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Remedies on Real Property Taxation

G.R. No. 171586 July 15, 2009

NATIONAL POWER CORPORATION, Petitioner,

vs.
PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO, Respondents.

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.2 To pursue 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.3

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 4 specifically provides:

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 ₱1,538,076,000.00 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"5 on April 14, 2000. The NPC 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:

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 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 motion for reconsideration, prompting the NPC to institute an 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 7 decision, that is, the 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 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.
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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 LGC.

THE COURT’S RULING

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

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.

A person legally burdened with the obligation to pay for the tax imposed on a property has legal interest in the
property and the personality to protest a tax assessment on the property. This is the logical and legal conclusion
when Section 226, on the rules governing an assessment protest, is placed side by side with Section 250 on the
payment of real property tax; both provisions refer to the same parties who may protest and pay the tax:

SECTION 226. Local Board of SECTION 250. Payment of Real Property

Assessment Appeals. - Any owner or Taxes in Instalments. - The owner of the
person having legal interest in the real property or the person having
property who is not satisfied with the legal interest therein may pay the basic
action of the provincial, city or municipal real property tax xxx due thereon without
assessor in the assessment of his interest in four (4) equal instalments xxx.
property may, within sixty (60) days from
the date of receipt of the written notice of
assessment, appeal to the Board of
Assessment Appeals of the province or
city xxx.

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. 13 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. 14 In either case, the unpaid realty tax attaches to the property 15 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. 16

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 ECA17 states:

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
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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,18 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. 19

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. 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.]1avvphi1

On liability for taxes, the NPC indeed assumed responsibility for the taxes due on the power plant and its
machineries,20 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.

In Testate of Concordia Lim v. City of Manila, 21 we had occasion to rule that:

In [Baguio v. Busuego22], the assumption by the vendee of the liability for real estate taxes prospectively due
was in harmony with the tax policy that the user of the property bears the tax. In [the 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.
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Compared with Baguio, the Lim case supposedly involved the same contractual assumption of tax liabilities,23 but
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; xxx. [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 24 that underlie the parties’ BOT agreement,25 the 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.

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.
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G.R. No. 169234 October 2, 2013

CAMP JOHN HAY DEVELOPMENT CORPORATION, Petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, REPRESENTED BY ITS CHAIRMAN HON. CESAR S.
GUTIERREZ, ADELINA A. TABANGIN, IN HER CAPACITY AS CHAIRMAN OF THE BOARD OF TAX
(ASSESSMENT) APPEALS OF BAGUIO CITY, AND HON. ESTRELLA B. TANO, IN HER CAPACITY AS THE
CITY ASSESSOR OF THE CITY OF BAGUIO, Respondents.

The facts

In a letter dated 21 March 2002, respondent City Assessor of Baguio City notified petitioner Camp John Hay
Development Corporation about the issuance against it of thirty-six (36) Owner’s Copy of Assessment of Real
Property (ARP), with ARP Nos. 01-07040-008887 to 01-07040-008922covering various buildings of petitioner
and two (2) parcels of land owned by the Bases Conversion Development Authority (BCDA) in the John Hay
Special Economic Zone (JHSEZ), Baguio City, which were leased out to petitioner.

In response, petitioner questioned the assessments in a letter dated 3April 2002 for lack of legal basis due to
the City Assessor’s failure to identify the specific properties and its corresponding assessed values. The City
Assessor replied in a letter dated 11 April 2002 that the subject ARPs (with an additional ARP on another building
bringing the total number of ARPs to thirty-seven [37]) against the buildings of petitioner located within the JHSEZ
were issued on the basis of the approved building permits obtained from the City Engineer’s Office of Baguio
City and pursuant to Sections 201 to 206 of RA No. 7160 or the LGC of 1991.

Consequently, on 23 May 2002, petitioner filed with the Board of Tax Assessment Appeals (BTAA) of Baguio
City an appeal under Section 226 2 of the LGC of 1991 challenging the validity and propriety of the issuances of
the City Assessor. The appeal was docketed as Tax Appeal Case No. 2002-003. Petitioner claimed that there
was no legal basis for the issuance of the assessments because it was allegedly exempted from paying taxes,
national and local, including real property taxes, pursuant to RA No. 7227, otherwise known as the Bases
Conversion and Development Act of 1992. 3

The Ruling of the BTAA

In a Resolution dated 12 July 2002, 4 the BTAA cited Section 7,5 Rule V of the Rules of Procedure Before the
LBAA, and enjoined petitioner to first comply therewith, particularly as to the payment under protest of the subject
real property taxes before the hearing of its appeal. Subsequently, the BTAA dismissed petitioner’s Motion for
Reconsideration in the 20 September 2002 Resolution 6 for lack of merit.

Aggrieved, petitioner elevated the case before the CBAA through a Memorandum on Appeal docketed as CBAA
Case No. L-37.

The Ruling of the CBAA

The CBAA denied petitioner’s appeal in a Resolution dated 23 May 2003, 7 set aside the BTAA’s order of
deferment of hearing, and remanded the case to the LBAA of Baguio City for further proceedings subject to a
full and up-to-date payment of the realty taxes on subject properties as assessed by the respondent City
Assessor of Baguio City, either in cash or in bond.

Citing various cases it previously decided, 8 the CBAA explained that the deferment of hearings by the LBAA was
merely in compliance with the mandate of the law. The governing provision in this case is Section 231, not
Section 226, of RA No. 7160 which provides that "appeal on assessments of real property made under the
provisions of this Code shall, in no case, suspend the collection of the corresponding realty taxes on the property
involved as assessed by the provincial or city assessor, without prejudice to subsequent adjustment depending
upon the final outcome of the appeal." In addition, as to the issue raised pertaining to the propriety of the subject
assessments issued against petitioner, allegedly claimed to be a tax-exemptentity, the CBAA expressed that it
has yet to acquire jurisdiction over it since the same has not been resolved by the LBAA.

On 8 September 2004, the CBAA denied petitioner’s Motion for Reconsideration for lack of merit. 9

Undaunted by the pronouncements in the abovementioned Resolutions, petitioner appealed to the CTA En Banc
by filing a Petition for Review under Section 11 of RA No. 1125, as amended by Section 9 of RA No. 9282, on
24 November 2004, docketed as C.T.A. EB No. 48, and raised the following issues for its consideration: (1)
whether or not respondent City Assessor of the City of Baguio has legal basis to issue against petitioner the
subject assessments with serial nos. 01-07040-008887 to 01-07040-008922for real property taxation of the
 Page 6 of 41

buildings of the petitioner, a tax-exemptentity, or land owned by the BCDA under lease to the petitioner; and
(2)whether or not the CBAA, in its Resolutions dated 23 May 2003 and 8September 2004, has legal basis to
order the remand of the case to the LBAA of Baguio City for further proceedings subject to a full and up-to- date
payment, in cash or bond, of the realty taxes on the subject properties as assessed by the City Assessor of the
City of Baguio.10

The Ruling of the CTA En Banc

In the assailed Decision dated 27 July 2005, 11 the CTA En Banc found that petitioner has indeed failed to comply
with Section 252 of RA No. 7160or the LGC of 1991. Hence, it dismissed the petition and affirmed the subject
Resolutions of the CBAA which remanded the case to the LBAA for further proceedings subject to compliance
with said Section, in relation to Section 7, Rule V of the Rules of Procedure before the LBAA.

Moreover, adopting the CBAA’s position, the court a quo ruled that it could not resolve the issue on whether
petitioner is liable to pay real property tax or whether it is indeed a tax-exempt entity considering that the LBAA
has not decided the case on the merits. To do otherwise would not only be procedurally wrong but legally wrong.
It therefore concluded that before a protest may be entertained, the tax should have been paid first without
prejudice to subsequent adjustment depending upon the final outcome of the appeal and that the tax or portion
thereof paid under protest, shall be held in trust by the treasurer concerned.

Consequently, this Petition for Review wherein petitioner on the ground of lack of legal basis seeks to set aside
the 27 July 2005 Decision, and to nullify the assessments of real property tax issued against it by respondent
City Assessor of Baguio City.12

The Issue

The Issue before the Court is whether or not respondent CTA En Banc erred in dismissing for lack of merit the
petition in C.T.A. EB No. 48, and accordingly affirmed the order of the CBAA to remand the case to the LBAA of
Baguio City for further proceedings subject to a full and up-to-date payment of realty taxes, either in cash or in
bond, on the subject properties assessed by the City Assessor of Baguio City.

In support of the present petition, petitioner posits the following grounds: (a) Section 225 (should be Section 252)
of RA No. 7160 or the LGC of 1991 does not apply when the person assessed is a tax-exemptentity; and (b)
Under the doctrine of operative fact, petitioner is not liable for the payment of the real property taxes subject of
this petition.13

Our Ruling

The Court finds the petition unmeritorious and therefore rules against petitioner.

Section 252 of RA No. 7160, also known as the LGC of 1991 14, categorically provides:

SEC. 252. Payment Under Protest. – (a) No protest shall be entertained unless the taxpayer first pays the tax.
There shall be annotated on the tax receipts the words "paid under protest." The protest in writing must be filed
within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case
of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.

(b) The tax or a portion thereof paid under protest, shall beheld in trust by the treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax
protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax
liability.

(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in
subparagraph (a), the tax payer may avail of the remedies as provided for in Chapter 3, Title Two, Book
II of this Code. (Emphasis and underlining supplied)

Relevant thereto, the remedies referred to under Chapter 3, Title Two, Book II of RA No. 7160 or the LGC of
1991 are those provided for under Sections 226 to 231. Significant provisions pertaining to the procedural and
substantive aspects of appeal before the LBAA and CBAA, including its effect on the payment of real property
taxes, follow:

SEC. 226. Local Board of Assessment Appeals. – Any owner or person having legal interest in the property who
is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may,
 Page 7 of 41

within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of
Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.

SEC. 229. Action by the Local Board of Assessment Appeals. – (a)The Board shall decide the appeal within one
hundred twenty (120) days from the date of receipt of such appeal. The Board, after hearing, shall render its
decision based on substantial evidence or such relevant evidence on record as a reasonable mind might accept
as adequate to support the conclusion.

(b) In the exercise of its appellate jurisdiction, the Board shall have the powers to summon witnesses,
administer oaths, conduct ocular inspection, take depositions, and issue subpoena and subpoena duces
tecum. The proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts
without necessarily adhering to technical rules applicable in judicial proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person having legal interest
therein and the provincial or city assessor with a copy of the decision of the Board. In case the provincial
or city assessor concurs in the revision or the assessment, it shall be his duty to notify the owner of the
property or the person having legal interest therein of such fact using the form prescribed for the purpose.
The owner of the property or the person having legal interest therein or the assessor who is not satisfied
with the decision of the Board may, within thirty (30) days after receipt of the decision of said Board,
appeal to the Central Board of Assessment Appeals, as here in provided. The decision of the Central
Board shall be final and executory.

SEC. 231. Effect of Appeal on the Payment of Real Property Tax. – Appeal on assessments of real property
made under the provisions of this Code shall, in no case, suspend the collection of the corresponding realty
taxes on the property involved as assessed by the provincial or city assessor, without prejudice to subsequent
adjustment depending upon the final outcome of the appeal. (Emphasis supplied)

The above-quoted provisions of RA No. 7160 or the LGC of 1991,clearly sets forth the administrative remedies
available to a taxpayer or real property owner who does not agree with the assessment of the real property tax
sought to be collected.

The language of the law is clear. No interpretation is needed. The elementary rule in statutory construction is
that if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation. Verba legis non est recedendum. From the words of a statute there should be no
departure.15

To begin with, Section 252 emphatically directs that the taxpayer/real property owner questioning the
assessment should first pay the tax due before his protest can be entertained. As a matter of fact, the words
"paid under protest" shall be annotated on the tax receipts. Consequently, only after such payment has been
made by the taxpayer may he file a protest in writing (within thirty (30) days from said payment of tax) to the
provincial, city, or municipal treasurer, who shall decide the protest within sixty (60)days from its receipt. In no
case is the local treasurer obliged to entertain the protest unless the tax due has been paid.

Secondly, within the period prescribed by law, any owner or person having legal interest in the property not
satisfied with the action of the provincial, city, or municipal assessor in the assessment of his property may file
an appeal with the LBAA of the province or city concerned, as provided in Section 226 of RA No. 7160 or the
LGC of 1991. Thereafter, within thirty (30) days from receipt, he may elevate, by filing a notice of appeal, the
adverse decision of the LBAA with the CBAA, which exercises exclusive jurisdiction to hear and decide all
appeals from the decisions, orders, and resolutions of the Local Boards involving contested assessments of real
properties, claims for tax refund and/or tax credits, or overpayments of taxes. 16

Significantly, in Dr. Olivares v. Mayor Marquez, 17 this Court had the occasion to extensively discuss the subject
provisions of RA No. 7160 or the LGC of 1991, in relation to the impropriety of the direct recourse before the
courts on issue of the correctness of assessment of real estate taxes. The pertinent articulations follow:

x x x A perusal of the petition before the RTC plainly shows that what is actually being assailed is the correctness
of the assessments made by the local assessor of Parañaque on petitioners’ properties. The allegations in the
said petition purportedly questioning the assessor’s authority to assess and collect the taxes were obviously
made in order to justify the filing of the petition with the RTC. In fact, there is nothing in the said petition that
supports their claim regarding the assessor’s alleged lack of authority. What petitioners raise are the following:

(1) some of the taxes being collected have already prescribed and may no longer be collected as provided
in Section 194 of the Local Government Code of 1991; (2) some properties have been doubly
taxed/assessed; (3) some properties being taxed are no longer existent;
 Page 8 of 41

(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 petitioners."

Moreover, these arguments essentially involve questions of fact. Hence, the petition should have been brought,
at the very first instance, to the LBAA.

Under the doctrine of primacy of administrative remedies, an error in the assessment must be administratively
pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction. But an appeal
shall not suspend the collection of the tax assessed without prejudice to a later adjustment pending the outcome
of the appeal.

Even assuming that the assessor’s authority is indeed an issue, it must be pointed out that in order for the court
a quo to resolve the petition, the issues of the correctness of the tax assessment and collection must also
necessarily be dealt with.

xxxx

In the present case, the authority of the assessor is not being questioned. Despite petitioners’ protestations, the
petition filed before the court a quo primarily involves the correctness of the assessments, which are questions
of fact, that are not allowed in a petition for certiorari, prohibition and mandamus. The court a quo is therefore
precluded from entertaining the petition, and it appropriately dismissed the petition. 18 (Emphasis and underlining
supplied)

By analogy, the rationale of the mandatory compliance with the requirement of "payment under protest" similarly
provided under Section 64of the Real Property Tax Code (RPTC) 19 was earlier emphasized in Meralcov.
Barlis,20 wherein the Court held:

We find the petitioner’s arguments to be without merit. The trial court has no jurisdiction to entertain a Petition
for Prohibition absent petitioner’s payment under protest, of the tax assessed as required by Sec.64 of the RPTC.
Payment of the tax assessed under protest, is a condition sine qua non before the trial court could assume
jurisdiction over the petition and failure to do so, the RTC has no jurisdiction to entertain it.

The restriction upon the power of courts to impeach tax assessment without a prior payment, under protest, of
the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their
collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local
government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely
disabled.

xxxx

There is no merit in petitioner’s argument that the trial court could take cognizance of the petition as it only
questions the validity of the issuance of the warrants of garnishment on its bank deposits and not the tax
assessment. Petitioner MERALCO in filing the Petition for Prohibition before the RTC was in truth assailing the
validity of the tax assessment and collection. To resolve the petition, it would not only be the question of validity
of the warrants of garnishments that would have to be tackled, but in addition the issues of tax assessment and
collection would necessarily have to be dealt with too. As the warrants of garnishment were issued to collect
back taxes from petitioner, the petition for prohibition would be for no other reason than to forestall the collection
of back taxes on the basis of tax assessment arguments. This, petitioner cannot do without first resorting to the
proper administrative remedies, or as previously discussed, by paying under protest the tax assessed, to allow
the court to assume jurisdiction over the petition.

xxxx

It cannot be gainsaid that petitioner should have addressed its arguments to respondent at the first opportunity
- upon receipt of the3 September 1986 notices of assessment signed by Municipal Treasurer Norberto A. San
Mateo. Thereafter, it should have availed of the proper administrative remedies in protesting an erroneous tax
assessment, i.e., to question the correctness of the assessments before the Local Board of Assessment Appeals
(LBAA), and later, invoke the appellate jurisdiction of the Central Board of Assessment Appeals(CBAA).

