Cenido v.
Apacionado the act or contract but only to insure its efficacy, so that after the
G.R. No. 132474. November 19, 1999. *
RENATO CENIDO (deceased), represented by VICTORIA
CENIDOSA, petitioner, vs. SPOUSES AMADEO
APACIONADO and HERMINIA STA. ANA, respondents.
Contracts; Sales; Essential Requisites of Contracts.—To
determine whether the “Pagpapatunay” is a valid contract of
sale, it must contain the essential requisites of contracts, viz.: (1)
consent of the contracting parties; (2) object certain which is the
subject matter of the contract; and (3) cause of the obligation
which is established.
Same; Same; Same; Evidence; One who alleges any
defect or the lack of a valid consent to a contract must establish
the same by full, clear and convincing evidence, not merely by
preponderance of evidence.—One who alleges any defect or the
lack of a valid consent to a contract must establish the same by
full, clear and convincing evidence, not merely by
preponderance thereof. Petitioner has not alleged that the old
man, by his physical or mental state, was incapacitated to give
his consent at the time of execution of the “Pagpapatunay.”
Petitioner has not shown that Bonifacio was insane or demented
or a deaf-mute who did not know how to write. Neither has
petitioner claimed, at the very least, that the consent of Bonifacio
to the contract was vitiated by mistake, violence, intimidation,
undue influence or fraud. If by assailing the intrinsic defects in
the wordage of the “Pagpapatunay” petitioner Cenido seeks to
specifically allege the exercise of extrinsic fraud and undue
influence on the old man, these defects are not substantial as to
render the entire contract void. There must be clear and
convincing evidence of what specific acts of undue influence or
fraud were employed by respondent spouses that gave rise to
said defects. Absent such proof, Bonifacio’s presumed consent
to the “Pagpapatunay” remains.
Same; Same; Same; Generally, contracts are obligatory,
in whatever form such contracts may have been entered into,
provided all the essential requisites for their validity are
present.—Generally, contracts are obligatory, in whatever form
such contracts may have been entered into, provided all the
essential requisites for their validity are present. When,
however, the law requires that a contract be in some form for it
to be valid or enforceable, that requirement must be complied
with.
Same; Same; A certain form may be prescribed by law for
any of the following purposes—for validity, enforceability, or
greater efficacy of the contract.—A certain form may be
prescribed by law for any of the following purposes: for validity,
enforceability, or greater efficacy of the contract. When the form
required is for validity, its nonobservance renders the contract
void and of no effect. When the required form is for
enforceability, non-compliance therewith will not permit, upon
the objection of a party, the contract, although otherwise valid,
to be proved or enforced by action. Formalities intended for
greater efficacy or convenience or to bind third persons, if not
done, would not adversely affect the validity or enforceability of
the contract between the contracting parties themselves.
Same; Same; The requirement of a public document in
Article 1358 of the Civil Code is not for the validity of the
instrument but for its efficacy.—The requirement of a public
document in Article 1358 is not for the validity of the instrument
but for its efficacy. Although a conveyance of land is not made
in a public document, it does not affect the validity of such
conveyance. Article 1358 does not require the accomplishment
of the acts or contracts in a public instrument in order to validate
existence of said contract has been admitted, the party bound
may be compelled to execute the proper document.
Same; Same; Land Registration; Land Titles; The
question of whether a contract is sufficient to transfer and
convey title to the land for purposes of original registration or the
issuance of a real estate tax declaration is another matter
altogether.—The private conveyance of the house and lot is
therefore valid between Bonifacio Aparato and respondent
spouses. The question of whether the “Pagpapatunay” is
sufficient to transfer and convey title to the land for purposes of
original registration or the issuance of a real estate tax
declaration in respondent spouses’ names, as prayed for by
respondent spouses, is another matter altogether. For greater
efficacy of the contract, convenience of the parties and to bind
third persons, respondent spouses have the right to compel the
vendor or his heirs to execute the necessary document to
properly convey the property.
Filiation; Illegitimate Children; The filiation of illegitimate
children may be proved by any of the forms of recognition of
natural children.—Under the Civil Code, natural children and
illegitimate children other than natural are entitled to support and
successional rights only when recognized or acknowledged by
the putative parent. Unless recognized, they have no rights
whatsoever against their alleged parent or his estate. The
filiation of illegitimate children may be proved by any of the forms
of recognition of natural children. This recognition may be made
in three ways: (1) voluntarily, which must be express such as
that in a record of birth, a will, a statement before a court of
record, or in any authentic writing; (2) legally, i.e., when a natural
child is recognized, such recognition extends to his or her
brothers and sisters of the full blood; and (3) judicially or
compulsorily, which may be demanded by the illegitimate child
of his parents.
Same; Same; Actions; The requirement that the action for
compulsory recognition be filed during the parent’s lifetime is to
prevent illegitimate children, on account of strong temptations to
large estates left by dead persons, to claim part of this estate
without giving the alleged parent personal opportunity to be
heard.—The illegitimate child can file an action for compulsory
recognition only during the lifetime of the presumed parent. After
the parent’s death, the child cannot bring such action, except,
however, in only two instances: one is when the supposed
parent died during the minority of the child, and the other is when
after the death of the parent, a document should be discovered
in which the parent recognized the child as his. The action must
be brought within four years from the attainment of majority in
the first case, and from the discovery of the document in the
second case. The requirement that the action be filed during the
parent’s lifetime is to prevent illegitimate children, on account of
strong temptations to large estates left by dead persons, to claim
part of this estate without giving the alleged parent personal
opportunity to be heard. It is vital that the parent be heard for
only the parent is in a position to reveal the true facts
surrounding the claimant’s conception.
Same; Same; Same; The voluntary recognition in a court
proceeding of a person’s filiation by the brother of the alleged
parent does not qualify as a “statement in a court of record”—
this statement must be made personally by the parent himself or
herself, not by any brother, sister or relative.—Petitioner Cenido
did not present any record of birth, will or any authentic writing
to show he was voluntarily recognized by Bonifacio as his
illegitimate son. In fact, petitioner admitted on the witness stand
that he had no document to prove Bonifacio’s recognition, much
less, his filiation. The voluntary recognition of petitioner’s filiation
by Bonifacio’s brother before the MTC does not qualify as a
“statement in a court of record.” Under the law, this statement
must be made personally by the parent himself or herself, not by
any brother, sister or relative; after all, the concept of recognition
speaks of a voluntary declaration by the parent, or if the parent
refuses, by judicial authority, to establish the paternity or
maternity of children born outside wedlock.
Tax Declarations; Real property tax shall be assessed in
the name of the person “owning or administering” the property
on which the tax is levied, and a tax declaration in the name of
a person who has no successional or administrative rights to a
decedent’s estate is null and void.—The Real Property Tax
Code provides that real property tax be assessed in the name of
the person “owning or administering” the property on which the
tax is levied. Since petitioner Cenido has not proven any
successional or administrative rights to Bonifacio’s estate, Tax
Declaration No. 02-6368 in Cenido’s name must be declared null
and void.
PETITION for review on certiorari of a decision of the Court of
Appeals.
PUNO, J.:
In this petition for review, petitioner Renato Cenido seeks to
reverse and set aside the decision of the Court of Appeals in 1 issuance of Tax Declaration No. 02-0368 in his name; (3) his
CA-G.R. CV No. 41011 which declared the private respondents
as the owners of a house and lot in Binangonan, Rizal. 2 the Municipal Trial Court, Branch 1, Binangonan in Case No.
The antecedent facts are as follows:
On May 22, 1989, respondent spouses Amadeo
Apacionado and Herminia Sta. Ana filed with the Regional Trial
Court, Branch 70, Rizal a complaint against petitioner Renato
Cenido for “Declaration of Ownership, Nullity, with
Damages.” The spouses alleged that: (1) they are the owners of
3 Apacionado spouses were allowed to stay in his father’s house
a parcel of unregistered land, 123 square meters in area and
located at Rizal Street, Barrio Layunan, Binangonan, Rizal,
more particularly described as follows:
“x x x that certain parcel of land located at Rizal, St., Layunan,
Binangonan, Rizal, with an area of 123 square meters, more or less,
bounded on the North by Gavino Aparato; on the East by Rizal St.,
on the South by Tranquilino Manuzon; and on the West by Simplicio
Aparato, and the residential house standing thereon.”
4
(2) this house and lot were purchased by the spouses from its
previous owner, Bonifacio Aparato, now deceased, who lived
under the spouses’ care and protection for some twenty years
prior to his death; (3) while he was alive, Bonifacio Aparato
mortgaged the said property twice, one to the Rural Bank of
Binangonan and the other to Linda C. Ynares, as security for
loans obtained by him; (4) the loans were paid off by the spouses
thereby securing the release and cancellation of said
mortgages; (5) the spouses also paid and continue to pay the
real estate taxes on the property; (6) from the time of sale, they
have been in open, public, continuous and uninterrupted
possession of the property in the concept of owners; (7) that on
January 7, 1987, petitioner Renato Cenido, claiming to be the
owner of the subject house and lot, filed a complaint for
ejectment against them with the Municipal Trial Court, Branch 2,
Binangonan, Rizal; (8) through fraudulent and unauthorized
means, Cenido was able to cause the issuance in his name of
Tax Declaration No. 02-0368 over the subject property, which
fact the spouses learned only upon the filing of the ejectment
case; (9) although the ejectment case was dismissed by the
Municipal Trial Court (MTC), Branch 2, the tax declaration in
Cenido’s name was not cancelled and still subsisted; (10) the
spouses have referred the matter to the barangay for conciliation
but Cenido unjustifiably refused to appear thereat. The spouses
thus prayed that:
“WHEREFORE, it is respectfully prayed of the Honorable Court
that judgment issue in the case:
1. Declaring them (plaintiffs) the true and absolute owners of the
house and lot now covered by Tax Declaration No. 02-0368;
2. Declaring Tax Declaration No. 02-0368 in the name of
defendant Renato Cenido as null and void and directing the
Provincial Assessor of Rizal and the Municipal Assessor of
Binangonan, Rizal to register and to declare the house and
lot covered by the same in their names (plaintiffs) for
purposes of taxation;
3. Ordering defendant to pay them in the least amount of
P50,000.00 as and for moral damages suffered;
4. Ordering defendant to pay them the amount of P10,000.00 as
and for attorney’s fees;
5. Ordering payment by defendant of exemplary damages in
such amount which the Honorable Court may deem just and
equitable in the premises;
6. Ordering defendant to pay the costs of suit; and Plaintiffs pray
for such other and further relief which the Honorable Court
may deem just and equitable considering the foregoing
premises.” 5
Petitioner Cenido answered claiming that: (1) he is the
illegitimate son of Bonifacio Aparato, the deceased owner of the
subject property; (2) as Aparato’s sole surviving heir, he became
the owner of the property as evidenced by the cancellation of
Tax Declaration No. 02-0274 in Bonifacio’s name and the
ownership over the house and lot was also confirmed in 1985 by
2264 which “adjudicated various claims involving the same
subject property wherein plaintiffs were privy to the said case”;
(4) that in said case, the Apacionado spouses participated in the
execution of the compromise agreement partitioning the
deceased’s estate among his heirs, which agreement was
adopted by the Municipal Trial Court as its judgment; (5) that the
temporarily; (6) the mortgages on the property were obtained by
his father upon request of the Apacionados who used the
proceeds of the loans exclusively for themselves; (7) the real
estate taxes on the property were paid for by his father, the
principal, and the spouses were merely his agents; (8) the
instrument attesting to the alleged sale of the house and lot by
Bonifacio Aparato to the spouses is not a public document; (8)
petitioner Cenido was never summoned to appear before the
barangay for conciliation proceedings. 6
Respondent spouses replied that: (1) Cenido is not the
illegitimate son of Bonifacio, Cenido’s claim of paternity being
spurious; (2) the ownership of the property was not the proper
subject in Civil Case No. 2264 before the MTC, Branch I, nor
were the spouses parties in said case. 7
The parties went to trial. Respondent spouses presented
four (4) witnesses, namely, respondent Herminia Sta. Ana
Apacionado; Rolando Nieves, the barangay captain; Norberto
Aparato, the son of Gavino Aparato, Bonifacio’s brother; and
Carlos Inabayan, one of the two witnesses to the deed of sale
between Bonifacio Aparato and the spouses over the property.
Petitioner Cenido presented only himself as witness.
On March 30, 1993, the trial court rendered judgment. The
court upheld petitioner Cenido’s ownership over the property by
virtue of the recognition made by Bonifacio’s then surviving
brother, Gavino, in the compromise judgment of the MTC.
Concomitantly, the court also did not sustain the deed of sale
between Bonifacio and the spouses because it was neither
notarized nor signed by Bonifacio and was intrinsically defective.
The court ordered thus:
 “WHEREFORE, in the light of the foregoing considerations, the
Court believes that preponderance of evidence is on the side of
defendant and so the complaint could not be given due course.
Accordingly, the case is, as it should be, dismissed. No attorney’s
fees or damages is being awarded as no evidence to this effect had
been given by defendant. With costs against plaintiffs.
SO ORDERED.” 8
Respondent spouses appealed to the Court of Appeals. In a
decision dated September 30, 1997, the appellate court found
the appeal meritorious and reversed the decision of the trial
court. It held that the recognition of Cenido’s filiation by Gavino,
Bonifacio’s brother, did not comply with the requirements of the
Civil Code and the Family Code; that the deed between
Bonifacio and respondent spouses was a valid contract of sale
over the property; and Cenido’s failure to object to the
presentation of the deed before the trial court was a waiver of
the defense of the Statute of Frauds. The Court of Appeals
disposed of as follows:
“WHEREFORE, the appealed Decision is hereby REVERSED
and SET ASIDE. Plaintiffs-Appellants Spouses Amadeo
Apacionado and Herminia Sta. Ana are declared owners of
the subject house and lot now covered by Tax Declaration No.
02-6368.”9
Hence, this recourse. Petitioner Cenido alleges that:
1. “The unsigned, unnotarized and highly doubtful private
document designated as ‘Pagpapatunay” which is
solely relied upon by the respondents in support of
their case is not sufficient to vest ownership of and
transfer the title, rights and interest over the subject
property to the respondents.
x x x.
2. The Court of Appeals departed from the accepted and
usual course of judicial proceedings in that it ruled
against the petitioner in view of the alleged weakness
of his defense rather than evaluate the case based on
the strength of the respondents’ evidence, thereby
necessitating this Honorable Court’s exercise of its
power of supervision.” 10
Victoria Cenidosa, in representation of petitioner Cenido, has
manifested, through counsel, that petitioner died in September
1993; that on December 18, 1985, eight years before his death,
Cenido sold the subject house and lot to Maria D. Ojeda for the
sum of P70,000.00; that Maria D. Ojeda is now old and sickly,
and is thus being represented in the instant case by her
daughter, Victoria O. Cenidosa. 11
In the same vein, respondent Herminia Sta. Ana Apacionado
also manifested that her husband, Amadeo Apacionado, died on
August 11, 1989. Amadeo is now being represented by his
compulsory heirs. 12
Before ruling on petitioner’s arguments, it is necessary to
establish certain facts essential for a proper adjudication of the
case.
The records reveal that the late Bonifacio Aparato had two
siblings—a sister named Ursula and a brother named
Gavino. Ursula died on March 1, 1979, Bonifacio on January 3,
13 14
1982 and Gavino, sometime after Bonifacio’s death. Both
15
Ursula and Bonifacio never married and died leaving no
legitimate offspring. Gavino’s son, Norberto, however, testified
that there was a fourth sibling, a sister, who married but also
died; as to when she died or whether she left any heirs, Norberto
did not know. What is clear and undisputed is that Bonifacio was
16
survived by Gavino who also left legitimate heirs.
Both Bonifacio and Ursula lived in the subject property under
the care and protection of the Apacionados. Herminia Sta. Ana
Apacionado started living with them in 1976. She took care of
Bonifacio and Ursula, who died three years later. Herminia
married Amado Apacionado, whose paternal grandmother was
a sister of Bonifacio. Amadeo moved into Bonifacio’s house and
17
assisted Herminia in taking care of the old man until his demise.
Shortly after Bonifacio’s death, Civil Case No. 2264 was
instituted by petitioner Cenido against Gavino Aparato before
the Municipal Trial Court, Branch 1, Binangonan. The records
do not reveal the nature of this action. Nevertheless, three years
18
after filing of the case, the parties entered into a compromise
agreement. The parties listed the properties of Bonifacio
comprising two parcels of land: one parcel was the residential
house and lot in question and the other was registered
agricultural land with an area of 38,641 square meters; Gavino
Aparato expressly recognized Renato Cenido as the sole
illegitimate son of his brother, likewise, Cenido recognized
Gavino as the brother of Bonifacio; as Bonifacio’s heirs, they
partitioned his estate among themselves, with the subject
property and three portions of the agricultural land as Cenido’s
share, and the remaining 15,309 square meters of the
agricultural land as Gavino’s; both parties agreed to share in the
documentation, registration and other expenses for the transfer
of their shares. This compromise agreement was adopted as the
decision of the MTC on January 31, 1985. 19
In the same year, petitioner Cenido obtained in his name
Tax Declaration No. 02-6368 over the subject property. Two
years later, in January 1987, he filed an ejectment case against
respondent spouses who continued occupying the property in
question. This case was dismissed.
Respondent spouses’ claim of ownership over the subject
property is anchored on a one-page typewritten document
entitled “Pagpapatunay,” executed by Bonifacio Aparato. The
“Pagpapatunay” reads as follows:
“PAGPAPATUNAY
DAPAT MALAMAN NG LAHAT:
Akong si BONIFACIO APARATO, binata, Pilipino, husto sa gulang, at
kasalukuyang naninirahan sa Layunan, Binangonan, Rizal, ay
nagpapatunay nitong mga sumusunod:
Una:—Na, ako ang siyang nagmamay-ari ng isang lagay na lupang
SOLAR at Bahay Tirahan na nakatirik sa nabanggit na solar na makikita
sa lugar ng Rizal St., Layunan, Binangonan, Rizal;
Ikalawa:—Na, sapagkat ang nagalaga sa akin hanggang sa ako’y
tuluyang kunin ng Dakilang Maykapal ay walang iba kungdi ang mag-
asawang AMADEO APACIONADO at HERMINIA STA.
ANA APACIONADO;
Ikatlo:—Na, pinatutunayan ko sa mga maykapangyarihan at
kanginumang tao na ang nabanggit na SOLAR at bahay tirahan ay
ipinagbili ko sa nabanggit na mag-asawa sa halagang SAMPUNG
LIBONG (P10,000.00) PISO, bilang pakunsuwelo sa kanilang
pagmamalasakit sa aking pagkatao at kalalagayan;
Na, patunay na ito ay aking nilagdaan ng maliwanag ang aking isip
at nalalaman ko ang lahat ng nilalaman nito.
SA KATUNAYAN NG LAHAT, lumagda ako ng aking pangalan at
apelyido ngayong ika-10 ng Disyembre 1981, dito sa Layunan,
Binangonan, Rizal.
(Thumbmarked)
BONIFACIO APARATO
Nagpatunay
NILAGDAAN SA HARAP NINA:
(SGD.) (SGD.)
 Virgilio O. Cenido Carlos Inabayan
20
- Saksi - Saksi -
On its face, the document “Pagpapatunay” attests to the fact that
Bonifacio Aparato was the owner of the house and lot in
Layunan, Rizal; that because the Apacionado spouses took care
of him until the time of his death, Bonifacio sold said property to
them for the sum of P10,000.00; that he was signing the same
document with a clear mind and with full knowledge of its
contents; and as proof thereof, he was affixing his signature on
said document on the tenth day of December 1981 in Layunan,
Binangonan, Rizal. Bonifacio affixed his thumbmark on the
space above his name; and this was witnessed by Virgilio O.
Cenido and Carlos Inabayan.
Petitioner Cenido disputes the authenticity and validity of the
“Pagpapatunay.” He claims that it is not a valid contract of sale
and its genuineness is highly doubtful because: (1) it was not
notarized and is merely a private instrument; (2) it was not
signed by the vendor, Bonifacio; (3) it was improbable for
Bonifacio to have executed the document and dictated the
words “lumagda ako ng aking pangalan at apelyido” because he
was paralyzed and could no longer sign his name at that time;
and (4) the phrase “ang nag-alaga sa akin hanggang sa ako’y
tuluyang kunin ng Dakilang Maykapal” speaks of an already
departed Bonifacio and could have been made only by persons
other than the dead man himself. 21
To determine whether the “Pagpapatunay” is a valid contract
of sale, it must contain the essential requisites of contracts, viz.:
(1) consent of the contracting parties; (2) object certain which is
the subject matter of the contract; and (3) cause of the obligation
which is established. 22
The object of the “Pagpapatunay” is the house and lot. The
consideration is P10,000.00 for the services rendered to Aparato
by respondent spouses. According to respondent Herminia
Apacionado, this P10,000.00 was not actually paid to Bonifacio
because the amount merely quantified the services they
rendered to the old man. It was the care the spouses voluntarily
gave that was the cause of the sale. The cause therefore was
23
the service remunerated. 24
Petitioner alleges that Bonifacio did not give his consent to
the deed because he did not affix his signature, but merely his
thumbmark, on the document. Bonifacio was a literate person
who could legibly sign his full name, and his signature is evident
in several documents such as his identification card as member
of the Anderson Fil-American Guerillas; the “Kasulatan ng
25
Palasanglaan” dated July 25, 1974 where he and his two other
siblings mortgaged the subject property for P2,000.00 to one
Linda Y. Cenido; “Padagdag sa Sanglaan” dated June 16,
26
1976; and another “Padagdag sa Sanglaan” dated March 2,
27
1979. 28
Respondent Herminia Sta. Ana Apacionado testified that
Bonifacio Aparato affixed his thumbmark because he could no
longer write at the time of execution of the document. The old
man was already 61 years of age and could not properly see
with his eyes. He was stricken by illness a month before and was
paralyzed from the waist down. He could still speak albeit in a
garbled manner, and be understood. The contents of the
“Pagpapatunay” were actually dictated by him to one Leticia
Bandola who typed the same on a typewriter she brought to his
house. 29
That Bonifacio was alive at the time of execution of the
contract and voluntarily gave his consent to the instrument is
supported by the testimony of Carlos Inabayan, the lessee of
Bonifacio’s billiard hall at the ground floor of the subject property.
Inabayan testified that on December 10, 1981, he was
summoned to go up to Bonifacio’s house. There, he saw
Bonifacio, respondent Apacionados, and a woman and her
husband. He was given a sheet of paper to read. He read the
paper and understood that it was a deed of sale of the house
and lot executed by Bonifacio in favor of the Apacionados.
Thereafter, Bonifacio requested him to sign the document as
witness. Reexamining the “Pagpapatunay,” Inabayan saw that
Bonifacio affixed his thumbmark on the space above his name.
Inabayan thus signed the document and returned to the billiard
hall.
30
Inabayan’s testimony has not been rebutted by petitioner.
Petitioner, through counsel, waived his right to do so, finding no
need to cross-examine the witness. This waiver was granted by
31
the court in the order of September 23, 1992. 32
One who alleges any defect or the lack of a valid consent to
a contract must establish the same by full, clear and convincing
evidence, not merely by preponderance thereof. Petitioner has
33
not alleged that the old man, by his physical or mental state, was
incapacitated to give his consent at the time of execution of the
“Pagpapatunay.” Petitioner has not shown that Bonifacio was
insane or demented or a deaf-mute who did not know how to
write. Neither has petitioner claimed, at the very least, that the
34
consent of Bonifacio to the contract was vitiated by mistake,
violence, intimidation, undue influence or fraud. If by assailing
35
the intrinsic defects in the wordage of the “Pagpapatunay”
petitioner Cenido seeks to specifically allege the exercise of
extrinsic fraud and undue influence on the old man, these
defects are not substantial as to render the entire contract void.
There must be clear and convincing evidence of what specific
acts of undue influence or fraud were employed by respondent
36 37
spouses that gave rise to said defects. Absent such proof,
Bonifacio’s presumed consent to the “Pagpapatunay” remains.
The “Pagpapatunay,” therefore, contains all the essential
requisites of a contract. Its authenticity and due execution have
not been disproved either. The finding of the trial court that the
document was prepared by another person and the thumbmark
of the dead Bonifacio was merely affixed to it is pure conjecture.
On the contrary, the testimonies of respondent Herminia Sta.
Ana and Carlos Inabayan prove that the document is authentic
and was duly executed by Bonifacio himself.
The “Pagpapatunay” is undisputably a private document.
And this fact does not detract from its validity. The Civil Code, in
Article 1356 provides:
“Art. 1356. Contracts shall be obligatory, in whatever form they may
have been entered into, provided all the essential requisites for their
validity are present. However, when the law requires that a contract
be in some form in order that it may be valid or enforceable, or that
a contract be proved in a certain way, that requirement is, absolute
and indispensable. In such cases, the right of the parties stated in
the following article cannot be exercised.”
Generally, contracts are obligatory, in whatever form such
contracts may have been entered into, provided all the essential
requisites for their validity are present. When, however, the law
requires that a contract be in some form for it to be valid or
enforceable, that requirement must be complied with.
A certain form may be prescribed by law for any of the
following purposes: for validity, enforceability, or greater efficacy
of the contract. When the form required is for validity, its non-
38
observance renders the contract void and of no effect. When 39
the required form is for enforceability, non-compliance therewith
will not permit, upon the objection of a party, the contract,
although otherwise valid, to be proved or enforced by
action. Formalities intended for greater efficacy or convenience
40
or to bind third persons, if not done, would not adversely affect
the validity or enforceability of the contract between the
contracting parties themselves. 41
Article 1358 of the Civil Code requires that:
“Art. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights
over immovable property; sales of real property or of an
interest therein are governed by Articles 1403, No. 2 and
1405;
(2) The cession, repudiation or renunciation of hereditary rights
or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which
has for its object an act appearing or which should appear in
a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act
appearing in a public document. All other contracts where the
amount involved exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods, chattels or
things in action are governed by Articles 1403, No. 2 and
1405.”
Acts and contracts which create, transmit, modify or extinguish
real rights over immovable property should be embodied in a
public document. Sales of real property are governed by the
Statute of Frauds which reads:
“Art. 1403. The following contracts are unenforceable, unless
they are ratified:
(1)x x x
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing, and
subscribed and by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a
year from the making thereof;
xxx
(e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;
(3) x x x.”
The sale of real property should be in writing and subscribed by
the party charged for it to be enforceable. The “Pagpapatunay”
is in writing and subscribed by Bonifacio Aparato, the vendor;
hence, it is enforceable under the Statute of Frauds. Not having
been subscribed and sworn to before a notary public, however,
the “Pagpapatunay” is not a public document, and therefore
does not comply with Article 1358, paragraph 1 of the Civil Code.
The requirement of a public document in Article 1358 is not
for the validity of the instrument but for its efficacy. Although a
42
conveyance of land is not made in a public document, it does
not affect the validity of such conveyance. Article 1358 does not
43
require the accomplishment of the acts or contracts in a public
instrument in order to validate the act or contract but only to
insure its efficacy, so that after the existence of said contract
44
has been admitted, the party bound may be compelled to
execute the proper document. This is clear from Article
45
1357, viz.:
“Art. 1357. If the law requires a document or other special form, as
in the acts and contracts enumerated in the following article [Article
1358], the contracting parties may compel each other to observe
that form, once the contract has been perfected. This right may be
exercised simultaneously with the action upon the contract.”
The private conveyance of the house and lot is therefore valid
between Bonifacio Aparato and respondent spouses. The
question of whether the “Pagpapatunay” is sufficient to transfer
and convey title to the land for purposes of original
registration or the issuance of a real estate tax declaration in
46
respondent spouses’ names, as prayed for by respondent
spouses, is another matter altogether. For greater efficacy of
47 48
the contract, convenience of the parties and to bind third
persons, respondent spouses have the right to compel the
vendor or his heirs to execute the necessary document to
properly convey the property. 49
Anent petitioner’s second assigned error, the fact that the
Court of Appeals sustained the validity of the “Pagpapatunay”
was not a conclusion that necessarily resulted from the
weakness of petitioner’s claim of filiation to Bonifacio Aparato.
Of and by itself, the “Pagpapatunay” is a valid contract of sale
between the parties and the Court of Appeals did not err in
upholding its validity.
The issue of petitioner’s paternity, however, is essential to
determine whether Tax Declaration No. 02-6368 in the name of
petitioner Cenido should be nullified, as prayed for by
respondent spouses in their complaint.
Tax Declaration No. 02-6368 in petitioner Cenido’s name
50
was issued pursuant to the compromise judgment of the MTC
where Gavino Aparato, Bonifacio’s brother, expressly
recognized petitioner Cenido as Bonifacio’s sole illegitimate son.
The compromise judgment was rendered in 1985, three years
after Bonifacio’s demise.
Under the Civil Code, natural children and illegitimate
51
children other than natural are entitled to support and
successional rights only when recognized or acknowledged by
the putative parent. Unless recognized, they have no rights
52
whatsoever against their alleged parent or his estate. 53
The filiation of illegitimate children may be proved by any of
the forms of recognition of natural children. This recognition 54
may be made in three ways: (1) voluntarily, which must be
55
express such as that in a record of birth, a will, a statement
before a court of record, or in any authentic writing; (2) 56
legally, i.e., when a natural child is recognized, such recognition
extends to his or her brothers and sisters of the full blood; and 57
(3) judicially or compulsorily, which may be demanded by the
illegitimate child of his parents. The action for compulsory
58
recognition of the illegitimate child must be brought during the
lifetime of the presumed parents. This is explicitly provided in
Article 285 of the Civil Code, viz.:
“Art. 285. The action for the recognition of natural children may be
brought only during the lifetime of the presumed parents, except in
the following cases:
(1) If the father or mother died during the minority of the
child, in which case the latter may file the action before
the expiration of four years from the attainment of his
majority;
 (2) If after the death of the father or of the mother a ——o0o——
document should appear of which nothing had been
heard and in which either or both parents recognize the
child.

