JARDINE DAVIES INSURANCE BROKERS, INC. v.

ALIPOSA and CARLOS

February 27, 2003
Callejo, Sr., J.

Facts:
The Sangguniang Bayan of Makati enacted Municipal, Ordinance No. 92-072 which
providesfor the schedule of real estate, business and franchise taxes in the
Municipality of Makati. Thereafter, the Department of Justice came out with a
resolution after an appeal from a taxpayer, declaring "null and void and without legal
effect" the said ordinance for having been enacted in contravention of Section 187 of
the Local Government Code of 1991.
Makati filed a petition with the RTC of Makati. In the meantime, Makati continued to
implement the ordinance.
Jardine Davies Insurance Brokers, Inc., a duly-organized corporation, was assessed
and billed by Makati an amount for taxes, fees and charges. Petitioner did not protest
the assessment but in fact, paid the said amounts without any protest.
The RTC rendered judgment declaring the ordinance valid.
Jardine Davies, relying on the resolution of the DOJ, filed a complaint with the RTC of
Makati against Makati and its Acting Municipal Treasurer for a refund or tax credit.
The defendants filed a motion to dismiss the complaint on the ground of prematurity.
Issue/Held: Whether Jardine Davies proscribed from filing its complaint with the RTC for a
refund of the alleged payment without any protest of the taxes due and without any appeal
with the Secretary of Justice as to the legality or constitutionality of the ordinance. YES.
Ratio:
As a general precept, a taxpayer may file a complaint assailing the validity of the
ordinance and praying for a refund of its perceived overpayments without first filing a
protest to the payment of taxes due under the ordinance.
However, the Court agrees with the contention of respondents that petitioner was
proscribed from filing its complaint with the RTC of Makati for the reason that
petitioner failed to appeal to the Secretary of Justice within 30 days from the
effectivity date of the ordinance as mandated by Section 187 of the Local
Government Code .
A municipal tax ordinance empowers a local government unit to impose taxes. The
power to tax is the most effective instrument to raise needed revenues to finance
and support the myriad activities of local government units for the delivery of basic
services essential to the promotion of the general welfare and enhancement of
peace, progress, and prosperity of the people. Consequently, any delay in
implementing tax measures would be to the detriment of the public. It is for this
reason that protests over tax ordinances are required to be done within certain time
frames. In the present case, the failure of Jardine Davies to appeal to the Secretary of
Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause.
Moreover, Jardine Davies even paid without any protest the amounts of taxes
assessed by respondents Makati and Acting Treasurer as provided for in the
ordinance.
NATIONAL POWER CORPORATION vs.
PROVINCE OF QUEZON - Real Property
Tax

FACTS:

NPC is a GOCC that entered into an Energy Conversion Agreement (ECA) under a build-
operate-transfer (BOT) arrangement with Mirant Pagbilao Corp. Under the agreement, Mirant
will build and finance a thermal power plant in Quezon, and operate and maintain the same for
25 years, after which, Mirant will transfer the power plant to the Respondent without
compensation. NPC also undertook to pay all taxes that the government may impose on Mirant.
Quezon then assessed Mirant real property taxes on the power plant and its machineries.

ISSUES:

(1) Can Petitioner file the protest against the real property tax assessment?
(2) Can Petitioner claim exemption from the RPT given the BOT arrangement with Mirant?
(3) Is payment under protest required before an appeal to the LBAA is made?

HELD:

(1) NO. The two entities vested with personality to contest an assessment are (a) the owner or (b)
the person with legal interest in the property. NPC is neither the owner nor the possessor/user of
the subject machineries even if it will acquire ownership of the plant at the end of 25 years. The
Court said that legal interest should be an interest that is actual and material, direct and
immediate, not simply contingent or expectant. While the Petitioner does indeed assume
responsibility for the taxes due on the power plant and its machineries, the tax liability referred
to is the liability arising from law that the local government unit can rightfully and successfully
enforce, not the contractual liability that is enforceable between the parties to a contract. The
local government units can neither be compelled to recognize the protest of a tax assessment
from the Petitioner, an entity against whom it cannot enforce the tax liability.

(2) NO. To successfully claim exemption under Section 234 (c) of the LGC, the claimant must
prove two elements: a) the machineries and equipment are actually, directly, and exclusively used
by local water districts and government-owned or controlled corporations; and b) the local water
districts and government-owned and controlled corporations claiming exemption must be
engaged in the supply and distribution of water and/or the generation and transmission of electric
power. Since neither the Petitioner nor Mirant satisfies both requirements, the claim for
exemption must fall.

(3) YES. If a taxpayer disputes the reasonableness of an increase in a real property tax
assessment, he is required to "first pay the tax" under protest. The case of Ty does not apply as it
involved a situation where the taxpayer was questioning the very authority and power of the
assessor, acting solely and independently, to impose the assessment and of the treasurer to collect
the tax. A claim for tax exemption, whether full or partial, does not question the authority of local
assessors to assess real property tax.

