owned by the petitioner and its hospital building constructed thereon are subject to assessment for purposes of real property tax. The Antecedents The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January 16, 1981 by virtue of Presidential Decree No. 1823.[2] It is the registered owner of a parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1,

SWO-04-000495, located at Quezon Avenue corner Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters and is covered by Transfer Certificate of Title (TCT) No. 261320 of the Registry of Deeds of Quezon City. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from the government. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City.[3] Accordingly, Tax Declaration Nos. C-021-01226 (16-2518) and C-021-01231 (152518-A) were issued for the land and the hospital building, respectively.[4] On August 25, 1993, the petitioner filed a Claim for Exemption[5] from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The petitioners request was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City (QC-LBAA, for brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the petitioner liable for real property taxes.[6] The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of Quezon City (CBAA, for brevity)[7] which ruled that the petitioner was not a charitable institution and that its real properties were not actually, directly and exclusively used for charitable purposes; hence, it was not entitled to real property tax exemption under the constitution and the law. The petitioner sought relief from the Court of Appeals, which rendered judgment affirming the decision of the CBAA.[8] Undaunted, the petitioner filed its petition in this Court contending that:
A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX EXEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE PURPOSES. B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS CHARTER, PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION.

The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the 1987 Constitution. It asserts that its character as a charitable institution is not altered by the fact that it admits paying patients and renders medical services to them, leases portions of the land to private parties, and rents out portions of the hospital to private medical

practitioners from which it derives income to be used for operational expenses. The petitioner points out that for the years 1995 to 1999, 100% of its out-patients were charity patients and of the hospitals 282-bed capacity, 60% thereof, or 170 beds, is allotted to charity patients. It asserts that the fact that it receives subsidies from the government attests to its character as a charitable institution. It contends that the exclusivity required in the Constitution does not necessarily mean solely. Hence, even if a portion of its real estate is leased out to private individuals from whom it derives income, it does not lose its character as a charitable institution, and its exemption from the payment of real estate taxes on its real property. The petitioner cited our ruling inHerrera v. QC-BAA[9] to bolster its pose. The petitioner further contends that even if P.D. No. 1823 does not exempt it from the payment of real estate taxes, it is not precluded from seeking tax exemption under the 1987 Constitution. In their comment on the petition, the respondents aver that the petitioner is not a charitable entity. The petitioners real property is not exempt from the payment of real estate taxes under P.D. No. 1823 and even under the 1987 Constitution because it failed to prove that it is a charitable institution and that the said property is actually, directly and exclusively used for charitable purposes. The respondents noted that in a newspaper report, it appears that graft charges were filed with the Sandiganbayan against the director of the petitioner, its administrative officer, and Zenaida Rivera, the proprietress of the Elliptical Orchids and Garden Center, for entering into a lease contract over 7,663.13 square meters of the property in 1990 for only P20,000 a month, when the monthly rental should be P357,000 a month as determined by the Commission on Audit; and that instead of complying with the directive of the COA for the cancellation of the contract for being grossly prejudicial to the government, the petitioner renewed the same on March 13, 1995 for a monthly rental of only P24,000. They assert that the petitioner uses the subsidies granted by the government for charity patients and uses the rest of its income from the property for the benefit of paying patients, among other purposes. They aver that the petitioner failed to adduce substantial evidence that 100% of its out-patients and 170 beds in the hospital are reserved for indigent patients. The respondents further assert, thus:

13. That the claims/allegations of the Petitioner LCP do not speak well of its record of service. That before a patient is admitted for treatment in the Center, first impression is that it is pay-patient and required to pay a certain amount as deposit. That even if a patient is living below the poverty line, he is charged with high hospital bills. And, without these bills being first settled, the poor patient cannot be allowed to leave the hospital or be discharged without first paying the hospital bills or issue a promissory note guaranteed and indorsed by an influential agency or person known only to the Center; that even the remains of deceased poor patients suffered the same fate. Moreover, before a patient is admitted for treatment as free or charity patient, one must undergo a series of interviews and must submit all the requirements needed by the Center, usually accompanied by endorsement by an influential agency or person known only to the Center. These facts were heard and admitted by the Petitioner LCP during the hearings before the Honorable QC-BAA and Honorable CBAA. These are the reasons of indigent patients, instead of seeking treatment with the Center, they prefer to be treated at the Quezon Institute. Can such practice by the Center be called charitable?[10]

The Issues The issues for resolution are the following: (a) whether the petitioner is a charitable institution within the context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt from real property taxes. The Courts Ruling The petition is partially granted. On the first issue, we hold that the petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the elements which should be considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the methods of administration, the nature of the actual work performed, the character of the services rendered, the indefiniteness of the beneficiaries, and the use and occupation of the properties.[11] In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds and hearts under the influence of education or religion, by assisting them to establish themselves in life or otherwise lessening the burden of government.[12] It may be applied to almost anything that tend to promote the well-doing and well-being of social man. It embraces the improvement and promotion of the happiness of man.[13] The word charitable is not restricted to relief of the poor or sick.[14] The test of a charity and a charitable organization are in law the same. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or private advantage. Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to the provisions of the decree, is to be administered by the Office of the President of the Philippines with the Ministry of Health and the Ministry of Human Settlements. It was organized for the welfare and benefit of the Filipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines. The raison detre for the creation of the petitioner is stated in the decree, viz:

Whereas, for decades, respiratory diseases have been a priority concern, having been the leading cause of illness and death in the Philippines, comprising more than 45% of the total annual deaths from all causes, thus, exacting a tremendous toll on human resources, which ailments are likely to increase and degenerate into serious lung diseases on account of unabated pollution, industrialization and unchecked cigarette smoking in the country; Whereas, the more common lung diseases are, to a great extent, preventable, and curable with early and adequate medical care, immunization and through prompt and intensive prevention and health education programs;

Whereas, there is an urgent need to consolidate and reinforce existing programs, strategies and efforts at preventing, treating and rehabilitating people affected by lung diseases, and to undertake research and training on the cure and prevention of lung diseases, through a Lung Center which will house and nurture the above and related activities and provide tertiary-level care for more difficult and problematical cases; Whereas, to achieve this purpose, the Government intends to provide material and financial support towards the establishment and maintenance of a Lung Center for the welfare and benefit of the Filipino people.[15]
The purposes for which the petitioner was created are spelled out in its Articles of Incorporation, thus:

SECOND:

That the purposes for which such corporation is formed are as follows:

1. To construct, establish, equip, maintain, administer and conduct an integrated medical institution which shall specialize in the treatment, care, rehabilitation and/or relief of lung and allied diseases in line with the concern of the government to assist and provide material and financial support in the establishment and maintenance of a lung center primarily to benefit the people of the Philippines and in pursuance of the policy of the State to secure the well-being of the people by providing them specialized health and medical services and by minimizing the incidence of lung diseases in the country and elsewhere. 2. To promote the noble undertaking of scientific research related to the prevention of lung or pulmonary ailments and the care of lung patients, including the holding of a series of relevant congresses, conventions, seminars and conferences; 3. To stimulate and, whenever possible, underwrite scientific researches on the biological, demographic, social, economic, eugenic and physiological aspects of lung or pulmonary diseases and their control; and to collect and publish the findings of such research for public consumption; 4. To facilitate the dissemination of ideas and public acceptance of information on lung consciousness or awareness, and the development of fact-finding, information and reporting facilities for and in aid of the general purposes or objects aforesaid, especially in human lung requirements, general health and physical fitness, and other relevant or related fields; 5. To encourage the training of physicians, nurses, health officers, social workers and medical and technical personnel in the practical and scientific implementation of services to lung patients; 6. To assist universities and research institutions in their studies about lung diseases, to encourage advanced training in matters of the lung and related fields and to support educational programs of value to general health; 7. To encourage the formation of other organizations on the national, provincial

and/or city and local levels; and to coordinate their various efforts and activities for the purpose of achieving a more effective programmatic approach on the common problems relative to the objectives enumerated herein; 8. To seek and obtain assistance in any form from both international and local foundations and organizations; and to administer grants and funds that may be given to the organization; 9. To extend, whenever possible and expedient, medical services to the public and, in general, to promote and protect the health of the masses of our people, which has long been recognized as an economic asset and a social blessing; 10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the people in any and all walks of life, including those who are poor and needy, all without regard to or discrimination, because of race, creed, color or political belief of the persons helped; and to enable them to obtain treatment when such disorders occur; 11. To participate, as circumstances may warrant, in any activity designed and carried on to promote the general health of the community; 12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and supplies by purchase, donation, or otherwise and to dispose of and distribute the same in such manner, and, on such basis as the Center shall, from time to time, deem proper and best, under the particular circumstances, to serve its general and non-profit purposes and objectives; 13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of properties, whether real or personal, for purposes herein mentioned; and 14. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the powers herein set forth and to do every other act and thing incidental thereto or connected therewith.[16]
Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks of life including those who are poor and the needy without discrimination. After all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity.[17] As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether outpatient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.[18] In Congregational Sunday School, etc. v. Board of Review,[19] the State Supreme Court of Illinois held, thus: [A]n institution does not lose its charitable character, and consequent exemption from

taxation, by reason of the fact that those recipients of its benefits who are able to pay are

required to do so, where no profit is made by the institution and the amounts so received are applied in furthering its charitable purposes, and those benefits are refused to none on account of inability to pay therefor. The fundamental ground upon which all exemptions in favor of charitable institutions are based is the benefit conferred upon the public by them, and a consequent relief, to some extent, of the burden upon the state to care for and advance the interests of its citizens.[20]
As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association of South Dakota v. Baker:[21] [T]he fact that paying patients are taken, the profits derived from attendance upon

these patients being exclusively devoted to the maintenance of the charity, seems rather to enhance the usefulness of the institution to the poor; for it is a matter of common observation amongst those who have gone about at all amongst the suffering classes, that the deserving poor can with difficulty be persuaded to enter an asylum of any kind confined to the reception of objects of charity; and that their honest pride is much less wounded by being placed in an institution in which paying patients are also received. The fact of receiving money from some of the patients does not, we think, at all impair the character of the charity, so long as the money thus received is devoted altogether to the charitable object which the institution is intended to further.[22]
The money received by the petitioner becomes a part of the trust fund and must be devoted to public trust purposes and cannot be diverted to private profit or benefit.[23] Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its character as a charitable institution simply because the gift or donation is in the form of subsidies granted by the government. As held by the State Supreme Court of Utah inYorgason v. County Board of Equalization of Salt Lake County:[24]

Second, the government subsidy payments are provided to the project. Thus, those payments are like a gift or donation of any other kind except they come from the government. In both Intermountain Health Care and the present case, the crux is the presence or absence of material reciprocity. It is entirely irrelevant to this analysis that the government, rather than a private benefactor, chose to make up the deficit resulting from the exchange between St. Marks Tower and the tenants by making a contribution to the landlord, just as it would have been irrelevant in Intermountain Health Care if the patients income supplements had come from private individuals rather than the government. Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government rather than private charitable contributions does not dictate the denial of a charitable exemption if the facts otherwise support such an exemption, as they do here.[25]
In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the government for 1991 and 1992 for its patients and for the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its operations.

Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken.[26] As held in Salvation Army v. Hoehn:[27]

An intention on the part of the legislature to grant an exemption from the taxing power of the state will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for it is a well settled principle that, when a special privilege or exemption is claimed under a statute, charter or act of incorporation, it is to be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force to a claim of exemption from taxation . [28]
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the petitioner shall enjoy the tax exemptions and privileges:

SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation organized primarily to help combat the high incidence of lung and pulmonary diseases in the Philippines, all donations, contributions, endowments and equipment and supplies to be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and benefit of the Lung Center, shall be exempt from income and gift taxes, the same further deductible in full for the purpose of determining the maximum deductible amount under Section 30, paragraph (h), of the National Internal Revenue Code, as amended. The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to equipment purchases made by, or for the Lung Center.[29]
It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges under Section 2:

It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies the exclusion of all others. The rule is expressed in the familiar maxim, expressio unius est exclusio alterius. The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of the rule is principle that what is expressed puts an end to that which is implied. Expressium facit cessare tacitum. Thus, where a statute, by its terms, is

expressly limited to certain matters, it may not, by interpretation or construction, be extended to other matters.
...

The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation. They are based on the rules of logic and the natural workings of the human mind. They are predicated upon ones own voluntary act and not upon that of others. They proceed from the premise that the legislature would not have made specified enumeration in a statute had the intention been not to restrict its meaning and confine its terms to those expressly mentioned.[30]
The exemption must not be so enlarged by construction since the reasonable presumption is that the State has granted in express terms all it intended to grant at all, and that unless the privilege is limited to the very terms of the statute the favor would be intended beyond what was meant.[31] Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:

(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements,actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt from taxation.[32]
The tax exemption under this constitutional provision covers property taxes only.[33] As Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: . . . what is exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes.[34] Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160 (otherwise known as the Local Government Code of 1991) as follows:

SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: ... (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes.[35]
We note that under the 1935 Constitution, ... all lands, buildings, and improvements used exclusively for charitable purposes shall be exempt from taxation.[36] However, under the 1973 and the present Constitutions, for lands, buildings, and improvements of the charitable institution to be considered exempt, the same should not only be exclusively used for charitable purposes; it is required that such property be used actually and directly for such purposes.[37] In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely

on our ruling in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on September 30, 1961 before the 1973 and 1987 Constitutions took effect.[38] As this Court held in Province of Abra v. Hernando:[39] Under the 1935 Constitution: Cemeteries, churches, and parsonages or convents

appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation. The present Constitution added charitable institutions, mosques, and non-profit cemeteries and required that for the exemption of lands, buildings, and improvements, they should not only be exclusively but also actually and directly used for religious or charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have sufficed were the words actually as well as directly not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELYused for charitable purposes. Exclusive is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and exclusively is defined, in a manner to exclude; as enjoying a privilege exclusively.[40] If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.[41] The words dominant use or principal use cannot be substituted for the words used exclusively without doing violence to the Constitutions and the law.[42] Solely is synonymous with exclusively.[43] What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes.[44] The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a private individual for her business enterprise under the business name Elliptical Orchids and Garden Center. Indeed, the petitioners evidence shows that it collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said lessees. Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes.[45] On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City Assessor is hereby DIRECTED to determine, after due hearing, the

precise portions of the land and the area thereof which are leased to private persons, and to compute the real property taxes due thereon as provided for by law. SO ORDERED. Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, Azcuna, and Tinga, JJ., concur. Vitug, J., on official leave. Ynares-Santiago, and Austria-Martinez, JJ., on leave.

[1] Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Fermin A. Martin, Jr.
and Salvador J. Valdez, Jr. concurring.

[2] SECTION

1. CREATION OF THE LUNG CENTER OF THE PHILIPPINES. There is hereby created a trust, under the name and style of Lung Center of the Philippines, which, subject to the provisions of this Decree, shall be administered, according to the Articles of Incorporation, By-Laws and Objectives of the Lung Center of the Philippines, Inc., duly registered (reg. No. 85886) with the Securities and Exchange Commission of the Republic of the Philippines, by the Office of the President, in coordination with the Ministry of Human Settlements and the Ministry of Health.

[3] Annex C, Rollo, p. 49. [4] Annexes 2 & 2-A, id. at 93-94. [5] Annex D, id. at 50-52. [6] Annex E, id. at 53-55. [7] Annexes 4 & 5, id. at 100-109. [8] Annex A, id. at 33-41. [9] 3 SCRA 187 (1961). [10] Rollo, pp. 83-84. [11] See Workmens Circle Educational Center of Springfield v. Board of Assessors of

City of Springfield, 51 N.E.2d 313 (1943).

[12] Congregational Sunday School & Publishing Society v. Board of Review, 125 N.E.

7 (1919), citing Jackson v. Philipps, 14 Allen (Mass.) 539.

[13] Bader Realty & Investment Co. v. St. Louis Housing Authority, 217 S.W.2d 489

(1949).
[14] Board of Assessors of Boston v. Garland School of Homemaking, 6 N.E.2d 379. [15] Rollo, pp. 119-120. [16] Id. at 123-125. [17] Scripps Memorial Hospital v. California Employment Commission, 24 Cal.2d 669,

151 P.2d 109 (1944).

[18] Sisters of Third Order of St. Frances v. Board of Review of Peoria County, 83 N.E.

272.
[19] See note 12. [20] Id. at 10. [21] 167 N.W. 148 (1918), citing State v. Powers, 10 Mo. App. 263, 74 Mo. 476. [22] Id. at 149. [23] See Obrien v. Physicians Hospital Association, 116 N.E. 975 (1917). [24] 714 P.2d 653 (1986). [25] Id. at 660-661. [26] Commissioner of Internal Revenue v. Court of Appeals, 298 SCRA 83 (1998). [27] 188 S.W.2d. 826 (1945). [28] Id. at 829. [29] Rollo, p. 120. (Underscoring supplied.) [30] Malinias v. COMELEC, 390 SCRA 480 (2002). [31] St. Louis Young Mens Christian Association v. Gehner, 47 S.W.2d 776 (1932). [32] Underscoring supplied.

[33] Commissioner of Internal Revenue v. Court of Appeals, supra. [34] Ibid. Citing II RECORDS OF THE CONSTITUTIONAL COMMISSION 90. [35] Underscoring supplied. [36] Article VI, Section 22, par. (3) of the 1935 Constitution provides that, Cemeteries,

churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation.
[37] Article VIII, Section 17, par. (3) of the 1973 Constitution provides that, Charitable

institutions, churches, parsonages or convents appurtenant thereto, mosques, and non-profit cemeteries, and all lands, buildings, and improvements actually, directly, and exclusively used for religious or charitable purposes shall be exempt from taxation.
[38] 3 SCRA 186 (1961). [39] 107 SCRA 105 (1981). [40] Young Mens Christian Association of Omaha v. Douglas County, 83 N.W. 924

(1900).
[41] St. Louis Young Mens Christian Association v. Gehner, supra. [42] See State ex rel Koeln v. St. Louis Y.M.C.A., 168 S.W. 589 (1914). [43] Lodge v. Nashville, 154 S.W. 141. [44] Christian Business College v. Kalamanzoo, 131 N.W. 553. [45] See Young Mens Christian Association of Omaha v. Douglas County, supra;

Martin v. City of New Orleans, 58 Am. 194 (1886).

THIRD DIVISION

[G.R. No. 127316. October 12, 2000]

LIGHT RAIL TRANSIT AUTHORITY, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF MANILA and the CITY ASSESSOR OF MANILA, respondents. DECISION
PANGANIBAN, J.:

The Light Rail Transit Authority and the Metro Transit Organization function as service-oriented business entities, which provide valuable transportation facilities to the paying public. In the absence, however, of any express grant of exemption in their favor, they are subject to the payment of real property taxes. The Case In the Petition for Review before us, the Light Rail Transit Authority (LRTA) challenges the November 15, 1996 Decision[1] of the Court of Appeals (CA) in CA-GR SP No. 38137, which disposed as follows:

"WHEREFORE, premises considered, the appealed decision (dated October 15, 1994) of the Central Board of Assessment Appeals is hereby AFFIRMED, with costs against the petitioner."[2]
The affirmed ruling of the Central Board of Assessment Appeals (CBAA) upheld the June 26, 1992 Resolution of the Board of Assessment Appeals of Manila, which had declared petitioner's carriageways and passenger terminals as improvements subject to real property taxes. The Facts

The undisputed facts are quoted by the Court of Appeals (CA) from the CBAA ruling, as follows:[3]

"1. The LRTA is a government-owned and controlled corporation created and organized under Executive Order No. 603, dated July 12, 1980 'x x x primarily responsible for the construction, operation, maintenance and/or lease of light rail transit system in the Philippines, giving due regard to the [reasonable requirements] of the public transportation of the country' (LRTA vs. The Hon. Commission on Audit, GR No. No. 88365); "2. x x x [B]y reason of x x x Executive Order 603, LRTA acquired real properties x x x constructed structural improvements, such as buildings, carriageways, passenger terminal stations, and installed various kinds of machinery and equipment and facilities for the purpose of its operations; "3. x x x [F]or x x x an effective maintenance, operation and management, it entered into a Contract of Management with the Meralco Transit Organization (METRO) in which the latter undertook to manage, operate and maintain the Light Rail Transit System owned by the LRTA subject to the specific stipulations contained in said agreement, including payments of a management fee and real property taxes (Add'l Exhibit "I", Records) "4. That it commenced its operations in 1984, and that sometime that year, RespondentAppellee City Assessor of Manila assessed the real properties of [petitioner], consisting of lands, buildings, carriageways and passenger terminal stations, machinery and equipment which he considered real propert[y] under the Real Property Tax Code, to commence with the year 1985; "5. That [petitioner] paid its real property taxes on all its real property holdings, except the carriageways and passenger terminal stations including the land where it is constructed on the ground that the same are not real properties under the Real Property Tax Code, and if the same are real propert[y], these x x x are for public use/purpose, therefore, exempt from realty taxation, which claim was denied by the Respondent-Appellee City Assessor of Manila; and "6. x x x [Petitioner], aggrieved by the action of the Respondent-Appellee City Assessor, filed an appeal with the Local Board of Assessment Appeals of Manila x x x. Appellee, herein, after due hearing, in its resolution dated June 26, 1992, denied [petitioner's] appeal, and declared that carriageways and passenger terminal stations are improvements, therefore, are real propert[y] under the Code, and not exempt from the payment of real property tax. "A motion for reconsideration filed by [petitioner] was likewise denied."
The CA Ruling The Court of Appeals held that petitioner's carriageways and passenger terminal stations constituted real property or improvements thereon and, as such, were taxable under the Real Property Tax Code. The appellate court emphasized that such pieces of property did not fall under any of the exemptions listed in Section 40 of the aforementioned law. The reason was that they were not owned by the government or any government-owned corporation which, as such, was exempt from the payment of real property taxes. True, the government owned the real property upon which the carriageways and terminal stations were built. However, they were still taxable, because

beneficial use had been transferred to petitioner, a taxable entity. The CA debunked the argument of petitioner that carriageways and terminals were intended for public use. The former agreed, instead, with the CBAA. The CBAA had concluded that since petitioner was not engaged in purely governmental or public service, the latter's endeavors were proprietary. Indeed, petitioner was deemed as a profit-oriented endeavor, serving as it did, only the paying public. Hence, this Petition.[4] The Issues In its Memorandum,[5] petitioner urges the Court to resolve the following matters:
"I

The Honorable Court of Appeals erred in not holding that the carriageways and terminal stations of petitioner are not improvements for purposes of the Real Property Tax Code.
"II

The Honorable Court of Appeals erred in not holding that being attached to national roads owned by the national government, subject carriageways and terminal stations should be considered property of the national government.
"III

The Honorable Court of Appeals erred in not holding that payment of charges or fares in the operation of the light rail transit system does not alter the nature of the subject carriageways and terminal stations as devoted for public use.
"IV

The Honorable Court of Appeals erred in failing to consider the view advanced by the Department of Finance, which takes charge of the overall collection of taxes, that subject carriageways and terminal stations are not subject to realty taxes.
"V

The Honorable Court of Appeals erred in failing to consider that payment of the realty taxes assessed is not warranted and should the legality of the questioned assessment be upheld, the amount of the realty taxes assessed would far exceed the annual earnings of petitioner, a government corporation."
The foregoing all point to one main issue: whether petitioner's carriageways and passenger terminal stations are subject to real property taxes. The Court's Ruling The Petition has no merit. Main Issue:

May Real Property Taxes be Assessed and Collected? The Real Property Tax Code,[6] the law in force at the time of the assailed assessment in 1984, mandated that "there shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property such as lands, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted."[7] Petitioner does not dispute that its subject carriageways and stations may be considered real property under Article 415 of the Civil Code.However, it resolutely argues that the same are improvements, not of its properties, but of the government-owned national roads to which they are immovably attached. They are thus not taxable as improvements under the Real Property Tax Code. In essence, it contends that to impose a tax on the carriageways and terminal stations would be to impose taxes on public roads. The argument does not persuade. We quote with approval the solicitor general's astute comment on this matter:

"There is no point in clarifying the concept of industrial accession to determine the nature of the property when what is fundamentally important for purposes of tax classification is to determine the character of the property subject [to] tax. The character of tax as a property tax must be determined by its incidents, and form the natural and legal effect thereof. It is irrelevant to associate the carriageways and/or the passenger terminals as accessory improvements when the view of taxability is focused on the character of the property. The latter situation is not a novel issue as it has already been resolved by this Honorable Court in the case of City of Manila vs. IAC (GR No. 71159, November 15, 1989) wherein it was held: 'The New Civil Code divides the properties into property for public and patrimonial property (Art. 423), and further enumerates the property for public use as provincial road, city streets, municipal streets, squares, fountains, public waters, public works for public service paid for by said [provinces], cities or municipalities; all other property is patrimonial without prejudice to provisions of special laws. (Art. 424, Province of Zamboanga v. City of Zamboanga, 22 SCRA 1334 [1968])
xxx

'...while the following are corporate or proprietary property in character, viz: 'municipal water works, slaughter houses, markets, stables, bathing establishments, wharves, ferries and fisheries.' Maintenance of parks, golf courses, cemeteries and airports, among others, are also recognized as municipal or city activities of a proprietary character (Dept. of Treasury v. City of Evansville; 60 NE 2nd 952)' "The foregoing enumeration in law does not specify or include carriageway or passenger terminals as inclusive of properties strictly for public use to exempt petitioner's properties from taxes. Precisely, the properties of petitioner are not exclusively considered as public roads being improvements placed upon the public road, and this separability nature of the structure in itself physically distinguishes it from a public road. Considering further that carriageways or passenger terminals are elevated structures which are not freely accessible to the public, viz-aviz roads which are public improvements openly utilized by the public, the former are entirely different from the latter.