Under the doctrine of primacy of administrative remedies, an error in the assessment must be administratively
pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction. But an appeal
shall not suspend the collection of the tax assessed without prejudice to a later adjustment pending the outcome
 Page 9 of 41

of the appeal. The failure to appeal within the statutory period shall render the assessment final and
unappealable.

Petitioner having failed to exhaust the administrative remedies available to it, the assessment attained finality
and collection would be in order. (Emphasis and underscoring supplied)

From the foregoing jurisprudential pronouncements, it is clear that the requirement of "payment under protest"
is a condition sine qua non before a protest or an appeal questioning the correctness of an assessment of real
property tax may be entertained.

Moreover, a claim for exemption from payment of real property taxes does not actually question the assessor’s
authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment
by the local assessor, a question of fact which should be resolved, at the very first instance, by the LBAA. This
may be inferred from Section 206 of RA No. 7160 or the LGC of 1991which states that:

SEC. 206. Proof of Exemption of Real Property from Taxation. – Every person by or for whom real property is
declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or
municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary
evidence in support of such claim including corporate charters, title of ownership, articles of incorporation,
bylaws, contracts, affidavits, certifications and mortgage deeds, and similar documents.

If the required evidence is not submitted within the period herein prescribed, the property shall be listed as
taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be
dropped from the assessment roll. (Emphasis supplied)

In other words, 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. 21

Therefore, if the property being taxed has not been dropped from the assessment roll, taxes must be paid under
protest if the exemption from taxation is insisted upon.

In the case at bench, records reveal that when petitioner received the letter dated 21 March 2002 issued by
respondent City Assessor, including copies of ARPs (with ARP Nos. 01-07040-008887 to 01-07040-008922)
attached thereto, it filed its protest through a letter dated 3 April 2002seeking clarification as to the legal basis of
said assessments, without payment of the assessed real property taxes. Afterwards, respondent City Assessor
replied thereto in a letter dated 11 April 2002 which explained the legal basis of the subject assessments and
even included an additional ARP against another real property of petitioner. Subsequently, petitioner then filed
before the BTAA its appeal questioning the validity and propriety of the subject ARPs.

Clearly from the foregoing factual backdrop, petitioner considered the11 April 2002 letter as the "action" referred
to in Section 226 which speaks of the local assessor’s act of denying the protest filed pursuant to Section252.
However, applying the above-cited jurisprudence in the present case, it is evident that petitioner’s failure to
comply with the mandatory requirement of payment under protest in accordance with Section 252 of the LGC of
1991 was fatal to its appeal. Notwithstanding such failure to comply therewith, the BTAA elected not to
immediately dismiss the case but instead took cognizance of petitioner’s appeal subject to the condition that
payment of the real property tax should first be made before proceeding with the hearing of its appeal, as
provided for under Section 7, Rule V of the Rules of Procedure Before the LBAA. Hence, the BTAA simply
recognized the importance of the requirement of "payment under protest" before an appeal may be entertained,
pursuant to Section 252, and in relation with Section231 of the same Code as to non-suspension of collection of
the realty tax pending appeal.

Notably, in its feeble attempt to justify non-compliance with the provision of Section 252, petitioner contends that
the requirement of paying the tax under protest is not applicable when the person being assessed is a tax-
exempt entity, and thus could not be deemed a "taxpayer" within the meaning of the law. In support thereto,
petitioner alleges that it is exempted from paying taxes, including real property taxes, since it is entitled to the
tax incentives and exemptions under the provisions of RA No. 7227 and Presidential Proclamation No. 420,
Series of 1994,22 as stated in and confirmed by the lease agreement it entered into with the BCDA. 23

This Court is not persuaded.

First, Section 206 of RA No. 7160 or the LGC of 1991, as quoted earlier, categorically provides that every person
by or for whom real property is declared, who shall claim exemption from payment of real property taxes imposed
 Page 10 of 41

against said property, shall file with the provincial, city or municipal assessor sufficient documentary evidence in
support of such claim. Clearly, the burden of proving exemption from local taxation is upon whom the subject
real property is declared; thus, said person shall be considered by law as the taxpayer thereof. Failure to do so,
said property shall be listed as taxable in the assessment roll.

In the present case, records show that respondent City Assessor of Baguio City notified petitioner, in the letters
dated 21 March 200224 and 11April 2002,25 about the subject ARPs covering various buildings owned by
petitioner and parcels of land (leased out to petitioner) all located within the JHSEZ, Baguio City. The subject
letters expressed that the assessments were based on the approved building permits obtained from the City
Engineer’s Office of Baguio City and pursuant to Sections 201 to 206 of RA No. 7160 or the LGC of 1991 which
pertains to whom the subject real properties were declared.

Noticeably, these factual allegations were neither contested nor denied by petitioner. As a matter of fact, it
expressly admitted ownership of the various buildings subject of the assessment and thereafter focused on the
argument of its exemption under RA No. 7227. But petitioner did not present any documentary evidence to
establish that the subject properties being tax exempt have already been dropped from the assessment roll, in
accordance with Section 206. Consequently, the City Assessor acted in accordance with her mandate and in the
regular performance of her official function when the subject ARPs were issued against petitioner herein, being
the owner of the buildings, and therefore considered as the person with the obligation to shoulder tax liability
thereof, if any, as contemplated by law.

It is an accepted principle in taxation that taxes are paid by the person obliged to declare the same for taxation
purposes. As discussed above, the duty to declare the true value of real property for taxation purposes is
imposed upon the owner, or administrator, or their duly authorized representatives. They are thus considered
the taxpayers. Hence, when these persons fail or refuse to make a declaration of the true value of their real
property within the prescribed period, the provincial or city assessor shall declare the property in the name of the
defaulting owner and assess the property for taxation. In this wise, the taxpayer assumes the character of a
defaulting owner, or defaulting administrator, or defaulting authorized representative, liable to pay back taxes.
For that reason, since petitioner herein is the declared owner of the subject buildings being assessed for real
property tax, it is therefore presumed to be the person with the obligation to shoulder the burden of paying the
subject tax in the present case; and accordingly, in questioning the reasonableness or correctness of the
assessment of real property tax, petitioner is mandated by law to comply with the requirement of payment under
protest of the tax assessed, particularly Section 252 of RA No. 7160 or the LGC of 1991.

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law
does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by
words too plain to be mistaken and too categorical to be misinterpreted.26 Thus applying the rule of strict
construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial
corporations, this Court holds that petitioner is considered a taxable entity in this case.

Second, considering that petitioner is deemed a taxpayer within the meaning of law, the issue on whether or not
it is entitled to exemption from paying taxes, national and local, including real property taxes, is a ma tter which
would be better resolved, at the very instance, before the LBAA, for the following grounds: (a) petitioner’s reliance
on its entitlement for exemption under the provisions of RA No. 7227 and Presidential Proclamation No. 420,
was allegedly confirmed by Section 18,27 Article XVI of the Lease Agreement dated 19 October 1996 it entered
with the BCDA. However, it appears from the records that said Lease Agreement has yet to be presented nor
formally offered before any administrative or judicial body for scrutiny; (b) the subject provision of the Lease
Agreement declared a condition that in order to be allegedly exempted from the payment of taxes, petitione r
should have first paid and remitted 5% of the gross income earned by it within ninety (90) days from the close of
the calendar year through the JPDC. Unfortunately, petitioner has neither established nor presented any
evidence to show that it has indeed paid and remitted 5% of said gross income tax; (c) the right to appeal is a
privilege of statutory origin, meaning a right granted only by the law, and not a constitutional right, natural or
inherent. Therefore, it follows that petitioner may avail of such opportunity only upon strict compliance with the
procedures and rules prescribed by the law itself, i.e. RA No. 7160 or the LGC of 1991; and (d) at any rate,
petitioner’s position of exemption is weakened by its own admission and recognition of this Court’s previous
ruling that the tax incentives granted in RA No. 7227 are exclusive only to the Subic Special Economic and Free
Port Zone; and thus, the extension of the same to the JHSEZ (as provided in the second sentence of Section 3
of Presidential Proclamation No. 420)28 finds no support therein and therefore declared null and void and of no
legal force and effect.29 Hence, petitioner needs more than mere arguments and/or allegations contained in its
pleadings to establish and prove its exemption, making prior proceedings before the LBAA a necessity.

With the above-enumerated reasons, it is obvious that in order for a complete determination of petitioner’s
alleged exemption from payment of real property tax under RA No. 7160 or the LGC of 1991, there are factual
issues needed to be confirmed. Hence, being a question of fact, petitioner cannot do without first resorting to the
 Page 11 of 41

proper administrative remedies, or as previously discussed, by paying under protest the tax assessed in
compliance with Section 252 thereof.

Accordingly, the CBAA and the CTA En Banc correctly ruled that real property taxes should first be paid before
any protest thereon may be considered. It is without a doubt that such requirement of "payment under protest"
is a condition sine qua non before an appeal may be entertained. Thus, remanding the case to the LBAA for
further proceedings subject to a full and up-to-date payment, either in cash or surety, of realty tax on the subject
properties was proper.

To reiterate, the restriction upon the power of courts to impeach tax assessment without a prior payment, under
protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as
such their collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the
local government unit, shall be crippled in dispensing the needed services to the people, and its machinery
gravely disabled.30 The right of local government units to collect taxes due must always be upheld to avoid severe
erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments
and the objective of RA No. 7160 or the LGC of 1991 that they enjoy genuine and meaningful local autonomy to
empower them to achieve their fullest development as self-reliant communities and make them effective partners
in the attainment of national goals. 31

All told, We go back to what was at the outset stated, that is, that a claim for tax exemption, whether full or partial,
does not question the authority of local assessor to assess real property tax, but merely raises a question of the
reasonableness or correctness of such assessment, which requires compliance with Section 252 of the LGC of
1991. Such argument which may involve a question of fact should be resolved at the first instance by the LBAA.

The CTA En Bane was correct in dismissing the petition in C.T.A. EB No. 48, and affirming the CBAA's position
that it cannot delve on the issue of petitioner's alleged non-taxability on the ground of exemption since the LBAA
has not decided the case on the merits. This is in compliance with the procedural steps prescribed in the law.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Tax Appeals En Bane in
C.T.A. EB No. 48 is AFFIRMED. The case is remanded to the Local Board of Assessment Appeals of Baguio
City for further proceedings. No costs.

SO ORDERED.
 Page 12 of 41

G.R. No. 192300 November 24, 2014

NATIONAL POWER CORPORATION, Petitioner,

vs.
MUNICIPAL GOVERNMENT OF NAVOTAS, SANGGUNIANG BAYAN OF NAVOTAS AND MANUEL T.
ENRIQUEZ, in his capacity as Municipal Treasurer of Navotas, Respondents.

The facts, as found by the CTA En Banc, are as follows:

Petitioner National Power Corporation (NPC) is a government owned and controlled corporation organized and
existing under and by virtue of Republic Act (RA) No. 6395, as amended, with principal office address at NPC
Office Building Complex, comer Quezon A venue and BIR Road, East Triangle, Diliman, Quezon City.

Respondent Municipal Government of Navotas, is a local government unit, hosting petitioner’s Navotas Power
Stations I and II located in the Municipality of Navotas. It may be served with summons and court processes
through the Municipal Mayor, at the Municipal Hall Building, Navotas, Metro Manila.

Respondent Sangguniang Bayan of Navotas is a legislative body being sued for the purpose of enjoining it from
performing any and all acts geared toward [the] collection of the assailed taxes and/or sale of petitioner’s
properties during the pendency of the instant petition. It may be served with summons and other court processes
through the Vice Mayor, as the presiding officer, at the Municipal Hall Building, Navotas, Metro Manila.

Respondent Manuel T. Enriquez is being sued in his official capacity as the Municipal Treasurer of Navotas and
may be served with summons and other court processes at the Municipal Hall Building, Navotas, Metro Manila.

On the respective dates of November 16, 1988 and June 29, 1992, petitioner entered into a Build-Operate-and-
Transfer Project Agreements (BOTs) with Mirant Navotas I Corporation (MNC-I), formerly known as Hopewell
Energy Philippines Corporation, and Mirant Navotas II Corporation (MNC-II), formerly known as Hopewell
Tileman (Philippines) Corporation. The BOTs are for the construction, operation and eventual transfer to
petitioner of MNC-I’s 200-MW and MNC-II’s 100-MW gas turbine power stations. During the period of the
agreement, the operation of the power stations shall be under the actual and direct control and supervision of
petitioner. Consequently, petitioner has the obligation to pay for all taxes, except business taxes, relative to the
implementation of the agreements.

For the 1st quarter of 2003, petitioner paid respondent Municipality, real property taxes in the amounts of
₱3,382,715.88 and ₱4,973,869.83 for the MNC-I and MNC-II power stations, respectively. After the said quarter,
petitioner stopped paying the real property taxes, claiming exemption from payment thereon pursuant to Section
234(c) of the Local Government Code (LGC) of 1991.

In a letter dated March 30, 2004, petitioner informed the Municipal Assessor of Navotas (Municipal Assessor) of
their position on the exemption from real property tax of the subject properties, pertaining to machineries and
equipment which are in the name of Hopewell Tileman (Phils.) Corporation.

Pursuant to the BOTs, MNC-I and MNC-II eventually transferred to petitioner all their rights, title and interests in
and to the fixtures, fittings, plant and equipment, and improvements comprising the power stations on March 24,
2003 and August 1, 2005, respectively.

On May 25, 2005, MNC-II received four notices from respondent Municipal Treasurer informing MNC-I and MNC-
II of their real property tax delinquencies for the 2nd, 3rd, and 4th quarters of calendar year 2003 and for the
calendar years 2004 and 2005. Details are as follows:

First and Second Notices, addressed

to Hopewell Energy (Phils.) Corp. ₱59,505,580.10
First and Second Notices, addressed
to Hopewell Tileman Phil. Corp. 88,792,759.05
Total ₱148,298,339.15

In a letter dated July 26, 2005, petitioner reiterated to the Municipal Assessor of Navotas their position that the
subject properties are exempt from real property tax.

On November 21, 2005, a Warrant of Levy was received from respondent Municipal Treasurer. MNC-II also
received two Notices of Sale of Delinquent Real Property, scheduling the public auction of the subject properties
on December 21, 2005.
 Page 13 of 41

On December 16, 2005, petitioner filed before the Regional Trial Court (RTC) of Malabon City, a Petition for
Declaratory Relief, Annulment of Notice of Delinquency, Warrant of Levy, and Notice of Sale with prayer for the
issuance of a Writ of Preliminary Injunction and Temporary Restraining Order (TRO).

Petitioner’s application for the issuance of a TRO was denied by the RTC. Respondents proceeded withthe
scheduled public auction. Considering that there were no bidders for the purchase of the subject properties, the
same were forfeited in favor of respondent Municipality. Petitioner filed an amended petition before the RTC
seeking to declare as null and void the public auction and the forfeiture of the subject properties in favor of
respondent Municipality on the ground that these actions are patently illegal because the subject properties are
exempt from real property tax.

The RTC denied the petition on May 23, 2007. It ruled that although Section 234 of the LGC exempts petitioner
from payment of real property tax due on the subject properties located at MNC-I and MNC-II, failure of petitioner
to exhaust administrative remedies resulted in the finality of the assessment; thus, the eventual collection was
in order. The RTC explained that petitioner should have appealed the assessments to the Local Board of
Assessment Appeals (LBAA), pursuant to Section 226 of the LGC, within 60 days from the date of receipt of the
written notice of assessment. If not satisfied with the decision of the LBAA, petitioner should appeal to the Central
Board of Assessment Appeals (CBAA), pursuant to Section 229 of the samecode. The RTC further went on in
saying that before initiating any protest to the assessment, the tax due must first be paid.

After an extension of 30 days was granted, a Petition for Review with application for Temporary Restraining
Order and/or Order of Suspension of Collection and Writ of Preliminary Injunctionwas seasonably filed with this
Court though registered mail on July 27, 2007 and received on August 2, 2007. The Petition was raffled to the
Second Division of this Court.

Respondents filed their Comment/Opposition through registered mail on October 15, 2007 and which was
received by this Court on October 30, 2007.

In a Resolution dated December 17, 2007, the Second Division treated petitioner’s application for TRO and/or
Order of Suspension of Collection and Writ of Preliminary Injunction as a "Motion to Suspend the Collection of
Taxes," considering that the ownership of the auctioned properties was not yet consolidated inthe name of
respondents; thus, the collection of payment of the alleged deficiency taxes was not yet consummated. The
application was granted on equitable considerations, to preserve the status quoduring the pendency of the
appeal, and in order not to render ineffectual and nugatory the judgment that will be rendered. Respondents
were enjoined from consolidating the ownership of the subject properties, from confiscating them, from taking
possession thereof and from doing any and all acts relative thereto during the pendency of petitioner’s appeal,
until further ordered.