In this case, the action must be commenced within four

years from the finding of the document.”

The illegitimate child can file an action for compulsory

recognition only during the lifetime of the presumed parent. After
the parent’s death, the child cannot bring such action, except,
however, in only two instances: one is when the supposed
parent died during the minority of the child, and the other is when
after the death of the parent, a document should be discovered
in which the parent recognized the child as his. The action must
be brought within four years from the attainment of majority in
the first case, and from the discovery of the document in the
second case. The requirement that the action be filed during the
parent’s lifetime is to prevent illegitimate children, on account of
strong temptations to large estates left by dead persons, to claim
part of this estate without giving the alleged parent personal
opportunity to be heard. It is vital that the parent be heard for
59

only the parent is in a position to reveal the true facts

surrounding the claimant’s conception. 60

In the case at bar, petitioner Cenido did not present any

record of birth, will or any authentic writing to show he was
voluntarily recognized by Bonifacio as his illegitimate son. In
fact, petitioner admitted on the witness stand that he had no
document to prove Bonifacio’s recognition, much less, his
filiation. The voluntary recognition of petitioner’s filiation by
61

Bonifacio’s brother before the MTC does not qualify as a

“statement in a court of record.” Under the law, this statement
must be made personally by the parent himself or herself, not by
any brother, sister or relative; after all, the concept of recognition
speaks of a voluntary declaration by the parent, or if the parent
refuses, by judicial authority, to establish the paternity or
maternity of children born outside wedlock. 62

The compromise judgment of the MTC does not qualify as a

compulsory recognition of petitioner. In the first place, when he
filed this case against Gavino Aparato, petitioner was no longer
a minor. He was already pushing fifty years old. Secondly, there
63

is no allegation that after Bonifacio’s death, a document was

discovered where Bonifacio recognized petitioner Cenido as his
son. Thirdly, there is nothing in the compromise judgment that
indicates that the action before the MTC was a settlement of
Bonifacio’s estate with a gross value not exceeding
P20,000.00. Definitely, the action could not have been for
64

compulsory recognition because the MTC had no jurisdiction

over the subject matter. 65

The Real Property Tax Code provides that real property tax
be assessed in the name of the person “owning or administer-
ing” the property on which the tax is levied. Since petitioner
66

Cenido has not proven any successional or administrative rights

to Bonifacio’s estate, Tax Declaration No. 02-6368 in Cenido’s
name must be declared null and void.

IN VIEW WHEREOF, the petition is denied and the Decision

and Resolution of the Court of Appeals in CA-G.R. CV No.
41011 are affirmed. Tax Declaration No. 02-6368 in the name of
petitioner Renato Cenido is declared null and void. No costs.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Kapunan, Pardo and Ynares-
Santiago, JJ., concur.

Petition denied; Reviewed decision and resolution affirmed.