"The character of petitioner's property, be it an improvements as otherwise distinguished by petitioner, needs no further classification when the law already classified it as patrimonial property that can be subject to tax. This is in line with the old ruling that if the public works is not for such free public service, it is not within the purview of the first paragraph of Art. 424 if the New Civil Code."[8]
Though the creation of the LRTA was impelled by public service -- to provide mass transportation to alleviate the traffic and transportation situation in Metro Manila -- its operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives.[9] Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation. True, petitioner's carriageways and terminal stations are anchored, at certain points, on public roads. However, it must be emphasized that these structures do not form part of such roads, since the former have been constructed over the latter in such a way that the flow of vehicular traffic would not be impeded. These carriageways and terminal stations serve a function different from that of the public roads. The former are part and parcel of the light rail transit (LRT) system which, unlike the latter, are not open to use by the general public. The carriageways are accessible only to the LRT trains, while the terminal stations have been built for the convenience of LRTA itself and its customers who pay the required fare. Basis of Assessment Is Actual Use of Real Property Under the Real Property Tax Code, real property is classified for assessment purposes on the basis of actual use,[10] which is defined as "the purpose for which the property is principally or predominantly utilized by the person in possession of the property."[11] Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public-use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations. We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom. Petitioner Not Exempt from Payment of Real Property Taxes In any event, there is another legal justification for upholding the assailed CA Decision. Under the Real Property Tax Code, real property "owned by the Republic of the Philippines or any of its political subdivisions and any government-owned or controlled corporation so exempt by its charter, provided, however, that this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person."[12] Executive Order No. 603, the charter of petitioner, does not provide for any real estate tax exemption in its favor. Its exemption is limited to direct and indirect taxes, duties or fees in connection with the importation of equipment not locally available, as the following provision shows:

"ARTICLE 4 TAX AND DUTY EXEMPTIONS Sec. 8. Equipment, Machineries, Spare Parts and Other Accessories and Materials. - The importation of equipment, machineries, spare parts, accessories and other materials, including supplies and services, used directly in the operations of the Light Rails Transit System, not obtainable locally on favorable terms, out of any funds of the authority including, as stated in Section 7 above, proceeds from foreign loans credits or indebtedness, shall likewise be exempted from all direct and indirect taxes, customs duties, fees, imposts, tariff duties, compensating taxes, wharfage fees and other charges and restrictions, the provisions of existing laws to the contrary notwithstanding."
Even granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity. Taxation is the rule and exemption is the exception. Any claim for tax exemption is strictly construed against the claimant.[13] LRTA has not shown its eligibility for exemption; hence, it is subject to the tax. WHEREFORE, the Petition is hereby DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against the petitioner. SO ORDERED. Melo, (Chairman), Vitug, and Purisima, JJ., concur. Gonzaga-Reyes, J., no part.
Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 90639 February 21, 1990 TESTATE ESTATE OF CONCORDIA T. LIM, plaintiff-appellant, vs. CITY OF MANILA, JESUS I. CALLEJA, in his capacity as City Treasurer of Manila, NICOLAS CATIIL, in his capacity as City Assessor of Manila, and/or GOVERNMENT SERVICE INSURANCE SYSTEM, defendantsappellees. Melquiades P. De Leon for plaintiff-appellant. GUTIERREZ, JR., J.: This is an appeal from the decision of the Regional Trial Court of Manila, Branch 29 dismissing a complaint for a "sum of money and/or recovery of real estate taxes paid under protest" which was certified and elevated to this Court by the Court of Appeals as a case involving pure questions of law. On February 13, 1969, the late Concordia Lim obtained a real estate loan from the defendant-appellee Government Service Insurance System (GSIS) in the amount of P875,488.54, secured by a mortgage constituted on two (2) parcels of land formerly covered by Transfer Certificates of Title Nos. 64075 and 63076 (later changed to TCT Nos. 125718 and 125719) registered in Manila with a three-story building thereon and located on No. 810 Nicanor Reyes St. (formerly Morayta), Sampaloc, Manila. When Lim failed to pay the loan, the mortgage was extrajudicially foreclosed and the subject properties sold at public auction. The GSIS, being the highest bidder, bought the properties. Upon Lim's failure to exercise her right of redemption, the titles to the properties were consolidated in

favor of the GSIS in 1977. However, pursuant to Resolution No. 188 of the Board of Trustees of the GSIS dated March 29, 1979, the estate of Lim, through Ernestina Crisologo Jose (the administratrix) was allowed to repurchase the foreclosed properties. On April 11, 1979, a Deed of Absolute Sale was executed. (Exhibit B, Table of Exhibits, pp. 3-5) The defendant City Treasurer of Manila required the plaintiff-appellant to pay the real estate taxes due on the properties for the years 1977, 1978 and the first quarter of 1979 in the amount of P67,960.39, before the titles could be transferred to the plaintiff-appellant. The latter paid the amount under protest. On July 11, 1979, the plaintiff-appellants counsel sent a demand letter requesting the GSIS to reimburse the taxes paid under protest. The GSIS refused. On September 6, 1979, a demand letter was sent to the City Treasurer of Manila to refund the amount but the latter also refused. On March 14, 1980, the plaintiff filed an action before the trial court for a sum of money for the refund or reimbursement of the real estate taxes paid under protest. During the pendency of the case, the plaintiff-appellant admitted that the foreclosed properties had been sold, through the administratrix, to another person. (2nd par. of Plaintiffs Manifestation dated December 21, 1981, Records, p. 105; TSN, March 4, 1982, p. 37) After trial, the lower court dismissed the complaint for lack of jurisdiction. It ruled that the case involves a protested action of the City Assessor which should have been flied before the Local Board of Assessment Appeals of Manila (citing Section 30 of the Real Property Tax Code [P.D. No. 464]) in line with the principle that all administrative remedies must first be exhausted. The lower court also cited by way of obiter dictum, the case of City of Baguio v. Busuego, 100 SCRA 116 (1980) wherein this Court ruled that while the GSIS may be exempt from the payment of real estate tax, the exemption does not cover properties the beneficial use of which was granted to other taxable persons. This ruling supports the lower court's view that the tax had attached to the subject properties for the years 1977, 1978 and first quarter of 1979. The lower court further stated that the plaintiff-appellant had assumed liability for the real estate taxes because of the provision in the Deed of Sale with the GSIS that: "any and all the taxes, ... relative to the execution and/or implementation of this Deed, ... shall be for the account of and paid by the VENDEE" (Exhibit B, Table of Exhibits, p. 5) Hence, this appeal raising several issues that can be summed up into the following: (1) whether or not the trial court has jurisdiction over the action for refund of real estate taxes paid under protest; (2) whether or not plaintiff-appellant has the right to recover; and (3) whether or not the plaintiff-appellant has personality to sue. The plaintiff-appellant argues that the lower court has jurisdiction over a complaint for refund as well as for reimbursement of the real estate taxes erroneously collected by the City of Manila from it and paid under protest. The records show that the subject properties were leased to other persons during the time when GSIS held their titles, as was the case during the ownership of the late Concordia Lim. However, the real estate taxes later assessed on the said properties for the years 1977, 1978 and the first quarter of 1979 were charged against the plaintiff-appellant even if the latter was not the beneficial user of the parcels of land. In real estate taxation, the unpaid tax attaches to the property and is chargeable against the taxable person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. (Sections 3(a) and 19 of P.D. No. 464; Province of Nueva Ecija v. Imperial Mining Co., Inc., 118 SCRA 632 [1982]). Raising doubts on the validity of the imposition and collection of the real property tax for the designated periods before the title to the properties may be transferred, the plaintiff-appellant paid under protest. This step was taken in accordance with the provision of Section 62 of P.D. No. 464, which states: Sec. 62. Payment under protest. (a) When a taxpayer desires for any reason to pay his tax under protest, he shall indicate the amount or portion thereof he is contesting and such protest shall be annotated on the tax receipts by writing thereon the words paid under protest.' Verbal protest shall be confirmed in writing, with a statement of the ground, therefor, within thirty days. The tax may be paid under protest, and in such case it shall be the duty of the Provincial, City or Municipal Treasurers to annotate the ground or grounds therefor on the receipt. (b) In case of payments made under protest, the amount or portion of the tax contested shall be held in trust by the treasurer and the difference shall be treated as revenue. (c) In the event that the protest is finally decided in favor of the government, the amount or portion of the tax held in trust by the treasurer shall accrue to the revenue account, but if the protest shall be

decided finally in favor of the protestant, the amount or portion of the tax protested against may either be refunded to the protestant or applied as tax credit to any other existing or future tax liability of the said protestant. (Emphasis Supplied) The Court rules that the plaintiff-appellant correctly filed the action for refund/reimbursement with the lower court as it is the courts which have jurisdiction to try cases involving the right to recover sums of money. Section 30 of the Real Property Tax Code is not applicable because what is questioned is the imposition of the tax assessed and who should shoulder the burden of the tax. There is no dispute over the amount assessed on the properties for tax purposes. Section 30 pertains to the administrative act of listing and valuation of the property for purposes of real estate taxation. It provides: Section 30. Local Board of Assessment Appeals Any owner who is not satisfied with the action of the provincial or city assessor in the assessment of his property may, within sixty days from the date of receipt by him of the written notice of assessment as provided in this Code, appeal to the Board of Assessment Appeals of the province or city by filing with it a petition under oath using the form prescribed for the purpose, together with copies of the tax declarations and such affidavit or documents submitted in support of the appeal. In further support of the conclusion that the lower court has jurisdiction to try the instant case, we note Section 64 of the Real Property Tax Code which provides that a "court shall entertain a suit assailing the validity of a tax assessed" after the taxpayer shall have paid under protest. The issue on the existence or non-existence of the appellant's right to recover the amounts paid hinges on the basic question of the validity of the tax imposition. If the imposition is valid and in accordance with law, then there is no right to recover. Otherwise, the amounts paid must be refunded by the respondent City Treasurer of Manila acting in his official capacity. (Sec. 62 [c], PD 464) The opinion of the lower court that the ruling in City of Baguio v. Busuego, supra justifies the imposition of the tax on plaintiff-appellant is erroneous. The facts in that case are different from those in the case at bar. It was shown that Busuego purchased, by way of installment, a parcel of land and building within a housing project of the GSIS. In a Contract to Sell with the GSIS, he agreed to: (1) the delivery of the possession of the properties to him pending the full payment of the price although the title remained with the GSIS; and (2) his liability to pay and shoulder all taxes and assessments on the lot and building or improvements thereon during the term of the contract to sell. Despite the tax exemption enjoyed by the GSIS, the realty tax liability imposed on the purchaser was held to be valid on the basis of the contractual obligation that he entered into and the fact that beneficial use had been given to him. The instant case does not present a similar contractual stipulation. The contract here which is alleged to include the condition that the buyer shall shoulder the taxes is a Contract of Sale. In the Busuego case, there was merely a Contract to Sell for the duration of which the party who shall be liable for the taxes about to be due is the buyer as per agreement. In the case at bar, what was assumed by the vendee was the liability for taxes and other expenses "relative to the execution and/or implementation" of the Deed of Absolute Sale "including among others, documentation, documentary and science stamps, expenses for registration and transfer of titles ... " This clause was stipulated for the purpose of clarifying which of the parties should bear the costs of execution and implementation of the sale and to comply with Article 1487 of the Civil Code which states: ART. 1487 The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary. Moreover, the taxes mentioned in the clause here refer to those necessary to the completion of the sale and accruing after the making of such sale on April 11, 1990 such as documentary stamp tax and capital gains tax. In the Busuego case, the assumption by the vendee of the liability for real estate taxes prospectively due was in harmony with the tax policy that the user of the property bears the tax. In the instant case, the interpretation that the plaintiff-appellant assumed a liability for overdue real estate taxes for the periods prior to the contract of sale is incongruent with the said policy because there was no immediate transfer of possession of the properties previous to full payment of the repurchase price. The facts of the case constrain us to rule that the plaintiff-appellant is not liable to pay the real property tax due for the years 1977, 1978 and first quarter of 1979. The clause in the Deed of Sale cannot be interpreted to include taxes for the periods prior to April 11, 1979, the date of repurchase. To impose the real property tax on the estate which was neither the owner nor the beneficial user of the property during the designated periods would not only be contrary to law but also unjust. If plaintiff-appellant intended to

assume the liability for realty taxes for the prior periods, the contract should have specifically stated "real estate taxes" due for the years 1977,1978 and first quarter of 1979. The payments made by the plaintiff-appellant cannot be construed to be an admission of a tax liability since they were paid under protest and were done only in compliance with one of the requirements for the consummation of the sale as directed by the City Treasurer of Manila. Hence, the tax assessed and collected from the plaintiff-appellants is not valid and a refund by the City government is in order. The Court rules, however, that the plaintiff-appellant is not entitled to a reimbursement from the respondent GSIS because: (1) the GSIS is exempt from payment of the real property tax under Sec. 33 of the Revised Charter of the GSIS; and (2) the tax should be based on "actual use" of the property. Section 40 of the Real Property Tax Code supports the view that not even the GSIS is liable to pay real property tax on public land leased to other persons. Section 40 provides: Sec. 40. Exemption from Real Property Tax. The exemption shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government owned corporation so exempt by its charter: Provided, however, That this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person. In fact, if there is anyone liable the law and applicable jurisprudence point to the lessees of land owned by the government-owned and controlled corporations. (Province of Nueva Ecija v. Imperial Mining Co., Inc., supra) In this case, the Court can only declare the non-liability of a right to a refund. We cannot rule on the liability of the lessees whose Identities are not even clear because they were never impleaded. The contention of the plaintiff-appellant that the respondent GSIS is liable to reimburse the tax because the latter allegedly failed to exercise its claim to the tax exemption privilege is without merit. The exemption is explicitly granted by law and need not be applied for. Regarding the issue on the existence of the personality to sue, the plaintiff-appellant asserts that since it was the one which paid under protest the amount of P67,960.39 as real property tax, then it is the real party in interest to sue for refund. The lower court, noting the transfer of the title to the properties to a third person, ruled that assuming arguendo that there is a right to seek recovery, the subsequent sale "must have included the tax" and "as such all the credits including the taxes that were paid was (sic) transfered already to the buyer." It ruled that plaintiff-appellant had no personality to sue and the right of action must be between the subsequent buyer and the plaintiff-appellant. The Court finds that the above ruling and the facts on which it is based are not sufficiently supported by the records of the case. The evidence merely shows an admission of a subsequent sale of the properties by the plaintiff-appellant, nothing more. WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE. The defendants appellees City of Manila, the City Treasurer and City Assessor of Manila are hereby ordered to refund to the TESTATE ESTATE OF CONCORDIA LIM, through administratrix ERNESTINA CRISOLOGO-JOSE, the amount of P67,960.39 as real estate taxes paid under protest. SO ORDERED. Fernan, C.J. (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

SECOND DIVISION
EFREN AQUINO and ANGELICA AQUINO, Petitioners, versus -

QUEZON CITY, represented by its OIC, BRIGIDO SIMON, ANSELMO O. REGIS, VICENTE N. COLOYAN, as the Acting Register of Deeds of Quezon City, and AIDA LINAO, accompanied by her husband PETE LINAO, Respondents. x --------------------------------------------- x SOLOMON TORRADO, represented herein by his heirs, namely: VICTOR SILVANO TORRADO, MONALISA TORRADO CARLET, CELIA TORRADO APTER, ROBERTO SILVANO TORRADO, SOLOMON SILVANO TORRADO, TITA SILVANO TORRADO, HILARIO SILVANO TORRADO, EMMANUEL SILVANO TORRADO, and AUGUSTUS CAESAR SILVANO TORRADO, Petitioners, - versus VERONICA BALUYOT and RUPERTO BALUYOT, CORAZON and MAXIMO UY, DNX DEVELOPMENT CORP., CITY TREASURER OF QUEZON CITY, REGISTER OF DEEDS OF QUEZON CITY, AND THE HONORABLE COURT OF APPEALS, Respondents.

G.R. No. 137534

G.R. No. 138624 Present: PUNO, J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ. Promulgated: August 3, 2006

X -------------------------------------------------------------------------------------------- X

DECISION
AZCUNA, J.:

In an order issued by this Court dated October 18, 2000, two petitions for review on certiorari involving the decisions of the Court of Appeals in CA-G.R. CV Nos. 37487 and 49241, declaring valid the auction sales of two real properties by the Quezon Citylocal government for failure to pay real property taxes, were consolidated for the Courts consideration. G.R. No. 137534 The first case, docketed as G.R. No. 137534, deals with a 612-square meter lot in East Avenue Subdivision, Diliman, QuezonCity. The lot was formerly owned by petitioner spouses Efren and Angelica Aquino (Petitioners Aquino) under Transfer Certificate of Title (TCT) No. 260878. By their own admission, Petitioners Aquino withheld payment of the real property taxes thereto from 1975 to 1982 as a form of protest against the government of then President Marcos. As a result of the nonpayment, the property was sold by the Quezon City local government, through the Treasurers Office, at public auction on February 29, 1984 to private respondent Aida Linao, the highest bidder. Aida Linao eventually consolidated her ownership under a petition granted by the Regional Trial Court (RTC) of Quezon City on September 25, 1985.[1] Accordingly, TCT No. 260878 was cancelled and a new one was issued under TCT No. 339476 in the name of Aida Linao.[2] Petitioners Aquino claimed that they learned of the sale only in April 1987 after they were informed by people squatting on the property that Aida Linao was taking steps to eject them. They then filed an action for annulment of title, reconveyance and damages against respondents Quezon City local government, its Treasurer, the Register of Deeds of Quezon City and Aida Linao[3]before the RTC of Quezon City.[4] They charged that the Quezon City local government sold their property without informing them of their tax default, in derogation of the notice requirements of the law. They also impute bad faith upon Aida Linao in buying their property despite knowledge of the infirmities leading to the auction sale. On February 25, 1995, after the parties presented their case, the RTC of Quezon City rendered a decision dismissing the complaint. The dismissal was later affirmed by the Court of Appeals on February 3, 1999. In this petition, Petitioners Aquino raise two issues:

1.

Whether there was failure on the part of the Quezon City local government to satisfy the notice requirements before selling the property for tax delinquency; and Whether there was failure on the part of the Quezon City local government to give actual notice of the impending sale despite knowing that the mailed notices were returned unclaimed. Whether or not Petitioners Aquino were estopped to question the absence of notice given their admission that they deliberately did not pay their taxes.

2.

3.

G.R. No. 138624 The second case, docketed as G.R. No. 138624, deals with a 407-square meter property located at No. 20 North Road,Cubao, Quezon City under TCT No. 21996 in the name of Solomon Torrado.[5] TCT No. 21996 covers two lots, Lots 7 & 8, but only the latter is the subject of the controversy. According to the Heirs of Solomon Torrado (Petitioner Heirs),[6] Solomon Torradopaid taxes on the improvements on Lot 8 for 1976, 1977, 1978, 1979, 1981 and 1982 but not on the lot itself because the Treasurers Office could not locate the index card for that property. For failure to pay real property taxes on Lot 8 from 1976 to 1982, the City Treasurer sent a Notice of Intent to Sell dated October 6, 1982 to Solomon Torrado to his address indicated in the tax register, which simply states as Butuan City. The notice was returned by reason of Insufficient Address. Next sent was a Notice of Sale of Delinquent Property dated December 10, 1982. This was sent to the same address and similarly returned unclaimed.[7] Thereafter, a public auction for Lot 8 was held on February 23, 1983 and the lot was sold to Veronica Baluyot, the winning bidder. A Notice of Sold Property was subsequently sent to Solomon Torrado to Butuan City, which was returned unclaimed. On May 29, 1985, a Final Bill of Sale was executed by the City Treasurer. On that basis, TCT No. 21996 was cancelled in part and TCT No. 355133, covering Lot 8, was issued in the name of Veronica Baluyot. Veronica Baluyot later mortgaged the property to spouses Corazon and Maximino Uy. For failure to pay the mortgage debt, Lot 8 was foreclosed and TCT No. 355133 was cancelled and substituted with TCT No. 45536 in the name of spouses Uy. Spouses Uy then sold the lot to DNX Corporation and TCT No. 45536 was cancelled and substituted with TCT No. N-162170, in the name of DNX Corporation.

