EH 403 (2011-2012) | TAXATION II – REAL PROPERTY TAX 1

STA LUCIA REALTY v. CITY OF PASIG [JUNE 15, 2011]

FACTS: Petitioner Sta. Lucia Realty & Development, Inc. (Sta. Lucia) is the registered owner of several parcels of land with Transfer Certificates of Title (TCT) Nos. 39112, 39110 and 38457, all of which indicated that the lots were located in Barrio Tatlong Kawayan, Municipality of Pasig. The parcel of land covered by TCT No. 39112 was consolidated with that covered by TCT No. 518403, which was situated in Barrio Tatlong Kawayan, Municipality of Cainta, Province of Rizal (Cainta). The two combined lots were subsequently partitioned into three, for which TCT Nos. 532250, 598424, and 599131, now all bearing the Cainta address, were issued. The lot covered by TCT No. 38457 was not segregated, but a commercial building owned by Sta. Lucia East Commercial Center, Inc., a separate corporation, was built on it. Upon Pasig’s petition to correct the location stated in TCT Nos. 532250, 598424, and 599131, the Land Registration Court, on June 9, 1995, ordered the amendment of the TCTs to read that the lots with respect to TCT No. 39112 were located in Barrio Tatlong Kawayan, Pasig City. On January 31, 1994, Cainta filed a petitionfor the settlement of its land boundary dispute with Pasig before the RTC, Branch 74 of Antipolo City (Antipolo RTC). This case, docketed as Civil Case No. 94-3006, is still pending up to this date. On November 28, 1995, Pasig filed a Complaint, docketed as Civil Case No. 65420, against Sta. Lucia for the collection of real estate taxes, including penalties and interests, on the lots covered by TCT Nos. 532250, 598424, 599131, 92869, 92870 and 38457, including the improvements thereon (the subject properties). Sta. Lucia, in its Answer, alleged that it had been religiously paying its real estate taxes to Cainta, just like what its predecessors-in-interest did, by virtue of the demands and assessments made and the Tax Declarations issued by Cainta on the claim that the subject properties were within its territorial jurisdiction. Sta. Lucia further argued that since 1913, the real estate taxes for the lots covered by the above TCTs had been paid to Cainta. Cainta was allowed to file its own Answer-in-Intervention when it moved to intervene on the ground that its interest would be greatly affected by the outcome of the case. It averred that it had been collecting the real property taxes on the subject properties even before Sta. Lucia acquired them. Cainta further asseverated that the establishment of the boundary monuments would show that the subject properties are within its metes and bounds. Sta. Lucia and Cainta thereafter moved for the suspension of the proceedings, and claimed that the pending petition in the Antipolo RTC, for the settlement of boundary dispute between Cainta and Pasig, presented a “prejudicial question” to the resolution of the case. The RTC denied this in an Order dated December 4, 1996 for lack of merit. Holding that the TCTs were conclusive evidence as to its ownership and location, the RTC, on August 10, 1998, rendered a Decision in favor of Pasig. On October 16, 1998, Pasig filed a Motion for Execution Pending Appeal, to which both Sta. Lucia and Cainta filed several oppositions, on the assertion that there were no good reasons to warrant the execution pending appeal. On April 15, 1999, the RTC ordered the issuance of a Writ of Execution against Sta. Lucia. On May 21, 1999, Sta. Lucia filed a Petition for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals to assail the RTC’s order granting the execution. Docketed as CA-G.R. SP No. 52874, the petition was raffled to the First Division of the Court of Appeals, which on September 22, 2000, ruled in favor of Sta. Lucia. In affirming the RTC, the Court of Appeals declared that there was no proper legal basis to suspend the proceedings. Elucidating on the legal meaning of a “prejudicial question,” it held that “there can be no prejudicial question when the cases involved are both civil.” The Court of Appeals further held that the elements of litis pendentia and forum shopping, as alleged by Cainta to be present, were not met. Sta. Lucia and Cainta filed separate Motions for Reconsideration, which the Court of Appeals denied in a Resolution dated January 27, 2005.

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Undaunted, Sta. Lucia and Cainta filed separate Petitions for Certiorari with this Court. Cainta’s petition, docketed as G.R. No. 166856 was denied on April 13, 2005 for Cainta’s failure to show any reversible error. Sta. Lucia’s own petition is the one subject of this decision. ISSUES: 1) Whether the RTC and the CA were correct in deciding Pasig’s Complaint without waiting for the resolution of the boundary dispute case between Pasig and Cainta; and 2) Whether Sta. Lucia should continue paying its real property taxes to Cainta, as it alleged to have always done, or to Pasig, as the location stated in Sta. Lucia’s TCTs. HELD: We agree with the First Division of the Court of Appeals in CA-G.R. SP No. 52874 that the resolution of the boundary dispute between Pasig and Cainta would determine which local government unit is entitled to collect realty taxes from Sta. Lucia. The Local Government Unit entitled To Collect Real Property Taxes The Former Seventh Division of the Court of Appeals held that the resolution of the complaint lodged before the Pasig RTC did not necessitate the assessment of the parties’ evidence on the metes and bounds of their respective territories. It cited our ruling in Odsigue v. Court of Appeals wherein we said that a certificate of title is conclusive evidence of both its ownership and location. The Court of Appeals even referred to specific provisions of the 1991 Local Government Code and Act. No. 496 to support its ruling that Pasig had the right to collect the realty taxes on the subject properties as the titles of the subject properties show on their faces that they are situated in Pasig.

Under Presidential Decree No. 464 or the “Real Property Tax Code,” the authority to collect real property taxes is vested in the locality where the property is situated:

Sec. 5. Appraisal of Real Property. — All real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated.

x x x x Sec. 57. Collection of tax to be the responsibility of treasurers. — The collection of the real

property tax and all penalties accruing thereto, and the enforcement of the remedies provided for in this Code or any applicable laws, shall be the responsibility of the treasurer of the province, city or municipality where the property is situated. (Emphases ours.)

This requisite was reiterated in Republic Act No. 7160, also known as the 1991 the Local Government

Code, to wit:

Section 201. Appraisal of Real Property. – All real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated. The Department of Finance shall promulgate the necessary rules and regulations for the classification, appraisal, and assessment of real property pursuant to the provisions of this Code.

Section 233. Rates of Levy. – A province or city or a municipality within the Metropolitan Manila Area shall fix a uniform rate of basic real property tax applicable to their respective localities as follows: x x x. (Emphases ours.)