 Allied Banking Corporation v. Quezon City
G.R. No. 154126. October 11, 2005. *
ALLIED BANKING CORPORATION AS TRUSTEE FOR THE
TRUST FUND OF COLLEGE ASSURANCE PLAN
PHILIPPINES, INC. (CAP), petitioner, vs. THE QUEZON CITY
GOVERNMENT, THE QUEZON CITY TREASURER, THE
QUEZON CITY ASSESSOR AND THE CITY MAYOR OF
QUEZON CITY, respondents.
Local Government Units; Municipal
Corporations; Taxation; Local Assessment Regulations No. 1-
92 suggests three approaches in estimating the fair market
value, namely (1) the sales analysis or market data approach;
(2) the income capitalization approach; and (3) the replacement
or reproduction cost approach.—Local Assessment Regulations
No. 1-92 suggests three approaches in estimating the fair
market value, namely: (1) the sales analysis or market data
approach; (2) the income capitalization approach; and (3) the
replacement or reproduction cost approach. Under the sales
analysis approach, the price paid in actual market transactions
is considered by taking into account valid sales data
accumulated from among the various sources stated in Sections
202, 203, 208, 209, 210, 211 and 213 of the Code. In the income
capitalization approach, the value of an income-producing
property is no more than the return derived from it. An analysis
of the income produced is necessary in order to estimate the
sum which might be invested in the purchase of the property.
The reproduction cost approach, on the other hand, is a factual
approach used exclusively in appraising man-made
improvements such as buildings and other structures, based on
such data as materials and labor costs to reproduce a new
replica of the improvement.
Same; Same; Same; Statutes; An ordinance that
contravenes any statute is ultra vires and void.—This Court
holds that the proviso directing that the real property tax be
based on the actual amount reflected in the deed of conveyance
or the prevailing BIR zonal value is invalid not only because it
mandates an exclusive rule in determining the fair market value
but more so because it departs from the established procedures
stated in the Local Assessment Regulations No. 1-92 and
unduly interferes with the duties statutorily placed upon the local
assessor by completely dispensing with his analysis and
discretion which the Code and the regulations require to be
exercised. An ordinance that contravenes any statute is ultra
vires and void.
Civil Procedure; Appeals; Raising questions of fact is
inappropriate in an appeal by certiorari under Rule 45 of the
Rules of Court where only questions of law may be reviewed.—
Raising questions of fact is moreover inappropriate in an appeal
by certiorari under Rule 45 of the Rules of Court where only
questions of law may be reviewed. It is axiomatic that the
Supreme Court is not a trier of facts and the factual findings of
the court a quo are conclusive upon it, except: (1) where the
conclusion is a finding grounded entirely on speculation, surmise
and conjectures; (2) where the inference made is manifestly
mistaken; (3) where there is grave abuse of discretion; and (4)
where the judgment is based on a misapprehension of facts, and
the findings of fact of the trial court are premised on the absence
of evidence and are contradicted by evidence on record.
Taxation; Fair Market Value; Words and Phrases; “Fair
market value” is the price at which a property may be sold by a
seller who is not compelled to sell and bought by a buyer who is
not compelled to buy, taking into consideration all uses to which
the property is adapted and might in reason be applied.—Fair
market value” is the price at which a property may be sold by a
seller who is not compelled to sell and bought by a buyer who is
not compelled to buy, taking into consideration all uses to which
the property is adapted and might in reason be applied. The
criterion established by the statute contemplates a hypothetical
sale. Hence, the buyers need not be actual and existing
purchasers.
PETITION for review on certiorari of a decision of the Regional
Trial Court of Quezon City, Br. 225.
The facts are stated in the opinion of the Court.
CARPIO-MORALES, J.:
From the Resolution of April 10, 2002 issued by Branch 225 of
1
the Regional Trial Court (RTC) of Quezon City dismissing the
petition for prohibition and declaratory relief of Allied Banking
2
Corporation (petitioner), the present appeal by certiorari was
lodged.
On December 19, 1995, the Quezon City government enacted
City Ordinance No. 357, Series of 1995 (the ordinance), Section 3
3 of which reads:
Section 3. The City Assessor shall undertake a general
revision of real property assessments using as basis the
newly approved schedule specified in Sections 1 and 2
hereof. He shall apply the new assessment level of 15% for
residential and 40% for commercial and industrial
classification, respectively as prescribed in Section 8 (a) of the
1993 Quezon City Revenue Code to determine the assessed
value of the land. Provided, however, that parcels of land
sold, ceded, transferred and conveyed for remuneratory
consideration after the effectivity of this revision shall be
subject to real estate tax based on the actual amount
reflected in the deed of conveyance or the current
approved zonal valuation of the Bureau of Internal
Revenue prevailing at the time of sale, cession, transfer
and conveyance, whichever is higher, as evidenced by
the certificate of payment of the capital gains tax issued
therefor. (Emphasis and italics supplied)
4
On July 1, 1998, petitioner, as trustee for College Assurance
Plan of the Philippines, Inc., purchased from Liwanag C.
Natividad, et al. a 1,000 square meter parcel of land located
along Aurora Boulevard, Quezon City in the amount of
P38,000,000.00. 5
Prior to the sale, Natividad, et al. had been paying the total
amount of P85,050.00 as annual real property tax based on the
6
property’s fair market value of P4,500,000.00 and assessed
value of P1,800,000.00 under Tax Declaration No. D-102-
03778. 7
After its acquisition of the property, petitioner was, in
accordance with Section 3 of the ordinance, required to pay
P102,600.00 as quarterly real estate tax (or P410,400.00
annually) under Tax Declaration No. D-102-03780 which
pegged the market value of the property at P38,000,000.00—
the consideration appearing in the Deed of Absolute Sale, and
its assessed value at P15,200,000.00. 8
Petitioner paid the quarterly real estate tax for the property
from the 1st quarter of 1999 up to the 3rd quarter of 2000. Its tax
payments for the 2nd, 3rd, and 4th quarter of 1999, and 1st and
2nd quarter of 2000 were, however, made under protest. 9
In its written protest with the City Treasurer, petitioner
10
assailed Section 3 of the ordinance as null and void, it
contending that it is violative of the equal protection and
uniformity of taxation clauses of the Constitution. Petitioner, 11
moreover, contended that the proviso is unjust, excessive,
oppressive, unreasonable, confiscatory and contrary to Section
130 of the Local Government Code which provides:
SECTION 130. Fundamental Principles.—The following
fundamental principles shall govern the exercise of the taxing and
revenue-raising powers of local government units:
(a) Taxation shall be uniform in each local government unit;
(b) Taxes, fees, charges and other impositions shall:
(1) be equitable and based as far as practicable on the
taxpayer’s ability to pay;
(2) be levied and collected only for public purposes;
(3) not be unjust, excessive, oppressive, or confiscatory;
(4) not be contrary to law, public policy, national economic
policy, or in restraint of trade;
xxx
Petitioner, through its counsel, later sent a March 24, 2000
demand letter to the Quezon City Treasurer’s Office seeking
a refund of the real estate taxes it erroneously collected from
it. The letter was referred for appropriate action to the City
12 13
Assessor who, by letter dated May 7, 2000, denied the demand
for refund on the ground that the ordinance is presumed valid
and legal unless otherwise declared by a court of competent
jurisdiction. 14
Petitioner thereupon filed on August 11, 2000 a petition for
prohibition and declaratory relief before the Quezon City RTC
for the declaration of nullity of Section 3 of the ordinance; the
enjoining of respondents—Quezon City Treasurer, Quezon City
Assessor, and City Mayor of Quezon City—from further
implementing the ordinance; for the Quezon City Treasurer to
be ordered to refund the amount of P633,150.00 representing
the real property tax erroneously collected and paid under
protest; and for respondents to pay attorney’s fees in the amount
of P1,000,000.00 and costs of the suit. 15
In support of its thesis, petitioner contended that the
reassessment under the third sentence of Section 3 of the
ordinance for purposes of real estate taxation of a property’s fair
market value where it is sold, ceded, transferred or conveyed for
remuneratory consideration is null and void as it is an invalid
classification of real properties which are transferred, ceded or
conveyed and those which are not, the latter remaining to be
valued and assessed in accordance with the general revisions
of assessments of real properties under the first sentence of
Section 3. 16
Petitioner additionally contended that the proviso of Section
3 of the ordinance which allows re-assessment every time the
property is transferred, ceded or conveyed violates Sections
219 and 220 of the Local Government Code which provide that
17 18
the assessment of real property shall not be increased oftener
than once every three (3) years except in case of new
improvements substantially increasing the value of said property
or of any change in its actual use. 19
Before respondents could file any responsive pleading or on
March 6, 2001, respondent Quezon City Government enacted
Ordinance No. SP-1032, S-2001 which repealed the assailed
20
proviso in Section 3 of the 1995 Ordinance. The repealing
ordinance which took effect upon its approval on March 28, 2001
reads in part:
“WHEREAS, the implementation of the second (2nd) sentence of
Section 3 of the Ordinance creates a situation whereby owners of
newly acquired land for remuneratory consideration beginning
January 1, 1996 and forward will have to pay higher taxes than its
adjoining/adjacent lot or lots in the adjoining blocks, or nearby lots
within its immediate vicinity which have remained undisturbed, not
having been sold, ceded, transferred, and/or conveyed;
WHEREAS, the owners of the newly acquired property are
complaining/protesting the validity/legality of the second (2nd)
sentence of Section 3 of the ordinance for being either arbitrary,
unjust, excessive, oppressive, and/or contrary to law;
WHEREAS, Section 5 Article X of the Philippine Constitution
provides that: ‘Each local government unit shall have the power to
create its own sources of revenue 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
government’ (Italics supplied);
WHEREAS, the guidelines and limitations imposed on the local
government units in the exercise of their taxing powers have been
expressly stipulated by Congress when it enacted Section 130 of
Republic Act No. 7160, otherwise known as the Local Government
Code of 1991 x x x;
WHEREAS, these fundamental principles of taxation find
support and affirmation in the following applicable cases decided by
the Court of Tax Appeals (sic), on similar cases which held that:
1. An increase in the valuation of land due to sale and transfer
of such property was arbitrary. Uniformity in taxation means
that all kinds of property of the same class shall be taxed at
the same rate. (Churchhill vs. Concepcion, 34 Phil.
969; Eastern Theatrical Co. vs. Alfonso, 83 Phil. 852) x x x.
2. The law requires the real property shall be assessed at its true
and full value, or cash value, or fair market value. But in
determining or fixing the fair market value of property for tax
purposes it is essential that the rules of uniformity be
observed. More important tha[n] the obligation to seek the fair
market value of property is the obligation of the assessor to
see to it that the “rule of taxation shall be uniform,” for this a
(sic) rule which is guaranteed by the Constitution. A taxpayer
should not be made to pay more taxes on his property while
owners of surrounding properties, under the same
circumstance pay less.
WHEREAS, it is clear from the foregoing premises that the second
(2nd) sentence of the Ordinance, fixing the realty tax based on the actual
amount reflected in the deed of conveyance or the current approved
zonal valuation x x x is violative of, and repugnant to, the uniformity rule
of taxation;
WHEREAS, in view of the above considerations there appear to be
merit and validity to the complaints/protests of tax payers, a re-
examination and repeal of the entire second sentence of Section 3 of the
Ordinance is in order.”
Petitioner subsequently moved to declare respondents in
default for failure to file a responsive pleading within the period,
21
as extended. Before the motion could be heard, however, 22
respondents moved to dismiss the petition, averring that the
23
passage of the repealing ordinance had rendered the petition
moot and academic.
Petitioner opposed the motion, it alleging that while its action
for the declaration of nullity of the proviso was rendered moot
and academic by its repeal, its claim for refund and attorney’s
fees had not been mooted, and the trial court still had to
determine if Section 3 of the ordinance “is null and void ab
initio and perforce, may not be enforced during the intervening
period from the time of its enactment until the time of its repeal.” 24
 Respondents maintained, however, that the assailed
proviso remained in full force and effect until the date of its
repeal, based on the rule that a statute is construed
prospectively unless the legislative intent was to give it
retrospective application. And they called attention to the
25
provision in Section 2 of the repealing ordinance that “[it] shall
take effect upon its approval,” hence, clearly showing that the
local legislative body was to grant it prospective application.
As to the claim for refund, respondents averred that it was
premature for the trial court to take cognizance thereof as
petitioner had an administrative remedy. 27
By Resolution of April 10, 2002, the trial court granted
respondents’ motion to dismiss in this wise:
There is no need for this Court to resolve whether the subject
Ordinance is null and void as the same was already declared to be
violative of, and repugnant to the “uniformity rule” on taxation by the
Quezon City Council itself thru its pronouncements in Quezon City
Ordinance No. 1032, Series of 2001. x x x
xxx
As to petitioner’s claim for refund, since an administrative
remedy is available for refund of taxes illegally and erroneously
collected and petitioner has not yet availed of it, the Court shall not
take cognizance of this issue considering the rule on “Exhaustion of
Administrative Remedy.” (Italics supplied)
28
Its Motion for Reconsideration having been denied, petitioner
29
comes before this Court on appeal by certiorari under Rule 45
on the following issues:
A
WHETHER OR NOT THE TRIAL COURT ERRED IN DISMISSING THE
INSTANT CASE FOR FAILURE OF THE PETITIONER TO EXHAUST
ADMINISTRATIVE REMEDIES.
B
WHETHER OR NOT SECTION 3, QUEZON CITY ORDINANCE
NO. 357, SERIES OF 1995, WHICH WAS ABROGATED FOR BEING
UNCONSTITUTIONAL CAN BE THE BASIS OF COLLECTING REAL
ESTATE TAXES PRIOR TO ITS REPEAL. 31
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. 32
Nevertheless, while cases raising purely legal questions are
excepted from the rule requiring exhaustion of administrative
remedies before a party may resort to the courts, petitioner, in
the case at bar, does not raise just pure questions of law. Its
cause of action requires the determination of the amount of
real property tax paid under protest and the amount of
attorney’s fees. These issues are essentially questions of fact
which preclude this Court from reviewing the same.
Since the procedure for obtaining a refund of real property taxes
is provided under Sections 252, 226, 229, 230 and 231 of the
34 35 36 37
Local Government Code, petitioner’s action for prohibition in the
RTC was premature as it had a plain, speedy and adequate
remedy of appeal in the ordinary course of law. As such, the trial 39
court correctly dismissed its action on the ground that it failed to
exhaust the administrative remedies stated above.
Raising questions of fact is moreover inappropriate in an
appeal by certiorari under Rule 45 of the Rules of Court where
only questions of law may be reviewed. It is axiomatic that the
41
Supreme Court is not a trier of facts and the factual findings of
42
the court a quo are conclusive upon it, except: (1) where the
conclusion is a finding grounded entirely on speculation, surmise
and conjectures; (2) where the inference made is manifestly
mistaken; (3) where there is grave abuse of discretion; and (4)
where the judgment is based on a misapprehension of facts, and
the findings of fact of the trial court are premised on the absence
of evidence and are contradicted by evidence on record. 43
26 From a considered scrutiny of the records of the case, this
Court finds that petitioner has shown no cause for this Court to
apply any of the foregoing exceptions.
Petitioner has not put squarely in issue the constitutionality
of the proviso in Section 3 of the ordinance. It merely alleges
that the said proviso cannot be the basis for collecting real estate
taxes at any given time, the Sangguniang Panlungsod of
Quezon City not having intended to impose such taxes in the
first place. As such the repealing ordinance should be given
retroactive effect.
As a rule, the courts will not resolve the constitutionality of a
law, if the controversy can be settled on other grounds. 44
Where questions of constitutional significance are raised,
the Court can exercise its power of judicial review only if the
following requisites are complied: First, there must be before the
Court an actual case calling for the exercise of judicial
review. Second, the question before the Court must be ripe for
30
adjudication. Third, the person challenging the validity of the act
must have standing to challenge. Fourth, the question of
constitutionality must have been raised at the earliest
opportunity, and lastly, the issue of constitutionality must be the
very lis mota of the case. 45
Considering that there are factual issues still waiting to be
threshed out at the level of the administrative agency, there is
no actual case calling for the exercise of judicial review. In
addition, the requisite that the constitutionality of the assailed
proviso in question be the very lis mota of the case is absent.
Thus, this Court refrains from passing on the constitutionality of
the proviso in Section 3 of the 1995 Ordinance.
The factual issues which petitioner interjected in its petition
aside, the only crucial legal query in this case is the validity of
the proviso fixing the appraised value of property at the stated
consideration at which the property was last sold.
This Court holds that the proviso in question is invalid as it
adopts a method of assessment or appraisal of real property
contrary to the Local Government Code, its Implementing Rules
and Regulations and the Local Assessment Regulations No. 1-
92 issued by the Department of Finance.
46 47
Under these immediately stated authorities, real properties
shall be appraised at the current and fair market value prevailing
33 in the locality where the property is situated and classified for
48
assessment purposes on the basis of its actual use. 49
38 “Fair market value” is the price at which a property may be
sold by a seller who is not compelled to sell and bought by a
buyer who is not compelled to buy, taking into consideration all
50
uses to which the property is adapted and might in reason be
applied. The criterion established by the statute contemplates a
40 hypothetical sale. Hence, the buyers need not be actual and
existing purchasers. 51
As this Court stressed in Reyes v. Almanzor, assessors, in
52
fixing the value of real property, have to consider all the
circumstances and elements of value, and must exercise
prudent discretion in reaching conclusions. In this regard, Local
53
Assessment Regulations No. 1-92 establishes the guidelines to
54
assist assessors in classifying, appraising and assessing real
property.
Local Assessment Regulations No. 1-92 suggests three
approaches in estimating the fair market value, namely: (1) the
sales analysis or market data approach; (2) the income
capitalization approach; and (3) the replacement or reproduction
cost approach. 55
Under the sales analysis approach, the price paid in actual
market transactions is considered by taking into account valid
sales data accumulated from among the various sources stated
in Sections 202, 203, 208, 209, 210, 211 and 213 of the Code. 56
In the income capitalization approach, the value of an income-
producing property is no more than the return derived from it. An
analysis of the income produced is necessary in order to
estimate the sum which might be invested in the purchase of the
property.
The reproduction cost approach, on the other hand, is a
factual approach used exclusively in appraising man-made
improvements such as buildings and other structures, based on
such data as materials and labor costs to reproduce a new
replica of the improvement.
The assessor uses any or all of these approaches in
analyzing the data gathered to arrive at the estimated fair market
value to be included in the ordinance containing the schedule of
fair market values.
Given these different approaches to guide the assessor, it
can readily be seen that the Code did not intend to have a rigid
rule for the valuation of property, which is affected by a multitude
of circumstances which no rule could foresee or provide for.
Thus, what a thing has cost is no singular and infallible criterion
of its market value. 57
Accordingly, this Court holds that the proviso directing that
the real property tax be based on the actual amount reflected in
the deed of conveyance or the prevailing BIR zonal value is
invalid not only because it mandates an exclusive rule in
determining the fair market value but more so because it departs
from the established procedures stated in the Local Assessment
Regulations No. 1-92 and unduly interferes with the duties
statutorily placed upon the local assessor by completely
58
dispensing with his analysis and discretion which the Code and
the regulations require to be exercised. An ordinance that
contravenes any statute is ultra vires and void. 59
Further, it is noted that there is nothing in the Charter of
Quezon City and the Quezon City Revenue Code of 1993 that
60 61
authorize public respondents to appraise property at the
consideration stated in the deed of conveyance.
Using the consideration appearing in the deed of conveyance to
assess or appraise real properties is not only illegal since “the
appraisal, assessment, levy and collection of real property tax
shall not be let to any private person,” but it will completely
62
destroy the fundamental principle in real property taxation—that
real property shall be classified, valued and assessed on the
basis of its actual use regardless of where located, whoever
owns it, and whoever uses it. Necessarily, allowing the parties
63
to a private sale to dictate the fair market value of the property
will dispense with the distinctions of actual use stated in the
Code and in the regulations.
The invalidity of the assessment or appraisal system
adopted by the proviso is not cured even if the proviso mandates
the comparison of the stated consideration as against the
prevailing BIR zonal value, whichever is higher, because an
integral part of that system still permits valuing real property in
disregard of its “actual use.”
In the same vein, there is also nothing in the Code or the
regulations showing the congressional intent to require an
immediate adjustment of taxes on the basis of the latest market
developments as, in fact, real property assessments may be
revised and/or increased only once every three (3)
years. Consequently, the real property tax burden should not be
64
interpreted to include those beyond what the Code or the
regulations expressly and clearly state.
Still another consequence of the proviso is to provide a
chilling effect on real property owners or administrators to enter
freely into contracts reflecting the increasing value of real
properties in accordance with prevailing market conditions.
While the Local Government Code provides that the assessment
of real property shall not be increased oftener than once every
three (3) years, the questioned part of the proviso subjects the
65
real property to a tax based on the actual amount appearing on
the deed of conveyance or the current approved zonal valuation
of the Bureau of Internal Revenue prevailing at the time of sale,
cession, transfer and conveyance, whichever is higher. As such,
any subsequent sale during the three-year period will result in a
real property tax higher than the tax assessed at the last prior
conveyance within the same period. To save on taxes, real
property owners or administrators are forced to hold on to the
property until after the said three-year period has lapsed. Should
they nonetheless decide to sell within the said three-year period,
they are compelled to dispose the property at a price not
exceeding that obtained from the last prior conveyance in order
to avoid a higher tax assessment. In these two scenarios, real
property owners are effectively prevented from obtaining the
best price possible for their properties and unduly hampers the
equitable distribution of wealth.
While the state may legitimately decide to structure its tax
system to discourage rapid turnover in ownership of real
properties, such state interest must be expressly stated in the
executing statute or it can at least be gleaned from its provisions.
In the case at bar, there is nothing in the Local Government
Code, the implementing rules and regulations, the local
assessment regulations, the Quezon City Charter, the Quezon
City Revenue Code of 1993 and the “Whereas” clauses of the
1995 Ordinance from which this Court can draw, at the very
least, an intimation of this state interest. As such, the proviso
must be stricken down for being contrary to public policy and for
restraining trade. 66
In fine, public respondent Quezon City Government
exceeded its statutory authority when it enacted the proviso in
question. The provision is thus null and void ab initio for
being ultra vires and for contravening the provisions of the Local
Government Code, its implementing regulations and the Local
Assessment Regulations No. 1-92. As such, it acquired no legal
effect and conferred no rights from its inception.
A word on the applicability of the doctrine in this decision. It
applies only in the determination of real estate tax payable by
owners or administrators of real property. In light of the foregoing
disquisitions, addressing the issue of retroactivity of the
repealing ordinance is rendered unnecessary.
 WHEREFORE, the petition is hereby GRANTED. The
assailed portion of the provisions of Section 3 of Quezon City
Ordinance No. 357, Series of 1995 is hereby declared invalid.
Petitioner’s claim for refund, however, must be lodged with the
Local Board of Assessment Appeals, if it is not barred by the
statute of limitations.
SO ORDERED.
Davide,Jr. (C.J.), Puno, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Austria-
Martinez, Corona, Callejo, Sr., Azcuna, Tinga, Chico-
Nazario and Garcia, JJ., concur.
Carpio, J., I concur. The assailed ordinance violates the
statutory prohibition against increases in assessments oftener
than three (3) years.
Petition granted.
——o0o——
City Assessor of Cebu City v. Association of Benevola De
Cebu
G.R. No. 152904. June 8, 2007. *
CITY ASSESSOR OF CEBU CITY,
petitioner, vs. ASSOCIATION OF BENEVOLA DE CEBU, INC.,
respondent.
Taxation; Hospitals; Physicians; The fact alone that the
doctors and medical specialists holding clinics in a separate
Medical Arts Center are those duly accredited by the Hospital—
they are consultants of the hospital and the ones who can treat
the Hospital’s patients confined in it—takes away the said
Medical Arts Center from being categorized as “commercial”
since a tertiary hospital is required by law to have a pool of
physicians who comprise the required medical departments in
various medical fields.—We so hold that CHHMAC is an integral
part of CHH. It is undisputed that the doctors and medical
specialists holding clinics in CHHMAC are those duly accredited
by CHH, that is, they are consultants of the hospital and the ones
who can treat CHH’s patients confined in it. This fact alone takes
away CHHMAC from being categorized as “commercial” since a
tertiary hospital like CHH is required by law to have a pool of
physicians who comprises the required medical departments in
various medical fields.
Same; Same; Same; The fact that the physicians are
holding office in a separate building does not take away the
essence and nature of their services vis-à-vis the over-all
operation of the hospital and the benefits to the hospital’s
patients—given what the law requires, it is clear that the Medical
Arts Center is an integral part of the Hospital.—Sec. 6.3,
Administrative Order No. (AO) 68-A, Series of 1989, Revised
Rules and Regulations Governing the Registration, Licensure
and Operation of Hospitals in the Philippines pertinently
provides: Tertiary Hospital—is fully departmentalized and
equipped with the service capabilities needed to support
certified medical specialists and other licensed physicians
rendering services in the field of Medicine, Pediatrics, Obstetrics
and Gynecology, Surgery, their subspecialties and ancillary
services. (Emphasis supplied.) Moreover, AO 68-A likewise
provides what clinic service and medical ancillary service are,
thus: 11.3.2Clinical Service—The medical services to patients
shall be performed by the medical staff appointed by the
governing body of the institution. x x x 11.3.3 Medical Ancillary
Service—These are support services which include Anesthesia
Department, Pathology Department, Radiology Department,
Out-Patient Department (OPD), Emergency Service, Dental,
Pharmacy, Medical Records and Medical Social Services.
Based on these provisions, these physicians holding offices or
clinics in CHHMAC, duly appointed or accredited by CHH,
precisely fulfill and carry out their roles in the hospital’s services
for its patients through the CHHMAC. The fact that they are
holding office in a separate building, like at CHHMAC, does not
take away the essence and nature of their services vis-à-vis the
over-all operation of the hospital and the benefits to the
hospital’s patients. Given what the law requires, it is clear that
CHHMAC is an integral part of CHH.
Same; Same; Same; The exemption in favor of property
used exclusively for charitable or educational purposes is “not
limited to property actually indispensable” therefore but extends
to facilities which are “incidental to and reasonably necessary
for” the accomplishment of said purposes, such as, in the case
of hospitals, “a school
for training nurses, a nurses’ home, property use to provide
housing facilities for interns, resident doctors, superintendents,
and other members of the hospital staff, and recreational
facilities for student nurses, interns and residents” such as
“athletic fields,” including “a farm used for the inmates of the
institution.”—The CHHMAC, being hundred meters away from
the CHH main building, does not denigrate from its being an
integral part of the latter. As aptly applied by the CBAA,
the Herrera ruling on what constitutes property exempt from
taxation is indeed applicable in the instant case, thus: Moreover,
the exemption in favor of property used exclusively for charitable
or educational purposes is “not limited to property actually
indispensable” therefore (Cooley on Taxation, Vol. 2, p. 1430),
but extends to facilities which are “incidental to and reasonably
necessary for” the accomplishment of said purposes, such as,
in the case of hospitals, “a school for training nurses, a nurses’
home, property use to provide housing facilities for interns,
resident doctors, superintendents, and other members of the
hospital staff, and recreational facilities for student nurses,
interns and residents” (84 C.J.S., 621), such as “athletic fields,”
including “a farm used for the inmates of the institution” (Cooley
on Taxation, Vol. 2, p. 1430). Verily, being an integral part of
CHH, CHHMAC should be under the same special assessment
level of as that of the former.
Same; Same; Same; Indubitably, the operation of the
hospital is not only for confinement and surgical operations
where hospital beds and operating theaters are required—the
usual course is that patients have to be diagnosed, and then
treatment and follow-up consultations follow or are required,
while other cases may necessitate surgical operations or other
medical intervention and confinement.—The operation of the
hospital is not only for confinement and surgical operations
where hospital beds and operating theaters are required.
Generally, confinement is required in emergency cases and
where a patient necessitates close monitoring. The usual course
is that patients have to be diagnosed, and then treatment and
follow-up consultations follow or are required. Other cases may
necessitate surgical operations or other medical intervention
and confinement. Thus, the more the patients, the more
important task of diagnosis, treatment, and care that may or may
not require eventual confinement or medical operation in the
CHHMAC. Thus, the importance of CHHMAC in the operation of
CHH cannot be over-emphasized nor disputed. Clearly, it plays
a key role and provides critical support to hospital operations.
Same; Same; Same; A hospital’s charge of rentals for the
offices and clinics its accredited physicians occupy cannot be
equated to a commercial venture, which is mainly for profit.—
Respondent’s charge of rentals for the offices and clinics its
accredited physicians occupy cannot be equated to a
commercial venture, which is mainly for profit. Respondent’s
explanation on this point is well taken. First, CHHMAC is only for
its consultants or accredited doctors and medical
specialists. Second, the charging of rentals is a practical
necessity: (1) to recoup the investment cost of the building, (2)
to cover the rentals for the lot CHHMAC is built on, and (3) to
maintain the CHHMAC building and its facilities. Third, as
correctly pointed out by respondent, it pays the proper taxes for
its rental income. And, fourth, if there is indeed any net income
from the lease income of CHHMAC, such does not inure to any
private or individual person as it will be used for respondent’s
other charitable projects. Given the foregoing arguments, we fail
to see any reason why the CHHMAC building should be
classified as “commercial” and be imposed the commercial level
of 35% as it is no t operated primarily for profit but as an integral
part of CHH. The CHHMAC, with operations being devoted for
the benefit of the CHH’s patients, should be accorded the 10%
special assessment.
PETITION for review on certiorari of the decision and resolution
of the Court of Appeals.
VELASCO, JR., J.:
Is a medical arts center built by a hospital to house its doctors a
separate commercial establishment or an appurtenant to the
hospital? This is the core issue to be resolved in the instant
petition where petitioner insists on a 35% assessment rate on
the building which he considers commercial in nature contrary
to respondent’s position that it is a special real property entitled
to a 10% assessment rate for purposes of realty tax.
The Case
This Petition for Review on Certiorari under Rule 45 assails the
1 situated as the buildings of CHH, housing its Dietary and
October 31, 2001 Decision of the Court of Appeals (CA) in CA-
2 Records Departments, are completely separate from the main
G.R. SP No. 62548, which affirmed the January 24, 2000
Decision and October 25, 2000 Resolution of the Central Board
3 4
of Assessment Appeals (CBAA); and the March 11, 2002
Resolution of the same court denying petitioner’s Motion for
5 necessary to CHH’s operations.
Reconsideration. The CBAA upheld the February 10, 1999
6
Decision of the Local Board of Assessment Appeals (LBAA),
which overturned the 35% assessment rate of respondent Cebu
City Assessor and ruled that petitioner is entitled to a 10%
assessment.
The Facts
Respondent Association of Benevola de Cebu, Inc. is a
nonstock, non-profit organization organized under the laws of
the Republic of the Philippines and is the owner of Chong Hua
Hospital (CHH) in Cebu City. In the late 1990’s, respondent
constructed the CHH Medical Arts Center (CHHMAC).
Thereafter, an April 17, 1998 Certificate of Occupancy was 7
issued to the center with a classification of “Commercial [Clinic].”
Petitioner City Assessor of Cebu City assessed the CHHMAC
building under Tax Declaration (TD) No. ’97 GR-04-024-
02529 as “commercial” with a market value of PhP 28,060,520
and an assessed value of PhP 9,821,180 at the assessment
level of 35% for commercial buildings, and not at the 10%
special assessment cu rrently imposed for CHH and its other
separate buildings—the CHH’s Dietary and Records
Departments.
Thus, respondent filed its September 15, 1998 letterpetition
with the Cebu City LBAA for reconsideration, asserting that
CHHMAC is part of CHH and ought to be imposed the same
special assessment level of 10% with that of CHH. On
September 25, 1998, respondent formally filed its appeal with
the LBAA which was docketed as Case No. 4406, TD No. ’97
GR-04-024-02529 entitled Association Benevola de Cebu, Inc.
v. City Assessor.
In the September 30, 1998 Order, the LBAA directed
petitioner to conduct an ocular inspection of the subject property
and to submit a report on the scheduled date of hearing. In the
October 7, 1998 hearing, the parties were required to submit
their respective position papers.
In its position paper, petitioner argued that CHHMAC is a
newly constructed five-storey building situated about 100 meters
away from CHH and, based on actual inspection, was
ascertained that it is not a part of the CHH building but a
separate building which is actually used as commercial
clinic/room spaces for renting out to physicians and, thus,
classified as “commercial.” Petitioner contended that in turn the
medical specialists in CHHMAC charge consultation fees for
patients who consult for diagnosis and relief of bodily ailment
together with the ancillary (or support) services which include
the areas of anesthesia, radiology, pathology, and more.
Petitioner concluded the foregoing set up to be ultimately geared
for commercial purposes, and thus having the proper
classification as “commercial” under Building Permit No. B01-
9750087 pursuant to Section 10 of the Local Assessment
Regulations No. 1-92 issued by the Department of Finance
(DOF).
On the other hand, respondent contended in its position
paper that CHHMAC building is actually, directly, and
exclusively part of CHH and should have a special assessment
level of 10% as provided und er City Tax Ordinance LXX.
Respondent asserted that the CHHMAC building is similarly
CHH building and are imposed the 10% special assessment
level. In fine, respondent argued that the CHHMAC, though not
actually indispensable, is nonetheless incidental and reasonably
The Ruling of the Local Board of Assessment Appeals
On February 10, 1999, the LBAA rendered a Decision, the 8
dispositive portion of which reads:
“WHEREFORE, premises considered, the appealed decision
imposing a thirty five (35) percent assessment level of TD No.
’97 GR-04-024-02529 on the Chong Hua Hospital Medical
Arts building is reversed and set aside and other [sic] one
issued declaring that the building is entitled to a ten (10)
percent assessment level.”
In reversing the ruling of petitioner City Assessor of Cebu City,
the LBAA reasoned that it is of public knowledge that hospitals
have plenty of spaces leased out to medical practitioners, which
is both an accepted and desirable fact; thus, respondent’s claim
is not disputed that such is a must for a tertiary hospital like CHH.
The LBAA held that it is inconsequential that a separate building
was constructed for that purpose pointing out that departments
or services of other institutions and establishments are also not
always housed in the same building.
Thus, the LBAA pointed to the fact that respondent’s Dietary
and Records Departments which are housed in separate
buildings were similarly imposed with CHH the special
assessment level of 10%, ratiocinating in turn that there is no
reason therefore why a higher level would be imposed for
CHHMAC as it is similarly situated with the Dietary and Records
Departments of the CHH.
The Ruling of the Central Board of Assessment Appeals
Aggrieved, petitioner filed its March 15, 1999 Notice of
Appeal and March 16, 1999 Appeal Memorandum before the
9 10
CBAA Visayas Field Office which docketed the appeal as CBAA
Case No. V-15, In Re: LBAA Case No. 4406, TD No. ’97 GR-04-
024-02529 entitled City Assessor of Cebu City v. Local Board of
Assessment Appeals of Cebu City and Associacion Benevola de
Cebu, Inc. On June 3, 1999, respondent filed its Answer to
petitioner’s appeal.
Subsequently, on January 24, 2000, the CBAA rendered a
Decision affirming in toto the LBAA Decision and resolved the
12
issue of whether the subject building of CHHMAC is part and
parcel of CHH. It agreed with the above disquisition of the LBAA
that it is a matter of public knowledge that hospitals lease out
spaces to its accredited medical practitioners, and in particular
it is of public knowledge that before the CHHMAC was
constructed, the accredited doctors of CHH were housed in the
main hospital building of CHH. Moreover, citing Herrera v.
Quezon City Board of Assessment Appeals later applied in Abra
13
Valley College, Inc. v. Aquino, the CBAA held that the fact that
14
the subject building is detached from the main hospital building
is of no consequence as the exemption in favor of property used
exclusively for charitable or educational purposes is not only
limited to property actually indispensable to the hospital, but also
extends to facilities which are incidental and reasonably
necessary for the accomplishment of such purposes.
Through its October 25, 2000 Resolution, the CBAA denied
15
petitioner’s Motion for Reconsideration. 16
The Ruling of the Court of Appeals
Not satisfied, petitioner brought before the CA a petition for
review under Rule 43 of the Rules of Court, docketed as CA-
17
G.R. SP No. 62548, ascribing error on the CBAA in dismissing
his appeal and in affirming the February 10, 1999 Decision of
the LBAA.
On October 31, 2001, the appellate court rendered the
assailed Decision which affirmed the January 24, 2000
19
Decision of the CBAA. It agreed with the CBAA that CHHMAC
is part and parcel of CHH in line with the ruling in Herrera on 20
what the term “appurtenant thereto” means. Thus, the CA held
that the facilities and utilities of CHHMAC are undoubtedly
necessary and indispensable for the CHH to achieve its ultimate
purpose.
The CA likewise ruled that the fact that rentals are paid by
CHH accredited doctors and medical specialists for spaces in
CHHMAC has no bearing on its classification as a hospital since
CHHMAC serves also as a place for medical check-up,
diagnosis, treatment, and care for its patients as well as a
specialized out-patient department of CHH where treatment and
diagnosis are done by accredited medical specialists in their
respective fields of anesthesia, radiology, pathology, and more.
The appellate court also applied Secs. 215 and 216 of the
Local Government Code (Republic Act No. 7160) which classify
lands, buildings, and improvements actually, directly, and
exclusively used for hospitals as special cases of real property
and not as commercial. Thus, CHHMAC being an integral part
of CHH is not commercial but special and should be imposed
the 10% special a ssessment, the same as CHH, instead of the
35% for commercial establishments.
Lastly, the CA pointed out that courts generally will not
interfere in matters which are addressed to the sound discretion
of the government agencies entrusted with the regulation of
activities under their special technical knowledge and training—
their findings and conclusions are accorded not only respect but
even finality.
Through the assailed March 11, 2002 Resolution, the CA 21
denied petitioner’s Motion for Reconsideration.
11 The Issues
Hence, before us is the instant petition with the solitary issue, as
follows:
“WHETHER OR NOT THERE IS SERIOUS ERROR BY THE COURT
OF APPEALS IN AFFIRMING THE DECISION OF THE CENTRAL
BOARD OF ASSESSMENT APPEALS THAT THE NEW BUILDING
“CHONG HUA HOSPITAL AND MEDICAL ARTS CENTER” (CHHMAC)
IS AN ESSENTIAL PART OF THE OLD BUILDING KNOWN AS
“CHONG HUA HOSPITAL.” IN THE NEGATIVE, WHETHER OR NOT
THE NEW BUILDING IS LIABLE TO PAY THE 35% ASSESSMENT
LEVEL. AND WHETHER OR NOT THE COURT OF APPEALS COULD
INTERFERE WITH THE FINDINGS OF THE CENTRAL BOARD OF
ASSESSMENT APPEALS, A GOVERNMENT AGENCY HAVING
SPECIAL TECHNICAL KNOWLEDGE AND TRAINING ON THE
MATTER SUBJECT OF THE PRESENT CASE.”
22
The Court’s Ruling
The petition is devoid of merit.
It is petitioner’s strong belief that the subject building,
CHHMAC, which is built on a rented land and situated about 100
meters from the main building of CHH, is not an extension nor
an integral part of CHH and thus should not enjoy the 10%
special assessment. Peti tioner anchors the classification of
CHHMAC as “commercial,” first, on Sec. 10 of Local
Assessment Regulations No. 1-92 issued by the DOF, which
18 provides:
“SEC. 10. Actual use of Real Property as basis of Assessment.——
Real Property shall be classi fied, valued and assessed on the basis
of its actual use regardless of where located, whoever owns it, and
whoever uses it. (Sec. 217, R.A. 7160)
A. “Actual use” refers to the purpose for which the property is principally or
predominantly utilized by the person in possession of the property. (Sec. 199 [b],
R.A. 7160)
Secondly, the result of the inspection on subject building by the
City Assessor’s inspection team shows that CHHMAC is a
commercial establishment based on the following: (1) CHHMAC
is exclusively intended for lease to doctors; (2) there are neither
operating rooms nor beds for patients; and (3) the doctors
renting the spaces earn income from the patients who avail
themselves of their services. Thus, petitioner argues that
CHHMAC is principally and actually used for lease to doctors,
and respondent as owner of CHHMAC derives rental income
from it; hence, CHHMAC was built and is intended for profit and
functions commercially.
Moreover, petitioner asserts that CHHMAC is not part of the
CHH main building as it is exclusively used as private clinics of
physicians who pay rental fees to petitioner. And while the
private clinics might be considered facilities, they are not
incidental to nor reasonably necessary for the accomplishment
of the hospital’s purposes as CHH can still function and
accomplish its purpose without the existence of CHHMAC. In
addition, petitioner contends that the Abra Valley College,
Inc. ruling is not applicable to the instant case for schools, the
23
subject matter in said case, are already entitled to special
assessment. Besides, petitioner points CHHMAC is not among
the facilities mentioned in said case. Further, petitioner argues
that CHHMAC is not in the same category as nurses’ homes and
housing facilities for the hospital staff as these are clearly not for
profit, that is, not commercial, and are clearly incidental and
reasonably necessary for the hospital’s purposes.
We are not persuaded.
A careful review of the records compels us to affirm the
assailed CA Decision as we find no reversible error for us to
reverse or alter it.
Chong Hua Hospital Medical Arts Center is an integral part
of Chong Hua Hospital
We so hold that CHHMAC is an integral part of CHH.
It is undisputed that the doctors and medical specialists
holding clinics in CHHMAC are those duly accredited by CHH,
that is, they are consultants of the hospital and the ones who
can treat CHH’s patients confined in it. This fact alone takes
away CHHMAC from being categorized as “commercial” since a
tertiary hospital like CHH is required by law to have a pool of
physicians who comprises the required medical departments in
various medical fields. As aptly pointed out by respondent:
“Chong Hua Hospital is a duly licensed tertiary hospital and is
covered by Dept. of Health (DOH) Adm. Order No. 68-A and the
“1989 Revised Rules and Regulations” governing the registration,
licensure and operation of hospitals in the Philippines. Under Sec.
6, sub-sec. 6.3, it is mandated by law, that respondent appellee in
order to retain its classification as a “TERTIARY HOSPITAL,” must
be fully departmentalized and equipped with the service capabilities
needed to support certified medical specialists and other licensed
physicians rendering services in the field of medicine, pediatrics,
obstetrics and gynecology, surgery, and their sub-specialties, ICCU
and ancillary services which is precisely the function of the Chong
Hua Hospital Medical Arts Center.” 24
Sec. 6.3, Administrative Order No. (AO) 68-A, Series of 1989,
Revised Rules and Regulations Governing the Registration,
Licensure and Operation of Hospitals in the Philippines
pertinently provides:
“Tertiary Hospital—is fully departmentalized and equipped
with the service capabilities needed to support certified
medical specialists and other licensed physicians rendering
services in the field of Medicine, Pediatrics, Obstetrics and
Gynecology, Surgery, their subspecialties and ancillary
services.” (Emphasis supplied.)
Moreover, AO 68-A likewise provides what clinic service and
medical ancillary service are, thus:
“11.3.2 Clinical Service—The medical services to patients shall be
performed by the medical staff appointed by the governing body of
the institution. x x x
11.3.3 Medical Ancillary Service—These are support services
which include Anesthesia Department, Pathology Department,
Radiology Department, Out-Patient Department (OPD), Emergency
Service, Dental, Pharmacy, Medical Records and Medical Social
Services.”
Based on these provisions, these physicians holding offices or
clinics in CHHMAC, duly appointed or accredited by CHH,
precisely fulfill and carry out their roles in the hospital’s services
for its patients through the CHHMAC. The fact that they are
holding office in a separate building, like at CHHMAC, does not
take away the essence and nature of their services vis-à-vis the
over-all operation of the hospital and the benefits to the
hospital’s patients. Given what the law requires, it is clear that
CHHMAC is an integral part of CHH.
These accredited physicians normally hold offices within the
premises of the hospital; in which case there is no question as
to the conduct of their business in the ambit of diagnosis,
treatment and/or confinement of patients. This was the case
before 1998 and before CHHMAC was built. Verily, their transfer
to a more spacious and, perhaps, convenient place and location
for the benefit of the hospital’s patients does not remove them
from being an integral part of the overall operation of the
hospital.
Conversely, it would have been different if CHHMAC was
also open for non-accredited physicians, that is, any medical
practitioner, for then respondent would be running a commercial
building for lease only to doctors which would indeed subject the
CHHMAC to the commercial level of 35% assessment.
Moreover, the CHHMAC, being hundred meters away from
the CHH main building, does not denigrate from its being an
integral part of the latter. As aptly applied by the CBAA,
the Herrera ruling on what constitutes property exempt from
taxation is indeed applicable in the instant case, thus:
“Moreover, the exemption in favor of property used exclusively for
charitable or educational purposes is “not limited to property actually
indispensable” therefore (Cooley on Taxation, Vol. 2, p. 1430), but
extends to facilities which are “incidental to and reasonably
necessary for” the accomplishment of said purposes, such as, in the
case of hospitals, “a school for training nurses, a nurses’ home,
property use to provide housing facilities for interns, resident
doctors, superintendents, and other members of the hospital staff,
and recreational facilities for student nurses, interns and residents”
(84 C.J.S., 621), such as “athletic fields,” including “a farm used for
the inmates of the institution” (Cooley on Taxation, Vol. 2, p. 1430).”
25
Verily, being an integral part of CHH, CHHMAC should be under
the same special assessment level of as that of the former.
The CHHMAC facility is definitely incidental to
and reasonably necessary for the operations of Chong
Hua Hospital
Given our discussion above, the CHHMAC facility, while
seemingly not indispensable to the operations of CHH, is
definitely incidental to and reasonably necessary for the
operations of the hospital. Considering the legal requirements
and the ramifications of the medical and clinical operations that
have been transferred to the CHHMAC from the CHH main
building in light of the accredited physicians’ transfer of offices
in 1998 after the CHHMAC building was finished, it cannot be
gainsaid that the services done in CHHMAC are indispensable
and essential to the hospital’s operation.
For one, as found by the appellate court, the CHHMAC
facility is primarily used by the hospital’s accredited physicians
to perform medical check-up, diagnosis, treatment, and care of
patients. For another, it also serves as a specialized outpatient
department of the hospital.
Indubitably, the operation of the hospital is not only for
confinement and surgical operations where hospital beds and
operating theaters are required. Generally, confinement is
required in emergency cases and where a patient necessitates
close monitoring. The usual course is that patients have to be
diagnosed, and then treatment and follow-up consultations
follow or are required. Other cases may necessitate surgical
operations or other medical intervention and confinement. Thus,
the more the patients, the more important task of diagnosis,
treatment, and care that may or may not require eventual
confinement or medical operation in the CHHMAC.
 ——o0o——
Thus, the importance of CHHMAC in the operation of CHH
cannot be over-emphasized nor disputed. Clearly, it plays a key
role and provides critical support to hospital operations.