In a Resolution dated March 6, 2008, the case was considered submitted for Decision after petitioner manifested
to adopt its Petition for Review as its Memorandum and after respondents failed to file their Memorandum.

In a Decision promulgated on July 18, 2008, the Second Division dismissed the Petition and sustained the RTC’s
Decision dated May 23, 2007. Petitioner’s Motion for Reconsideration filed on August 6, 2008 was likewise
denied in a Resolution dated January 9, 2009. 3

Resultantly, petitioner filed a petition before the CTA En Banc.

In a Decision dated March 1, 2010, the CTA En Bancaffirmed the CTA Second Division’s decision and held as
follows:

WHEREFORE, finding no reversible error in the assailed Decision promulgated on July 18, 2008 and the
Resolution dated January 9, 2009, the instant Petition for Review is hereby DISMISSED for lack of merit.

SO ORDERED.4

Unfazed, petitioner filed a Motion for Reconsideration but the same was denied in a Resolution dated May 6,
2010.

Accordingly, petitioner lodged the present petition praying as follows:

WHEREFORE, it is respectfully prayed that the Decision dated March 1, 2010 and Resolution dated May 6, 2010
of the Court of Tax Appeals En Bancbe REVERSED and SET ASIDE; a new one be rendered declaring:

1) that the Court of Tax Appeals has jurisdiction over the subject matter of the case;
 Page 14 of 41

2) petitioner as exempt from paying real property taxes over the properties subject of the present case;
and

3) the assailed Notices of Delinquency, Warrant of Levy and Notice of Sale and the Auction Sale and
Forfeiture as null and void.

Petitioner prays for suchother reliefs just and equitable under the premises. 5

Thus, petitioner assigns the following errors for this Court’s resolution:

THE COURT OT TAX APPEALS EN BANC ERRED IN SUSTAINING THE DECISION OF THE COURT OF TAX
APPEALS SECOND DIVISION WHICH HELD THAT:

1) IT HAS NO JURISDICTION OVER THE INSTANT PETITION.

2) APPEALS TO THE LBAA AND CBAA ARE REQUIRED BEFORE THE PETITION DATED
DECEMBER 12, 2005 (AS AMENDED ON JANUARY 5, 2006) FOR DECLARATORY RELIEF FILED
BY PETITIONER BEFORE THE REGIONAL TRIAL COURT MAY BE GIVEN DUE COURSE. 6

In essence, the issue is whether or not the CTA Second Division has jurisdiction to review the decision of the
RTC which concerns a petition for declaratory relief involving real property taxes. We rule in the affirmative.

First, Section 7 of Republic Act (R.A.) No. 9282 7 explicitly enumerates the scope of the CTA’s jurisdiction over
decisions, orders or resolutions of the RTC in local tax cases, to wit:

Sec. 7. Jurisdiction. – The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising
under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising
under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue,
where the National Internal Revenue Code provides a specific period of action, in which case the inaction
shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees, or other
monetary charges, seizure, detention or release of property affected, fines, forfeitures or other penalties
in relation thereto, or other matters arising under the Customs Laws or other laws administered by the
Bureau of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over
cases involving the assessment and taxation of real property originally decided by the provincial or city
board assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from
decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of
the Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or
article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving
dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs
Code, and safeguard measures under Republic Act No. 8800, where either party may appeal the decision
to impose or not to impose said duties;

x x x8
 Page 15 of 41

Such authority is echoed in Section 3, Rule 4 of the Revised Rules of the CTA, which enumerates the jurisdiction
of the CTA, sitting as a Division, to wit:

Section 3. Cases Within the Jurisdiction of the Court In Division.– The Court Division shall exercise:

(a) Exclusive original or appellate jurisdiction to review by appeal the following:

xxxx

(3) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by themin
the exercise of their original jurisdiction;

x x x9

Indeed, the CTA, sitting as Division, has jurisdiction to review by appeal the decisions, rulings and resolutions of
the RTC over local tax cases, which includes real property taxes. This is evident from a perusal of the Local
Government Code (LGC) which includes the matter of Real Property Taxation under one of its main chapters.
Indubitably, the power to impose real property tax is in line with the power vested in the local governments to
create their own revenue sources, within the limitations set forth by law. As such, the collection of real property
taxes is conferred with the local treasurer rather than the Bureau of Internal Revenue.

We, therefore, disagree withthe conclusion of the CTA En Bancthat real property taxes have always been treated
by our laws separately from local taxes. The fact that a separate chapter is devoted to the treatment of real
property taxes, and a distinct appeal procedure is provided therefor does not justify an inference that Section
7(a)(3) of R.A. 9282 pertains only to local taxes other than real property taxes. Rather, the term "local taxes" in
the aforementioned provision should be considered in its general and comprehensive sense, which embraces
real property tax assessments, in line with the precept Generalia verba sunt generaliter inteligencia—what is
generally spoken shall be generally understood. 10 Between the restricted sense and the general meaning of a
word, the general must prevail unless it was clearly intended that the restricted sense was to be used. 11 In the
words of the Court in Marcos v. Chief of Staff: 12 Where words are used which have both, a restricted and a
general meaning, the general must prevail over the restricted unless the nature of the subject matter of the
context clearly indicates that the limited sense is intended. 13

Here, the context in which the word"local taxes" is employed does not clearly indicate that the limited orrestricted
view was intended by the legislature. In addition, the specification of real property tax assessment under
Paragraph (a)(5) of Section 7 of R.A. 9282, in relation to the decisions of the CBAA, is only proper given that the
CBAA has no jurisdiction, either original or appellate, over cases involving local taxes other than real property
taxes.

Based on the foregoing, the general meaning of "local taxes" should be adopted in relation to Paragraph (a)(3)
of Section 7 of R.A. 9282, which necessarily includes real property taxes. Second, as correctly pointed out by
petitioner, when the legality or validity of the assessment is in question, and not its reasonableness or
correctness, appeals to the LBAA, and subsequently to the CBAA, pursuant to Sections 226 14 and 22915 of the
LGC, are not necessary.

Stated differently, in the event that the taxpayer questions the authority and power of the assessor to impose the
assessment, and of the treasurer to collect the real property tax, resort to judicial action may prosper. This is in
consonance with the ruling in Ty v. Trampe. 16 Here, a petition for prohibition with prayer for a restraining order
and/or writ of preliminary injunction was filed to declare null and void the new tax assessments and enjoin the
collection ofreal estate taxes based on said assessments. Despite the alleged non-exhaustion of administrative
remedies and non-payment of the real property tax, the Court gave due course to the case on the ground that
the controversy did not involve questions of fact but only of law. Thus: Respondents argue that this case
ispremature because petitioners neither appealed the questioned assessments on their properties to the Board
of Assessment Appeal, pursuant to Sec. 226, nor paid the taxes under protest, per Sec. 252.

We do not agree. Although as a rule, administrative remedies must first be exhausted before resort to judicial
action can prosper, there is a well-settled exception in cases where the controversy does not involve questions
of fact but only of law. In the present case, the parties, even during the proceedings in the lower court on 11 April
1994, already agreed "that the issues in the petition are legal", and thus, no evidence was presented in said
court.

In laying down the powers of the Local Board of Assessment Appeals, R.A. 7160 provides in Sec. 229 (b) that
"(t)he proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts . . . ." It follows
that appeals to this Board may be fruitful only where questions of fact are involved. Again, the protest
 Page 16 of 41

contemplated under Sec. 252 of R.A. 7160 is needed where there is a question as to the reasonableness of the
amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax
assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not
act on his protest. In the case at bench, however, the petitioners are questioning the very authority and power of
the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax.
These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any
increase.17

Accordingly, if the only issue isthe legality or validity of the assessment – a question of law – directrecourse to
the RTC is warranted.

In the case at bar, the claim of petitioner essentially questions the very authority and power of the Municipal
Assessor to impose the assessment and of the Municipal Treasurer to collect the real property tax with respect
to the machineries and equipment located in the Navotas I and II power plants. Certainly, it does not pertain to
the correctness of the amounts assessed but attacks the validity of the assessment of the taxes itself.

The well-established rule is that the allegations in the complaint and the character of the relief sought determine
the nature of an action.18 Here, it is not disputed that the machineries and equipment are being used for power
generation. The primordial issue, however, is whether these machineries and equipment are actually, directly
and exclusively used by petitioner within the purview of Section 23419 of the LGC, which exempts it from payment
of real property taxes, to wit:

Section 234. Exemptions from Real Property Tax.- The following are exempted from payment of the real property
tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit
or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used
for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts
and government owned or controlled corporations engaged in the supply and distribution of water and/or
generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment usedfor pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations
are hereby withdrawn upon the effectivity of this Code.

As can be gleaned from the foregoing,the issue is clearly legal given that it involves an interpretation of the
contract between the parties vis-à-vis the applicable laws, i.e.,which entity actually, directly and exclusively uses
the subject machineries and equipment. The answer to such question would then determine whether petitioner
is indeed exempt from payment of real property taxes. Since the issue is a question of law, the jurisdiction was
correctly lodged with the RTC.

On this score, it is worthy to note that in its Decision dated March 23, 2007, the RTC already declared that
petitioner is exempt from payment of real property taxes on its machineries located at MNC-I & MNC-II, the
pertinent portion of which reads:

There is no dispute that Section 234 of the Local Government Code exempts petitioner from payment of real
property tax due on its machineries located at MNC-1 and MNC-2 power stations.20

The foregoing was not disputed by respondents.

Despite this, the RTC still dismissed the petition on the ground of lack of jurisdiction for failure of petitioner to
appeal the assailed assessment to the LBAA and the CBAA.
 Page 17 of 41

More, we find it obscure that the CTA En Banc, while finding that the issue obtaining in the present case pertains
to a question of fact, held that Ty is applicable to the present case with respect to the requirement for payment
under protest, to wit:

If the legality of the real property tax assessment is at issue, the well pronounced ruling and ratiocination made
by the Supreme Court in the case of Ty vs. Trampeis applicable. There, the Supreme Court notes:

Again, the protest contemplated under Sec. 252 of R.A. 7160 is needed where there is a question as to the
reasonableness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a
real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal
treasurer will not act on his protest. In the case at bench however, the petitioners are questioning the very
authority and power of the assessor, acting solely and independently, to impose the assessment and of the
treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on
the very validity of any increase.

In a similar way, as there has been an apparent admission by petitioner that it is not questioning the
excessiveness or reasonableness of the real property tax assessment, but the legality thereof; there is no need
for petitioner to pay the realproperty tax assessment before initiating a protest.

At this point, although we agree with petitioner on it stance that payment under protest is not necessary, we still
maintain the view that exhausting the available remedies of lodging an appeal before the LBAA and CBAA before
availing judicial intervention is still mandatory.21

We find the reasoning of the CTA En Banc quite illogical. For one, it held that unlike Ty, the resolution of the
question of law submitted by petitioner requires proof of facts; 22 hence, resort to the LBAA is necessary.
However, instead of sustaining the requirement of payment under protest under Section 25223 of the LGC, the
CTA En Banc found the payment of protest no longer necessary given the availing circumstances of the case. If
indeed the Court a quofinds the present case to fall under the jurisdiction of the LBAA, and then the CBAA on
appeal, the dispensation with the requirement of payment under protest would be devoid of merit and contrary
to law and jurisprudence.

It is for the foregoing reasons that we deem the reversal of the ruling of the CTA En Bancin order. At the risk of
repetition, what is being questioned in the present case is the authority of the Municipal Assessor to impose the
assessment and of the Municipal Treasurer to collect the real property taxes. Accordingly, resort to the LBAA
and the CBAA is no longer necessary for the same reason that what is being questioned is the legality or validity
of the tax assessment, not the reasonableness or correctness of the assessment. Certainly, it would be unjust
to require the realty owner to first pay the tax, the validity of which he precisely questions, before he can lodge
a complaint to the court.

In fine, if a taxpayer is not satisfied with the decision of the CBAA or the RTC, as the case may be, the taxpayer
may file, within thirty (30) days from receipt of the assailed decision,a petition for review with the CTA pursuant
to Section 7(a) of R.A. 9282. In cases where the question involves the amount of the tax or the correctness
thereof, the appeal will be pursuant to Section 7(a)(5) of R.A. 9282. Whenthe appeal comes from a judicial
remedy which questions the authority of the local government to impose the tax, Section 7(a)(3) of R.A. 9282
applies. Thereafter, such decision, ruling or resolution may be further reviewed by the CT A En Banc pursuant
to Section 2, Rule 4 of the Revised Rules of the CT A, to wit:

Section 2. Cases Within the Jurisdiction of the Court En Banc. -The Court En Banc shall exercise exclusive
appellate jurisdiction to review by appeal the following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise
of its exclusive appellate jurisdiction over:

xxxx

(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original jurisdiction;

x x x24

Thus, the CT A En Banc erred in dismissing the petition for review en bane, and affirming the CTA Second
Division’s position that the RTC has no jurisdiction over the instant case for failure of petitioner to exhaust
administrative remedies which resulted in the finality of the assessment. Anent the matter on the validity of the
Notices of Delinquency issued by the Municipal Treasurer, as well as the Warrant of Levy, the same involves
questions of fact. Thus, the remand of this case to the RTC is warranted for the proper verification and
 Page 18 of 41

determination of the factual basis and merits of this case, and in order that the ends of substantial justice and
fair play may be served.

WHEREFORE, the Court GRANTS the petition and SETS ASIDE the Decision dated March 1, 2010 and
Resolution dated May 6, 2010 of the Court of Tax Appeals En Banc in E.B. No. 461. Moreover, this case is
REMANDED to the Regional Trial Court for determination of petitioner's claims for annulment of Notice of
Delinquency, Warrant of Levy, and Notice of Sale.

SO ORDERED.
 Page 19 of 41

G.R. No. 184203 November 26, 2014

CITY OF LAPU-LAPU, Petitioner,

vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.

x-----------------------x

G.R. No. 187583

PROVINCE OF BATAAN, represented by GOVERNOR ENRIQUE T. GARCIA, JR., and EMERLINDA S.

TALENTO, in her capacity as Provincial Treasurer of Bataan, Petitioners,
vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.

Facts common to the consolidated petitions

In the exercise of his legislative powers, 6 President Ferdinand E. Marcos issued Presidential Decree No. 66 in
1972, declaring as government policy the establishment of export processing zones in strategic locations in the
Philippines. Presidential Decree No. 66 aimed "to encourage and promote foreign commerce as a means of
making the Philippines a center of international trade, of strengthening our export trade and foreign exchange
position, of hastening industrialization,of reducing domestic unemployment, and of accelerating the development
of the country."7

To carry out this policy, the Export Processing Zone Authority (EPZA) was created to operate, administer, and
manage the export processing zones established in the Port of Mariveles, Bataan 8 and such other export
processing zones that may be created by virtue of the decree. 9

The decree declared the EPZA non-profit in character10 with all its revenues devoted to its development,
improvement, and maintenance.11 To maintain this non-profit character, the EPZA was declared exempt from all
taxes that may be due to the Republic of the Philippines, its provinces, cities, municipalities, and other
government agencies and instrumentalities.12 Specifically, Section 21 of Presidential Decree No. 66 declared the
EPZA exempt from payment of real property taxes:

Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be non-profit and
shall devote and use all its returns from its capital investment, as well as excess revenues from its operations,
for the development, improvement and maintenance and other related expenditures of the Authority to pay its
indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section
1 of this Decree. In consonance therewith, the Authority is hereby declared exempt:

....

(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to be paid to
the National Government, its provinces, cities, municipalities and other government agenciesand
instrumentalities[.]

In 1979, President Marcos issued Proclamation No. 1811, establishing the Mactan Export Processing Zone.
Certain parcels of land of the public domain located in the City of Lapu-Lapuin Mactan, Cebu were reserved to
serve as site of the Mactan Export Processing Zone.

In 1995, the PEZA was created by virtue of Republic Act No. 7916 or "the Special Economic Zone Act of
1995"13 to operate, administer, manage, and develop economic zones in the country. 14 The PEZA was granted
the power to register, regulate, and supervise the enterprises located in the economic zones. 15 By virtue of the
law, the export processing zone in Mariveles, Bataan became the Bataan Economic Zone 16 and the Mactan
Export Processing Zone the Mactan Economic Zone. 17

As for the EPZA, the law required it to "evolve into the PEZA in accordance with the guidelines and regulations
set forth in an executive order issued for [the] purpose." 18

On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282, directing the PEZA to assume
and exercise all of the EPZA’s powers, functions, and responsibilities "as provided in Presidential Decree No.
66, as amended, insofar as they are not inconsistent with the powers, functions, and responsibilities of the PEZA,
as mandated under [the Special Economic Zone Act of 1995]." 19 All of EPZA’s properties, equipment, and assets,
among others, were ordered transferred to the PEZA. 20
 Page 20 of 41

Facts of G.R. No. 184203

In the letter21 dated March 25, 1998, the City of Lapu-Lapu, through the Office of the Treasurer, demanded from
the PEZA 32,912,350.08 in real property taxes for the period from 1992 to 1998 on the PEZA’s properties located
in the Mactan Economic Zone.

