THIRD DIVISION

[G.R. No. 173863. September 15, 2010.] CHEVRON PHILIPPINES, INC. (Formerly CALTEX PHILIPPINES, INC.), petitioner, vs. BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK DEVELOPMENT CORPORATION, respondents.

DECISION

VILLARAMA, JR., J :
p

This petition for review on certiorari assails the Decision 1 dated November 30, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87117, which affirmed the Resolution 2 dated August 2, 2004 and the Order 3 dated September 30, 2004 of the Office of the President in O.P. Case No. 04-D-170.
SaCIDT

The facts follow. On June 28, 2002, the Board of Directors of respondent Clark Development Corporation (CDC) issued and approved Policy Guidelines on the Movement of Petroleum Fuel to and from the Clark Special Economic Zone (CSEZ) 4 which provided, among others, for the following fees and charges:
1.Accreditation Fee xxx xxx xxx 2.Annual Inspection Fee xxx xxx xxx 3.Royalty Fees Suppliers delivering fuel from outside sources shall be assessed the following royalty fees: -Php0.50 per liter those delivering Coastal petroleum fuel to CSEZ locators not sanctioned by CDC

-Php1.00 per liter those bringing-in petroleum fuel (except Jet A-1) from outside sources xxx xxx xxx 4.Gate Pass Fee xxx xxx xxx 5

The above policy guidelines were implemented effective July 27, 2002. On October 1, 2002, CDC sent a letter 6 to herein petitioner Chevron Philippines, Inc. (formerly Caltex Philippines, Inc.), a domestic corporation which has been supplying fuel to Nanox Philippines, a locator inside the CSEZ since 2001, informing the petitioner that a royalty fee of P0.50 per liter shall be assessed on its deliveries to Nanox Philippines effective August 1, 2002. Thereafter, on October 21, 2002 a Statement of Account 7 was sent by CDC billing the petitioner for royalty fees in the amount of P115,000.00 for its fuel sales from Coastal depot to Nanox Philippines from August 1-31 to September 3-21, 2002. Claiming that nothing in the law authorizes CDC to impose royalty fees or any fees based on a per unit measurement of any commodity sold within the special economic zone, petitioner sent a letter 8 dated October 30, 2002 to the President and Chief Executive Officer of CDC, Mr. Emmanuel Y. Angeles, to protest the assessment for royalty fees. Petitioner nevertheless paid the said fees under protest on November 4, 2002.
CcTIDH

On August 18, 2003, CDC again wrote a letter 9 to petitioner regarding the latter's unsettled royalty fees covering the period of December 2002 to July 2003. Petitioner responded through a letter 10 dated September 8, 2003 reiterating its continuing objection over the assessed royalty fees and requested a refund of the amount paid under protest on November 4, 2002. The letter also asked CDC to revoke the imposition of such royalty fees. The request was denied by CDC in a letter 11 dated September 29, 2003. Petitioner elevated its protest before respondent Bases Conversion Development Authority (BCDA) arguing that the royalty fees imposed had no reasonable relation to the probable expenses of regulation and that the imposition on a per unit measurement of fuel sales was for a revenue generating purpose, thus, akin to a "tax". The protest was however denied by BCDA in a letter 12 dated March 3, 2004. Petitioner appealed to the Office of the President which dismissed 13 the appeal for lack of merit on August 2, 2004 and denied 14 petitioner's motion for reconsideration thereof on September 30, 2004.

Aggrieved, petitioner elevated the case to the CA which likewise dismissed 15 the appeal for lack of merit on November 30, 2005 and denied 16 the motion for reconsideration on July 26, 2006. The CA held that in imposing the challenged royalty fees, respondent CDC was exercising its right to regulate the flow of fuel into CSEZ, which is bolstered by the fact that it possesses exclusive right to distribute fuel within CSEZ pursuant to its Joint Venture Agreement (JVA) 17 with Subic Bay Metropolitan Authority (SBMA) and Coastal Subic Bay Terminal, Inc. (CSBTI) dated April 11, 1996. The appellate court also found that royalty fees were assessed on fuel delivered, not on the sale, by petitioner and that the basis of such imposition was petitioner's delivery receipts to Nanox Philippines. The fact that revenue is incidentally also obtained does not make the imposition a tax as long as the primary purpose of such imposition is regulation. 18 Petitioner filed a motion for reconsideration but the CA denied the same in its Resolution 19 dated July 26, 2006. Hence, this petition raising the following grounds:
I.THE ISSUE RAISED BEFORE THE COURT A QUO IS A QUESTION OF SUBSTANCE NOT HERETOFORE DETERMINED BY THE HONORABLE SUPREME COURT. II.THE RULING OF THE COURT OF APPEALS THAT THE CDC HAS THE POWER TO IMPOSE THE QUESTIONED "ROYALTY FEES" IS CONTRARY TO LAW. III.THE COURT OF APPEALS WAS MANIFESTLY MISTAKEN AND COMMITTED GRAVE ABUSE OF DISCRETION AND A CLEAR MISUNDERSTANDING OF FACTS WHEN IT RULED CONTRARY TO THE EVIDENCE THAT: (i) THE QUESTIONED "ROYALTY FEE" IS PRIMARILY FOR REGULATION; AND (ii) ANY REVENUE EARNED THEREFROM IS MERELY INCIDENTAL TO THE PURPOSE OF REGULATION. IV.THE COURT OF APPEALS FAILED TO GIVE DUE WEIGHT AND CONSIDERATION TO THE EVIDENCE PRESENTED BY CPI SUCH AS THE LETTERS COMING FROM RESPONDENT CDC ITSELF PROVING THAT THE QUESTIONED ROYALTY FEES ARE IMPOSED ON THE BASIS OF FUEL SALES (NOT DELIVERY OF FUEL) AND NOT FOR REGULATION BUT PURELY FOR INCOME GENERATION, I.E., AS PRICE OR CONSIDERATION FOR

THE RIGHT TO MARKET AND DISTRIBUTE FUEL INSIDE THE CSEZ. 20

SECHIA

Petitioner argues that CDC does not have any power to impose royalty fees on sale of fuel inside the CSEZ on the basis of purely income generating functions and its exclusive right to market and distribute goods inside the CSEZ. Such imposition of royalty fees for revenue generating purposes would amount to a tax, which the respondents have no power to impose. Petitioner stresses that the royalty fee imposed by CDC is not regulatory in nature but a revenue generating measure to increase its profits and to further enhance its exclusive right to market and distribute fuel in CSEZ. 21 Petitioner would also like this Court to note that the fees imposed, assuming arguendo they are regulatory in nature, are unreasonable and are grossly in excess of regulation costs. It adds that the amount of the fees should be presumed to be unreasonable and that the burden of proving that the fees are not unreasonable lies with the respondents. 22 On the part of the respondents, they argue that the purpose of the royalty fees is to regulate the flow of fuel to and from the CSEZ. Such being its main purpose, and revenue (if any) just an incidental product, the imposition cannot be considered a tax. It is their position that the regulation is a valid exercise of police power since it is aimed at promoting the general welfare of the public. They claim that being the administrator of the CSEZ, CDC is responsible for the safe distribution of fuel products inside the CSEZ. 23 The petition has no merit. In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is generated. Thus, in Gerochi v. Department of Energy, 24 the Court stated:
The conservative and pivotal distinction between these two (2) powers rests in the purpose for which the charge is made. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.

In the case at bar, we hold that the subject royalty fee was imposed primarily for regulatory purposes, and not for the generation of income or profits as petitioner

claims. The Policy Guidelines on the Movement of Petroleum Fuel to and from the Clark Special Economic Zone 25 provides:
EDcICT

DECLARATION OF POLICY It is hereby declared the policy of CDC to develop and maintain the Clark Special Economic Zone (CSEZ) as a highly secured zone free from threats of any kind, which could possibly endanger the lives and properties of locators, would-be investors, visitors, and employees. It is also declared the policy of CDC to operate and manage the CSEZ as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the CSEZ. 26 (Emphasis supplied.)

From the foregoing, it can be gleaned that the Policy Guidelines was issued, first and foremost, to ensure the safety, security, and good condition of the petroleum fuel industry within the CSEZ. The questioned royalty fees form part of the regulatory framework to ensure "free flow or movement" of petroleum fuel to and from the CSEZ. The fact that respondents have the exclusive right to distribute and market petroleum products within CSEZ pursuant to its JVA with SBMA and CSBTI does not diminish the regulatory purpose of the royalty fee for fuel products supplied by petitioner to its client at the CSEZ. As pointed out by the respondents in their Comment, from the time the JVA took effect up to the time CDC implemented its Policy Guidelines on the Movement of Petroleum Fuel to and from the CSEZ, suppliers/distributors were allowed to bring in petroleum products inside CSEZ without any charge at all. But this arrangement clearly negates CDC's mandate under the JVA as exclusive distributor of CSBTI's fuel products within CSEZ and respondents' ownership of the Subic-Clark Pipeline. 27 On this score, respondents were justified in charging royalty fees on fuel delivered by outside suppliers. However, it was erroneous for petitioner to argue that such exclusive right of respondent CDC to market and distribute fuel inside CSEZ is the sole basis of the royalty fees imposed under the Policy Guidelines. Being the administrator of CSEZ, the responsibility of ensuring the safe, efficient and orderly distribution of fuel products within the Zone falls on CDC. Addressing specific concerns demanded by the nature of goods or products involved is encompassed in the range of services which respondent CDC is expected to provide under the law, in pursuance of its general power of supervision and control over the movement of all supplies and equipment into the CSEZ. Section 2 of Executive Order No. 80 28 provides:

SEC. 2.Powers and Functions of the Clark Development Corporation. The BCDA, as the incorporator and holding company of its Clark subsidiary, shall determine the powers and functions of the CDC. Pursuant to Section 15 of RA 7227, the CDC shall have the specific powers of the Export Processing Zone Authority as provided for in Section 4 of Presidential Decree No. 66 (1972) as amended.
IHSTDE

Among those specific powers granted to CDC under Section 4 of Presidential Decree No. 66 are:
(a)To operate, administer and manage the export processing zone established in the Port of Mariveles, Bataan, and such other export processing zones as may be established under this Decree; to construct, acquire, own, lease, operate and maintain infrastructure facilities, factory building, warehouses, dams, reservoir, water distribution, electric light and power system, telecommunications and transportation, or such other facilities and services necessary or useful in the conduct of commerce or in the attainment of the purposes and objectives of this Decree; xxx xxx xxx (g)To fix, assess and collect storage charges and fees, including rentals for the lease, use or occupancy of lands, buildings, structure, warehouses, facilities and other properties owned and administered by the Authority; and to fix and collect the fees and charges for the issuance of permits, licenses and the rendering of services not enumerated herein, the provisions of law to the contrary notwithstanding; (h)For the due and effective exercise of the powers conferred by law and to the extend (sic) [extent] requisite therefor, to exercise exclusive jurisdiction and sole police authority over all areas owned or administered by the Authority. For this purpose, the Authority shall have supervision and control over the bringing in or taking out of the Zone, including the movement therein, of all cargoes, wares, articles, machineries, equipment, supplies or merchandise of every type and description; xxx xxx xxx (Emphasis supplied.)

In relation to the regulatory purpose of the imposed fees, this Court in Progressive Development Corporation v. Quezon City, 29 stated that ". . . the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a

reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well." In the case at bar, there can be no doubt that the oil industry is greatly imbued with public interest as it vitally affects the general welfare. 30 In addition, fuel is a highly combustible product which, if left unchecked, poses a serious threat to life and property. Also, the reasonable relation between the royalty fees imposed on a "per liter" basis and the regulation sought to be attained is that the higher the volume of fuel entering CSEZ, the greater the extent and frequency of supervision and inspection required to ensure safety, security, and order within the Zone.
aEACcS

Respondents submit that increased administrative costs were triggered by security risks that have recently emerged, such as terrorist strikes in airlines and military/government facilities. Explaining the regulatory feature of the charges imposed under the Policy Guidelines, then BCDA President Rufo Colayco in his letter dated March 3, 2004 addressed to petitioner's Chief Corporate Counsel, stressed:
The need for regulation is more evident in the light of the 9/11 tragedy considering that what is being moved from one location to another are highly combustible fuel products that could cause loss of lives and damage to properties, hence, a set of guidelines was promulgated on 28 June 2002. It must be emphasized also that greater security measure must be observed in the CSEZ because of the presence of the airport which is a vital public infrastructure. We are therefore constrained to sustain the imposition of the royalty fees on deliveries of CPI's fuel products to Nanox Philippines. 31

As to the issue of reasonableness of the amount of the fees, we hold that no evidence was adduced by the petitioner to show that the fees imposed are unreasonable. Administrative issuances have the force and effect of law. 32 They benefit from the same presumption of validity and constitutionality enjoyed by statutes. These two precepts place a heavy burden upon any party assailing governmental regulations. 33 Petitioner's plain allegations are simply not enough to overcome the presumption of validity and reasonableness of the subject imposition. WHEREFORE, the petition is DENIED for lack of merit and the Decision of the Court of Appeals dated November 30, 2005 in CA-G.R. SP No. 87117 is hereby AFFIRMED. With costs against the petitioner.
THAICD

SO ORDERED. Carpio Morales, Peralta, * Bersamin and Sereno, JJ., concur.

Footnotes 1.Rollo, pp. 33-40. Penned by Associate Justice Aurora Santiago-Lagman, with Associate Justices Ruben T. Reyes (now a retired member of this Court) and Rebecca De Guia-Salvador, concurring. 2.CA rollo, pp. 35-37. 3.Id. at 38-40. 4.Id. at 41-50. 5.Id. at 45-46. 6.Id. at 51. 7.Id. at 52. 8.Id. at 53. 9.Id. at 54. 10.Id. at 55. 11.Id. at 56-57. 12.Id. at 61-62. 13.Id. at 35-37. 14.Id. at 38-40. 15.Rollo, p. 40. 16.Id. at 41. 17.Id. at 154-167. 18.Id. at 39. 19.Id. at 41.

20.Id. at 13-14. 21.Id. at 220-229. 22.Id. at 230-234. 23.Id. at 255-256. 24.G.R. No. 159796, July 17, 2007, 527 SCRA 696, 715, citing Progressive Development Corporation v. Quezon City, G.R. No. 36081, April 24, 1989, 172 SCRA 629, 635. 25.Rollo, pp. 43-51. 26.Id. at 43. 27.Id. at 139-140. 28.AUTHORIZING THE ESTABLISHMENT OF THE CLARK DEVELOPMENT CORPORATION AS THE IMPLEMENTING ARM OF THE BASES CONVERSION AND DEVELOPMENT AUTHORITY FOR THE CLARK SPECIAL ECONOMIC ZONE, AND DIRECTING ALL HEADS OF DEPARTMENTS, BUREAUS, OFFICES, AGENCIES AND INSTRUMENTALITIES OF GOVERNMENT TO SUPPORT THE PROGRAM. 29.Supra note 24, at 636. 30.Caltex Philippines, Inc. v. Commission on Audit, G.R. No. 92585, May 8, 1992, 208 SCRA 726, 756. 31.CA rollo, p. 61. 32.Mirasol v. Department of Public Works and Highways, G.R. No. 158793, June 8, 2006, 490 SCRA 318, 347, citing Eslao v. Commission on Audit, G.R. No. 108310, September 1, 1994, 236 SCRA 161, 175. 33.Id. at 347-348, citing JMM Promotion and Management, Inc. v. Court of Appeals, G.R. No. 120095, August 5, 1996, 260 SCRA 319. *Designated additional member per Special Order No. 885 dated September 1, 2010.