Meanwhile, on January 13, 1989, Solomon Torrado commenced an action with the RTC of Quezon City against the spousesBaluyot, the Quezon City local government, the City Treasurer and Register of Deeds.[8] On March 12, 1992, the RTC of QuezonCity dismissed the action. Recourse to the Court of Appeals was made but on March 24, 1998, the appeal was dismissed. Before this Court, Petitioner Heirs raise the following questions: 1. 2. In the auction sale of tax delinquent property, is constructive notice sufficient? Was the City Treasurer negligent in continuing to send notices to an insufficient address notwithstanding a tax declaration in the tax records pertaining to another property bearing Solomon Torrados complete address? Was the auction sale conducted in accordance with P.D. 464? Was the title of Veronica Baluyot, the purchaser of the property, void as well as those of the subsequent transferees? Is DNX Corporation, the subsequent purchaser of the property, a buyer in good faith? Issues common to both petitions The Court will first discuss the issues that were raised in common by petitioners. The first issue in common relates to the interpretation of the notice requirements under Sections 65 and 73 of Presidential Decree (P.D.) No. 464 (the Real Property Tax Code then in force):[9]
xxx SECTION 65. Notice of delinquency in the payment of the real property tax. Upon the real property tax or any installment thereof becoming delinquent, the provincial or city treasurer shall immediately cause notice of the fact to be posted at the main entrance of the provincial building and of all municipal buildings or municipal or city hall and in a public and conspicuous place in each barrio of the municipality of the province or city as the case may be. The notice of delinquency shall also be published once a week for three consecutive weeks, in a newspaper of general circulation in the province or city, if any there be, and announced by a crier at the market place for at least three market days.

3. 4. 5.

Such notice shall specify the date upon which tax became delinquent, and shall state that personal property may be seized to effect payment. It shall also state that, at any time, before the seizure of personal property, payment may be made with penalty in accordance with the next following section, and further, that unless the tax and penalties be paid before the expiration of the year for which the tax is due, or the tax shall have been judicially set aside, the entire delinquent real property will be sold at public auction, and that thereafter the full title to the property will be and remain with the purchaser, subject only to the right of delinquent taxpayer or any other person in his behalf to redeem the sold property within one year from the date of sale. xxx SECTION 73. Advertisement of sale of real property at public auction. After the expiration of the year for which the tax is due, the provincial or city treasurer shall advertise the sale at public auction of the entire delinquent real property, except real property mentioned in subsection (a) of Section forty hereof, to satisfy all the taxes and penalties due and the costs of sale. Such advertisement shall be made by posting a notice for three consecutive weeks at the main entrance of the provincial building and of all municipal buildings in the province, or at the main entrance of the city or municipal hall in the case of cities, and in a public and conspicuous place in the barrio or district wherein the property is situated, in English, Spanish and the local dialect commonly used, and by announcement at least three market days at the market by crier, and, in the discretion of the provincial or city treasurer, by publication once a week for three consecutive weeks in a newspaper of general circulation published in the province or city. The notice, publication, and announcement by crier shall state the amount of the taxes, penalties and costs of sale; the date, hour, and place of sale, the name of the taxpayer against whom the tax was assessed; and the kind or nature of property and, if land, its approximate areas, lot number, and location stating the street and block number, district or barrio, municipality and the province or city where the property to be sold is situated. Copy of the notice shall forthwith be sent either by registered mail or by messenger, or through the barrio captain, to the delinquent taxpayer, at his address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located, or at his residence, if known to said treasurer or barrio captain: Provided, however, That a return of the proof of service under oath shall be filed by the person making the service with the provincial or city treasurer concerned.

Both petitioners construe the above-quoted provisions to mean that two sets of notices, one under Section 65 and the other under Section 73, are required before a delinquent property could be sold for failure to pay real property taxes. With respect to the first notice under Section 65, the owner of the real property subject to tax is supposed to be given a Notice of Tax Delinquency stating that if the property tax is not paid, the local government would sell the real property to satisfy the tax in arrears. This consists of four separate measures: 1) posting of the notice of tax delinquency at the main entrance of the city hall; 2) posting of the notice of tax delinquency in a public and conspicuous place in each barangay of the city; 3) publication of

the notice of tax delinquency once a week for three consecutive weeks in a newspaper of general circulation in the city; and 4) verbal announcement of the existence of the notice of tax delinquency by a crier at the market place for at least three market days. The second notice under Section 73 pertains to a Notice of Sale at Public Auction notifying the owner of the real property that since there was failure to heed the first notice, the local government would now be selling his delinquent property at public auction on a specified date to satisfy the tax in arrears. For Petitioners Aquino, while it seems the Quezon City local government complied with the second set of requirements in selling their lot, it failed to do the same with the first. [10] The only compliance by the Quezon City local government was the sending of a Notice of Intent to Sell by registered mail to the last known address of Petitioners Aquino. No posting or publication of any kind was done. Petitioner Heirs, on the other hand, push for the same construction and claim that there was failure on the part of the City Treasurer to send Solomon Torrado a Notice of Delinquency at all. Respondents, on the other hand, counter with their own interpretation of P.D. No. 464. Instead of a two-step notice requirement, respondents put forward the view that there are three methods of enforcement on tax delinquent real property provided under P.D. No. 464. The first method is by distraint of personal property under Sections 65, 68, 70, 71 and 72. The second method is by sale of the delinquent real property itself under Sections 73 to 81. The third method is by filing a case in court under Section 82. Respondents submit that the real property in issue was sold under the second method. That being the case, while they admit that there was only partial compliance with the provisions of Section 65 [11] this would be relevant had the local government chosen the method of distraint of personal property. In this case, the Quezon City local government chose the second method of sale and there was full compliance with the provisions of Section 73. Hence, the auction sale was valid. A simple application of the elementary rules of statutory construction provides a straightforward resolution to this conflict. Section 65 basically provides that upon delinquency of a real property tax, a notice of delinquency shall be given. This is followed by Section 66,

penalty for delinquency, and Section 67, application of the remedies. The latter reads in its entirety as follows:
SECTION 67. Remedies cumulative, simultaneous and unconditional. Collection of the real property tax may be enforced through any or all of the remedies provided under this Code, and the use or non-use of one remedy shall not be a bar against the institution of the others. Formal demand for the payment of the delinquent taxes and penalties due need not be made before any of such remedies may be resorted to; notice of delinquency as required in Section sixty-five hereof shall be sufficient for the purpose.

Following Section 67 are provisions on distraint of personal property (Sections 68, 69, 70, 71 and 72), provisions concerning the sale of real property (Sections 73 to 81) and the provision on collection of real property tax through the courts (Section 82). A rule of statutory construction is that a statute must be construed as a whole. The meaning of the law is not to be extracted from a single part, portion or section or from isolated words and phrases, clauses or sentences, but from a general consideration or view of the act as a whole. Every part of the statute must be interpreted with reference to the context. [12] In line with this rule, the Court finds that Section 65s notice of delinquency should be read in line with the Section 67s statement that the different tax remedies do not require a formal demand for the payment but may be substituted by the notice of delinquency. Reference to the notice of delinquency in relation to tax remedies, in general, illustrates the formers function as a prerequisite to all the individual tax remedies subsequently detailed. Also, the phrase notice of delinquency as required in Section sixty-five found on the last part of Section 67 further underscores its mandatory nature and interrelation to the three remedies. It is incorrect for the respondents to claim that notice of delinquency has limited application only to distraint of personal property. They mistakenly lumped Section 65 exclusively with Sections 68 to 72 and, in so doing, restricted its application from the other tax remedies. Section 65 is to be construed together with Sections 66 and 78 and all three operate in reference to tax methods in general. Definitely, there is no more logical way to construe the whole chapter on Collection of Real Property Tax (Sections 56 to 85) than to stress that while three methods are provided to enforce collection on real property taxes, a notice of delinquency is a requirement regardless of the method or methods chosen. Thus, while the Court agrees with the respondents interpretation that there are three

methods by which taxes may be enforced, petitioners are correct in insisting that two notices must be sent to the taxpayer concerned. Nevertheless, respondents still prevail because the Court is satisfied that the two-notice requirement has been complied with by the Treasurers Office. Contrary to the stand taken by Petitioners Aquino, despite the provisions of Section 65, the local government concerned need not post and publish the notice of delinquency, it being sufficient that personal service was done. In Talusan v. Tayag,[13] one of the issues raised was the lack of publication of the notice of delinquency. As to this issue the Court said, speaking through now Chief Justice Panganiban:
Petitioners assert that the tax sale should be annulled because of noncompliance with the requirement of publication prescribed in Section 65 of PD 464. In this regard, we note that unlike land registration proceedings which are in rem, cases involving an auction sale of land for the collection of delinquent taxes are in personam. Thus, notice by publication, though sufficient in proceedings in rem, does not as a rule satisfy the requirement of proceedings in personam. As such, mere publication of the notice of delinquency would not suffice, considering that the procedure in tax sales is inpersonam. It was, therefore, still incumbent upon the city treasurer to send the notice of tax delinquency directly to the taxpayer in order to protect the interests of the latter. In the present case, the notice of delinquency was sent by registered mail to the permanent address of the registered owner in Manila. In that notice, the city treasurer of Baguio City directed him to settle the charges immediately and to protect his interest in the property. Under the circumstances, we hold that the notice sent by registered mail adequately protected the rights of the taxpayer, who was the registered owner of the condominium unit.

Petitioners Aquino admit that notice of delinquency was mailed, hence, they cannot complain that their rights were not adequately protected. Publication and posting not being indispensable, there was proper compliance with Section 65. Petitioner Heirs, on the other hand, made no such admission but, on the contrary, argued that no notice of delinquency was prepared by the City Treasurer much less sent to Solomon Torrado. The Court holds, for one, that this is a question of fact that will generally not be resolved on a petition for review.[14] Second, records bear out that a Notice of Intent to Sell dated October 6, 1982was sent by the Treasurers Office to Solomon Torrado. While this was not captioned as a Notice of Delinquency, its contents sufficiently inform the recipient of the deficiency in real property taxes, and this notice is apart from the subsequent Notice of Sale sent

immediately prior to the auction sale. Hence, on the common issue concerning compliance with P.D. No. 464, the Court rules in favor of respondents. The Court proceeds to the common issue of actual versus constructive notice of sale. Petitioners Aquino argue that actual notice is required and, therefore, the mailing of the Notice of Sale to their last known address, which they had abandoned, did not constitute valid notice under the law. Petitioner Heirs likewise argue that constructive notice to the delinquent owner of the real property by mailing is not sufficient, especially when the local government concerned is aware that the mailed notices have not reached the owner. The applicable provision in regard to this issue is found in the last paragraph of Section 73, quoted above. Under said provision, notices of the sale at public auction may be sent to the delinquent taxpayer, either (i) at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or (ii) at his residence, if known to such treasurer or barrio captain. Plainly, Section 73 gives the treasurer the option of where to send the notice of sale. In giving the treasurer the option, nowhere in the wordings is there an indication of a requirement that notice must actually be received by the intended recipient. Compliance by the treasurer is limited to strictly following the provisions of the statute: he may send it at the address of the delinquent taxpayer as shown in the tax rolls or tax records or to the residence if known by him or the barrio captain. In both petitions, the City Treasurer opted to comply with the first option. Petitioners Aquino and Petitioner Heirs do not deny that notices were sent to their or their predecessors address, as shown in the tax records. The named persons in the notices sent by City Treasurer were the correct delinquent taxpayers and were the registered owners of the property subject to tax, albeit the mailing addresses were not to their actual residences. Therefore, the prescribed procedure in auction sales of property for tax delinquency was followed punctiliously. Had the City Treasurer sent the notices to an address other than the one indicated in the tax records, and such address is not the residence known to the treasurer or barangay captain, or if sent to a person who is not the registered owner of the property, then the Court would be able to declare non-compliance with the law. But the fact that petitioners

were not able to read their notices is of no consequence to the annulment of the auction sale. Additionally, Petitioner Heirs maintain that the Treasurers Office was already aware that Solomon Torrados address stated in the tax records as Butuan City was insufficient so that the notices could not possibly be sufficient for the notices to reach the recipient. There was however a more complete address indicated in the tax records for the improvements to Lot 8, which was No. 20 North Road, Cubao, Quezon City. Petitioner Heirs argue that the City Treasurer could have used this address instead of repeatedly sending notice to an insufficient address which for certain would be returned unclaimed. The fault herein lies with Solomon Torrado and not with the City Treasurer. Solomon Torrados use in his tax declarations forLot 8, as well as in TCT No. 21996, the minimal address of Butuan City, is further compounded by the fact that he can no longer be found in Butuan City as he had moved to Quezon City since 1959.[15] He, therefore, had more than 25 years, or 25 opportunities, to amend his address and provide the City Treasurer of a more complete and reliable one. By neglecting to do so, he was aware of the chances he was taking should notices be sent to him by the Treasurers Office. Instead, he maintained the terse address of Butuan City. In contrast, the Treasurers Office cannot be faulted for not sending the notices to Solomon Torrados address at No. 20 North Road, Cubao, Quezon City, which was indicated in his tax declarations to his other properties. As discussed, the last paragraph of Section 73 instructs the treasurer on where to send the notice of sale: either at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or at his residence, if known to such treasurer or barrio captain. Petitioner Heirs have not shown that the City Treasurer or barrio captain actually knew that Solomon Torrados residence was No. 20 North Road, Cubao, Quezon City. Therefore, the City Treasurer could not be blamed for having mailed the notices to the address shown in the tax records, which was in conformity with Section 73. In disposing of these two issues, there is no further need to discuss the issues of estoppel and good faith.

WHEREFORE, both petitions are DENIED and the decisions of the Court of Appeals in CA-G.R. CV Nos. 37487 and 49241 are AFFIRMED. No costs. SO ORDERED.

ADOLFO S. AZCUNA Associate Justice

WE CONCUR:

REYNATO S. PUNO Chairperson Associate Justice

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

RENATO C. CORONA Associate Justice

CANCIO C. GARCIA Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Associate Justice Chairperson, Second Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN Chief Justice Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 172267 August 20, 2008

NATIONAL HOUSING AUTHORITY, petitioner, vs. ILOILO CITY, as represented by its Mayor, HON. JERRY TREAS, ILOILO CITY TREASURER CATHERINE TINGSON, and ROSALINA FRANCISCO, respondents. DECISION TINGA, J.: The National Housing Authority (NHA) assails the Decision1 of the Court of Appeals dated 22 March 2006 which declared it not exempt from posting a deposit as a jurisdictional requisite before the court can take cognizance of cases filed by it questioning the validity of a sale of real property at public auction. The following undisputed facts are narrated by the appellate court: On July 19, 2002, the National Housing Authority (NHA, for brevity) filed a Complaint for "Annulmentof the Auction Sale conducted on December 7 & 8, 1998 by the Iloilo City Treasurer and the Subsequent Certificate of Re-Purchase Executed in Favor of a Third Party" against Iloilo City, as represented by its Mayor Jerry Treas, Iloilo City Treasurer Catherine Tingson and Rosalina Francisco. The case was subsequently docketed as Civil Case No. 02-27241. For nonpayment of realty taxes, defendants auctioned off plaintiff NHAs Lot No. 1150-A [of the subdivision plan Psd-29811, being a portion of Lot No. 1150 of the Cadastral Survey of Iloilo, situated at Barangay Monica, City of Iloilo] covered by TCT No. T-76179. Such auction sale was allegedly done without notice to plaintiff NHA as the registered owner thereof, in addition to the fact that the latter is a tax-exempt agency of the government. There being no private individual who offered to bid for the property, the defendant City of Iloilo bought the same per Certificate of Sale under its name. After the one-year redemption period expired, such defendant executed a Final Bill of Sale in its favor. Subsequently, defendant Rosalina Francisco purchased the land. As a result, plaintiffs TCT was cancelled, and a new TCT No. T-107295 was issued in the name of defendant Francisco. Defendants filed separate Motions to Dismiss based on the same grounds, particularly: lack of jurisdiction and forum shopping. According to them, the lower court did not acquire jurisdiction for failure of plaintiff to comply with the deposit mandated under Section 267, R.A. 7160, to wit: Sec. 267. Acting AssailingValidity of Tax Sale.No court shall entertain any action assailing the validity of any sale at public auction of real property or rights therein under this Title until the taxpayer shall have deposited with the court the amount for which the real property was sold, together with interest of two (2%) per month from the date of sale to the time of the institution of the action. The amount so deposited shall be paid to the purchaser at the auction sale if the deed is declared invalid but it shall be returned to the depositor if the action fails. Neither shall any court declare a sale at public auction invalid by reason

of irregularities or informalities in the proceedings unless the substantive rights of the delinquent owner of the real property or the person having legal interest therein have been impaired. Also, defendants asserted that the Complaint violated the non-forum shopping requirement, there being a similar case between the same parties, involving the same subject matter, cause of action and issues, docketed as Civil Case No. 22090 before Branch 34 of Iloilo RTC. In fact, said case has been dismissed on the ground of non-compliance with the deposit requirement under Sec. 267, R.A. 7160, per Order dated July 5, 2002, thus: WHEREFORE, Civil Case No. 22090 is hereby dismissed. Acting favorably upon defendants Motion to Dismiss, the court a quo dismissed plaintiffs Complaint per the herein assailed Order dated February 26, 2004, to wit: WHEREFORE, for failure of the plaintiff National Housing Authority to comply with the afore-quoted provision of Section 267, R.A. 7160, the deposit not being a tax, fee or charge covered by P.D. 2013 and R.A. 7279 and compliance therewith being a condition precedent to take cognizance of said complaint these Motions to Dismiss collectively, is [sic] granted.
We hereby order that the Dismissal of the complaint dated 05 June 2000 filed with Us on 19 July 2002 is with prejudice.2

The Court of Appeals affirmed the order of the trial court. In this Petition for Review on Certiorari3 dated 16 May 2006, NHA asserts that under several statutesnamely Presidential Decree (P.D.) No. 1922, P.D. No. 2013 and Republic Act (R.A.) No. 7279it is exempt from the payment of any and all fees and taxes of any kind, whether local or general. As such, the provision in Section 267 of R.A. No. 7160 requiring the "taxpayer" to deposit with the court the amount equivalent to the value for which the real property was sold, together with the interest of two percent (2%) per month from the date of sale to the time of institution of the action, before the court may entertain an action assailing the validity of any sale at public auction of real property or rights therein, should allegedly not apply to NHA. Assuming that it is indeed required to make a deposit, NHA avers that a deposit is not necessary in view of the fact that the government is always presumed to be solvent. In its Comment4 dated 7 February 2007, respondent Iloilo City maintains that NHA is required to make a deposit as a jurisdictional requisite before the court can assume jurisdiction over the suit. It claims that NHA cannot take refuge in its theory that it is exempt from making a deposit because it is not a taxpayer and is, within the contemplation of the 2nd paragraph of Article 267 of R.A. No. 7160, merely a juridical person having legal interest in the subject property. Rosalina Francisco, who is impleaded in the petition because she repurchased the subject property from respondent Iloilo City, filed a Comment/Opposition5 dated 21 February 2007, insisting that NHAs failure to make a deposit rendered its action

jurisdictionally infirm. In its Consolidated Reply6 dated 26 September 2007, NHA avers that it is not required to make the deposit not only because it is a tax-exempt entity, but more importantly because the government is always presumed to be solvent. It also reiterates the irregularities in the conduct of the delinquency sale, such as the fact that it was not served a copy of the warrant of levy, which allegedly necessitate a review of the case. There is no doubt that as assiduously pointed out in its petition, NHA is a tax-exempt entity, having been given that status by several laws. However, whether its tax-exempt status vests it with immunity as well from the deposit requirement under Section 267 of R.A. No. 7160 is the issue we are faced with in this case. The disputed provision on which the spotlight now beams down is rather unsophisticated: Sec. 267. Action Assailing Validity of Tax Sale.No court shall entertain any action assailing the validity of any sale at public auction of real property or rights therein under this Title until the taxpayer shall have deposited with the court the amount for which the real property was sold, together with interest of two percent (2%) per month from the date of sale to the time of the institution of the action. The amount so deposited shall be paid to the purchaser at the auction sale if the deed is declared invalid but it shall be returned to the depositor if the action fails. Neither shall any court declare a sale at public auction invalid by reason of irregularities or informalities in the proceedings unless the substantive rights of the delinquent owner of the real property or the person having legal interest therein have been impaired. As is apparent from a reading of the foregoing provision, a deposit equivalent to the amount of the sale at public auction plus two percent (2%) interest per month from the date of the sale to the time the court action is instituted is a conditiona "prerequisite," to borrow the term used by the acknowledged father of the Local Government Code7 which must be satisfied before the court can entertain any action assailing the validity of the public auction sale. The law, in plain and unequivocal language, prevents the court from entertaining a suit unless a deposit is made. This is evident from the use of the word "shall" in the first sentence of Section 267. Otherwise stated, the deposit is a jurisdictional requirement the nonpayment of which warrants the failure of the action. The deposit requirement, to be sure, is not a tax measure. As expressed in Section 267 itself, the amount deposited shall be paid to the purchaser at the auction sale if the deed is declared invalid; otherwise, it shall be returned to the depositor. The deposit, equivalent to the value for which the real property was sold plus interest, is essentially meant to reimburse the purchaser of the amount he had paid at the auction sale should the court declare the sale invalid. Clearly, the deposit precondition is an ingenious legal device to guarantee the satisfaction of the tax delinquency, with the local government unit keeping the payment on the bid price no matter the final outcome of the suit to nullify the tax sale. Thus, the

requirement is not applicable if the plaintiff is the government or any of its agencies as it is presumed to be solvent,8 and more so where the tax exempt status of such plaintiff as basis of the suit is acknowledged. In this case, NHA is indisputably a tax-exempt entity whose exemption covers real property taxes and so its property should not even be subjected to any delinquency sale. Perforce, the bond mandated in Section 267, whose purpose it is to ensure the collection of the tax delinquency should not be required of NHA before it can bring suit assailing the validity of the auction sale. Note should be taken that NHA had consistently insisted on the nullity of the proceedings undertaken by respondent Iloilo City which eventually led to the public auction sale of its property. Since, as had been resolved, NHA is liable neither for real property taxes nor for the bond requirement in Section 267, it necessarily follows that any public auction sale involving property owned by NHA would be null and void and any suit filed by the latter questioning such sale should not be dismissed for failure to pay the bond. NHA cannot be declared delinquent in the payment of real property tax obligations which, by reason of its tax-exempt status, cannot even accrue in the first place. Nonetheless, because respondent Iloilo City filed a motion to dismiss NHAs Complaint dated 5 June 2002 based on Section 267 and not an answer, it is both proper and prudent to remand the case to the trial court in order to afford respondent Iloilo City full opportunity to be heard on the matters raised in the complaint. As a final note, a case involving the same defendants and cause of action, docketed as Civil Case No. 22090 before the Regional Trial Court of Iloilo City, Branch 34, had already been previously dismissed for failure to comply with the deposit requirement deemed by the court to be a condition precedent for the filing of that suit. 9 This previous case, however, hardly counts for forum-shopping precisely because it is no longer pending. There is forum-shopping where a litigant sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending.10 Furthermore, the order of dismissal was clearly based on a mere technicality. Since no judgment on the merits was rendered after consideration of the evidence or stipulation submitted by the parties at the trial of that case, it falls short of one of the essential requisites of res judicata that the judgment be one on the merits.11 WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 22 March 2006 is REVERSED and SET ASIDE. The case is REMANDED to the Regional Trial Court of Iloilo City, Branch 33, which is DIRECTED to resume proceedings in Civil Case No. 02-27241 in accordance with this Decision. No pronouncement as to costs. SO ORDERED. DANTE O. TINGA Associate Justice