G.R. No. 171033 August 3, 2010

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

The spouses Roberto and Monette Naval obtained a loan from respondent Rizal
Commercial Banking Corporation, secured by a real estate mortgage of properties
covered by Transfer Certificate of Titles , the real estate mortgage was later foreclosed
and the properties were sold at public auction with respondent as the highest bidder.
The corresponding Certificates of Sale were issued in favor of respondent. However,
the certificates of sale were allegedly registered only on February 10, 2004.

Meanwhile, on May 30, 2003, an auction sale of tax delinquent properties was
conducted by the City Treasurer of Quezon City. Included in the properties that were
auctioned were the aforementioned TCTs . For these delinquent properties, Alvin
Emerson S. Yu was adjudged as the highest bidder. Upon payment of the tax
delinquencies, he was issued the corresponding Certificate of Sale of Delinquent
Property.On February 10, 2004, the Certificate of Sale of Delinquent Property was
registered with the Office of the Register of Deeds of Quezon City.

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

Petitioners contended, that it had until February 10, 2005, or one (1) year from the date
of registration of the certificate of sale on February 10, 2004, within which to redeem the
subject properties, pursuant to Section 78 of Presidential Decree (P.D.) No. 464 or the
Real Property Tax Code
Issue: WON the redemption period was already elapsed.

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

REPUBLIC V. PARANAQUE
G.R. No. 191109
July 18, 2012

Philippine Reclamation Authority (PRA) is a government-owned and

controlled corporation (GOCC), a taxable entity, and, therefore not exempt
from payment of real property taxes.

By virtue of its mandateunder PD 1084 of 1977, EO 525 of 1979 and EO

380 of 2004, the Philippine Reclamation Authority (PRA), a government
corporation formerly called Public Estates Authority (PEA), reclaimed
several portions of the foreshore and offshore areas of Manila Bay,
including those located in Paraaque City, and was issued Original
Certificates of Title Transfer Certificates of Titleover the reclaimed lands.

In 2003, then Paraaque City Treasurer Liberato M. Carabeo (Carabeo)

issued Warrants of Levy on PRAs reclaimed properties (Central Business
Park and Barangay San Dionisio) located in Paraaque City based on the
assessment for delinquent real property taxes made by then Paraaque
City Assessor Soledad Medina Cue for tax years 2001 and 2002. PRA filed
a petition for prohibition with prayer for temporary restraining order (TRO)
and/or writ of preliminary injunction against Carabeo before the RTC, which
denied the petition. After an exchange of several pleadings and the failure
of both parties to arrive at a compromise agreement, PRA filed a Motion for
Leave to File and Admit Attached Supplemental Petition which sought to
declare as null and void the assessment for real property taxes, the levy
based on the said assessment, the public auction sale conducted on April
7, 2003, and the Certificates of Sale issued pursuant to the auction sale.

On January 8, 2010, the RTC rendered its decision dismissing PRAs

petition.

PRA asserts that it is not a GOCC under Section 2(13) of the Introductory
Provisions of the Administrative Code. Neither is it a GOCC under Section
16, Article XII of the 1987 Constitution because it is not required to meet
the test of economic viability. Instead, PRA is a government instrumentality
vested with corporate powers and performing an essential public service
pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. Although it has a capital stock divided into shares, it is
not authorized to distribute dividends and allotment of surplus and profits to
its stockholders. Therefore, it may not be classified as a stock corporation
because it lacks the second requisite of a stock corporation which is the
distribution of dividends and allotment of surplus and profits to the
stockholders.

Thus, PRA insists that, as an incorporated instrumentality of the National

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

Issue

WON PRA is not exempt from the payment of real property tax

Ruling

Yes.
Based on Section 2(13) of the Introductory Provisions of the Administrative
Code of 1987 it is clear that a GOCC must be "organized as a stock or non-
stock corporation" while an instrumentality is vested by law with corporate
powers. Likewise, when the law makes a government instrumentality
operationally autonomous, the instrumentality remains part of the National
Government machinery although not integrated with the department
framework.

When the law vests in a government instrumentality corporate powers, the

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

In the case at bench, PRA is not a GOCC because it is neither a stock

nor a non-stock corporation. It cannot be considered as a stock corporation
because although it has a capital stock divided into no par value shares as
provided in Section 7 of P.D. No. 1084, it is not authorized to distribute
dividends, surplus allotments or profits to stockholders. There is no
provision whatsoever in P.D. No. 1084 or in any of the subsequent
executive issuances pertaining to PRA, particularly, E.O. No. 525, E.O. No.
65 and EO No. 7987 that authorizes PRA to distribute dividends, surplus
allotments or profits to its stockholders.