The only import of these provisions is that, while a local government unit is authorized under several laws to collect real estate tax on properties falling under its territorial jurisdiction, it is imperative to first show that these properties are unquestionably within its geographical boundaries. Clearly therefore, the local government unit entitled to collect real property taxes from Sta. Lucia must undoubtedly show that the subject properties are situated within its territorial jurisdiction; otherwise, it would be acting beyond the powers vested to it by law. Certificates of Title as Conclusive Evidence of Location While we fully agree that a certificate of title is conclusive as to its ownership and location, this does not preclude the filing of an action for the very purpose of attacking the statements therein. In De Pedro v. Romasan Development Corporation, we proclaimed that:

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We agree with the petitioners that, generally, a certificate of title shall be conclusive as to all matters contained therein and conclusive evidence of the ownership of the land referred to therein. However, it bears stressing that while certificates of title are indefeasible, unassailable and binding against the whole world, including the government itself, they do not create or vest title. They merely confirm or record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be used as a shield for the commission of fraud; neither do they permit one to enrich himself at the expense of other.

Although it is true that “Pasig” is the locality stated in the TCTs of the subject properties, both Sta. Lucia and Cainta aver that the metes and bounds of the subject properties, as they are described in the TCTs, reveal that they are within Cainta’s boundaries. This only means that there may be a conflict between the location as stated and the location as technically described in the TCTs. Mere reliance therefore on the face of the TCTs will not suffice as they can only be conclusive evidence of the subject properties’ locations if both the stated and described locations point to the same area. The Antipolo RTC, wherein the boundary dispute case between Pasig and Cainta is pending, would be able to best determine once and for all the precise metes and bounds of both Pasig’s and Cainta’s respective territorial jurisdictions. The resolution of this dispute would necessarily ascertain the extent and reach of each local government’s authority, a prerequisite in the proper exercise of their powers, one of which is the power of taxation. The “Prejudicial Question” Debate It would be unfair to hold Sta. Lucia liable again for real property taxes it already paid simply because Pasig cannot wait for its boundary dispute with Cainta to be decided. Pasig has consistently argued that the boundary dispute case is not a prejudicial question that would entail the suspension of its collection case against Sta. Lucia. This was also its argument in City of Pasig v. Commission on Elections, when it sought to nullify the COMELEC’s ruling to hold in abeyance (until the settlement of the boundary dispute case), the plebiscite that will ratify its creation of Barangay Karangalan. We agreed with the COMELEC therein that the boundary dispute case presented a prejudicial question. In light of the foregoing, we hold that the Pasig RTC should have held in abeyance the proceedings in Civil Case No. 65420, in view of the fact that the outcome of the boundary dispute case before the Antipolo RTC will undeniably affect both Pasig’s and Cainta’s rights. In fact, the only reason Pasig had to file a tax collection case against Sta. Lucia was not that Sta. Lucia refused to pay, but that Sta. Lucia had already paid, albeit to another local government unit. Evidently, had the territorial boundaries of the contending local government units herein been delineated with accuracy, then there would be no controversy at all. In the meantime, to avoid further animosity, Sta. Lucia is directed to deposit the succeeding real property taxes due on the subject properties, in an escrow account with the Land Bank of the Philippines.

WHEREFORE, the instant petition is GRANTED. The June 30, 2004 Decision and the January 27, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 69603 are SET ASIDE. The City of Pasig and the Municipality of Cainta are both directed to await the judgment in their boundary dispute case (Civil Case No. 94-3006), pending before Branch 74 of the Regional Trial Court in Antipolo City, to determine which local government unit is entitled to exercise its powers, including the collection of real property taxes, on the properties subject of the dispute. In the meantime, Sta. Lucia Realty and Development, Inc. is directed to deposit the succeeding real property taxes due on the lots and improvements covered by TCT Nos. 532250, 598424, 599131, 92869, 92870 and 38457 in an escrow account with the Land Bank of the Philippines.

CITY OF PASIG v. PEREZ and MENDOZA [G.R. No. 185023 August 24, 2011]

FACTS: This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land, with a total area of 18.4891 hectares, situated in Pasig City. Portions of the properties are leased to different business establishments. In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos), voluntarily surrendered MPLDC to the Republic of the Philippines.On 30 September 2002, the Pasig City Assessor’s Office sent MPLDC two notices of tax delinquency for its failure to pay real property tax on the properties for the period 1979 to 2001 totaling P256,858,555.86. Independent Realty Corporation (IRC) President Ernesto R. Jalandoni (Jalandoni) and Treasurer Rosario Razon informed the Pasig City Treasurer that the tax for the period 1979 to 1986 had been paid, and that the properties were exempt from tax beginning 1987. The Pasig City Treasurer then informed MPLDC and IRC that the properties were not exempt from tax. Then, General Manager Antonio Merelos (Merelos) and Jalandoni again informed the