THIRD DIVISION [G.R. No. 170532. April 30, 2009.] THE PROVINCIAL ASSESSOR OF MARINDUQUE, petitioner, vs. THE HONORABLE COURT OF APPEALS AND MARCOPPER MINING CORPORATION, respondents. DECISION AUSTRIA-MARTINEZ, J p: The Provincial Assessor of the Province of Marinduque (petitioner) assails by Petition for Certiorari under Rule 65 of the Rules of Court the May 30, 2005 Decision 1 of the Court of Appeals (CA) which declared the Siltation Dam and Decant System of Marcopper Mining Corporation (respondent) exempt from real property tax; and the September 29, 2005 CA Resolution 2 which denied petitioner's motion for reconsideration. DEcTCa Petitioner issued against respondent an Assessment Notice, 3 dated March 28, 1994, for real property taxes due on the latter's real properties, including its Siltation Dam and Decant System (subject property) at Barangay Lamese, Sta. Cruz, Marinduque. The subject property is covered by Tax Declaration No. 0535697 dated November 17, 1993, and has a market value of Php36,360,996.19. 4 Respondent paid the tax demanded, 5 but appealed the assessment before the Local Board of Assessment Appeals (LBAA) on the ground that the subject property is exempt from real property taxation under Section 234 (e) of Republic Act (R.A.) No. 7160 6 or the Local Government Code of 1991, which provides: Sec. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: xxx xxx xxx (e) Machinery and equipment used for pollution control and environmental protection. xxx xxx xxx (Emphasis supplied) Attached to its appeal is an Affidavit issued by its Chief Mining Engineer Ricardo Esquieres, Jr. (Esquieres), stating that the subject property was constructed to comply with the condition imposed by the Department of Environment and Natural Resources (DENR) that respondent prevent run-offs and silt materials from contaminating the Mogpog and Boac Rivers; and describing the subject property as a specialized combination of essential impervious earth materials with a special provision for a spillway and a diversion canal. Esquieres explains that the subject property is intended for the purpose of pollution control, sediment control, domestic and agricultural water supply and flood control. 7 DCASIT

Respondent also submitted a May 24, 1994 Certification issued by DENR Regional Technical Director Carlos J. Magno that the subject property is a "Siltation Dam structure intended primarily for pollution control of silted materials . . . ." 8 In a Decision 9 dated November 10, 1995, the LBAA dismissed respondent's appeal for having been filed out of time. It further held that the subject property is taxable as an improvement on the principal real property, citing the ruling of the Court in Benguet Corporation v. Central Board of Assessment Appeals 10 that a tailings dam is a permanent improvement not exempt from real property taxation. Respondent appealed 11 to the Central Board of Assessment Appeals (CBAA) which, in a Decision 12 dated December 21, 1998, held that respondent's appeal with the LBAA was timely, but the same lacked legal basis because the subject property was neither a machinery nor an equipment but a permanent improvement, and therefore not tax exempt under Sec. 234 (e) of R.A. No. 7160. Citing the definition of machinery under Sec. 199 of R.A. No. 7160, viz.: TAEcSC Sec. 199. Definition of Terms. When used in this Title, the term: xxx xxx xxx (o) Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes." the CBAA held that to be considered a "machinery", the subject property must either be a physical facility for production, or a service facility, or one that is actually, directly and exclusively used to meet the needs of the particular industry, business, or activity and which by its very nature and purpose is designed for, or necessary to a manufacturing, mining, logging, commercial, industrial or agricultural purpose. The subject property does not produce anything nor operate as auxiliary to a production process; thus, it is neither a physical facility for production nor a service facility. It is not even necessary to the mining activity of respondent because its purpose is merely to contain silt and sediments. 13 EHaCID

Moreover, the CBAA noted that based on an ocular inspection it conducted, the subject property had not been actually used for pollution control for it had been out of operation since 1993. 14 Respondent filed a Petition/Motion for Partial Reconsideration, 15 but the CBAA denied the same in its July 27, 2000 Resolution. 16 Respondent appealed 17 to the CA on the sole issue of whether the subject property is tax exempt under Sec. 234 (e) of R.A. No. 7160. 18 The CA reversed the LBAA and CBAA in its Decision dated May 30, 2005 herein assailed, the dispositive portion of which reads: THE FOREGOING DISQUISITIONS CONSIDERED, the instant petition for review is hereby GRANTED, the assailed Decision and Resolution of the Central Board of Assessment Appeals, dated December 21, 1998 and July 27, 2000, respectively are REVERSED and SET ASIDE. The petitioner's siltation dam and decant system being exempt from real property tax as it is hereby determined, the Municipal Treasurer of Sta. Cruz, Marinduque, is hereby directed to refund the tax payments made by petitioner under protest, or in lieu thereof, to credit said payments in favor of petitioner for any taxes it will be required to pay in the future. DIEcHa SO ORDERED. 19 The CA held that the concept of machinery under Section 199 of R.A. No. 7160 is broad enough to include a "machinery, instrument, apparatus or device consisting of parts which, functioning together, allows a person to perform a task more efficiently", such as the subject property. Not only does it function as a machinery, but it is also actually and directly used for the mining business of petitioner. The CA noted that it was constructed in compliance with a DENR requirement; thus, it "is part and parcel of [respondent's] mining operations to protect the environment within which it operates . . . [i]t is a device used for cleaning up after production, in order to clean the water which must necessarily flow into the Mogpog and Boac Rivers". 20 Thus, the CA held that the subject property is exempt from real property taxation under Section 91 of R.A. No. 7942 or the Philippine Mining Act of 1995, 21 viz.: Sec. 91. Incentives for Pollution Control Devices. Pollution control devices acquired, constructed or installed by contractors shall not be considered as improvements on the land or building where they are placed, and shall not be subject to real property and other taxes or assessments: Provided, however, That payment of mine wastes and tailings fees is not exempted. (Emphasis supplied) AaIDHS

It qualifies as a pollution control device defined under DENR Administrative Order No. 95-23 as an "infrastructure, machinery, equipment, and/or improvement used for impounding, treating or neutralizing, precipitating, filtering, conveying and cleansing mine industrial waste and tailing, as well as eliminating and reducing hazardous effects of solid particles, chemicals, liquids or other harmful by-products and gases emitted from any facility utilized in mining operations for their disposal". 22 The definition "extends to all kinds of pollution control devices acquired, constructed, or installed on the land or buildings of the mining corporation". 23 Finally, the CA ruled that, contrary to the view of the CBAA, the non-operational state of the subject property "does not remove it from the purview of the clear provisions of R.A. No. 7160 . . . and R.A. No. 7942 . . . [i]n the absence of clear and convincing evidence that the siltation dam and decant system was inutile to achieve its purpose prior to being damaged, and continued to be so . . . ." 24 Petitioner filed a Motion for Reconsideration 25 but the CA denied it in a Resolution 26 dated September 29, 2005. Hence, the present petition, raising two main issues: I. The propriety of the present action for certiorari under Rule 65 of the Rules of Court: EHCaDS i. Whether or not there is available to Petitioner, the remedy of appeal or other plain, speedy and adequate remedy in the ordinary course of law; ii. Whether or not a petition for review on certiorari under Rule 45 of the Rules of Court is the appropriate remedy; iii. Whether or not, if available to the Petitioner, the remedy of appeal or other plain, speedy and adequate remedy in the ordinary course of law were lost through the fault of the Petitioner. II. Whether or not the Respondent court committed grave abuse of discretion amounting to lack or excess of jurisdiction when it rendered the Decision and its subsequent Resolution, exempting the siltation dam and decant system of Respondent Marcopper from the real property tax imposed by the Provincial Government of Marinduque. i. Respondent Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when it whimsically, arbitrarily and capriciously disregarded by treating as though non-existent, the established and undisputed fact that the Siltation Dam Decant System of Respondent Marcopper was damaged and has not been in operation since 1993 up to, at the very least, the

ocular inspection conducted by the CBAA in November 1996, if not up to the present, given the failure of Respondent Marcopper to claim otherwise; cTAaDC ii. Respondent Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when it whimsically, arbitrarily and capriciously disregarded, by treating as though non-existent, the established and undisputed fact that Respondent Marcopper does not have a certificate of tax exemption from the DENR under the provisions of the Philippine Mining Act of 1995 so as to entitle it to exemption from the realty tax imposed by the local government of Marinduque. iii. Respondent Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when, inspite of the non-operation during the relevant years of the Siltation Dam and Decant System, the lack of certificate of tax exemption therefor and the clear and unambiguous provisions of the Local Government Code and the Philippine Mining Act of 1995, it declared the aforesaid real property as a machinery and equipment or a pollution control device that is exempt from realty tax. 27 (Emphasis supplied) ScHADI Petitioner posits that the CA committed not only a reversible error in holding that the subject property is tax exempt under Sec. 234 (e) of R.A. No. 7160, but also a grave abuse of discretion in discarding key factual findings of both the LBAA and the CBAA regarding the nature of the subject property which factual findings respondent did not even controvert. Petitioner points out that the CBAA found that the subject property had not been used for pollution control because it had been out of operation since 1993; 28 and respondent admitted this in its Petition for Review before the CA where it categorically stated that "[w]hat is not denied, however, which even the barangay resolutions state was that the siltation dam was damaged in 1993 when a typhoon hit Marinduque. This naturally affected the environment in the area for which reason Marcopper specifically wanted to repair the dam". 29 Yet, petitioner argues, the CA completely ignored such undisputed fact by holding that there is "absence of clear and convincing evidence that the siltation dam and decant system was inutile to achieve its purpose prior to being damaged, and continued to be so . . . ." 30 Petitioner further cites the finding of the CBAA that respondent did not obtain from the DENR a certification of the tax exempt classification of the subject properties. This CBAA finding was not controverted by respondent in its pleadings before the CA; yet, said court completely glossed over this matter and declared the subject properties tax exempt. 31 aSATHE

On the other hand, respondent contends that petitioner's mode of appeal from the CA Decision should have been a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed within fifteen (15) days from October 13, 2005, the day petitioner received notice of the CA Resolution denying its motion for reconsideration. That petitioner filed instead a Petition for Certiorari on December 12, 2005 the 60th day from receipt of the CA Resolution indicates that it resorted to a special civil action for certiorari as a substitute for the appeal it had lost; 32 worse, petitioner raised factual issues which the Court cannot resolve for it is no trier of facts. 33 The petition has merit. On the proper mode of appeal Previously, under Section 36 of Presidential Decree (P.D.) No. 464 or the Real Property Tax Code, the proper mode of appeal from a decision rendered by the CBAA was by special civil action for certiorari filed directly with the Court. 34 However, with the passage of R.A. No. 7902, 35 granting the CA exclusive appellate jurisdiction over decisions of boards and commissions, the Court issued Revised Administrative Circular No. 1-95 36 which provides under paragraphs 1 37 and 5 38 that appeal from a decision of the CBAA shall be by Petition for Review with the CA. Thus, from the final judgment of the CA, appeal to the Court on questions of law is by Petition for Review on Certiorari under Rule 45 of the Rules of Court. 39 The availability of such remedy bars recourse to a special civil action for certiorari even if one of the grounds invoked is grave abuse of discretion. 40 ESacHC Indeed, petitioner erred in its mode of appeal by Petition for Certiorari under Rule 65. 41 Nonetheless, in its Resolution 42 of July 5, 2006, the Court gave due course to the petition for it involves not only the power of taxation of a local government unit but also its stewardship of the environment. The higher interest of public welfare dictates that the Court suspend its rules pro hac vice in order to resolve the merits of the petition. 43 On whether the subject property is exempt from real property taxation It should be borne in mind that the protest and appeals filed by respondents before the LBAA, CBAA, and CA refer to the Assessment Notice dated March 28, 1994 and effective January 1, 1995. 44 No other assessment notice is under question. The disputed assessment notice having taken effect on January 1, 1995, its validity is determined by the provisions of Title II (Real Property Taxation) of R.A. No. 7160, effective January 1, 1992. R.A. No. 7942 has no bearing on the matter, for

this law came into effect only on April 14, 1995. Hence, reference to R.A. No. 7942 by the CA and the respondent are all out of place. Title II of R.A. No. 7160 governs the administration, appraisal, assessment, levy and collection of real property tax. Section 234 thereof grants exemption from real property taxation based on ownership, character or usage. As the Court explained in Mactan Cebu International Airport Authority v. Marcos, 45 to wit: aHcACT Section 234 of the LGC provides for the exemptions from payment of real property taxes and withdraws previous exemptions therefrom granted to natural and juridical persons, including government-owned and controlled corporations, except as provided therein. xxx xxx xxx These exemptions are based on the ownership, character, and use of the property. Thus: (a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered cooperatives. (b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i) charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and (iii) nonprofit or religious cemeteries. IcSEAH (c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use to which they are devoted are: (i) all lands, buildings and improvements which are actually directly and exclusively used for religious, charitable or educational purposes; (ii) all machineries and equipment actually, directly and exclusively used by local water districts or by governmentowned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; and (iii) all machinery and equipment used for pollution control and environmental protection. To help provide a healthy environment in the midst of the modernization of the country, all machinery and equipment for pollution control and environmental protection may not be taxed by local governments. (Emphasis supplied) As held in Mactan, the exemption granted under Sec. 234 (e) of R.A. No. 7160 to "[m]achinery and equipment used for pollution control and environmental protection" is based on usage. The term usage means direct, immediate and actual application of the property itself to the exempting purpose. 46 Section 199 of R.A. No. 7160 defines actual use as "the purpose for which the property is principally or predominantly utilized by the person in possession thereof". It contemplates

concrete, as distinguished from mere potential, use. Thus, a claim for exemption under Sec. 234 (e) of R.A. No. 7160 should be supported by evidence that the property sought to be exempt is actually, directly and exclusively used for pollution control and environmental protection. 47 ASTcaE The records yield no allegation or evidence by respondent that the subject property was actually, directly and exclusively used for pollution control and environmental protection during the period covered by the assessment notice under protest. Rather, the finding of the CBAA that said property "apparently out of commission and not apt to its function as would control pollution and protect the environment" 48 stands undisputed; such finding is even admitted by respondent when, to repeat, in its Petition for Review before the CA, it categorically stated that "[w]hat is not denied, however, which even the barangay resolutions state was that the siltation dam was damaged in 1993 when a typhoon hit Marinduque. This naturally affected the environment in the area for which reason Marcopper specifically wanted to repair the dam". 49 Moreover, Sec. 206 prescribes the evidentiary requirements for exemption from real property taxation, viz.: Sec. 206. Proof of Exemption of Real Property from Taxation. Every person by or for whom real property is declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary evidence in support of such claim including corporate charters, title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage deeds, and similar documents. If the required evidence is not submitted within the period herein prescribed, the property shall be listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll. (Emphasis supplied) HESCcA The burden is upon the taxpayer to prove, by clear and convincing evidence, that his claim for exemption has legal and factual basis. 50 As aptly pointed out by petitioner, there is no allegation nor evidence in respondent's pleadings that it had complied with the procedural requirement under Sec. 206. There is nothing in the records which would indicate that, within 30 days from its filing of Tax Declaration No. 05-35697 on November 17, 1993, 51 respondent filed with the provincial assessor an application for exemption or any documentary evidence of the exempt status of the subject property.