Charging rentals for the offices used by its

accredited physicians cannot be equated to a commercial
venture

Finally, respondent’s charge of rentals for the offices and clinics

its accredited physicians occupy cannot be equated to a
commercial venture, which is mainly for profit.

Respondent’s explanation on this point is well taken. First,

CHHMAC is only for its consultants or accredited doctors and
medical specialists. Second, the charging of rentals is a practical
necessity: (1) to recoup the investment cost of the building, (2)
to cover the rentals for the lot CHHMAC is built on, and (3) to
maintain the CHHMAC building and its facilities. Third, as
correctly pointed out by respondent, it pays the proper taxes for
its rental income. And, fourth, if there is indeed any net income
from the lease income of CHHMAC, such does not inure to any
private or individual person as it will be used for respondent’s
other charitable projects.

Given the foregoing arguments, we fail to see any reason

why the CHHMAC building should be classified as “commercial”
and be imposed the commercial level of 35% as it is not
operated primarily for profit but as an integral part of CHH. The
CHHMAC, with operations being devoted for the benefit of the
CHH’s patients, should be accorded the 10% special
assessment.

In this regard, we point with approbation the appellate court’s

application of Sec. 216 in relation with Sec. 215 of the Local
Government Code on the proper classification of the subject
CHHMAC building as “special” and not “commercial.” Secs. 215
and 216 pertinently provide:

“SEC. 215. Classes of Real Property for Assessment Purposes.—

For purposes of assessment, real property shall be classified as
residential, agricultural, commercial, industrial, mineral, timberland
or special.
xxxx
SEC. 216. Special Classes of Real Property.——All lands,
buildings, and other improvements thereon actually, directly
and exclusively used for hospitals, cultural or scientific purposes,
and those owned and used by local water districts, and government-
owned or controlled corporations rendering essential public services
in the supply and distribution of water and/or generation and
transmission of electric power shall be classified as special.
(Emphasis supplied.)”

Thus, applying the above provisos in line with City Tax

Ordinance LXX of Cebu City, the 10% special assessment
should be imposed for the CHHMAC building which should be
classified as “special.”

WHEREFORE, the petition is DENIED for lack of merit and

the October 31, 2001 Decision and March 11, 2002 Resolution
of the CA are hereby AFFIRMED. No pronouncement as to
costs.

SO ORDERED.

Quisumbing (Chairperson), Carpio, Carpio-Morales and Tinga,

JJ., concur.

Petition denied, judgment and resolution affirmed.

 Callanta v. Office of the Ombudsman
G.R. Nos. 115253-74. January 30, 1998. *
ANTONIO P. CALLANTA, GILBERTO M. DELOS REYES,
CESAR Q. CONCON, ALMICAR EDIRA, JACINTO 1
PAHAMTANG, ANTONIO V. ABELLANA, APOLINARIO
SALARES, JR. and SHIRLEY PALMERO,
petitioners, vs. OFFICE OF THE OMBUDSMAN and CITY
GOVERNMENT OF CEBU, respondents.
Property; Taxation; Sec. 22 of PD 464 clearly provides
three (3) occasions when assessments of real property may be
made by the local assessor.—Sec. 22 clearly provides three (3)
occasions when assessments of real properties may be made
by the local assessor. In the case at bar, the second instance
gave rise to the revised assessed values for which the property
owners subsequently sought reconsideration. Sec. 30 of the
same Code is equally clear that the aggrieved owners should
have brought their appeals before the LBAA. Unfortunately,
despite the advice to this effect contained in their respective
notices of assessment, the owners chose to bring their requests
for a review/readjustment before the city assessor, a remedy not
sanctioned by the law. To allow this procedure would indeed
invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real
property may be initially set unreasonably high, and then
subsequently reduced upon the request of a property owner. In
the latter instance, allusions of a possible covert, illicit trade-off
cannot be avoided, and in fact can conveniently take place.
Such occasion for mischief must be prevented and excised from
our system.
Same; Same; Whenever the local assessor sends a
notice to the owner or lawful possessor of real property of its
revised assessed value, the former shall thereafter no longer
have any jurisdiction to entertain any request for a review or
readjustment.—Indeed, the longstanding practice adverted to by
petitioners does not justify a continuance of their acts. We
cannot sanction such compromising situations. Henceforth,
whenever the local assessor sends a notice to the owner or
lawful possessor of real property of its revised assessed value,
the former shall thereafter no longer have any jurisdiction to
entertain any request for a review or readjustment. The
appropriate forum where the aggrieved party may bring his
appeal is the LBAA, as provided by law.
Same; Same; The assessment is deemed made when the
notice to this effect is released, mailed or sent to the taxpayer
for the purpose of giving effect to said assessment.—In the
same vein, we have said that “the assessment is deemed made
when the notice to this effect is released, mailed or sent to the
taxpayer for the purpose of giving effect to said assessment.”
Same; Same; Where the taxpayer fails to question such
assessment within the reglementary period provided by law, the
local government’s right becomes absolute upon the expiration
of such period with respect to that taxpayer’s property.—With
respect to real property taxes, the obligation to pay arises on the
first day of January of the year following the assessment.
Corollarily, on the same date, the right of the local government
to collect said taxes also arises. And where the taxpayer fails to
question such assessment within the reglementary period
provided by law, the local government’s right becomes absolute
upon the expiration of such period with respect to that taxpayer’s
property.
Same; Same; Petitioner’s unauthorized reduction of the
assessed values ineluctably resulted in the local government’s
deprivation of the corresponding revenues.—Thus, petitioners’
unauthorized reduction of the assessed values ineluctably
resulted in the local government’s deprivation of the
corresponding revenues. Lost or reduced revenues undeniably
translate into damages or injury within the contemplation of the
law. The city government of Cebu, therefore, had every legal
right to feel aggrieved and to institute this proceeding against
petitioners.
Criminal Law; Anti-Graft and Corrupt Practices; In grave
misconduct, the elements of corruption, clear intent to violate the
law or flagrant disregard of established rule must be manifest.—
These averments of petitioners are impressed with some merit.
In grave misconduct, the elements of corruption, clear intent to
violate the law or flagrant disregard of established rule must be
manifest. From the evidence on record, we do not find any of
these elements. x x x Without evidence showing that petitioners
received any gift, money or other payoff or that they were
induced by offers of such, we cannot impute any taint of direct
corruption to the questioned acts of petitioners.
Same; Same; Where the charges on which the removal of
the public officer is sought are misconduct in office, gross
negligence or corruption, the ground for dismissal should be
clearly established.—Gross negligence, on the other hand, is
flagrant and palpable disregard or breach of duty. It is the
conscious pursuit of a course of conduct which would naturally
and reasonably cause injury. As discussed above, we can hardly
characterize the acts of petitioners as grossly negligent. Where
the charges on which the removal of the public officer is sought
are misconduct in office, gross negligence, or corruption, the
ground for dismissal should be clearly established.
Same; Same; Public officers occupying exalted positions
in the civil service, must, in accordance with the Constitution and
the Ethical Standards Law, exemplify the ideals of integrity,
efficiency, and particularly proficiency in the law.—But
Petitioners Callanta, Delos Reyes and Concon, as public officers
occupying exalted positions in the civil service, must, in
accordance with the Constitution and the Ethical Standards Law,
exemplify the ideals of integrity, efficiency, and particularly
proficiency in the law. They must ever be prudent to act always
in accordance with law, and not to perform or authorize legally
doubtful acts that may stain the integrity of their office. Their act
alone of initially authorizing multifold increases in the assessed
values, only to scale them down to as much as fifty per cent upon
“requests” of the affected property owners, is already reflective
of inefficiency, and indicative of misconduct or malfeasance, if
not incompetence in their offices, for which they should be
penalized. Considering that they are senior officials who had
failed to live up to the standards and ideals expected of their
rank and stature, Petitioners Callanta, Delos Reyes and Concon
are hereby imposed the penalty of suspension from office for
one (1) year.
Same; Same; Public officials and employees are required
to follow only the lawful orders of their superiors which are
issued within the scope of their authority.—The defense of the
other petitioners that they were merely following the orders of
their superiors does not totally exculpate them from liability.
They should likewise be aware of the limits of the functions of
their office. Public officials and employees are required to follow
only the lawful orders of their superiors which are issued within
the scope of their authority. In our jurisdiction, the rule of law,
and not of men, governs. Nowhere in our statutes is blind
obedience required of junior personnel to the commands and
directives of their superiors. In indiscreetly following the orders
of their superiors, Petitioners Edira, Pahamtang, Abellana,
Salares Jr. and Palmero had breached their accountability to the
public. They deserve to be reprimanded.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
PANGANIBAN, J.:
May officials and employees of the Office of the City Assessor
reduce the new assessed values of real properties upon
requests of the affected property owners? To forestall the
practice of initially setting unreasonably high reassessment
values only to eventually change them to unreasonably lower
values upon “requests” of property owners, the law gives no
such authority to the city assessor or his subalterns. Seemingly
innocuous occasions for mischief and veiled opportunities for
graft should be excised from the public system. Built-in checks
should be zealously observed so that the ingenious and shrewd
cannot circumvent them and the audacious cannot violate them
with impunity.
Statement of the Case
Before us is a petition for certiorari under Rule 65 of the Rules
of Court seeking to set aside the ombudsman’s amended
Resolution dated October 28, 1993, which dismissed from
2
government service Petitioners Callanta, Delos Reyes and
Concon and suspended the other petitioners from holding office
for three (3) months without pay. Also challenged is the
ombudsman’s Order dated April 18, 1994, denying petitioners’
3
motion for reconsideration and urgent motion to stop the
execution of the amended Resolution.
The Facts
The parties do not dispute the findings of fact of the deputy
ombudsman for the Visayas, as approved by the ombudsman
4
and which this Court finds substantiated by the records. The
pertinent portions are as follows:
“It is alleged that a general revision of assessment was conducted
by the Office of the City Assessor in 1988 and sometime thereafter.
Notices of assessment together with the new tax declarations were
subsequently sent to the property owners. Thereafter, respondents,
without the authority of the Local Board of Assessment Appeals,
reassessed the values of certain properties, in contravention of Sec.
30 of P.D. 464. The said assessment resulted in the reduction of
assessed values of the properties x x x.
xxx xxx xxx
The extent of participation of the individual respondents in the
adjustments [reductions] referred to above, could be summarized
as follows, to wit:
1. Antonio P. Callanta
—approved and ordered the adjustments of the revised
assessments reducing both the market and assessed values of
real properties under Tax Declaration Nos. x x x.
2. Ma. Almicar Edera [, Jacinto Pahamtang, Segundino
Lucero, Antonio V. Abellana, Nicolas Abarri and
Apolinario Salares, Jr.]
—conducted the adjustments of the revised assessment reducing
both the market and assessed values of real properties under Tax
Declaration Nos. x x x.
3. Gilberto delos Reyes [and Cesar Q. Concon]
—approved for and in behalf of the City Assessor the adjustments
of the revised assessments reducing both the market and
assessed values of real properties under Tax Declaration Nos. x
x x.
xxx xxx xxx
10. Shirley Palmero
—recommended the approval of the adjustment of the revised
assessment reducing both the market and assessed value of real
property under Tax Declaration No. GR-04-028-05093 and
conducted similar aforesaid adjustments on real properties under
Tax Declaration Nos. x x x.”5
In several similarly worded letter-complaints dated December
19, 1991, the City of Cebu simultaneously filed criminal and
administrative charges against the above-enumerated officers
and staff of the City Assessor’s Office for “violations of Section
106 of the Real Property Tax Code[,] for gross negligence or
willful under-assessment of real properties within the city’s
taxing jurisdiction and for violation of Sec. 3(e) of R.A. 3019,
otherwise known as the Anti-Graft and Corrupt Practices Act[,]
for the act of causing undue injury to the City Government by
giving private persons unwarranted benefits, advantages or
preferences in the discharge of their official and administrative
functions through manifest partiality, evident bad faith or gross
inexcusable negligence by reassessing the real properties of
taxpayers without any authority whatsoever, thereby resulting in
the reduction of tax assessments to the prejudice of the city
government x x x.” Specifically, the administrative charges were
for “dishonesty and/or serious irregularities in the performance
of duties/public functions.” The deputy ombudsman summarized
the defenses of petitioners in this wise:
“Respondents [herein petitioners], in their joint counter-affidavit,
denied the charges filed against them. They explained that the acts
complained of were done within the bounds of their official duties
and functions, citing as their legal basis, Sec. 22 of P.D. 464. That
Sec. 30 of P.D. 464 which is the basis of the complaints does not
prohibit the Assessor from either correcting from whatever error or
flaw he and his deputies may have made.
Respondents further alleged that they have not derived any
benefit from the adjustments nor caused injury to any party
particularly the City Government of Cebu. They explained that the
general revision of real property assessments for the City of Cebu
has not been completed nor has the City Assessor certified its
completion to the Secretary of Justice, thus taxes under these
revised tax declarations are not yet due, has [sic] not yet accrued,
are not yet collectible and therefore, cannot serve as basis for
alleged injury.”
6
The deputy ombudsman, ruling purely on the administrative
aspect of the cases, held in the assailed amended Resolution
that while the city assessor had not yet submitted a certification
to the secretary of finance stating that the general revision of
property assessments has been completed, “thus forestalling
the effectivity of [the] assessments and the accrual of taxes
thereunder,” the city government of Cebu already acquired a
vested interest on the taxes by reason of the property owners’
failure to question the same to the Local Board of Assessment
Appeals (LBAA) within sixty (60) days from receipt of their
notices of assessment, as provided under Sec. 30 of PD 464,7
as amended. He opined that approval by the secretary of finance
is not necessary for the assessments to take effect, and the
taxes thereunder to accrue and become payable. In addition,
even if no law expressly prohibits the local assessor or his
authorized deputies from making corrections or adjustments in
assessments, the unrestricted exercise of such authority in all
stages of the appraisal and assessment process “would open
the floodgates to corruption.” Besides, the questioned
assessments were done pursuant to the general revision;
hence, requests for readjustment are effectively petitions for
reappraisal and reassessment which are not allowed under the
law. Section 30 of PD 464, as amended, provides the remedy
for questioning assessments of real properties and the
“reassessments” requested by the property owners and granted
by the assessor is not included therein. The deputy ombudsman
thus concluded that the unauthorized and improper
corrections/adjustments made by petitioners resulting in
decreased fair market values of the real properties involved
adversely affected the city government. Such acts allegedly
constituted willful or gross negligence amounting to intentional
violation and gross disregard of Sec. 106 of PD 464, as
8
amended.
Finding that the readjustments were made pursuant to the
direct orders of Petitioner Antonio P. Callanta, who was then
officer-in-charge of the Office of the City Assessor, and of
Petitioners Gilberto delos Reyes and Cesar Concon who acted
on behalf of Callanta in approving the reduced assessments, the
deputy ombudsman resolved that the three violated Sec. 4, par.
(c) of RA 6713 (the “Code of Conduct and Ethical Standards for
9
Public Officials and Employees”) for performing acts contrary to
law, specifically PD 464, amounting to gross neglect of duty
and/or grave misconduct. The penalty of dismissal with forfeiture
of accrued benefits was meted upon them. As regards
Petitioners Edira, Pahamtang, Lucero, Abellana, Abarri, Salares
Jr. and Palmero, the deputy ombudsman found them guilty only
of negligence in the performance of their functions for making
the adjustments without taking into account the revised
assessments previously made. The penalty of suspension for
three (3) months without pay was imposed on them.
Ombudsman Conrado M. Vasquez approved the findings
and recommendations of the deputy ombudsman for the
Visayas on December 8, 1993. Petitioners filed a motion for
reconsideration as well as a motion to stop the execution of the
ombudsman’s decision by the city government of Cebu. Both
motions were denied for lack of merit. 10
Hence, this petition. 11
Issues
Petitioners present the following assignment of errors:
“First—The Ombudsman gravely erred in resolving that the assessor
acted illegally and in grave misconduct by adjusting/correcting the
valuations of the tax declarations subject of the complaints.
Second—It is gravely erroneous for both respondents to assume
that taxes for the subject tax declarations had accrued and become
payable, thereby making petitioners liable for causing undue injury to the
city government of Cebu.
Third—The Ombudsman manifestly overlooked certain relevant
facts not disputed by the parties and which if properly considered would
justify a different conclusion.
Fourth—It is both gravely erroneous and a grave abuse in the
exercise of discretion for the Ombudsman to hold liable the rest of the
petitioners aside from Mr. Callanta, the city assessor who alone
promulgated the act/policy.
Fifth—The Ombudsman and Mayor Osmeña [of Cebu City] had
clearly acted with undue haste amounting to grave abuse of discretion
and violation of existing laws and regulations in effecting the dismissal
of herein petitioners.”
12
In his Memorandum dated March 18, 1997, the ombudsman
13
encapsulates the issues, which we adopt, as follows:
“Whether or not petitioners violated the law by their acts of
accommodating requests for reconsideration of the revised
assessments;
In the affirmative, whether or not the violations were
injurious/prejudicial to Cebu City; and
Whether or not the acts of petitioners constitute grave
misconduct and/or negligence which warrants [sic] their
dismissal/suspension from service.”
The Court’s Ruling
The petition is partly meritorious.
First Issue:
Authority of the City Assessor to Reconsider Real
Property Assessments
Petitioners anchor the validity of their acts upon the absence of
a specific provision of law expressly prohibiting the assessor
from making adjustments or corrections in the assessment of
real properties, and upon the long-standing practice of the city
assessor’s office in making such adjustments/corrections
believed in good faith to be sanctioned under Sec. 22, PD
464 (now Sec. 220 of RA 7160), which reads:
14
“Sec. 22. Valuation of Real Property.—Upon the discovery of
real property or during the general revision of property
assessments as provided in Section twenty-one of this Code
or at any time when requested by the person in whose name
the property is declared, the provincial or city assessor or his
authorized deputy shall make an appraisal and assessment in
accordance with Section five hereof of the real property listed
and described in the declaration irrespective of any previous
assessment or taxpayer’s valuation thereon: Provided,
however, That the assessment of real property shall not be
increased oftener once every five years in the absence of new
improvements increasing the value of said property or of any
change in its use, except as otherwise provided in this Code.”
Public respondents, on the other hand, insist that petitioners
have no legal authority to act upon requests for reconsideration
or appeals of property owners, a power which is explicitly vested
upon the LBAA under Sec. 30 of the Real Property Tax Code, a
amended, which provides:
“Sec. 30. Local Board of Assessment Appeals.—Any owner
who is not satisfied with the action of the provincial or city
assessor in the assessment of his property may, within sixty
days from the date of receipt by him of the written notice of
assessment as provided in this Code, appeal to the Board of
Assessment Appeals of the province or city, by filing with it a
petition under oath using the form prescribed for the purpose,
together with the copies of the tax declarations and such
affidavit or documents submitted in support of the appeal.”
We find no merit in the contentions of petitioners. Enlightening
is the following disquisition by the counsel for the ombudsman
15
on the above-cited legal provisions:
“The instances referred to [under Sec. 22] are as follows:
1. upon the discovery of real property;
2. during the general revision of property assessments as
provided in Section 21 of the Code; and
3. at anytime [sic] when requested by the person in whose name
the property is declared.
It is not disputed that the assessment/valuation involved herein
were conducted by virtue of the 1988 general revision of property
assessments under No. 2 instance above.
After an assessment has been conducted, the assessor shall within
thirty days issue a written notice of such new or revised assessment to
the person in whose name the property is declared. (Section 27, PD
464). If the owner is not satisfied with the action of the assessor in the
assessment of his property, he may appeal within sixty days from receipt
of the notice of assessment to the Local Board of Assessment Appeals
pursuant to Section 30 of P.D. 464 which provides:
 xxx xxx xxx
Under the aforecited procedure, the issuance of a notice of
assessment by the local assessor shall be his last action on a
particular assessment. On the side of the property owner, it is this
last action which gives him [the] right to appeal to the Local Board
of Assessment Appeals. The above procedure also, does not grant
the property owner the remedy of filing a motion for reconsideration
before the local assessor.
The act of herein petitioners in providing the corresponding notice
of assessment the chance for the property owners concerned to file a
motion for reconsideration and for acting on the motions filed is not in
accordance with law and in excess of their authority and therefore
constitutes ultra vires acts.”
16
Applying the above, we agree with the following conclusions of
the deputy ombudsman:
“x x x The appraisal and assessment done pursuant to the
1988 general revision work were within the purview of the
second instance (i.e. during the general revision x x x as set
forth in said Sec. 22[)]. But to make the same appraisal and
assessment upon the request of the property owners who
were not satisfied with the result of the first valuation of their
property is grossly out of context in the application of the third
instance allowed by Sec. 22. [W]hat the property owners
involved were actually asking were practically a reappraisal
and reassessment of the properties (because an appraisal
and assessment had already been made under the second
instance and their request was prompted by the receipt of the
written notice of such valuation), the allowance for which is
nowhere to be discerned in the provisions of Sec. 22 x x x.” 17
To repeat, Sec. 22 clearly provides three (3) occasions when
assessments of real properties may be made by the local
assessor. In the case at bar, the second instance gave rise to
the revised assessed values for which the property owners
subsequently sought reconsideration. Sec. 30 of the same Code
is equally clear that the aggrieved owners should have brought
their appeals before the LBAA. Unfortunately, despite the advice
to this effect contained in their respective notices of assessment,
the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not
sanctioned by the law. To allow this procedure would indeed
invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real
property may be initially set unreasonably high, and then
subsequently reduced upon the request of a property owner. In
the latter instance, allusions of a possible covert, illicit trade-off
cannot be avoided, and in fact can conveniently take place.
Such occasion for mischief must be prevented and excised from
our system.
In this case, based on a list of properties submitted by
18
petitioners comparing their (1) previous assessed values (“old
values”), (2) assessed values under the general revision
(“revised values”), and (3) the unauthorized adjusted values
(“unauthorized values”), the Court observes that the old values
of some properties were increased by more than 1,000% (or 10
times) in the general revision, but were reduced to only about
half under the unauthorized adjustments. The large 19
discrepancies seem to indicate a tendency to overvalue initially
and thereafter to reduce the increases upon “request” of the
property owner affected. To avoid this dubious, suspicious,
bribable and compromising situation, the law itself specifically
provided an appellate body—the LBAA—before which property
owners may seek relief. Neither habit nor good faith can amend
this appellate procedure provided under the law.
Indeed, the long-standing practice adverted to by petitioners
does not justify a continuance of their acts. We cannot sanction
such compromising situations. Henceforth, whenever the local
assessor sends a notice to the owner or lawful possessor of real
property of its revised assessed value, the former shall
thereafter no longer have any jurisdiction to entertain any
request for a review or readjustment. The appropriate forum
where the aggrieved party may bring his appeal is the LBAA, as
provided by law.
Second Issue:
Injury or Prejudice to the City Government of Cebu
In order to determine whether the city government of Cebu was
prejudiced by the acts of petitioners, we need to determine the
date when the revised assessments became due and payable.
Petitioners argue that at the time the complaint was filed, the
general revision of property values undertaken by their office
was not yet finished or completed for the entire city; hence, the
revised values were not yet effective and payments thereon
were not yet due and payable. No certification has yet been
submitted to the secretary of finance as required under Sec. 23
of PD 464. Therefore, it was premature for the city government
of Cebu to claim prejudice or injury caused by the questioned
readjustments.
Public respondents, on the other hand, aver that the city
government acquired a vested interest in the taxes accruing
from the revised values, because such values became final and
effective upon the property owners’ failure to appeal to the LBAA
within the reglementary period provided by law.
The following provisions of PD 464, which is the law
applicable to the instant case, are relevant in determining when
the revised assessments on real properties became effective:
“Sec. 23. Certification of Revised Values to the Secretary of
Finance.—When the provincial or city assessor shall have finished
a general revision of property assessments for any province,
municipality or city, he shall so certify to the Secretary of Finance
and the assessments shall become effective and taxes shall accrue
and be payable thereunder in accordance with the provisions of this
Code.
Sec. 24. Date of Effectivity of Assessment or Reassessment.—
All assessments or reassessments made after the first day of
January of any year shall take effect on the first day of January of
the succeeding year: x x x.” [italics ours]
Petitioners solely invoke Sec. 23 and ignore Sec. 24. This Court
believes both sections should be construed together. While, at
first glance, Sec. 23 seems to impose the certification to the
secretary of finance as a condition sine qua non before the
revised values may become effective, the second part of the
section, which we underscored above, gives a contrary
understanding. We hold that the dominant provision is Sec. 24,
the specific provision on the effectivity of assessments or
reassessments. This section is clear and unequivocal. The
assessments take effect on the first day of January of the
succeeding year after the revision is made. While Sec. 23
requires the local assessor to certify to the finance secretary that
the general revision has been finished, such certification is,
however, not the operative act for the effectivity of the new
assessments. This interpretation is bolstered by the fact that
under the Local Government Code of 1991, Title Two, Book II
20
of which has replaced the Real Property Tax Code, there is no
longer any provision requiring such certification.
The general revision of property values was commenced by
the city assessor of Cebu in 1988. Subsequently, the notices of
the new assessments and the new declarations were sent to the
property owners. The nature of an assessment has been
explained this wise:
“An assessment fixes and determines the tax liability of a taxpayer.
As soon as it is served, an obligation arises on the part of the
taxpayer concerned to pay the amount assessed and demanded.”
In the same vein, we have said that “the assessment is deemed
made when the notice to this effect is released, mailed or sent
to the taxpayer for the purpose of giving effect to said
assessment.” 22
With respect to real property taxes, the obligation to pay
arises on the first day of January of the year following the
assessment. Corollarily, on the same date, the right of the local
government to collect said taxes also arises. And where the
taxpayer fails to question such assessment within the
reglementary period provided by law, the local government’s
right becomes absolute upon the expiration of such period with
23
respect to that taxpayer’s property.
Thus, petitioners’ unauthorized reduction of the assessed
values ineluctably resulted in the local government’s deprivation
of the corresponding revenues. Lost or reduced revenues
undeniably translate into damages or injury within the
contemplation of the law. The city government of Cebu,
therefore, had every legal right to feel aggrieved and to institute
this proceeding against petitioners.
Third Issue:
Penalties Imposed Too Harsh Under the Circumstances
Lastly, petitioners contend that the city assessor alone should
be held responsible for the acts questioned, since, as head of
the office, he laid down the policies and issued the orders, while
his deputies and the employees under him merely followed his
instructions. In the instant controversy, the other petitioners
acted only upon the orders of Petitioner Callanta, which did not
appear to be unlawful or erroneous on its face. They aver that
they merely followed in good faith a procedure long practised by
the office. They deny acting with evident bad faith or gross
negligence, since they honestly believed that they had the
authority to act on the requests for reconsideration. This is
bolstered by the absence of any findings of corruption on their
part.
These averments of petitioners are impressed with some
merit. In grave misconduct, the elements of corruption, clear
intent to violate the law or flagrant disregard of established rule
must be manifest. From the evidence on record, we do not find
24
any of these elements. In the words of the deputy ombudsman
himself:
“No proof, however, can be obtained from the evidence presented
that would strongly indicate that private respondents knowingly
induced or caused the respondent public officers to commit the
offense defined in Sec. 3(e), R.A. 3019 as amended, nor is there
any sufficient showing that said private respondents had directly or
indirectly given any gift, present, share, percentage or benefit to the
respondents [sic] public officers or any other person in connection
with the questioned transaction subject of the instant cases. x x x” 25
Without evidence showing that petitioners received any gift,
money or other payoff or that they were induced by offers of
such, we cannot impute any taint of direct corruption to the
questioned acts of petitioners.
Any indication of intent to violate the law or of flagrant
disregard of established rule is meanwhile negated by the
petitioners’ honest belief that their acts were sanctioned under
the third instance provided in Sec. 22 of PD 464, as buttressed
by the long-standing adherence of local assessors to the
questioned procedure.
Gross negligence, on the other hand, is flagrant and
21
palpable disregard or breach of duty. It is the conscious pursuit
of a course of conduct which would naturally and reasonably
cause injury. As discussed above, we can hardly characterize
26
the acts of petitioners as grossly negligent. Where the charges
on which the removal of the public officer is sought are
misconduct in office, gross negligence, or corruption, the ground
for dismissal should be clearly established.
But Petitioners Callanta, Delos Reyes and Concon, as public
officers occupying exalted positions in the civil service, must, in
accordance with the Constitution and the Ethical Standards
27
Law, exemplify the ideals of integrity, efficiency, and particularly
proficiency in the law. They must ever be prudent to act always
in accordance with law, and not to perform or authorize legally
doubtful acts that may stain the integrity of their office. Their act
alone of initially authorizing multifold increases in the assessed
values, only to scale them down to as much as fifty per cent upon
“requests” of the affected property owners, is already reflective
of inefficiency, and indicative of misconduct or malfeasance, if
not incompetence in their offices, for which they should be
penalized. Considering that they are senior officials who had
failed to live up to the standards and ideals expected of their
rank and stature, Petitioners Callanta, Delos Reyes and Concon
are hereby imposed the penalty of suspension from office for
one (1) year.28
The defense of the other petitioners that they were merely
following the orders of their superiors does not totally exculpate
them from liability. They should likewise be aware of the limits of
the functions of their office. Public officials and employees are
required to follow only the lawful orders of their superiors which
are issued within the scope of their authority. In our jurisdiction,
29
the rule of law, and not of men, governs. Nowhere in our statutes
is blind obedience required of junior personnel to the commands
and directives of their superiors. In indiscreetly following the
orders of their superiors, Petitioners Edira, Pahamtang,
Abellana, Salares, Jr. and Palmero had breached their
accountability to the public. They deserve to be reprimanded.
Epilogue
The Court notes the solicitor general’s Manifestation and
Motion dated September 20, 1994, which was adverse to the
30
ombudsman. The chief government lawyer thus declined to file
a comment on the former’s behalf. Hence, the ombudsman had
to defend his findings and conclusions in the assailed Resolution
through his own counsel. We must commend the chief graft-
buster for his vigilance and effort to close gaps that provide
clandestine opportunities for corruption. His drive to eliminate
existing systems of procedure in government that covertly allow
graft and corrupt practices—which he describes as
“predominantly in the form of leeway to bargain”—is exemplary.
Similar approaches to curb and arrest the most serious and
prevalent problem in the bureaucracy are imperative. Indeed,
what we need now is not only to punish the wrongdoers or
reward the “outstanding” civil servants, but also to plug the
hidden gaps and potholes of corruption as well as to insist on
strict compliance with existing legal procedures in order to abate
any occasion for graft or circumvention of the law.
WHEREFORE, the petition is PARTLY GRANTED. The
challenged amended Resolution is hereby MODIFIED as
follows: Petitioners Antonio P. Callanta, Gilberto M. delos Reyes
and Cesar Q. Concon are SUSPENDED from office for one (1)
year, while Petitioners Almicar Edira, Jacinto Pahamtang,
Antonio V. Abellana, Apolinario Salares, Jr. and Shirley Palmero
are REPRIMANDED. All petitioners are WARNED that a
repetition of the same or similar acts in the future will be dealt
with more severely.