The City reiterated its demand in the letter22 dated May 21, 1998. It cited Sections 193 and 234 of the Local
Government Code of 1991 that withdrew the real property tax exemptions previously granted to or presently
enjoyed by all persons. The City pointed out that no provision in the Special Economic Zone Act of 1995
specifically exempted the PEZA from payment of real property taxes, unlike Section 21 of Presidential Decree
No. 66 that explicitly provided for EPZA’s exemption. Since no legal provision explicitly exempted the PEZA from
payment of real property taxes, the City argued that it can tax the PEZA.

The City made subsequent demands23 on the PEZA. In its last reminder24 dated May 13, 2002, the City assessed
the PEZA 86,843,503.48 as real property taxes for the period from 1992 to 2002.

On September 11, 2002, the PEZAfiled a petition for declaratory Relief 25 with the Regional Trial Court of Pasay
City, praying that the trial court declare it exempt from payment ofreal property taxes. The case was raffled to
Branch 111.

The City answered26 the petition, maintaining that the PEZA is liable for real property taxes. To support its
argument, the City cited a legal opinion dated September 6, 1999 issued by the Department of Justice, 27 which
stated that the PEZA is not exempt from payment of real property taxes. The Department of Justice based its
opinion on Sections 193 and 234 of the Local Government Code that withdrew the tax exemptions, including real
property tax exemptions, previously granted to all persons.

A reply28 was filed by the PEZA to which the City filed a rejoinder. 29

Pursuant to Rule 63, Section 3 of Rules of Court, 30 the Office of the Solicitor General filed a comment31 on the
PEZA’s petition for declaratory relief. It agreed that the PEZA is exempt from payment of real property taxes,
citing Sections 24 and 51 of the Special Economic Zone Act of 1995.

The trial court agreed with the Solicitor General. Section 24 of the Special Economic Zone Act of 1995 provides:

SEC. 24. Exemption from National and Local Taxes. – Except for real property taxes on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within the
ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s
office of the municipality or city where the enterprise is located.

Section 51 of the law, on the other hand, provides:

SEC. 51. Ipso-Facto Clause. – All privileges, benefits, advantages or exemptions granted to special economic
zones under Republic Act No. 7227, shall ipso-facto be accorded to special economic zones already created or
to be created under this Act. The free port status shall not be vested upon new special economic zones.

Based on Section 51, the trial court held that all privileges, benefits, advantages, or exemptions granted tospecial
economic zones created under the Bases Conversion and Development Act of 1992 apply to special economic
zones created under the Special Economic ZoneAct of 1995.

Since these benefits include exemption from payment of national or local taxes, these benefits apply to special
economic zones owned by the PEZA.

According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of the Special Economic
Zone Act of 1995. It ruled that Section 24, which taxes real property owned by developers of economic zones,
only applies to private developers of economic zones, not to public developers like the PEZA. The PEZA,
therefore, is not liable for real property taxes on the land it owns.

Characterizing the PEZA as an agency of the National Government, the trial court ruled that the City had no
authority to tax the PEZA under Sections 133(o) and 234(a) of the Local Government Code of 1991.
 Page 21 of 41

In the resolution32 dated June 14, 2006, the trial court granted the PEZA’s petition for declaratory relief and
declared it exempt from payment of real property taxes.

The City filed a motion for reconsideration, 33 which the trial court denied in its resolution34 dated September 26,
2006.

The City then appealed35 to the Court of Appeals.

The Court of Appeals noted the following issues the City raised in its appellant’s brief: (1) whether the trial court
had jurisdiction over the PEZA’s petition for declaratory relief; (2) whether the PEZA is a government agency
performing governmental functions; and (3) whether the PEZA is exempt from payment of real property taxes.

The issues presented by the City, according to the Court of Appeals, are pure questions of law which should
have been raised in a petition for review on certiorari directly filed before this court. Since the City availed itself
of the wrong mode of appeal, the Court of Appeals dismissed the City’s appeal in the decision 36 dated January
11, 2008.

The City filed a motion for extension of time to file a motion for reconsideration, 37 which the Court of Appeals
denied in the resolution38 dated April 11, 2008.

Despite the denial of its motion for extension, the City filed a motion for reconsideration. 39 In the
resolution40 dated August 6, 2008, the Court of Appeals denied that motion.

In its petition for review on certiorari with this court,41 the City argues that the Court of Appeals "hid under the
skirts of technical rules"42 in resolving its appeal. The City maintains that its appeal involved mixed questions of
fact and law. According to the City, whether the PEZA performed governmental functions "cannot completely be
addressed by law but [by] the factual and actual activities [the PEZA is] carrying out." 43

Even assuming that the petition involves pure questions of law, the City contends that the subject matter of the
case "is of extreme importance with [far-reaching] consequence that [its magnitude] would surely shape and
determine the course ofour nation’s future."44 The Court of Appeals, the City argues, should have resolved the
case on the merits.

The City insists that the trial court had no jurisdiction to hear the PEZA’s petition for declaratory relief. According
to the City, the case involves real property located in the City of Lapu-Lapu. The petition for declaratory relief
should have been filed before the Regional Trial Court of the City of Lapu-Lapu.45

Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite allegedly demanded real
property taxes from the PEZA. The City argues that the PEZA should have likewise impleaded these local
government units as respondents in its petition for declaratory relief. For its failure to do so, the PEZA violated
Rule 63, Section 2 of the Rules of Court, and the trial court should have dismissed the petition. 46

This court ordered the PEZA to comment on the City’s petition for review on certiorari. 47

At the outset of its comment, the PEZA argues that the Court of Appeals’ decision dated January 11, 2008 had
become final and executory. After the Court of Appeals had denied the City’s appeal, the City filed a motion for
extension of time to file a motion for reconsideration. Arguing that the time to file a motion for reconsideration is
not extendible, the PEZA filed its motion for reconsideration out of time. The Cityhas no more right to appeal to
this court.48

The PEZA maintains that the City availed itself of the wrong mode of appeal before the Court of Appeals. Since
the City raised pure questions of law in its appeal, the PEZA argues that the proper remedy is a petition for
review on certiorari with this court, not an ordinary appeal before the appellate court. The Court of Appeals,
therefore, correctly dismissed outright the City’s appeal under Rule 50, Section 2 of the Rules of Court. 49

On the merits, the PEZA argues that it is an agency and instrumentality of the National Government. It is therefore
exempt from payment of real property taxes under Sections 133(o) and 234(a) of the Local Government
Code.50 It adds that the tax privileges under Sections 24 and 51 of the Special Economic Zone Act of 1995
applied to it.51

Considering that the site of the Mactan Economic Zoneis a reserved land under Proclamation No. 1811, the
PEZA claims that the properties sought to be taxed are lands of public dominion exempt from real property
taxes.52
 Page 22 of 41

As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had jurisdiction to hear its
petition for declaratory relief under Rule 63, Section 1 of the Rules of Court.[53]] It also argued that it need not
implead the Province of Bataan, the City of Baguio, and the Province of Cavite as respondents considering that
their demands came after the PEZA had already filed the petition in court. 54

Facts of G.R. No. 187583

After the City of Lapu-Lapu had demanded payment of real property taxes from the PEZA, the Province of Bataan
followed suit. In its letter55 dated May 29, 2003, the Province, through the Office of the Provincial Treasurer,
informed the PEZA that it would be sending a real property tax billing to the PEZA. Arguing that the PEZA is a
developer of economic zones, the Province claimed that the PEZA is liable for real property taxes under Section
24 of the Special Economic Zone Act of 1995.

In its reply letter56 dated June 18, 2003, the PEZA requested the Province to suspend the service of the real
property tax billing. It cited its petition for declaratory relief against the City of Lapu-Lapu pending before the
Regional Trial Court, Branch 111, Pasay City as basis.

The Province argued that serving a real property tax billing on the PEZA "would not in any way affect [its] petition
for declaratory relief before [the Regional Trial Court] of Pasay City." 57 Thus, in its letter58 dated June 27, 2003,
the Province notified the PEZAof its real property tax liabilities for June 1, 1995 to December 31, 2002 totalling
₱110,549,032.55.

After having been served a tax billing, the PEZA again requested the Province to suspend collecting its alleged
real property tax liabilities until the Regional Trial Court of Pasay Cityresolves its petition for declaratory relief. 59

The Province ignored the PEZA’s request. On January 20, 2004, the Province served on the PEZA a statement
of unpaid real property tax for the period from June 1995 to December 2004. 60

The PEZA again requested the Province to suspend collecting its alleged real property taxes.61 The Province
denied the request in its letter62 dated January 29, 2004, then servedon the PEZA a warrant of levy63 covering
the PEZA’s real properties located in Mariveles, Bataan.

The PEZA’s subsequent requests64 for suspension of collection were all denied by the Province. 65 The Province
then served on the PEZA a notice of delinquency in the payment of real property taxes 66 and a notice of sale of
real property for unpaid real property tax.67 The Province finally sent the PEZA a notice of public auction of the
latter’s properties in Mariveles, Bataan. 68

On June 14, 2004, the PEZA filed a petition for injunction 69 with prayer for issuance of a temporary restraining
order and/or writ of preliminary injunction before the Regional Trial Court of Pasay City, arguing that it is exempt
from payment ofreal property taxes. It added that the notice of sale issued by the Province was void because it
was not published in a newspaper ofgeneral circulation asrequired by Section 260 of the Local Government
Code.70

The case was raffled to Branch 115.

In its order71 dated June 18, 2004, the trial court issued a temporary restraining order against the Province. After
the PEZA had filed a ₱100,000.00 bond, 72 the trial court issued a writ of preliminary injunction, 73 enjoining the
Province from selling the PEZA’s real properties at public auction.

On March 3, 2006, the PEZA and Province both manifested that each would file a memorandum after which the
case would be deemed submitted for decision. The parties then filed their respective memoranda. 74

In the order75 dated January 31, 2007, the trial court denied the PEZA’s petition for injunction. The trial court
ruled that the PEZA is not exempt from payment of real property taxes. According to the trial court, Sections 193
and 234 of the Local Government Code had withdrawn the real property tax exemptions previously granted to
all persons, whether natural or juridical.76 As to the tax exemptions under Section 51 of the Special Economic
Zone Act of 1995, the trial court ruled that the provision only applies to businesses operating within the economic
zones, not to the PEZA.77

The PEZA filed before the Court of Appeals a petition for certiorari 78 with prayer for issuance of a temporary
restraining order.
 Page 23 of 41

The Court of Appeals issued a temporary restraining order, enjoining the Province and its Provincial Treasurer
from selling PEZA's properties at public auction scheduled on October 17, 2007. 79 It also ordered the Province
to comment on the PEZA’s petition.

In its comment,80 the Province alleged that it received a copy of the temporary restraining order only on October
18, 2007 when it had already sold the PEZA’s properties at public auction. Arguing that the act sought to be
enjoined was already fait accompli, the Province prayed for the dismissal of the petition for certiorari.

The PEZA then filed a supplemental petition for certiorari, prohibition, and mandamus 81 against the Province,
arguing that the Provincial Treasurer of Bataan acted with grave abuse of discretion in issuing the notice of
delinquency and notice of sale. It maintained that it is exempt from payment of real property taxes because it is
a government instrumentality. It added that its lands are property of public dominion which cannot be sold at
public auction.

The PEZA also filed a motion 82 for issuance of an order affirming the temporary restraining order and a writ of
preliminary injunction to enjoin the Province from consolidating title over the PEZA’s properties.

In its resolution83 dated January 16, 2008,the Court of Appeals admitted the supplemental petition for certiorari,
prohibition, and mandamus. It required the Province to comment on the supplemental petition and to file a
memorandum on the PEZA’s prayer for issuance of temporary restraining order.

The Province commented84 on the PEZA’s supplemental petition, to which the PEZA replied.85

The Province then filed a motion 86 for leave to admit attached rejoinder with motion to dismiss. In the rejoinder
with motion to dismiss,87 the Province argued for the first time that the Court of Appeals had no jurisdiction over
the subject matter of the action.

According to the Province, the PEZA erred in filing a petition for certiorari. Arguing that the PEZA sought to
reverse a Regional Trial Court decision in a local tax case, the Province claimed that the court with appellate
jurisdiction over the action is the Court of Tax Appeals. The PEZA then prayed that the Court of Appeals dismiss
the petition for certiorari for lack of jurisdiction over the subject matter of the action.

The Court of Appeals held that the issue before it was whether the trial court judge gravely abused his discretion
in dismissing the PEZA’s petition for prohibition. This issue, according to the Court of Appeals, is properly
addressed in a petition for certiorari over which it has jurisdiction to resolve. It, therefore, maintained jurisdiction
to resolve the PEZA’s petition for certiorari. 88

Although it admitted that appeal, not certiorari, was the PEZA’s proper remedy to reverse the trial court’s
decision,89 the Court of Appeals proceeded to decide the petition for certiorari in "the broader interest of justice." 90

The Court of Appeals ruled that the trial court judge gravely abused his discretion in dismissing the PEZA’s
petition for prohibition. It held that Section 21 of Presidential Decree No. 66 and Section 51 of the Special
Economic Zone Act of 1995 granted the PEZA exemption from payment of real property taxes. 91 Based on the
criteria set in Manila International Airport Authority v. Court of Appeals,92 the Court of Appeals found that the
PEZA is an instrumentality of the national government. No taxes, therefore, could be levied on it by local
government units.93

In the decision94 dated August 27, 2008, the Court of Appeals granted the PEZA’s petition for certiorari. It set
aside the trial court’s decision and nullified all the Province’s proceedings with respect to the collection of real
property taxes from the PEZA.

The Province filed a motion for reconsideration,95 which the Court of Appeals denied in the resolution 96 dated
April 16, 2009 for lack of merit.

In its petition for review on certiorari with this court, 97 the Province of Bataan insists that the Court of Appeals
had no jurisdiction to take cognizance of the PEZA’s petition for certiorari. The Province maintains that the Court
of Tax Appeals had jurisdiction to hear the PEZA’s petition since it involved a local tax case decided by a Regional
Trial Court.98

The Province reiterates that the PEZA is not exempt from payment of real property taxes. The Province points
out that the EPZA, the PEZA’s predecessor, had to be categorically exempted from payment of real property
taxes. The EPZA, therefore, was not inherently exempt from payment of real property taxes and so is the PEZA.
Since Congress omitted from the Special Economic Zone Act of 1995 a provision specifically exempting the
 Page 24 of 41

PEZA from payment of real property taxes, the Province argues that the PEZA is a taxable entity. It cited the rule
in statutory construction that provisions omitted in revised statutes are deemed repealed. 99

With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting tax exemptions and
benefits, the Province argues that these provisions only apply to business establishments operating within
special economic zones,100 not to the PEZA.

This court ordered the PEZA tocomment on the Province’s petition for review on certiorari.101 In its
comment,102 the PEZA argues that the Court of Appeals had jurisdiction to hear its petition for certiorari since
the issue was whether the trial court committed grave abuse of discretion in denying its petition for injunction.
The PEZA maintains thatit is exempt from payment of real property taxes under Section 21 of Presidential Decree
No. 66 and Section 51 of the Special Economic Zone Act of 1995.

The Province filed its reply,103 reiterating its arguments in its petition for review on certiorari. On the PEZA’s
motion,104 this court consolidated the petitions filed by the City of Lapu-Lapu and the Province of Bataan.105

The issues for our resolution are the following:

I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapu’s appeal for raising pure
questions of law;II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear,
try, and decide the City of Lapu-Lapu’s petition for declaratory relief;III. Whether the petition for injunction
filed before the Regional Trial Court, Branch 115, Pasay City, is a local tax case appealable to the Court
of Tax Appeals; andIV. Whether the PEZA is exempt from payment of real property taxes.

We deny the consolidated petitions.

II.

The Regional Trial Court of Pasay had no

jurisdiction to hear, try, and decide the
PEZA’s petition for declaratory relief
against the City of Lapu-Lapu

Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63 provides:

SECTION 1. Who may file petition. – Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other
governmental regulation may, before breach or violation, thereof, bring an action in the appropriate Regional
Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder.