This Court is convinced that PRA is not a GOCC either under Section 2(3)
of the Introductory Provisions of the Administrative Code or under Section
16, Article XII of the 1987 Constitution. The facts, the evidence on record
and jurisprudence on the issue support the position that PRA was not
organized either as a stock or a non-stock corporation. Neither was it
created by Congress to operate commercially and compete in the
private market. Instead, PRA is a government instrumentality vested
with corporate powers and performing an essential public service
pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. Being an incorporated government
instrumentality, it is exempt from payment of real property tax.
Clearly, respondent has no valid or legal basis in taxing the subject
reclaimed lands managed by PRA. On the other hand, Section 234(a) of
the LGC, in relation to its Section 133(o), exempts PRA from paying realty
taxes and protects it from the taxing powers of local government units.

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

This exemption should be read in relation to Section 133(o) of the same

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

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

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

Section 133(o) recognizes the basic principle that local governments

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

When local governments invoke the power to tax on national government

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

Another rule is that a tax exemption is strictly construed against the

taxpayer claiming the exemption. However, when Congress grants an
exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government
instrumentality.

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

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

There is also no reason for local governments to tax national government

instrumentalities for rendering essential public services to inhabitants of
local governments. The only exception is when the legislature clearly
intended to tax government instrumentalities for the delivery of essential
public services for sound and compelling policy considerations. There must
be express language in the law empowering local governments to tax
national government instrumentalities. Any doubt whether such power
exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax national
government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:

The states have no power by taxation or otherwise, to retard, impede,

burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government.

The power to tax which was called by Justice Marshall as the "power to
destroy" cannot be allowed to defeat an instrumentality or creation of the
very entity which has the inherent power to wield it.

The Court agrees with PRA that the subject reclaimed lands are still part of
the public domain, owned by the State and, therefore, exempt from
payment of real estate taxes.Similarly, Article 420 of the Civil Code
enumerates properties belonging to the State.

Here, the subject lands are reclaimed lands, specifically portions of the
foreshore and offshore areas of Manila Bay. As such, these lands remain
public lands and form part of the public domain. In the case of Chavez v.
Public Estates Authority and AMARI Coastal Development The fact that
alienable lands of the public domain were transferred to the PEA (now
PRA) and issued land patents or certificates of title in PEAs name did not
automatically make such lands private. This Court also held therein that
reclaimed lands retained their inherent potential as areas for public use or
public service.

As the central implementing agency tasked to undertake reclamation

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

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

Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of

the Administrative Code of 1987, provides that the President shall have the
power to reserve for settlement or public use, and for specific public
purposes, any of the lands of the public domain, the use of which is not
otherwise directed by law. The reserved land shall thereafter remain
subject to the specific public purpose indicated until otherwise provided by
law or proclamation.

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

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

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

Mactan Cebu International Airport

Authority v. Marcos 261 SCRA 667 (1996)
Oct23

Facts:
Petitioner Mactan Cebu International Airport Authority was created by virtue of R.A. 6958,
mandated to principally undertake the economical, efficient, and effective control, management,
and supervision of the Mactan International Airport and Lahug Airport, and such other airports as
may be established in Cebu.

Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from
payment of realty taxes in accordance with Section 14 of its charter. However, on October 11,
1994, Mr. Eustaquio B. Cesa, Officer in Charge, Office of the Treasurer of the City of Cebu,
demanded payment from realty taxes in the total amount of P2229078.79. Petitioner objected to
such demand for payment as baseless and unjustified claiming in its favor the afore cited Section
14 of R.A. 6958. It was also asserted that it is an instrumentality of the government performing
governmental functions, citing Section 133 of the Local Government Code of 1991.

Section 133. Common limitations on the Taxing Powers of Local Government Units.

The exercise of the taxing powers of the provinces, cities, barangays, municipalities shall not
extend to the levi of the following:

xxx Taxes, fees or charges of any kind in the National Government, its agencies and
instrumentalities, and LGUs. xxx

Respondent City refused to cancel and set aside petitioners realty tax account, insisting that the
MCIAA is a government-controlled corporation whose tax exemption privilege has been
withdrawn by virtue of Sections 193 and 234 of Labor Code that took effect on January 1, 1992.

Issue:
Whether or not the petitioner is a taxable person
Rulings:

Taxation is the rule and exemption is the exception. MCIAAs exemption from payment of taxes
is withdrawn by virtue of Sections 193 and 234 of Labor Code. Statutes granting tax exemptions
shall be strictly construed against the taxpayer and liberally construed in favor of the taxing
authority.

The petitioner cannot claim that it was never a taxable person under its Charter. It was only
exempted from the payment of realty taxes. The grant of the privilege only in respect of this tax
is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except
real property tax.

Real property tax; liability of GSIS. Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax
exemption from real estate taxes, among other tax burdens, until January 1, 1992 when
the LGC took effect and withdrew exemptions from payment of real estate taxes privileges
granted under PD 1146. RA 8291 restored in 1997 the tax exempt status of GSIS by reenacting
under its Sec. 39 what was once Sec. 33 of P.D. 1146. If any real estate tax is due to the City of
Manila, it is only for the interim period, or from 1992 to 1996, to be precise. Government
Service Insurance System vs. City Treasurer and City Assessor of the City of Manila, G.R. No.
186242, December 23, 2009.