What respondent submitted along with its appeal before the LBAA are Affidavit of Esquieres, 52 the project design of the subject property, 53 as well as a Certification 54 dated May 24, 1994 issued by Carlos J. Magno, Regional Technical Director of DENR Regional Office No. IV. But far from proving that the subject property is tax exempt, the documents classify the subject property as anything but machinery or equipment. DAEICc The DENR Certification classifies the subject property as a "structure intended primarily for pollution control of silted materials in order to protect the environmental degradation of Maguila-guila, Mangamu-Mogpog River system from getting turbid". 55 That the subject property is a structure is further underscored by the project design which describes the subject property as a "zoned earth siltation dam" 56 composed of a clay core consisting of clayey materials or impervious fill, a random fill made up of heavily to intensely fractured metarock, and filters comprised of course tailings, river sand deposits and course filter gravels. 57 It is described in greater detail by respondent's Chief Mining Engineer Ricardo Esquieres, Jr. in an October 11, 1994 Affidavit 58 attached to respondent's appeal 59 before the LBAA, thus: 7. The siltation dam and decant system was constructed sometime in August 1992. It is not only a specialized combination of essential impervious earth materials which provide adequate strength and detention of turbid streamwater. It also has special provisions like spillway and diversion canal which also promote its integrity by providing a safe outlet of the impounded streamwater. Basically, the zoned-earth dam is composed of a clay core, random fill and filter drains. cAHIaE 1. Clay core impervious central portion of the dam to be inclined with a width to heat ratio greater than 1.0 and designed to be thick thick enough to reduce seepage. 2. Random fill relatively more permeable than the clay core and of greater strength. Placed at the upstream face of the dam (to serve as armor or ballast against slope stability). 3. Filters designed to ensure that the dam structure is always in its full drained state, thus, relieving any pore pressure that may develop behind the dam. 60 Therefore, by design, composition and function, the subject property is a structure adhered to the soil, and has neither a mechanical contrivance, instrument, tool, implement, appliances, apparatus, nor paraphernalia that produces a mechanical

effect or performs a mechanical work of any kind. 61 It meets none of the following features of a machinery as described in Section 199 (o) of R.A. No. 7160: (o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes. HCaIDS That a structure such as the subject property does not qualify as a machinery or equipment used for pollution control as contemplated under R.A. No. 7160 is evident from the adoption of an expanded definition of pollution control device in R.A. No. 7942. Under Section 3 (am) thereof, a pollution control device now also refers to "infrastructure" or "improvement", and not just to machinery or equipment. This new concept, however, cannot benefit respondent, for the assessment notice under review pertains to real property tax assessed prior to the amendment of Sec. 234 (e) of R.A. No. 7160 by Sec. 91 in relation to Sec. 3 (am) of R.A. No. 7942. It is settled that tax laws are prospective in application, unless expressly provided to apply retroactively. 62 R.A. No. 7942 does not provide for the retroactive application of its provisions. In sum, the CA committed grave abuse of discretion in ignoring irrefutable evidence that the subject property is not a machinery used for pollution control, but a structure adhering to the soil and intended for pollution control, but has not been actually applied for that purpose during the period under assessment. WHEREFORE, the petition is GRANTED. The Decision dated May 30, 2005 and Resolution dated September 29, 2005 are REVERSED and SET ASIDE. The Assessment Notice dated March 28, 1994 is declared VALID under the then applicable Republic Act No. 7160. CAETcH No costs. SO ORDERED. Ynares-Santiago, Chico-Nazario, Nachura and Peralta, JJ., concur. Footnotes

1. Penned by Associate Justice Danilo B. Pine and concurred in by Associate Justices Rodrigo V. Cosico and Arcangelita Romilla-Lontok; rollo, p. 44. aEAIDH 2. Id. at 61. 3. CA rollo, p. 53. 4. Exhibit "C-2", id. at 54. 5. Id. at 56. 6. Id. at 83. SHTcDE 7. Id. at 45-46. 8. CA rollo, p. 81. 9. Rollo, p. 63. 10. G.R. No. 106041, January 29, 1993, 218 SCRA 271. 11. CA rollo, p. 118. 12. Rollo, p. 73. 13. Rollo, pp. 81-82. 14. Id. at 81. acSECT 15. CA rollo, p. 46. 16. Rollo, p. 84. 17. CA rollo, p. 9. 18. Id. at 7. 19. Rollo, p. 59. 20. Rollo, pp. 55-56. 21. Id. at 57. ECSHAD 22. Id. at 57-58. 23. Id. at 58. 24. Id. 25. CA rollo, p. 318. 26. Rollo, p. 61. 27. Petitioner's Memorandum, rollo, pp. 503-504. TCASIH 28. Petition, id. at 14. 29. Petition for Review in CA-G.R. No. 60672, CA rollo, p. 21. 30. CA Decision, rollo, p. 58. 31. Petition, rollo, pp. 16-17. 32. Memorandum for Respondent, id. at 560-563. 33. Id. at 564. 34. Caltex (Phil.) Inc. v. Central Board of Assessment Appeals, G.R. No. L50466, May 3, 1982, 114 SCRA 296, 300. See also Benguet Corporation v.

Central Board of Assessment Appeals, supra, note 10 at 279 and Sesbreo v. Central Board of Assessment Appeals, G.R. No. 106588, March 24, 1997, 270 SCRA 360, 369. DSAICa 35. An Act Expanding the Jurisdiction of the Court of Appeals; approved February 23, 1995. 36. Rules Governing Appeals to the Court of Appeals from Judgments or Final Orders of the Court of Tax Appeals and Quasi-judicial Agencies; effective June 1, 1995. 37. 1. Scope. These rules shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Land Registration Authority, Social Security Commission, Office of the President, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National Telecommunication Commission, Department of Agrarian Reform under Republic Act 6657, Government Service Insurance System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, and Construction Industry Arbitration Commission. DTIaHE 38. 5. How appeal taken. Appeal shall be taken by filing a verified petition for review in seven (7) legible copies with the Court of Appeals, with proof of service of a copy thereof on the adverse party and on the court or agency a quo. The original copy of the petition intended for the Court of Appeals shall be indicated as such by the petitioner. 39. Macasasa v. Sicad, G.R. No. 146547, June 20, 2006, 491 SCRA 368, 375376. 40. Madrigal Transport, Inc. v. Lapanday Holdings Corporation, G.R. No. 156067, August 11, 2004, 436 SCRA 123, 137. 41. See Talento v. Escalada, G.R. No. 180884, June 27, 2008, 556 SCRA 491, 498. cACEHI 42. Rollo, p. 492. 43. People v. Zulueta, 89 Phil. 752, 756-757 (1951). See Hydro Resources Contractors Corp. v. Court of Appeals, G.R. No. 85714, November 29, 1991, 204 SCRA 309, 315. In Sanchez v. Court of Appeals (345 Phil. 155, 179 [1997]), the Court noted that in "Remedial Law Compendium", Volume One, p. 708, (1997),

Justice Florenz D. Regalado enumerated the following exceptions.: "(1) where the appeal does not constitute a speedy and adequate remedy (Salvadades v. Pajarillo, 78 Phil. 77), as where 33 appeals were involved from orders issued in a single proceeding which will inevitably result in a proliferation of more appeals (PCIB v. Escolin, G.R. Nos. L-27860 and 27896, Mar. 29, 1974); (2) where the orders were also issued either in excess of or without jurisdiction (Aguilar v. Tan, G.R. No. L23600, June 30, 1970, Cf. Bautista v. Sarmiento, G.R. No. L-45137, September 23, 1985); (3) for certain special consideration, as public welfare or public policy (See Jose v. Zulueta, G.R. No. 16598, May 31, 1961 and the cases cited therein); (4) where in criminal actions, the court rejects rebuttal evidence for the prosecution as, in case of acquittal, there could be no remedy (People v. Abalos, G.R. No. L-29039, Nov. 28, 1968); (5) where the order is a patent nullity (Marcelo v. De Guzman, G.R. No. L-29077, June 29, 1982); and (6) where the decision in the certiorari case will avoid future litigations (St. Peter Memorial Park, Inc. v. Campos, G.R. No. L-38280, Mar. 21, 1975)." SEIacA 44. Sec. 221 of R.A. No. 7160, which provides; Sec. 221. Date of Effectivity of Assessment or Reassessment. All assessments or reassessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of the succeeding year: Provided, however, That the reassessment of real property due to its partial or total destruction, or to a major change in its actual use, or to any great and sudden inflation or deflation of real property values, or to the gross illegality of the assessment when made or to any other abnormal cause, shall be made within ninety (90) days from the date any such cause or causes occurred, and shall take effect at the beginning of the quarter next following the reassessment (Previously Section 24 of Presidential Decree No. 464 (PD 464) or the Real Property Tax Code.) See Province of Nueva Ecija v. Imperial Mining Co., Inc., G.R. No. L59463, November 19, 1982, 118 SCRA 632. TEDaAc 45. G.R. No. 120082, September 11, 1996, 261 SCRA 667. 46. Lung Center of the Philippines v. Quezon City, G.R. No. 144104, June 29, 2004, 433 SCRA 119, 137. 47. See Senator Aquilino Pimentel, The Local Government Code Revisited, Manila (2007), p. 444. See also Light Rail Transit Authority v. Central Board of Assessment Appeals, G.R. No. 127316, October 12, 2000, 342 SCRA 692. HEAcDC 48. Rollo, p. 81. 49. Petition for Review in CA-G.R. No. 60672, CA rollo, p. 21.

50. Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation, G.R. No. 147295, February 16, 2007, 516 SCRA 93, 103. SEHTIc 51. CA rollo, p. 55. 52. Id. at 63-68. 53. Id. at 72-80. 54. Id. at 81. 55. Id. 56. Id. at 72. acTDCI 57. Id. at 77-78. 58. Id. at 63. 59. Id. at 61. 60. Id. at 65. 61. See Central Azucarera de La Carlota v. Coscolluela, 44 Phil. 527 (1923). 62. Pansacola v. Commissioner of Internal Revenue, G.R. No. 159991, November 16, 2006, 507 SCRA 81, 92-93; Abello v. Commissioner of Internal Revenue, G.R. No. 120721, February 23, 2005, 452 SCRA 162, 173. ECTIcS

SECOND DIVISION
[G.R. No. 158881. April 16, 2008.] PETRON CORPORATION, petitioner, vs. MAYOR TOBIAS M. TIANGCO, and MUNICIPAL TREASURER MANUEL T. ENRIQUEZ of the MUNICIPALITY OF NAVOTAS, METRO MANILA, respondents.

DECISION

TINGA, J :
p

The novel but important issue before us is whether a local government unit is empowered under the Local Government Code (the LGC) to impose business taxes on persons or entities engaged in the sale of petroleum products. I.

The present Petition for Review on Certiorari under Rule 45 filed by petitioner Petron Corporation (Petron) directly assails the Decision of the Regional Trial Court (RTC) of Malabon, Branch 74, which dismissed petitioner's complaint for cancellation of assessment made by the then municipality (now City) of Navotas (Navotas) for deficiency taxes, and ordering the payment of P10,204,916.17 pesos in business taxes to Navotas. As the issues raised are pure questions of law, we need not dwell on the facts at length. Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. Through that depot, it has engaged in the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay. 1 On 1 March 2002, Petron received a letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the corporation was assessed taxes "relative to the figures covering sale of diesel declared by your Navotas Terminal from 1997 to 2001." 2 The stated total amount due was P6,259,087.62, a figure derived from the gross sales of the depot during the years in question. The computation sheets 3 that were attached to the letter made reference to Ordinance 92-03, or the New Navotas Revenue Code (Navotas Revenue Code), though such enactment was not cited in the letter itself.
HIACac

Petron duly filed with Navotas a letter-protest to the notice of assessment pursuant to Section 195 of the Code. It argued that it was exempt from local business taxes in view of Art. 232 (h) of the Implementing Rules (IRR) of the LGC, as well as a ruling of the Bureau of Local Government Finance of the Department of Finance dated 31 July 1995, the latter stating that sales of petroleum fuels are not subject to local taxation. The letter-protest was denied by the Navotas Municipal Treasurer, respondent Manuel T. Enriquez, in a letter dated 8 May 2002. 4 This was followed by a letter from the Mayor dated 15 May 2002, captioned "Final Demand to Pay", requiring that Petron pay the assessed amount within five (5) days from receipt thereof, with a threat of closure of Petron's operations within Navotas should there be no payment. 5 Petron, through counsel, replied to the Mayor by another letter posing objections to the threat of closure. The Mayor did not respond to this last letter. 6 Thus, on 20 May 2002, Petron filed with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes with Prayer for the Issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction. The quested TRO was not issued by the Malabon RTC upon manifestation of respondents that they would not proceed with the closure of Petron's Navotas bulk plant until after the RTC shall have decided the case on the merits. 7 However, while the case was pending decision, respondents refused to issue a business permit to Petron, thus prompting Petron to file a Supplemental Complaint with Prayer for Preliminary Mandatory Injunction against respondents. 8

On 5 May 2003, the Malabon RTC rendered its Decision dismissing Petron's complaint and ordering the payment of the assessed amount. 9 Eleven days later, Petron received a Closure Order from the Mayor, directing Petron to cease and desist from operating the bulk plant. Petron sought a TRO from the Malabon RTC, but this was denied. 10 Petron also filed a motion for reconsideration of the order of denial, but this was likewise denied. 11 On 4 August 2003, this Court issued a TRO, enjoining the respondents from closing Petron's Navotas bulk plant or otherwise interfering in its operations. 12 II. As earlier stated, Petron has opted to assail the RTC Decision directly before this Court since the matter at hand involves pure questions of law, a characterization conceded by the RTC Decision itself. Particularly, the controversy hinges on the correct interpretation of Section 133 (h) of the LGC, and the applicability of Article 232 (h) of the IRR.
acCDSH

Section 133 (h) of the LGC reads as follows:

Sec. 133.Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and Barangays shall not extend to the levy of the following: xxx xxx xxx (h)Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;

Evidently, Section 133 prescribes the limitations on the capacity of local government units to exercise their taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local government units, namely: "excise taxes on articles enumerated under the National Internal Revenue Code [(NIRC)], as amended;" and "taxes, fees or charges on petroleum products." The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the provision, a municipality is authorized to impose business taxes on a whole host of business activities. Suffice it to say, unless there is another provision of law which states otherwise, Section 143, broad in scope as it is, would undoubtedly cover the business of selling diesel fuels, or any other petroleum product for that matter.

Nonetheless, Article 232 of the IRR defines with more particularity the capacity of a municipality to impose taxes on businesses. The enumeration that follows is generally a positive list of businesses which may be subjected to business taxes, and paragraph (h) of Article 232 does allow the imposition of local business taxes "[o]n any business not otherwise specified in the preceding paragraphs which the sanggunian concerned may deem proper to tax," but subject to this important qualification, thus:
". . . provided further, that in line with existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products shall not be subject to any local tax imposed on this article.

Notably, the Malabon RTC declared Art. 232 (h) of the IRR void because the LGC purportedly does not contain a provision prohibiting the imposition of business taxes on petroleum products. 13 This submission warrants close examination as well. With all the relevant provisions of law laid out, we address the core issues submitted by Petron, namely: first, is the challenged tax on sale of the diesel fuels an excise tax on an article enumerated under the NIRC, thusly prohibited under Section 133 (h) of the LGC?; second, is the challenged tax prohibited by Section 133 (h) under the proviso, "taxes, fees or charges on petroleum products"? and; third, does Art. 232 (h) of the IRR similarly prohibit the imposition of the challenged tax?
ECISAD

III. As earlier observed, Section 133 (h) provides two kinds of taxes which cannot be imposed by local government units: "excise taxes on articles enumerated" under the NIRC, as amended; and "taxes, fees or charges on petroleum products." There is no doubt that among the excise taxes on articles enumerated under the NIRC are those levied on petroleum products, per Section 148 of the NIRC. We first consider Petron's argument that the "business taxes" on its sale of diesel fuels partakes of an excise tax, which if true, could invalidate the challenged tax solely on the basis of the phrase "excise taxes on articles enumerated under the [NIRC]." To support this argument, it cites Cordero v. Conda, 14 Allied Thread Co. Inc. v. City Mayor of Manila, 15 and Iloilo Bottlers, Inc. v. City of Iloilo, 16 as having explained that "an excise tax is a tax upon the performance, carrying on, or the exercise of an activity." 17 Respondents, on the other hand, argue that what the provision prohibits is the imposition of excise taxes on petroleum products, but not the imposition of business taxes on the same. They cite Philippine Petroleum

Corporation v. Municipality of Pililia, 18 where the Court had noted, "[a] tax on business is distinct from a tax on the article itself." 19
ScAaHE

Petron's argument is fraught with far-reaching implications, for if it were sustained, it would mean that local government units are barred from imposing business taxes on any of the articles subject to excise taxes under the NIRC. These would include alcohol products, 20 tobacco products, 21 mineral products 22 automobiles, 23 and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. 24 Admittedly, the proffered definition of an excise tax as "a tax upon the performance, carrying on, or exercise of some right, privilege, activity, calling or occupation" derives from the compendium American Jurisprudence, popularly referred to as Am Jur, 25 and has been cited in previous decisions of this Court, including those cited by Petron itself. Such a definition would not have been inconsistent with previous incarnations of our Tax Code, such as the NIRC of 1939, 26 as amended, or the NIRC of 1977 27 because in those laws the term "excise tax" was not used at all. In contrast, the nomenclature used in those prior laws in referring to taxes imposed on specific articles was "specific tax." 28 Yet beginning with the National Internal Revenue Code of 1986, as amended, the term "excise taxes" was used and defined as applicable "to goods manufactured or produced in the Philippines. . . and to things imported." 29 This definition was carried over into the present NIRC of 1997. 30 Further, these two latest codes categorize two different kinds of excise taxes: "specific tax" which is imposed and based on weight or volume capacity or any other physical unit of measurement; and "ad valorem tax" which is imposed and based on the selling price or other specified value of the goods. In other words, the meaning of "excise tax" has undergone a transformation, morphing from the Am Jur definition to its current signification which is a tax on certain specified goods or articles.