An action for reformation of an instrument, to quiet title to real property or remove clouds therefrom, or to
consolidate ownership under Article 1607 of the Civil Code, may be brought under this Rule.

The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court, the subject matter of
litigation in an action for declaratory relief being incapable of pecuniary estimation.121 Section 19 of the Judiciary
Reorganization Act of 1980 provides:

SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of litigation is incapable of pecuniary estimation[.]

Consistent with the law, the Rules state that a petition for declaratory relief is filed "in the appropriate Regional
Trial Court."122

A special civil action for declaratory relief is filed for a judicial determination of any question of construction or
validity arising from, and for a declaration of rights and duties, under any of the following subject matters: a deed,
will, contract or other written instrument, statute, executive order or regulation, ordinance, orany other
governmental regulation.123 However, a declaratory judgment may issue only if there has been "no breach of the
documents in question."124 If the contract or statute subject matter of the action has already been breached, the
appropriate ordinary civil action must be filed. 125 If adequate relief is available through another form of action or
proceeding, the other action must be preferred over an action for declaratory relief. 126
 Page 25 of 41

In Ollada v. Central Bank of the Philippines,127 the Central Bank issued CB-IED Form No. 5 requiring certified
public accountants to submit an accreditation under oath before they were allowed to certify financial statements
submitted to the bank. Among those financial statements the Central Bank disallowed were those certified by
accountant Felipe B. Ollada.128 Claiming that the requirement "restrained the legitimate pursuit of one’s trade," 129

Ollada filed a petition for declaratory relief against the Central Bank.

This court ordered the dismissal of Ollada’s petition "without prejudice to [his] seeking relief in another
appropriate action."130 According to this court, Ollada’s right had already been violated when the Central Bank
refused to accept the financial statements he prepared. Since there was already a breach, a petition for
declaratory relief was not proper. Ollada must pursue the "appropriate ordinary civil action or proceeding." 131 This
court explained:

Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief under the provisions
of Rule 66 of the Rules of Court. On the question of when a special civil action of this nature would prosper, we
have already held that the complaint for declaratory relief will not prosper if filed after a contract, statute or right
has been breached or violated. In the present case such is precisely the situation arising from the facts allege d
in the petition for declaratory relief. As vigorously claimed by petitioner himself, respondent had already invaded
or violated his right and caused him injury — all these giving him a complete cause of action enforceable in an
appropriate ordinary civil action or proceeding. The dismissal of the action was, therefore, proper in the lightof
our ruling in De Borja vs. Villadolid, 47 O.G. (5) p. 2315, and Samson vs. Andal, G.R. No. L-3439, July 31, 1951,
where we held that an action for declaratory relief should be filed before there has been a breach of a contract,
statutes or right, and that it is sufficient tobar such action, that there had been a breach — which would constitute
actionable violation. The rule is that an action for Declaratory Relief is proper only if adequate relief is not
available through the means of other existing forms of action or proceeding (1 C.J.S. 1027-1028).132

It is also required that the parties to the action for declaratory relief be those whose rights or interests are affected
by the contract or statute in question. 133 "There must be an actual justiciable controversy or the ‘ripening seeds’
of one"134 between the parties. The issue between the parties "must be ripe for judicial determination." 135 An
action for declaratory relief based on theoreticalor hypothetical questions cannot be filed for our courts are not
advisory courts.136

In Republic v. Roque,137 this court dismissed respondents’ petition for declaratory relief for lack of justiciable
controversy. According to this court, "[the respondents’] fear of prospective prosecution [under the Human
Security Act] was solely based on remarks of certain government officials which were addressed to the general
public."138

In Velarde v. Social Justice Society, 139 this court refused to resolve the issue of "whether or not [a religious
leader’s endorsement] of a candidate for elective office or in urging or requiring the members of his flock to vote
for a specific candidate is violative [of the separation clause]." 140 According to the court, there was no justiciable
controversy and ordered the dismissal of the Social Justice Society’s petition for declaratory relief. This court
explained: Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders, the
petitioner and his co-respondents below had endorsed or threatened to endorse a candidate or candidates for
elective offices; and that such actual or threatened endorsement "will enable [them] to elect men to public office
who [would] in turn be forever beholden to their leaders, enabling them to control the government"[;] and "pos[ing]
a clear and present danger ofserious erosion of the people’s faith in the electoral process[;] and reinforc[ing] their
belief that religious leaders determine the ultimate result of elections," which would then be violative of the
separation clause.

Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to
constitute a justiciable controversy. The Petition does not even allege any indication or manifest intent on the
part of any of the respondents below to champion an electoral candidate, or to urge their so-called flock to vote
for, or not to vote for, a particular candidate. It is a time-honored rule that sheer speculation does not give rise to
an actionable right.

Obviously, there is no factual allegation that SJS’ rights are being subjected to any threatened, imminent and
inevitable violation that should be prevented by the declaratory relief sought. The judicial power and duty of the
courts to settle actual controversies involving rights that are legally demandable and enforceable cannot be
exercised when there is no actual or threatened violation of a legal right.

All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof be resolved." In
other words, it merely sought an opinion of the trial court on whether the speculated acts of religious leaders
endorsing elective candidates for political offices violated the constitutional principle on the separation of church
and state. SJS did not ask for a declaration of its rights and duties; neither did it pray for the stoppage of any
 Page 26 of 41

threatened violation of its declared rights. Courts, however, are proscribed from rendering an advisory
opinion.141 In sum, a petition for declaratory relief must satisfy six requisites:

[F]irst, the subject matter of the controversy must be a deed, will, contract or other written instrument, statute,
executive order or regulation, or ordinance; second, the terms of said documents and the validity thereof are
doubtful and require judicial construction; third, there must have been no breach of the documents in question;
fourth, there must be an actual justiciable controversy or the "ripening seeds" of one between persons whose
interests are adverse; fifth, the issue must be ripe for judicial determination; and sixth, adequate relief is not
available through other means or other forms of action or proceeding.142 (Emphases omitted)

We rule that the PEZA erred in availing itself of a petition for declaratory relief against the City. The City had
already issued demand letters and real property tax assessment against the PEZA, in violation of the PEZA’s
alleged tax-exempt status under its charter. The Special Economic Zone Act of 1995, the subject matter of
PEZA’s petition for declaratory relief, had already been breached. The trial court, therefore, had no jurisdiction
over the petition for declaratory relief. There are several aspects of jurisdiction. 143 Jurisdiction over the subject
matter is "the power to hear and determine cases of the general class to which the proceedings in question
belong."144 It is conferred by law, which may either be the Constitution or a statute. 145 Jurisdiction over the subject
matter means "the nature of the cause of action and the relief sought."146 Thus, the cause of action and character
of the relief sought as alleged in the complaint are examinedto determine whether a court had jurisdiction over
the subject matter.147 Any decision rendered by a court without jurisdiction over the subjectmatter of the action
is void.148

Another aspect of jurisdiction is jurisdiction over the person. It is "the power of [a] court to render a personal
judgment or to subject the parties in a particular action to the judgment and other rulings rendered in the
action."149 A court automatically acquires jurisdiction over the person of the plaintiff upon the filing of the initiatory
pleading.150 With respect to the defendant, voluntary appearance in court or a valid service of summons vests
the court with jurisdiction over the defendant’s person. 151 Jurisdiction over the person of the defendant is
indispensable in actions in personamor those actions based on a party’s personal liability. 152 The proceedings in
an action in personamare void if the court had no jurisdiction over the person of the defendant. 153

Jurisdiction over the resor the thing under litigation is acquired either "by the seizure of the property under legal
process, whereby it is brought into actual custody of the law; or asa result of the institution of legal proceedings,
in which the power of the court is recognized and made effective." 154 Jurisdiction over the res is necessary in
actions in remor those actions "directed against the thing or property or status of a person and seek judgments
with respect thereto as against the whole world."155 The proceedings in an action in rem are void if the court had
no jurisdiction over the thing under litigation. 156

In the present case, the Regional Trial Court had no jurisdiction over the subject matter of the action, specifically,
over the remedy sought. As this court explained in Malana v. Tappa: 157

. . . an action for declaratory relief presupposes that there has been no actual breach of the instruments involved
or of rights arising thereunder. Since the purpose of an action for declaratory relief is to secure an authoritative
statement of the rights and obligations of the parties under a statute, deed, or contract for their guidance in the
enforcement thereof, or compliance therewith, and not to settle issues arising from an alleged breach thereof, it
may be entertained only before the breach or violation of the statute, deed, or contract to which it refers. A petition
for declaratory relief gives a practical remedy for ending controversies that have not reached the state where
another relief is immediately available; and supplies the need for a form of action that will set controversies at
rest before they lead to a repudiation of obligations, an invasion of rights, and a commission of wrongs.

Where the law or contract has already been contravened prior to the filing of an action for declaratory relief, the
courts can no longer assume jurisdiction over the action. In other words, a court has no more jurisdiction over
an action for declaratory relief if its subject has already been infringed or transgressed before the institution of
the action.158 (Emphasis supplied)

The trial court should have dismissed the PEZA’s petition for declaratory relief for lack of jurisdiction.

Once an assessment has already been issued by the assessor, the proper remedy of a taxpayer depends on
whether the assessment was erroneous or illegal.

An erroneous assessment "presupposes that the taxpayer is subject to the tax but is disputing the correctness
of the amount assessed."159 With an erroneous assessment, the taxpayer claims that the local assessor erred in
determining any of the items for computing the real property tax, i.e., the value of the real property or the portion
thereof subject to tax and the proper assessment levels. In case of an erroneous assessment, the taxpayer must
exhaust the administrative remedies provided under the Local Government Code before resorting to judicial
action.
 Page 27 of 41

The taxpayer must first pay the realproperty tax under protest. Section 252 of the Local Government Code
provides:

SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the taxpayer first paysthe
tax. There shall be annotated on the tax receipts the words "paid under protest". The protest in writing must be
filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the
case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from
receipt.

(b) The tax or a portion thereof paidunder protest, shall be held in trust by the treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax
protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax
liability.

(d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in
subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book II of
this Code.

Should the taxpayer find the action on the protest unsatisfactory, the taxpayer may appeal with the Local Board
of Assessment Appeals within 60 days from receipt of the decision on the protest:

SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the property
who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property
may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of
Assessment Appeals of the provincial or city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.

Payment under protest and appeal to the Local Board of Assessment Appeals are "successive administrative
remedies to a taxpayer who questions the correctness of an assessment." 160 The Local Board Assessment
Appeals shall not entertain an appeal "without the action of the local assessor" 161 on the protest.

If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment Appeals, the taxpayer may
appeal with the Central Board of Assessment Appeals within 30 days from receipt of the Local Board’s decision:

SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall decide the appeal within
one hundred twenty (120) days from the date of receipt of such appeal. The Board, after hearing, shall render
its decision based on substantial evidence or such relevant evidence on record as a reasonable mind might
accept as adequate to support the conclusion. (b) In the exercise ofits appellate jurisdiction, the Board shall have
the power to summon witnesses, administer oaths, conduct ocular inspection, take depositions, and issue
subpoena and subpoena duces tecum. The proceedings of the Board shall be conducted solely for the purpose
of ascertaining the facts without necessarily adhering to technical rules applicable in judicial proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person having legal interest therein
and the provincial or city assessor with a copy of the decision of the Board. In case the provincial or city assessor
concurs in the revision or the assessment, it shall be his duty to notify the owner of the property or the person
having legal interest therein of such factusing the form prescribed for the purpose. The owner of the property or
the person having legal interest therein or the assessor who is not satisfied with the decision of the Board, may,
within thirty (30) days after receipt of the decision of said Board, appeal to the Central Board of Assessment
Appeals, as herein provided. The decision of the Central Board shall be final and executory. (Emphasis supplied)

On the other hand, an assessment is illegal if it was made without authority under the law. 162 In case of an illegal
assessment, the taxpayer may directly resort to judicial action without paying under protest the assessed tax
and filing an appeal with the Local and Central Board of Assessment Appeals.

In Ty v. Trampe,163 the Municipal Assessor of Pasig sent Alejandro B. Ty a notice of assessment with respect to
Ty’s real properties in Pasig. Without resorting to the administrative remedies under the Local Government Code,
Ty filed before the Regional Trial Court a petition, praying that the trial court nullify the notice of assessment. In
assessing the real property taxes due, the Municipal Assessor used a schedule of market values solely prepared
by him. This, Ty argued, was void for being contrary to the Local Government Code requiring that the schedule
of market values be jointly prepared by the provincial, city, and municipal assessors of the municipalities within
the Metropolitan Manila Area.
 Page 28 of 41

This court ruled that the assessmentwas illegal for having been issued without authority of the Municipal
Assessor. Reconciling provisions of the Real Property Tax Code and the Local Government Code, this court
held that the schedule of market valuesmust be jointly prepared by the provincial, city, and municipal assessors
of the municipalities within the Metropolitan Manila Area.

As to the issue of exhaustion of administrative remedies, this court held that Ty did not err in directly resorting to
judicial action. According to this court, payment under protest is required only "where there is a question as to
the reasonableness of the amount assessed."164 As to appeals before the Local and Central Board of
Assessment Appeals, they are "fruitful only where questions of fact are involved." 165

Ty raised the issue of the legality of the notice of assessment, an issue that did not go into the reasonableness
of the amount assessed. Neither did the issue involve a question of fact. Ty raised a question of law and,
therefore, need not resort to the administrative remedies provided under the Local Government Code.

In the present case, the PEZA did not avail itself of any of the remedies against a notice of assessment. A petition
for declaratory relief is not the proper remedy once a notice of assessment was already issued.

Instead of a petition for declaratory relief, the PEZA should have directly resorted to a judicial action. The PEZA
should have filed a complaint for injunction, the "appropriate ordinary civil action" 166 to enjoin the City from
enforcing its demand and collecting the assessed taxes from the PEZA. After all, a declaratory judgment as to
the PEZA’s tax-exempt status is useless unless the City isenjoined from enforcing its demand.

Injunction "is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from doing a certain
act."167 "It may be the main action or merely a provisional remedy for and as incident in the main action."168 The
essential requisites of a writ of injunction are: "(1) there must be a right in esseor the existence of a right to be
protected; and (2) the act against which the injunction is directed to constitute a violation of such right." 169

We note, however, that the City confused the concepts of jurisdiction and venue in contending that the Regional
Trial Court of Pasay had no jurisdiction because the real properties involved in this case are located in the City
of Lapu-Lapu.

On the one hand, jurisdiction is "the power to hear and determine cases of the general class to which the
proceedings in question belong."170 Jurisdiction is a matter of substantive law.171 Thus, an action may be filed
only with the court or tribunal where the Constitution or a statute says it can be brought. 172 Objections to
jurisdiction cannot be waived and may be brought at any stage of the proceedings, even on appeal. 173 When a
case is filed with a court which has no jurisdiction over the action, the court shall motu propriodismiss the case. 174

On the other hand, venue is "the place of trial or geographical location in which an action or proceeding should
be brought." 175 In civil cases, venue is a matter of procedural law. 176 A party’s objections to venue must be
brought at the earliest opportunity either in a motion to dismiss or in the answer; otherwise the objection shall be
deemed waived.177 When the venue of a civil action is improperly laid, the court cannot motu propriodismiss the
case.178

The venue of an action depends on whether the action is a real or personal action. Should the action affect title
to or possession of real property, or interest therein, it is a real action. The action should be filed in the proper
court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated. 179 If
the action is a personal action, the action shall be filed with the proper court where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the plaintiff. 180

The City was objecting to the venue of the action, not to the jurisdiction of the Regional Trial Court of Pasay. In
essence, the City was contending that the PEZA’s petition is a real action as it affects title to or possession of
real property, and, therefore, the PEZA should have filed the petition with the Regional Trial Court of Lapu-Lapu
City where the real properties are located. However, whatever objections the City has against the venue of the
PEZA’s action for declaratory relief are already deemed waived. Objections to venue must be raised at the
earliest possible opportunity.181 The City did not file a motion to dismiss the petition on the ground that the venue
was improperly laid. Neither did the City raise this objection in its answer.

In any event, the law sought to be judicially interpreted in this case had already been breached. The Regional
Trial Court of Pasay, therefore, had no jurisdiction over the PEZA’s petition for declaratory relief against the City.

WHEREFORE, the consolidated petitions are DENIED.