SO ORDERED.

Narvasa (C.J.), Regalado, Davide,

Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Francisco and Martinez, JJ., concur.

Petition partly granted.

——o0o——
 Quezon City v. Bayan Telecommunications
G.R. No. 162015. March 6, 2006. *
THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY
TREASURER OF QUEZON CITY, DR. VICTOR B. ENRIGA,
petitioners, vs. BAYAN TELECOMMUNICATIONS, INC.,
respondent.
Civil Procedure; Appeals; Prohibitions; One of the
recognized exceptions to the exhaustion-of-administrative
remedies rule is when only legal issues are to be resolved.—
Petitioners argue that Bayantel had failed to avail itself of the
administrative remedies provided for under the LGC, adding that
the trial court erred in giving due course to Bayantel’s petition for
prohibition. To petitioners, the appeal mechanics under the LGC
constitute Bayantel’s plain and speedy remedy in this case. The
Court does not agree. With the reality that Bayantel’s real
properties were already levied upon on account of its
nonpayment of real estate taxes thereon, the Court agrees with
Bayantel that an appeal to the LBAA is not a speedy and
adequate remedy within the context of the aforequoted Section
2 of Rule 65. This is not to mention of the auction sale of said
properties already scheduled on July 30, 2002. Moreover, one
of the recognized exceptions to the exhaustion-of-administrative
remedies rule is when, as here, only legal issues are to be
resolved. In fact, the Court, cognizant of the nature of the
questions presently involved, gave due course to the instant
petition. As the Court has said in Ty vs. Trampe, 250 SCRA 500
(1995): x x x. 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. x x x.
Taxation; Realty Tax; Franchises; Local
Governments; While Section 14 of Republic Act 3259 may be
validly viewed as an implied delegation of power to tax, the
delegation under that provision, as couched, is limited to
impositions over properties of the franchisee which are not
actually, directly and exclusively used in the pursuit of its
franchise.—The legislative intent expressed in the phrase
“exclusive of this franchise” cannot be construed other than
distinguishing between two (2) sets of properties, be they real or
personal, owned by the franchisee, namely, (a) those actually,
directly and exclusively used in its radio or telecommunications
business, and (b) those properties which are not so used. It is
worthy to note that the properties subject of the present
controversy are only those which are admittedly falling under the
first category. To the mind of the Court, Section 14 of Rep. Act
No. 3259 effectively works to grant or delegate to local
governments of Congress’ inherent power to tax the franchisee’s
properties belonging to the second group of properties indicated
above, that is, all properties which, “exclusive of this franchise,”
are not actually and directly used in the pursuit of its franchise.
As may be recalled, the taxing power of local governments
under both the 1935 and the 1973 Constitutions solely
depended upon an enabling law. Absent such enabling law,
local government units were without authority to impose and
collect taxes on real properties within their respective territorial
jurisdictions. While Section 14 of Rep. Act No. 3259 may be
validly viewed as an implied delegation of power to tax, the
delegation under that provision, as couched, is limited to
impositions over properties of the franchisee which are not
actually, directly and exclusively used in the pursuit of its
franchise. Necessarily, other properties of Bayantel directly used
in the pursuit of its business are beyond the pale of the
delegated taxing power of local governments. In a very real
sense, therefore, real properties of Bayantel, save
those exclusive of its franchise, are subject to realty taxes.
Ultimately, therefore, the inevitable result was that all realties
which are actually, directly and exclusively used in the operation
of its franchise are “exempted” from any property tax. Bayantel’s
franchise being national in character, the “exemption” thus
granted under Section 14 of Rep. Act No. 3259 applies to all its
real or personal properties found anywhere within the Philippine
archipelago.
Same; Same; Same; Same; The realty tax exemption
heretofore enjoyed by Bayantel under its original franchise, but
subsequently withdrawn by force of Section 234 of the Local
Government Code, has been restored by Section 14 of Republic
Act No. 7633.—With the LGC’s taking effect on January 1, 1992,
Bayantel’s “exemption” from real estate taxes for properties of
whatever kind located within the Metro Manila area was, by force
of Section 234 of the Code, expressly withdrawn. But, not long
thereafter, however, or on July 20, 1992, Congress passed Rep.
Act No. 7633 amending Bayantel’s original franchise. Worthy of
note is that Section 11 of Rep. Act No. 7633 is a virtual
reenacment of the tax provision, i.e., Section 14, of Bayantel’s
original franchise under Rep. Act No. 3259. Stated otherwise,
Section 14 of Rep. Act No. 3259 which was deemed impliedly
repealed by Section 234 of the LGC was expressly revived
under Section 14 of Rep. Act No. 7633. In concrete terms, the
realty tax exemption heretofore enjoyed by Bayantel under its
original franchise, but subsequently withdrawn by force of
Section 234 of the LGC, has been restored by Section 14 of Rep.
Act No. 7633.
Same; Same; Same; Same; The power to tax is primarily
vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue
of a valid delegation as before, but pursuant to direct authority
conferred by Section 5, Article X of the Constitution.—Bayantel’s
posture is well-taken. While the system of local government
taxation has changed with the onset of the 1987 Constitution,
the power of local government units to tax is still limited. As we
explained in Mactan Cebu International Airport Authority: The
power to tax is primarily vested in the Congress; however, in our
jurisdiction, it may be exercised by local legislative bodies,
no longer merely by virtue of a valid delegation as before,
but pursuant to direct authority conferred by Section 5,
Article X of the Constitution. Under the latter, the exercise of
the power may be subject to such guidelines and limitations as
the Congress may provide which, however, must be consistent
with the basic policy of local autonomy. (at p. 680; Emphasis
supplied.)
Same; Same; Same; Same; The Supreme Court has
upheld the power of Congress to grant exemptions over the
power of local government units to impose taxes.—In Philippine
Long Distance Telephone Company, Inc. (PLDT) vs. City of
Davao, 363 SCRA 522 (2001), this Court has upheld the power
of Congress to grant exemptions over the power of local
government units to impose taxes. There, the Court wrote:
Indeed, the grant of taxing powers to local government units
under the Constitution and the LGC does not affect the
power of Congress to grant exemptions to certain persons,
pursuant to a declared national policy. The legal effect of the
constitutional grant to local governments simply means that in
interpreting statutory provisions on municipal taxing powers,
doubts must be resolved in favor of municipal corporations.
PETITION for review on certiorari of the decision and
resolution of the Regional Trial Court, Br. 227, Quezon City.
GARCIA, J.:
Before the Court, on pure questions of law, is this petition for
review on certiorari under Rule 45 of the Rules of Court to nullify
and set aside the following issuances of the Regional Trial Court
(RTC) of Quezon City, Branch 227, in its Civil Case No. Q-02-
47292, to wit:
1. Decision dated June 6, 2003, declaring respondent
1
Bayan Telecommunications, Inc. exempt from real
estate taxation on its real properties located in
Quezon City; and
2. Order dated December 30, 2003, denying petitioners’
2
motion for reconsideration.
The facts:
Respondent Bayan Telecommunications, Inc. (Bayantel) is
3
a legislative franchise holder under Republic Act (Rep. Act) No.
3259 to establish and operate radio stations for domestic
4
telecommunications, radiophone, broadcasting and telecasting.
Of relevance to this controversy is the tax provision of Rep.
Act No. 3259, embodied in Section 14 thereof, which reads:
SECTION 14. (a) The grantee shall be liable to pay the same taxes
on its real estate, buildings and personal property, exclusive of the
franchise, as other persons or corporations are now or hereafter
may be required by law to pay. (b) The grantee shall further pay to
the Treasurer of the Philippines each year, within ten days after the
audit and approval of the accounts as prescribed in this Act, one
and one-half per centum of all gross receipts from the business
transacted under this franchise by the said grantee (Emphasis
supplied).
On January 1, 1992, Rep. Act No. 7160, otherwise known as
the “Local Government Code of 1991” (LGC), took effect.
Section 232 of the Code grants local government units within the
Metro Manila Area the power to levy tax on real properties, thus:
SEC. 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 hereinafter
specifically exempted.
Complementing the aforequoted provision is the second
paragraph of Section 234 of the same Code which withdrew any
exemption from realty tax heretofore granted to or enjoyed by all
persons, natural or juridical, to wit:
SEC. 234. Exemptions from Real Property Tax.—The following are
exempted from payment of the real property tax:
xxx xxx xxx
Except as provided herein, any exemption from payment of real
property tax previously granted to, or enjoyed by, all persons,
whether natural or juridical, including government-owned-or-
controlled corporations is hereby withdrawn upon effectivity
of this Code (Emphasis supplied).
On July 20, 1992, barely few months after the LGC took effect,
Congress enacted Rep. Act No. 7633, amending Bayantel’s
original franchise. The amendatory law (Rep. Act No. 7633)
contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to
pay the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay. In
addition thereto, the grantee, its successors or assigns shall pay a
franchise tax equivalent to three percent (3%) of all gross receipts
of the telephone or other telecommunications businesses
transacted under this franchise by the grantee, its successors or
assigns and the said percentage shall be in lieu of all taxes on this
franchise or earnings thereof. Provided, That the grantee, its
successors or assigns shall continue to be liable for income taxes
payable under Title II of the National Internal Revenue Code . . . . x
x x. [Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon
City, Bayantel owned several real properties on which it
maintained various telecommunications facilities. These real
properties, as hereunder described, are covered by the following
tax declarations:
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-
096-04072 and D-096-04073 pertaining to Bayantel’s
Head Office and Operations Center in Roosevelt St.,
San Francisco del Monte, Quezon City allegedly the
nerve center of petitioner’s telecommunications
franchise operations, said Operation Center housing
mainly petitioner’s Network Operations Group and
switching, transmission and related equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-
124-00920 and D-124-00941 covering Bayantel’s
land, building and equipment in Maginhawa St.,
Barangay East Teacher’s Village, Quezon City which
houses telecommunications facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-
011-10811, and D-011-11540 referring to Bayantel’s
Exchange Center located in Proj. 8, Brgy. Bahay
Toro, Tandang Sora, Quezon City which houses the
Network Operations Group and cover switching,
transmission and other related equipment.
In 1993, the government of Quezon City, pursuant to the taxing
power vested on local government units by Section 5, Article X
of the 1987 Constitution, infra, in relation to Section 232 of the
LGC, supra, enacted City Ordinance No. SP-91, S-93, otherwise
known as the Quezon City Revenue Code (QCRC), imposing, 5
under Section 5 thereof, a real property tax on all real properties
in Quezon City, and, reiterating in its Section 6, the withdrawal
of exemption from real property tax under Section 234 of the
LGC, supra. Furthermore, much like the LGC, the QCRC, under
its Section 230, withdrew tax exemption privileges in general, as
follows:
SEC. 230. 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 RA 6938, non-stock and
non-profit hospitals and educational institutions, business
enterprises certified by the Board of Investments (BOI) as
pioneer or non-pioneer for a period of six (6) and four (4)
years, respectively, . . . are hereby withdrawn effective
upon approval of this Code (Emphasis supplied).
Conformably with the City’s Revenue Code, new tax
declarations for Bayantel’s real properties in Quezon City were
issued by the City Assessor and were received by Bayantel on
August 13, 1998, except one (Tax Declaration No. 124-01013)
which was received on July 14, 1999.
Meanwhile, on March 16, 1995, Rep. Act No.
7925, otherwise known as the “Public Telecommunications
6
Policy Act of the Philippines,” envisaged to level the playing field
among telecommunications companies, took effect. Section 23
of the Act provides:
SEC. 23. Equality of Treatment in the Telecommunications
Industry.—Any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or may hereafter be granted,
shall ipso facto become part of previously granted
telecommunications franchises and shall be accorded immediately
and unconditionally to the grantees of such franchises: Provided,
however, That the foregoing shall neither apply to nor affect
provisions of telecommunications franchises concerning territory
 covered by the franchise, the life span of the franchise, or the type
of service authorized by the franchise.
On January 7, 1999, Bayantel wrote the office of the City
Assessor seeking the exclusion of its real properties in the city
from the roll of taxable real properties. With its request having
been denied, Bayantel interposed an appeal with the Local
Board of Assessment Appeals (LBAA). And, evidently on its firm
belief of its exempt status, Bayantel did not pay the real property
taxes assessed against it by the Quezon City government.
On account thereof, the Quezon City Treasurer sent out
notices of delinquency for the total amount of P43,878,208.18,
followed by the issuance of several warrants of levy against
Bayantel’s properties preparatory to their sale at a public auction
set on July 30, 2002.
Threatened with the imminent loss of its properties, Bayantel
immediately withdrew its appeal with the LBAA and instead filed
with the RTC of Quezon City a petition for prohibition with an
urgent application for a temporary restraining order (TRO)
and/or writ of preliminary injunction, thereat docketed as Civil
Case No. Q-02-47292, which was raffled to Branch 227 of the
court.
On July 29, 2002, or in the eve of the public auction
scheduled the following day, the lower court issued a TRO,
followed, after due hearing, by a writ of preliminary
injunction via its order of August 20, 2002.
And, having heard the parties on the merits, the same court
came out with its challenged Decision of June 6, 2003, the
dispositive portion of which reads:
“WHEREFORE, premises considered, pursuant to the enabling
franchise under Section 11 of Republic Act No. 7633, the real estate
properties and buildings of petitioner [now, respondent Bayantel]
which have been admitted to be used in the operation of petitioner’s
franchise described in the following tax declarations are hereby
DECLARED exempt from real estate taxation:
1. Tax Declaration No. D-096-04071—
2. Tax Declaration No. D-096-04074—
3. Tax Declaration No. D-124-01013—
4. Tax Declaration No. D-011-10810—
5. Tax Declaration No. D-011-10811—
6. Tax Declaration No. D-011-10809—
7. Tax Declaration No. D-124-00941—
8. Tax Declaration No. D-124-00940—
9. Tax Declaration No. D-124-00939—
10. Tax Declaration No. D-096-04072—
11. Tax Declaration No. D-096-04073—
12. Tax Declaration No. D-011-11540—
The preliminary prohibitory injunction issued in the August 20,
2002 Order of this Court is hereby made permanent. Since this is a
resolution of a purely legal issue, there is no pronouncement as to
costs.
SO ORDERED.”
Their motion for reconsideration having been denied by the court
in its Order dated December 30, 2003, petitioners elevated the
case directly to this Court on pure questions of law, ascribing to
the lower court the following errors:
I. [I]n declaring the real properties of respondent exempt
from real property taxes notwithstanding the fact that
the tax exemption granted to Bayantel in its original
franchise had been withdrawn by the [LGC] and that
the said exemption was not restored by the enactment
of RA 7633.
II. [In] declaring the real properties of respondent exempt
from real property taxes notwithstanding the enactment
of the [QCRC] which withdrew the tax exemption which
may have been granted by RA 7633.
III. [In] declaring the real properties of respondent exempt
from real property taxes notwithstanding the vague
and ambiguous grant of tax exemption provided
under Section 11 of RA 7633.
IV. [In] declaring the real properties of respondent exempt
from real property taxes notwithstanding the fact that
[it] had failed to exhaust administrative remedies in its
claim for real property tax exemption. (Words in
bracket added.)
As we see it, the errors assigned may ultimately be reduced to
two (2) basic issues, namely:
1. Whether or not Bayantel’s real properties in Quezon
City are exempt from real property taxes under its
legislative franchise; and
2. Whether or not Bayantel is required to exhaust
administrative remedies before seeking judicial relief
with the trial court.
We shall first address the second issue, the same being
procedural in nature.
Petitioners argue that Bayantel had failed to avail itself of the
administrative remedies provided for under the LGC, adding that
the trial court erred in giving due course to Bayantel’s petition for
prohibition. To petitioners, the appeal mechanics under the LGC
constitute Bayantel’s plain and speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following
provision of Rule 65 of the Rules of Court:
SEC. 2. Petition for prohibition.—When the proceedings of any
tribunal, . . . are without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter
specified therein, or otherwise, granting such incidental reliefs as
law and justice may require.
With the reality that Bayantel’s real properties were already
levied upon on account of its nonpayment of real estate taxes
thereon, the Court agrees with Bayantel that an appeal to the
LBAA is not a speedy and adequate remedy within the context
of the aforequoted Section 2 of Rule 65. This is not to mention
of the auction sale of said properties already scheduled on July
30, 2002.
Moreover, one of the recognized exceptions to the
exhaustion-of-administrative remedies rule is when, as here,
only legal issues are to be resolved. In fact, the Court, cognizant
of the nature of the questions presently involved, gave due
course to the instant petition. As the Court has said in Ty vs.
Trampe: 7
x x x. 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. x x x.
Lest it be overlooked, an appeal to the LBAA, to be properly
considered, required prior payment under protest of the amount
of P43,878,208.18, a figure which, in the light of the then
prevailing Asian financial crisis, may have been difficult to raise
up. Given this reality, an appeal to the LBAA may not be
considered as a plain, speedy and adequate remedy. It is thus
understandable why Bayantel opted to withdraw its earlier
appeal with the LBAA and, instead, filed its petition for
prohibition with urgent application for injunctive relief in Civil
Case No. Q-02-47292. The remedy availed of by Bayantel under
Section 2, Rule 65 of the Rules of Court must be upheld.
This brings the Court to the more weighty question of
whether or not Bayantel’s real properties in Quezon City are,
under its franchise, exempt from real property tax.
The lower court resolved the issue in the affirmative,
basically owing to the phrase “exclusive of this franchise” found
in Section 11 of Bayantel’s amended franchise, Rep. Act No.
7633. To petitioners, however, the language of Section 11 of
Rep. Act No. 7633 is neither clear nor unequivocal. The
elaborate and extensive discussion devoted by the trial court on
the meaning and import of said phrase, they add, suggests as
much. It is petitioners’ thesis that Bayantel was in no time given
any express exemption from the payment of real property tax
under its amendatory franchise.
There seems to be no issue as to Bayantel’s exemption from
real estate taxes by virtue of the term “exclusive of the franchise”
qualifying the phrase “same taxes on its real estate, buildings
and personal property,” found in Section 14, supra, of its
franchise, Rep. Act No. 3259, as originally granted.
The legislative intent expressed in the phrase “exclusive of
this franchise” cannot be construed other than distinguishing
between two (2) sets of properties, be they real or personal,
owned by the franchisee, namely, (a) those actually, directly and
exclusively used in its radio or telecommunications business,
and (b) those properties which are not so used. It is worthy to
note that the properties subject of the present controversy are
only those which are admittedly falling under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259
effectively works to grant or delegate to local governments of
Congress’ inherent power to tax the franchisee’s properties
belonging to the second group of properties indicated above,
that is, all properties which, “exclusive of this franchise,” are not
actually and directly used in the pursuit of its franchise. As may
be recalled, the taxing power of local governments under both
the 1935 and the 1973 Constitutions solely depended upon
an enabling law. Absent such enabling law, local government
units were without authority to impose and collect taxes on real
properties within their respective territorial jurisdictions. While
Section 14 of Rep. Act No. 3259 may be validly viewed as an
implied delegation of power to tax, the delegation under that
provision, as couched, is limited to impositions over properties
of the franchisee which are not actually, directly and exclusively
used in the pursuit of its franchise. Necessarily, other properties
of Bayantel directly used in the pursuit of its business are beyond
the pale of the delegated taxing power of local governments. In
a very real sense, therefore, real properties of Bayantel, save
those exclusive of its franchise, are subject to realty taxes.
Ultimately, therefore, the inevitable result was that all realties
which are actually, directly and exclusively used in the operation
of its franchise are “exempted” from any property tax.
Bayantel’s franchise being national in character, the
“exemption” thus granted under Section 14 of Rep. Act No. 3259
applies to all its real or personal properties found anywhere
within the Philippine archipelago.
However, with the LGC’s taking effect on January 1, 1992,
Bayantel’s “exemption” from real estate taxes for properties of
whatever kind located within the Metro Manila area was, by force
of Section 234 of the Code, supra, expressly withdrawn. But, not
long thereafter, however, or on July 20, 1992, Congress passed
Rep. Act No. 7633 amending Bayantel’s original franchise.
Worthy of note is that Section 11 of Rep. Act No. 7633 is a virtual
reenacment of the tax provision, i.e., Section 14, supra, of
Bayantel’s original franchise under Rep. Act No. 3259. Stated
otherwise, Section 14 of Rep. Act No. 3259 which was deemed
impliedly repealed by Section 234 of the LGC was expressly
revived under Section 14 of Rep. Act No. 7633. In concrete
terms, the realty tax exemption heretofore enjoyed by Bayantel
under its original franchise, but subsequently withdrawn by force
of Section 234 of the LGC, has been restored by Section 14 of
Rep. Act No. 7633.
The Court has taken stock of the fact that by virtue of Section
5, Article X of the 1987 Constitution, local governments are
8
empowered to levy taxes. And pursuant to this constitutional
empowerment, juxtaposed with Section 232 of the LGC, the
9
Quezon City government enacted in 1993 its local Revenue
Code, imposing real property tax on all real properties found
within its territorial jurisdiction. And as earlier stated, the
City’s Revenue Code, just like the LGC, expressly withdrew,
under Section 230 thereof, supra, all tax exemption privileges in
general.
This thus raises the question of whether or not the
City’s Revenue Code pursuant to which the city treasurer of
Quezon City levied real property taxes against Bayantel’s real
properties located within the City effectively withdrew the tax
exemption enjoyed by Bayantel under its franchise, as
amended.
Bayantel answers the poser in the negative arguing that
once again it is only “liable to pay the same taxes, as any other
persons or corporations on all its real or personal
properties, exclusive of its franchise.”
Bayantel’s posture is well-taken. While the system of local
government taxation has changed with the onset of the 1987
Constitution, the power of local government units to tax is still
limited. As we explained in Mactan Cebu International Airport
Authority:10
The power to tax is primarily vested in the Congress; however, in
our jurisdiction, it may be exercised by local legislative bodies, no
longer merely be virtue of a valid delegation as before, but pursuant
to direct authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the power may be
subject to such guidelines and limitations as the Congress may
provide which, however, must be consistent with the basic policy of
local autonomy. (at p. 680; Emphasis supplied.)
Clearly then, while a new slant on the subject of local taxation
now prevails in the sense that the former doctrine of local
government units’ delegated power to tax had been effectively
modified with Article X, Section 5 of the 1987 Constitution now
in place, .the basic doctrine on local taxation remains essentially
the same. For as the Court stressed in Mac-tan, “the power to
tax is [still] primarily vested in the Congress.”
This new perspective is best articulated by Fr. Joaquin G.
Bernas, S.J., himself a Commissioner of the 1986 Constitutional
Commission which crafted the 1987 Constitution, thus:
 “What is the effect of Section 5 on the fiscal position of municipal
corporations? Section 5 does not change the doctrine that
municipal corporations do not possess inherent powers of
taxation. What it does is to confer municipal corporations a
general power to levy taxes and otherwise create sources of
revenue. They no longer have to wait for a statutory grant of these
powers. The power of the legislative authority relative to the fiscal
powers of local governments has been reduced to the authority to
impose limitations on municipal powers. Moreover, these limitations
must be “consistent with the basic policy of local autonomy.” The
important legal effect of Section 5 is thus to reverse the
principle that doubts are resolved against municipal
corporations. Henceforth, in interpreting statutory provisions on
municipal fiscal powers, doubts will be resolved in favor of municipal
corporations. It is understood, however, that taxes imposed by local
government must be for a public purpose, uniform within a locality,
must not be confiscatory, and must be within the jurisdiction of the
local unit to pass.” (Emphasis supplied.)
11
liable to pay the same taxes on their real estate, buildings and
personal property, exclusive of this franchise, as other persons
or corporations are now or hereafter may be required by law to
pay.” The Court views this subsequent piece of legislation as
an express and real intention on the part of Congress to
once again remove from the LGC’s delegated taxing power,
all of the franchisee’s (Bayantel’s) properties that are actually,
directly and exclusively used in the pursuit of its franchise.
WHEREFORE, the petition is DENIED. No pronouncement
as to costs.
SO ORDERED.
Puno (Chairperson), Sandoval-Gutierrez, Corona and Azcuna,
JJ., concur.