The change in perspective brought forth by the use of the term "excise tax" in a different connotation was not lost on the departed author Jose Nolledo as he accorded divergent treatments in his 1973 and 1994 commentaries on our tax laws. Writing in 1973, and essentially alluding to the Am Jur definition of "excise tax", Nolledo observed:
Are specific taxes, taxes on property or excise taxes In the case of Meralco v. Trinidad ([G.R.] 16738, 1925) it was held that specific taxes are property taxes, a ruling which seems to be erroneous. Specific taxes are truly excise taxes for the fact that the value of the property taxed is taken into account will not change the nature of the tax.

It is correct to say that specific taxes are taxes on the privilege to import, manufacture and remove from storage certain articles specified by law.

31 In contrast, after the tax code was amended to classify specific taxes as a subset of excise taxes, Nolledo, in his 1994 commentaries, wrote:
1.Excise taxes, as used in the Tax Code, refers to taxes applicable to certain specified goods or articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported into the Philippines. They are either specific or ad valorem.
HICATc

2.Nature of excise taxes. They are imposed directly on certain specified goods. (infra) They are, therefore, taxes on property. (see Medina vs. City of Baguio, 91 Phil. 854.) A tax is not excise where it does not subject directly the produce or goods to tax but indirectly as an incident to, or in connection with, the business to be taxed. 32

In their 2004 commentaries, De Leon and De Leon restate the Am Jur definition of excise tax, and observe that the term is "synonymous with 'privilege tax' and [both terms] are often used interchangeably." 33 At the same time, they offer a caveat that "[e]xcise tax, as [defined by Am Jur], is not to be confused with excise tax imposed [by the NIRC] on certain specified articles manufactured or produced in, or imported into, the Philippines, 'for domestic sale or consumption or for any other disposition.'" 34 It is evident that Am Jur aside, the current definition of an excise tax is that of a tax levied on a specific article, rather than one "upon the performance, carrying on, or the exercise of an activity." This current definition was already in place when the LGC was enacted in 1991, and we can only presume that it was what the Congress had intended as it specified that local government units could not impose "excise taxes on articles enumerated under the [NIRC]." This prohibition must pertain to the same kind of excise taxes as imposed by the NIRC, and not those previously defined "excise taxes" which were not integrated or denominated as such in our present tax law. It is quite apparent, therefore, that our current body of taxation law does not explicitly accommodate the traditional definition of excise tax offered by Petron. In fact, absent any statutory adoption of the traditional definition, it may be said that starting in 1986 excise taxes in this jurisdiction refer exclusively to specific or ad valorem taxes imposed under the NIRC. At the very least, it is this concept of

excise tax which we can reasonably assume that Congress had in mind and actually adopted when it crafted the LGC. The palpable absurdity that ensues should the alternative interpretation prevail all but strengthens this position. Thus, Petron's argument concerning excise taxes is founded not on what the NIRC or the LGC actually provides, but on a non-statutory definition sourced from a legal paradigm that is no longer applicable in this jurisdiction. That such definition was referred to again in our 1998 decision in Province of Bulacan v. Court of Appeals 35 is ultimately of little consequence, and so is Petron's reliance on such ruling. The Court therein had correctly nullified, on the basis of Section 133 (h) of the LGC, a province-imposed tax "of 10% of the fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth and other quarry resources . . . extracted from public lands," because it noted that under Section 151 of the NIRC, all nonmetallic minerals and quarry resources were assessed with excise taxes of "two percent (2%) based on the actual market value of the gross output thereof at the time of removal, in case of those locally extracted or produced." 36 Additionally, the Court also observed that the case had emanated from an attempt to impose the said tax on quarry resources from private lands, despite the clear language of the tax ordinance limiting the tax to such resources extracted from public lands. 37 On that score alone, the case could have been correctly decided.
HECaTD

It is true that the Court had additionally reasoned in Province of Bulacan that "[t]he tax imposed by the Province of Bulacan is an excise tax, being a tax upon the performance, carrying on, or exercise of an activity." As earlier noted, such definition of excise tax however was not explicitly carried over into the NIRC and was even superseded beginning with the 1986 amendments thereto. To insist on utilizing this definition simply because it had been reiterated in Province of Bulacan, unnecessary as such reiteration may have been to the resolution of that case, would have the unfortunate effect of infusing life into a concept that is diametrically inconsistent with the present state of the law. We thus can assert with clear comfort that excise taxes, as imposed under the NIRC, do not pertain to "the performance, carrying on, or exercise of an activity", at least not to the extent of equating excise with business taxes. IV. We next consider whether the clause "taxes, fees or charges on petroleum products" in Section 133 (h) precludes local government units from imposing business taxes based on the sale of petroleum products. The power of a municipality to impose business taxes derives from Section 143 of the LGC that specifically enumerates several types of business on which it may

impose taxes, including manufacturers, wholesalers, distributors, dealers of any article of commerce of whatever nature; 38 those engaged in the export or commerce of essential commodities; 39 retailers; 40 contractors and other independent contractors; 41 banks and financial institutions; 42 and peddlers engaged in the sale of any merchandise or article of commerce. 43 This obviously broad power is further supplemented by paragraph (h) of Section 143 which authorizes the sanggunian to impose taxes on any other businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax. 44 This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987 Constitution. Section 5, Article X assures that "[e]ach local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges," though the power is "subject to such guidelines and limitations as the Congress may provide." There is no doubt that following the 1987 Constitution and the LGC, the fiscal autonomy of local government units has received greater affirmation than ever. Previous decisions that have been skeptical of the viability, if not the wisdom of reposing fiscal autonomy to local government units have fallen by the wayside.
aSECAD

Respondents cite our declaration in City Government of San Pablo v. Reyes 45 that following the 1987 Constitution the rule thenceforth "in interpreting statutory provisions on municipal fiscal powers, doubts will have to be resolved in favor of municipal corporations." 46 Such policy is also echoed in Section 5 (a) of the LGC, which states that "[a]ny provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit." But somewhat conversely, Section 5 (b) then proceeds to assert that "[i]n case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer." 47 And this latter qualification has to be respected as a constitutionally authorized limitation which Congress has seen fit to provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the power of local government units to impose taxes. Congress has the constitutional authority to impose limitations on the power to tax of local government units, and Section 133 of the LGC is one such limitation. Indeed, the provision is the explicit statutory impediment to the enjoyment of absolute taxing power by local government units, not to mention the reality that such power is a delegated power. To cite one example, under Section 133 (g), local government units are disallowed from levying business taxes on "business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and (4) four years, respectively from the date of registration."

Section 133 (h) states that local government units "shall not extend to the levy of . . . taxes, fees or charges on petroleum products." Respondents assert that the phrase "taxes, fees or charges on petroleum products" pertains to the imposition of direct or excise taxes on petroleum products, and not business taxes. If the phrase actually pertains to excise taxes, then it would be an exercise in utter redundancy, since the preceding phrase already prohibits the imposition of excise taxes on articles already subject to such taxes under the NIRC, such as petroleum products. There would be no sense on the part of the legislature to twice emphasize in the same sentence that excise taxes on petroleum products are beyond the pale of local government taxation.

It appears that this argument of respondents was fashioned on the basis of the pronouncement of the Court in Philippine Petroleum Corporation v. Municipality of Pililla, thus: 48
. . . [W]hile Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in P.D. No. 436.
aCcADT

The dicta that "[a] tax on a business is distinct from a tax on the article itself" might at first blush somehow lend support to respondents' position, yet that dicta has not since been reprised by this Court. It is likewise worth observing that Pililla did involve a tax ordinance that imposed business taxes on an enterprise engaged in the manufacture and storage of petroleum products. Significantly, the legal milieu governing Pililla is vastly different from that existing at bar, to the extent that the earlier case could not be presently controlling. At the time the taxes sought to be collected in Pililla were imposed, there was no national law in place similar to Section 133 (h) of the LGC that barred local "taxes, fees or charges on petroleum products." There were circulars to that effect issued by the Finance Department, yet the Court could not validate such issuances since under the tax laws then in place "no exemptions were given to manufacturers, wholesalers, retailers, or dealers in petroleum products." 49 In fact, the Court tellingly observed that "if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy,

it should have been expressly stated in P.D. No. 436." 50 Such expression conspiciously * missing in P.D. No. 436 is now found in Section 133 (h). In view of the difference in statutory paradigm between this case and Pililla, the latter case is severely diminished as applicable precedent at bar. The Court then was correct in observing that a mere administrative circular could not prohibit a local tax that is not otherwise barred under a national statute, yet in this case that conflict is not present since the LGC explicitly prohibits the imposition of several classes of local taxes, including those on petroleum products. The final and only straw Pililla provides that respondents can still grasp at is the bare statement that "[a] tax on a business is distinct from a tax on the article itself," 51 a sentence which could have been omitted from that decision without any effect. We can concede that a tax on a business is distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter part of Section 133 (h) is concerned, for the phrase "taxes, fees or charges on petroleum products" does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. It would have been a different matter had Congress, in crafting Section 133 (h), barred "excise taxes" or "direct taxes," or any category of taxes only, for then it would be understood that only such specified taxes on petroleum products could not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133 (h). Where the law does not distinguish, we should not distinguish.
CAETcH

The language of Section 133 (h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all "taxes, fees and charges." The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to "taxes, fees and charges" pertains only to one class of articles of the many subjects of excise taxes, specifically, "petroleum products". While local government units are authorized to burden all such other class of goods with "taxes, fees and charges", excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products. V.

We no longer need to dwell on the arguments centering on Article 232 of the IRR. As earlier stated, the provision explicitly stipulates that "in line with existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products shall not be subject to any local tax imposed on this article [on business taxes]." The RTC went as far as to declare Article 232 as "invalid" on the premise that the prohibition was not similarly warranted under the LGC. Assuming that the LGC does not, in fact, prohibit the imposition of business taxes on petroleum products, we would agree that the IRR could not impose such a prohibition. With our ruling that Section 133 (h) does indeed prohibit the imposition of local business taxes on petroleum products, however, the RTC declaration that Article 232 was invalid is, in turn, itself invalid. Even absent Article 232, local government units cannot impose business taxes on petroleum products. If anything, Article 232 merely reiterates what the LGC itself already provides, with the additional explanation that such prohibition was "in line with existing national policy." VI. We have said all that need be said for the resolution of this case, but there is one more line of argument raised by respondents that deserves a remark. Respondents argue, "assuming. . . that the Oversight Committee [that drafted the IRR] can legislate, that the "existing national policy" referred to in Article 232 had been superseded by Republic Act No. 8479, or the Oil Deregulation Law. Boiled down to its essence, the argument is that since the oil industry is presently deregulated the basis for exempting petroleum products from business taxes no longer exists.
EICSTa

Of course, the starting premise for this argument, that the IRR can establish a tax or an exemption, is false and has been flatly rejected by this Court before. 52 The Code itself does not connect its prohibition on taxation of petroleum products with any existing or future national oil policy, so the change in such national policy with the regime of oil deregulation is ultimately of no moment. Still, we can divine the reasoning behind singling out petroleum products, among all other commodities, as beyond the power of local government units to levy local taxes. Why the special concern over petroleum products? The answer is quite evident to all sentient persons. In this age where unfortunately dependence on petroleum as fuel has yet no equally feasible alternative, the cost of petroleum products, though fully controlled by private enterprise, remains an area of public concern. To be blunt about it, there is an inevitable link between the fluctuation of oil prices and the prices of every other commodity. The reality, indeed, is oil is a political commodity. Such fact has received recognition from this Court. "[O]il [is] a

commodity whose supply and price affect the ebb and flow of the lifeblood of the nation. Its shortage of supply or a slight, upward spiral in its price shakes our economic foundation. Studies show that the areas most impacted by the movement of oil are food manufacture, land transport, trade, electricity and water." 53 "[T]he upswing and downswing of our economy materially depend on the oscillation of oil." 54 "Fluctuations in the supply and price of oil products have a dramatic effect on economic development and public welfare." 55 It can be reasonably presumed that if municipalities, cities and provinces were authorized to impose business taxes on manufacturers and retailers of petroleum products, the resulting losses to these enterprises would be passed on to the consumers, triggering the chain of increases that normally accompany the increase in oil prices. No similarly massive trigger effect would ensue upon the imposition of business taxes on other commodities, including those already subject to excise taxation under the NIRC. It may very well be that the policy of deregulation, which was not yet in effect at the time of the enactment of the LGC, has changed the complexion of the issue, for unlike before, oil companies are free at will to increase oil prices, thus mitigating the similarly arbitrary consequences that could develop if petroleum products were subject to local taxes. Still, it cannot be denied that subjecting petroleum products to business taxes apart from the taxes already imposed by Congress in this age of deregulation would lead to the same result had they been so taxed during the era of oil regulation the increase of oil prices. We do not discount the authority of Congress to enact measures that facilitate the increase in oil prices; witness the Oil Deregulation Law and the most recent Expanded VAT Law. Yet these hard choices are presumably made by Congress with the expectation that the negative effects of increased oil prices are offset by the other economic benefits promised by those new laws (i.e., a more vibrant oil industry; increased government revenue).
cAaETS

The Court defers to the other branches of government in the formulation of oil policy, but when the choices are made through legislation, the Court expects that the choices are deliberate, considering that the stakes are virtually all-in. Herein, respondents may be bolstered by the constitutional and statutory policy favoring local fiscal autonomy, but it would be utter indolence to reflexively affirm such policy when the inevitable effect is an increase in oil prices. Any prudent adjudication should fully ascertain the mandate of local government units to impose taxes on petroleum products, and such mandate should be cast in so specific terms as to leave no dispute as to the legislative intendment to extend such power in the name of local autonomy. What we have found instead, from the plain letter of the law is an explicit disinclination on the part of the legislature to impart that particular taxing power to local government units.

While Section 133 (h) does not generally bar the imposition of business taxes on articles burdened by excise taxes under the NIRC, it specifically prohibits local government units from extending the levy of any kind of "taxes, fees or charges on petroleum products." Accordingly, the subject tax assessment is ultra vires and void. WHEREFORE, the Petition is GRANTED. The Decision of the Regional Trial Court of Malabon City in Civil Case No. 3380-MN is REVERSED and SET ASIDE and the subject assessment for deficiency taxes on petitioner is ordered CANCELLED. The Temporary Restraining Order dated 4 August 2003 is hereby made PERMANENT. No pronouncement as to costs. SO ORDERED. Quisumbing, Carpio-Morales, Velasco, Jr. and Brion, JJ., concur.
Footnotes 1.Rollo, p. 60. 2.Id. at 200. 3.Id. at 201-205. 4.See rollo, p. 26. 5.Id. at 210. 6.Id. at 27. 7.Id. at 19.
aHADTC

8.Id. at 158-164. 9.Id. at 60-69. 10.In an Order dated 19 June 2003. 11.In an Order dated 2 July 2003. 12.Rollo, pp. 213-215. 13.Id. at 66.

14.124 Phil. 926 (1966). 15.218 Phil. 308 (1984). 16.G.R. No. L-52019, 19 August 1988, 164 SCRA 607. 17.Rollo, p. 31. 18.G.R. No. 90776, 3 June 1991, 198 SCRA 82. 19.Id., at 89. 20.See Sections 141-143, NIRC. 21.See Sections 144-147, NIRC. 22.See Section 151, NIRC. 23.See Section 149, NIRC. 24.See Section 150, NIRC. 25.See Footnote No. 27, Cordero v. Conda, 124 Phil. 926, 937 (1966); citing 51 Am. Jur., pp. 1068-1069. 26.COMMONWEALTH ACT NO. 466, as amended. 27.Pres. Decree No. 1158. 28.See Title IV, COMMONWEALTH ACT NO. 466; Title IV, Pres. Decree No. 1158. 29.See Sec. 126, Pres. Decree No. 1994, establishing National Internal Revenue Code of 1986. 30.See Sec. 129, National Internal Revenue Code of 1997. 31.J. NOLLEDO, NATIONAL INTERNAL REVENUE CODE OF THE PHILIPPINES (1973 ed.), at 678-679. 32.J. NOLLEDO, THE NATIONAL INTERNAL REVENUE CODE ANNOTATED (5th ed., 1994), at 471-472. 33.H. DE LEON & H. DE LEON, JR., THE FUNDAMENTALS OF TAXATION (14th ed., 2004), at 12-13. 34.Id. at 13.
cHCaIE

35.359 Phil. 779 (1998). 36.Id. at 794-795. 37.Id. at 795.

HSaEAD

38.See Section 143 (a) & (b), Local Government Code. 39.See Section 143 (c), Local Government Code. 40.See Section 143 (d), Local Government Code. 41.See Section 143 (e), Local Government Code. 42.See Section 143 (f), Local Government Code. 43.See Section 143 (g), Local Government Code. 44.See Yamane v. BA Lepanto, G.R. No. 154993, 25 October 2005, 474 SCRA 258, 272-273. 45.364 Phil. 842 (1999). 46.Id. at 857. 47.Section 5 (b) also provides, "Any tax exemption, incentive or relief granted by any local government unit pursuant to the provisions of this Code shall be construed strictly against the person claiming it; . . ." This proviso should find no application to this case, since the tax exemption invoked by Petron was not granted or legislated by Navotas, but bestowed by the Congress through the Local Government Code. 48.Supra note 18 at 89. 49.Id. at 89. 50.Id. 51.Supra note 19. 52.See e.g., John Hay People's Alternative Coalition v. Lim, 460 Phil. 530, 551 (2003). 53.Tatad v. Secretary of Energy, 346 Phil. 321, 379 (1997). 54.Id. at 348.
CAcEaS

55.Garcia v. Corona, 378 Phil. 848, 859 (1999).