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Pasig City Treasurer that the properties were exempt from tax. In turn, the Pasig City Treasurer again informed Merelos that the properties were not exempt from tax. On 20 October 2005, the Pasig City Assessor’s Office sent MPLDC a notice of final demand for payment of tax for the period 1987 to 2005 totaling P389,027,814.48. On the same day, MPLDC paid P2,000,000 partial payment under protest. On 9 November 2005, MPLDC received two warrants of levy on the properties. On 1 December 2005, respondent Republic of the Philippines, through the PCGG, filed with the RTC a petition for prohibition with prayer for issuance of a temporary restraining order or writ of preliminary injunction to enjoin petitioner Pasig City from auctioning the properties and from collecting real property tax. Subsequently, the Pasig City Treasurer offered the properties for sale at public auction. Since there was no other bidder, Pasig City bought the properties and was issued the corresponding certificates of sale. On 19 December 2005, PCGG filed with the RTC an amended petition for certiorari, prohibition and mandamus against Pasig City. PCGG prayed that: (1) the assessments for the payment of real property tax and penalty be declared void; (2) the warrants of levy on the properties be declared void; (3) the public auction be declared void; (4) the issuance of certificates of sale be declared void; (5) Pasig City be prohibited from assessing MPLDC real property tax and penalty; (6) Pasig City be prohibited from collecting real property tax and penalty from MPLDC; (7) Pasig City be ordered to assess the actual occupants of the properties real property tax and penalty; and (8) Pasig City be ordered to collect real property tax and penalty from the actual occupants of the properties. The RTC granted the petition for certiorari, prohibition and mandamus. The CA set aside the Decision. The Court of Appeals held: Although the government, through the PCGG have [sic] sequestered Mid-Pasig and all its assets including the subject parcels of land, the sequestration per se, did not operate to convert Mid-Pasig and its properties to public property.” There was no declaration making it a public property. As such, prior to a valid court declaration the “PCGG cannot perform acts of strict ownership of [sic] sequestered property. It is a mere conservator.” In view thereof and the fact that Mid-Pasig and its properties have not been validly declared by the Sandiganbayan as “ill-gotten” wealth, the same are not yet public properties. Thus, Pasig City through its City Assessor and City Treasurer did not act with grave abuse of discretion when it issued real property tax assessment on the subject parcels of land. PCGG filed an MR. The CA reversed itself stating: We are convinced that the subject properties were not sequestered by the government so as to amount to a deprivation of property without due process of law; instead, they were voluntarily surrendered to the State by Campos, a self-admitted crony of the then President Marcos. The relinquishment of the subject properties to the State as ill-gotten wealth of Marcos, as recognized by the Supreme Court, makes a judicial declaration that the same were ill-gotten unnecessary. By virtue of said relinquishment, the State correctly exercised dominion over the subject properties. Indubitably, the subject properties, being ill-gotten wealth, belong to the State. x x x By its nature, ill-gotten wealth is owned by the State. As a matter of fact, the Republic continues to exercise dominion over the subject properties ISSUE: WON the lower courts erred in granting PCGG’s petition for certiorari, prohibition and mandamus and in ordering Pasig City to assess and collect real property tax from the lessees of the properties. HELD: The petition is partly meritorious. As correctly found by the RTC and the CA, the Republic of the Philippines owns the properties. Campos voluntarily surrendered MPLDC, which owned the properties, to the Republic of the Philippines. In Republic of the Philippines v. Sandiganbayan,8 the Court stated:

x x x Jose Y. Campos, “a confessed crony of former President Ferdinand E. Marcos,” voluntarily surrendered or turned over to the PCGG the properties, assets and corporations he held in trust for the deposed President. Among the corporations he surrendered were the Independent Realty Corporation and the Mid-Pasig Land Development Corporation

Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the Philippines are exempt from real property tax “except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.” Thus, the portions of the properties not leased to taxable entities are exempt from real estate tax while the portions of the properties leased to taxable entities are subject to real estate tax. The law imposes the liability to pay real estate tax on the Republic of the Philippines for the portions of the properties leased to taxable entities. It is, of course, assumed that the Republic of the Philippines passes on the real estate tax as part of the rent to the lessees. Article 420 of the Civil Code classifies as properties of public dominion those that are “intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads” and those that “are intended for some public service or for the development of the national wealth.” Properties of public dominion are not only exempt from real estate tax, they are exempt from sale at public auction.

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In the present case, the parcels of land are not properties of public dominion because they are not “intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads.” Neither are they “intended for some public service or for the development of the national wealth.” MPLDC leases portions of the properties to different business establishments. Thus, the portions of the properties leased to taxable entities are not only subject to real estate tax, they can also be sold at public auction to satisfy the tax delinquency. In sum, only those portions of the properties leased to taxable entities are subject to real estate tax for the period of such leases. Pasig City must, therefore, issue to respondent new real property tax assessments covering the portions of the properties leased to taxable entities. If the Republic of the Philippines fails to pay the real property tax on the portions of the properties leased to taxable entities, then such portions may be sold at public auction to satisfy the tax delinquency. WHEREFORE, the petition is PARTIALLY GRANTED. The Court SETS ASIDE the 17 October 2008 Decision of the Court of Appeals in CA-G.R. SP No. 97498 and declares VOID the 30 September 2002 real property tax assessment issued by Pasig City on the subject properties of Mid-Pasig Land Development Corporation, the 8 November 2005 warrants of levy on the properties, and the 2 December 2005 auction sale. Pasig City is DIRECTED to issue to respondent new real property tax assessments covering only the portions of the properties actually leased to taxable entities, and only for the period of such leases. Interests and penalties on such new real property tax assessment shall accrue only after receipt of such new assessment by respondent. SO ORDERED.

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY (PFDA), PETITIONER, VS. CENTRAL BOARD OF ASSESSMENT APPEALS, LOCAL BOARD OF ASSESSMENT APPEALS OF LUCENA CITY, CITY OF LUCENA,

LUCENA CITY ASSESSOR AND LUCENA CITY TREASURER, RESPONDENTS. [G.R. No. 178030 : December 15, 2010]

FACTS: The facts as found by the CBAA are as follows: The records show that the Lucena Fishing Port Complex (LFPC) is one of the fishery infrastructure projects undertaken by the National Government under the Nationwide Fish Port-Package. Located at Barangay Dalahican, Lucena City, the fish port was constructed on a reclaimed land with an area of 8.7 hectares more or less, at a total cost of PHP 296,764,618.77 financed through a loan (L/A PH-25 and 51) from the Overseas Economic Cooperation Fund (OECF) of Japan, dated November 9, 1978 and May 31, 1978, respectively. On October 26, 1999, in a letter addressed to PFDA, the City Government of Lucena demanded payment of realty taxes on the LFPC property for the period from 1993 to 1999 in the total amount of P39,397,880.00. This was received by PFDA on November 24, 1999. On October 17, 2000 another demand letter was sent by the Government of Lucena City on the same LFPC property, this time in the amount of P45,660,080.00 covering the period from 1993 to 2000. On December 18, 2000 Petitioner-Appellant filed its Appeal before the Local Board of Assessment Appeals of Lucena City, which was dismissed for lack of merit. On November 6, 2001 Petitioner-Appellant filed its motion for reconsideration; this was denied by the Appellee Local Board on December 10, 2001.[3] PFDA appealed to the CBAA. In its Decision dated 5 October 2005, the CBAA dismissed the appeal for lack of merit. The CBAA ruled: Ownership of LFPC however has, before hand, been handed over to the PFDA, as provided for under Sec. 11 of P.D. No. 977, as amended, and declared under the MCIAA case [Mactan Cebu International Airport Authority v. Marcos, G.R. No. 120082, 11 September 1996, 261 SCRA 667]. The allegations therefore that PFDA is not the beneficial user of LFPC and not a taxable person are rendered moot and academic by such ownership of PFDA over LFPC. x x x PFDA's Charter, P.D. 977, provided for exemption from income tax under Par. 2, Sec. 10 thereof: "(t)he Authority shall be exempted from the payment of income tax". Nothing was said however about PFDA's exemption from payment of real property tax: PFDA therefore was not to lay claim for realty tax exemption on its Fishing Port Complexes. Reading Sec. 40 of P.D. 464 and Sec. 234 of R.A. 7160 however, provided such ground: LFPC is owned by the Republic of the Philippines, PFDA is only tasked to manage, operate, and develop the same. Hence, LFPC is exempted from payment of realty tax. x x x