In net effect, the controversy presently before the Court involves, Petition denied.
at bottom, a clash between the inherent taxing power of the
legislature, which necessarily includes the power to exempt, and Notes.—Any exemption from the payment of a tax must be
the local government’s delegated power to tax under the aegis clearly stated in the language of the law. (Commissioner of
of the 1987 Constitution. Internal Revenue vs. Court of Appeals, 329 SCRA 237 [2000]
The power to tax is no longer vested exclusively on
Now to go back to the Quezon City Revenue Code which Congress. (National Power Corporation vs. City of
imposed real estate taxes on all real properties within the city’s Cabanatuan, 401 SCRA 259 [2003])
territory and removed exemptions theretofore “previously
granted to, or presently enjoyed by all persons, whether natural Section 193 of the Local Government Code is indicative of
or juridical ….,” there can really be no dispute that the power of
12 the legislative intent to vest broad taxing powers upon local
the Quezon City Government to tax is limited by Section 232 of government units and to limit exemptions from local taxation to
the LGC which expressly provides that “a province or city or entities specifically provided. (Philippine Rural Electric
municipality within the Metropolitan Manila Area may levy an Cooperatives Association, Inc. vs. The Secretary, Department
annual ad valorem tax on real property such as land, building, of Interior and Local Government, 403 SCRA 558 [2003])
machinery, and other improvement not hereinafter
specifically exempted.” Under this law, the Legislature ——o0o——
highlighted its power to thereafter exempt certain realties from
the taxing power of local government units. An interpretation
denying Congress such power to exempt would reduce the
phrase “not hereinafter specifically exempted” as a pure jargon,
without meaning whatsoever. Needless to state, such absurd
situation is unacceptable.

For sure, in Philippine Long Distance Telephone Company,

Inc. (PLDT) vs. City of Davao, this Court has upheld the power
13

of Congress to grant exemptions over the power of local

government units to impose taxes. There, the Court wrote:

Indeed, the grant of taxing powers to local government units

under the Constitution and the LGC does not affect the power
of Congress to grant exemptions to certain persons, pursuant to
a declared national policy. The legal effect of the constitutional grant
to local governments simply means that in interpreting statutory
provisions on municipal taxing powers, doubts must be resolved in
favor of municipal corporations. (Emphasis supplied.)

As we see it, then, the issue in this case no longer dwells on

whether Congress has the power to exempt Bayantel’s
properties from realty taxes by its enactment of Rep. Act No.
7633 which amended Bayantel’s original franchise. The more
decisive question turns on whether Congress actually did
exempt Bayantel’s properties at all by virtue of Section 11
of Rep. Act No. 7633.

Admittedly, Rep. Act No. 7633 was enacted subsequent to

the LGC. Perfectly aware that the LGC has already withdrawn
Bayantel’s former exemption from realty taxes, Congress opted
to pass Rep. Act No. 7633 using, under Section 11 thereof,
exactly the same defining phrase “exclusive of this franchise”
which was the basis for Bayantel’s exemption from realty taxes
prior to the LGC. In plain language, Section 11 of Rep. Act No.
7633 states that “the grantee, its successors or assigns shall be
 Systems Plus Computer College v. Local Gov’t of
Caloocan City
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.
Civil Procedure; Special Civil Actions; Mandamus; Where
administrative remedies are available, a petition for mandamus
does not lie.—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. Where administrative
remedies are available, a petition for mandamus does not lie.
Local Governments; Local Board of Assessment
Appeals; Appeals; 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.—Under Section 226 of RA 7160, 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.
Same; Same; Same; The determination by the
respondent City Assessor with regard to the taxability of the
subject real properties is subject to appeal before the Local
Board of Assessment Appeals.—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.
Same; Same; Same; Doctrine of exhaustion of
administrative remedies; 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.—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. 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.
PETITION for review on certiorari of a decision of the Regional
Trial Court of Kaloocan City, Br. 121.
CORONA, J.:
The instant petition for certiorari assails the Resolution of the
1
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 10thAvenue,
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 and other applicable provisions of the Local
2
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 which in effect novated their
4
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 respondent’s earlier denial of the
application for tax exemption. In this connection, a duly
5
notarized certification jointly issued by Consolidated Assembly
6
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, were 7
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.
x x x.
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
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. Otherwise
13

motion for reconsideration having been denied, petitioner filed stated, before seeking the intervention of the courts, it is a
the instant petition for certiorari imputing grave abuse of
9 precondition that petitioner should first avail of all the means
discretion on the part of the trial court when it ruled: (1) that afforded by the administrative processes. 14

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
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

use and enjoyment of a right or office or which such other is

entitled, there being no other plain, speedy, and adequate WHEREFORE, the instant petition for certiorari is hereby
remedy in the ordinary course of law. 10 DISMISSED.

Where administrative remedies are available, a petition for SO ORDERED.

mandamus does not lie. 11

Puno (Chairman), Panganiban, Sandoval-

Under Section 226 of RA 7160, the remedy of appeal to the
12 Gutierrez and Carpio-Morales, JJ., concur.
Local Board of Assessment Appeals is available from an
adverse ruling or action of the provincial, city or municipal Petition dismissed.
assessor in the assessment of property, thus:
Section 226. Local Board of Assessment Appeals.—Any owner or Note.—Before a party may seek the intervention of the
person having legal interest in the property who is not satisfied with court, it is a precondition that he should first avail of all the
the action of the provincial, city or municipal assessor in the means afforded by administrative processes. (Zabat vs. Court of
assessment of his property may, within sixty (60) days from the date Appeals, 338 SCRA 551 [2000])
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 ——o0o——
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. Petitioner’s
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
 Talento v. Escalada, Jr.
G.R. No. 180884. June 27, 2008.*
EMERLINDA S. TALENTO, in her capacity as the Provincial
Treasurer of the Province of Bataan, petitioner, vs. HON.
REMIGIO M. ESCALADA, JR., Presiding Judge of the Regional
Trial Court of Bataan, Branch 3, and PETRON CORPORATION,
respondents.
Appeals; Certiorari; Taxation; The question whether the
collection of taxes may be suspended by reason of the filing of
an appeal and posting of a surety bond is undoubtedly a pure
question of law which should be appealed to the Supreme Court
by petition for review on certiorari under Rule 45, not through the
special civil action of certiorari under Rule 65.—The question
posed in this petition, i.e., whether the collection of taxes may
be suspended by reason of the filing of an appeal and posting of
a surety bond, is undoubtedly a pure question of law. Section
2(c) of Rule 41 of the Rules of Court provides: SEC. 2. Modes
of Appeal.—(c) Appeal by certiorari.—In all cases when only
questions of law are raised or involved, the appeal shall be to
the Supreme Court by petition for review on certiorari under
Rule 45. (Emphasis supplied) Thus, petitioner resorted to the
erroneous remedy when she filed a petition for certiorari under
Rule 65, when the proper mode should have been a petition for
review on certiorari under Rule 45. Moreover, under Section 2,
Rule 45 of the same Rules, the period to file a petition for review
is 15 days from notice of the order appealed from. In the instant
case, petitioner received the questioned order of the trial court
on November 6, 2007, hence, she had only up to November 21,
2007 to file the petition. However, the same was filed only on
January 4, 2008, or 43 days late. Consequently, petitioner’s
failure to file an appeal within the reglementary period rendered
the order of the trial court final and executory.
Same; Same; Rule 65 is an independent action that
cannot be availed of as a substitute for the lost remedy of an
ordinary appeal, including that under Rule 45, especially if such
loss or lapse was occasioned by one’s own neglect or error in
the choice of remedies.—The perfection of an appeal in the
manner and within the period prescribed by law is mandatory.
Failure to conform to the rules regarding appeal will render the
judgment final and executory and beyond the power of the
Court’s review. Jurisprudence mandates that when a decision
becomes final and executory, it becomes valid and binding upon
the parties and their successors in interest. Such decision or
order can no longer be disturbed or reopened no matter how
erroneous it may have been. Petitioner’s resort to a petition
under Rule 65 is obviously a ploy to make up for the loss of the
right to file an appeal via a petition under Rule 45. However, a
special civil action under Rule 65 can not cure petitioner’s failure
to timely file a petition for review on certiorari under Rule 45 of
the Rules of Court. Rule 65 is an independent action that cannot
be availed of as a substitute for the lost remedy of an ordinary
appeal, including that under Rule 45, especially if such loss or
lapse was occasioned by one’s own neglect or error in the
choice of remedies.
Same; Motions for Reconsideration; The settled rule is
that a motion for reconsideration is a sine qua non condition for
the filing of a petition for certiorari.—We note that no motion for
reconsideration of the November 5, 2007 order of the trial court
was filed prior to the filing of the instant petition. The settled rule
is that a motion for reconsideration is a sine qua non condition
for the filing of a petition for certiorari. The purpose is to grant
the public respondent an opportunity to correct any actual or
perceived error attributed to it by the re-examination of the legal
and factual circumstances of the case. Petitioner’s failure to file
a motion for reconsideration deprived the trial court of the
opportunity to rectify an error unwittingly committed or to
vindicate itself of an act unfairly imputed. Besides, a motion for
reconsideration under the present circumstances is the plain,
speedy and adequate remedy to the adverse judgment of the
trial court.
Preliminary Injunction; Requisites.—The requisites for the
issuance of a writ of preliminary injunction are: (1) the existence
of a clear and unmistakable right that must be protected; and (2)
an urgent and paramount necessity for the writ to prevent
serious damage. The urgency and paramount necessity for the
issuance of a writ of injunction becomes relevant in the instant
case considering that what is being enjoined is the sale by public
auction of the properties of Petron amounting to at least P1.7
billion and which properties are vital to its business operations.
If at all, the repercussions and far-reaching implications of the
sale of these properties on the operations of Petron merit the
issuance of a writ of preliminary injunction in its favor.
Taxation; An exception to the rule that appeal shall not
suspend the collection of realty taxes is where the taxpayer has
shown a clear and unmistakable right to refuse or to hold in
abeyance the payment of taxes.—We are not unaware of the
doctrine that taxes are the lifeblood of the government, without
which it can not properly perform its functions; and that appeal
shall not suspend the collection of realty taxes. However, there
is an exception to the foregoing rule, i.e., where the taxpayer has
shown a clear and unmistakable right to refuse or to hold in
abeyance the payment of taxes. In the instant case, we note that
respondent contested the revised assessment on the following
grounds: that the subject assessment pertained to properties
that have been previously declared; that the assessment
covered periods of more than 10 years which is not allowed
under the LGC; that the fair market value or replacement cost
used by petitioner included items which should be properly
excluded; that prompt payment of discounts were not
considered in determining the fair market value; and that the
subject assessment should take effect a year after or on January
1, 2008. To our mind, the resolution of these issues would have
a direct bearing on the assessment made by petitioner. Hence,
it is necessary that the issues must first be passed upon before
the properties of respondent is sold in public auction.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
YNARES-SANTIAGO, J.:
The instant petition for certiorari under Rule 65 of the Rules
of Court assails the November 5, 2007 Order of the Regional
1
Trial Court of Bataan, Branch 3, in Civil Case No. 8801, granting
the petition for the issuance of a writ of preliminary injunction
filed by private respondent Petron Corporation (Petron) thereby
enjoining petitioner Emerlinda S. Talento, Provincial Treasurer
of Bataan, and her representatives from proceeding with the
public auction of Petron’s machineries and pieces of equipment
during the pendency of the latter’s appeal from the revised
assessment of its properties.
The facts of the case are as follows:
On June 18, 2007, Petron received from the Provincial
Assessor’s Office of Bataan a notice of revised assessment over
its machineries and pieces of equipment in Lamao, Limay,
Bataan. Petron was given a period of 60 days within which to file
an appeal with the Local Board of Assessment Appeals
(LBAA). Based on said revised assessment, petitioner
2
Provincial Treasurer of Bataan issued a notice informing Petron
that as of June 30, 2007, its total liability
is P1,731,025,403.06, representing deficiency real property tax
3
due from 1994 up to the first and second quarters of 2007.

On August 17, 2007, Petron filed a petition with the LBAA
4 posting by plaintiff to the Court of an injunction bond in the amount
(docketed as LBAA Case No. 2007-01) contesting the revised
assessment on the grounds that the subject assessment
pertained to properties that have been previously declared; and
that the assessment covered periods of more than 10 years
which is not allowed under the Local Government Code (LGC).
According to Petron, the possible valid assessment pursuant to
Section 222 of the LGC could only be for the years 1997 to 2006.
Petron further contended that the fair market value or
replacement cost used by petitioner included items which should
be properly excluded; that prompt payment of discounts were
not considered in determining the fair market value; and that the
subject assessment should take effect a year after or on January
1, 2008. In the same petition, Petron sought the approval of a
surety bond in the amount of P1,286,057,899.54. 5 collection of taxes may be suspended by reason of the filing of
On August 22, 2007, Petron received from petitioner a final
notice of delinquent real property tax with a warning that the
subject properties would be levied and auctioned should Petron
fail to settle the revised assessment due. 6 “SEC. 2. Modes of Appeal.—
Consequently, Petron sent a letter to petitioner stating that
7
in view of the pendency of its appeal with the LBAA, any action
8
by the Treasurer’s Office on the subject properties would be
premature. However, petitioner replied that only Petron’s
payment under protest shall bar the collection of the realty taxes
due, pursuant to Sections 231 and 252 of the LGC.
9
With the issuance of a Warrant of Levy against its 10
machineries and pieces of equipment, Petron filed on
September 24, 2007, an urgent motion to lift the final notice of
delinquent real property tax and warrant of levy with the LBAA.
It argued that the issuance of the notice and warrant is
premature because an appeal has been filed with the LBAA,
where it posted a surety bond in the amount
of P1,286,057,899.54. 11
On October 3, 2007, Petron received a notice of sale of its
properties scheduled on October 17, 2007. Consequently, on
12
October 8, 2007, Petron withdrew its motion to lift the final notice
of delinquent real property tax and warrant of levy with the
LBAA. On even date, Petron filed with the Regional Trial
13
Court of Bataan the instant case (docketed as Civil Case No.
8801) for prohibition with prayer for the issuance of a
temporary restraining order (TRO) and preliminary
injunction. 14
On October 15, 2007, the trial court issued a TRO for 20
days enjoining petitioner from proceeding with the public auction
of Petron’s properties. Petitioner thereafter filed an urgent
15
motion for the immediate dissolution of the TRO, followed by a
motion to dismiss Petron’s petition for prohibition.
On November 5, 2007, the trial court issued the assailed
Order granting Petron’s petition for issuance of writ of
preliminary injunction, subject to Petron’s posting of
a P444,967,503.52 bond in addition to its previously posted
surety bond of P1,286,057,899.54, to complete the total amount
equivalent to the revised assessment of P1,731,025,403.06.
The trial court held that in scheduling the sale of the properties
despite the pendency of Petron’s appeal and posting of the
surety bond with the LBAA, petitioner deprived Petron of the
right to appeal. The dispositive portion thereof, reads:
“WHEREFORE, the writ of preliminary injunction prayed for by
plaintiff is hereby GRANTED and ISSUED, enjoining defendant
Treasurer, her agents, representatives, or anybody acting in her
behalf from proceeding with the scheduled public auction of
plaintiff’s real properties, or any disposition thereof, pending the
determination of the merits of the main action, to be effective upon
of Four Hundred Forty Four Million Nine Hundred Sixty Seven
Thousand Five Hundred Three and 52/100 Pesos
(P444,967,503.52) and the approval thereof by the Court.
Defendant’s Urgent Motion for the Immediate Dissolution of the
Temporary Restraining Order dated October 23, 2007 is hereby
DENIED.
SO ORDERED.” 16
From the said Order of the trial court, petitioner went directly
to this Court via the instant petition for certiorari under Rule 65
of the Rules of Court.
The question posed in this petition, i.e., whether the
an appeal and posting of a surety bond, is undoubtedly a pure
question of law. Section 2(c) of Rule 41 of the Rules of Court
provides:
(c) Appeal by certiorari.—In all cases when only questions of
law are raised or involved, the appeal shall be to the Supreme Court
by petition for review on certiorari under Rule 45.” (Emphasis
supplied)
Thus, petitioner resorted to the erroneous remedy when she
filed a petition for certiorari under Rule 65, when the proper
mode should have been a petition for review on certiorari under
Rule 45. Moreover, under Section 2, Rule 45 of the same Rules,
the period to file a petition for review is 15 days from notice of
the order appealed from. In the instant case, petitioner received
the questioned order of the trial court on November 6, 2007,
hence, she had only up to November 21, 2007 to file the petition.
However, the same was filed only on January 4, 2008, or 43
days late. Consequently, petitioner’s failure to file an appeal
within the reglementary period rendered the order of the trial
court final and executory.
The perfection of an appeal in the manner and within the
period prescribed by law is mandatory. Failure to conform to the
rules regarding appeal will render the judgment final and
executory and beyond the power of the Court’s review.
Jurisprudence mandates that when a decision becomes final
and executory, it becomes valid and binding upon the parties
and their successors in interest. Such decision or order can no
longer be disturbed or reopened no matter how erroneous it may
have been. 17
Petitioner’s resort to a petition under Rule 65 is obviously a
ploy to make up for the loss of the right to file an appeal via a
petition under Rule 45. However, a special civil action under
Rule 65 cannot cure petitioner’s failure to timely file a petition for
review on certiorari under Rule 45 of the Rules of Court. Rule 65
is an independent action that cannot be availed of as a substitute
for the lost remedy of an ordinary appeal, including that under
Rule 45, especially if such loss or lapse was occasioned by
one’s own neglect or error in the choice of remedies. 18
Moreover, even if we assume that a petition under Rule 65
is the proper remedy, the petition is still dismissible.
We note that no motion for reconsideration of the November
5, 2007 order of the trial court was filed prior to the filing of the
instant petition. The settled rule is that a motion for
reconsideration is a sine qua non condition for the filing of a
petition for certiorari. The purpose is to grant the public
respondent an opportunity to correct any actual or perceived
error attributed to it by the re-examination of the legal and factual
circumstances of the case. Petitioner’s failure to file a motion for
reconsideration deprived the trial court of the opportunity to
rectify an error unwittingly committed or to vindicate itself of an
act unfairly imputed. Besides, a motion for reconsideration under
the present circumstances is the plain, speedy and adequate
remedy to the adverse judgment of the trial court. 19
Petitioner also blatantly disregarded the rule on hierarchy of
courts. Although the Supreme Court, Regional Trial Courts, and
the Court of Appeals have concurrent jurisdiction to issue writs
of certiorari, prohibition, mandamus, quo warranto, habeas
corpus and injunction, such concurrence does not give the
petitioner unrestricted freedom of choice of court forum.
Recourse should have been made first with the Court of Appeals
and not directly to this Court. 20
True, litigation is not a game of technicalities. It is equally
true, however, that every case must be presented in accordance
with the prescribed procedure to ensure an orderly and speedy
administration of justice. The failure therefore of petitioner to
21
comply with the settled procedural rules justifies the dismissal of
the present petition.
Finally, we find that the trial court correctly granted
respondent’s petition for issuance of a writ of preliminary
injunction. Section 3, Rule 58, of the Rules of Court, provides:
“SEC. 3. Grounds for issuance of preliminary injunction.—A
preliminary injunction may be granted by the court when it is
established:
(a) That the applicant is entitled to the relief demanded,
and the whole or part of such relief consists in restraining the
commission or continuance of the acts complained of, or in the
performance of an act or acts, either for a limited period or
perpetually;
(b) That the commission, continuance or non-
performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or
(c) That a party, court, or agency or a person is doing,
threatening, or attempting to do, or is procuring or suffering to
be done, some act or acts probably in violation of the rights of
the applicant respecting the subject of the action or proceeding,
and tending to render the judgment ineffectual.”
The requisites for the issuance of a writ of preliminary
injunction are: (1) the existence of a clear and unmistakable right
that must be protected; and (2) an urgent and paramount
necessity for the writ to prevent serious damage. 22
The urgency and paramount necessity for the issuance of a
writ of injunction becomes relevant in the instant case
considering that what is being enjoined is the sale by public
auction of the properties of Petron amounting to at least P1.7
billion and which properties are vital to its business operations.
If at all, the repercussions and far-reaching implications of the
sale of these properties on the operations of Petron merit the
issuance of a writ of preliminary injunction in its favor.
We are not unaware of the doctrine that taxes are the
lifeblood of the government, without which it can not properly
perform its functions; and that appeal shall not suspend the
collection of realty taxes. However, there is an exception to the
foregoing rule, i.e., where the taxpayer has shown a clear and
unmistakable right to refuse or to hold in abeyance the payment
of taxes. In the instant case, we note that respondent contested
the revised assessment on the following grounds: that the
subject assessment pertained to properties that have been
previously declared; that the assessment covered periods of
more than 10 years which is not allowed under the LGC; that the
fair market value or replacement cost used by petitioner included
items which should be properly excluded; that prompt payment
of discounts were not considered in determining the fair market
value; and that the subject assessment should take effect a year
after or on January 1, 2008. To our mind, the resolution of these
issues would have a direct bearing on the assessment made by
petitioner. Hence, it is necessary that the issues must first be
passed upon before the properties of respondent is sold in public
auction.
In addition to the fact that the issues raised by the
respondent would have a direct impact on the validity of the
assessment made by the petitioner, we also note that
respondent has posted a surety bond equivalent to the amount
of the assessment due. The Rules of Procedure of the LBAA,
particularly Section 7, Rule V thereof, provides:
“Section 7. Effect of Appeal on Collection of Taxes.—An
appeal shall not suspend the collection of the corresponding realty
taxes on the real property subject of the appeal as assessed by the
Provincial, City or Municipal Assessor, without prejudice to the
subsequent adjustment depending upon the outcome of the appeal.
An appeal may be entertained but the hearing thereof shall be
deferred until the corresponding taxes due on the real property
subject of the appeal shall have been paid under protest or the
petitioner shall have given a surety bond, subject to the following
conditions:
(1) the amount of the bond must not be less than the total
realty taxes and penalties due as assessed by the assessor nor
more than double said amount;
(2) the bond must be accompanied by a certification from the
Insurance Commissioner (a) that the surety is duly authorized to
issue such bond; (a) that the surety bond is approved by and
registered with said Commission; and (c) that the amount covered
by the surety bond is within the writing capacity of the surety
company; and
(3) the amount of the bond in excess of the surety company’s
writing capacity, if any, must be covered by Reinsurance Binder, in
which case, a certification to this effect must likewise accompany
the surety bond.”
Corollarily, Section 11 of Republic Act No. 9282, which 23
amended Republic Act No. 1125 (The Law Creating the Court of
Tax Appeals) provides:
“Section 11. Who may Appeal; Mode of Appeal; Effect of
Appeal;—
xxxx
No appeal taken to the Court of Appeals from the Collector of
Internal Revenue x x x shall suspend the payment, levy, distraint,
and/or sale of any property for the satisfaction of his tax liability as
provided by existing law. Provided, however, That when in the
opinion of the Court the collection by the aforementioned
government agencies may jeopardize the interest of the
Government and/or the taxpayer the Court at any stage of the
processing may suspend the collection and require the taxpayer
either to deposit the amount claimed or to file a surety bond for not
more than double the amount with the Court.”
WHEREFORE, in view of all the foregoing, the instant
petition is DISMISSED.
SO ORDERED.
Austria-Martinez, Carpio-Morales, Chico-Nazario and Reyes,
**
JJ., concur.
Petition dismissed.
 NAPOCOR v. Province of Quezon and Municipality of
Pagbilao
G.R. No. 171586. July 15, 2009.*
NATIONAL POWER CORPORATION,
petitioner, vs. PROVINCE OF QUEZON and MUNICIPALITY
OF PAGBILAO, respondents.
Remedial Law; Actions; Jurisdiction; A party cannot
invoke a court’s jurisdiction to secure affirmative relief and, after
failing to obtain the requested relief, repudiate or question that
same jurisdiction.—We agree that the NPC can no longer divest
the CBAA of the power to decide the appeal after invoking and
submitting itself to the board’s jurisdiction. We note that even the
NPC itself found nothing objectionable in the LBAA’s sin
perjuicio decision when it filed its appeal before the CBAA; the
NPC did not cite this ground as basis for its appeal. What it cited
were grounds that went into the merits of its case. In fact, its
appeal contained no prayer for the remand of the case to the
LBAA. A basic jurisdictional rule, essentially based on fairness,
is that a party cannot invoke a court’s jurisdiction to secure
affirmative relief and, after failing to obtain the requested relief,
repudiate or question that same jurisdiction.
Taxation; Assessment; A taxpayer’s failure to question the
assessment before the Local Board of Assessment Appeals
(LBAA) renders the assessment of the local assessor final,
executory, and demandable; Entities vested with the personality
to contest an assessment are the owner and the person with
legal interest in the property.—Before we resolve the question
of the NPC’s entitlement to tax exemption, we find it necessary
to determine first whether the NPC initiated a valid protest
against the assessment. A taxpayer’s failure to question the
assessment before the LBAA renders the assessment of the
local assessor final, executory, and demandable, thus
precluding the taxpayer from questioning the correctness of the
assessment, or from invoking any defense that would reopen the
question of its liability on the merits. Section 226 of the LGC lists
down the two entities vested with the personality to contest an
assessment: the owner and the person with legal interest in the
property.
Same; Same; The unpaid realty tax attaches to the
property but is directly chargeable against the taxable person
who has actual and beneficial use and possession of the
property regardless of whether or not that person is the owner.—
The liability for taxes generally rests on the owner of the real
property at the time the tax accrues. This is a necessary
consequence that proceeds from the fact of ownership.
However, personal liability for realty taxes may also expressly
rest on the entity with the beneficial use of the real property, such
as the tax on property owned by the government but leased to
private persons or entities, or when the tax assessment is made
on the basis of the actual use of the property. In either case,
the unpaid realty tax attaches to the property but is directly
chargeable against the taxable person who has actual and
beneficial use and possession of the property regardless of
whether or not that person is the owner.
Same; Same; Legal interest should be an interest that is
actual and material, direct and immediate, not simply contingent
or expectant.—In Cariño v. Ofilado (217 SCRA 206 [1993]), we
declared that legal interest should be an interest that is
actual and material, direct and immediate, not simply
contingent or expectant. The concept of the directness and
immediacy involved is no different from that required in motions
for intervention under Rule 19 of the Rules of Court that allow
one who is not a party to the case to participate because of his
or her direct and immediate interest, characterized by either gain
or loss from the judgment that the court may render. In the
present case, the NPC’s ownership of the plant will happen
only after the lapse of the 25-year period; until such time arrives,
the NPC’s claim of ownership is merely contingent, i.e.,
dependent on whether the plant and its machineries exist at that
time. Prior to this event, the NPC’s real interest is only in the
continued operation of the plant for the generation of electricity.
Same; Same; Tax Liability; 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.—On
liability for taxes, the NPC indeed assumed responsibility for the
taxes due on the power plant and its machineries, specifically,
“all real estate taxes and assessments, rates and other charges
in respect of the site, the buildings and improvements thereon
and the [power plant].” At first blush, this contractual provision
would appear to make the NPC liable and give it standing to
protest the assessment. The tax liability we refer to above,
however, 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 as discussed below. By law, the tax
liability rests on Mirant based on its ownership, use, and
possession of the plant and its machineries.
Same; Same; Same; National Power Corporation
(NPC) is neither the owner, nor the possessor or user of the
property taxed; No interest on its part thus justifies any tax
liability on its part other than its voluntary contractual
undertaking.—The NPC is neither the owner, nor the possessor
or user of the property taxed. No interest on its part thus justifies
any tax liability on its part other than its voluntary contractual
undertaking. Under this legal situation, only Mirant as the
contractual obligor, not the local government unit, can enforce
the tax liability that the NPC contractually assumed; the NPC
does not have the “legal interest” that the law and jurisprudence
require to give it personality to protest the tax imposed by law on
Mirant.
Same; Tax Exemptions; Two Elements to Successfully
Claim Exemption under Section 234(c) of the Local Government
Code (LGC).—The NPC’s claim of tax exemptions is completely
without merit. 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.
Same; Same; Based on the clear wording of the law, it is
the machineries that are exempted from the payment of real
property tax, not the water or electricity that these machineries
generate and distribute.—Nor will NPC find solace in its claim
that it utilizes all the power plant’s generated electricity in
supplying the power needs of its customers. Based on the clear
wording of the law, it is the machineries that are exempted from
the payment of real property tax, not the water or electricity that
these machineries generate and distribute.
Same; Same; The test of exemption is the use, not the
ownership of the machineries devoted to generation and
transmission of electric power.—Even the NPC’s claim of
beneficial ownership is unavailing. The test of exemption is the
use, not the ownership of the machineries devoted to generation
and transmission of electric power. The nature of the NPC’s
ownership of these machineries only finds materiality in
resolving the NPC’s claim of legal interest in protesting the tax
assessment on Mirant. As we discussed above, this claim is
inexistent for tax protest purposes.
PETITION for review on certiorari of a decision of the Court of
Appeals.
BRION, J.:
We resolve in this petition for review on certiorari the
question of whether the National Power Corporation (NPC), as
a government-owned and controlled corporation, can claim tax
exemption under Section 234 of the Local Government Code
(LGC) for the taxes due from the Mirant Pagbilao Corporation
(Mirant) whose tax liabilities the NPC has contractually
1
assumed.
Background Facts
The NPC is a government-owned and controlled corporation
mandated by law to undertake, among others, the production of
electricity from nuclear, geothermal, and other sources, and the
transmission of electric power on a nationwide basis. To pursue
2 Section 218(d) of the LGC for government-owned and
this mandate, the NPC entered into an Energy Conversion
Agreement (ECA) with Mirant on November 9, 1991. The ECA
provided for a build-operate-transfer (BOT) arrangement
between Mirant and the NPC. Mirant will build and finance a
coal-fired thermal power plant on the lots owned by the NPC in
Pagbilao, Quezon for the purpose of converting fuel into
electricity, and thereafter, operate and maintain the power plant
for a period of 25 years. The NPC, in turn, will supply the
necessary fuel to be converted by Mirant into electric power,
take the power generated, and use it to supply the electric power
needs of the country. At the end of the 25-year term, Mirant will
transfer the power plant to the NPC without compensation.
According to the NPC, the power plant is currently operational
and is one of the largest sources of electric power in the country.
Among the obligations undertaken by the NPC under the
ECA was the payment of all taxes that the government may
impose on Mirant; Article 11.1 of the ECA specifically provides:
4 motion for reconsideration, prompting the NPC to institute an
“11.1 RESPONSIBILITY. [NPC] shall be responsible for
the payment of (a) all taxes, import duties, fees, charges and other
levies imposed by the National Government of the Republic of the
Philippines or any agency or instrumentality thereof to which
[Mirant] may at any time be or become subject in or in relation to the
performance of their obligations under this Agreement (other than
(i) taxes imposed or calculated on the basis of the net income [of
Mirant] and (ii) construction permit fees, environmental permit fees
and other similar fees and charges), and (b) all real estate taxes
and assessments, rates and other charges in respect of the
Site, the buildings and improvements thereon and the Power
Station.” [Emphasis supplied.]
In a letter dated March 2, 2000, the Municipality of
Pagbilao assessed Mirant’s real property taxes on the power
plant and its machineries in the total amount of
P1,538,076,000.00 for the period of 1997 to 2000. The
Municipality of Pagbilao furnished the NPC a copy of the
assessment letter.
To protect its interests, the NPC filed a petition before the
Local Board of Assessment Appeals (LBAA) entitled “In Re:
Petition to Declare Exempt from Payment of Property Tax on
Machineries and Equipment Used for Generation and
Transmission of Power, under Section 234(c) of RA 7160 [LGC],
located at Pagbilao, Quezon xxx” on April 14, 2000. The NPC
5
objected to the assessment against Mirant on the claim that
it (the NPC) is entitled to the tax exemptions provided in Section
234, paragraphs (c) and (e) of the LGC. These provisions state:
“Section 234. Exemptions from Real Property Tax.—The
following are exempted from payment for the real property tax:
xxx xxx xxx
(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;
xxx xxx xxx
(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 government-owned
or –controlled corporations are hereby withdrawn upon the
effectivity of the Code.”
Assuming that it cannot claim the exemptions stated in these
provisions, the NPC alternatively asserted that it is entitled to:
a. the lower assessment level of 10% under
controlled corporations engaged in the generation and
transmission of electric power, instead of the 80%
assessment level for commercial properties as imposed
in the assessment letter; and
b. an allowance for depreciation of the subject
machineries under Section 225 of the LGC.
The LBAA dismissed the NPC’s petition on the Municipality
of Pagbilao’s motion, through a one-page Order dated
November 13, 2000. 6
The NPC appealed the denial of its petition with the Central
Board of Assessment Appeals (CBAA). Although it noted the
3 incompleteness of the LBAA decision for failing to state the
factual basis of its ruling, the CBAA nevertheless affirmed, in its
decision of August 18, 2003, the denial of the NPC’s claim for
exemption. The CBAA likewise denied the NPC’s subsequent
appeal before the Court of Tax Appeals (CTA).
Before the CTA, the NPC claimed it was procedurally
erroneous for the CBAA to exercise jurisdiction over its appeal
because the LBAA issued a sin perjuicio decision, that is, the
7
LBAA pronounced a judgment without any finding of fact. It
argued that the CBAA should have remanded the case to the
LBAA. On substantive issues, the NPC asserted the same
grounds it relied upon to support its claimed tax exemptions.
The CTA en banc resolved to dismiss the NPC’s petition on
February 21, 2006. From this ruling, the NPC filed the present
petition seeking the reversal of the CTA en banc’s decision.
The Petition
The NPC contends that the CTA en banc erred in ruling that
the NPC is estopped from questioning the
LBAA’s sin perjuicio judgment; the LBAA decision, it posits,
cannot serve as an appealable decision that would vest the
CBAA with appellate jurisdiction; a sin perjuicio decision, by its
nature, is null and void.
The NPC likewise assails the CTA en banc ruling that the
NPC was not the proper party to protest the real property tax
assessment, as it did not have the requisite “legal interest.” The
NPC claims that it has legal interest because of its beneficial
ownership of the power plant and its machineries; what Mirant
holds is merely a naked title. Under the terms of the ECA, the
NPC also claims that it possesses all the attributes of ownership,
namely, the rights to enjoy, to dispose of, and to recover against
the holder and possessor of the thing owned. That it will acquire
and fully own the power plant after the lapse of 25 years further
underscores its “legal interest” in protesting the assessment.
that went into the merits of its case. In fact, its appeal contained
no prayer for the remand of the case to the LBAA.
A basic jurisdictional rule, essentially based on fairness, is
that a party cannot invoke a court’s jurisdiction to secure
affirmative relief and, after failing to obtain the requested relief,
repudiate or question that same jurisdiction. Moreover, a
11