SPECIAL SECOND DIVISION [G.R. No. 171586. January 25, 2010.] NATIONAL POWER CORPORATION, petitioner, vs. PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO, respondents. RESOLUTION BRION, J p: The petitioner National Power Corporation (Napocor) filed the present motion for reconsideration 1 of the Court's Decision of July 15, 2009, in which we denied Napocor's claimed real property tax exemptions. For the resolution of the motion, we deem it proper to provide first a background of the case. aDHScI BACKGROUND FACTS The Province of Quezon assessed Mirant Pagbilao Corporation (Mirant) for unpaid real property taxes in the amount of P1.5 Billion for the machineries located in its power plant in Pagbilao, Quezon. Napocor, which entered into a Build-Operate-Transfer (BOT) Agreement (entitled Energy Conversion Agreement) with Mirant, was furnished a copy of the tax assessment. Napocor (nota bene, not Mirant) protested the assessment before the Local Board of Assessment Appeals (LBAA), claiming entitlement to the tax exemptions provided under Section 234 of the Local Government Code (LGC), which states: Section 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: xxx xxx xxx (c) All machineries and equipment that are actually, directly, and exclusively used by local water districts and government-owned or -controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; xxx xxx xxx (e) Machinery and equipment used for pollution control and environmental protection. aTEScI xxx xxx xxx Assuming that it cannot claim the above tax exemptions, Napocor argued that it is entitled to certain tax privileges, namely: a. the lower assessment level of 10% under Section 218 (d) of the LGC for government-owned and controlled corporations engaged in the generation and transmission of electric power, instead of the 80% assessment level for commercial properties imposed in the assessment letter; and b. an allowance for depreciation of the subject machineries under Section 225 of the LGC. In the Court's Decision of July 15, 2009, we ruled that Napocor is not entitled to any of these claimed tax exemptions and privileges on the basis primarily of the defective protest filed by the Napocor. We found that Napocor did not file a valid protest against the realty tax assessment because it did not possess the requisite legal standing. When a taxpayer fails to question the assessment before the LBAA, the assessment becomes final, executory, and demandable, precluding the taxpayer from questioning the correctness of

the assessment or from invoking any defense that would reopen the question of its liability on the merits. 2 CTSAaH Under Section 226 of the LGC, 3 any owner or person having legal interest in the property may appeal an assessment for real property taxes to the LBAA. Since Section 250 adopts the same language in enumerating who may pay the tax, we equated those who are liable to pay the tax to the same entities who may protest the tax assessment. A person legally burdened with the obligation to pay for the tax imposed on the property has the legal interest in the property and the personality to protest the tax assessment. To prove that it had legal interest in the taxed machineries, Napocor relied on: 1. the stipulation in the BOT Agreement that authorized the transfer of ownership to Napocor after 25 years; 2. its authority to control and supervise the construction and operation of the power plant; and 3. its obligation to pay for all taxes that may be incurred, as provided in the BOT Agreement. Napocor posited that these indicated that Mirant only possessed naked title to the machineries. We denied the first argument by ruling that legal interest should be one that is actual and material, direct and immediate, not simply contingent or expectant. 4 We disproved Napocor's claim of control and supervision under the second argument after reading the full terms of the BOT Agreement, which, contrary to Napocor's claims, granted Mirant substantial power in the control and supervision of the power plant's construction and operation. 5 DASCIc For the third argument, we relied on the Court's rulings in Baguio v. Busuego 6 and Lim v. Manila. 7 In these cases, the Court essentially declared that contractual assumption of tax liability alone is insufficient to make one liable for taxes. The contractual assumption of tax liability must be supplemented by an interest that the party assuming the liability had on the property; the person from whom payment is sought must have also acquired the beneficial use of the property taxed. In other words, he must have the use and possession of the property an element that was missing in Napocor's case. We further stated that the tax liability must be a liability that arises from law, which the local government unit can rightfully and successfully enforce, not the contractual liability that is enforceable only between the parties to the contract. In the present case, the Province of Quezon is a third party to the BOT Agreement and could thus not exact payment from Napocor without violating the principle of relativity of contracts. 8 Corollarily, for reasons of fairness, the local government units cannot be compelled to recognize the protest of a tax assessment from Napocor, an entity against whom it cannot enforce the tax liability. At any rate, even if the Court were to brush aside the issue of legal interest to protest, Napocor could still not successfully claim exemption under Section 234 (c) of the LGC because to be entitled to the exemption under that provision, there must be actual, direct, and exclusive use of machineries. Napocor failed to satisfy these requirements. CSHcDT THE MOTION FOR RECONSIDERATION Although Napocor insists that it is entitled to the tax exemptions and privileges claimed, the primary issue for the Court to resolve, however, is to determine whether Napocor has

sufficient legal interest to protest the tax assessment because without the requisite interest, the tax assessment stands and no claim of exemption or privilege can prevail. Section 226 of the LGC, as mentioned, limits the right to appeal the local assessor's action to the owner or the person having legal interest in the property. Napocor posits that it is the beneficial owner of the subject machineries, with Mirant retaining merely a naked title to secure certain obligations. Thus, it argues that the BOT Agreement is a mere financing agreement and is similar to the arrangement authorized under Article 1503 of the Civil Code, which declares: Art. 1503. When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer. Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller's property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract. ISAaTH xxx xxx xxx Pursuant to this arrangement, Mirant's ownership over the subject machineries is merely a security interest, given only for the purpose of ensuring the performance of Napocor's obligations. Napocor additionally contends that its contractual assumption liability (through the BOT Agreement) for all taxes vests it with sufficient legal interest because it is actually, directly, and materially affected by the assessment. While its motion for reconsideration was pending, Napocor filed a Motion to Refer the Case to the Court En Banc considering that "the issues raised have far-reaching consequences in the power industry, the country's economy and the daily lives of the Filipino people, and since it involves the application of real property tax provision of the LGC against Napocor, an exempt government instrumentality." 9 Also, the Philippine Independent Power Producers Association, Inc. (PIPPA) filed a Motion for Leave to Intervene and a Motion for Reconsideration-in-Intervention. PIPPA is a non-stock corporation comprising of privately-owned power generating companies which includes TeaM Energy Corporation (TeaM Energy), successor of Mirant. PIPPA is claiming interest in the case since any decision here will affect the other members of PIPPA, all of which have executed similar BOT agreements with Napocor. cTDIaC THE COURT'S RULING At the outset, we resolve to deny the referral of the case to the Court en banc. We do not find the reasons raised by Napocor meritorious enough to warrant the attention of the members of the Court en banc, as they are merely reiterations of the arguments it raised in the petition for review on certiorari that it earlier filed with the Court. 10 Who may appeal a real property tax assessment Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a legal owner who has legal title to the property. 11 Given this definition, Napocor

is clearly not vested with the requisite interest to protest the tax assessment, as it is not an entity having the legal title over the machineries. It has absolutely no solid claim of ownership or even of use and possession of the machineries, as our July 15, 2009 Decision explained. A BOT agreement is not a mere financing arrangement. In Napocor v. CBAA 12 a case strikingly similar to the one before us, we discussed the nature of BOT agreements in the following manner: The underlying concept behind a BOT agreement is defined and described in the BOT law as follows: AcICHD Build-operate-and-transfer A contractual arrangement whereby the project proponent undertakes the construction, including financing, of a given infrastructure facility, and the operation and maintenance thereof. The project proponent operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract to enable the project proponent to recover its investment, and operating and maintenance expenses in the project. The project proponent transfers the facility to the government agency or local government unit concerned at the end of the fixed term which shall not exceed fifty (50) years . . . . 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. CIaHDc A reading of the provisions of the parties' BOT Agreement shows that it fully conforms to this concept. By its express terms, BPPC has complete ownership both legal and beneficial of the project, including the machineries and equipment used, subject only to the transfer of these properties without cost to NAPOCOR after the lapse of the period agreed upon. As agreed upon, BPPC provided the funds for the construction of the power plant, including the machineries and equipment needed for power generation; thereafter, it actually operated and still operates the power plant, uses its machineries and equipment, and receives payment for these activities and the electricity generated under a defined compensation scheme. Notably, BPPC as owner-user is responsible for any defect in the machineries and equipment. xxx xxx xxx That some kind of "financing" arrangement is contemplated in the sense that the private sector proponent shall initially shoulder the heavy cost of constructing the project's buildings and structures and of purchasing the needed machineries and equipment is undeniable. The arrangement, however, goes beyond the simple provision of funds, since the private sector proponent not only constructs and buys the necessary assets to put up the project, but operates and manages it as well during an agreed period that would allow it to recover its basic costs and earn profits. In other words, the private sector proponent goes into business for itself, assuming risks and incurring costs for its account. If it receives support from the government at all during the

agreed period, these are pre-agreed items of assistance geared to ensure that the BOT agreement's objectives both for the project proponent and for the government are achieved. In this sense, a BOT arrangement is sui generis and is different from the usual financing arrangements where funds are advanced to a borrower who uses the funds to establish a project that it owns, subject only to a collateral security arrangement to guard against the nonpayment of the loan. It is different, too, from an arrangement where a government agency borrows funds to put a project from a private sector-lender who is thereafter commissioned to run the project for the government agency. In the latter case, the government agency is the owner of the project from the beginning, and the lenderoperator is merely its agent in running the project. HEcIDa If the BOT Agreement under consideration departs at all from the concept of a BOT project as defined by law, it is only in the way BPPC's cost recovery is achieved; instead of selling to facility users or to the general public at large, the generated electricity is purchased by NAPOCOR which then resells it to power distribution companies. This deviation, however, is dictated, more than anything else, by the structure and usages of the power industry and does not change the BOT nature of the transaction between the parties. Consistent with the BOT concept and as implemented, BPPC the owner-manageroperator of the project is the actual user of its machineries and equipment. BPPC's ownership and use of the machineries and equipment are actual, direct, and immediate, while NAPOCOR's is contingent and, at this stage of the BOT Agreement, not sufficient to support its claim for tax exemption. Thus, the CTA committed no reversible error in denying NAPOCOR's claim for tax exemption. [Emphasis supplied.] Given the special nature of a BOT agreement as discussed in the cited case, we find Article 1503 inapplicable to define the contract between Napocor and Mirant, as it refers only to ordinary contracts of sale. We thus declared in Tatad v. Garcia 13 that under BOT agreements, the private corporations/investors are the owners of the facility or machinery concerned. Apparently, even Napocor and Mirant recognize this principle; Article 2.12 of their BOT Agreement provides that "until the Transfer Date, [Mirant] shall, directly or indirectly, own the Power Station and all the fixtures, fitting, machinery and equipment on the Site . . . . [Mirant] shall operate, manage, and maintain the Power Station for the purpose of converting fuel of Napocor into electricity." DHATcE Moreover, if Napocor truly believed that it was the owner of the subject machineries, it should have complied with Sections 202 and 206 of the LGC which obligates owners of real property to: a. file a sworn statement declaring the true value of the real property, whether taxable or exempt; 14 and b. file sufficient documentary evidence supporting its claim for tax exemption. 15 While a real property owner's failure to comply with Sections 202 and 206 does not necessarily negate its tax obligation nor invalidate its legitimate claim for tax exemption, Napocor's omission to do so in this case can be construed as contradictory to its claim of ownership of the subject machineries. That it assumed liability for the taxes that may be imposed on the subject machineries similarly does not clothe it with legal title over the same. We do not believe that the phrase "person having legal interest in the property" in Section 226 of the LGC can include an entity that assumes another person's tax liability by contract.

A review of the provisions of the LGC on real property taxation shows that the phrase has been repeatedly adopted and used to define an entity: a. in whose name the real property shall be listed, valued, and assessed; 16 cHITCS b. who may be summoned by the local assessor to gather information on which to base the market value of the real property; 17 c. who may protest the tax assessment before the LBAA 18 and may appeal the latter's decision to the CBAA; 19 d. who may be liable for the idle land tax, 20 as well as who may be exempt from the same; 21 e. who shall be notified of any proposed ordinance imposing a special levy, 22 as well as who may object the proposed ordinance; 23 f. who may pay the real property tax; 24 g. who is entitled to be notified of the warrant of levy and against whom it may be enforced; 25 h. who may stay the public auction upon payment of the delinquent tax, penalties and surcharge; 26 and i. who may redeem the property after it was sold at the public auction for delinquent taxes. 27 IcDCaS For the Court to consider an entity assuming another person's tax liability by contract as a person having legal interest in the real property would extend to it the privileges and responsibilities enumerated above. The framers of the LGC certainly did not contemplate that the listing, valuation, and assessment of real property can be made in the name of such entity; nor did they intend to make the warrant of levy enforceable against it. Insofar as the provisions of the LGC are concerned, this entity is a party foreign to the operation of real property tax laws and could not be clothed with any legal interest over the property apart from its assumed liability for tax. The rights and obligations arising from the BOT Agreement between Napocor and Mirant were of no legal interest to the tax collector the Province of Quezon which is charged with the performance of independent duties under the LGC. 28 Some authorities consider a person whose pecuniary interests is or may be adversely affected by the tax assessment as one who has legal interest in the property (hence, possessed of the requisite standing to protest it), citing Cooley's Law on Taxation. 29 The reference to this foreign material, however, is misplaced. The tax laws of the United States deem it sufficient that a person's pecuniary interests are affected by the tax assessment to consider him as a person aggrieved and who may thus avail of the judicial or administrative remedies against it. As opposed to our LGC, mere pecuniary interest is not sufficient; our law has required legal interest in the property taxed before any administrative or judicial remedy can be availed. The right to appeal a tax assessment is a purely statutory right; whether a person challenging an assessment bears such a relation to the real property being assessed as to entitle him the right to appeal is determined by the applicable statute in this case, our own LGC, not US federal or state tax laws. aHESCT In light of our ruling above, PIPPA's motion to intervene and motion for reconsiderationin-intervention is already mooted. PIPPA as an organization of independent power producers is not an interested party insofar as this case is concerned. Even if TeaM Energy, as Mirant's successor, is included as one of its members, the motion to intervene

and motion for reconsideration-in-intervention can no longer be entertained, as it amounts to a protest against the tax assessment that was filed without the complying with Section 252 of the LGC, a matter that we shall discuss below. Most importantly, our Decision has not touched or affected at all the contractual stipulations between Napocor and its BOT partners for the former's assumption of the tax liabilities of the latter. Payment under protest is required before an appeal to the LBAA can be made Apart from Napocor's failure to prove that it has sufficient legal interest, a further review of the records revealed another basis for disregarding Napocor's protest against the assessment. The LBAA dismissed Napocor's petition for exemption for its failure to comply with Section 252 of the LGC 30 requiring payment of the assailed tax before any protest can be made. Although the CBAA ultimately dismissed Napocor's appeal for failure to meet the requirements for tax exemption, it agreed with Napocor's position that "the protest contemplated in Section 252 (a) is applicable only when the taxpayer is questioning the reasonableness or excessiveness of an assessment. It presupposes that the taxpayer is subject to the tax but is disputing the correctness of the amount assessed. It does not apply where, as in this case, the legality of the assessment is put in issue on account of the taxpayer's claim that it is exempt from tax." The CTA en banc agreed with the CBAA's discussion, relying mainly on the cases of Ty v. Trampe 31 and Olivarez v. Marquez. 32 cCAIES We disagree. The cases of Ty and Olivarez must be placed in their proper perspective. The petitioner in Ty v. Trampe questioned before the trial court the increased real estate taxes imposed by and being collected in Pasig City effective from the year 1994, premised on the legal question of whether or not Presidential Decree No. 921 (PD 921) was repealed by the LGC. PD 921 required that the schedule of values of real properties in the Metropolitan Manila area shall be prepared jointly by the city assessors in the districts created therein; while Section 212 of the LGC stated that the schedule shall be prepared by the provincial, city or municipal assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in their respective local government units for enactment by ordinance of the Sanggunian concerned. The private respondents assailed Ty's act of filing a prohibition petition before the trial court contending that Ty should have availed first the administrative remedies provided in the LGC, particularly Sections 252 (on payment under protest before the local treasurer) and 226 (on appeals to the LBAA). The Court, through former Chief Justice Artemio Panganiban, declared that Ty correctly filed a petition for prohibition before the trial court against the assailed act of the city assessor and treasurer. The administrative protest proceedings provided in Section 252 and 226 will not apply. The protest contemplated under Section 252 is required where there is a question as to the reasonableness or correctness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real property tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. Ty however was questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These were not questions merely of amounts of the