SO ORDERED.
 Page 29 of 41

G.R. No. 196278 June 17, 2015

CE CASECNAN WATER and ENERGY COMPANY, INC., Petitioner,

vs.
THE PROVINCE OF NUEVA ECIJA, THEOFFICEOFTHEPROVINCIAL ASSESSOR OF NUEVA ECIJA, and
THEOFFICEOFTHEPROVINCIAL TREASURER OF NUEVA ECIJA, as represented by HON. AURELIO UMALI,
HON. FLORANTE FAJARDO and HON. EDILBERTO PANCHO, respectively, or their lawful
successors, Respondents,
NATIONAL IRRIGATION ADMINISTRATION and DEPARTMENT OF FINANCE, As Necessary Parties.

Factual Antecedents

On June 26, 1995, petitioner and the National Irrigation Administration (NIA) entered into a build-operate-transfer
(BOT) contract known as the "Amended and Restated Casecnan Project Agreement" 5 (Casecnan Contract) relative
to the construction and development of the Casecnan Multi-Purpose Irrigation and Power Project (Casecnan Project)
in Pantabangan, Nueva Ecija and Alfonso Castaneda, Nueva Vizcaya. The Casecnan Project is a combined irrigation
and hydroelectric power generation facility using the Pantabangan Dam in Nueva Ecija. On September 29, 2003,
petitioner and NIA executed a Supplemental Agreement6 amending Article II of the Casecnan Contract which pertains
to payment of taxes. Article 2.2 thereof states that NIA must reimburse petitioner for real property taxes (RPT) provided
the same was paid upon NIA’s directive and with the concurrence of the Department of Finance.

On September 6, 2005, petitioner received from the Office of the Provincial Assessor a Notice of Assessment of Real
Property dated August 2, 2005, which indicates that for the years 2002 to 2005, its RPT due was 248,676,349.60.
Petitioner assailed the assessment with the Nueva Ecija Local Board of Assessment Appeals (Nueva Ecija LBAA)
which dismissed it on January 26, 2006. Undeterred, petitioner filed a Notice of Appeal with the Nueva Ecija Central
Board of Assessment Appeals (Nueva Ecija CBAA). During the pendency thereof, respondents collected from
petitioner the RPT due under the said assessment as well as those pertaining to the years 2006 up to the second
quarter of 2008, totalling ₱363,703,606.88. Petitioner paid the assessed RPT under protest; it also initiated
proceedings questioning the validity of the collection with respect to the years 2006 up to the second quarter of 2008.
Thereafter, petitioner received a letter7 dated July 9, 2008 from the Office of the Provincial Treasurer stating that it has
RPT in arrears for the years 2002 up to the second quarter of 2008 amounting to ₱1,277,474,342.10. Petitioner
received another letter8 dated August 29, 2008 from the same office clarifying that its arrearages in RPT actually
amounted to ₱1,279,997,722.70 (2008 RPT Reassessment). Again, petitioner questioned this assessment through
an appeal before the Nueva Ecija LBAA. While the same was pending, petitioner received from respondents a letter
dated September 10, 2008 demanding payment for its alleged RPT arrearages.

Hence, on September 23, 2008, petitioner filed with the RTC of San Jose City, Nueva Ecija a Complaint 9 for injunction
and damages with application for temporary restraining order (TRO) and preliminary injunction 10 praying to restrain
the collection of the 2008 RPT Reassessment. Petitioner emphasized, among others, that it was not the one which
should pay the taxes but NIA.

Ruling of the Regional Trial Court

On September 24, 2008, the RTC denied petitioner’s application for a 72-hour TRO.11 Meanwhile, petitioner received
from the Office of the Provincial Treasurer a letter dated September 22, 2008 further demanding payment for RPT
covering the third quarter of 2008 (2008-3Q Assessment). Thus, petitioner filed on September 29, 2008 an Amended
Complaint12 asking the RTC to likewise enjoin respondents from collecting RPT based on the 2008-3Q Assessment in
the amount of ₱53,346,755.18.

On October 2, 2008, the RTC issued a 20-day TRO13 enjoining respondents from collecting from petitioner the RPT
covered by the 2008 RPT Reassessment amounting to ₱1,279,997,722.70, including surcharges and penalties.

Subsequently, however, the RTC denied petitioner’s application for writ of preliminary injunction in its Order 14 of
October 24, 2008.It also denied petitioner’s Motion for Reconsideration thereof in an Order 15 dated January 30, 2009.

On April 24, 2009, petitioner filed with the CA a Petition for Certiorari16 under Rule 65 of the Rules of Court seeking to
annul and set aside the aforementioned October 24, 2008 and January 30, 2009 RTC Orders.

Ruling of the Court of Appeals

In its November 2, 2010 Decision,17 the CA observed that the Petition for Certiorari before it was actually an offshoot
of the 2008 RPT Reassessment. And since in resolving the issue of whether the RTC committed grave abuse of
discretion in denying petitioner’s application for a writ of preliminary injunction, the issue of the validity of the
assessment and the collection of the RPT against petitioner must also be resolved, thus jurisdiction over the case lies
within the Court of Tax Appeals (CTA).Hence, the CA ruled:
 Page 30 of 41

WHEREFORE, premises considered, the Petition for Certiorari is hereby DENIED DUE COURSE and accordingly,
DISMISSED for lack of jurisdiction.

SO ORDERED.18

Petitioner sought reconsideration; however, it was denied in a Resolution19 dated March 24, 2011.

Undaunted, petitioner filed this Petition imputing upon the CA grave error in:

x x x ruling that it is the Court of Tax Appeals (and not the Court of Appeals) which has jurisdiction over the CA
Injunction Case.20

Petitioner’s Arguments

In its Petition21 and Reply,22 petitioner argues that it is the CA, not the CTA, which has jurisdiction over the subject
matter of its Petition for Certiorari. Petitioner maintains that its petition relates to an ordinary civil action for injunction
and not to a local tax case. It insists that in both the RTC injunction case and the Petition for Certiorari before the CA,
petitioner was not protesting respondents’ assessment of RPT against it; what it was seeking was respondents’
enjoinment from committing or continuing to commit acts that would probably violate its right. In particular, petitioner
points out that the RTC injunction case was intended to enjoin respondents from collecting payment during the
pendency of the case with the LBAA challenging the validity of the 2008 RPT Reassessment. Petitioner explains that
the said injunction case was filed with the RTC because the LBAA has no injunctive power.

Respondents’ Arguments

In their Comment,23 respondents argue that in resolving the issue on the propriety of issuing a writ of injunction, the
CA will have to inevitably pass upon the propriety of the assessment of RPT on the Casecnan Project, a local tax
matter which is within the jurisdiction of the CTA. Respondents also echo the CA pronouncement that petitioner failed
to exhaust administrative remedies with respect to the assessment and collection of RPT.

Our Ruling

There is no merit in the Petition.

It is the CTA which has the power to rule

on a Petition for Certiorari assailing an
interlocutory order of the RTC relating
to a local tax case.

Jurisdiction over the subject matter is required for a court to act on any controversy. It is conferred by law and not by
the consent or waiver upon a court. As such, if a court lacks jurisdiction over an action, it cannot decide the case on
the merits and must dismiss it.24

With respect to the CTA, its jurisdiction was expanded and its rank elevated to that of a collegiate court with special
jurisdiction by virtue of Republic Act No. 9282.25 This expanded jurisdiction of the CTA includes its exclusive appellate
jurisdiction to review by appeal the decisions, orders or resolutions of the RTC in local tax cases originally decided or
resolved by the RTC in the exercise of its original or appellate jurisdiction. 26

In the recent case of City of Manila v. Grecia-Cuerdo,27 the Court ruled that the CTA likewise has the jurisdiction to
issue writs of certiorari or to determine whether there has been grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the CTA’s exclusive
appellate jurisdiction, thus:

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section 1,
Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one Supreme Court
and in such lower courts as may be established by law and that judicial power includes the duty of the courts of justice
to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether
or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA includes
that of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction of the
tax court. It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari
in these cases.28 (Citations omitted and emphasis supplied)
 Page 31 of 41

Further, the Court in City of Manila, citing J. M. Tuason & Co., Inc. v. Jaramillo, 29 De Jesus v. Court of Appeals,30 as
well as the more recent cases of Galang, Jr. v. Hon. Judge Geronimo 31 and Bulilis v. Nuez,32 held that:

Consistent with the above pronouncement, this Court has held as early as the case of J.M. Tuason & Co., Inc. v.
Jaramillo, et al. that ‘if a case may be appealed to a particular court or judicial tribunal or body, then said court or
judicial tribunal or body has jurisdiction to issue the extraordinary writ of certiorari, in aid of its appellate jurisdiction.’
This principle was affirmed in De Jesus v. Court of Appeals, where the Court stated that ‘a court may issue a writ of
certiorari in aid of its appellate jurisdiction if said court has jurisdiction to review, by appeal or writ of error, the final
orders or decisions of the lower court.’ The rulings in J.M. Tuason and De Jesus were reiterated in the more recent
cases of Galang, Jr. v. Geronimo and Bulilis v. Nuez.

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction is conferred on
a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into effect may be
employed by such court or officer.33 (Citations omitted)

Anent petitioner’s contention that it is the CA which has jurisdiction over a certiorari petition assailing an interlocutory
order issued by the RTC in a local tax case, the Court had this to say: If this Court were to sustain petitioners’
contention that jurisdiction over their certiorari petition lies with the CA, this Court would be confirming the exercise by
two judicial bodies, the CA and the CTA, of jurisdiction over basically the same subject matter – precisely the split-
jurisdiction situation which is anathema to the orderly administration of justice. The Court cannot accept that such was
the legislative motive, especially considering that the law expressly confers on the CTA, the tribunal with the
specialized competence over tax and tariff matters, the role of judicial review over local tax cases without mention of
any other court that may exercise such power. Thus, the Court agrees with the ruling of the CA that since appellate
jurisdiction over private respondents’ complaint for tax refund is vested in the CTA, it follows that a petition for certiorari
seeking nullification of an interlocutory order issued in the said case should, likewise, be filed with the same court. To
rule otherwise would lead to an absurd situation where one court decides an appeal in the main case while another
court rules on an incident in the very same case.

xxxx

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it effectively, to
make all orders that will preserve the subject of the action, and to give effect to the final determination of the appeal.
It carries with it the power to protect that jurisdiction and to make the decisions of the court thereunder effective. The
court, in aid of its appellate jurisdiction, has authority to control all auxiliary and incidental matters necessary to the
efficient and proper exercise of that jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the
performance of any act which might interfere with the proper exercise of its rightful jurisdiction in cases pending before
it.34 (Citations omitted and emphasis supplied) Given these, it is settled that it is the CTA which has exclusive
jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the RTC in a local tax
case.

The RTC injunction case is a local tax >case.

In maintaining that it is the CA that has jurisdiction over petitioner’s certiorari petition, the latter argues that the
injunction case it filed with the RTC is not a local tax case but an ordinary civil action. It insists that it is not protesting
the assessment of RPT against it but only prays that respondents be enjoined from collecting the same.

The Court finds, however, that in praying to restrain the collection of RPT, petitioner also implicitly questions the
propriety of the assessment of such RPT. This is because in ruling as to whether to restrain the collection, the RTC
1awp++i1

must first necessarily rule on the propriety of the assessment. In other words, in filing an action for injunction to restrain
collection, petitioner was in effect also challenging the validity of the RPT assessment. As aptly discussed by the CA:

x x x [T]he original action filed with the RTC is one for Injunction, with an application for Temporary Restraining Order
and a Writ of Preliminary Injunction to enjoin the province of Nueva Ecija from further collecting the alleged real
property tax liability assessed against it. Simply because the action is an application for injunctive relief does not
necessarily mean that it may no longer be considered as a local tax case. The subject matter and the issues, not the
name or designation of the remedy, should control. While an ancillary action for injunction may not be a main case,
the court [still has] to determine, even in a preliminary matter, the applicable tax laws, rules and jurisprudence. x x x 35

Moreover, in National Power Corporation v. Municipal Government of Navotas,36 as well as in City of Lapu-Lapu v.
Philippine Economic Zone Authority,37 this Court already held that local tax cases include RPT.

No doubt, the injunction case before the RTC is a local tax case. And as earlier discussed, a certiorari petition
questioning an interlocutory order issued in a local tax case falls under the jurisdiction of the CT A. Thus, the CA
correctly dismissed the Petition for Certiorari before it for lack of jurisdiction.

WHEREFORE, the Petition is DENIED. The November 2, 2010 Decision and March 24, 2011 Resolution of the
Court of Appeals in CA-G.R. SP No.108441 are AFFIRMED.SO ORDERED.
 Page 32 of 41

G.R. No. 209303, November 14, 2016

NATIONAL POWER CORPORATION, Petitioner, v. THE PROVINCIAL TREASURER OF BENGUET, THE

PROVINCIAL ASSESSOR OF BENGUET, THE MUNICIPAL TREASURER OF ITOGON, BENGUET AND THE
MUNICIPAL ASSESSOR OF ITOGON, BENGUET, Respondent.

DECISION

PERALTA,**J.:

For this Court's resolution is a petition for review on certiorari filed by petitioner National Power Corporation
(NPC) seeking to reverse and set aside the Decision 1 dated September 12, 2013 of the Court of Tax Appeals
(CTA) En Banc in E.B. No. 891.

Below are the facts of the case.

NPC is a government-owned and controlled corporation created and existing under and by virtue of Republic Act
(R.A.) No. 6395 with principal office address at NPC Office Building Complex, corner Quezon Avenue and BIR
Road, East Triangle, Diliman, Quezon City. NPC was created to undertake the development of power generation
and production from hydroelectric or other sources, and may undertake the construction, operation and
maintenance of power plants, dams, reservoirs, and other works. It operates and maintains the Binga Hydro-
Electric Power Plant.2chanrobleslaw

Respondents Provincial Treasurer, Provincial Assessor, Municipal Treasurer and Municipal Assessor of Itogon
are representatives of the province of Benguet, a local government unit. Respondents issued the subject
assessment in their official capacities. 3chanrobleslaw

Sometime in May 2000, the Municipal Assessor of Itogon, Benguet assessed NPC the amount of P62,645,668.80
real property tax for the following properties located within the Binga Hydro-Electric Power
Plant:ChanRoblesVirtualawlibrary
Tax Declaration No. Classification

99-006-01448 Home Economics Building

99-006-01457 Nursery School

99-006-01458 Elem. School Bldg.

99-006-01505 Power House

99-006-01506 Industrial Road

99-006-01516 (N) High School Building

99-007-02221 Equipment/ Structure

99-008-01509 Machineries/ Equipment

On March 17, 2006, NPC received a letter dated February 16, 2006 from OIC- Provincial Treasurer of Benguet
demanding the payment of real property tax delinquency in the amount of P62,645,668.80. 4chanrobleslaw

On April 20, 2006, NPC challenged before the Local Board of Assessment Appeals (LBAA) the legality of the
assessment and the authority of the respondents to assess and collect real property taxes from it when its
properties are exempt pursuant to Section 234 (b) and (c) of Republic Act (R.A.) No. 7160, otherwise known as
the Local Government Code (LGC) of 1991. In the letters dated September 3, 2000 and April 19, 2001, NPC
filed its requests for exemption, which the respondent Municipal Treasurer of Itogon, Benguet has not acted
upon.5chanrobleslaw

In their Answer dated June 30, 2006, respondents alleged that NPC's properties were not exempt from tax since
the properties were classified in their tax declarations as "industrial," "for industrial use," or "machineries" and
"equipment." There was no evidence that the properties were being used for generation and transmission of
electric power. Respondents alleged that the period to assess had not prescribed as the demand letter in 2006
was for collection of delinquency taxes, and not an initial assessment which was issued in 2003 but was not
settled by NPC. Respondents also alleged that the appeal to the LBAA was filed out of time. 6chanrobleslaw

In an Order dated July 28, 2006, the LBAA deferred the proceedings upon NPC's payment under protest of the
 Page 33 of 41

assessed amount, or upon filing of a surety bond to cover the disputed amount of tax. NPC moved to reconsider
the Order on the ground of lack of legal basis, but the same was denied in a Resolution dated October 3,
2006.7chanrobleslaw

NPC filed a petition for review before the Central Board of Assessment Appeals (CBAA) claiming that payment
under protest was not required before it could challenge the authority of respondents to assess tax on tax exempt
properties before the LBAA.8chanrobleslaw

In their Answer, respondents reiterated their contentions about the taxability of the subject properties. They
added that, pursuant to Section 252 of the LGC, payment under protest was a necessary condition to a protest
against the assessment issued by respondents.9chanrobleslaw

On July 28, 2011, the CBAA dismissed the appeal for being filed out of time, thus:ChanRoblesVirtualawlibrary
IN VIEW THEREOF, the instant appeal is hereby dismissed for having filed out of time. (Petitioner) is advised to
proceed under Section 206 of R.A. No. 7160 (the Local Government Code of 1991) and take the necessary
steps in support of its claim for exemption (sic) to be dropped from the assessment roll.