WE CONCUR:
LEONARDO A. QUISUMBING Associate Justice ChairpersonCONCHITA CARPIO MORALES Associate JusticePRESBITERO J. VELASCO, JR. Associate JusticeARTURO D. BRION Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. LEONARDO A. QUISUMBING Associate Justice Chairperson, Second Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice SECOND DIVISION

[G.R. No. 114231. May 18, 2001]

MANILA ELECTRIC COMPANY, petitioner, vs. NELIA A. BARLIS, in her capacity as Officer-in-Charge/Acting Municipal Treasurer of Muntinlupa, substituting EDUARDO A. ALON, former Municipal Treasurer of Muntinlupa, Metro Manila,[1] respondent. DECISION
DE LEON, JR., J.:

At the crux of this petition for review on certiorari under Rule 45 is the issue of whether or not the trial court has jurisdiction over a petition for prohibition which seeks to set aside the warrants of garnishment over petitioners bank deposits in satisfaction of real property taxes, without paying under protest the tax assessed and without exhausting available administrative

remedies. In its 11 August 1993 Decision,[2] the Court of Appeals ruled in the negative and declared void for lack of jurisdiction the 17 June 1992 Order of the Regional Trial Court[3] as the petition for prohibition lacked sufficient cause of action and was filed without exhaustion of available administrative remedies. Thus, the petitioner seeks to set aside the appellate courts Decision and its 28 February 1994 Resolution denying his motion for reconsideration of its decision. The facts are as follows: From 1968 to 1972 the Manila Electric Company (MERALCO), a duly-organized corporation in the Philippines engaged in the distribution of electricity, erected four (4) power generating plants in Sucat, Muntinlupa, named as Gardner I, Gardner II, Snyder I and Snyder II stations. To equip the power plants, various machineries and equipment were purchased both locally and abroad. When the Real Property Tax Code took effect on 1 June 1974, MERALCO filed its tax declarations covering the Sucat power plants, the buildings thereon and the machineries and equipment therein. From 1975 to 1978 MERALCO paid the real property taxes on the said properties on the basis of their assessed value as stated in the tax declarations. On 29 December 1978 MERALCO sold all the power-generating plants including the landsite to the National Power Corporation (NAPOCOR), a corporation fully owned and controlled by the Philippine government. In 1985, the Offices of the Municipal Assessor and Municipal Treasurer of Muntinlupa, while reviewing records pertaining to assessments and collection of real property taxes, discovered, among others, that MERALCO, for the period beginning 1 January 1976 to 29 December 1978, misdeclared and/or failed to declare for taxation purposes a number of real properties, consisting of several equipment and machineries, found in the said power plants. A review of the Deed of Sale which MERALCO executed in favor of NAPOCOR when it sold the power plants to the latter convinced the municipal government of Muntinlupa of the misdeclaration/non-declaration of the true value of the said machineries and equipment. The Municipal Assessor of Muntinlupa then declared and assessed the subject real properties for taxation purposes and on 19 November 1985 furnished MERALCO their corresponding tax declarations.[4] There was no response from MERALCO. Thereafter, on 3 September 1986, the then Municipal Treasurer of Muntinlupa, Norberto A. San Mateo issued several collection notices[5] to MERALCO, ordering it to pay the deficiency in the real property taxes covering the machineries and equipment found in the said power plants. Still, MERALCO did not pay the tax assessed. The Municipality of Muntinlupa sought the assistance of the Bureau of Local Government Finance-Department of Finance (BLGF-DOF), and a number of hearings were conducted with both MERALCO and the Municipality of Muntinlupa participating. Finally, on 14 August 1989, the BLGF-DOF issued a Letter-Endorsement declaring MERALCO liable to pay the deficiency or delinquent real property taxes claimed by the Municipality of Muntinlupa on the grounds that the properties were not declared for taxation purposes by MERALCO, and that they were not used in a new and preferred industry.[6] On the basis thereof, Municipal Treasurer Eduardo A. Alon forwarded a supplemental

collection notice to MERALCO, dated 31 October 1989, demanding the immediate payment of thirty six million pesos (P36,000,000.00) of unpaid real property taxes inclusive of penalties and accrued interest.[7] In addition, Municipal Treasurer Alon also sent a formal letter to MERALCO, dated 20 November 1989, reiterating his demand for tax payment.[8] Again, MERALCO did not pay. Accordingly, after issuing the requisite certification of nonpayment of real property taxes and complying with the additional requirement of public posting of the notice of delinquency, Municipal Treasurer Eduardo A. Alon issued warrants of garnishment, copies of which were served on MERALCO on 10 October 1990, ordering the attachment of the bank deposits of MERALCO with the Philippine Commercial and Industrial Bank (PCIB), Metropolitan Bank and Trust Company (METROBANK) and the Bank of the Philippine Islands (BPI) to the extent of its unpaid real property taxes.[9] Immediately, MERALCO filed before the Regional Trial Court (RTC) of Makati, Metro Manila a Petition for Prohibition with Prayer for Writ of Preliminary Mandatory Injunction and/or Temporary Restraining Order (TRO) praying, among others, that a TRO be issued to enjoin the Municipal Treasurer of Muntinlupa from enforcing the warrants of garnishment. Thereupon, the trial court issued a TRO[10] which, after hearing on the injunctive aspect of the case, was modified to the effect that the warrants of garnishment against the bank accounts shall be in full force and effect, provided, that the Municipal Treasurer shall not in the meantime collect, receive or withdraw the frozen bank deposits; and that MERALCO can withdraw from the frozen deposits provided that it does not leave a balance less than the tax claim of the Municipality of Muntinlupa.[11] On 17 October 1990 MERALCO filed an Amended Petition. For its part, the Municipal Treasurer filed a Motion to Dismiss on the grounds of: (1) lack of jurisdiction since, under Sec. 64 of the Real Property Tax Code, courts are prohibited from entertaining any suit assailing the validity of a tax assessed thereunder until the taxpayer shall have paid, under protest, the tax assessed against him; and (2) lack of cause of action by reason of MERALCOs failure to question the notice of assessment issued to it by the Municipality of Muntinlupa before the Local Board of Assessment Appeals. In its 17 June 1991 Order the trial court denied the said motion.[12] On a Petition for Certiorari filed before the Supreme Court, later endorsed to the Court of Appeals, the Municipal Treasurer of Muntinlupa assailed the Order of 17 June 1991 of the RTC.[13] On 11 August 1993 the Court of Appeals in its Decision granted the petition declaring the assailed order void and without life in law, having been issued without jurisdiction, on a petition that further does not state a sufficient cause of action, filed by a party who had not exhausted available administrative remedies.[14] MERALCO moved for a reconsideration of the Decision, but was denied for lack of merit in a Resolution dated 28 February 1994. Two (2) questions require our resolution, to wit: (a) Whether or not the RTC has jurisdiction over a petition for prohibition which seeks to set aside the warrants of garnishment over the bank deposits of petitioner MERALCO without payment under protest of the tax assessed as required in Sec. 64 of the Real Property Tax Code, as amended (RPTC, for brevity); and (b) Whether or not the Petition for Prohibition had no cause of action by reason of MERALCOs failure to exhaust available administrative remedies, i.e., to question the notice

of assessment issued to it by the Municipality of Muntinlupa before the Local Board of Assessment Appeals prior to the filing of the said petition before the trial court. Petitioner MERALCO maintains that the trial court has jurisdiction to entertain the Petition for Prohibition since it is not the taxpayer, referred to in Sec. 64 of the RPTC, required to make a protest payment of the tax assessed before a tax action may be taken cognizance of by the court. Petitioner reasons that by inference from Secs. 27 and 34 of the RPTC, the term taxpayer alludes to the property owner, a person in whose name the property is declared, or the owner or administrator, but not a previous owner which petitioner was at the time the notice of collection was sent to it. Hence, it argues that its protest payment of the tax assessed is not a condition precedent to the courts acquiring jurisdiction over its petition. Petitioner further maintains that the trial court has jurisdiction over the Petition for Prohibition as it has sufficient cause of action the annulment of the warrants of garnishment over its bank deposits in PCI Bank, METROBANK and BPI. Petitioner contends that it need not exhaust any administrative remedies, i.e., to appeal the tax assessment before the Local Board of Assessment Appeals since, first, the petition merely seeks to assail the validity of the issuance of the warrants of garnishment over its bank deposits, and not the tax assessment; second, it is not a taxpayer for purposes of appealing a real property tax assessment over the power plant machineries and equipment since it is no longer the owner thereof; and, third, even if it were to follow the prescribed remedies on protesting a tax assessment it had nothing to appeal since the respondent municipal treasurer issued notices of collection and not notices of assessment. Petitioner contends that, assuming arguendo, what respondent sent were notices of assessment, such act was irregular since pursuant to Secs. 7 and 90 of the RPTC, it is only the provincial or city assessor, and the municipal deputy assessor, who has the authority to conduct and issue tax assessments, and not respondent municipal treasurer. We find the petitioners arguments to be without merit. The trial court has no jurisdiction to entertain a Petition for Prohibition absent petitioners payment, under protest, of the tax assessed as required by Sec. 64 of the RPTC.[15] Payment of the tax assessed under protest, is a condition sine qua non before the trial court could assume jurisdiction over the petition and failure to do so, the RTC has no jurisdiction to entertain it. The restriction upon the power of courts to impeach tax assessment without a prior payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely disabled. Petitioner is begging the question when it asserts that it is not the taxpayer contemplated under Sec. 64 of the RPTC. It is an accepted principle in taxation that taxes are paid by the person obliged to declare the same for taxation purposes. Under the Real Property Tax Code, the duty to declare the true value of real property for taxation purposes is imposed upon the owner, or administrator, or their duly authorized representatives.[16] They are thus the taxpayers. When these persons fail or refuse to make a declaration of the true value of their real property within the prescribed period, the provincial or city assessor shall declare the property

in the name of the defaulting owner and assess the property for taxation. [17] In this wise, the taxpayer assumes the character of a defaulting owner, or defaulting administrator, or defaulting authorized representative, liable to pay back taxes. Respondent Municipal Treasurer claims that petitioner MERALCO misdeclared and/or failed to declare the true value of the Sucat power plant machineries and equipment during the taxable years 1976-1978 when it was still the owner thereof, and that it is the deficiency in the realty tax on the real propertys reassessed value which it seeks to collect. Based on the foregoing, the notice of assessment and collection was directed to petitioner, not because it is still the present owner of the subject real property including the machineries and equipment thereon , but because it is the defaulting owner thereof who has failed to make proper tax declaration and the proper tax payment thereon. Thus, petitioner is the taxpayer contemplated under Sec. 64 of the RPTC, and payment under protest of the tax assessed is necessary for the trial court to acquire jurisdiction over its petition. The fact that NAPOCOR is the present owner of the Sucat power plant machineries and equipment does not constitute a legal barrier to the collection of delinquent taxes from the previous owner, MERALCO, who has defaulted in its payment. In Testate Estate of Concordia T. Lim v. City of Manila,[18] the Court held that the unpaid tax attaches to the property and is chargeable against the person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. In that case, the Court declared that to impose the real property tax on the subsequent owner which was neither the owner nor the beneficial user of the property during the designated periods would not only be contrary to law but also unjust. Correspondingly, petitioner MERALCO, not NAPOCOR, is liable for the payment of the back taxes on said properties. There is no merit in petitioners argument that the trial court could take cognizance of the petition as it only questions the validity of the issuance of the warrants of garnishment on its bank deposits and not the tax assessment. Petitioner MERALCO in filing the Petition for Prohibition before the RTC was in truth assailing the validity of the tax assessment and collection. To resolve the petition, it would not only be the question of validity of the warrants of garnishments that would have to be tackled, but in addition the issues of tax assessment and collection would necessarily have to be dealt with too. As the warrants of garnishment were issued to collect back taxes from petitioner, the petition for prohibition would be for no other reason than to forestall the collection of back taxes on the basis of tax assessment arguments. This, petitioner cannot do without first resorting to the proper administrative remedies,[19] or as previously discussed, by paying under protest the tax assessed, to allow the court to assume jurisdiction over the petition. Respondent claims that on 19 November 1985 the Municipal Assessor of Muntinlupa sent petitioner a real property tax declaration containing the reassessed valuation of the Sucat power plant machineries and equipment therein, and this served as notice of assessment to petitioner. The Municipal Treasurer thereafter sent petitioner notices of collection dated 3 September 1986. The records are, however, bereft of any evidence showing actual receipt by petitioner of the real property tax declaration sent by the Municipal Assessor. However, the respondent in a Petition for Certiorari (G.R. No. 100763)[20] filed with this Court which later

referred the same to the Court of Appeals for resolution, narrated that the municipal assessor assessed and declared the afore-listed properties for taxation purposes as of 28 November 1985. Significantly, in the same petition, respondent referred to former Municipal Treasurer Norberto A. San Mateos notices to MERALCO, all dated 3 September 1986, as notices of assessment[21] and not notices of collection as it claims in this present petition. Respondent cannot maintain diverse positions. A notice of assessment should effectively inform the taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of properties.[22] From the tone and content of the notices, the 3 September 1986 notices sent by former Municipal Treasurer Norberto A. San Mateo to petitioner MERALCO are the notices of assessment required by the law as it merely informed the petitioner that it has yet to pay the taxes in accordance with the reassessed values of the real property mentioned therein.[23] The 31 October 1989 notices sent by Municipal Treasurer Eduardo A. Alon to MERALCO is likewise of the same character.[24] Only the letter dated 20 November 1989 sent by Municipal Treasurer Eduardo A. Alon to petitioner MERALCO could qualify as the actual notice of collection since it is an unmistakable demand for payment of back taxes. [25] Be that as it may, petitioner was correct when it pointed out that the Municipal Treasurer, contrary to that required by law, issued the notices of assessment.[26]However, the trial court is without authority to address the alleged irregularity in the issuance of the notices of assessment without prior tax payment, under protest, by petitioner. Section 64 of the RPTC, prohibits courts from declaring any tax invalid by reason of irregularities or informalities in the proceedings of the officers charged with the assessment or collection of taxes except upon the condition that the taxpayer pays the just amount of the tax, as determined by the court in the pending proceeding.[27] As petitioner failed to make a protest payment of the tax assessed, any argument regarding the procedure that should have been observed in the preparation of the notice of assessment and collection is futile as the trial court in such a scenario cannot assume jurisdiction over the matter. It cannot be gainsaid that petitioner should have addressed its arguments to respondent at the first opportunity upon receipt of the 3 September 1986 notices of assessment signed by Municipal Treasurer Norberto A. San Mateo. Thereafter, it should have availed of the proper administrative remedies in protesting an erroneous tax assessment, i.e., to question the correctness of the assessments before the Local Board of Assessment Appeals (LBAA), and later, invoke the appellate jurisdiction of the Central Board of Assessment Appeals (CBAA).[28] 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.[29] But an appeal shall not suspend the collection of the tax assessed without prejudice to a later adjustment pending the outcome of the appeal. The failure to appeal within the statutory period shall render the assessment final and unappealable.[30] Petitioner having failed to exhaust the administrative remedies available to it, the assessment attained finality and collection would be in order. To quell any further argument regarding the validity of the issuance of the warrants of garnishment of the bank deposits of petitioner, we shall rule upon it.

Petitioner contends that real property tax constitutes a lien on the property subject to tax, thus, payment thereof should be made by proceeding against the real property itself or any personal property located therein, and not the separate personal property of petitioner, specifically its bank deposits. Respondent, while agreeing to that proposition, in turn points out that the Real Property Tax Code, as amended, affords local government units three (3) concurrent and simultaneous remedies to enforce the Codes provisions, namely: (a) distraint of personal property, (b) sale of delinquent real property, and (c) collection of real property tax through ordinary court action. From the foregoing, respondent argues that it is not limited to the enforcement of tax lien but is also authorized to proceed against the personal properties of the defaulting taxpayer unless it could be shown that the personal properties being subject to distraint are exempt from attachment, which the bank deposits are not. We agree with the respondent. The remedy of levy can be pursued by putting up for sale the real property subject of tax, i.e., the delinquent property upon which the tax lien attaches, regardless of the present owner or possessor thereof. The remedy of distraint and levy of personal property meanwhile allows the taxing authority to subject any personal property of the taxpayer to execution,[31] save certain exceptions as enumerated under Sec. 69 of the RPTC.[32] Bank deposits are not among those exceptions. Thus, the issuance of the warrants of garnishment over petitioners bank deposits was not improper or irregular, and hence, could not be subject to prohibition. WHEREFORE, the 11 August 1993 Decision of the Court of Appeals declaring as void the 17 June 1992 Order of the Regional Trial Court is hereby AFFIRMED. The appellate courts 28 February 1994 Resolution denying petitioners motion for reconsideration of its subject Decision is likewise AFFIRMED. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur. SECOND DIVISION

[G.R. No. 114231. February 1, 2002]

MANILA ELECTRIC COMPANY, petitioner, vs. NELIA A. BARLIS, in her capacity as Officer-in-Charge/Acting Municipal Treasurer of Muntinlupa, substituting EDUARDO A. ALON, former Municipal Treasurer ofMuntinlupa, Metro Manila, respondent. RESOLUTION
DE LEON, JR., J.:

Submitted for resolution is petitioners Motion for Reconsideration of our Decision promulgated on May 18, 2001 affirming the Decision of the Court of Appeals dated August 11, 1993 and its

Resolution dated February 28, 1994. The said Decision of the Court of Appeals declared as void the June 17, 1991 Order of the Regional Trial Court (RTC) of Makati City, Branch 66, denying respondent Municipal Treasurers Motion to Dismiss the petitioners Petition for Prohibition. In our Decision, we ruled, among others that the RTC had no jurisdiction to entertain petitioners Petition for Prohibition to enjoin respondent Municipal Treasurer of Muntinlupa from garnishing petitioners bank deposits to the extent of its unpaid real estate taxes inasmuch as petitioner did not comply with the legal requirement of paying under protest the taxes assessed against it as provided for in Section 64 of the Real Property Tax Code. We also held that the petitioner had no cause of action since its failure to question the notice of assessment before the Local Board of Assessment Appeals (LBAA) prior to the filing of the suit in the RTC was tantamount to a failure to exhaust administrative remedies. In urging us to reconsider our Decision, petitioner questions our finding that what was sent to it by former Municipal Treasurers Norberto A. San Mateo and Eduardo A. Alon were the tax assessment notices contemplated by law and not mere collection notices. As movant-petitionerputs it, having received mere collection notices, how could petitioner avail of the proper administrative remedies in protesting an erroneous tax assessment before the LBAA?[1] Petitioners argument merits our attention. Anent movant-petitioners allegation that the September 3, 1986 and October 31, 1989 notices were actually tax collection notices and not tax assessment notices as we found them to be, a second and more careful examination of the said notices leads us to concede that petitioner indeed has a point. We reproduce hereunder a sample of one of the notices sent to petitioner.[2] ______________Patalastas G/Gng. MANILA ELECTRIC COMPANY

Ortigas Avenue, Pasig Metro Manila Mahal na G./Gng.

Ipinababatid po namin sa inyo na ayon sa talaan ng aming tanggapan, ang buwis sa mga ari-

arian ng nakatala sa inyong pangalan ay hindi pa nakakabayad tulad ngnasasaad sa ibaba: Tax Decl. Loca- Assessment Year Tax Due Penalty Total No. tion B-009-05501 Sucat P86,874,490 1976-78 6,515,586.75 +1,563,740.82 P8,079,327.57 B-009-05502 Sucat P81,082,860 1977-78 4,054,143.00 +972,994.32 P5,027,137.32 B-009- 05503 Sucat P75,291,220 1978 1,882,280.50 +451,747.32 P2,334,027.82 -- TOTAL P15,440,492.71 Inaasahan po namin na di ninyo ipagwawalang bahala ang patalastas na ito at ang pagbabayad na nabanggit na buwis sa lalong madaling panahon. Ipinaaalaala polamang ang sino mang magpabaya o magkautang ng buwis ng maluwat ay isusubasta (Au

ction Sale) ng Pamahalaan ang inyong ari-arian ng sangayon sa batas.