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The ownership of LFPC as passed on by the Republic of the Philippines to PFDA is bourne by Direct evidence: P.D. 977, as amended (supra). Therefore, Petitioner-Appellant's claim for realty tax exemption on LFPC is untenable. WHEREFORE, for all of the foregoing, the herein Appeal is hereby dismissed for lack of merit. SO ORDERED.[4] PFDA moved for reconsideration, which the CBAA denied in its Resolution dated 7 June 2006.[5] On appeal, the Court of Tax Appeals denied PFDA's petition for review and affirmed the 5 October 2005 Decision of the CBAA. The Court of Tax Appeals held that PFDA is a government-owned or controlled corporation, and is therefore subject to the real property tax imposed by local government units pursuant to Section 232 in relation to Sections 193 and 234 of the Local Government Code. Furthermore, the Court of Tax Appeals ruled that PFDA failed to prove that it is exempt from real property tax pursuant to Section 234 of the Local Government Code or any of its provisions. Hence, this petition for review. ISSUE: Whether PFDA is liable for the real property tax assessed on the Lucena Fishing Port Complex? RULING: The petition is meritorious. In ruling that PFDA is not exempt from paying real property tax, the Court of Tax Appeals cited Sections 193, 232, and 234 of the Local Government Code which read: Section 193. Withdrawal of Tax Exemption Privileges. ‒ Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or -controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. Section 232. Power to Levy Real Property Tax. ‒ A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted. 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 subdivision except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or -controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and 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. The ruling of the Court of Tax Appeals is anchored on the wrong premise that the PFDA is a government-owned or controlled corporation. On the contrary, this Court has already ruled that the PFDA is a government instrumentality and not a government-owned or controlled corporation.

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In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals,6 the Court resolved the issue of whether the PFDA is a government-owned or controlled corporation or an instrumentality of the national government. In that case, the City of Iloilo assessed real property taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and operated by PFDA. The Court held that PFDA is an instrumentality of the government and is thus exempt from the payment of real property tax, thus: The Court rules that the Authority [PFDA] is not a GOCC but an instrumentality of the national government which is generally exempt from payment of real property tax. However, said exemption does not apply to the portions of the IFPC which the Authority leased to private entities. With respect to these properties, the Authority is liable to pay property tax. Nonetheless, the IFPC, being a property of public dominion cannot be sold at public auction to satisfy the tax delinquency. x x x Indeed, the Authority is not a GOCC but an instrumentality of the government. The Authority has a capital stock but it is not divided into shares of stocks. Also, it has no stockholders or voting shares. Hence it is not a stock corporation. Neither is it a non-stock corporation because it has no members. The Authority is actually a national government instrumentality which is defined as an agency of the national government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers.[7] (Emphasis supplied) This ruling was affirmed by the Court in a subsequent PFDA case involving the Navotas Fishing Port Complex, which is also managed and operated by the PFDA. In consonance with the previous ruling, the Court held in the subsequent PFDA case that the PFDA is a government instrumentality not subject to real property tax except those portions of the Navotas Fishing Port Complex that were leased to taxable or private persons and entities for their beneficial use.[8] Similarly, we hold that as a government instrumentality, the PFDA is exempt from real property tax imposed on the Lucena Fishing Port Complex, except those portions which are leased to private persons or entities. The exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.[9] Under Section 133(o)[10] of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the PFDA. Thus, PFDA is not liable to pay real property tax assessed by the Office of the City Treasurer of Lucena City on the Lucena Fishing Port Complex, except those portions which are leased to private persons or entities. Besides, the Lucena Fishing Port Complex is a property of public dominion intended for public use, and is therefore exempt from real property tax under Section 234(a)[11] of the Local Government Code. Properties of public dominion are owned by the State or the Republic of the Philippines.[12] Thus, Article 420 of the Civil Code provides: Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied) The Lucena Fishing Port Complex, which is one of the major infrastructure projects undertaken by the National Government under the Nationwide Fishing Ports Package, is devoted for public use and falls within the term "ports." The Lucena Fishing Port Complex "serves as PFDA's commitment to continuously provide post-harvest infrastructure support to the fishing industry, especially in areas where productivity among the various players in the fishing industry need to be enhanced."[13] As property of public dominion, the Lucena Fishing Port Complex is owned by the Republic of the Philippines and thus exempt from real estate tax. WHEREFORE, petition granted. SO ORDERED.

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MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs.

COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF PARAÑAQUE, respondents.

[G.R. No. 155650 July 20, 2006]

FACTS: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.5 On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due. On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down as follows:

TAX DECLARATION

TAXABLE YEAR TAX DUE PENALTY TOTAL

E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20

E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49

E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00

E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00

E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24

E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99

E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00

E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00

*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50

*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00

*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00

GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75 #9476101 for P28,676,480.00 #9476103 for P49,115.006

On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax. On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Parañaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878. On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for

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reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.7 A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents — the City of Parañaque, City Mayor of Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer of Parañaque, and the City Assessor of Parañaque ("respondents") — from auctioning the Airport Lands and Buildings. On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction. On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO. MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments. Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax. Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax. ISSUE: Whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws? RULING: MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments. First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. 1. MIAA is Not a Government-Owned or Controlled Corporation Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents claim that the deletion of the phrase "any government-owned or controlled so exempt by its charter" in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of government-owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax. There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:

SEC. 2. General Terms Defined. – x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)

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A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.11 This prevents MIAA from qualifying as a non-stock corporation. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows:

SEC. 2. General Terms Defined. –– x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,12 police authority13 and the levying of fees and charges.14 At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order." A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: x x x x (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units.(Emphasis and underscoring supplied)

Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide."18 When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies.19

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There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. 2. Airport Lands and Buildings of MIAA are Owned by the Republic a. Airport Lands and Buildings are of Public Dominion The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides:

ARTICLE 419. Property is either of public dominion or of private ownership. ARTICLE 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied) ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user's tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A user's tax is more equitable — a principle of taxation mandated in the 1987 Constitution.21 The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both international and domestic air traffic,"22 are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines. b. Airport Lands and Buildings are Outside the Commerce of Man The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man.