SO ORDERED.10chanroblesvirtuallawlibrary
The CBAA, in an Order dated February 23, 2012, denied NPC's motion for reconsideration. It ruled that it is
incumbent upon NPC to pay under protest before the LBAA could entertain its appeal as provided under Section
252 of the LGC. It also stressed that the meetings and ocular inspection during the pendency of the case were
all pursuant to R.A. 9285 11 or the Alternative Dispute Resolution Act of 2004.

Undaunted, NPC appealed to the CTA En Banc by filing a Petition for Review dated April 13, 2012. The CTA En
Banc denied the same for lack of merit.12 It ruled that as expressly provided in Section 252 of the LGC, a written
protest against the assessment may be filed before the LBAA within thirty (30) days from payment under protest.
NPC failed to pay under protest the contested assessment, a condition sine qua non for invocation of LBAA's
appellate authority.13chanrobleslaw

Hence, NPC filed the instant petition raising the sole issue:ChanRoblesVirtualawlibrary
THE CTA EN BANC ERRED IN DISMISSING THE PETITION BASED ON PRESCRIPTION AS SAID ISSUE
WAS NEVER RAISED IN THE LBAA. IN FACT, WHEN PETITIONER ELEVATED THE CASE BEFORE THE
CBAA, THE LATTER EVEN CONCLUDED THAT THE ONLY ISSUE TO BE RESOLVED THEREIN WAS
WHETHER THE QUESTIONED PROPERTIES ARE MACHINERIES AND EQUIPMENT THAT ARE
ACTUALLY, DIRECTLY AND EXCLUSIVELY USED BY NPC IN THE GENERATION AND TRANSMISSION OF
ELECTRIC POWER. THUS, THE CTA EN BANC SHOULD HAVE RESOLVED THE CASE BASED ON THE
ISSUE PRESENTED AND ON THE MERITS CONSIDERING THE FAR-REACHING IMPLICATIONS OF ITS
DECISION ON THE OTHER PROPERTIES OF NPC WHICH ARE SIMILARLY SITUATED AS THE SUBJECT
PROPERTIES HEREIN, INSTEAD OF DENYING THE PETITION BASED ON
PRESCRIPTION.14chanroblesvirtuallawlibrary
This Court finds the instant petition without merit.

At the outset, settled is the rule that should the taxpayer/real property owner question the excessiveness or
reasonableness of the assessment, Section 252 of the LGC of 1991 directs that the taxpayer should first pay the
tax due before his protest can be entertained, thus:ChanRoblesVirtualawlibrary
SEC. 252. Payment Under Protest. — (a) No protest shall be entertained unless the taxpayer first pays the tax.
There shall be annotated on the tax receipts the words "paid under protest". The protest in writing must
be filed within thirty (30) days from payment of the tax to the provincial, city treasurer, or municipal treasurer,
in the case of a municipality within Metropolitan Area, who shall decide the protest within sixty (60) days from
receipt.

(b) The tax or a portion thereof paid under protest shall be held in trust by the treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested
shall be refunded to the protestant, or applied as tax credits against his existing or future tax liability.

(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in
subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, Book
II of this Code.15chanroblesvirtuallawlibrary
There shall be annotated on the tax receipts the words "paid under protest." It is only after the taxpayer has paid
the tax due that he may file a protest in writing within 30 days from payment of the tax to the Provincial, City or
Municipal Treasurer, who shall decide the protest within sixty days from receipt. In no case is the local treasurer
obliged to entertain the protest unless the tax due has been paid. 16chanrobleslaw

Relevant thereto, Chapter 3, Title Two, Book II of the LGC of 1991, Sections 226 to 231, 17 provides for the
 Page 34 of 41

administrative remedies available to a taxpayer or real property owner who does not agree with the assessment
of the real property tax sought to be collected, particularly, the procedural and substantive aspects of appeal
before the LBAA and CBAA, including its effect on the payment of real property taxes.

NPC alleges that payment under protest under Section 252 of the LGC is required when the reasonableness of
the amount assessed is being questioned. Challenging the very authority and power of the assessor to impose
the assessment and of the treasurer to collect the tax is an attack on the very validity on any increase and not
merely on the amounts of increase in tax. Thus, such payment is not a condition sine qua non for the LBAA to
entertain the NPC's challenge on the validity of the tax imposed on its tax-exempt properties.18chanrobleslaw

We are not persuaded. As settled in jurisprudence, a claim for exemption from the payment of real property taxes
does not actually question the assessor's authority to assess and collect such taxes, but pertains to the
reasonableness or correctness of the assessment by the local assessor, a question of fact which should be
resolved, at the very first instance, by the LBAA.19 The same may be inferred in Section 206 of the LGC of 1991,
to wit:ChanRoblesVirtualawlibrary
SEC. 206. Proof of Exemption of Real Properly 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 prpperty sufficient
documentary evidence in support of such claim including corporate charters, title of ownership, articles of
incorporation, bylaws, contracts, affidavits, certifications and mortgage deeds, and similar documents.

If the required evidence is not submitted within the period herein prescribed, the property shall be
listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the
same shall be dropped from the assessment roll. 20chanroblesvirtuallawlibrary
Section 206 of the LGC categorically provides that every person by or for whom real property is declared, who
shall claim exemption from payment of real property taxes imposed against said property, shall file with the
provincial, city or municipal assessor sufficient documentary evidence in support of such claim. The burden of
proving exemption from local taxation is upon whom the subject real property is declared. 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. Thus, if the property being taxed has not been dropped from the assessment roll, taxes must be
paid under protest if the exemption from taxation is insisted upon.21chanrobleslaw

As held in Camp John Hay Development Corp. v. Central Board of Assessment Appeals:22
x x x the restriction upon the power of courts to impeach tax assessment without a prior payment, under protest,
of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their
collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local
government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely
disabled. The right of local government units to collect taxes due must always be upheld to avoid severe erosion.
This consideration is consistent with the State policy to guarantee the autonomy of local governments and the
objective of RA No. 7160 or the LGC of 1991 that they enjoy genuine and meaningful local autonomy to empower
them to achieve their fullest development as self-reliant communities and make them effective partners in the
attainment of national goals.

x x x23chanroblesvirtuallawlibrary
Records reveal that the petitioner sent a letter dated September 5, 2000 to the respondent Municipal Treasurer
seeking clarification on the assessment levels used by the Assessor in the billing taxes, as well as claiming tax
exemption on certain properties. It reiterated its claim of exemption in its letter dated April 19, 2001. NPC received
the final demand for payment of tax delinquency issued by the Provincial Treasurer in a letter dated February
16, 2006. Thereafter, petitioner filed a petition purportedly questioning the authority of the respondents to assess
and to collect taxes against some of its properties before the LBAA, without payment under protest of the
assessed real property taxes.

Nothing in the said petition before the LBAA supports petitioner's claim regarding the respondents' alleged lack
of authority. Instead, it raises the following issues, which involve a question of fact: 1.) the properties such as
reservoir, machineries and equipment which are actually, directly and exclusively used by NPC in the generation
and transmission of electricity, and the school buildings are exempt from taxation; and 2.) regarding the escape
revision which was made retroactive from 1994, said taxes could no longer be assessed and collected since
they should have been assessed within five (5) years from the date they became due.24 Though couched in
terms which challenge the validity of the assessment and authority of the respondents, NPC, as a government-
owned and controlled corporation engaged in the generation and transmission of electric power, essentially
anchors its petition based on a claim of exemption from real property tax.

Records are bereft of evidence which proves that, within 30 days from the filing of its Tax Declaration, NPC filed
 Page 35 of 41

with the Municipal Assessor of Itogon, Benguet an application for exemption or any documentary evidence of
the exempt status of its properties. Respondent Municipal Assessor assessed petitioner's properties for real
property tax since they were not dropped from the assessment roll upon failure of NPC to comply with the
requirements of the law. As found by the CTA En Banc:ChanRoblesVirtualawlibrary
x x x Evidently, the two letters requesting exemption from payment of realty tax dated September 3, 2000 and
April 19, 2001 addressed to respondent Municipal Assessor were filed beyond the required thirty (30)-day period
from the declaration of the subject properties for realty tax purposes in May 2000. There is also no showing that
petitioner submitted together with the said formal requests sufficient documents in support of such claim.
Significantly, in the proceedings below, respondents categorically stated that petitioner failed to prove its claimed
tax exemption. This declaration remains undisputed to date. Precisely, the subject properties were listed as
taxable in the assessment roll giving respondents the authority to issue the assailed assessment.

x x x25cralawredchanroblesvirtuallawlibrary
Based on the foregoing backdrop and the above-cited jurisprudence, it is evident that NPC's failure to comply
with the mandatory requirement of payment under protest in accordance with Section 252 of the LGC was fatal
to its appeal. We note that it is not the first occasion where this Court ruled that the NPC, in claiming tax
exemption, questions the reasonableness or correctness of the assessment by the local assessor and not the
legality of the assessment or his authority to assess real property tax. 26 As such, petitioner should have first
complied with Section 252. Its failure to prove that this requirement has been complied with 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.

Notwithstanding such failure to comply therewith, the LBAA opted not to immediately dismiss the case but instead
deferred the hearing subject to the condition that payment of the real property tax should first be made before
proceeding, as provided for under Section 7, 27 Rule V of the Rules of Procedure of the LBAA. We held that, in
requiring the payment under protest before proceeding with the case, the LBAA simply recognized the
importance of the requirement of "payment under protest" before an appeal may be entertained, pursuant to
Section 252, and in relation with Section 231 28 of the same Code as to non-suspension of collection of the realty
tax pending appeal.29chanrobleslaw

NPC alleged that the filing of the motion for reconsideration before the LBAA, though not required under Section
229 (c) of the LGC, should not be taken against it for choosing to exhaust all the means to prove that the
properties are tax-exempt. It should not be deprived of its right to appeal and ventilate its case before the courts
where the decision on the issue of taxability of the properties will have a far-reaching implication on its other
properties similarly situated. It would have been more prudent for the CBAA and the CTA En Banc to have
resolved the case based on the evidence and arguments advanced rather than dismiss the same on pure
technicality and require NPC to present all over again its evidence of exemption of its properties, which are
already deemed exempt during the proceedings before the CBAA. 30chanrobleslaw

In its statement of the timeliness of the appeal, the NPC alleged that as provided under Section 229 (c) of the
LGC, it has 30 days from its receipt of the assailed Order on October 16, 2006 to file its appeal before the CBAA.
However, the CBAA dismissed the same on the ground that it was filed beyond the period of
appeal, viz.:ChanRoblesVirtualawlibrary
x x x [NPC] failed to realize that the period of prescription starts from receipt of the Order of the LBAA which
deferred the hearing on the [NPC]'s Petition. By its own admission, said Order was "received by [NPC] on August
9, 2006," hence the period of appeal to the CBAA should have prescribed thirty (30) days thereafter, or to be
exact, on September 8, 2006.

The provision does not require [NPC] to file a Motion for Reconsideration. But if it does, it files the same at its
own risk as the Motion for Reconsideration does not stay the period of prescription.

To repeat therefore, [NPC] has thirty (30) days from August 9, 2006 or not later than September 8, 2006 within
which to appeal to the Central Board of Assessment Appeals (CBAA). Clearly timeliness has been considerably
breached when the herein Appeal reached this Board on November 22, 2006, seventy-five (75) days, way
beyond the September 8, 2006 deadline.

x x x31chanroblesvirtuallawlibrary
On August 9, 2006, NPC received the LBAA's Order dated July 28, 2009 postponing the hearing. Thereafter,
petitioner opted to file a motion for reconsideration before the LBAA on August 25, 2006, or on the sixteenth day
from receipt of the Order.32 On October 17, 2006, NPC received the Resolution of the LBAA dated October 3,
2006 denying its motion for reconsideration. Therefore, NPC had the remaining period of 14 days, or until
October 31, 2006, within which to appeal.

While it is evident in jurisprudence that the filing of motion for reconsideration before the LBAA is allowed,33 this
Court finds that, inevitably, the filing of the appeal before the CBAA through registered mail on November 16,
 Page 36 of 41

2006 was already late. It is settled that the "fresh period rule" in the case of Domingo Neypes, et al. v. Court of
Appeals, et al..34 applies only to judicial appeals and not to administrative appeals. 35chanrobleslaw

In Panolino v. Tajala,36 We elucidated that:ChanRoblesVirtualawlibrary

x x x The "fresh period rule" in Neypes declares:

chanRoblesvirtualLawlibraryTo standardize the appeal periods provided in the Rules and to afford litigants fair
opportunity to appeal their cases, the Court deems it practical to allow a fresh period of 15 days within which to
file the notice of appeal in the Regional Trial Court, counted from receipt of the order dismissing a motion for a
new trial or motion for reconsideration.

Henceforth, this "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal Trial Courts
to the Regional Trial Courts; Rule 42 on petitions for review from the Regional Trial Courts to the Court of
Appeals; Rule 43 on appeals from quasi-judicial agencies to the Court of Appeals; and Rule 45 governing
appeals by certiorari to the Supreme Court. The new rule aims to regiment or make the appeal period uniform,
to be counted from receipt of the order denying the motion for new trial, motion for reconsideration (whether full
or partial) or any final order or resolution.

x x x

As reflected in the above-quoted portion of the decision in Neypes, the "fresh period rule" shall apply to Rule 40
(appeals from the Municipal Trial Courts to the Regional Trial Courts); Rule 41 (appeals from the Regional Trial
Courts to the Court of Appeals or Supreme Court); Rule 42 (appeals from the Regional Trial Courts to the Court
of Appeals); Rule 43 (appeals from quasi-judicial agencies to the Court of Appeals); and Rule 45 (appeals
by certiorari to the Supreme Court). Obviously, these Rules cover judicial proceedings under the 1997
Rules of Civil Procedure.

Petitioner's present case is administrative in nature involving an appeal from the decision or order of the DENR
regional office to the DENR Secretary. Such appeal is indeed governed by Section 1 of Administrative Order No.
87, Series of 1990. As earlier quoted, Section 1 clearly provides that if the motion for reconsideration is denied,
the movant shall perfect his appeal "during the remainder of the period of appeal, reckoned from receipt of the
resolution of denial;" whereas if the decision is reversed, the adverse party has a fresh 15-day period to perfect
his appeal. (Emphasis supplied.)

x x x37chanroblesvirtuallawlibrary
In the instant case, the subject appeal, i.e., appeal from a decision of the LBAA to the CBAA, is not judicial but
administrative in nature. Thus, the "fresh period rule" in Neypes does not apply. Contrary to NPC's allegation
that it has 30 days from receipt of the Order denying its motion for reconsideration within which to appeal before
the CBAA, it only has the remaining 14 days from the 30-day period of appeal.

Considering that the LBAA has not resolved the merits of the case, the CBAA cannot rule on the very issue of
real property tax exemption of some of NPC's properties as it has yet to acquire jurisdiction. This Court, in
compliance with the procedural steps prescribed in the law, cannot delve on the issue of NPC'S alleged non-
taxability on the ground of exemption. As such, this Court's role in addressing NPC's concerns and the interests
at stake is not all-encompassing. This Court cannot tackle the feared far-reaching implication of the decision on
the other properties of NPC similarly situated as the subject properties, as discussed earlier, the LBAA has yet
to decide on the merits of the case. We can only resolve the current controversy through a reading and
interpretation of the law.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Tax Appeals En Banc in
C.T.A. EB No. 891 is AFFIRMED. The case is REMANDED to the Local Board of Assessment Appeals for further
proceedings subject to payment under protest of the assailed assessment.

SO ORDERED.chanR
 Page 37 of 41

G.R. No. 180110

CAPITOL WIRELESS, INC., Petitioner,

vs.
THE PROVINCIAL TREASURER OF BATANGAS, THE PROVINCIAL ASSESSOR OF BATANGAS, THE
MUNICIPAL TREASURER AND ASSESSOR OF NASUGBU, BATANGAS, Respondents.

Below are the acts of the case.