Subalit kung kayo po naman ay bayad na, ipakita po lamang ang katibayan ng pagbabayad (Of

ficial Receipt) at ipagwalang bahala ang patalastas na ito. (Underscoring supplied)

It is apparent why the foregoing cannot qualify as a notice of tax assessment. A notice of assessment as provided for in the Real Property Tax Code should effectively inform the taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of properties. The September 3, 1986 and October 31, 1989 notices do not contain the essential information that a notice of assessment must specify, namely, the value of a specific property or proportion thereof which is being taxed, nor does it state the discovery, listing, classification and appraisal of the property subject to taxation. In fact, the tenor of the notices bespeaks an intention to collect unpaid taxes, thus the reminder to the taxpayer that the failure to pay the taxes shall authorize the government to auction off the properties subject to taxes or, in the words of the notice, Ipinaaalaala po lamang, ang sino mang magpabaya o magkautang ng buwis ngmaluwat ay isusubasta (Auctio n Sale) ng pamahalaan ang inyong ari-arian ng naaayon sa batas. The petitioner is also correct in pointing out that the last paragraph of the said notices that inform the taxpayer that in case payment has already been made, the notices may be disregarded is an indication that it is in fact a notice of collection. Furthermore, even the Bureau of Local Government Finance (BLGF), upon whose recommendation former Municipal Treasurer Alon relied in the collection of back taxes against petitioner, deemed the September 3, 1986 notice as a collection letter. Hence, The Bureau should be informed of any recent action taken by MERALCO on the collection

letter dated September 3, 1986 of that Office and whether NAPOCOR was also advised thereof and its reaction thereon, if any, for our record and reference.[3]
We therefore take this opportunity to correct that portion of our decision that declare the September 3, 1986 and October 31, 1989 notices to be tax assessment notices, to wit: From the tone and content of the notices, the 3 September 1986 notices sent by Former

Municipal Treasurer Norberto A. San Mateo to petitioner MERALCO are the notices of assessment required by the law as it merely informed the petitioner that it has yet to pay the taxes in accordance with the reassessed values of the real property mentioned therein. The 31 October 1989 notices sent by Municipal Treasurer Eduardo A. Alon to MERALCO is likewise of the same character. Only the letter dated 20 November 1989 sent by Municipal Treasurer Eduardo A. Alon to petitioner MERALCO could qualify as the actual notice of collection since it is an unmistakable demand for payment of back taxes.
We now hold that the September 3, 1986 and October 31, 1989 notices were actually notices of collection only as contended by petitioner. In the instant Motion for Reconsideration, movant-petitioner also asseverates that contrary to the ruling of this Court that it is taking diverse positions,[4] it allegedly never admitted in its pleadings that the properties subject to tax were assessed and declared for taxation purposes as of November, 1985. In petitioners Petition for Prohibition before the trial court, it alleged, among others, that: 14. Respondent cannot levy additional real estate taxes without a prior reappraisal of the

property and an amendment of the tax declaration by the Assessor.Assuming arguendo that

there was such a re-appraisal made and new tax declarations issued, such re-appraisal shall operate prospectively and not retroactively as was done in this case;[5] (Underscoring supplied.)
The pertinent allegations in petitioners Petition for Review on Certiorari before this Court is of similar content, thus: The ancilliary issue is the question: whether the Regional Trial Court has the jurisdiction to

prohibit the collection of real estate taxes which purport to be due to under-declaration and undervaluation of the property by the original owner (MERALCO) when no new assessment was made and served on the new owner (NAPOCOR), especially when the supposed undervaluation and underdeclaration was discovered after the sale of the property to the new owner.;[6] (Underscoring supplied.); and
At the very outset, the courts error is evident. The Court, in its Decision stated that the

controversy is about the municipal treasurers right to assess realty taxes. But in justifying its conclusion, the court, in its Resolution, cited a provision authorizing the municipal deputy assessor to assess realty for tax purposes.
Assuming arguendo that respondent Alon can issue assessments, the Court of Appeals

decision is still erroneous as it proceeded from wrong premises. The respondent court believes the case involves a taxpayer questioning an assessment made by Respondent Treasurer and therefore Section 64 of the Realty Property Tax Code prevents the filing of the PETITION FOR PROHIBITION without first paying the tax assessed under protest.
The respondent court is gravely in error for the following reasons: xxx x x x. xxx

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

In striking down Petitioners arguments, the Honorable Court of Appeals ruled that [a]

remedy is also made available by law to the private respondent [Petitioner herein] where he disagrees with the assessment levied upon it.
Again, the respondent Court acted on the misguided premise that an assessment was issued in

this case, and that Petitioner is the taxpayer for purposes of real property taxes. As discussed above, the Petitioner cannot be considered a taxpayer for purposes of appealing a realty tax assessment over the Napocor Plants.Neither was there any assessment served on the Petitioner. Considering the same, no appeal or other remedy is available to the Petitioner save for the petition for prohibition.[7] (Underscoring supplied.)
As there has been no apparent admission by petitioner that it had received the 1985 tax assessment notices allegedly sent by respondent Municipal Treasurer, and because we have found that the records are bereft of evidence showing actual receipt by petitioner of the real property tax declaration allegedly sent by the Municipal Assessor, We are thus compelled to declare that a question of fact has been raised before this Court: On the one hand, said respondent claims that,

aside from the September 3, 1986 and October 31, 1989 notices, he had transmitted to petitioner tax assessment notices in the form of real property tax declarations in November of 1985. On the other hand, petitioner denies having received any tax assessment notice from said respondent prior to receipt of the notices of collection. Whether or not a tax assessment had been made and sent to the petitioner prior to the collection of back taxes by respondent Municipal Treasurer is of vital importance in determining the applicability of Section 64 of the Real Property Tax Code inasmuch as payment under protest is required only when there has in fact been a tax assessment, the validity of which is being questioned. Concomitantly, the doctrine of exhaustion of administrative remedies finds no application where no tax assessment has been made. Ordinarily, in the light of the foregoing facts, we would remand this case to the trial court pursuant to the basic tenet that this Court is not atrier of facts. Under the present circumstances, however, a remand of this case to the trial court would be a superfluity. The Petition for Review on Certiorari of petitioner before us raises the same grounds which petitioner relies upon in its Petition for Prohibition before the trial court that the respondent Municipal Treasurer arbitrarily and despotically issued the writ of garnishment against petitioners funds, to wit: 1) The petitioner is not the taxpayer contemplated by the Real Property Tax Code for purposes of an assessment; 2) There was no assessment made prior to the collection of back taxes thereby rendering irregular the collection of taxes by the respondent; and 3) Respondent cannot garnish petitioners funds for the satisfaction of delinquent taxes. His remedy is merely to levy upon the real property subject of the tax pursuant to the legal principle that unpaid real property taxes constitute a lien upon the real property subject to back taxes. By the parties own doing, all the issues that bear upon the propriety of the issuance of the warrants of garnishment against petitioners bank deposits for the collection of back taxes have been raised before this Court in its Petition for Review on Certiorari and properly resolved in favor of respondent Municipal Treasurer. In resolving all those issues presented before us by petitioner, we have, in effect, resolved petitioners amended petition for prohibition filed before the trial court. In other words, we have already decided that said respondent did not act arbitrarily and despotically in garnishing petitioners funds. Hence, should the trial court find that there has indeed been a prior assessment, petitioners petition for prohibition would be dismissed for failure to pay under protest and to exhaust administrative remedies. However, a finding by the trial court that there was no tax assessment made prior to the collection of taxes would render inapplicable the requirement of paying under protest and exhausting administrative remedies by first appealing to the LBAA before the trial court takes cognizance of petitioners petition for prohibition. Unfortunately therefore, even if the trial court can assume jurisdiction over the said petition for prohibition, there is nothing substantial left for it to do. Finally, petitioners insistence that its petition for prohibition before the trial court should be allowed as it does not question the validity of a tax assessment but only the arbitrary garnishment of its funds should be given scant consideration. As we have said, to resolve the petition for prohibition, it would not only be the question of the validity of the warrants of garnishment that would have to be tackled, but in addition the issues of tax assessment and collection would have to be dealt with too. We would like to stress here that despite petitioners representations, its Amended Petition for Prohibition does in fact assail the validity of the tax assessment made on its properties. The following allegations in petitioners Amended Petition for Prohibition before the RTC should make this glaringly clear: 13. Respondent based his claim that petitioner was delinquent in the payment of its real estate taxes
on the flimsy ground that there was a big discrepancy in the valuation reported by petitioner to the Municipal Assessor in 1974 and the selling price of the machineries and equipment when

petitioner sold them to National Power Corporation in 1978. Naturally in times of rising cost, especially of imported machinery and equipment like those installed at the Sucat power plants, the prices of articles several years after a lapse of time from their acquisition will be very much higher. Following respondents theory, he should assess himself delinquency taxes for his own house and lot because, for sure, the values of his house and lot today is many times more than when he bought it.

xxx xxx

xxx

18. The allegedly delinquent real estate taxes claimed by respondent as shown in the annex to
the Notices of Garnishment, Annexes E, F and G were arrived at by respondent taxing the same property twice and in one case, even three times; by evaluating the property based on selling price of the machineries and equipment rather than the actual acquisition cost thereof; by taxing as undeclared machineries, items that were already declared by petitioner in 1974 and by including the value of the land and other tax-exempt property in the computation of said alleged deficiency tax.[8]

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED with finality. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

SECOND DIVISION

[G.R. No. 122451. October 12, 2000]

CAGAYAN ROBINA SUGAR MILLING CO., petitioner, vs. COURT OF APPEALS, CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS, and THE PROVINCIAL ASSESSOR OF CAGAYAN, respondents. DECISION
QUISUMBING, J.:

This petition assails the decision[1] dated September 26, 1995, of the Court of Appeals in CAG.R. SP No. 37934, denying petitioner's petition for review of the decision[2] dated April 30, 1994, of the Central Board of Assessment Appeals (CBAA). Earlier, the CBAA had dismissed petitioner's appeal from the Resolution[3] of the Local Board of Assessment Appeals (LBAA) dated April 1, 1992, which fixed at P260,327,060.00 the market value of petitioner's properties located in Piat, Cagayan. The factual antecedents which gave rise to the instant case, are as follows: In 1990, the Assets Privatization Trust (APT) offered for sale all the assets and properties of the Cagayan Sugar Corporation (CASUCO), which had been foreclosed and transferred to APT by the Development Bank of the Philippines. The APT set the floor bid price for the said properties at three hundred fifty five million pesos (P355,000,000.00). Petitioner, as the highest bidder, acquired the aforesaid properties for a total price of P464,000,000.00.

Among the properties bought by petitioner were sugar mill machineries located at the CASUCO millsite in Sto. Domingo, Piat, Cagayan.The market value of these machineries was pegged at P391,623,520.00 and the assessed value was set at P313,298,820.00 under Tax Declaration No. 5355. On October 18, 1990, the Provincial Assessor of Cagayan issued a "Notice of Assessment of Real Property" to petitioner covering the machineries installed at the CASUCO millsite (Lots 89-F-1 and 89-F-2 of Psd-2-01-005548) based on the market value of P391,623,520.00 and the assessed value thereof at P313,298,820.00. On February 8, 1991, petitioner appealed the assessment to the LBAA, on the ground that it was excessive, erroneous, and unjust. On September 10, 1991, petitioner asked the Provincial Assessor to reconsider his assessment, contending that it should not be based on the APT-set selling price alone, but should likewise consider the operating conditions of the properties and pricing factors such as goodwill and future business potential. On April 1, 1992, the LBAA resolved that the basis of the market value for assessment purposes of the properties acquired by petitioner should be the APT floor bid price of P355,000,000.00. The LBAA then deducted from this amount the value of the land (P4,721,130.00), the total market value of the buildings (P17,605,340.00), to derive the market value of the machineries, amounting to P332,673,530.00. By further deducting the value of machineries not subject to real property tax, the LBAA fixed the market value of the petitioner's machineries at P260,327,060.00 for assessment purposes. The LBAA ordered the Provincial Assessor of Cagayan to make the necessary amendments, as a result of which Declaration No. 5514 was issued, putting the assessed value of petitioner's machineries at P208,261,650.00. On April 18, 1992, petitioner prepared an "Appeal of Assessment" addressed to the LBAA but did not file the same with the CBAA. It was only on November 25, 1992, that petitioner filed with the CBAA an "Appeal of Assessment" identical with its earlier appeal dated April 18, 1992. On January 2, 1994, the LBAA and the Provincial Assessor of Cagayan moved to dismiss petitioner's appeal dated November 25, 1992, on the ground that it had been filed beyond the thirtyday reglementary period therefor. On May 17, 1994, the CBAA dismissed petitioner's appeal on the ground that it was timebarred. Petitioner moved for reconsideration of the decision, but its motion was denied by the CBAA in its resolution of June 30, 1994. On October 3, 1994, petitioner filed with this Court a special civil action for certiorari, docketed as G.R. No. 116795, assailing the May 17, 1994 decision and June 30, 1994 resolution of the CBAA for having been issued with grave abuse discretion amounting to lack or excess of jurisdiction. On July 3, 1995, we resolved to refer G.R. No. 116795 to the Court of Appeals for appropriate action, pursuant to Revised Administrative Circular No. 1-95.[4] On September 26, 1995, the appellate court disposed of the case as follows:

IN VIEW OF ALL THE FOREGOING, the Petition is hereby DENIED due course and is DISMISSED. With costs against the Petitioner. SO ORDERED.[5]
Hence, the instant case anchored on the following assignment of errors:

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT:

(1) THE RESPONDENT PROVINCIAL ASSESSOR'S AND THE LOCAL BOARD OF ASSESSMENT APPEALS' ASSESSMENT OF PETITIONER'S MACHINERIES WAS PREPARED IN ACCORDANCE WITH SECTIONS 5 AND 28 OF THE REAL PROPERTY TAX CODE (P.D. NO. 464); AND (2) THE RESPONDENT CENTRAL BOARD OF ASSESSMENT APPEALS ACTED IN ACCORD WITH LAW IN FIXING THE MARKET VALUE OF THE MACHINERIES INSTALLED IN THE MILLSITE OF PETITIONER AT P260,237,060.00 AND THE ASSESSED VALUE THEREOF AT P208,261,650.00.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT CENTRAL BOARD OF ASSESSMENT APPEALS ACTED IN ACCORD WITH LAW WHEN IT DISMISSED PETITIONER'S APPEAL FOR HAVING BEEN FILED OUTSIDE THE REGLEMENTARY PERIOD.
We find that the issues for our resolution are:
(1) Did the Court of Appeals err in finding the assessment of petitioner's machineries proper and correct under the Real Property Tax Code? (2) Did the appellate court err in upholding the dismissal of petitioner's appeal to the CBAA for being time-barred?

We note that the real property tax being assessed and collected against petitioner's machineries is for 1990. Hence, in this case, the applicable law is the Real Property Tax Code (P.D. No. 464), and not the Local Government Code of 1991 (R.A. No. 7160). Petitioner contends that in fixing the market value of the machineries in question at P260,327,060.00, the LBAA deviated from the rules provided for in the Real Property Tax Code for the appraisal of machineries. Petitioner argues that in simply deducting from the APT floor bid price of P355,000,000.00, the value of the land, buildings, and machineries not subject to real property tax in order to arrive at the market value, the LBAA used a method not sanctioned by P.D. No. 464 and it was error for both the CBAA and the court a quo to have affirmed it. Petitioner points out that the APT erred in relying on Sales Analysis or Market Data Approach to determine the floor bid price. The Sales Analysis or Market Data Approach involves a comparison of the property appraised to similar properties sold in similar markets in order to derive a market value for the property to be appraised. Petitioner submits that in the instant case, no comparison with any similar property was ever made. Instead, the comparison was made to a bid price. Moreover, in using as basis the valuation of the APT, the LBAA failed to take into account other circumstances of value such as goodwill and future business potential. Petitioner insists that the Court of Appeals erred when it failed to rule that both the Provincial Assessor and the LBAA should have applied the following formula provided for in Section 28[6]of P.D. No. 464:

Remaining Economic Life x Replacement Cost = Current Market Value[7] Economic Life.
We agree with petitioner that Section 28 of the Real Property Tax Code provides for a formula for computing the current market value of machineries. However, Section 28 must be read in consonance with Section 3 (n)[8] of the said law, which defines "market value." Under the latter provision, the LBAA and CBAA were not precluded from adopting various approaches to value determination, including adopting the APT "floor bid price" for petitioner's properties. As correctly pointed out by the CBAA and affirmed by the court a quo:

Valuation on the basis of a floor bid price is not bereft of any basis in law. One of the

approaches to value is the Sales Analysis Approach or the Market Data Approach where the source of market data for valuation is from offer of sales or bids of real property. Valuation based on the floor bid price belongs to this approach, pursuant to Section 3(n)[9]
Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise.[10] In the instant case, petitioner failed to show that the use by the LBAA and CBAA of the APT floor bid price, pursuant to Section 3 (n) of the Real Property Tax Code was incorrect and done in bad faith. The method used by the LBAA and CBAA cannot be deemed erroneous since there is no rigid rule for the valuation of property, which is affected by a multitude of circumstances and which rules could not foresee nor provide for.[11] Worthy of note, petitioner has not shown that the current market value of its properties would be significantly lower if its proposed formula is adopted. A party challenging an appraiser's finding of value is required not only to prove that the appraised value is erroneous but also what the proper value is.[12] Factual findings of administrative agencies, which have acquired expertise in their field, are generally binding and conclusive upon the Court.[13] The Court will not presume to interfere with the intelligent exercise of the judgment of men specially trained in appraising property.[14] Where the judicial mind is left in doubt, it is a sound rule to leave the assessment undisturbed.[15] In this case, we see no reason to depart from this rule. Petitioner insists that its protest has merit, in view of a 1st Indorsement Letter of the Deputy Executive Director of the Bureau of Local Government Finance dated May 17, 1996,[16] directing the Provincial Assessor of Cagayan to recompute the market value of petitioner's machineries. However, said letter referred to the protested assessment done by the Provincial Assessor. There was no reference at all to the assessment of petitioner's machineries, which was done by the LBAA, which revised and corrected the protested appraisal by the Provincial Assessor. Said letter did not find erroneous the re-assessment done by the LBAA, which was subsequently upheld by both the CBAA and the Court of Appeals. Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the Court of Appeals.[17] On the issue of whether the period for petitioner's appeal to the CBAA had already elapsed, petitioner posits that since the appraisal and assessment of the Provincial Assessor is void ab initio for not having been made in accordance with Section 28 of P.D. No. 464, the prescriptive period provided for in Section 30[18] of the decree should not apply to petitioner. Petitioner cites Basey Wood Industries, Inc. v. Board of Assessment Appeals (CBAA Case No. 100), where the CBAA held that when an assessment is not in accordance with law, the prescriptive period for appeal to the Provincial Board of Assessment Appeals is suspended. Petitioner's arguments, however, are off tangent. The appeal found to be time-barred is not petitioner's appeal of the Provincial Assessor's assessment to the LBAA, but the resolution of the LBAA sought to be appealed to the CBAA. As found by the Court of Appeals:

Records show that the Petitioner had already received, as of April 18, 1992, the Resolution of the Respondent LBAA dated April 1, 1992, denying Petitioner's appeal. The Petitioner, thus, had only until May 18, 1992, to appeal the questioned Resolution of Respondent LBAA. However, it was only on November 25, 1992 when the Petitioner lodged its appeal with the Respondent CBAABy then, the thirty (30) day reglementary period to perfect Petitioner's appeal had long elapsed.[19]
Based on the records, we hold that the respondent court did not err in finding petitioner's appeal to the CBAA time-barred. The applicable provision is Section 34[20] of P.D. No. 464, and not Section 30. Where the owner or administrator of a property or an assessor is not satisfied with the decision of the Local Board of Assessment Appeals, he may, within thirty days from the receipt of the decision,

appeal to the Central Board of Assessment Appeals.[21] Petitioner does not dispute respondent court's findings that petitioner received on April 18, 1992, the LBAA resolution denying its appeal and that it had only until May 18, 1992, to appeal the local board's resolution to the CBAA. Petitioner, however, only filed its appeal with the CBAA on November 25, 1992 or way beyond the period to perfect an appeal. No error was thus committed by the CBAA when it dismissed petitioner's appeal for having been filed out of time and the appellate court was correct in affirming the dismissal. Wellentrenched is the rule that the perfection of an appeal within the period therefor is both mandatory and jurisdictional, and that failing in this regard renders the decision final and executory.[22] WHEREFORE, the instant petition is DENIED and the decision of the Court of Appeals in CAG.R. SP No. 37934 AFFIRMED. Costs against petitioners. SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 155591 September 22, 2004 DR. PABLO R. OLIVARES, DR. ROSARIO DE LEON OLIVARES, EDWIN D. OLIVAREZ and OLIVAREZ REALTY CORPORATION, petitioners, vs. MAYOR JOEY MARQUEZ, CITY TREASURER SILVESTRE A. DE LEON, ASSISTANT CITY TREASURER LIBERATO M. CARABEO, CITY ASSESSOR SOLEDED S. MEDINA CUE and ASSISTANT CITY ASSESSOR JOSE MARLEO P. DEL ROSARIO, respondents. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Order dated July 24, 2002 of the Regional Trial Court (Branch 257) of Paraaque City (RTC for brevity), dismissing Civil Case No. 98-0313 on the following grounds: 1. Questions involving tax assessment is within the jurisdiction of the Bureau of Internal Revenue (BIR). 2. It is improper for this Court to prohibit or annul a tax assessment issued by the City Assessors Office since it is legally inherent in the functions of their office. Any complaint or protest thereto should be coursed through the BIR. 3. It appears on record that the City Treasurers Office had already responded to the letter-protest of plaintiff. Hence, the prayer in the complaint asking that the City Treasurer be ordered to act on it is now moot.
4. It is also of judicial notice that at present there is no longer any publication regarding plaintiffs tax delinquency. Hence, the prayer that this kind of publication be ordered stopped is now, likewise, moot.1

Civil Case No. 98-0313 is a petition for certiorari, prohibition and mandamus filed by petitioners with the RTC on August 18, 1998, questioning the assessment and levy made by the Office of the City Treasurer of Paraaque City on petitioners properties. Petitioners alleged that on July 1, 1998, they received a final notice from the Office of the City Treasurer on their real estate tax delinquencies. They protested said notice in a letter dated July 7, 1998, and sought reinvestigation on the grounds that: (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. They wrote another letter on July 24, 1998, but respondents failed to act thereon. Thus, petitioners sought, among others, the annulment of the assessments and respondents be ordered to act on their protest immediately.2 Respondents filed a motion to dismiss Civil Case No. 98-0313 on the grounds that: (1) the trial court has no

jurisdiction over tax assessment matters; (2) petitioners failed to comply with the requirements of a tax protest; and (3) the petition states no cause of action.3 Petitioners opposed the motion, arguing that the trial court has jurisdiction over the case as the issue raised pertains to the authority of respondents to assess and collect the real estate taxes. Petitioners cite the case of Ty vs. Trampe,4 wherein the Court upheld the jurisdiction of the Regional Trial Court (Branch 163) of Pasig to entertain the petition for prohibition as it questions the power of the assessor to impose and collect any tax, and not merely the reasonableness thereof. Ruling in favor of respondents motion to dismiss, the trial court issued the herein assailed order dismissing Civil Case No. 98-0313. The trial court denied petitioners motion for reconsideration.5 Hence, petitioners filed the herein petition for review raising the following "questions of law" to be resolved by the Court: FIRST QUESTION OF LAW WHETHER OR NOT THE COURT A QUO HAS JURISDICTION TO TRY THE CASE INVOLVING MATTERS QUESTIONING THE VERY AUTHORITY AND POWER OF THE ASSESSOR TO IMPOSE ASSESSMENT AND OF THE CITY TREASURER TO COLLECT THE TAX. SECOND QUESTION OF LAW
WHETHER OR NOT THE COURT A QUO BLATANTLY ERRED [IN] NOT DECLARING THE

CONFISCATORY AND OPPRESSIVE NATURE OF THE ASSESSMENTS AS ILLEGAL, VOID AB INITIO, UNCONSTITUTIONAL AND CONSTITUTING DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW.6 The Court rules against petitioners. The petition has no merit. 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.7 Where administrative remedies are available, petitions for the issuance of these peremptory writs do not lie8 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.9 Republic Act (R.A.) 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.10 Section 252 of R.A. No. 7160 provides: SEC. 252. Payment Under Protest. - (a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words "paid under protest". The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Area, who shall decide the protest within sixty (60) days from receipt. (b) The tax or a portion thereof paid under protest shall be held in trust by the treasurer concerned. (c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credits against his existing or future tax liability. (d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, Book II11of this Code. (Emphasis supplied) Chapter 3, Title Two, Book II of the Local Government Code, entitled "Assessment Appeals," refers to the appellate procedure before the Local Board of Assessment Appeals (LBAA), as provided in Section 226, et seq. of the Code, and the Central Board of Assessment Appeals (CBAA), as provided in Section 230 thereof. Thus, 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, to wit: SEC. 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. 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.12 An appeal may be taken to the CBAA by filing a notice of appeal within thirty days from receipt thereof.13 From the CBAA, the dispute may then be taken to the Court of Appeals by filing a verified petition for review under Rule 43 of the Rules of Court. The Court is not convinced with petitioners argument that their recourse of filing a petition before the trial court is proper as they are questioning the very authority of respondents to assess and collect the real estate taxes due on their properties, and not merely the correctness of said amount. The well-established rule is that the allegations in the complaint and the character of the relief sought determine the nature of an action.14 A perusal of the petition before the RTC plainly shows that what is actually being assailed is the correctness of the assessments made by the local assessor of Paraaque on petitioners properties. The allegations in the said petition purportedly questioning the assessors authority to assess and collect the taxes were obviously made in order to justify the filing of the petition with the RTC. In fact, there is nothing in the said petition that supports their claim regarding the assessors alleged lack of authority. What petitioners raise are the following: (1) some of the taxes being collected have already prescribed and may no longer be collected as provided in Section 194 of the Local Government Code of 1991; (2) some properties have been doubly taxed/assessed; (3) some properties being taxed are no longer existent; (4) some properties are exempt from taxation as they are being used exclusively for educational purposes; and (5) some errors are made in the assessment and collection of taxes due on petitioners properties,15 and that respondents committed grave abuse of discretion in making the "improper, excessive and unlawful the collection of taxes against the petitioner[s]."16 Moreover, these arguments essentially involve questions of fact. Hence, the petition should have been brought, at the very first instance, to the LBAA. Under the doctrine of primacy of administrative remedies, an error in the assessment must be administratively pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction. But an appeal shall not suspend the collection of the tax assessed without prejudice to a later adjustment pending the outcome of the appeal.17 Even assuming that the assessors authority is indeed an issue, it must be pointed out that in order for the court a quo to resolve the petition, the issues of the correctness of the tax assessment and collection must also necessarily be dealt with. In Ty vs. Trampe,18 cited by petitioners, the Court held that jurisdiction over the case was properly vested with the trial court because what was being questioned is the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax, and not merely of amounts of the increase in the tax. The petitioners therein were questioning 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 P.D. No. 921 was repealed by R.A. No. 7160. P.D. No. 921, particularly Section 9 thereof, requires 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 Sec. 212 of R.A. No. 7160 states 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 sanggunianconcerned. In the present case, the authority of the assessor is not being questioned. Despite petitioners protestations, the petition filed before the court a quo primarily involves the correctness of the assessments, which are questions of fact, that are not allowed in a petition for certiorari, prohibition and mandamus. The court a quo is therefore precluded from entertaining the petition, and it appropriately dismissed the petition. WHEREFORE, the petition is DENIED for lack of merit. SO ORDERED.