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The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.25 Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax. Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands,"27 provide:

SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public fishponds, working men's village and other improvements for the public benefit. SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this Act or by proclamation of the President. (Emphasis and underscoring supplied)

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines. c. MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.28 d. Transfer to MIAA was Meant to Implement a Reorganization The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides:

SECTION 3. Creation of the Manila International Airport Authority. — x x x x The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. (Emphasis supplied) SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied) SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory Provisions. — The Manila International Airport including the Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished. x x x x.

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The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation. The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings. At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic. e. Real Property Owned by the Republic is Not Taxable Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines." Section 234(a) provides:

SEC. 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; x x x. (Emphasis supplied)

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:

Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.29

3. Refutation of Arguments of Minority The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon the effectivity of the Code.

The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate tax. The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of tax on national government instrumentalities. By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the

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national government, its agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned by the Republic. The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by local governments. The minority insists that the juridical persons exempt from local taxation are limited to the three classes of entities specifically enumerated as exempt in Section 193. The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This theory will result in gross absurdities. It will make the national government, which itself is a juridical person, subject to tax by local governments since the national government is not included in the enumeration of exempt entities in Section 193. Under this theory, local governments can impose any kind of local tax, and not only real estate tax, on the national government. Under the minority's theory, many national government instrumentalities with juridical personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research Institute,31Laguna Lake Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development Authority,34Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine National Railways.39 The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between national government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting local governments from imposing any kind of tax on the national government, its agencies and instrumentalities. Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is when the government gives the beneficial use of the real property to a taxable entity. The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person. To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. 4. Conclusion Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Parañaque.

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Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale. WHEREFORE, petition is granted. SO ORDERED. LUNG CENTER OF THE PHILIPPINES vs.QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City

Assessor of Quezon City [G.R. No. 144104 June 29, 2004]

FACTS: The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January 16, 1981. It is the registered owner of a parcel of land located at Quezon Avenue corner Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City. On August 25, 1993, the petitioner filed a Claim for Exemption from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The petitioner’s request was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City for the reversal of the resolution of the City Assessor. The petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the petitioner liable for real property taxes. The QC-LBAA’s decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of Quezon City which ruled that the petitioner was not a charitable institution and that its real properties were not actually, directly and exclusively used for charitable purposes; hence, it was not entitled to real property tax exemption under the constitution and the law. The petitioner sought relief from the Court of Appeals, which rendered judgment affirming the decision of the CBAA. ISSUE: Does Lung center of the Philippines exempt from reality tax on the ground that its land, building and improvements, subject of assessment are actually, directly and exclusively devoted for charitable purposes? RULING: Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties areACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is

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defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a privilege exclusively."40 If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. The words "dominant use" or "principal use" cannot be substituted for the words "used exclusively" without doing violence to the Constitutions and the law.42Solely is synonymous with exclusively. What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a private individual for her business enterprise under the business name "Elliptical Orchids and Garden Center." Indeed, the petitioner’s evidence shows that it collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said lessees. Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.

NATIONAL POWER CORPORATION VS. CBAA [GR.No.171470 Jan.30, 2009]

FACTS: On January 11, 1993, First Private Power Corporation (FPPC) entered into a BOT agreement with NAPOCOR for the construction of Power Plant in La Union. The Agreement provided for the creation of the Bauang Private Power Corporation (BPPC) that will own, manage and operatethe power plant/station, and assume and perform FPPC’s obligations under the BOT agreement. For a fee, BPPC will convert NAPOCOR’s supplied diesel fuel into electricity and deliver the product to NAPOCOR. NAPOCOR assumed responsibility for the payment of all real estate taxes and assessments, rates, and other charges in respect of the Site and the buildings and improvements thereon. Municipal Assessor’s Office initially declared BPPC’s machineries and equipment as tax-exempt. The Vice Mayor of the municipality questioned before the Regional Director of the Bureau of Local Government Finance (BLG) the exemption. Department of Finance ruled that BPPC’s machineries and equipments are subject to real property tax and directed the Assessors’ Office to take appropriate action which was followed. The Notice of Assessment and Tax Bill to BPPC showed the total sum of P288,582,848.00 for the 1995-1998 period. NAPOCOR intervened by filing a petition with the LBAA asking that retroactive to 1995, the machineries covered by the tax declarations be exempt from real property tax under Section 234(c) of the LGC. Section 234. Exemptions from Real Property Tax. – The following are exempted from the payment of real property tax: x x x x(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; The LBAA denied the protest. It ruled that the exemption provided applies only when a government-owned or controlled corporation like NAPOCOR unlike in this case where NAPOCOR does not own and does not even actually and directly use the machineries but BPPC, a non-government entity. Upon appeal, the same decision was affirmed by the CBAA as well as the CTA. The latter ruled that NAPOCOR is not the registered owner of the machineries and equipment. These are registered in BPPC’s name as further confirmed by BOT Agreement. CTA declared that until the transfer date of the power station, NAPOCOR does not own any of the machineries and equipment, and therefore has no legal right, title, or interest over these properties, hence this recourse. ISSUE: Can the exempt GOCC pass its tax-exempt status to its BOT partner? SUPREME COURT: We find that NAPOCOR failed to sufficiently show that the CTA committed any reversible error in its ruling. NAPOCOR’s basis for its claimed exemption – Section 234(c) of the LGC – is clear and not at all