increase in the tax but attacks on the very validity of any increase. Moreover, Ty was raising a legal question that is properly cognizable by the trial court; no issues of fact were involved. In enumerating the power of the LBAA, Section 229 declares that "the proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts . . . ." Appeals to the LBAA (under Section 226) are therefore fruitful only where questions of fact are involved. TECIHD Olivarez v. Marquez, on the other hand, involved a petition for certiorari, mandamus, and prohibition questioning the assessment and levy made by the City of Paraaque. Olivarez was seeking the annulment of his realty tax delinquency assessment. Marquez assailed Olivarez' failure to first exhaust administrative remedies, particularly the requirement of payment under protest. Olivarez replied that his petition was filed to question the assessor's authority to assess and collect realty taxes and therefore, as held in Ty v. Trampe, the exhaustion of administrative remedies was not required. The Court however did not agree with Olivarez's argument. It found that there was nothing in his petition that supported his claim regarding the assessor's alleged lack of authority. What Olivarez raised were the following grounds: "(1) some of the taxes being collected have already prescribed and may no longer be collected as provided in Section 194 of the Local Government Code of 1991; (2) some properties have been doubly taxed/assessed; (3) some properties being taxed are no longer existent; (4) some properties are exempt from taxation as they are being used exclusively for educational purposes; and (5) some errors are made in the assessment and collection of taxes due on petitioners' properties, and that respondents committed grave abuse of discretion in making the improper, excessive and unlawful the collection of taxes against the petitioner." The Olivarez petition filed before the trial court primarily involved the correctness of the assessments, which is a question of fact that is not allowed in a petition for certiorari, prohibition, and mandamus. Hence, we declared that the petition should have been brought, at the very first instance, to the LBAA, not the trial court. STcaDI Like Olivarez, Napocor, by claiming exemption from realty taxation, is simply raising a question of the correctness of the assessment. A claim for tax exemption, whether full or partial, does not question the authority of local assessors to assess real property tax. This may be inferred from Section 206 which states that: SEC. 206. Proof of Exemption of Real Property from Taxation. Every person by or for whom real property is declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary evidence in support of such claim including corporate charters, title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage deeds, and similar documents. If the required evidence is not submitted within the period herein prescribed, the property shall be listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll. [Emphasis provided] By providing that real property not declared and proved as tax-exempt shall be included in the assessment roll, the above-quoted provision implies that the local assessor has the authority to assess the property for realty taxes, and any subsequent claim for exemption shall be allowed only when sufficient proof has been adduced supporting the claim. Since Napocor was simply questioning the correctness of the assessment, it should have first

complied with Section 252, particularly the requirement of payment under protest. Napocor's failure to prove that this requirement has been complied with thus renders its administrative protest under Section 226 of the LGC without any effect. No protest shall be entertained unless the taxpayer first pays the tax. aHIDAE It was an ill-advised move for Napocor to directly file an appeal with the LBAA under Section 226 without first paying the tax as required under Section 252. Sections 252 and 226 provide successive administrative remedies to a taxpayer who questions the correctness of an assessment. Section 226, in declaring that "any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city, or municipal assessor in the assessment of his property may . . . appeal to the Board of Assessment Appeals . . .," should be read in conjunction with Section 252 (d), which states that "in the event that the protest is denied . . ., the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book II of the LGC [Chapter 3 refers to Assessment Appeals, which includes Sections 226 to 231]. The "action" referred to in Section 226 (in relation to a protest of real property tax assessment) thus refers to the local assessor's act of denying the protest filed pursuant to Section 252. Without the action of the local assessor, the appellate authority of the LBAA cannot be invoked. Napocor's action before the LBAA was thus prematurely filed. For the foregoing reasons, we DENY the petitioner's motion for reconsideration. SO ORDERED. aIETCA Carpio Morales, Leonardo-de Castro, Abad and Perez, JJ., concur. Footnotes 1. Rollo, pp. 498-517. 2. FELS Energy Inc. v. Province of Batangas, G.R. No. 168557, February 16, 2007, 516 SCRA 186. 3. SEC. 226. Local Board of Assessment Appeals. Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. 4. Citing Cario v. Ofilado, G.R. No. 102836, January 18, 1993, 217 SCRA 206. 5. Citing Articles 2.1, 3.1, 5.1, and 5.3 of the Energy Conversion Agreement. 6. 188 Phil. 218 (1980). 7. G.R. No. 90639, February 21, 1990, 182 SCRA 482. 8. CIVIL CODE, Article 1311. 9. Rollo, p. 535. 10. Supreme Court Circular No. 2-98. 11. Black's Law Dictionary (5th ed.), pp. 805-806. 12. G.R. No. 171470, January 30, 2009, 57 SCRA 418, 434-437. 13. 313 Phil. 296, 323, 326 (1995). 14. SEC. 202. Declaration of Real Property by the Owner or Administrator. It shall be the duty of all persons, natural or juridical, owning or administering real property, including the improvements therein, within a city or municipality, or their duly authorized representative, to prepare, or cause to be prepared, and file with the provincial,

city or municipal assessor, a sworn statement declaring the true value of their property, whether previously declared or undeclared, taxable or exempt, which shall be the current and fair market value of the property, as determined by the declarant. Such declaration shall contain a description of the property sufficient in detail to enable the assessor or his deputy to identify the same for assessment purposes. The sworn declaration of real property herein referred to shall be filed with the assessor concerned once every three (3) years during the period from January first (1st) to June thirtieth (30th) commencing with the calendar year 1992. [emphasis provided] 15. SEC. 206. Proof of Exemption of Real Property from Taxation. Every person by or for whom real property is declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary evidence in support of such claim including corporate charters, title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage deeds, and similar documents. If the required evidence is not submitted within the period herein prescribed, the property shall be listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll. 16. SEC. 205. Listing of Real Property in the Assessment Rolls. (a) In every province and city, including the municipalities within the Metropolitan Manila Area, there shall be prepared and maintained by the provincial, city or municipal assessor an assessment roll wherein shall be listed all real property, whether taxable or exempt, located within the territorial jurisdiction of the local government unit concerned. Real property shall be listed, valued and assessed in the name of the owner or administrator, or anyone having legal interest in the property. . . . . 17. SEC. 213. Authority of Assessor to Take Evidence. For the purpose of obtaining information on which to base the market value of any real property, the assessor of the province, city or municipality or his deputy may summon the owners of the properties to be affected or persons having legal interest therein and witnesses, administer oaths, and take deposition concerning the property, its ownership, amount, nature, and value. 18. Supra note 3. 19. SEC. 229. Action by the Local Board of Assessment Appeals. . . . (c) The secretary of the Board shall furnish the owner of the property or the person having legal interest therein and the provincial or city assessor with a copy of the decision of the Board. In case the provincial or city assessor concurs in the revision or the assessment, it shall be his duty to notify the owner of the property or the person having legal interest therein of such fact using the form prescribed for the purpose. The owner of the property or the person having legal interest therein or the assessor who is not satisfied with the decision of the Board, may, within thirty (30) days after receipt of the decision of said Board, appeal to the Central Board of Assessment appeals, as herein provided. The decision of the Central Board shall be final and executory. 20. SEC. 237. Idle Lands, Coverage. For purposes of real property taxation, idle lands shall include the following: (a) "Agricultural lands, more than one (1) hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half (1/2) of which

remain uncultivated or unimproved by the owner of the property or person having legal interest therein." Agricultural lands planted to permanent or perennial crops with at least fifty (50) trees to a hectare shall not be considered idle lands. Lands actually used for grazing purposes shall likewise not be considered idle lands. (b) Lands, other than agricultural, located in a city or municipality, more than one thousand (1,000) square meters in area one-half (1/2) of which remain unutilized or unimproved by the owner of the property or person having legal interest therein. Regardless of land area, this Section shall likewise apply to residential lots in subdivisions duly approved by proper authorities, the ownership of which has been transferred to individual owners, who shall be liable for the additional tax: Provided, however, That individual lots of such subdivisions, the ownership of which has not been transferred to the buyer shall be considered as part of the subdivision, and shall be subject to the additional tax payable by subdivision owner or operator. 21. SEC. 238. Idle Lands Exempt from Tax. A province or city or a municipality within the Metropolitan Manila Area may exempt idle lands from the additional levy by reason of force majeure, civil disturbance, natural calamity or any cause or circumstance which physically or legally prevents the owner of the property or person having legal interest therein from improving, utilizing or cultivating the same. 22. SEC. 242. Publication of Proposed Ordinance Imposing a Special Levy. Before the enactment of an ordinance imposing a special levy, the sanggunian concerned shall conduct a public hearing thereon; notify in writing the owners of the real property to be affected or the persons having legal interest therein as to the date and place thereof and afford the latter the opportunity to express their positions or objections relative to the proposed ordinance. 23. SEC. 244. Taxpayers' Remedies Against Special Levy. Any owner of real property affected by a special levy or any person having a legal interest therein may, upon receipt of the written notice of assessment of the special levy, avail of the remedies provided for in Chapter 3, Title Two, Book II of this Code. 24. SEC. 250. Payment of Real Property Taxes in Installments. The owner of the real property or the person having legal interest therein may pay the basic real property tax and the additional tax for Special Education Fund (SEF) due thereon without interest in four (4) equal installments; the first installment to be due and payable on or before March Thirty-first (31st); the second installment, on or before June Thirty (30); the third installment, on or before September Thirty (30); and the last installment on or before December Thirty-first (31st), except the special levy the payment of which shall be governed by ordinance of the sanggunian concerned. The date for the payment of any other tax imposed under this Title without interest shall be prescribed by the sanggunian concerned. Payments of real property taxes shall first be applied to prior years delinquencies, interests, and penalties, if any, and only after said delinquencies are settled may tax payments be credited for the current period. 25. SEC. 258. Levy on Real Property. After the expiration of the time required to pay the basic real property tax or any other tax levied under this Title, real property subject to such tax may be levied upon through the issuance of a warrant on or before, or simultaneously with, the institution of the civil action for the collection of the delinquent tax. The provincial or city treasurer, or a treasurer of a municipality within the Metropolitan Manila Area, as the case may be, when issuing a warrant of levy shall

prepare a duly authenticated certificate showing the name of the delinquent owner of the property or person having legal interest therein, the description of the property, the amount of the tax due and the interest thereon. The warrant shall operate with the force of a legal execution throughout the province, city or a municipality within the Metropolitan Manila Area. The warrant shall be mailed to or served upon the delinquent owner of the real property or person having legal interest therein, or in case he is out of the country or cannot be located, to the administrator or occupant of the property. At the same time, written notice of the levy with the attached warrant shall be mailed to or served upon the assessor and the Registrar of Deeds of the province, city or a municipality within the Metropolitan Manila Area where the property is located, who shall annotate the levy on the tax declaration and certificate of title of the property, respectively. The levying officer shall submit a report on the levy to the sanggunian concerned within ten (10) days after receipt of the warrant by the owner of the property or person having legal interest therein. 26. SEC. 260. Advertisement and Sale. Within thirty (30) days after service of the warrant of levy, the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as may be necessary to satisfy the tax delinquency and expenses of sale. The advertisement shall be effected by posting a notice at the main entrance of the provincial, city or municipal building, and in a publicly accessible and conspicuous place in the barangay where the real property is located, and by publication once a week for two (2) weeks in a newspaper of general circulation in the province, city or municipality where the property is located. The advertisement shall specify the amount of the delinquent tax, the interest due thereon and expenses of sale, the date and place of sale, the name of the owner of the real property or person having legal interest therein, and a description of the property to be sold. At any time before the date fixed for the sale, the owner of the real property or person having legal interest therein may stay the proceedings by paying the delinquent tax, the interest due thereon and the expenses of sale. The sale shall be held either at the main entrance of the provincial, city or municipal building, or on the property to be sold, or at any other place as specified in the notice of the sale. Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report of the sale to the sanggunian concerned, and which shall form part of his records. The local treasurer shall likewise prepare and deliver to the purchaser a certificate of sale which shall contain the name of the purchaser, a description of the property sold, the amount of the delinquent tax, the interest due thereon, the expenses of sale and a brief description of the proceedings: Provided, however, That proceeds of the sale in excess of the delinquent tax, the interest due thereon, and the expenses of sale shall be remitted to the owner of the real property or person having legal interest therein. The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray the costs of collection thru the remedies provided for in this Title, including the expenses of advertisement and sale. 27. SEC. 254. Notice of Delinquency in the Payment of the Real Property Tax. . . . (b) Such notice shall specify the date upon which the tax became delinquent and shall state that personal property may be distrained to effect payment. It shall likewise state that at any time before the distraint of personal property, payment of the tax with surcharges, interests and penalties may be made in accordance with the next following Section, and unless the tax, surcharges and penalties are paid before the expiration of the year for which the tax is due except when the notice of assessment or

special levy is contested administratively or judicially pursuant to the provisions of Chapter 3, Title II, Book II of this Code, the delinquent real property will be sold at public auction, and the title to the property will be vested in the purchaser, subject, however, to the right of the delinquent owner of the property or any person having legal interest therein to redeem the property within one (1) year from the date of sale. SEC. 261. Redemption of Property Sold. Within one (1) year from the date of sale, the owner of the delinquent real property or person having legal interest therein, or his representative, shall have the right to redeem the property upon payment to the local treasurer of the amount of the delinquent tax, including the interest due thereon, and the expenses of sale from the date of delinquency to the date of sale, plus interest of not more than two percent (2%) per month on the purchase price from the date of sale to the date of redemption. Such payment shall invalidate the certificate of sale issued to the purchaser and the owner of the delinquent real property or person having legal interest therein shall be entitled to a certificate of redemption which shall be issued by the local treasurer or his deputy. From the date of sale until the expiration of the period of redemption, the delinquent real property shall remain in the possession of the owner or person having legal interest therein who shall be entitled to the income and other fruits thereof. The local treasurer or his deputy, upon receipt from the purchaser of the certificate of sale, shall forthwith return to the latter the entire amount paid by him plus interest of not more than two percent (2%) per month. Thereafter, the property shall be free from the lien of such delinquent tax, interest due thereon and expenses of sale. 28. Hamilton Mfg. Co. v. City of Lowell, 274 Mass. 477, 175 N.E. 73. 29. Cooley on Taxation (4th ed.), Volume 3, 1207, p. 2420. 30. SEC. 252. Payment Under Protest. (a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words "paid under protest". The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt. (b) The tax or a portion thereof paid under protest, shall be held in trust by the treasurer concerned. (c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax liability. (d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book II of this Code. 31. 321 Phil. 81, 101-102 (1995). 32. G.R. No. 155591, September 22, 2004, 438 SCRA 679, 686, 687.

MANILA INTERNATIONAL AIRPORT AUTHORITY vs. CITY OF PASAY, ET AL. EN BANC [G.R. No. 163072. April 2, 2009.]