Puno, Callejo, Sr., Tinga, and Chico-Nazario*, JJ., concur. Footnotes

THIRD DIVISION

[G.R. No. 146382. August 7, 2003]

SYSTEMS PLUS COMPUTER COLLEGE OF CALOOCAN CITY, petitioner, vs. LOCAL GOVERNMENT OF CALOOCAN CITY, MAMERTO MANAHAN, ATTY. NESTOR D. FRANCISCO, as City Assessor and City Legal Officer of Caloocan City, and ADORACION ANGELES, Presiding Judge, Regional Trial Court of Caloocan City, Branch 121. respondents. DECISION
CORONA, J.:

The instant petition for certiorari assails the Resolution[1] of the respondent Regional Trial Court of Caloocan City, Branch 121, dated December 29, 1999, dismissing the petition for mandamus in Civil Case No. C-595, and the Order dated February 23, 2000 denying the subsequent motion for reconsideration. Petitioner Systems Plus Computer College is a non-stock and non-profit educational institution organized and established in 1997 with business address at 141-143 10th Avenue, Caloocan City. As such, it enjoys property tax exemption from the local government on its buildings but not on the parcels of land which petitioner is renting for P5,000 monthly from its sister companies, Consolidated Assembly, Inc. (Consolidated Assembly) and Pair Management and Development Corporation (Pair Management). On January 8, 1998, petitioner requested respondent city government of Caloocan, through respondent Mamerto Manahan, City Assessor and Administrator, to extend tax exemption to the parcels of land claiming that the same were being used actually, directly and exclusively for educational purposes pursuant to Article VI, Section 28(3) of the 1987 Constitution[2] and other applicable provisions of the Local Government Code. On February 5, 1998, respondent city government, on recommendation of respondent Atty. Nestor Francisco, City Legal Officer, denied the request on the ground that the subject parcels of land were owned by Consolidated Assembly and Pair Management which derived income therefrom in the form of rentals and other local taxes assumed by the petitioner. Hence, from the land owners standpoint, the same were not actually, directly and exclusively used for educational purposes.[3] On February 15, 1999, the petitioner, on the one hand, and the Consolidated Assembly and Pair Management, on the other, entered into separate agreements [4] which in effect novated their existing contracts of lease on the subject parcels of land and converted them to donations of the beneficial use thereof. On February 19, 1999, the petitioner wrote respondent City Assessor informing the latter of the new agreements and seeking a reconsideration of respondents earlier denial of the application for tax exemption.[5] In this connection, a duly notarized certification[6] jointly issued by Consolidated Assembly and Pair Management to the effect that they no longer received income by way of rentals from the subject properties, accompanied by the corresponding board resolutions,[7] were submitted

by the petitioner. Nevertheless, on July 21, 1999, respondent city government again denied the application for tax exemption, reasoning out as follows:

Firstly, it may be reasonably implied from the above facts that SYSTEMS COMPUTER COLLEGE is an agency for its sister corporations, particularly, PAIR MANAGEMENT & DEVELOPMENT CORPORATION and CONSOLIDATED ASSEMBLY, INC. to evade payment of Real Property Taxes. It bears stress (sic) that immediately after the denial by this Office of the first request of SYSTEMS PLUS COMPUTER COLLEGE for Real Property Tax Exemption of the properties then leased to it by its sister companies; PAIR MANAGEMENT & DEVELOPMENT CORPORATION and CONSOLIDATED ASSEMBLY, INC., the latter corporations donated the beneficial use of the subject properties to SYSTEMS PLUS COMPUTER COLLEGE, if only to evade payment of Real Property Taxes. The revenue officers, in proper cases, may disregard the separate corporate entity where it serves as a shield for tax evasion. xxx. Secondly, the grant of exemption from taxation rests upon the theory that an exemption will benefit the body of people, and not upon any idea of lessening the burden of individual or corporate owners. Thirdly, while the beneficial use of the properties being sought to be exempt from Real Property Taxes were donated to SYSTEMS PLUS COMPUTER COLLEGE, there is no showing that the same are actually, directly and exclusively used either for religious, charitable, or educational purposes.[8]
Twice debunked, petitioner filed a petition for mandamus with the respondent Regional Trial Court of Caloocan City, Branch 121, which, however, dismissed it for being premature. Its timely motion for reconsideration having been denied, petitioner filed the instant petition for certiorari[9] imputing grave abuse of discretion on the part of the trial court when it ruled: (1) that mandamus does not lie against the public respondents and (2) that petitioner failed to exhaust available administrative remedies. Mandamus is defined as a writ commanding a tribunal, corporation, board or person to do the act required to be done when it or he unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust or station, or unlawfully excludes another from the use and enjoyment of a right or office or which such other is entitled, there being no other plain, speedy, and adequate remedy in the ordinary course of law.[10] Where administrative remedies are available, a petition for mandamus does not lie.[11] Under Section 226 of RA 7160,[12] the remedy of appeal to the Local Board of Assessment Appeals is available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of property, thus:

Section 226. Local Board of Assessment Appeals. -Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.
However, petitioner argues that it is not contesting any assessment made by respondent City Assessor. Petitioners argument obviously proceeds from its misunderstanding of the term

assessment. Under Section 199(f), Title II, Book II, of the Local Government Code of 1991, assessment is defined as the act or process of determining the value of a property, or proportion thereof subject to tax, including the discovery, listing, classification and appraisal of properties. Viewed from this broader perspective, the determination made by the respondent City Assessor with regard to the taxability of the subject real properties squarely falls within its power to assess properties for taxation purposes subject to appeal before the Local Board of Assessment Appeals. Petitioner also argues that it is seeking to enforce, through the petition for mandamus, a clear legal right under the Constitution and the pertinent provisions of the Local Government Code granting tax exemption on properties actually, directly and exclusively used for educational purposes. But petitioner is taking an unwarranted shortcut. The argument gratuitously presumes the existence of the fact which it must first prove by competent and sufficient evidence before the City Assessor. It must be stressed that the authority to receive evidence, as basis for classification of properties for taxation, is legally vested on the respondent City Assessor whose action is appealable to the Local Board of Assessment Appeals and the Central Board of Assessment Appeals, if necessary. The petitioner cannot bypass the authority of the concerned administrative agencies and directly seek redress from the courts even on the pretext of raising a supposedly pure question of law without violating the doctrine of exhaustion of administrative remedies. Hence, when the law provides for remedies against the action of an administrative board, body, or officer, as in the case at bar, relief to the courts can be made only after exhausting all remedies provided therein.[13] Otherwise stated, before seeking the intervention of the courts, it is a precondition that petitioner should first avail of all the means afforded by the administrative processes.[14] Besides, mandamus does not lie against the respondent City Assessor in the exercise of his function of assessing properties for taxation purposes. While its duty to conduct assessments is a ministerial function, the actual exercise thereof is necessarily discretionary. Well-settled is the rule that mandamus may not be availed of to direct the exercise of judgment or discretion in a particular way, or to retract or reverse an action already taken in the exercise of either.[15] WHEREFORE, the instant petition for certiorari is hereby DISMISSED. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

FIRST DIVISION

[G.R. No. 137621. February 6, 2002]

HAGONOY MARKET VENDOR ASSOCIATION, petitioner, vs. MUNICIPALITY OF HAGONOY, BULACAN,respondent. DECISION
PUNO, J.:

Laws are of two (2) kinds: substantive and procedural. Substantive laws, insofar as their provisions are unambiguous, are rigorously applied to resolve legal issues on the merits. In contrast,

courts generally frown upon an uncompromising application of procedural laws so as not to subvert substantial justice. Nonetheless, it is not totally uncommon for courts to decide cases based on a rigid application of the so-called technical rules of procedure as these rules exist for the orderly administration of justice. Interestingly, the case at bar singularly illustrates both instances, i.e., when procedural rules are unbendingly applied and when their rigid application may be relaxed. This is a petition for review of the Resolution[1] of the Court of Appeals, dated February 15, 1999, dismissing the appeal of petitioner Hagonoy Market Vendor Association from the Resolutions of the Secretary of Justice for being formally deficient. The facts: On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance, Kautusan Blg. 28,[2] which increased the stall rentals of the market vendors in Hagonoy. Article 3 provided that it shall take effect upon approval. The subject ordinance was posted from November 4-25, 1996.[3] In the last week of November, 1997, the petitioners members were personally given copies of the approved Ordinance and were informed that it shall be enforced in January, 1998. On December 8, 1997, the petitioners President filed an appeal with the Secretary of Justice assailing the constitutionality of the tax ordinance. Petitioner claimed it was unaware of the posting of the ordinance. Respondent opposed the appeal. It contended that the ordinance took effect on October 6, 1996 and that the ordinance, as approved, was posted as required by law. Hence, it was pointed out that petitioners appeal, made over a year later, was already time-barred. The Secretary of Justice dismissed the appeal on the ground that it was filed out of time, i.e., beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996, as prescribed under Section 187 of the 1991 Local Government Code. Citing the case of Taada vs. Tuvera,[4] the Secretary of Justice held that the date of effectivity of the subject ordinance retroacted to the date of its approval in October 1996, after the required publication or posting has been complied with, pursuant to Section 3 of said ordinance.[5] After its motion for reconsideration was denied, petitioner appealed to the Court of Appeals. Petitioner did not assail the finding of the Secretary of Justice that their appeal was filed beyond the reglementary period. Instead, it urged that the Secretary of Justice should have overlooked this mere technicality and ruled on its petition on the merits. Unfortunately, its petition for review was dismissed by the Court of Appeals for being formally deficient as it was not accompanied by certified true copies of the assailed Resolutions of the Secretary of Justice.[6] Undaunted, the petitioner moved for reconsideration but it was denied.[7] Hence, this appeal, where petitioner contends that:
I

THE HONORABLE COURT OF APPEALS, WITH DUE RESPECT, ERRED IN ITS STRICT, RIGID AND TECHNICAL ADHERENCE TO SECTION 6, RULE 43 OF THE 1997 RULES OF COURT AND THIS, IN EFFECT, FRUSTRATED THE VALID LEGAL ISSUES RAISED BY THE PETITIONER THAT ORDINANCE (KAUTUSAN) NO. 28 WAS NOT VALIDLY ENACTED, IS CONTRARY TO LAW AND IS UNCONSTITUTIONAL, TANTAMOUNT TO AN ILLEGAL EXACTION IF ENFORCED RETROACTIVELY FROM THE DATE OF ITS APPROVAL ON OCTOBER 1, 1996.
II

THE HONORABLE COURT OF APPEALS, WITH DUE RESPECT, ERRED IN DENYING

THE MOTION FOR RECONSIDERATION NOTWITHSTANDING PETITIONERS EXPLANATION THAT ITS FAILURE TO SECURE THE CERTIFIED TRUE COPIES OF THE RESOLUTIONS OF THE DEPARTMENT OF JUSTICE WAS DUE TO THE INTERVENTION OF AN ACT OF GOD TYPHOON LOLENG, AND THAT THE ACTUAL COPIES RECEIVED BY THE PETITIONER MAY BE CONSIDERED AS SUBSTANTIAL COMPLIANCE WITH THE RULES.
III

PETITIONER WILL SUFFER IRREPARABLE DAMAGE IF ORDINANCE/KAUTUSAN NO. 28 BE NOT DECLARED NULL AND VOID AND IS ALLOWED TO BE ENFORCED RETROACTIVELY FROM OCTOBER 1, 1996, CONTRARY TO THE GENERAL RULE, ARTICLE 4 OF THE CIVIL CODE, THAT NO LAW SHALL HAVE RETROACTIVE EFFECT.
The first and second assigned errors impugn the dismissal by the Court of Appeals of its petition for review for petitioners failure to attach certified true copies of the assailed Resolutions of the Secretary of Justice. The petitioner insists that it had good reasons for its failure to comply with the rule and the Court of Appeals erred in refusing to accept its explanation. We agree. In its Motion for Reconsideration before the Court of Appeals,[8] the petitioner satisfactorily explained the circumstances relative to its failure to attach to its appeal certified true copies of the assailed Resolutions of the Secretary of Justice, thus: x x x (D)uring the preparation of the petition on October 21, 1998, it was raining very hard

due to (t)yphoon Loleng. When the petition was completed, copy was served on the Department of Justice at about (sic) past 4:00 p.m. of October 21, 1998, with (the) instruction to have the Resolutions of the Department of Justice be stamped as certified true copies. However, due to bad weather, the person in charge (at the Department of Justice) was no longer available to certify to (sic) the Resolutions.
The following day, October 22, 1998, was declared a non-working holiday because of

(t)yphoon Loleng. Thus, petitioner was again unable to have the Resolutions of the Department of Justice stamped certified true copies. In the morning of October 23, 1998, due to time constraint(s), herein counsel served a copy by personal service on (r)espondents lawyer at (sic) Malolos, Bulacan, despite the flooded roads and heavy rains. However, as the herein counsel went back to Manila, (official business in) government offices were suspended in the afternoon and the personnel of the Department of Justice tasked with issuing or stamping certified true copies of their Resolutions were no longer available.
To avoid being time-barred in the filing of the (p)etition, the same was filed with the Court of

Appeals as is.
We find that the Court of Appeals erred in dismissing petitioners appeal on the ground that it was formally deficient. It is clear from the records that the petitioner exerted due diligence to get the copies of its appealed Resolutions certified by the Department of Justice, but failed to do so on account of typhoon Loleng. Under the circumstances, respondent appellate court should have tempered its strict application of procedural rules in view of the fortuitous event considering that litigation is not a game of technicalities.[9]

Nonetheless, we hold that the petition should be dismissed as the appeal of the petitioner with the Secretary of Justice is already time-barred. The applicable law is Section 187 of the 1991 Local Government Code which provides: SEC. 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue

Measures; Mandatory Public Hearings. - The procedure for the approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and accrual and payment of the tax, fee or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings.
The aforecited law requires that an appeal of a tax ordinance or revenue measure should be made to the Secretary of Justice within thirty (30) days from effectivity of the ordinance and even during its pendency, the effectivity of the assailed ordinance shall not be suspended. In the case at bar, Municipal Ordinance No. 28 took effect in October 1996. Petitioner filed its appeal only in December 1997,more than a year after the effectivity of the ordinance in 1996. Clearly, the Secretary of Justice correctly dismissed it for being time-barred. At this point, it is apropos to state that the timeframe fixed by law for parties to avail of their legal remedies before competent courts is not a mere technicality that can be easily brushed aside. The periods stated in Section 187 of the Local Government Code are mandatory.[10] Ordinance No. 28 is a revenue measure adopted by the municipality of Hagonoy to fix and collect public market stall rentals. Being its lifeblood, collection of revenues by the government is of paramount importance. The funds for the operation of its agencies and provision of basic services to its inhabitants are largely derived from its revenues and collections. Thus, it is essential that the validity of revenue measures is not left uncertain for a considerable length of time.[11] Hence, the law provided a time limit for an aggrieved party to assail the legality of revenue measures and tax ordinances. In a last ditch effort to justify its failure to file a timely appeal with the Secretary of Justice, the petitioner contends that its period to appeal should be counted not from the time the ordinance took effect in 1996 but from the time its members were personally given copies of the approved ordinance in November 1997. It insists that it was unaware of the approval and effectivity of the subject ordinance in 1996 on two (2) grounds: first, no public hearing was conducted prior to the passage of the ordinance and, second, the approved ordinance was not posted. We do not agree. Petitioners bold assertion that there was no public hearing conducted prior to the passage of Kautusan Blg. 28 is belied by its own evidence. In petitioners two (2) communications with the Secretary of Justice,[12] it enumerated the various objections raised by its members before the passage of the ordinance in several meetings called by the Sanggunian for the purpose. These show beyond doubt that petitioner was aware of the proposed increase and in fact participated in the public hearings therefor. The respondent municipality likewise submitted the Minutes and Report of the public hearings conducted by the Sangguniang Bayans Committee on Appropriations and Market on February 6, July 15 and August 19, all in 1996, for the proposed increase in the stall rentals.[13] Petitioner cannot gripe that there was practically no public hearing conducted as its objections to the proposed measure were not considered by the Sangguniang Bayan. To be sure, public hearings

are conducted by legislative bodies to allow interested parties to ventilate their views on a proposed law or ordinance. These views, however, are not binding on the legislative body and it is not compelled by law to adopt the same. Sanggunian members are elected by the people to make laws that will promote the general interest of their constituents. They are mandated to use their discretion and best judgment in serving the people. Parties who participate in public hearings to give their opinions on a proposed ordinance should not expect that their views would be patronized by their lawmakers. On the issue of publication or posting, Section 188 of the Local Government Code provides: Section 188. Publication of Tax Ordinance and Revenue Measures. Within ten (10) days after

their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation; Provided, however, That in provinces, cities and municipalities where there are no newspapers of local circulation, the same may be posted in at least two (2) conspicuous and publicly accessible places. (emphasis supplied)
The records is bereft of any evidence to prove petitioners negative allegation that the subject ordinance was not posted as required by law. In contrast, the respondent Sangguniang Bayan of the Municipality of Hagonoy, Bulacan, presented evidence which clearly shows that the procedure for the enactment of the assailed ordinance was complied with. Municipal Ordinance No. 28 was enacted by the Sangguniang Bayan of Hagonoy on October 1, 1996. Then Acting Municipal Mayor Maria Garcia Santos approved the Ordinance on October 7, 1996. After its approval, copies of the Ordinance were given to the Municipal Treasurer on the same day. On November 9, 1996, the Ordinance was approved by the Sangguniang Panlalawigan. The Ordinance was posted during the period from November 4 - 25, 1996 in three (3) public places, viz: in front of the municipal building, at the bulletin board of the Sta. Ana Parish Church and on the front door of the Office of the Market Master in the public market.[14] Posting was validly made in lieu of publication as there was no newspaper of local circulation in the municipality of Hagonoy. This fact was known to and admitted by petitioner. Thus, petitioners ambiguous and unsupported claim that it was only sometime in November 1997 that the Provincial Board approved Municipal Ordinance No. 28 and so the posting could not have been made in November 1996[15] was sufficiently disproved by the positive evidence of respondent municipality. Given the foregoing circumstances, petitioner cannot validly claim lack of knowledge of the approved ordinance. The filing of its appeal a year after the effectivity of the subject ordinance is fatal to its cause. Finally, even on the substantive points raised, the petition must fail. Section 6c.04 of the 1993 Municipal Revenue Code and Section 191 of the Local Government Code limiting the percentage of increase that can be imposed apply to tax rates, not rentals. Neither can it be said that the rates were not uniformly imposed or that the public markets included in the Ordinance were unreasonably determined or classified. To be sure, the Ordinance covered the three (3) concrete public markets: the two-storey Bagong Palengke, the burnt but reconstructed Lumang Palengke and the more recent Lumang Palengke with wet market. However, the Palengkeng Bagong Munisipyo or Gabaldon was excluded from the increase in rentals as it is only a makeshift, dilapidated place, with no doors or protection for security, intended for transient peddlers who used to sell their goods along the sidewalk.[16] IN VIEW WHEREOF, the petition is DISMISSED for lack of merit. No pronouncement as to costs. SO ORDERED. Davide, Jr., C.J. (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 117577 December 1, 1995 ALEJANDRO B. TY AND MVR PICTURE TUBE, INC., petitioners, vs. THE HON. AURELIO C. TRAMPE, in his capacity as Judge of the Regional Trial Court of Pasig, Metro Manila, THE HON. SECRETARY OF FINANCE, THE MUNICIPAL ASSESSOR OF PASIG AND THE MUNICIPAL TREASURER OF PASIG, respondents. PANGANIBAN, J.: ARE THE INCREASED REAL ESTATE TAXES imposed by and being collected in the Municipality (now City) of Pasig, effective from the year 1994, valid an legal? This is the question brought before this Court for resolution. The Parties Petitioner Alejandro B. Ty is a resident of and registered owner of lands and buildings in the Municipality (now City) of Pasig, while petitioner MVR Picture Tube, Inc. is a corporation duly organized and existing under Philippine laws and is likewise a registered owner of lands and buildings in said Municipality 1 . Respondent Aurelio C. Trampe is being sued in his capacity as presiding judge of Branch 163. Regional Trial Court of the National Capital Judicial Region, sitting in Pasig, whose Decision dated 14 July 1994 and Order dated 30 September 1994 in Special Civil Action No. 629 (entitled "Alejandro B. Ty and MVR Picture Tube, Inc. vs. The Hon. Secretary of Finance. et al.") are sought to be set aside. Respondent Secretary of Finance is impleaded as the government officer who approved the Schedule of Market Values used as basis for the new tax assessments being enforced by respondents Municipal Assessor and Municipal Treasurer of Pasig and the legality of which is being questioned in this petition 2 . The Antecedent Facts On 06 January 1994, respondent Assessor sent a notice of assessment respecting certain real properties of petitioners located in Pasig, Metro Manila. In a letter dated 18 March 1994, petitioners through counsel "request(ed) the Municipal Assessor to reconsider the subject assessments" 3 . Not satisfied, petitioners on 29 March 1994 filed with the Regional Trial Court of the National Capital Judicial Region, Branch 163, presided over by respondent Judge, a Petition for Prohibition with prayer for a restraining order and/or writ of preliminary injunction to declare null and void the new tax assessments and to enjoin the collection of real estate taxes based on said assessments. In a Decision 4 dated 14 July 1994, respondent Judge denied the petition "for lack of merit" in the following disposition. WHEREFORE, foregoing premises considered, petitioners' prayer to declare unconstitutional the schedule of market values as prepared by the Municipal Assessor of Pasig, Metro Manila, and to enjoin permanently the Municipal Treasurer of Pasig, Metro Manila, from collecting the real property taxes based thereof (sic) is hereby DENIED for lack of merit. Cost (sic) de oficio. Subsequently, petitioners' Motion for Reconsideration was also denied by respondent Judge in an Order 5 dated 30 September 1994. Rebuffed by said Decision and Order, petitioners filed this present Petition for Review directly before this Court, raising pure questions of law and assigning the following errors: The Court a quo gravely erred in holding that Presidential Decree No. 921 was expressly repealed by R.A. 7160 and that said presidential decree including its Implementing Rules (P.D. 464) went down to the statutes' graveyard together with the other decision(s) of the Supreme Court affecting the same.