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ambiguous in its terms. Exempt from real property taxation are: (a) all machineries and equipment; (b) [that are] actually, directly, and exclusively used by; (c) [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. The present case is not the first occasion where NAPOCOR claimed real property tax exemption for a contract partner under BOT agreement. SC has earlier decided that the mere undertaking of petitioner NPC that it shall be responsible for the payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot be extended. Under this standard, the claimant must show beyond doubt, with clear and convincing evidence, the factual basis for the claim. Thus, the real issue in a tax exemption case such as the present case is whether NAPOCOR was able to convincingly show the factual basis for its claimed exception. The records show that NAPOCOR, no less, admits BPPC’s ownership of the machineries and equipment in the power plant. Likewise, the provisions of the BOT agreement cited above clearly show BPPC’s ownership. Thus, ownership is not a disputed issue. Rather than ownership, NAPOCOR’s use of the machineries and equipment is the critical issue, since its claim under Sec. 234(c) of the LGC is premised on actual, direct and exclusive use. To support this claim, NAPOCOR characterizes the BOT Agreement as a mere financing agreement where BPPC is the financier, while it (NAPOCOR) is the actual user of the properties. As in the fact of ownership, NAPOCOR’s assertion is belied by the documented arrangements between the contracting parties, viewed particularly from the prism of the BOT law. Under this concept, it is the project proponent who constructs the project at its own cost and subsequently operates and manages it. The proponent secures the return on its investments from those using the project’s facilities through appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated. At the end of the fixed term agreed upon, the project proponent transfers the ownership of the facility to the government agency. Thus, the government is able to put up projects and provide immediate services without the burden of the heavy expenditures that a project start up requires. Under this concept, it is the project proponent who constructs the project at its own cost and subsequently operates and manages it. The proponent secures the return on its investments from those using the project’s facilities through appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated. At the end of the fixed term agreed upon, the project proponent transfers the ownership of the facility to the government agency. Thus, the government is able to put up projects and provide immediate services without the burden of the heavy expenditures that a project start up requires. That some kind of “financing” arrangement is contemplated – in the sense that the private sector proponent shall initially shoulder the heavy cost of constructing the project’s buildings and structures and of purchasing the needed machineries and equipment – is undeniable. The arrangement, however, goes beyond the simple provision of funds, since the private sector proponent not only constructs and buys the necessary assets to put up the project, but operates and manages it as well during an agreed period that would allow it to recover its basic costs and earn profits. In other words, the private sector proponent goes into business for itself, assuming risks and incurring costs for its account. That some kind of “financing” arrangement is contemplated – in the sense that the private sector proponent shall initially shoulder the heavy cost of constructing the project’s buildings and structures and of purchasing the needed machineries and equipment – is undeniable. The arrangement, however, goes beyond the simple provision of funds, since the private sector proponent not only constructs and buys the necessary assets to put up the project, but operates and manages it as well during an agreed period that would allow it to recover its basic costs and earn profits. In other words, the private sector proponent goes into business for itself, assuming risks and incurring costs for its account.

NATIONAL POWER CORPORATION vs.PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO

FACTS: The NPC is a government-owned and controlled corporation mandated by law to undertake, among others, the production of electricity from nuclear, geothermal, and other sources, and the transmission of electric power on a nationwide basis. To pursue 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.

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Among the obligations undertaken by the NPC under the ECA was the payment of all taxes that the government may impose on Mirant. In a letter dated March 2, 2000, the Municipality of Pagbilao assessed Mirant’s real property taxes on the power plant and its machineries 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) which was later on dismissed. It appealed the denial of its petition with the Central Board of Assessment Appeals (CBAA) which affirmed the ruling of LBAA. It elevated its petition before CTA en banc which resolved to dismiss the NPC’s petition NPC:

The NPC 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.

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.

ISSUE: Was NPC the proper party to protest? Was Mirant exempt from paying the real property tax? RULING: 1. The liability for taxes generally rests on the owner of the real property at the time the tax accrues. This is a necessary consequence that proceeds from the fact of ownership. However, personal liability for realty taxes may also expressly rest on the entity with the beneficial use of the real property, such as the tax on property owned by the government but leased to private persons or entities, or when the tax assessment is made on the basis of the actual use of the property. In either case, the unpaid realty tax attaches to the property but is directly chargeable against the taxable person who has actual and beneficial use and possession of the property regardless of whether or not that person is the owner. In the present case, the NPC, contrary to its claims, is neither the owner nor the possessor/user of the subject machineries. Legal interest should be an interest that is actual and material, direct and immediate, not simply contingent or expectant. 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. The tax liability 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. By law, the tax liability rests on Mirant based on its ownership, use, and possession of the plant and its machineries. 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. 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

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2. The government-owned or controlled corporation claiming exemption must be the entity actually, directly, and exclusively using the real properties and the use must be devoted to the generation and transmission of electric power. Neither the NPC nor Mirant satisfies both requirements. Although the plant’s machineries are devoted to the generation of electric power, by the NPC’s own admission and as previously pointed out, Mirant – a private corporation – uses and operates them. That Mirant operates the machineries solely in compliance with the will of the NPC only underscores the fact that NPC does not actually, directly, and exclusively use them. The machineries must be actually, directly, and exclusively used by the government-owned or controlled corporation for the exemption under Section 234(c) to apply. Nor will NPC find solace in its claim that it utilizes all the power plant’s generated electricity in supplying the power needs of its customers. Based on the clear wording of the law, it is the machineries that are exempted from the payment of real property tax, not the water or electricity that these machineries generate and distribute. Even the NPC’s claim of beneficial ownership is unavailing. The test of exemption is the use, not the ownership of the machineries devoted to generation and transmission of electric power. The nature of the NPC’s ownership of these machineries only finds materiality in resolving the NPC’s claim of legal interest in protesting the tax assessment on Mirant.

FORTICH vs. CORONA [G.R. No. 131457. November 17, 1998]