The NPC’s assertion of beneficial ownership of the power
plant also supports its claim for tax exemptions under Section
234(c) of the LGC. The NPC alleges that it has the right to
control and supervise the entire output and operation of the
power plant. This arrangement, to the NPC, proves that it is the
entity actually, directly, and exclusively using the subject
machineries. Mirant’s possession of the power plant is irrelevant
since all of Mirant activities relating to power generation are
undertaken for and in behalf of the NPC. Additionally, all the
electricity Mirant generates is utilized by the NPC in supplying
the power needs of the country; Mirant therefore operates the
power plant for the exclusive and direct benefit of the NPC.
Lastly, the NPC posits that the machineries taxed by the local
government include anti-pollution devices which should have
been excluded from the assessment under Section 234(e) of the
remand would be unnecessary, as we find the CBAA’s and the
CTA en banc’s denial of NPC’s claims entirely in accord with the
law and with jurisprudence.
The entity liable for tax has the right to protest the
assessment
Before we resolve the question of the NPC’s entitlement to
tax exemption, we find it necessary to determine first whether
the NPC initiated a valid protest against the assessment. A
taxpayer’s failure to question the assessment before the LBAA
renders the assessment of the local assessor final, executory,
and demandable, thus precluding the taxpayer from questioning
the correctness of the assessment, or from invoking any defense
that would reopen the question of its liability on the merits. 12

LGC.
Section 226 of the LGC lists down the two entities vested
Assuming that the NPC is liable to pay the assessed real with the personality to contest an assessment: the owner and
property tax, it asserts that a reassessment is necessary as it is the person with legal interest in the property.
entitled to depreciation allowance on the machineries and to the
lower 10% assessment level under Sections 225 and 218(d) of A person legally burdened with the obligation to pay for the
the LGC, respectively. This position is complemented by its tax imposed on a property has legal interest in the property and
prayer to have the case remanded to the LBAA for the proper the personality to protest a tax assessment on the property. This
determination of its tax liabilities. is the logical and legal conclusion when Section 226, on the
rules governing an assessment protest, is placed side by side
The Court’s Ruling with Section 250 on the payment of real property tax; both
provisions refer to the same parties who may protest and pay
This case is not one of first impression. We have previously the tax:
ruled against the NPC’s claimed exemptions under the LGC in
the cases of FELS Energy, Inc. v. Province of SECTION 226. Local SECTION 250. Payment
Batangas and NPC v. CBAA. Based on the principles we
8 9 Board of Assessment of Real Property Taxes in
declared in those cases, as well as the defects we found in the Appeals.—Any owner or Instalments.—The owner of
NPC’s tax assessment protest, we conclude that the petition person having legal the real property or the
lacks merit. interest in the person having legal
property who is not satisfied interest therein may pay
The NPC is estopped from with the action of the the basic real property tax
questioning the CBAA’s jurisdiction provincial, city or municipal xxx due thereon without
assessor in the assessment interest in four (4) equal
The assailed CTA en banc decision brushed aside the of his property may, within installments xxx.
NPC’s sin perjuicio arguments by declaring that: sixty (60) days from the date
“The court finds merit in [NPC’s] claim that the Order of the of the receipt of the written
LBAA of the Province of Quezon is a sin perjuicio decision. A notice of assessment,
perusal thereof shows that the assailed Order does not contain appeal to the Board of
findings of facts in support of the dismissal of the case. It Assessment Appeals of the
merely stated a finding of merit in the contention of the Municipality province or city xxx.
of Pagbilao x x x.

However, on appeal before the CBAA, [NPC] assigned

several errors, both in fact and in law, pertaining to the LBAA’s
The liability for taxes generally rests on the owner of the real
decision. Thus, petitioner is bound by the appellate jurisdiction property at the time the tax accrues. This is a necessary
of the CBAA under the principle of equitable estoppel. In this consequence that proceeds from the fact of
regard, [NPC] is in no position to question the appellate ownership. However, personal liability for realty taxes may also
13

jurisdiction of the CBAA as it is the same party which sought
its jurisdiction and participated in the proceedings
therein.” [Emphasis supplied.]
10
We agree that the NPC can no longer divest the CBAA of
expressly rest on the entity with the beneficial use of the real
property, such as the tax on property owned by the government
but leased to private persons or entities, or when the tax
assessment is made on the basis of the actual use of the
property. In either case, the unpaid realty tax attaches to the
14

the power to decide the appeal after invoking and submitting property but is directly chargeable against the
15

itself to the board’s jurisdiction. We note that even the NPC itself taxable person who has actual and beneficial use and
found nothing objectionable in the LBAA’s sin perjuicio decision possession of the property regardless of whether or not
when it filed its appeal before the CBAA; the NPC did not cite that person is the owner. 16

this ground as basis for its appeal. What it cited were grounds
 In the present case, the NPC, contrary to its claims, is
neither the owner nor the possessor/user of the subject
machineries.
The ECA’s terms regarding the power plant’s machineries
clearly vest their ownership with Mirant. Article 2.12 of the
ECA states:
17
“2.12 OWNERSHIP OF POWER STATION. From the Effective
Date until the Transfer Date [that is, the day following the last day
of the 25-year period], [Mirant] shall, directly or indirectly, own
the Power Station and all the fixtures, fittings, machinery and
equipment on the Site or used in connection with the Power
Station which have been supplied by it or at its cost. [Mirant] shall
operate, manage, and maintain the Power Station for the purpose
of converting fuel of [NPC] into electricity.” [Emphasis supplied.]
The NPC contends that it should nevertheless be regarded
as the beneficial owner of the plant, since it will acquire
ownership thereof at the end of 25 years. The NPC also asserts,
by quoting portions of the ECA, that it has the right to control and
supervise the construction and operation of the plant, and that
Mirant has retained only naked title to it. These contentions,
unfortunately, are not sufficient to vest the NPC the personality
to protest the assessment.
In Cariño v. Ofilado, we declared that legal interest
18
should be an interest that is actual and material, direct and
immediate, not simply contingent or expectant. The concept
of the directness and immediacy involved is no different from
that required in motions for intervention under Rule 19 of the
Rules of Court that allow one who is not a party to the case to
participate because of his or her direct and immediate interest,
characterized by either gain or loss from the judgment that the
court may render. In the present case, the NPC’s ownership of
19
the plant will happen only after the lapse of the 25-year period;
until such time arrives, the NPC’s claim of ownership is merely
contingent, i.e., dependent on whether the plant and its
machineries exist at that time. Prior to this event, the NPC’s real
interest is only in the continued operation of the plant for the
generation of electricity. This interest has not been shown to be
adversely affected by the realty taxes imposed and is an interest
that NPC can protect, not by claiming an exemption that is not
due to Mirant, but by paying the taxes it (NPC) has assumed for
Mirant under the ECA.
To show that Mirant only retains a naked title, the NPC has
selectively cited provisions of the ECA to make it appear that it
has the sole authority over the power plant and its operations.
Contrary to these assertions, however, a complete reading of
the ECA shows that Mirant has more substantial powers in the
control and supervision of the power plant’s construction and
operations.
Under Articles 2.1 and 3.1 of the ECA, Mirant is responsible
for the design, construction, equipping, testing, and
commissioning of the power plant. Article 5.1 on the operation
of the power plant states that Mirant shall be responsible for the
power plant’s management, operation, maintenance, and repair
until the Transfer Date. This is reiterated in Article 5.3 where
Mirant undertakes to operate the power plant to convert fuel into
electricity.
While the NPC asserts that it has the power to authorize the
closure of the power plant without any veto on the part of Mirant,
the full text of Article 8.5 of the ECA shows that Mirant is
possessed with similar powers to terminate the agreement:
“8.5 BUYOUT. If the circumstances set out in Article 7.18, Article
9.4, Article 14.4 or Article 28.4 arise or if, not earlier than 20 years
after the Completion Date, [the NPC] gives not less than 90 days
notice to [Mirant] that it wishes to close the power station, or if [the
NPC] has failed to ensure the due payment of any sum due
hereunder within three months of its due date then, upon
[Mirant] giving to [the NPC] not less than 90 days notice
requiring [the NPC] to buy out [Mirant] or, as the case may be,
[the NPC] giving not less than 90 days notice requiring [Mirant] to
sell out to [NPC], [NPC] shall purchase all [Mirant’s] right, title, and
interest in and to the Power Station and thereupon all [Mirant’s]
obligations hereunder shall cease.” [Emphasis supplied.]
On liability for taxes, the NPC indeed assumed responsibility
for the taxes due on the power plant and its
machineries, specifically, “all real estate taxes and
20
assessments, rates and other charges in respect of the site, the
buildings and improvements thereon and the [power plant].” At
first blush, this contractual provision would appear to make the
NPC liable and give it standing to protest the assessment. The
tax liability we refer to above, however, 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
as discussed below. By law, the tax liability rests on Mirant
based on its ownership, use, and possession of the plant and its
machineries.
In Testate of Concordia Lim v. City of Manila, we had 21
occasion to rule that:
“In [Baguio v. Busuego ], the assumption by the vendee of the
22
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
present case], the interpretation that the [vendee] 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.
xxxx
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.”
For a fuller appreciation of this ruling, the Baguio case
referred to a contract of sale wherein the vendee not only
assumed liability for the taxes on the property, but also acquired
its use and possession, even though title remained with the
vendor pending full payment of the purchase price. Under this
situation, we found the vendee who had assumed liability for the
realty taxes and who had been given use and possession to be
liable. Compared with Baguio, the Lim case supposedly
involved the same contractual assumption of tax liabilities, but 23
possession and enjoyment of the property remained with other
persons. Effectively, Lim held that the contractual assumption of
the obligation to pay real property tax, by itself, is not sufficient
to make one legally compellable by the government to pay for
the taxes due; the person liable must also have use and
possession of the property.
Using the Baguio and Lim situations as guides, and after
considering the comparable legal situations of the parties
assuming liability in these cases, we conclude that the NPC’s
contractual liability alone cannot be the basis for the
enforcement of tax liabilities against it by the local government
unit. In Baguio and Lim, the vendors still retained ownership,
and the effectiveness of the tax liabilities assumed by the
vendees turned on the possession and use of the property
subject to tax. In other words, the contractual assumption of
liability was supplemented by an interest that the party assuming
liability had on the property taxed; on this basis, the vendee
in Baguio was found liable, while the vendee in Lim was not. In
the present case, the NPC is neither the owner, nor the
possessor or user of the property taxed. No interest on its part
thus justifies any tax liability on its part other than its voluntary
contractual undertaking. Under this legal situation, only Mirant
as the contractual obligor, not the local government unit, can
enforce the tax liability that the NPC contractually assumed; the
NPC does not have the “legal interest” that the law and
jurisprudence require to give it personality to protest the tax
imposed by law on Mirant.
By our above conclusion, we do not thereby pass upon the
validity of the contractual stipulation between the NPC and
Mirant on the assumption of liability that the NPC undertook. All
we declare is that the stipulation is entirely between the NPC
and Mirant, and does not bind third persons who are not privy to
the contract between these parties. We say this pursuant to the
principle of relativity of contracts under Article 1311 of the Civil
Code which postulates that contracts take effect only between
the parties, their assigns and heirs. Quite obviously, there is no
privity between the respondent local government units and the
NPC, even though both are public corporations. The tax due will
not come from one pocket and go to another pocket of the same
governmental entity. An LGU is independent and autonomous in
its taxing powers and this is clearly reflected in Section 130 of
the LGC which states:
“SECTION 130. Fundamental Principles.—The following
fundamental principles shall govern the exercise of the taxing and
other revenue-raising powers of local government units:
xxx
(d) The revenue collected pursuant to the provisions of this
Code shall inure solely to the benefit of, and be subject to
disposition by, the local government unit levying the tax, fee,
charge or other imposition unless otherwise specifically provided
herein; x x x.” [Emphasis supplied.]
An exception to the rule on relativity of contracts is provided
under the same Article 1311 as follows:
“If the contract should contain some stipulation in favor of a third
person, he may demand its fulfilment provided he communicated
his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately
conferred a favor upon a third person.” [Emphasis supplied.]
The NPC’s assumption of tax liability under Article 11.1 of
the ECA does not appear, however, to be in any way for the
benefit of the Municipality of Pagbilao and the Province of
Quezon. In fact, if the NPC theory of the case were to be
followed, the NPC’s assumption of tax liability will work against
the interests of these LGUs. Besides, based on the objectives of
the BOT Law that underlie the parties’ BOT agreement, the
24 25
assumption of taxes clause is an incentive for private
corporations to take part and invest in Philippine industries.
Thus, the principle of relativity of contracts applies with full force
in the relationship between Mirant and NPC, on the one hand,
and the respondent LGUs, on the other.
To reiterate, only the parties to the ECA agreement can
exact and demand the enforcement of the rights and obligations
it established—only Mirant can demand compliance from the
NPC for the payment of the real property tax the NPC assumed
to pay. The local government units (the Municipality of Pagbilao
and the Province of Quezon), as third parties to the ECA, cannot
demand payment from the NPC on the basis of Article 11.1 of
the ECA alone. Corollarily, the local government units can
neither be compelled to recognize the protest of a tax
assessment from the NPC, an entity against whom it cannot
enforce the tax liability.
The test of exemption is the nature of the use, not
ownership, of the subject machineries
At any rate, the NPC’s claim of tax exemptions is completely
without merit. 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.
As applied to the present case, the government-owned or
controlled corporation claiming exemption must be the entity
actually, directly, and exclusively using the real properties, and
the use must be devoted to the generation and transmission of
electric power. Neither the NPC nor Mirant satisfies both
requirements. Although the plant’s machineries are devoted to
the generation of electric power, by the NPC’s own admission
and as previously pointed out, Mirant—a private corporation—
uses and operates them. That Mirant operates the machineries
solely in compliance with the will of the NPC only underscores
the fact that NPC does not actually, directly, and exclusively
use them. The machineries must be actually, directly, and
exclusively used by the government-owned or controlled
corporation for the exemption under Section 234(c) to apply. 26
Nor will NPC find solace in its claim that it utilizes all the
power plant’s generated electricity in supplying the power needs
of its customers. Based on the clear wording of the law, it is the
machineries that are exempted from the payment of real
property tax, not the water or electricity that these machineries
generate and distribute. 27
Even the NPC’s claim of beneficial ownership is unavailing.
The test of exemption is the use, not the ownership of the
machineries devoted to generation and transmission of electric
power. The nature of the NPC’s ownership of these
28
machineries only finds materiality in resolving the NPC’s claim
of legal interest in protesting the tax assessment on Mirant.
As we discussed above, this claim is inexistent for tax protest
purposes.
Lastly, from the points of view of essential fairness and the
integrity of our tax system, we find it essentially wrong to allow
the NPC to assume in its BOT contracts the liability of the other
contracting party for taxes that the government can impose on
that other party, and at the same time allow NPC to turn around
and say that no taxes should be collected because the NPC is
tax-exempt as a government-owned and controlled corporation.
We cannot be a party to this kind of arrangement; for us to allow
it without congressional authority is to intrude into the realm of
policy and to debase the tax system that the Legislature
established. We will then also be grossly unfair to the people of
the Province of Quezon and the Municipality of Pagbilao who,
by law, stand to benefit from the tax provisions of the LGC.
WHEREFORE, we DENY the National Power Corporation’s
petition for review on certiorari, and AFFIRM the decision of the
Court of Tax Appeals en banc dated February 21, 2006. Costs
against the petitioner.
SO ORDERED.
Quisumbing (Chairperson), Carpio-Morales, Chico-
Nazario and Leonardo-De Castro, JJ., concur.
** ***
 Petition denied, judgment affirmed.