The Court a quo while holding that the new tax assessments have tremendously increased ranging from 418.8% to 570%, gravely erred in blaming petitioners for their failure to exhaust administrative remedies provided for by law.
The Court a quo blatantly erred in not declaring the confiscatory and oppressive nature of the

assessments as illegal. void ab initio and unconstitutional constituting a deprivation of property without due process of law. 6

In a resolution dated 21 November 1994, this Court, without giving due course to the petition, required respondents to comment thereon. Respondents Municipal Treasurer and Municipal Assessor, through counsel, filed their Comment on 19 December 1994, and respondent Secretary of Finance, through the Solicitor General, submitted his on 11 May 1995. Petitioners filed their Reply to the Comment of respondent Assessor and Treasurer 06 January 1995, and their Reply to that of the respondent Secretary on 18 May 1995. After careful deliberation on the above pleadings, the Court resolved to give due course to the petition, and, inasmuch as the issues are relatively simple, the Court dispensed with requiring the parties to submit further memoranda and instead decided to consider the respondents' respective Comments as their answers and memoranda. Thus the case is now considered submitted for resolution. The Issues The issues brought by the parties for decision by this Court are: 1. Whether Republic Act No. 7160, otherwise known as the Local Government Code of 1991, repealed the provisions of Presidential Decree No. 921; 2. Whether petitioners are required to exhaust administrative remedies prior to seeking judicial relief; and 3. Whether the new tax assessments are oppressive and confiscatory, and therefore unconstitutional. In disposing of the above issues against petitioners, the court a quo ruled that the schedule of market values and the assessments based thereon prepared solely by respondent assessor are valid and legal, they having been prepared in accordance with the provisions of the Local Government Code of 1991 (R.A. 7160). It held also that said Code had effectively repealed the previous law on the matter, P.D. 921, which required, in the preparation of said schedule, joint action by all the city and municipal assessors in the Metropolitan Manila area. The lower court also faulted petitioners with failure to exhaust administrative remedies provided under Sections 226 and 252 of R.A. 7160. Finally, it found the questioned assessments consistent with the "tremendously increased . . . price of real estate anywhere in the country." 7 Stated the court: This Court is inclined to agree with the view of defendants that R.A. 7160 in its repealing clause provide (sic) that Presidential Decree Nos. . . . 464 . . . are hereby repealed and rendered of no force and effect. Hence said presidential decrees including their implementing rules went down to the statutes' graveyard together with the decisions of the Supreme Court on cases effecting (sic) the same. This Court is also in accord with respondents (sic) view that petitioners failed to avail of either Section 226 of R.A. 7160, that is by appealing the assessment of their properties to the Board of Assessment Appeal within sixty 160) days from the date of receipt of the written Notice of Assessment, and if it is true that petitioner (sic) as alleged in their pleadings was not afforded the opportunity to appeal to the board of assessment appeal, then they could have availed of the provisions of Section 252, of the same R.A. 7160 by paying the real estate tax under protest. Because of petitioners (sic) failure to avail of either Sections 226 or 252 of R.A. 7160, they failed to exhaust administratives (sic) remedies provided for by law before bringing the case to Court. (Buayan Cattle Co., Inc. vs. Quintillan, 128 SCRA 276). Therefore the filing of this case before this Court is premature, the same not falling under the exception because the issue involved is not a question of law but of fact (Valmonte vs. Belmonte, Jr., 170 SCRA 256).
Petitioners also alleged that the New Tax Assessments are not only oppressive and confiscatory but

also destructive in view of the tremendous increase in its valuation, from P855,360.00 to P4,121,280.00 a marked increase of 418.8% of one of its properties, while the other, from P857,600.00 to P4,374,410.00, an increased (sic) of 510%. This Court agree (sic) with petitioners (sic) observation, but the reality (sic) the price of real property anywhere in the country tremendously increased. This is shown in the Real Estate Monitor of Economic Incorporated (copy attached with the memorandum of respondents). For

example real properties in Pasig in 1991 located at the Ortigas Commercial Complex command (sic) a price of P42,000.00 per square meter which price is supported by a case filed before this Court (civil case no. 64506, Jesus Fajardo, et al. vs. Ortigas and Co.) for Recovery (sic) of agents (sic) commission. The property subject of the sale which was also located at the Ortigas Commercial Complex at Pasig, Metro Manila was sold to a Taiwanese at P42,000.00 per square meter. It is therefore not surprising that the assessment of real properties in Pasig has increased tremendously. Had petitioners first exhausted administrative remedies they would have realized the fact that prices of real estate has (sic) tremendously increased and would have known the reason/reasons why.8

In its Order dated 30 September 1994 denying the Motion for Reconsideration, the court a quo ruled:
This Court despite petitioners' exhaustive and thorough research and discussion of the point in issue, is

still inclined to sustain the view that P.D. 921 was impliedly repealed by R.A. 7160. P.D. 921 to the mind of this Court is an implementing law of P.D. 464, Sections 3, 6, 9, 12 and 13 of said P.D. provide how certain provisions of P.D. 464 shall be implemented. Since P.D. 464 was expressly repealed by R.A. 7160. P.D. 921 must necessarily be considered repealed, otherwise, what should Sections 3, 6, 9, 12 and 13 of P.D. 921 implement? And, had the law makers intended to have said P.D. 921 remain valid and enforceable they would have provided so in R.A. 7160. Since there is none, P.D. 921 must be considered repealed. 9

Re: The First Issue: Repeal of P.D. 921? To resolve the first issue, it is necessary to revisit the following provisions of law: 1. Section 15 of P.D. No. 464, promulgated on 20 May 1974, otherwise known as the Peal Property Tax Code: Sec. 15. Preparation of Schedule of Values. Before any general revision of property assessments is made, as provided in this Code, there shall be prepared for the province or city a Schedule of Market Value for the different classes of real property therein situated in such form and detail as shall be prescribed by the Secretary of Finance. Said schedule, together with an abstract of the data (on) which it is based, shall be submitted to the Secretary of Finance for review not later than the thirty-first day of December immediately preceding the calendar year the general revision of assessments shall be undertaken. The Secretary of Finance shall have ninety days from the date of receipt within which to review said schedule to determine whether it conforms with the provisions of this Code. 2. Subsequently, on 12 April 1976, P.D. 921 was promulgated, which in Section 9 thereof, states: Sec. 9. Preparation of Schedule of Values for Real Property within the Metropolitan Area. The Schedule of Values that will serve as the basis for the appraisal and assessment for taxation purposes of real properties located within the Metropolitan Area shall be prepared jointly by the City Assessors of the Districts created under Section one hereof, with the City Assessor of Manila acting as Chairman, in accordance with the pertinent provisions of Presidential Decree No. 464, as amended, otherwise known as the Real Property Tax Code, and the implementing rules and regulations thereof issued by the Secretary of Finance. 3. Section One of P.D. 921, referred to above, provides: Sec. 1. Division of Metropolitan Manila into Local Treasury and Assessment Districts. For purposes of effective fiscal management, Metropolitan Manila is hereby divided into the following Local Treasury and Assessment Districts: First District Manila Second District Quezon City, Pasig, Marikina, Mandaluyong and San Juan Third District Caloocan City, Malabon, Navotas and Valenzuela Fourth District Pasay City, Makati, Paranaque, Muntinlupa, Las Pias, Pateros and Taguig Manila, Quezon City, Caloocan City and Pasay City shall be the respective Centers of the aforesaid Treasury and Assessment Districts.

4. On 01 January 1992, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, took effect. Section 212 of said law is quoted as follows: Sec. 212. Preparation of Schedule of Fair Market Values. Before any general revision of property assessment is made pursuant to the provisions of this Title, there shall be prepared a schedule of fair market values by the provincial, city and the municipal assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in their respective local government units for enactment by ordinance of the sanggunian concerned. The schedule of fair market values shall be published in a newspaper of general circulation in the province, city or municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or municipal hall and in two other conspicuous public place therein. 5. The repealing clause of R.A. 7160 found in the Section 534 thereof is hereby reproduced as follows: Sec. 534. Repealing Clause. (a) . . . (b) . . . (c) . . . ; and Presidential Decree Nos. 381, 436, 464, 477, 626, 632, 752, and 1136 are hereby repealed and rendered of no force and effect. xxx xxx xxx (f) All general and special laws, acts, city charter, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. (emphasis supplied) It is obvious from the above provisions of R.A 7160, specifically Sec. 534, that P.D. 921 was NOT EXPRESSLY repealed by said statute. Thus, the question is: Was P.D. 921 IMPLIEDLY repealed by R.A. 7160? Petitioners contend that, contrary to the aforequoted Decision of the lower court, "whether the assessment is made before or after the effectivity of R.A. 7160, the observance of, and compliance with, the explicit requirement of P.D. 921 is strict and mandatory either" because P.D. 921 was not impliedly repealed by R.A. 7160 and is therefore still the applicable statute, or because the Supreme Court, in three related cases 10 promulgated on 16 December 1993 after the Local Government Code of 1991 already took effect ruled that a schedule of market values and the corresponding assessments based thereon "prepared solely by the city assessor . . . failed to comply with the explicit requirement (of collegial and joint action by all the assessors in the Metropolitan Manila area under P.D. 921) . . . and are on that account illegal and void." On the other hand, respondents aver that Section 9 of P.D. 921 and Section 212 of R.A. 7160 are clearly and unequivocally incompatible because they dwell on the same subject matter, namely, the preparation of a schedule of values for real property within the Metropolitan Manila Area. Under P.D. 921, the schedule shall be preparedjointly by the city assessors of the District, while, under R.A. 7160, such schedule shall be prepared "by the provincial, city and municipal assessors of the municipalities within the Metropolitan Manila area . . . ". Furthermore, they claim that "Section 9 (of P.D. 921) merely supplement(ed) Section 15 of P.D. 464 in so far as the preparation of the schedule of values in Metro Manila (is concerned)." Thus, "with the express repeal of P.D. 464 . . . P.D. 921 . . .can not therefore exist independently on its own." They also argue that although the aforecited Supreme Court decision was promulgated after R.A. 7160 took effect, "the assessment of the Municipal Assessors in those three (3) cited cases were assessed in 1990 prior to the effectivity of the Code." Hence, the doctrine in said cases cannot be applied to those prepared in 1994 under R.A. 7160. We rule for petitioners. R.A. 7160 has a repealing provision (Section 534) and, if the intention of the legislature was to abrogate P.D. 921, it would have included it in such repealing clause, as it did in expressly rendering of no force and effect several other presidential decrees. Hence, any repeal or modification of P.D. 921 can only be possible under par. (f) of said Section 534, as follows: (f) All general and special laws, acts, city charter, decrees, executive orders, proclamations and administrative regulations, part or parts thereof which are inconsistent with any of the provisions of the Code are hereby repealed or modified accordingly. The foregoing partakes of the nature of a general repealing provision. It is a basic rule of statutory construction that repeals by implication are not favored. An implied repeal will not be allowed unless it is convincingly and unambiguously demonstrated that the two laws are so clearly repugnant and patently inconsistent that they cannot

co-exist. This is based on the rationale that the will of the legislature cannot be overturned by the judicial function of construction and interpretation. Courts cannot take the place of Congress in repealing statutes. Their function is to try to harmonize, as much as possible, seeming conflicts in the laws and resolve doubts in favor of their validity and co-existence. In Villegas v. Subido, 11 the issue raised before the Court was whether the Decentralization Act had the effect of repealing what was specifically ordained in the Charter of the City of Manila. Under the Charter, it was provided in its Section 22 that "The President of the Philippines with the consent of the Commission on Appointments shall appoint . . . the City Treasurer and his Assistant." Under the Decentralization Act, it was provided that "All other employees, except teachers paid out of provincial, city or municipal general funds and other local funds shall . . . be appointed by the provincial governor, city or municipal mayor upon recommendation of the head of office concerned." The Court, case 12 , said: in holding that there was no implied repeal in this

. . . It has been the constant holding of this Court that repeals by implication are not favored and will not be so declared unless it be manifest that the legislature so intended. Such a doctrine goes as far back as United States v. Reyes, a 1908 decision (10 Phil. 423, Cf. U.S. v. Academia, 10 Phil. 431 [1908]). It is necessary then before such a repeal is deemed to exist that it be shown that the statutes or statutory provisions deal with the same subject matter and that the latter be inconsistent with the former. (Cf. Calderon v. Provincia del Santisimo Rosario, 28 Phil. 164 [1914]). There must be a showing of repugnancy clear and convincing in character. The language used in the latter statute must be such as to render it irreconcilable with what has been formerly enacted. An inconsistency that falls short of that standard does not suffice. What is needed is a manifest indication of the legislative purpose to repeal. [Citing numerous cases] More specifically, a subsequent statute, general in character as to its terms and application, is not to be construed as repealing a special or specific enactment, unless the legislative purpose to do so is manifest. This is so even if the provisions of the latter are sufficiently comprehensive to include what was set forth in the special act. This principle has likewise been consistently applied in decisions of the Court from Manila Railroad Co. v. Rafferty (40 Phil 224), decided as far back as 1919. A citation from an opinion of Justice Tuason is illuminating. Thus: "From another angle the presumption against repeal is stronger. A special law is not regarded as having been amended or repealed by a general law unless the intent to repeal or alter is manifest. Generalia specialibus non derogant. An this is true although the terms of the general act are broad enough to include the matter in the special statute. . . . At any rate, in the event harmony between provisions of this type in the same law or in two laws is impossible, the specific provision controls unless the statute, considered in its entirety, indicates a contrary intention upon the part of the legislature. . . . A general law is one which embraces a class of subjects or places and does not omit any subject or place naturally belonging to such class, while a special act is one which relates to particular persons or things of a class." (citing Valera v. Tuason, 80 Phil. 823, 827-828 [1948].) In the relatively recent case of Mecano vs. Commission on Audit 13 , the Court en banc had occasion to reiterate and to reinforce the rule against implied repeals, as follows: Repeal by implication proceeds on the premise that where a statute of later date clearly reveals an intention on the part of the legislature to abrogate a prior act on the subject, that intention must be given effect. Hence, before there can be a repeal, there must be a clear showing on the part of the law maker that the intent in enacting the new law was to abrogate the old one. The intention to repeal must be clear and manifest; otherwise, at least, as a general rule, the later act is to be construed as a continuation of, and not a substitute for, the first act and will continue so far as the two acts are the same from the time of the first enactment. There are two categories of repeal by implication. The first is where provisions in the two acts on the same subject matter are in an irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one. The second is if the later act covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate to repeal the earlier law. Implied repeal by irreconcilable inconsistency take place when the two statutes cover the same subject matter; they are so clearly inconsistent and incompatible with each other that they cannot be reconciled or harmonized; and both cannot be given effect, that is that one law cannot be enforced without nullifying the other.

In the same vein, but in different words, this Court ruled in Gordon vs. Veridiano 14 : Courts of justice, when confronted with apparently conflicting statutes, should endeavor to reconcile the same instead of declaring outright the invalidity of one as against the other. Such alacrity should be avoided. The wise policy is for the judge to harmonize them if this is possible, bearing in mind that they are equally the handiwork of the same legislature, and so give effect to both while at the same time also according due respect to a coordinate department of the government. It is this policy the Court will apply in arriving at the interpretation of the laws above-cited and the conclusions that should follow therefrom. In the instant case, and using the Courts' standard for implied repeal in Mecano, we compared the two laws. Presidential Decree No. 921 was promulgated on 12 April 1976, with the aim of, inter alia, evolving "a progressive revenue raising program that will not unduly burden the tax payers . . . " 15 in Metropolitan Manila. Hence, it provided for the "administration of local financial services in Metropolitan Manila" only, and for this purpose, divided the area into four Local Treasury and Assessment Districts, regulated the duties and functions of the treasurers and assessors in the cities and municipalities in said area and spelled out the process of assessing, imposing and distributing the proceeds of real estate taxes therein. Upon the other hand, Republic Act No. 7160, otherwise "known and cited as the Local 'Government Code of 1991'" 16 took effect on 01 January 1992 17. It declared "genuine and meaningful local autonomy" as a policy of the state. Such policy was meant to decentralize government "powers, authority, responsibilities and resources" from the national government to the local government units "to enable them to attain their fullest development as selfreliant communities and make them more effective partners in the attainment of national goals." 18 In the formulation and implementation of policies and measures on local autonomy, ''(l)ocal government units may group themselves, consolidate or coordinate their efforts, services and resources for purposes commonly beneficial to them." 19 From the above, it is clear that the two laws are not co-extensive and mutually inclusive in their scope and purpose. While R.A. 7160 covers almost all governmental functions delegated to local government units all over the country, P.D. 921 embraces only the Metropolitan Manila area and is limited to the administration of financial services therein, especially the assessment and collection of real estate (and some other local) taxes. Coming down to specifics, Sec. 9 of P.D. 921 requires 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 Sec. 212 of R.A. 7160 states that the schedule shall be prepared "by the provincial, city and 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. . . ." It is obvious that harmony in these provisions is not only possible, but in fact desirable, necessary and consistent with the legislative intent and policy. By reading together and harmonizing these two provisions, we arrive at the following steps in the preparation of the said schedule, as follows: 1. The assessor in each municipality or city in the Metropolitan Manila area shall prepare his/her proposed schedule of values, in accordance with Sec. 212, R.A. 7160. 2. Then, the Local Treasury and Assessment District shall meet, per Sec. 9, P.D. 921. In the instant case, that district shall be composed of the assessors in Quezon City, Pasig, Marikina, Mandaluyong and San Juan, pursuant to Sec. 1 of said P.D. In this meeting, the different assessors shall compare their individual assessments, discuss and thereafter jointly agree and produce a schedule of values for their district, taking into account the preamble of said P.D. that they should evolve "a progressive revenue raising program that will not unduly burden the taxpayers". 3. The schedule jointly agreed upon by the assessors shall then be published in a newspaper of general circulation and submitted to the sanggunian concerned for enactment by ordinance, per Sec. 212, R.A. 7160. By this harmonization, both the preamble of P.D. 921 decreeing that the real estate taxes shall "not unduly burden the taxpayer" and the "operative principle of decentralization" provided under Sec. 3, R.A. 7160 encouraging local government units to "consolidate or coordinate their efforts, services and resources" shall be fulfilled. Indeed the essence of joint local action for common good so cherished in the Local Government Code finds concrete expression in this harmonization. How about respondents' claim that, with the express repeal of P.D. 464, P.D. 921 being merely a "supplement" of said P.D. cannot "exist independently on its own"? Quite the contrary is true. By harmonizing P.D. 921 with R.A. 7160, we have just demonstrated that it can exist outside of P.D. 464, as a support, supplement and extension of

R.A. 7160, which for this purpose, has replaced P.D. 464. Since it is now clear that P.D. 921 is still good law, it is equally clear that this Court's ruling in the Mathay/Javier/Puyat-Reyes cases (supra) is still the prevailing and applicable doctrine. And, applying the said ruling in the present case, it is likewise clear that the schedule of values prepared solely by the respondent municipal assessor is illegal and void. Re: The Second Issue: Exhaustion of Administrative Remedies We now come to the second issue. The provisions of Sections 226 and 252 of R.A. 7160 being material to this issue, are set forth below: Sec. 226. Local Board of Assessment Appeals. Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. Sec. 252. Payment under Protest. (a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words "paid under protest". The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt. (b) The tax or a portion thereof paid under protest shall be held in trust by the treasurer concerned. (c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax liability. (d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, Book II of this Code. Respondents argue that this case is premature because petitioners neither appealed the questioned assessments on their properties to the Board of Assessment Appeal, pursuant to Sec. 226, nor paid the taxes under protest, per Sec. 252. We do not agree. Although as a rule, administrative remedies must first be exhausted before resort 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. 20 In the present case, the parties, even during the proceedings in the lower court on 11 April 1994, already agreed "that the issues in the petition are legal" 21 , and thus, no evidence was presented in said court. In laying down the powers of the Local Board of Assessment Appeals, R.A. 7160 provides in Sec. 229 (b) that "(t)he proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts . . . ." It follows that appeals to this Board may be fruitful only where questions of fact are involved. Again, the protest contemplated under Sec. 252 of R.A. 7160 is needed where there is a question as to the reasonableness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench however, the petitioners are questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase. Finally, it will be noted that in the consolidated cases of Mathay/Javier/Puyat-Reyes cited earlier, the Supreme Court referred the petitions (which similarly questioned the schedules of market values prepared solely by the respective assessors in the local government units concerned) to the Board of Assessment Appeal, not for the latter, to exercise its appellate jurisdiction, but rather to act only as a fact-finding commission. Said the Court 22 thru Chief Justice Andres R. Narvasa: On November 5, 1991, the Court issued a Resolution clarifying its earlier one of May 16, 1991. It pointed out that the authority of the Central Board of Assessment Appeals "to take cognizance of the factual issues raised in these two cases by virtue of the referral by this Court in the exercise of its extraordinary or certiorari jurisdiction should not be confused with its appellate jurisdiction over

appealed assessment cases under Section 36 of P.D. 464 otherwise known as the Real Property Tax Code. The Board is not acting in its appellate jurisdiction in the instant cases but rather, it is acting as a Court-appointed fact-finding commission to assist the Court in resolving the factual issues raised in G.R. Nos. 97618 and 97760." In other words, the Court gave due course to the petitions therein in spite of the fact that the petitioners had not, apriori, exhausted administrative remedies by filing an appeal before said Board. Because there were factual issues raised in the Mathay, et al. cases, the Supreme Court constituted the Central Board of Assessment Appeals as a fact-finding body to assist the Court in resolving said factual issues. But in the instant proceedings, there are no such factual issues. Therefore, there is no reason to require petitioners to exhaust the administrative remedies provided in R.A. 7160, nor to mandate a referral by this Court to said Board. Re: The Third Issue: Constitutionality of the Assessments Having already definitively disposed of the case through the resolution of the foregoing two issues, we find no more need to pass upon the third. It is axiomatic that the constitutionality of a law, regulation, ordinance or act will not be resolved by courts if the controversy can be, as in this case it has been, settled on other grounds. In the recent case of Macasiano vs. National Housing Authority 23 , this Court declared: It is a rule firmly entrenched in our jurisprudence that the constitutionality of an act of the legislature will not be determined by the courts unless that question is properly raised and presented in appropriate cases and is necessary to a determination of the case, i.e., the issue of constitutionality must be the very lis mota presented. To reiterate, the essential requisites for a successful judicial inquiry into the constitutionality of a law are: (a) the existence of an actual case or controversy involving a conflict of legal rights susceptible of judicial determination, (b) the constitutional question must be raised by a proper party, (c) the constitutional question must be raised at the earliest opportunity, and (d) the resolution of the constitutional question must be necessary to the decision of the case. (emphasis supplied) The aforequoted decision in Macasiano merely reiterated the ruling in Laurel vs. Garcia 24, where this Court held:
The Court does not ordinarily pass upon constitutional questions unless these questions are properly raised in appropriate cases and their resolution is necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly presented by the record if the case can be disposed of on some other ground such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]). 25 (emphasis supplied)