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, respondents. DECISION CARPIO, J p: This is a petition for review on certiorari 1 of the Decision 2 dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. DEICaA The Facts Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903), 3 otherwise known as the Revised Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Under Sections 3 4 and 22 5 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Paraaque City. On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. MIAA's real property tax delinquency for its real properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows: EIcSDC TAX TAXABLE TAX DUE PENALTY TOTAL DECLARATION YEAR A7-183-08346 1997-2001 243,522,855.00 123,351,728.18 366,874,583.18 A7-183-05224 1992-2001 113,582,466.00 71,159,414.98 184,741,880.98 A7-191-00843 1992-2001 54,454,800.00 34,115,932.20 88,570,732.20 A7-191-00140 1992-2001 1,632,960.00 1,023,049.44 2,656,009.44 A7-191-00139 1992-2001 6,068,448.00 3,801,882.85 9,870,330.85 A7-183-05409 1992-2001 59,129,520.00 37,044,644.28 96,174,164.28 A7-183-05410 1992-2001 20,619,720.00 12,918,254.58 33,537,974.58 A7-183-05413 1992-2001 7,908,240.00 4,954,512.36 12,862,752.36 A7-183-05412 1992-2001 18,441,981.20 11,553,901.13 29,995,882.33 A7-183-05411 1992-2001 109,946,736.00 68,881,630.13 178,828,366.13 A7-183-05245 1992-2001 7,440,000.00 4,661,160.00 12,101,160.00 GRAND TOTAL P642,747,726.20 P373,466,110.13 P1,016,213,836.33 ============= ============ ============= On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid. On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary injunction or temporary restraining order. The

petition sought to enjoin the City of Pasay from imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties. On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition. The Court of Appeals' Ruling The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals and educational institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon the effectivity of the Local Government Code. The Issue The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax. The Court's Ruling The petition is meritorious. In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the Local Government Code which read: ITCcAD SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. 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; (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and environment protection. Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.

The Court of Appeals held that as a government-owned corporation, MIAA's tax exemption under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992. In Manila International Airport Authority v. Court of Appeals 6 (2006 MIAA case), this Court already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Paraaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands and buildings located in Paraaque City. The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case involved airport lands and buildings located in Paraaque City while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court held: To summarize, MIAA is not a government-owned or controlled corporation under Section 2 (13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides: TSEHcA 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. The term "ports . . . constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code. 7 (Emphasis in the original) The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes . . . government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a "government-owned or controlled corporation". Obviously, the term government

"instrumentality" is broader than the term "government-owned or controlled corporation". Section 2 (10) provides: SEC. 2. General Terms Defined. . . . (10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. The term "government-owned or controlled corporation" has a separate definition under Section 2 (13) 8 of the Introductory Provisions of the Administrative Code of 1987: SEC. 2. General Terms Defined. . . . (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. The fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled corporation", there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation". TEAICc A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2 (13) will show that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation". As explained in the 2006 MIAA case: A government-owned or controlled corporation must be "organized as a stock or nonstock 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 Code defines a stock corporation as one whose "capital stock is divided into shares and . . . authorized to distribute to the holders of such shares dividends . . . ." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. xxx xxx xxx MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers". A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

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

Ynares-Santiago, J., please see dissenting opinion. Austria-Martinez, J., joins the separate opinion of J. Nachura. Tinga, J., please see dissenting opinion. Nachura, J., please see separate opinion. Separate Opinions YNARES-SANTIAGO, J., dissenting: Indeed, as pointed out by Justice Antonio T. Carpio, the Court has twice reaffirmed the ruling in Manila International Airport Authority v. Court of Appeals 1 in the subsequent cases of Philippine Fisheries Development Authority v. Court of Appeals 2 and Philippine Fisheries Development Authority v. Court of Appeals. 3 However, upon further study of the issues presented in said cases, I agree with Justice Dante O. Tinga that the Manila International Airport Authority (MIAA) ruling was incorrectly rationalized, particularly on the unwieldy characterization of MIAA as a species of a government instrumentality. I submit that the present ponencia of Justice Carpio perpetuates the error which I find imperative for the Court to correct. Nevertheless, unlike Justice Tinga's rationalization, I find that there is no more need to belabor the issue of whether the MIAA is a government-owned or controlled corporation (GOCC) or a government instrumentality in order to resolve the issue of whether the airport properties are subject to real property tax. cSIADa Instead, I subscribe to the "simple, direct and painless approach" proposed by Justice Antonio Eduardo B. Nachura that it is imperative to "fine tune" the Court's ruling in Mactan Cebu International Airport Authority v. Marcos 4 vis--vis that in Manila International Airport Authority v. Court of Appeals; 5 and that what needs only to be ascertained is whether the airport properties are owned by the Republic; and if such, then said properties are exempt from real property tax, by applying Section 234 of Republic Act No. 7160 (R.A. No. 7160) or the Local Government Code (LGC). Pursuant to Section 232 of the LGC, a province or city or municipality within the Metropolitan Manila Area is vested with the power to levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereafter specifically exempted. Corollarily, Section 234 thereof provides an enumeration of certain properties which are exempt from payment of the real property tax, among which is "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". Article 420 of the Civil Code enumerates the properties of public dominion, to wit: 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. There is no question that the airport and all its installations, facilities and equipment, are intended for public use and are, thus, properties of public dominion. Concededly, the Court ruled in Mactan Cebu International Airport Authority v. Marcos 6 that:

The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the Republic of the Philippines whose beneficial use has been granted to the petitioner, and (b) whether the petitioner is a "taxable person". Section 15 of [MCIAA's] Charter provides: Sec. 15. Transfer of Existing Facilities and Intangible Assets. Al existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation, aerodome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, that the operations control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach control office, and the area control center shall be retained by the Air Transportation Office. No equipment, however, shall be removed by the Air Transportation Office from Mactan without the concurrence of the Authority. The Authority may assist in the maintenance of the Air Transportation Office equipment. The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International Airport in the Province of Cebu", which belonged to the Republic of the Philippines, then under the Air Transportation Office (ATO). SHIETa It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands" among other things, to the petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines. This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner's authorized capital stock consists of, inter alia, "the value of such real estate owned and/or administered by the airports". Hence, the petitioner is now the owner of the land in question and the exception in Section 234 (c) of the LGC is inapplicable. Meanwhile, Executive Order No. 903 7 or the Revised Charter of the Manila International Airport Authority, provides in Section 3 thereof that xxx xxx xxx The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. 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. Regardless of the apparent transfer of title of the said properties to MIAA, I submit that the latter is only holding the properties for the benefit of the Republic in its capacity as agent thereof. It is to be noted that despite the conveyance of the title to the said properties to the MIAA, however, the latter could not in any way dispose of the same through sale or through any other mode unless specifically approved by the President of the Republic. 8 Even MIAA's borrowing power is dictated upon by the President. Thus, MIAA could raise funds, either from local or international sources, by way of loans,

credits or securities, and other borrowing instruments, create pledges, mortgages and other voluntary lines or encumbrances on any of its assets or properties, only after consultation with the Secretary of Finance and with the approval of the President. In addition, MIAA's total outstanding indebtedness could exceed its net worth only upon express authorization by the President. 9 I fully agree with Justice Nachura that "even if MIAA holds the record title over the airport properties, such holding can only be for the benefit of the Republic, that MIAA exercises an essentially public function". In sum, the airport and all its installations, facilities and equipment of the MIAA, are properties of public dominion and should thus be exempted from payment of real property tax, except those properties where the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. ACCORDINGLY, I vote to grant the petition. TDcCIS TINGA, J., dissenting: I maintain my dissent expressed in the 2006 ruling in MIAA v. City of Paraaque 1 (the "Paraaque case.") The majority relies on two main points drawn from the 2006 Paraaque case in this instance as it rules once again that the MIAA is exempt from realty taxes assessed by the City of Pasay. First, because MIAA is a government instrumentality, it somehow finds itself exempt from the said taxes, supposedly by operation of the Local Government Code. Second, the subject properties are allegedly owned by the Republic of the Philippines, notwithstanding that legal title thereto is in the name of the MIAA, which is a distinct and independent juridical personality from the Republic. HEISca I. Once again, attempts are drawn to classify MIAA as a government instrumentality, and not as a government owned or controlled corporation. Such characterization was apparently insisted upon in order to tailor-fit the MIAA to Section 133 of the Local Government Code, which reads: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx 15. Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (emphasis and underscoring supplied). How was the Paraaque case able to define the MIAA as a instrumentality of the National Government? The case propounded that MIAA was not a GOCC: 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. . . . (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: . . . . (Emphasis supplied) A government-owned or controlled corporation must be "organized as a stock or nonstock 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. xxx xxx xxx Clearly, under its Charter, MIAA does not have capital stock that is divided into shares. Section 3 of the Corporation Code 10 defines a stock corporation as one whose "capital stock is divided into shares and . . . authorized to distribute to the holders of such shares dividends . . . ." 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. ScEaAD MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers". A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. 11 This prevents MIAA from qualifying as a non-stock corporation. Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers". MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use. 2 This "black or white" categorization of "stock" and "non-stock" corporations utterly disregards the fact that nothing in the Constitution prevents Congress from creating government owned or controlled corporations in whatever structure it deems necessary. Note that this * definitions of "stock" and "non-stock" corporations are taken from the Administrative Code, and not the Constitution. The Administrative Code is a statute, and is thus not superior in hierarchy to any other subsequent statute created by Congress, including the charters for GOCCs. Since MIAA was presumed not to be a stock or non-stock corporation, the majority in the Paraaque case then strived to fit it into a category. 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. . . .

(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. . . . (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, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order". 3 Unfortunately, this cited statutory definition of an "instrumentality" is incomplete. Worse, the omitted portion from Section 2 (10) completely contradicts the premise of the ponente that an instrumentality is mutually exclusive from a GOCC. For the provision reads in full, with the omitted portion highlighted, thus: cCaIET (10) Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. This previous omission had not escaped the attention of the outside world. For example, lawyer Gregorio Batiller, Jr., has written a paper on the Paraaque case entitled "A Tale of Two Airports", which is published on the Internet. 4 He notes therein: Also of interest was the dissenting opinion of Justice Dante Tinga to the effect that the majority opinion failed to quote in full the definition of "government instrumentality": The Majority gives the impression that a government instrumentality is a distinct concept from a government corporation. Most tellingly, the majority selectively cites a portion of Section 2(10) of the Administrative Code of 1987, as follows: Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. . . . (emphasis omitted)" However, Section 2(10) of the Administrative Code, when read in full, makes an important clarification which the majority does not show. The portions omitted by the majority are highlighted below: . . . "(10) Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by, law endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. So the majority opinion effectively begged the question in finding that the MIAA was not a GOCC but a mere government instrumentality, which is other than a GOCC. 5 The Office of the President itself was alarmed by the redefinition made by the MIAA case of instrumentalities, causing it on 29 December 2006 to issue Executive Order No. 596 creating the unwieldy category of "Government Instrumentality Vested with

Corporate Powers or Government Corporate Entities" just so that it was clear that these newly defined "instrumentalities" or "government corporate entities" still fell within the jurisdiction of the Office of the Government Corporate Counsel. The E.O. reads in part: EXECUTIVE ORDER NO. 596 DEFINING AND INCLUDING "GOVERNMENT INSTRUMENTALITY VESTED WITH CORPORATE POWERS" OR "GOVERNMENT CORPORATE ENTITIES" UNDER THE JURISDICTION OF THE OFFICE OF THE GOVERNMENT CORPORATE COUNSEL (OGCC) AS PRINCIPAL LAW OFFICE OF GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCs) AND FOR OTHER PURPOSES. DCScaT WHEREAS, the Office of the Government Corporate Counsel (OGCC), as the principal law office of all Government-Owned or Controlled Corporations (GOCCs), including their subsidiaries, other corporate offsprings and government acquired assets corporations, plays a very significant role in safeguarding the legal interests and providing the legal requirements of all GOCCs; WHEREAS, there is an imperative need to integrate, strengthen and rationalize the powers and jurisdiction of the OGCC in the light of the Decision of the Supreme Court dated July 20, 2006, in the case of "Manila International Airport Authority vs. Court of Appeals, City of Paraaque, et al." (G.R. No. 155650), where the High Court differentiated "government corporate entities" and "government instrumentalities with corporate powers" from GOCCs for purposes of the provisions of the Local Government Code on real estate taxes, and other fees and charges imposed by local government units; WHEREAS, in the interest of an effective administration of justice, the application and definition of the term "GOCCs" need to be further clarified and rationalized to have consistency in referring to the term and to avoid unintended conflicts and/or confusion' NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in my by law, do hereby order: SEC. 1. The Office of the Government Corporate Counsel (OGCC) shall be the principal law office of all GOCCs, except as may otherwise be provided by their respective charter or authorized by the President, their subsidiaries, corporate offsprings, and government acquired asset corporations. The OGCC shall likewise be the principal law of the "government instrumentality vested with corporate powers" or "government corporate entity", as defined by the Supreme Court in the case of "MIAA v. Court of Appeals, City of Paraaque, et al.," supra, notable examples of which are: Manila International Airport Authority (MIAA), Mactan International Airport Authority, the Philippine Ports Authority (PPA), Philippine Deposit Insurance Corporation (PDIC), Metropolitan Water and Sewerage Services (MWSS), Philippine Rice Research Institute (PRRI), Laguna Lake Development Authority (LLDA), Fisheries Development Authority (FDA), Bases Conversion Development Authority (BCDA), Cebu Port Authority (CPA), Cagayan de Oro Port Authority, and San Fernando Port Authority. aATEDS SEC. 2. As provided under PD 2029, series of 1986, the term GOCCs is defined as a stock or non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law, is owned or controlled by the government directly, or indirectly, through a parent corporation or subsidiary corporation, to the extent of at least majority of its outstanding capital stock or of its outstanding voting capital stock.

Under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987, a government "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. SEC. 3. The following corporations are considered GOCCs under the conditions and/or circumstances indicated: a) A corporation organized under the general corporation law under private ownership at least a majority of the shares of stock of which were conveyed to a government financial institution, whether by foreclosure or otherwise, or a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific assets acquired by a government financial institution in satisfaction of debts incurred therewith and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time, shall not be considered a GOCC before such disposition and even if the ownership or control thereof is subsequently transferred to another GOCC; b) A corporation created by special law which is explicitly intended under that law for ultimate transfer to private ownership under certain specified conditions shall be considered a GOCC, until it is transferred to private ownership; c) A corporation that is authorized to be established by special law, but which is still required under that law to register with the Securities and Exchange Commission in order to acquire a juridical personality, shall not, on the basis of the special law alone, be considered a GOCC. xxx xxx xxx Reading this Executive Order, one cannot help but get the impression that the Republic of the Philippines, ostensibly the victorious party in the Paraaque case, felt that the 2006 ponencia redefining "instrumentalities" was wrong. Ostensibly, the Office of the Government Corporate Counsel, the winning counsel in the MIAA case, cooperated in the drafting of this E.O. and probably also felt that the redefinition of "instrumentalities" was wrong. I had pointed out in my Dissent to the MIAA case that under the framework propounded in that case, GOCCs such as the Philippine Ports Authority, the Bases Conversion Development Authority, the Philippine Economic Zone Authority, the Light Rail Transit Authority, the Bangko Sentral ng Pilipinas, the National Power Corporation, the Lung Center of the Philippines, and even the Philippine Institute of Traditional and Alternative Health Care have been reclassified as instrumentalities instead of GOCCs. SHcDAI Notably, GOCCs are mandated by Republic Act No. 7656 to remit 50% of their annual net earnings as cash, stock or property dividends to the National Government. By denying categorization of those above-mentioned corporations as GOCCs, the Court in MIAA effectively gave its imprimatur to those entities to withhold remitting 50% of their annual net earnings to the National Government. Hence, the necessity of E.O. No. 596 to undo the destructive effects of the Paraaque case on the national coffers. In a welcome development, the majority now acknowledges the existence of that second clause in Section 2 (10) of the Introductory Provisions of the Administrative Code, the clause which made explicit that government instrumentalities include GOCCs. In truth, I had never quite understood this hesitation in plainly saying that GOCCs are

instrumentalities. That fact is really of little consequence in determining whether or not the MIAA or other government instrumentalities or GOCCs are exempt from real property taxes. As I had consistently explained, the liability of such entities is mandated by Section 232, in relation with Section 234 of the Local Government Code. Section 232 lays down the general rule that provinces, cities or municipalities within Metro Manila may levy an ad valorem tax on real property "not hereinafter specifically exempted". Such specific exemptions are enumerated in Section 234, and the only exemption tied to government properties extends to "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted . . . to a taxable person". 6 Moreover, the final paragraph of Section 234 explains that "[e]xcept as provided herein [in Section 234], 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". What are the implications of Section 232 in relation to Section 234 as to the liability for real property taxes of government instrumentalities such as MIAA? 1) All persons, whether natural or juridical, including GOCCs are liable for real property taxes. 2) The only exempt properties are those owned by the Republic or any of its political subdivisions. 3) So-called "government corporate entities", so long as they have juridical personality distinct from the Republic of the Philippines or any of its political subdivisions, are liable for real property taxes. 4) After the enactment of the Local Government Code in 1991, Congress remained free to reenact tax exemptions from real property taxes to government instrumentalities, as it did with the Government Service Insurance System in 1997. aIETCA It is that simple. The most honest intellectual argument favoring the exemption of the MIAA from real property taxes corresponds with the issue of whether its properties may be deemed as "owned by the Republic or any of its political subdivisions". The matter of whether MIAA is a GOCC or an instrumentality or a "government corporate entity" should in fact be irrelevant. However, the framework established by the ponente beginning with the Paraaque case has inexplicably and unnecessarily included the question of what is a GOCC? That issue, utterly irrelevant to settling the question of MIAA's tax liability, has caused nothing but distraction and confusion. It should be remembered that prior to the Paraaque case, the prevailing rule on taxation of GOCCs was as enunciated in Mactan Cebu International Airport v. Hon. Marcos. 7 That rule was a highly sensible rule that gave due respect to national government prerogatives and the devolution of taxing powers to local governments. Neither did Mactan Cebu prevent Congress from enacting legislation exempting selected GOCCs to be exempt from real property taxes. A significant portion of my Dissenting Opinion in the Paraaque case was devoted to explaining Mactan Cebu, and criticizing the ponencia for implicitly rejecting that doctrine without categorically saying so. In the years since, significant confusion has arisen on whether Mactan Cebu and the framework it established in real property taxation of