Petitioner Capitol Wireless Inc. (Capwire) is a Philippine corporation in the business of providing international
telecommunications services. 3 As such provider, Capwire has signed agreements with other local and foreign
telecommunications companies covering an international network of

submarine cable systems such as the Asia Pacific Cable Network System (APCN) (which connects Australia,
Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea, Japan, Indonesia and the Philippines); the
BruneiMalaysia-Philippines Cable Network System (BMP-CNS), the PhilippinesItaly

(SEA-ME-WE-3 CNS), and the Guam Philippines (GP-CNS) systems. 4 The agreements provide for co-
ownership and other rights among the parties over the network. 5

Petitioner Capwire claims that it is co-owner only of the so-called "Wet Segment" of the APCN, while the landing
stations or terminals and Segment E of APCN located in Nasugbu, Batangas are allegedly owned by the
Philippine Long Distance Telephone Corporation (PLDT). 6 Moreover, it alleges that the Wet Segment is laid in
inten1ational, and not Philippine, waters. 7

Capwire claims that as co-owner, it does not own any particular physical part of the cable system but, consistent
with its financial contributions, it owns the right to use a certain capacity of the said systern. 8 This property right
is allegedly reported in its financial books as "Indefeasible Rights in Cable Systems." 9

However, for loan restructuring purposes, Capwire claims that "it was required to register the value of its right,"
hence, it engaged an appraiser to "assess the market value of the international submarine cable system and the
cost to Capwire." 10 On May 15, 2000, Capwire submitted a Sworn Statement of True Value of Real Properties
at the Provincial Treasurer's Office, Batangas City, Batangas Province, for the Wet Segment of the system,
stating:

Capwire claims that it also reported that the system "interconnects at the PLDT Landing Station in Nasugbu,
Batangas," which is covered by a transfer certificate of title and tax declarations in the name of PLDT. 11

As a result, the respondent Provincial Assessor of Batangas (Provincial Assessor) issued the following
Assessments of Real Property (ARP) against Capwire:

In essence, the Provincial Assessor had determined that the submarine cable systems described in Capwire's
Sworn Statement of True Value of Real Properties are taxable real property, a determination that was contested
by Capwire in an exchange of letters between the company and the public respondent. 12 The reason cited by
Capwire is that the cable system lies outside of Philippine territory, i.e., on international waters. 13

On February 7, 2003 and March 4, 2003, Capwire received a Warrant of Levy and a Notice of Auction Sale,
respectively, from the respondent Provincial Treasurer of Batangas (Provincial Treasurer). 14

On March I 0, 2003, Capwire filed a Petition for Prohibition and Declaration of Nullity of Warrant of Levy, Notice
of Auction Sale and/or Auction Sale with the Regional Trial Court (RTC) of Batangas City. 15

After the filing of the public respondents' Comment, 16 on May 5, 2003, the RTC issued an Order dismissing the
petition for failure of the petitioner Capwire to follow the requisite of payment under protest as well as failure to
appeal to the Local Board of Assessment Appeals (LBAA), as provided for in Sections 206 and 226 of Republic
Act (R.A.) No. 7160, or the Local Government Code. 17

Capwire filed a Motion for Reconsideration, 18 but the same was likewise dismissed by the RTC in an
Order19 dated August 26, 2003. It then filed an appeal to the Court of Appeals. 20

On May 30, 2007, the Court of Appeals promulgated its Decision dismissing the appeal filed by Capwire and
affirming the order of the trial court.1âwphi1 The dispositive portion of the CA's decision states:
 Page 38 of 41

WHEREFORE, premises considered, the assailed Orders dated May 5, 2003 and August 26, 2003 of the
Regional Trial Court, Branch II of Batangas City, are AFFIRMED.

SO ORDERED.21

The appellate court held that the trial court correctly dismissed Capwire's petition because of the latter's failure
to comply with the requirements set in Sections 226 and 229 of the Local Government Code, that is, by not
availing of remedies before administrative bodies like the LBAA and the Central Board of Assessment Appeals
(CBAA). 22 Although Capwire claims that it saw no need to undergo administrative proceedings because its
petition raises purely legal questions, the appellate comi did not share this view and noted that the case raises
questions of fact, such as the extent to which parts of the submarine cable system lie within the territorial
jurisdiction of the taxing authorities, the public respondents. 23 Further, the CA noted that Capwire failed to pay
the tax assessed against it under protest, another strict requirement under Section 252 of the Local Government
Code24

Hence, the instant petition for review of Capwire.

Petitioner Capwire asserts that recourse to the Local Board of Assessment Appeals, or payment of the tax under
protest, is inapplicable to the case at bar since there is no question of fact involved, or that the question involved
is not the reasonableness of the amount assessed but, rather, the authority and power of the assessor to impose
the tax and of the treasurer to collect it. 25 It contends that there is only a pure question of law since the issue is
whether its submarine cable system, which it claims lies in international waters, is taxable. 26 Capwire holds the
position that the cable system is not subject to tax.27

Respondents assessors and treasurers of the Province of Batangas and Municipality of Nasugbu, Batangas
disagree with Capwire and insist that the case presents questions of fact such as the extent and portion of the
submarine cable system that lies within the jurisdiction of the said local governments, as well as the nature of
the so-called indefeasible rights as property of Capwire. 28 Such questions are allegedly resolvable only before
administrative agencies like the Local Board of Assessment Appeals. 29

The Court confronts the following issues: Is the case cognizable by the administrative agencies and covered by
the requirements in Sections 226 and 229 of the Local Government Code which makes the dismissal of

Capwire's petition by the RTC proper? May submarine communications cables be classified as taxable real
property by the local governments?

The petition is denied. No error attended the ruling of the appellate court that the case involves factual questions
that should have been resolved before the appropriate administrative bodies.

In disputes involving real property taxation, the general rule is to require the taxpayer to first avail of
administrative remedies and pay the tax under protest before allowing any resort to a judicial action, except when
the assessment itself is alleged to be illegal or is made without legal authority.30

For example, prior resort to administrative action is required when among the issues raised is an allegedly
erroneous assessment, like when the reasonableness of the amount is challenged, while direct court action is
permitted when only the legality, power, validity or authority of the; assessment itself is in question.JI Stated
differently, the general rule of a prerequisite recourse to administrative remedies applies when questions of fact
are raised, but the exception of direct court action is allowed when purely questions of law are involved. 32

This Court has previously and rather succinctly discussed the difference between a question of fact and a
question of law. In Cosmos Bottling Corporation v. Nagrama, Jr., 33 it held:

The Court has made numerous dichotomies between questions of law and fact. A reading of these dichotomies
shows that labels attached to law and fact are descriptive rather than definitive. We are not alone in Our difficult
task of clearly distinguishing questions of fact from questions of law. The United States Supreme Court has ruled
that: "we [do not] yet know of any other rule or principle that will unerringly distinguish a factual finding from a
legal conclusion."

In Ramos v. Pepsi-Cola Bottling Co. of the PI., the Court ruled:

There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain
state of facts; there is a question of fact when the doubt or difference arises as to the truth or the falsehood of
alleged facts.
 Page 39 of 41

We shall label this the doubt dichotomy.

In Republic v. Sandiganbayan, the Court ruled:

x x x A question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the issue does not call for an examination of the probative value
of the evidence presented, the truth or falsehood of facts being admitted. In contrast, a question of fact exists
when the doubt or difference arises as to the truth or falsehood of facts or when the query invites calibration of
the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific
surrounding circumstances as well as their relation to each other and to the whole, and the probability of the
situation.

For the sake of brevity, We shall label this the law application and calibration dichotomy.

In contrast, the dynamic legal scholarship in the United States has birthed many commentaries on the question
of law and question of fact dichotomy. As early as 1944, the law was described as growing downward toward
"roots of fact" which grew upward to meet it. In 1950, the late Professor Louis Jaffe saw fact and law as a
spectrum, with one shade blending imperceptibly into the other. Others have defined questions of law as those
that deal with the general body of legal principles; questions of fact deal with "all other phenomena xx x." Kenneth
Culp Davis also weighed in and noted that the difference between fact and law has been characterized as that
between "ought" questions and "is" questions. 34

Guided by the quoted pronouncement, the Court sustains the CA's finding that petitioner's case is one replete
with questions of fact instead of pure questions of law, which renders its filing in a judicial forum improper because
it is instead cognizable by local administrative bodies like the Board of Assessment Appeals, which are the proper
venues for trying these factual issues. Verily, what is alleged by Capwire in its petition as "the crux of the
controversy," that is, "whether or not an indefeasible right over a submarine cable system that lies in international
waters can be subject to real property tax in the Philippines,"35 is not the genuine issue that the case presents
- as it is already obvious and fundamental that real property that lies outside of Philippine territorial jurisdiction
cannot be subjected to its domestic and sovereign power of real property taxation - but, rather, such factual
issues as the extent and status of Capwire's ownership of the system, the actual length of the cable/s that lie in
Philippine territory, and the corresponding assessment and taxes due on the same, because the public
respondents imposed and collected the assailed real property tax on the finding that at least a portion or some
portions of the submarine cable system that Capwire owns or co-owns lies inside Philippine territory. Capwire's
disagreement with such findings of the administrative bodies presents little to no legal question that only the
courts may directly resolve.

Instead, Capwire argues and makes claims on mere assumptions of certain facts as if they have been already
admitted or established, when they have not, since no evidence of such have yet been presented in the proper
agencies and even in the current petition. As such, it remains unsettled whether Capwire is a mere co-owner,
not full owner, of the subject submarine cable and, if the former, as to what extent; whether all or certain portions
of the cable are indeed submerged in water; and whether the waters wherein the cable/s is/are laid are entirely
outside of Philippine territorial or inland waters, i.e., in international waters. More simply, Capwire argues based
on mere legal conclusions, culminating on its claim of illegality of respondents' acts, but the conclusions are yet
unsupported by facts that should have been threshed out quasi-judicially before the administrative agencies. It
has been held that "a bare characterization in a petition of unlawfulness, is merely a legal conclusion and a wish
of the pleader, and such a legal conclusion unsubstantiated by facts which could give it life, has no standing in
any court where issues must be presented and determined by facts in ordinary and concise
language."36 Therefore, Capwire's resort to judicial action, premised on its legal conclusion that its cables (the
equipment being taxed) lie entirely on international waters, without first administratively substantiating such a
factual premise, is improper and was rightly denied. Its proposition that the cables lie entirely beyond Philippine
territory, and therefore, outside of Philippine sovereignty, is a fact that is not subject to judicial notice since, on
the contrary, and as will be explained later, it is in fact certain that portions of the cable would definitely lie within
Philippine waters. Jurisprudence on the Local Government Code is clear that facts such as these must be
threshed out administratively, as the courts in these types of cases step in at the first instance only when pure
questions of law are involved.

Nonetheless, We proceed to decide on whether submarine wires or cables used for communications may be
taxed like other real estate.

We hold in the affirmative.

Submarine or undersea communications cables are akin to electric transmission lines which this Court has
recently declared in Manila Electric Company v. City Assessor and City Treasurer of Lucena City, 37 as "no longer
exempted from real prope1iy tax" and may qualify as "machinery" subject to real property tax under the Local
 Page 40 of 41

Government Code. To the extent that the equipment's location is determinable to be within the taxing authority's
jurisdiction, the Court sees no reason to distinguish between submarine cables used for communications and
aerial or underground wires or lines used for electric transmission, so that both pieces of property do not merit a
different treatment in the aspect of real property taxation. Both electric lines and communications cables, in the
strictest sense, are not directly adhered to the soil but pass through posts, relays or landing stations, but both
may be classified under the term "machinery" as real property under Article 415(5)38 of the Civil Code for the
simple reason that such pieces of equipment serve the owner's business or tend to meet the needs of his industry
or works that are on real estate. Even objects in or on a body of water may be classified as such, as "waters" is
classified as an immovable under Article 415(8)39 of the Code. A classic example is a boathouse which, by its
nature, is a vessel and, therefore, a personal property but, if it is tied to the shore and used as a residence, and
since it floats on waters which is immovable, is considered real property. 40 Besides, the Court has already held
that "it is a familiar phenomenon to see things classed as real property for purposes of taxation which on general
principle might be considered personal property." 41

Thus, absent any showing from Capwire of any express grant of an exemption for its lines and cables from real
property taxation, then this interpretation applies and Capwire's submarine cable may be held subject to real
property tax.

Having determined that Capwire is liable, and public respondents have the right to impose a real property tax on
its submarine cable, the issue that is unresolved is how much of such cable is taxable based on the extent of
Capwire's ownership or co-ownership of it and the length that is laid within respondents' taxing jurisdiction. The
matter, however, requires a factual determination that is best performed by the Local and Central Boards of
Assessment Appeals, a remedy which the petitioner did not avail of.

At any rate, given the importance of the issue, it is proper to lay down the other legal bases for the local taxing
authorities' power to tax portions of the submarine cables of petitioner. It is not in dispute that the submarine
cable system's Landing Station in Nasugbu, Batangas is owned by PLDT and not by Capwire. Obviously,
Capwire is not liable for the real property tax on this Landing Station. Nonetheless, Capwire admits that it co -
owns the submarine cable system that is subject of the tax assessed and being collected by public respondents.
As the Court takes judicial notice that Nasugbu is a coastal town and the surrounding sea falls within what the
United Nations Convention on the Law of the Sea (UN CLOS) would define as the country's territorial sea (to the
extent of 12 nautical miles outward from the nearest baseline, under Part II, Sections 1 and 2) over which the
country has sovereignty, including the seabed and subsoil, it follows that indeed a portion of the submarine cable
system lies within Philippine territory and thus falls within the jurisdiction of the said local taxing authorities. 42 It
easily belies Capwire's contention that the cable system is entirely in international waters. And even if such
portion does not lie in the 12-nautical-mile vicinity of the territorial sea but further inward, in Prof Magallona v.
Hon. Ermita, et al.43 this Court held that "whether referred to as Philippine 'internal waters' under A1iicle I of the
Constitution44 or as 'archipelagic waters' under UNCLOS Part III, Article 49(1, 2, 4),45 the Philippines exercises
sovereignty over the body of water lying landward of (its) baselines, including the air space over it and the
submarine areas underneath." Further, under Part VI, Article 7946 of the UNCLOS, the Philippines clearly has
jurisdiction with respect to cables laid in its territory that are utilized in support of other installations and structures
under its jurisdiction.

And as far as local government units are concerned, the areas described above are to be considered subsumed
under the term "municipal waters" which, under the Local Government Code, includes "not only streams, lakes,
and tidal waters within the municipality, not being the subject of private ownership and not comprised within the
national parks, public forest, timber lands, forest reserves or fishery reserves, but also marine waters included
between two lines drawn perpendicularly to the general coastline from points where the boundary lines of the
municipality or city touch the sea at low tide and a third line parallel with the general coastline and fifteen (15)
kilometers from it."47 Although the term "municipal waters" appears in the Code in the context of the grant of
quarrying and fisheries privileges for a fee by local governments, 48 its inclusion in the Code's Book II which
covers local taxation means that it may also apply as guide in determining the territorial extent of the local
authorities' power to levy real property taxation.

Thus, the jurisdiction or authority over such part of the subject submarine cable system lying within Philippine
jurisdiction includes the authority to tax the same, for taxation is one of the three basic and necessary attributes
of sovereignty,49 and such authority has been delegated by the national legislature to the local governments with
respect to real property.50 taxation.

As earlier stated, a way for Capwire to claim that its cable system is not covered by such authority is by showing
a domestic enactment or even contract, or an international agreement or treaty exempting the same from real
property taxation. It failed to do so, however, despite the fact that the burden of proving exemption from local
taxation is upon whom the subject real property is declared. 51 Under the Local Government Code, every person
by or for whom real property is declared, who shall claim tax exemption for such property from real property
taxation "shall file with the provincial, city or municipal assessor within thirty (30) days from the date of the
 Page 41 of 41

declaration of real property sufficient documentary evidence in support of such claim." 52 Capwire omitted to do
so. And even under Capwire's legislative franchise, RA 4387, which amended RA 2037, where it may be derived
that there was a grant of real property tax exemption for properties that are part of its franchise, or directly meet
the needs of its business,53 such had been expressly withdrawn by the Local Government Code, which took
effect on January l, 1992, Sections 193 and 234 of which provide:54

Section 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemptions
or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938,
nonstock and nonprofit hospitals and educational institutions, arc hereby withdrawn upon the effectivity of this
Code.

xxxx

Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property
tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration of otherwise, to a
taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques,

nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government-owned or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938;
and

(e) Machinery and equipment used for pollution control and 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 .iuridical, including all government-owned or
controlled corporations arc hereby withdrawn upon the cffectivity of this Code.55

Such express withdrawal had been previously held effective upon exemptions bestowed by legislative franchises
granted prior to the effectivity of the Local Government Code. 56 Capwire fails to allege or provide any other
privilege or exemption that were granted to it by the legislature after the enactment of the Local Government
Code. Therefore, the presumption stays that it enjoys no such privilege or exemption. Tax exemptions arc strictly
construed against the taxpayer because taxes are considered the lifeblood of the nation. 57

WHEREFORE, the petition is DENIED. The Court of Appeals’ Decision dated May 30, 2007 and Resolution
dated October 8. 2007 are AFFIRMED.

SO ORDERED