SC OPINION This pertains to the two (2) separate motions for reconsideration filed by respondent Corona et. al and applicant-intervenors seeking a reversal of SC’s April 24, 1998 Decision nullifying the so-called "win-win" Resolution dated November 7, 1997, issued by the Office of the President in by Torres. Corona et. Al. and the intervenors, among others contend that the “win-win” Resolution was not void. Movants are presenting also the issue of whether or not the power of the local government units to reclassify lands is subject to the approval of the Department of Agrarian Reform (DAR). The motions are being opposed vehemently by herein petitioners. SC: The grounds raised here were extensively covered and resolved in our challenged Decision. A minute resolution denying the instant motions with finality would have been sufficient, considering that the same follows as a matter of course if warranted under the circumstances as in other equally important cases. Regrettably, the issues presented before us by the movants are matters of no extraordinary import to merit the attention of the Court en banc. Specifically, the issue of whether or not the power of the local government units to reclassify lands is subject to the approval of the DAR is no longer novel, this having been decided by this Court in the case of Province of Camarines Sur, et al. vs. Court of Appeals[5] wherein we held that local government units need not obtain the approval of the DAR to convert or reclassify lands from agricultural to non-agricultural use. The dispositive portion of the Decision in the aforecited case states: "WHEREFORE, the petition is GRANTED and the questioned decision of the Court of Appeals is set aside insofar as it (a) nullifies the trial court's order allowing the Province of Camarines Sur to take possession of private respondent's property; (b) orders the trial court to suspend the expropriation proceedings; and (c) requires the Province of Camarines Sur to obtain the approval of the Department of Agrarian Reform to convert or reclassify private respondent's property from agricultural to non-agricultural use. SC here denied with finality the two MR. It should be stressed that when the March 29, 1996 OP Decision was declared final and executory, vested rights were acquired by the herein petitioners, namely, the province of Bukidnon, the municipality of Sumilao, Bukidnon, and the NQSR Management and Development Corporation, and all others who should be benefited by the said decision. Thus, we repeat, the issue here is not a question of technicality but that of substance and merit. With respect to the motion for reconsideration filed by the applicants for intervention, we likewise find the same unmeritorious. The issue of the applicants' right to intervene in these proceedings should be laid to rest. The rule in this jurisdiction is that a party who wishes to intervene must have a "certain right" or "legal

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interest" in the subject matter of the litigation.[17] Such interest must be "actual, substantial, material, direct and immediate, and not simply contingent and expectant Note: It might help that we should have a brief background of the SC Decision in FORTICH vs. CORONA, G.R. No. 131457, dated April 24, 1998 . The case pertains to a 144-hectare property situated in Bukidnon which was placed by DAR under compulsory acquisition. However Provincial Development Council (PDC) of Bukidnon, headed by Governor Carlos O. Fortich, passed Resolution No. 6, designating certain areas along Bukidnon-Sayre Highway as part of the Bukidnon Agro-Industrial Zones where the subject property is situated. Pursuant to Section 20 of R.A. No. 7160, otherwise known as the Local Government Code, the Sangguniang Bayan of Sumilao, Bukidnon, enacted Ordinance No. 24 converting or re-classifying 144 hectares of land from agricultural to industrial/institutional with a view of providing an opportunity to attract investors who can inject new economic vitality, provide more jobs and raise the income of its people. However, the DAR, placed the same under the compulsory coverage of CARP and directed the distribution thereof to all qualified beneficiaries. Appeal was made to the Office of the President (OP). On March 29, 1996, OP, through then Executive Secretary Ruben D. Torres, issued a Decision reversing the DAR Secretary’s decision, which approved the conversion of a one hundred forty-four (144)-hectare land from agricultural to agro-industrial/institutional area. Pertinent portion of said decision states: “Stated more simply, the language of Section 20 of R.A. No. 7160, supra, is clear and affords no room for any other interpretation. By unequivocal legal mandate, it grants local government units autonomy in their local affairs including the power to convert portions of their agricultural lands and provide for the manner of their utilization and disposition to enable them to attain their fullest development as self-reliant communities.” The OP Decision above became final and executor, on June 23, 1997. On October 9, 1997, some alleged farmer-beneficiaries began their hunger strike in front of the DAR Compound in Quezon City to protest the OP Decision. This led the Office of the President, through then Deputy Executive Secretary Renato C. Corona, to issue the so-called “Win-Win” Resolution[2] on November 7, 1997, substantially modifying its earlier Decision after it had already become final and executory. The said Resolution modified the approval of the land conversion to agro-industrial area only to the extent of forty-four (44) hectares, and ordered the remaining one hundred (100) hectares to be distributed to qualified farmer-beneficiaries. ISSUE: Was Corona’s “Win-Win” Resolution valid, considering that the OP decision has already become final and executory? Take note: This case is significant only with respect to our topic in REAL PROPERTY TAX, re classification of real property, such that LGUs need not obtain the necessary approval of the DAR to convert or reclassify parcels of land from agricultural to non-agricultural, as aptly opined by the SC in the November 17, 1998 SC IOPINION above. The power to classify or reclassify or convert is authorized under Sec. 20 of the LGC. RULING: Corona’s resolution was invalid. To quote in the case: When the Office of the President issued the Order dated June 23,1997 declaring the Decision of March 29, 1996 final and executory, as no one has seasonably filed a motion for reconsideration thereto, the said Office had lost its jurisdiction to re-open the case, more so modify its Decision. Having lost its jurisdiction, the Office of the President has no more authority to entertain the second motion for reconsideration filed by respondent DAR Secretary, which second motion became the basis of the assailed “Win-Win” Resolution. Section 7 of Administrative Order No. 18 and Section 4, Rule 43 of the Revised Rules of Court mandate that only one (1) motion for reconsideration is allowed to be taken from the Decision of March 29, 1996. And even if a second motion for reconsideration was permitted to be filed in “exceptionally meritorious cases,” as provided in the second paragraph of Section 7 of AO 18, still the said motion should not have been entertained considering that the first motion for reconsideration was not seasonably filed, thereby allowing the Decision of March 29, 1996 to lapse into finality. Thus, the act of the Office of the President in re-opening the case and substantially modifying its March 29,1996 Decision which had already become final and executory, was in gross disregard of the rules and basic legal precept that accord finality to administrative determinations. In other words, the finality of the March 29, 1996 OP Decision accordingly vested appurtenant rights to the land in dispute on petitioners as well as on the people of Bukidnon and other parts of thecountry who stand to be benefited by the development of the property.