In view of the foregoing ruling, the question may be asked: what happens to real estate tax payments already made prior to its promulgation and finality? Under the law 26 , "the taxpayer may file a written claim for refund or credit for taxes and interests . . . ." Finally, this Tribunal would be remiss in its duty as guardian of the judicial branch if we let pass unnoticed the ease by which the respondent Judge consigned "to the statutes' graveyard" a legislative enactment "together with the (three) decisions of the Supreme Court" promulgated jointly and unanimously en banc. An elementary regard for the sacredness of laws and the stability of judicial doctrines laid down by superior authority should have constrained him to be more circumspect in rendering his decision and to spell out carefully and precisely the reasons for his decision to invalidate such acts, instead of imperiously decreeing an implied repeal. He knows or should have known the legal precedents against implied repeals. Respondent Judge, in his decision, did not even make an attempt to try to reconcile or harmonize the laws involved. Instead, he just unceremoniously swept them and this Court's decisions into the dustbin of "judicial history." In his future acts and decisions, he is admonished to be more judicious in setting aside established laws, doctrines and precedents. WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the questioned Decision and Order of respondent Judge, DECLARING as null and void the questioned Schedule of Market Values for properties in Pasig City prepared by respondent Assessor, as well as the corresponding assessments and real estate tax increases based thereon; and ENJOINING the respondent Treasurer from collecting the real estate tax increases made on the basis of said Schedule and assessments. No costs. SO ORDERED. Narvasa, C.J., Feliciano, Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco and Hermosisima, Jr., JJ., concur.

Footnotes Republic of the Philippines SUPREME COURT Baguio City THIRD DIVISION G.R. No. 133698 April 4, 2001 ANTONIO TALUSAN and CELIA TALUSAN, petitioners, vs. HERMINIGILDO* TAYAG and JUAN HERNANDEZ, respondents. PANGANIBAN, J.: For purposes of real property taxation, the registered owner of a property is deemed the taxpayer and, hence, the only one entitled to a notice of tax delinquency and the resultant proceedings relative to an auction sale. Petitioners, who allegedly acquired the property through an unregistered deed of sale, are not entitled to such notice, because they are not the registered owners. Moral lessons: real property buyers must register their purchases as soon as possible and, equally important, they must pay their taxes on time. The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the November 20, 1997 Decision1 of the Court of Appeals (CA) in CA-GR CV No. 41586. The dispositive portion of the challenged Decision is hereunder reproduced as follows: "WHEREFORE, premises considered, the appealed decision (dated February 4, 1993) of the Regional Trial Court (Branch 7) in Baguio City in Civil Case No. 1456-R is hereby AFFIRMED, with costs against plaintiffs/appellants." Also assailed is the April 27, 1998 CA Resolution2 which denied petitioners Motion for Reconsideration. The questioned CA ruling affirmed the Decision3 of Branch 7 of the Regional Trial Court (RTC) of Baguio City in Civil Case No. 1456-R. The RTC, in turn, dismissed an action for the annulment of the auction sale of a condominium unit, covered by Condominium Certificate of Title No. 651 and located in Building IV, Europa Condominium Villas, Baguio City. The Facts The CA summarized the antecedents of this case in this wise:4 "On June 28, 1988, [herein petitioners] filed a complaint wherein they alleged, inter alia, that: --They bought the subject property covered by Condominium Certificate of Title No. 651, from its former owner, Elias Imperial, as evidenced by a Deed of Absolute Sale: --On October 15, 1985, [herein Respondent] Juan D. Hernandez, x x x sued x x x in his capacity as City Treasurer of Baguio City, wrote a letter to the former owner Elias Imperial informing him that the above described property would be sold at public auction on December 9, 1985, x x x to satisfy the delinquent real estate taxes, penalties and cost of sale, and demanded payment of the sum of P4,039.80, representing total taxes due and penalties thereon; --Elias Imperial and his entire family emigrated to Australia in 1974. Elias Imperial never authorized a certain Dante Origan x x x to receive any letter or mail matter for and on his behalf; --[Respondent] Hernandez sold the above-described property to [Respondent] Tayag for P4,400.00 without any notice to the former owner thereof, [or] to [petitioners], and without compliance with the provisions of PD No. 464, as evidenced by the Certificate of Sale; --A final bill of sale was later issued in favor of the [Respondent] Hermenegildo Tayag. The assessed value alone of the said property is P37,310.00 and the fair market value of the same is more than P300,000.00 and both [respondents] knew these; --The bid price of P4,400 is so unconscionably low and shocking to the conscience, thus, the sale for the alleged unpaid taxes in the sum of P4,039.79, including penalties is null and void ab initio; --[Petitioners] have been in actual possession of the Unit in question, since they bought the same from its

former owners, and their possession is open, public, continuous, adverse and in the concept of owners, while [Respondent] Hermegildo Tayag has never been in possession of the said property; --[Petitioners] through intermediaries offered to pay to the [respondents] the sum of P4,400 plus all interests and expenses which [they] might have incurred x x x but said offer was rejected without any just [or] lawful cause. There is a need to issue a writ of preliminary injunction to preserve the status quo. They asked for: moral damages of not less than P50,000.00; exemplary damages of not less than P20,000.00; attorneys fee of P30,000.00, plus appearance fee of P2,000.00 for every appearance; and litigation expenses of not less than P5,000.00 to prosecute the case. (pages 3-8 of the Record) On July 14, 1988, [Respondent] Hermenegildo Tayag filed his [A]nswer with [C]ounterclaim (pages 28-32 of the Record), wherein he substantially denied the allegations in the complaint and, at the same time, raised the following affirmative defenses, among others: --(T)he ownership of the Condominium unit registered under Condominium Certificate of Title No. 651, Baguio City, has been consolidated in his name by virtue of the decision of the Regional Trial Court of Baguio, Branch 6, on September 16, 1987 x x x . The said decision has [become] final and executory as evidenced by the Certificate of Finality issued on October 8, 1987; --[Petitioners have] no cause of action against him, he being a buyer in good faith in a regular and lawful public bidding in which any person is qualified to participate. --The lower court has no jurisdiction over [petitioners] claim because the [petitioners] pray for the annulment of the Certificate of the Sale and the Final Bill of Sale, which was affirmed by virtue of the decision of the Regional Trial Court of Baguio, Branch 6, on September 16, 1987 x x x. The said decision has [become] final and executory as evidenced by the Certificate of Finality issued on October 8, 1987; --The public auction sale complied with the requirements of Presidential Decree No. 464 hence, the same is lawful and valid: --[Respondent] Tayag is not bound by the alleged [D]eed of [S]ale in favor of the [petitioners] by Elias [I]mperial, because it was not registered and recorded with the Registry of Deeds of Baguio City. [Respondent] Tayag then prayed for the award in his favor, of: moral damages of at least P50,000.00; exemplary damages; attorneys fees in the sum of P10,000.00; and, expenses of litigation. [Respondent] Hernandez likewise filed an [A]nswer on July 18. 1988, wherein he denied the material averments in the complaint and stated that no irregularity or illegality was committed in the conduct of the proceedings with respect to the delinquent real property of Elias Imperial and the actuations of the defendant herein were all within the limits of his authority and in accordance with the provisions of the law pertaining to delinquent real property, particularly, P.D. 464 otherwise known as the Real Property Tax Code and therefore, no damages may be imputed against him. He also claimed, by way of affirmative defenses, that: --The complaint states no cause of action against the [respondent] herein: --[Petitioners] have not complied with x x x Section 83 of P.D. No. 464 x x x thus, the case cannot prosper; --Granting that a Deed of Sale was actually issued in favor of the plaintiffs [because of] the fact that it is unregistered, the same does not bind third persons including defendant herein." In their Complaint, petitioners alleged that on December 7, 1981, they had acquired the condominium from Elias Imperial, the original registered owner, for P100,000. The sale was purportedly evidenced by a Deed of Sale which, however, had not and thenceforth never been registered with the Register of Deeds. Petitioners also averred that on December 9, 1985, Baguio City Treasurer Juan Hernandez sold the property at a public auction due to nonpayment of delinquent real estate taxes thereon. The property was sold to Respondent Herminigildo Tayag for P4,400 which represented the unpaid taxes. Thus, petitioners filed a Complaint seeking the annulment of the auction sale. They cited irregularities in the proceedings and noncompliance with statutory requirements. Dismissing the Complaint, Branch 7 of the RTC of Baguio City cited the December 16, 1987 judgment of Branch 6 of the same court in LRC Adm. Case No.207-R. This earlier Branch 6 Decision had consolidated ownership of the condominium unit in favor of Respondent Tayag. The Branch 7 Decision also cited the May 31, 1988 Order of

Branch 5 of the same court which had granted a Petition for the Cancellation of Condominium Certificate of Title No. 651 in the name of Elias Imperial and directed the Register of Deeds to issue a new Certificate of Title in the name of Respondent Tayag. According to the trial court, the Decision in LRC Adm. Case No. 207-R had already upheld the legality of the questioned auction sale. Hence, to rule again on the same issue would amount to passing upon a judgment made by a coequal court, contrary to the principle of "conclusiveness of judgment." Ruling of the CA The appellate court affirmed the trial courts ruling and ratiocination. The CA explained that LRC Adm. Case No. 207-R had already ruled on the validity of the auction sale of the subject condominium unit. It further sustained the validity of that sale, because the city treasurer complied with the requirements of notice, publication and posting. It added that "[i]f [petitioners] never received the notices sent to Elias Imperial, then they have only themselves to blame for failing to register the deed of sale between them and the former owner x x x." Rejecting petitioners contention that the purchase price was inadequate, the CA ruled that such inadequacy could not nullify the auction sale. It likewise held that petitioners had not established bad faith on the part of respondents in conducting the auction sale. Finally, it agreed with the latters contention that the former were "remiss in causing the registration of the sale in their favor of the subject property and they likewise did not fulfill their obligation to pay taxes. It [is] thus clear x x x they should only have themselves to blame. Laws exist to be followed, failing in which the price must be paid." Hence, this recourse.5 The Issues Petitioners assigned the following alleged errors for the consideration of this Court:6 "I. FIRST ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in failing to consider that the petitioners were deprived of their right to due process in this case due to the gross and inexcusable negligence of their former counsel who failed to inform them of the decision in this case and protect their interest. "II. SECOND ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in failing to nullify the auction sale of the subject property of petitioners due to alleged tax delinquency when there was no compliance with the mandatory requirement of Section 46 of P.D. 464 that such notice of delinquency of the payment of the property tax should be published. "III. THIRD ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in failing to consider the lack of personal notice of the sale for public auction of the subject property to its owner which nullifies the said proceeding. "IV. FOURTH ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in holding that the decision of the trial court in the petition for the consolidation of the title case filed by the private respondent in LRC Admin. Case 207 is a bar to this proceeding. "V. FIFTH ASSIGNMENT OF ERROR The Honorable Court of Appeals erred in not nullifying the auction sale of subject property on equitable considerations." We deem it appropriate to simplify the issues in this wise: (1) whether the RTC Decision in LRC Adm. Case No. 207R is a bar to this proceeding; and (2) whether the auction sale of the subject condominium unit should be annulled on the grounds of (a) non-publication of the notice of delinquency for the payment of property tax, (b) lack of personal notice of the sale or public auction of the subject property and (c) equitable considerations. As a preliminary matter, we shall also consider petitioners submission that they were deprived of due process because of their counsels failure to inform them immediately of the receipt of the CA Decision. Preliminary Matter: Negligence of Petitioners Former Counsel Petitioners aver that their former counsel informed them of the CA Decision only on February 5, 1998, more than two months after he had received a copy on December 3, 1997. According to petitioners, their former counsels

negligence effectively deprived them of their right to due process. We disagree. Notwithstanding its late filing, their Motion for Reconsideration was accepted and considered by the CA. Hence, this issue has become moot, a fact which petitioners themselves admitted in their Memorandum: "As a matter of fact, in the very resolution of the Court of Appeals of April 27, 1998 (Annex C to Petition) denying the motion for reconsideration, wherein the matter of inexcusable negligence of counsel in not informing petitioners immediately of the decision of the court a quo, were among the grounds thereof, it was held that the issues raised therein had already been considered in the Decision of November 20, 1997. The Court of Appeals obviously considered that the Motion for Reconsideration was validly filed by petitioners so that the Court of Appeals favorably considered the plea of petitioners to be afforded due process by acting on the Motion for Reconsideration. Otherwise, it could have just denied said Motion for late filing or simply noted the same without action."7 Moreover, petitioners themselves declared in their Reply Memorandum8 that this matter is no longer in issue: "At any rate this issue was raised in the Motion for Reconsideration of the Decision of the appellate court and obviously it was favorably considered as the said Court denied the merit of said Motion by stating that the issues raised have already been treated in the Decision, instead of outrightly denying the same for late filing. Hence, this is no longer in issue in this proceeding."9 First Issue: Bar by Earlier Judgment Petitioners contend that the Decision in LRC Adm. Case No. 207-R, rendered by the Regional Trial Court of Baguio City (Branch 6), did not preclude the filing of a separate action to annul the auction sale. Citing Tiongco v. Philippine Veterans Bank,10 they aver that this RTC Branch had no jurisdiction to rule on the validity of that sale. Hence, its Decision in the LRC case cannot bar the present proceedings. Petitioners reliance on Tiongco is misplaced, considering that its factual incidents are different from those of the present controversy. In that case, the trial court was acting on a Petition for the Surrender of Certificates of Title. In LRC Adm. Case No. 207-R, the trial court was faced with a Petition for Consolidation of Ownership. It had jurisdiction to rule on all matters necessary for the determination of the issue of ownership, including the validity of the auction sale. Indeed, this Court in several cases11 has previously declared that a petition for the surrender of the owners duplicate certificate involves contentious questions which should be threshed out in an ordinary case, because the land registration court has no jurisdiction to try them.
1wphi1.nt

Presidential Decree (PD) 1529, however, intended to avoid a multiplicity of suits and to promote the expeditious termination of cases. In more recent cases,12 therefore, the Court declared that this Decree had eliminated the distinction between general jurisdiction vested in the regional trial court and the latters limited jurisdiction when acting merely as a land registration court. Land registration courts, as such, can now hear and decide even controversial and contentious cases, as well as those involving substantial issues.13 Thus, petitioners err in contending that the RTC is, in a land registration case, barred from ruling on the validity of the auction sale. That court now has the authority to act not only on applications for original registration, but also on all petitions filed after the original registration of title. Coupled with this authority is the power to hear and determine all questions arising upon such applications or petitions.14 Especially where the issue of ownership is ineluctably tied up with the question of registration, the land registration court commits no error in assuming jurisdiction.15 It is equally important to consider that a land registration courts decision ordering the confirmation and the registration of title, being the result of a proceeding in rem, binds the whole world.16 Thus, the trial courts ruling consolidating the ownership and the title of the property in the name of herein respondent is valid and binding not only on petitioners, but also on everyone else who may have any claim thereon. Second Issue: Validity of the Auction sale Petitioners contend that the auction sale was invalid, because several requisites regarding notice and publication were not satisfied. We are not convinced. It has been held that matters of notice and publication in tax sales are factual questions that cannot be determined by this Court.17 Moreover, a recourse under Rule 45 of the Rules of Court, as in this case, generally precludes the determination of factual issues. This Court will not, as a rule, inquire into the evidence relied upon by the lower courts to support their findings.18 In this case, the CA had already ruled on the question of compliance with the

requirements of notice and publication in this wise:

"In the case at bench, it cannot be denied that the requirements of notice, publication and posting have

been complied with by the public defendant prior to the auction sale wherein the subject condominium unit was sold. x x x Ergo, there was nothing irregular in the questioned public auction -- thus, the validity of the same must be upheld in accordance with the aforementioned cases."19 The CA ruling notwithstanding, we shall proceed to discuss these factual issues in order to assure petitioners of a complete adjudication of their case, and not a mere disposition of procedural technicalities. The Non-Publication of Notice of Real Property Tax Delinquency Petitioners assert that the tax sale should be annulled because of noncompliance with the requirement of publication prescribed in Section 65 of PD 464. In this regard, we note that unlike land registration proceedings which are in rem, cases involving an auction sale of land for the collection of delinquent taxes are in personam. Thus, notice by publication, though sufficient in proceedings in rem, does not as a rule satisfy the requirement of proceedings in personam.20 As such, mere publication of the notice of delinquency would not suffice, considering that the procedure in tax sales is in personam. It was, therefore, still incumbent upon the city treasurer to send the notice of tax delinquency directly to the taxpayer in order to protect the interests of the latter. In the present case, the notice of delinquency was sent by registered mail to the permanent address of the registered owner in Manila. In that notice, the city treasurer of Baguio City directed him to settle the charges immediately and to protect his interest in the property. Under the circumstances, we hold that the notice sent by registered mail adequately protected the rights of the taxpayer, who was the registered owner of the condominium unit. For purposes of the real property tax, the registered owner of the property is deemed the taxpayer. Hence, only the registered owner is entitled to a notice of tax delinquency and other proceedings relative to the tax sale. Not being registered owners of the property, petitioners cannot claim to have been deprived of such notice. In fact, they were not entitled to it. Lack of Personal Notice of the Sale or of the Public Auction of the Subject Property Petitioners also contend that the registered owner was not given personal notice of the public auction. They cite Section 73 of PD 464, the pertinent portion of which is reproduced hereunder: "x x x. Copy of the notices shall forthwith be sent either by registered mail or by messenger, or through messenger, or through the barrio captain, to the delinquent taxpayer, at the address shown in the tax rolls or property tax records of the municipality or city where the property is located, or at his residence, if known to said treasurer or barrio captain. x x x." (Underscoring supplied by petitioners in their Memorandum) According to petitioners, the notice of public auction should have been sent to the address appearing in the tax roll or property records of the City of Baguio. That address is Unit No. 5, Baden #4105, Europa Condominium Villas, Baguio City; not the known address or residence of the registered owner at 145 Ermin Garcia Street, Cubao, Quezon City. They contend that notice may be sent to the residence of the taxpayer, only when the tax roll does not show any address of the property. The above-cited provision, however, shows that the determination of the taxpayers address to which the notice may be sent is the treasurers discretionary prerogative. In this case, the city treasurer deemed it best to send the notice of public auction to the residence of the taxpayer. The former validly exercised this option, inasmuch as the address of the latter was known to him. Moreover, it was more practical and favorable to the registered owner that the notice of delinquency be sent to his permanent residence in Manila, because he was using the subject condominium unit merely as a vacation house and not as a residence. This Court in Pecson v. Court of Appeals21 made a clear and categorical ruling on the matter, when it declared as follows: "Under the said provisions of law, notices of the sale of the public auction may be sent to the delinquent taxpayer, either (I) at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or (ii) at his residence, if known to such treasurer or barrio captain." (emphasis supplied) To reiterate, for purposes of the collection of real property taxes, the registered owner of the property is considered the taxpayer. Although petitioners have been in possession of the subject premises by virtue of anunregistered deed

of sale, such transaction has no binding effect with respect to third persons who have no knowledge of it. The importance of registration and its binding effect is stated in Section 51 of the Property Registration Decree or PD 1529, which reads: "Sec. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms, deeds, mortgages, leases or other voluntary instrument as are sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will purporting to convey or effect registered land, shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Registry of Deeds to make registration. The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the Office of the Register of Deeds for the province or the city where the land lies." Thus, insofar as third persons are concerned, it is the registration of the deed of sale that can validly transfer or convey a persons interest in a property.22 In the absence of registration, the registered owner whose name appears on the certificate of title is deemed the taxpayer to whom the notice of auction sale should be sent. Petitioners, therefore, cannot claim to be taxpayers. For this reason, the annulment of the auction sale may not be invoked successfully. The Annulment of the Auction Sale on Equitable Considerations As correctly pointed out by respondents, equitable considerations will not find application, if the statutes or rules of procedure explicitly provide for the requisites and standards by which the matters at bench can be resolved. While it may be assumed that both petitioners and Respondent Tayag are innocent purchasers of the subject property, it is a well-settled principle that between two purchasers, the one who has registered the sale in ones favor has a preferred right over the other whose title has not been registered, even if the latter is in actual possession of the subject property.23 Likewise, we cannot help but point out the fact that petitioners brought this misfortune upon themselves. They neither registered the Deed of Sale after its execution nor moved for the consolidation of ownership of title to the property in their name. Worse, they failed to pay the real property taxes due. Although they had been in possession of the property since 1981, they did not take the necessary steps to protect and legitimize their interest. Indeed, petitioners suit is now barred by laches.24 The law helps the vigilant, but not those who sleep on their rights, for time is a means of obliterating actions. Verily, time runs against the slothful and the contemners of their own rights.25 WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners. SO ORDERED. Melo, Vitug, Gonzaga-Reyes, Sandoval-Gutierrez, JJ., concur.