Note.—There is no vested right in a tax exemption, more so

when the latest expression of legislative intent renders its
continuance doubtful. (Republic vs. Caguioa, 536 SCRA 193
[2007])
——o0o——
 NAPOCOR v. Province of Quezon and Municipality of
Pagbilao [2010]
G.R. No. 171586. January 25, 2010.*
NATIONAL POWER CORPORATION,
petitioner, vs. PROVINCE OF QUEZON and MUNICIPALITY
OF PAGBILAO, respondent.
Remedial Law; Actions; Parties; Legal interest should be
one that is actual and material, direct and immediate, not simply
contingent or expectant.—We denied the first argument by ruling
that legal interest should be one that is actual and material,
direct and immediate, not simply contingent or expectant.
We disproved Napocor’s claim of control and supervision under
the second argument after reading the full terms of the BOT
Agreement, which, contrary to Napocor’s claims, granted Mirant
substantial power in the control and supervision of the power
plant’s construction and operation.
Same; Same; Same; Taxation; Contractual assumption of
tax liability alone is insufficient to make one liable for taxes.—
For the third argument, we relied on the Court’s rulings in Baguio
v. Busuego, 100 SCRA 116 (1980) and Lim v. Manila, 182
SCRA 482 (1990). In these cases, the Court essentially declared
that contractual assumption of tax liability alone is insufficient to
make one liable for taxes. The contractual assumption of tax
liability must be supplemented by an interest that the party
assuming the liability had on the property; the person from whom
payment is sought must have also acquired the beneficial use of
the property taxed. In other words, he must have the use and
possession of the property—an element that was missing in
Napocor’s case.
Same; Same; Same; Same; Local Taxation; Tax Liability;
The tax liability must be a liability that arises from law, which the
local government unit can rightfully and successfully enforce, not
the contractual liability that is enforceable only between the
parties to the contract.—We further stated that the tax liability
must be a liability that arises from law, which the local
government unit can rightfully and successfully enforce, not the
contractual liability that is enforceable only between the parties
to the contract. In the present case, the Province of Quezon is a
third party to the BOT Agreement and could thus not exact
payment from Napocor without violating the principle of relativity
of contracts. Corollarily, for reasons of fairness, the local
government units cannot be compelled to recognize the protest
of a tax assessment from Napocor, an entity against whom it
cannot enforce the tax liability.
Same; Same; Same; Same; Definition of Legal Interest;
National Power Corporation (Napocor) is clearly not vested with
the requisite interest to protest the tax assessment as it is not an
entity having the legal title over the machineries.—Legal interest
is defined as interest in property or a claim cognizable at
law, equivalent to that of a legal owner who has legal title to the
property. Given this definition, Napocor is clearly not vested with
the requisite interest to protest the tax assessment, as it is not
an entity having the legal title over the machineries. It has
absolutely no solid claim of ownership or even of use and
possession of the machineries, as our July 15, 2009 Decision
explained.
Same; Same; Same; Same; The phrase “person having
legal interest in the property” in Section 226 of the Local
Government Code (LGC) can include an entity that assumes
another person’s tax liability by contract.—While a real property
owner’s failure to comply with Sections 202 and 206 does not
necessarily negate its tax obligation nor invalidate its legitimate
claim for tax exemption, Napocor’s omission to do so in this case
can be construed as contradictory to its claim of ownership of
the subject machineries. That it assumed liability for the taxes
that may be imposed on the subject machineries similarly does
not clothe it with legal title over the same. We do not believe
that the phrase “person having legal interest in the
property” in Section 226 of the LGC can include an entity
that assumes another person’s tax liability by contract.
Taxation; Assessment; Tax Exemptions; A claim for tax
exemption whether full or partial does not question the authority
of local assessor to assess real property tax.—Like Olivarez,
Napocor, by claiming exemption from realty taxation, is simply
raising a question of the correctness of the assessment. A claim
for tax exemption, whether full or partial, does not question
the authority of local assessor to assess real property
tax. This may be inferred from Section 206.
MOTION FOR RECONSIDERATION of a decision of the
Supreme Court.
RESOLUTION
BRION, J.:
The petitioner National Power Corporation (Napocor) filed
the present motion for reconsideration of the Court’s Decision
1
Background Facts
The Province of Quezon assessed Mirant Pagbilao
Corporation (Mirant) for unpaid real property taxes in the amount
of P1.5 Billion for the machineries located in its power plant in
Pagbilao, Quezon. Napocor, which entered into a Build-
Operate-Transfer (BOT) Agreement (entitled Energy
Conversion Agreement) with Mirant, was furnished a copy of the
tax assessment.
Napocor (nota bene, not Mirant) protested the assessment
before the Local Board of Assessment Appeals (LBAA), claiming
entitlement to the tax exemptions provided under Section 234
of the Local Government Code (LGC), which states:
“Section 234. Exemptions from Real Property Tax.—The
following are exempted from payment of the real property tax:
xxxx
(c) All machineries and equipment that are actually,
directly, and exclusively used by local water districts and
government-owned or -controlled corporations engaged in the
supply and distribution of water and/or generation and
transmission of electric power;
xxxx
(e) Machinery and equipment used for pollution control
and environmental protection.
xxxx
Assuming that it cannot claim the above tax exemptions, Napocor
argued that it is entitled to certain tax privileges, namely:
a. the lower assessment level of 10% under Section
218(d) of the LGC for government-owned and controlled
corporations engaged in the generation and transmission of
electric power, instead of the 80% assessment level for
commercial properties as imposed in the assessment letter;
and
b. an allowance for depreciation of the subject
machineries under Section 225 of the LGC.
In the Court’s Decision of July 15, 2009, we ruled that
Napocor is not entitled to any of these claimed tax exemptions
and privileges on the basis primarily of the defective protest filed
by the Napocor. We found that Napocor did not file a valid
protest against the realty tax assessment because it did not
possess the requisite legal standing. When a taxpayer fails to
question the assessment before the LBAA, the assessment
becomes final, executory, and demandable, precluding the
taxpayer from questioning the correctness of the assessment or
from invoking any defense that would reopen the question of its
liability on the merits.
2
Under Section 226 of the LGC, any owner or person
3
having legal interest in the property may appeal an
assessment for real property taxes to the LBAA. Since Section
250 adopts the same language in enumerating who may pay the
tax, we equated those who are liable to pay the tax to the same
entities who may protest the tax assessment. A person legally
burdened with the obligation to pay for the tax imposed on the
property has the legal interest in the property and the personality
to protest the tax assessment.
To prove that it had legal interest in the taxed machineries,
Napocor relied on:
1. the stipulation in the BOT Agreement that
authorized the transfer of ownership to Napocor after 25
years;
2. its authority to control and supervise the
construction and operation of the power plant; and
3. its obligation to pay for all taxes that may be
incurred, as provided in the BOT Agreement.
Napocor posited that these indicated that Mirant only
possessed naked title to the machineries.
We denied the first argument by ruling that legal interest
should be one that is actual and material, direct and
immediate, not simply contingent or expectant. We 4
disproved Napocor’s claim of control and supervision under the
second argument after reading the full terms of the BOT
Agreement, which, contrary to Napocor’s claims, granted Mirant
substantial power in the control and supervision of the power
plant’s construction and operation. 5
For the third argument, we relied on the Court’s rulings
in Baguio v. Busuego and Lim v. Manila. In these cases, the
6 7
Court essentially declared that contractual assumption of tax
liability alone is insufficient to make one liable for taxes. The
contractual assumption of tax liability must be supplemented by
an interest that the party assuming the liability had on the
property; the person from whom payment is sought must have
also acquired the beneficial use of the property taxed. In other
words, he must have the use and possession of the property—
an element that was missing in Napocor’s case.
We further stated that the tax liability must be a liability that
arises from law, which the local government unit can rightfully
and successfully enforce, not the contractual liability that is
enforceable only between the parties to the contract. In the
present case, the Province of Quezon is a third party to the BOT
Agreement and could thus not exact payment from Napocor
without violating the principle of relativity of
contracts. Corollarily, for reasons of fairness, the local
8
government units cannot be compelled to recognize the protest
of a tax assessment from Napocor, an entity against whom it
cannot enforce the tax liability.
At any rate, even if the Court were to brush aside the issue
of legal interest to protest, Napocor could still not successfully
claim exemption under Section 234 (c) of the LGC because to
be entitled to the exemption under that provision, there must
be actual, direct, and exclusive use of machineries. Napocor
failed to satisfy these requirements.
The Motion for Reconsideration
Although Napocor insists that it is entitled to the tax
exemptions and privileges claimed, the primary issue for the
Court to resolve, however, is to determine whether Napocor
has sufficient legal interest to protest the tax
assessment because without the requisite interest, the tax
assessment stands, and no claim of exemption or privilege can
prevail.
Section 226 of the LGC, as mentioned, limits the right to
appeal the local assessor’s action to the owner or the person
having legal interest in the property. Napocor posits that it is the
beneficial owner of the subject machineries, with Mirant
retaining merely a naked title to secure certain obligations. Thus,
it argues that the BOT Agreement is a mere financing agreement
and is similar to the arrangement authorized under Article 1503
of the Civil Code, which declares:
“Art. 1503. When there is a contract of sale of specific goods,
the seller may, by the terms of the contract, reserve the right of
possession or ownership in the goods until certain conditions have
been fulfilled. The right of possession or ownership may be thus
reserved notwithstanding the delivery of the goods to the buyer or
to a carrier or other bailee for the purpose of transmission to the
buyer.
Where goods are shipped, and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of the seller
or of his agent, the seller thereby reserves the ownership in the
goods. But, if except for the form of the bill of lading, the ownership
would have passed to the buyer on shipment of the goods, the
seller’s property in the goods shall be deemed to be only for
the purpose of securing performance by the buyer of his
obligations under the contract.
x x x x”
Pursuant to this arrangement, Mirant’s ownership over the
subject machineries is merely a security interest, given only for
the purpose of ensuring the performance of Napocor’s
obligations.
Napocor additionally contends that its contractual
assumption liability (through the BOT Agreement) for all taxes
vests it with sufficient legal interest because it is actually,
directly, and materially affected by the assessment.
While its motion for reconsideration was pending, Napocor
filed a Motion to Refer the Case to the Court En
Banc considering that “the issues raised have far-reaching
consequences in the power industry, the country’s economy and
the daily lives of the Filipino people, and since it involves the
application of real property tax provision of the LGC against
Napocor, an exempt government instrumentality.” 9
Also, the Philippine Independent Power Producers
Association, Inc. (PIPPA) filed a Motion for Leave to
Intervene and a Motion for Reconsideration-in-Intervention.
PIPPA is a non-stock corporation comprising of privately-owned
power generating companies which includes TeaM Energy
Corporation (TeaM Energy), successor of Mirant. PIPPA is
claiming interest in the case since any decision here will affect
the other members of PIPPA, all of which have executed similar
BOT agreements with Napocor.
The Court’s Ruling
At the outset, we resolve to deny the referral of the case to
the Court en banc. We do not find the reasons raised by
Napocor meritorious enough to warrant the attention of the
members of the Court en banc, as they are merely reiterations
of the arguments it raised in the petition for review
on certiorari that it earlier filed with the Court. 10
Who may appeal a real property tax assessment
Legal interest is defined as interest in property or a claim
cognizable at law, equivalent to that of a legal owner who has
legal title to the property. Given this definition, Napocor is
11
clearly not vested with the requisite interest to protest the tax
assessment, as it is not an entity having the legal title over the
machineries. It has absolutely no solid claim of ownership or
even of use and possession of the machineries, as our July 15,
2009 Decision explained.
A BOT agreement is not a mere financing arrangement.
In Napocor v. CBAA —a case strikingly similar to the one before
12
us, we discussed the nature of BOT agreements in the following
manner:
“The underlying concept behind a BOT agreement is defined
and described in the BOT law as follows:
Build-operate-and-transfer—A contractual arrangement
whereby the project proponent undertakes the construction,
including financing, of a given infrastructure facility, and the
operation and maintenance thereof. The project proponent
operates the facility over a fixed term during which it is allowed
to charge facility users appropriate tolls, fees, rentals, and
charges not exceeding those proposed in its bid or as
negotiated and incorporated in the contract to enable the project
proponent to recover its investment, and operating and
maintenance expenses in the project. The project proponent
transfers the facility to the government agency or local
government unit concerned at the end of the fixed
term which shall not exceed fifty (50) years x x x x.
Under this concept, it is the project proponent who constructs the
project at its own cost and subsequently operates and manages it.
The proponent secures the return on its investments from those
using the project’s facilities through appropriate tolls, fees, rentals,
and charges not exceeding those proposed in its bid or as
negotiated. At the end of the fixed term agreed upon, the project
proponent transfers the ownership of the facility to the
government agency. Thus, the government is able to put up
projects and provide immediate services without the burden of the
heavy expenditures that a project start up requires.
A reading of the provisions of the parties’ BOT Agreement
shows that it fully conforms to this concept. By its express terms,
BPPC has complete ownership—both legal and beneficial—of
the project, including the machineries and equipment used,
subject only to the transfer of these properties without cost to
NAPOCOR after the lapse of the period agreed upon. As agreed
upon, BPPC provided the funds for the construction of the power
plant, including the machineries and equipment needed for power
generation; thereafter, it actually operated and still operates the
power plant, uses its machineries and equipment, and receives
payment for these activities and the electricity generated under a
defined compensation scheme. Notably, BPPC—as owner-user—
is responsible for any defect in the machineries and equipment.
xxxx
That some kind of “financing” arrangement is contemplated—in
the sense that the private sector proponent shall initially shoulder
the heavy cost of constructing the project’s buildings and structures
and of purchasing the needed machineries and equipment—is
undeniable. The arrangement, however, goes beyond the simple
provision of funds, since the private sector proponent not only
constructs and buys the necessary assets to put up the project, but
operates and manages it as well during an agreed period that would
allow it to recover its basic costs and earn profits. In other words,
the private sector proponent goes into business for itself, assuming
risks and incurring costs for its account. If it receives support from
the government at all during the agreed period, these are pre-
agreed items of assistance geared to ensure that the BOT
agreement’s objectives—both for the project proponent and for the
government—are achieved. In this sense, a BOT arrangement is
sui generis and is different from the usual financing
arrangements where funds are advanced to a borrower who uses
the funds to establish a project that it owns, subject only to a
collateral security arrangement to guard against the nonpayment of
the loan. It is different, too, from an arrangement where a
government agency borrows funds to put a project from a private
sector-lender who is thereafter commissioned to run the project for
the government agency. In the latter case, the government agency
is the owner of the project from the beginning, and the lender-
operator is merely its agent in running the project.
If the BOT Agreement under consideration departs at all from
the concept of a BOT project as defined by law, it is only in the way
BPPC’s cost recovery is achieved; instead of selling to facility users
or to the general public at large, the generated electricity is
purchased by NAPOCOR which then resells it to power distribution
companies. This deviation, however, is dictated, more than anything
else, by the structure and usages of the power industry and does
not change the BOT nature of the transaction between the parties.
Consistent with the BOT concept and as
implemented, BPPC—the owner-manager-operator of the
project—is the actual user of its machineries and equipment.
BPPC’s ownership and use of the machineries and equipment
are actual, direct, and immediate, while NAPOCOR’s is
contingent and, at this stage of the BOT Agreement, not
sufficient to support its claim for tax exemption. Thus, the CTA
committed no reversible error in denying NAPOCOR’s claim for tax
exemption.” [Emphasis supplied.]
Given the special nature of a BOT agreement as discussed
in the cited case, we find Article 1503 inapplicable to define the
contract between Napocor and Mirant, as it refers only to
ordinary contracts of sale. We thus declared in Tatad v.
Garcia that
13
under BOT agreements, the private
corporations/investors are the owners of the facility or
machinery concerned. Apparently, even Napocor and Mirant
recognize this principle; Article 2.12 of their BOT Agreement
provides that “until the Transfer Date, [Mirant] shall, directly or
indirectly, own the Power Station and all the fixtures, fitting,
machinery and equipment on the Site x x x. [Mirant] shall
operate, manage, and maintain the Power Station for the
purpose of converting fuel of Napocor into electricity.”
Moreover, if Napocor truly believed that it was the owner of
the subject machineries, it should have complied with Sections
202 and 206 of the LGC which obligates owners of real property
to:
a. file a sworn statement declaring the true value of the real
property, whether taxable or exempt; and 14
b. file sufficient documentary evidence supporting its claim
for tax exemption. 15
While a real property owner’s failure to comply with Sections
202 and 206 does not necessarily negate its tax obligation nor
invalidate its legitimate claim for tax exemption, Napocor’s
omission to do so in this case can be construed as contradictory
to its claim of ownership of the subject machineries. That it
assumed liability for the taxes that may be imposed on the
subject machineries similarly does not clothe it with legal title
over the same. We do not believe that the phrase “person
having legal interest in the property” in Section 226 of the
LGC can include an entity that assumes another person’s
tax liability by contract.
A review of the provisions of the LGC on real property
taxation shows that the phrase has been repeatedly adopted
and used to define an entity:
a. in whose name the real property shall be listed, valued,
and assessed; 16
 b. who may be summoned by the local assessor to gather
information on which to base the market value of the real Apart from Napocor’s failure to prove that it has sufficient
property; 17
legal interest, a further review of the records revealed another
c. who may protest the tax assessment before the basis for disregarding Napocor’s protest against the
LBAA and may appeal the latter’s decision to the
18
assessment.
CBAA; 19

d. who may be liable for the idle land tax, as well as who
20
The LBAA dismissed Napocor’s petition for exemption for its
may be exempt from the same; 21
failure to comply with Section 252 of the LGC requiring 30

e. who shall be notified of any proposed ordinance payment of the assailed tax before any protest can be made.
imposing a special levy, as well as who may object the
22
Although the CBAA ultimately dismissed Napocor’s appeal for
proposed ordinance; 23
failure to meet the requirements for tax exemption, it agreed with
f. who may pay the real property tax; 24
Napocor’s position that “the protest contemplated in Section 252
g. who is entitled to be notified of the warrant of levy and (a) is applicable only when the taxpayer is questioning the
against whom it may be enforced; 25
reasonableness or excessiveness of an assessment. It
h. who may stay the public auction upon payment of the presupposes that the taxpayer is subject to the tax but is
delinquent tax, penalties and surcharge; and 26
disputing the correctness of the amount assessed. It does not
i. who may redeem the property after it was sold at the apply where, as in this case, the legality of the assessment is
public auction for delinquent taxes. 27
put in issue on account of the taxpayer’s claim that it is exempt
from tax.” The CTA en banc agreed with the CBAA’s discussion,
For the Court to consider an entity assuming another relying mainly on the cases of Ty v. Trampe and Olivarez v.
31

person’s tax liability by contract as a person having legal interest Marquez. 32

in the real property would extend to it the privileges and

responsibilities enumerated above. The framers of the LGC
certainly did not contemplate that the listing, valuation, and
assessment of real property can be made in the name of such
entity; nor did they intend to make the warrant of levy
enforceable against it. Insofar as the provisions of the LGC are
concerned, this entity is a party foreign to the operation of real
property tax laws and could not be clothed with any legal interest
over the property apart from its assumed liability for tax. The
rights and obligations arising from the BOT Agreement between
Napocor and Mirant were of no legal interest to the tax
collector—the Province of Quezon—which is charged with the
performance of independent duties under the LGC. 28
Some authorities consider a person whose pecuniary
interests is or may be adversely affected by the tax
assessment as one who has legal interest in the property
(hence, possessed of the requisite standing to protest it), citing
Cooley’s Law on Taxation. The reference to this foreign
29
We disagree. The cases of Ty and Olivarez must be placed
in their proper perspective.
The petitioner in Ty v. Trampe questioned before the trial
court the increased real estate taxes imposed by and being
collected in Pasig City effective from the year 1994, premised on
the legal question of whether or not Presidential Decree No. 921
(PD 921) was repealed by the LGC. PD 921 required that the
schedule of values of real properties in the Metropolitan Manila
area shall be prepared jointly by the city assessors in the districts
created therein; while Section 212 of the LGC stated that the
schedule shall be prepared by the provincial, city or municipal
assessors of the municipalities within the Metropolitan Manila
Area for the different classes of real property situated in their
respective local government units for enactment by ordinance of
the Sanggunian concerned. The private respondents assailed
Ty’s act of filing a prohibition petition before the trial court

contending that Ty should have availed first the administrative

material, however, is misplaced. The tax laws of the United
States deem it sufficient that a person’s pecuniary interests are remedies provided in the LGC, particularly Sections 252 (on
payment under protest before the local treasurer) and 226 (on
affected by the tax assessment to consider him as a person
appeals to the LBAA).
aggrieved and who may thus avail of the judicial or
administrative remedies against it. As opposed to our LGC,
The Court, through former Chief Justice Artemio
mere pecuniary interest is not sufficient; our law has
required legal interest in the property taxed before any Panganiban, declared that Ty correctly filed a petition for
prohibition before the trial court against the assailed act of the
administrative or judicial remedy can be availed. The right to
city assessor and treasurer. The administrative protest
appeal a tax assessment is a purely statutory right; whether a
proceedings provided in Section 252 and 226 will not apply. The
person challenging an assessment bears such a relation to the
protest contemplated under Section 252 is required where
real property being assessed as to entitle him the right to appeal
there is a question as to the reasonableness or
is determined by the applicable statute—in this case, our own
correctness of the amount assessed. Hence, if a taxpayer
LGC, not US federal or state tax laws.
disputes the reasonableness of an increase in a real property
tax assessment, he is required to “first pay the tax” under
In light of our ruling above, PIPPA’s motion to intervene and
protest.
motion for reconsideration-in-intervention is already mooted.
PIPPA as an organization of independent power producers is
Otherwise, the city or municipal treasurer will not act on his
not an interested party insofar as this case is concerned. Even
protest. Ty however was questioning the very authority and
if TeaM Energy, as Mirant’s successor, is included as one of its
power of the assessor, acting solely and independently, to
members, the motion to intervene and motion for
impose the assessment and of the treasurer to collect the tax.
reconsideration-in-intervention can no longer be entertained, as
These were not questions merely of amounts of the increase in
it amounts to a protest against the tax assessment that was filed
the tax but attacks on the very validity of any increase. Moreover,
without the complying with Section 252 of the LGC, a matter that
Ty was raising a legal question that is properly cognizable by the
we shall discuss below. Most importantly, our Decision has not
trial court; no issues of fact were involved. In enumerating the
touched or affected at all the contractual stipulations between
power of the LBAA, Section 229 declares that “the proceedings
Napocor and its BOT partners for the former’s assumption of the
of the Board shall be conducted solely for the purpose of
tax liabilities of the latter.
ascertaining the facts x x x.” Appeals to the LBAA (under Section
226) are therefore fruitful only where questions of fact are
Payment under protest is required before
an appeal to the LBAA can be made involved.

Olivarez v. Marquez, on the other hand, involved a petition
for certiorari, mandamus, and prohibition questioning the
assessment and levy made by the City of Parañaque. Olivarez
was seeking the annulment of his realty tax delinquency
assessment. Marquez assailed Olivarez’ failure to first exhaust
administrative remedies, particularly the requirement of
payment under protest. Olivarez replied that his petition was
filed to question the assessor’s authority to assess and collect
realty taxes and therefore, as held in Ty v. Trampe, the
exhaustion of administrative remedies was not required. The
Court however did not agree with Olivarez’s argument. It found
that there was nothing in his petition that supported his claim
regarding the assessor’s alleged lack of authority. What Olivarez
raised were the following grounds: “(1) some of the taxes being
collected have already prescribed and may no longer be
collected as provided in Section 194 of the Local Government
Code of 1991; (2) some properties have been doubly
taxed/assessed; (3) some properties being taxed are no longer
existent; (4) some properties are exempt from taxation as
they are being used exclusively for educational purposes; and
(5) some errors are made in the assessment and collection of
taxes due on petitioners’ properties, and that respondents
committed grave abuse of discretion in making the improper,
excessive and unlawful the collection of taxes against the
petitioner.” The Olivarez petition filed before the trial court
primarily involved the correctness of the assessments,
which is a question of fact that is not allowed in a petition
for certiorari, prohibition, and mandamus. Hence, we declared
that the petition should have been brought, at the very first
instance, to the LBAA, not the trial court.
questions the correctness of an assessment. Section 226, in
declaring that “any owner or person having legal interest in the
property who is not satisfied with the action of the provincial, city,
or municipal assessor in the assessment of his property may x
x x appeal to the Board of Assessment Appeals x x x,” should be
read in conjunction with Section 252 (d), which states that “in the
event that the protest is denied
x x x, the taxpayer may avail of the remedies as provided for in
Chapter 3, Title II, Book II of the LGC [Chapter 3 refers to
Assessment Appeals, which includes Sections 226 to 231]. The
“action” referred to in Section 226 (in relation to a protest of real
property tax assessment) thus refers to the local assessor’s act
of denying the protest filed pursuant to Section 252. Without the
action of the local assessor, the appellate authority of the LBAA
cannot be invoked. Napocor’s action before the LBAA was thus
prematurely filed.
For the foregoing reasons, we DENY the petitioner’s motion
for reconsideration.
SO ORDERED.
Carpio-Morales (Acting Chairperson), Leonardo-De
Castro, Abad and Perez, JJ., concur.
Motion for Reconsideration denied.
Note.—A suit filed by one who is not a real party-in-interest
must be dismissed. (Alegria vs. Drilon, 558 SCRA 459 [2008])
——o0o——

Like Olivarez, Napocor, by claiming exemption from realty

taxation, is simply raising a question of the correctness of the
assessment. A claim for tax exemption, whether full or
partial, does not question the authority of local assessor to
assess real property tax. This may be inferred from Section
206 which states that:

“SEC. 206. Proof of Exemption of Real Property from

Taxation.—Every person by or for whom real property is declared,
who shall claim tax exemption for such property under this Title shall
file with the provincial, city or municipal assessor within thirty (30)
days from the date of the declaration of real property sufficient
documentary evidence in support of such claim including corporate
charters, title of ownership, articles of incorporation, by-laws,
contracts, affidavits, certifications and mortgage deeds, and similar
documents. If the required evidence is not submitted within the
period herein prescribed, the property shall be listed as taxable
in the assessment roll. However, if the property shall be proven
to be tax exempt, the same shall be dropped from the
assessment roll.” [Emphasis provided]

By providing that real property not declared and proved as

tax-exempt shall be included in the assessment roll, the above-
quoted provision implies that the local assessor has the authority
to assess the property for realty taxes, and any subsequent
claim for exemption shall be allowed only when sufficient proof
has been adduced supporting the claim. Since Napocor was
simply questioning the correctness of the assessment, it should
have first complied with Section 252, particularly the
requirement of payment under protest. Napocor’s failure to
prove that this requirement has been complied with thus renders
its administrative protest under Section 226 of the LGC without
any effect. No protest shall be entertained unless the taxpayer
first pays the tax.

It was an ill-advised move for Napocor to directly file an

appeal with the LBAA under Section 226 without first paying the
tax as required under Section 252. Sections 252 and 226
provide successive administrative remedies to a taxpayer who