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Notes:

o SEC. 20. Reclassification of Lands. - (a) A city or municipality may, through an ordinance passed by the sanggunian after conducting public hearings for the purpose, authorize the reclassification of agricultural lands and provide for the manner of their utilization or disposition in the following cases: (1) when the land ceases to be economically feasible and sound for agricultural purposes as determined by the Department of Agriculture or (2) where the land shall have substantially greater economic value for residential, commercial, or industrial purposes, as determined by the sanggunian concerned: Provided, That such reclassification shall be limited to the following percentage of the total agricultural land area at the time of the passage of the ordinance:

o (1) For highly urbanized and independent component cities, fifteen percent (15%); o (2) For component cities and first to third class municipalities, ten percent (10%); and o (3) For fourth to sixth class municipalities, five percent (5%): Provided, further, That agricultural lands

distributed to agrarian reform beneficiaries pursuant to Republic Act Numbered Sixty-six hundred fifty-seven (R.A. No. 6657), otherwise known as "The Comprehensive Agrarian Reform Law", shall not be affected by the said reclassification and the conversion of such lands into other purposes shall be governed by Section 65 of said Act.

o (b) The President may, when public interest so requires and upon recommendation of the National Economic and Development Authority, authorize a city or municipality to reclassify lands in excess of the limits set in the next preceding paragraph.

o (c) The local government units shall, in conformity with existing laws, continue to prepare their respective comprehensive land use plans enacted through zoning ordinances which shall be the primary and dominant bases for the future use of land resources: Provided, That the requirements for food production, human settlements, and industrial expansion shall be taken into consideration in the preparation of such plans.

o (d) Where approval by a national agency is required for reclassification, such approval shall not be unreasonably withheld. Failure to act on a proper and complete application for reclassification within three (3) months from receipt of the same shall be deemed as approval thereof.

o (e) Nothing in this Section shall be construed as repealing, amending, or modifying in any manner the provisions of R.A. No. 6657.

ALFREDO PATALINGHUG vs. HON. COURT OF APPEALS

[G.R. No. 104786 January 27, 1994] ISSUE: Whether or not petitioner's operation of a funeral home constitutes permissible use within a particular district or zone in Davao City. FACTS: On November 17, 1982, the Sangguniang Panlungsod of Davao City enacted Ordinance No. 363 otherwise known as the "Expanded Zoning Ordinance of Davao City," Section 8 of which states:

Sec. 8. USE REGULATIONS IN C-2 DISTRICTS (Shaded light red in the Expanded Zoning Map) – A C-2 District shall be dominantly for commercial and compatible industrial uses as provided hereunder: xxx xxx xxx xxx xxx xxx 3.1 Funeral Parlors/Memorial Homes with adequate off street parking space (see parking standards of P.D. 1096) and provided that they shall be established not less than 50 meters from any residential structures, churches and other institutional buildings. (Emphasis provided)

Upon prior approval and certification of zoning compliance by Zoning Administrator issued on February 10, 1987 a Building Permit in favor of petitioner for the construction of a funeral parlor in the name and style of Metropolitan Funeral Parlor at Cabaguio Avenue, Agdao, Davao City. Thereafter, petitioner commenced the construction of his funeral parlor. Acting on the complaint of several residents of Barangay Agdao, Davao City that the construction of petitioner's funeral parlor violated Ordinance No. 363, since it was allegedly situated within a 50-meter radius from the Iglesia ni Kristo Chapel and several residential structures, the Sangguniang Panlungsod conducted an investigation and found that "the nearest residential structure, owned by Wilfred G. Tepoot is only 8 inches to the south. . . . ."

Notwithstanding the findings of the Sangguniang Panlungsod, petitioner continued to construct his funeral parlor which was finished on November 3, 1987.

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Consequently, private respondents filed a case for the declaration of nullity of a building permit with preliminary prohibitory and mandatory injunction and/or restraining order with the trial court.

RTC: After conducting its own ocular inspection, the lower court dismissed the complaint based on the following findings: 1. that the residential building owned by Cribillo and Iglesia ni Kristo chapel are 63.25 meters and 55.95 meters away, respectively from the funeral parlor. 2. Although the residential building owned by certain Mr. Tepoot is adjacent to the funeral parlor, and is only separated therefrom by a concrete fence, said residential building is being rented by a certain Mr. Asiaten who actually devotes it to his laundry business with machinery thereon. (thus, commercial, not residential) CA: Reversed the lower court by annulling the building permit issued in favor of petitioner. It ruled that although the buildings owned by Cribillo and Iglesia ni Kristo were beyond the 50-meter residential radius prohibited by Ordinance 363, the construction of the funeral parlor was within the 50-meter radius measured from the Tepoot's building. The CA disagreed with the lower court's determination that Tepoot's building was commercial and ruled that although it was used by Mr. Tepoot's lessee for laundry business, it was a residential lot as reflected in the tax declaration, thus paving the way for the application of Ordinance No. 363. SC: Mr. Tepoot’s building is commercial and not residential, thus, petitioner PATALINGHUG did not violate the ordinance. In the case at bar, the testimony of City Councilor Vergara shows that Mr. Tepoot's building was used for a dual purpose both as a dwelling and as a place where a laundry business was conducted. But while its commercial aspect has been established by the presence of machineries and laundry paraphernalia, its use as a residence, other than being declared for taxation purposes as such, was not fully substantiated. Virtual The reversal by the CA of the trial court's decision was based on Tepoot's building being declared for taxation purposes as residential. It is our considered view, however, that a tax declaration is not conclusive of the nature of the property for zoning purposes. A property may have been declared by its owner as residential for real estate taxation purposes but it may well be within a commercial zone. A discrepancy may thus exist in the determination of the nature of property for real estate taxation purposes vis-a-vis the determination of a property for zoning purposes. Needless to say, even if we are to examine the evidentiary value of a tax declaration under the Real Property Tax Code, a tax declaration only enables the assessor to identify the same for assessment levels. In fact, a tax declaration does not bind a provincial/city assessor, for under Sec. 22 of the Real Estate Tax Code, appraisal and assessment are based on the actual use irrespective of "any previous assessment or taxpayer's valuation thereon," which is based on a taxpayer's declaration. In fact, a piece of land declared by a taxpayer as residential may be assessed by the provincial or city assessor as commercial because its actual use is commercial. The trial court's determination that Mr. Tepoot's building is commercial and, therefore, Sec. 8 is inapplicable, is strengthened by the fact that the Sangguniang Panlungsod has declared the questioned area as commercial or C-2. Consequently, even if Tepoot's building was declared for taxation purposes as residential, once a local government has reclassified an area as commercial, that determination for zoning purposes must prevail. While the commercial character of the questioned vicinity has been declared thru the ordinance, private respondents have failed to present convincing arguments to substantiate their claim that Cabaguio Avenue, where the funeral parlor was constructed, was still a residential zone. Unquestionably, the operation of a funeral parlor constitutes a "commercial purpose," as gleaned from Ordinance No. 363. The declaration of the said area as a commercial zone thru a municipal ordinance is an exercise of police power to promote the good order and general welfare of the people in the locality. The ordinance which regulates the location of funeral homes has been adopted as part of comprehensive zoning plans for the orderly development of the area covered thereunder.