GOCCs and instrumentalities, remains extant. Batiller makes the same point in his paper, expressly asking why "the Supreme Court did not explicitly declare that the Mactan Cebu International Airport case was deemed repealed". He added: Inevitably, the refusal of the Supreme Court to clarify whether its Decision in the Mactan Cebu International Airport case is deemed repealed would leave us with an ambiguous situation where two (2) of our major international airports are treated differently tax wise: one in Cebu which is deemed to be a GOCC subject to real estate taxes and the other in Manila which is not a GOCC and exempt from real estate taxes. Where lies the substantial difference between the two (2) airports? Your guess is as good as mine. 8 There are no good reasons why the Court should not reassert the Mactan Cebu doctrine. Under that ruling, real properties owned by the Republic of the Philippines or any of its political subdivisions are exempted from the payment of real property taxes, while instrumentalities or GOCCs are generally exempted from local government taxes, save for real property taxes. At the same time, Congress is free should it so desire to exempt particular GOCCs or instrumentalities from real property taxes by enacting legislation for that purpose. This paradigm is eminently more sober than that created by the Paraaque case, which attempted to amend the Constitution by elevating as a constitutional principle, the real property tax exemption of all government instrumentalities, most of which also happen to be GOCCs. Considering that the Constitution itself is supremely deferential to the notion of local government rule and the power of local governments to generate revenue through local taxes, the idea that not even the local government code could subject such "instrumentalities" to local taxes is plainly absurd. II. I do recognize that the present majority opinion has chosen to lay equal, if not greater emphasis on the premise that the MIAA properties are supposedly of public dominion, and as such are exempt from realty taxes under Section 234 (a) of the Local Government Code. Again, I respectfully disagree. It is Article 420 of the Civil Code which defines what are properties of public dominion. I do not doubt that Article 420 can be interpreted in such a way that airport properties, such as its runways, hangars and the like, can be considered akin to ports or roads, both of which are among those properties considered as part of the public dominion under Article 420 (1). It may likewise be possible that those properties considered as "property of public dominion" under Article 420 of the Civil Code are also "property owned by the Republic", which under Section 234 of the Local Government Code, are exempt from real property taxes. THaDAE The necessary question to ask is whether properties which are similar in character to those enumerated under Article 420 (1) may be considered still part of the public dominion if, by virtue of statute, ownership thereof is vested in a GOCC which has independent juridical personality from the Republic of the Philippines. The question becomes even more complex if, as in the case of MIAA, the law itself authorizes such GOCC to sell the properties in question. One of the most recognizable characteristics of public dominion properties is that they are placed outside the commerce of man and cannot be alienated or leased or otherwise be the subject matter of contracts. 9 The fact is that the MIAA may, by law, alienate,

lease or place the airport properties as the subject matter of contracts. The following provisions of the MIAA charter make that clear: SEC. 5. Functions, Powers, and Duties. The Authority shall have the following functions, powers and duties: xxx xxx xxx (i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable, or any interest therein; xxx xxx xxx SEC. 16. Borrowing Power. The Authority may, after consultation with the Minister of Finance and with the approval of the President of the Philippines, as recommended by the Minister of Transportation and Communications, raise funds, either from local or international sources, by way of loans, credits or securities, and other borrowing instruments, with the power to create pledges, mortgages and other voluntary liens or encumbrances on any of its assets or properties. There is thus that contradiction where property which ostensibly is classified as part of the public dominion under Article 420 of the Civil Code is nonetheless classified to lie within the commerce of man by virtue of a subsequent law such as the MIAA charter. In order for the Court to classify the MIAA properties as part of public dominion, it will be necessary to invalidate the provisions of the MIAA charter allowing the Authority to lease, sell, create pledges, mortgages and other voluntary liens or encumbrances on any of the airport properties. The provisions of the MIAA charter could not very well be invalidated with the Civil Code as basis, since the MIAA charter and the Civil Code are both statutes, and thus of equal rank in the hierarchy of laws, and more significantly the Civil Code was enacted earlier and therefore could not be the repealing law. If there is a provision in the Constitution that adopted the definition of and limitations on public dominion properties as found in the Civil Code, then the aforequoted provisions from the MIAA charter allowing the Authority to place its properties within the commerce of man may be invalidated. The Constitution however does not do so, confining itself instead to a general statement that "all lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State". Note though that under Article 420, public dominion properties are not necessarily owned by the State, the two subsections thereto referring to (a) properties intended for public use; and (b) those which belong to the State and are intended for some public service or for the development of the national wealth. 10 In Laurel v. Garcia, 11 the Court notably acknowledged that "property of public dominion is not owned by the State but pertains to the State". Thus, there is no equivalence between the concept of public dominion under the Civil Code, and of public domain under the Constitution. DCSTAH Accordingly, the framework of public dominion properties is one that is statutory, rather than constitutional in design. That being the case, Congress is able by law to segregate properties which ostensibly are, by their nature, part of the public dominion under Article 420 (1) of the Civil Code, and place them within the commerce of man by vesting title thereto in an independent juridical personality such as the MIAA, and authorizing their sale, lease, mortgage and other similar encumbrances. When Congress accomplishes that by law, the properties could no longer be considered as part of the public dominion.

This point has been recognized by previous jurisprudence which I had cited in my dissent in the Paraaque case. For example, in Philippine Ports Authority v. City of Iloilo, the Court stated that "properties of public dominion are owned by the general public and cannot be declared to be owned by a public corporation, such as [the Philippine Ports Authority]". 12 I had likewise previously explained: The second Public Ports Authority case, penned by Justice Callejo, likewise lays down useful doctrines in this regard. The Court refuted the claim that the properties of the PPA were owned by the Republic of the Philippines, noting that PPA's charter expressly transferred ownership over these properties to the PPA, a situation which similarly obtains with MIAA. The Court even went as far as saying that the fact that the PPA "had not been issued any torrens title over the port and port facilities and appurtenances is of no legal consequence. A torrens title does not, by itself, vest ownership; it is merely an evidence of title over properties. . . . It has never been recognized as a mode of acquiring ownership over real properties." The Court further added: . . . The bare fact that the port and its facilities and appurtenances are accessible to the general public does not exempt it from the payment of real property taxes. It must be stressed that the said port facilities and appurtenances are the petitioner's corporate patrimonial properties, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. The petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its proprietary interests . . . The petitioner is even empowered to invest its funds in such government securities approved by the Board of Directors, and derives its income from rates, charges or fees for the use by vessels of the port premises, appliances or equipment. . . . Clearly then, the petitioner is a profit-earning corporation; hence, its patrimonial properties are subject to tax. There is no doubt that the properties of the MIAA, as with the PPA, are in a sense, for public use. A similar argument was propounded by the Light Rail Transit Authority in Light Rail Transit Authority v. Central Board of Assessment, 118 which was cited in Philippine Ports Authority and deserves renewed emphasis. The Light Rail Transit Authority (LRTA), a body corporate, "provides valuable transportation facilities to the paying public." 119 It claimed that its carriage-ways and terminal stations are immovably attached to government-owned national roads, and to impose real property taxes thereupon would be to impose taxes on public roads. This view did not persuade the Court, whose decision was penned by Justice (now Chief Justice) Panganiban. It was noted: HICcSA Though the creation of the LRTA was impelled by public service to provide mass transportation to alleviate the traffic and transportation situation in Metro Manila its operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives. Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation. xxx xxx xxx

Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations. We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom. xxx xxx xxx Even granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity. There is no substantial distinction between the properties held by the PPA, the LRTA, and the MIAA. These three entities are in the business of operating facilities that promote public transportation. The majority further asserts that MIAA's properties, being part of the public dominion, are outside the commerce of man. But if this is so, then why does Section 3 of MIAA's charter authorize the President of the Philippines to approve the sale of any of these properties? In fact, why does MIAA's charter in the first place authorize the transfer of these airport properties, assuming that indeed these are beyond the commerce of man? 13 III. In the present case, the City of Pasay had issued notices of levy and warrants of levy for the NAIA Pasay properties, leading MIAA to file with the Court of Appeals a petition for prohibition and injunction, seeking to enjoin the City of Pasay from imposing real property taxes, levying against and auctioning for public sale the NAIA Pasay properties. In the Paraaque case, I had expressed that while MIAA was liable for the realty taxes, its properties could not be foreclosed upon by the local government unit seeking the taxes. I explained then: cSIADH Despite the fact that the City of Paraaque ineluctably has the power to impose real property taxes over the MIAA, there is an equally relevant statutory limitation on this power that must be fully upheld. Section 3 of the MIAA charter states that "[a]ny portion [of the [lands transferred, conveyed and assigned to the ownership and administration of the MIAA] shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines". Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the collection of delinquent real property taxes. While the Local Government Code withdrew all previous local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other hand shielding its properties from any form of sale or disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It simply means

that the LGU has to find another way to collect the taxes due from MIAA, thus paving the way for a mutually acceptable negotiated solution. Accordingly, I believe that MIAA is entitled to a writ of prohibition and injunctive relief enjoining the City of Pasay from auctioning for public sale the NAIA Pasay properties. Thus, the Court of Appeals erred when it denied those reliefs to the MIAA. I VOTE to PARTIALLY GRANT the petition and to issue the Writ of Prohibition insofar as it would enjoin the City of Pasay from auctioning for public sale the NAIA Pasay properties. In all other respects, I respectfully dissent. NACHURA, J.: Are airport properties subject to real property tax? The question seriously begs for a definitive resolution, in light of our ostensibly contradictory decisions 1 that may have generated no small measure of confusion even among lawyers and magistrates. Hereunder, I propose a simple, direct and painless approach to arrive at an acceptable answer to the question. I. Real property tax is a direct tax on the ownership of lands and buildings or other improvements thereon, not specially exempted, and is payable regardless of whether the property is used or not, although the value may vary in accordance with such factor. The tax is usually single or indivisible, although the land and building or improvements erected thereon are assessed separately, except when the land and building or improvements belong to separate owners. 2 The power to levy this tax is vested in local government units (LGUs). Thus, Republic Act (R.A.) No. 7160, or the Local Government Code (LGC) of 1991, 3 provides: Under Book II, Title II, Chapter IV-Imposition of Real Property Tax 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. 4 DTCSHA A significant innovation in the LGC is the withdrawal, subject to some exceptions, of all tax exemption privileges of all natural or juridical persons, including government-owned and controlled corporations (GOCCs), thus: Under Book II, Title I, Chapter V-Miscellaneous Provisions 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. 5 This is where the controversy started. The airport authorities, formerly exempt from paying taxes, are now being obliged to pay real property tax on airport properties. To challenge the real property tax assessments, the airport authorities invoke two provisions of the LGC one is stated in Book II, Title I, Chapter I on General Provisions, which reads: Section 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:

(a) Income tax, except when levied on banks and other financial institutions; (b) Documentary stamp tax; (c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein; (d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned; (e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such goods or merchandise; (f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen; (g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration; (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; (i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein; (j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code; TIEHDC (k) Taxes on premiums paid by way of reinsurance or retrocession; (l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles; (m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein; (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixtynine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units. 6 and the other in Book II, Title I, Chapter IV on Imposition of Real Property Tax: Section 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and 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. 7 In Mactan Cebu International Airport Authority (MCIAA) v. Marcos, 8 the Court ruled that Section 133 (o) is qualified by Sections 232 and 234. Thus, MCIAA could not seek refuge in Section 133 (o), but only in Section 234 (a) provided it could establish that the properties were owned by the Republic of the Philippines. The Court ratiocinated, thus: [R]eading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person", as provided in item (a) of the first paragraph of Section 234. DcCEHI As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234. In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units cannot extend to the levy of:

(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government units. 9 In addition, the Court went on to hold that the properties comprising the Lahug International Airport and the Mactan International Airport are no longer owned by the Republic, the latter having conveyed the same absolutely to MCIAA. About a decade later, however, the Court ruled in Manila International Airport Authority (MIAA) v. Court of Appeals, 10 that the airport properties, this time comprising the Ninoy Aquino International Airport (NAIA), are exempt from real property tax. It justified its ruling by categorizing MIAA as a government instrumentality specifically exempted from paying tax by Section 133 (o) of R.A. No. 7160. It further reasoned that the subject properties are properties of public dominion, owned by the Republic, and are only held in trust by MIAA, thus: Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Paraaque. cSHIaA 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 . . . 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. 11 II. In this case, we are confronted by the very same issue. A basic principle in statutory construction decrees that, to discover the general legislative intent, the whole statute, and not only a particular provision thereof, should be considered. Every section, provision or clause in the law must be read and construed in reference to each other in order to arrive at the true intention of the legislature. 12 Notably, Section 133 of the LGC speaks of the general limitations on the taxing power of LGUs. This is reinforced by its inclusion in Title I, Chapter I entitled "General Provisions" on "Local Government Taxation". On the other hand, Section 234, containing the enumeration of the specific exemptions from real property tax, is in Chapter IV entitled "Imposition of Real Property Tax" under Title II on "Real Property Taxation". When read together, Section 234, a specific provision, qualifies Section 133, a general provision.

Indeed, whenever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, will overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply. 13 Otherwise stated, where there are two acts or provisions, one of which is special and particular, and certainly includes the matter in question, and the other general, which, if standing alone, will include the same matter and thus conflict with the special act or provision, the special must be taken as intended to constitute an exception to the general act or provision, especially when such general and special acts or provisions are contemporaneous, as the legislature is not to be presumed to have intended a conflict. 14 Mactan Cebu therefore adheres to the intendment of the law insofar as it holds that MCIAA cannot seek refuge in Section 133 (o); that it can only invoke Section 234 (a) so long as it can establish that the properties were owned by the Republic of the Philippines. To repeat, Section 234, which specifies the properties exempted from real property tax, prevails over the general limitations on the taxing power of LGUs stated in Section 133. Thus, if Section 133 (o) is not to be a haven, then, I respectfully submit that it is no longer necessary to dichotomize between a government instrumentality and a GOCC. As stressed by the Court in Mactan Cebu, what need only be ascertained is whether the airport properties are owned by the Republic if the airport Authority is to be freed from the burden of paying the real property tax. Similarly, in MIAA, with the Court's finding that the NAIA lands and buildings are owned by the Republic, the airport Authority does not have to pay real property tax to the City of Paraaque. EHCcIT III. As pointed out earlier, Mactan Cebu and MIAA ostensibly contradict each other. While the first considers airport properties as subject to real property tax, the second exempts the same from this imposition. The conflict, however, is more apparent than real. The divergent conclusions in the two cases proceed from different premises; hence, the resulting contradiction. To elucidate, in Mactan Cebu, the Court focused on the proper interpretation of Sections 133, 232 and 234 of the LGC, and emphasized the nature of the tax exemptions granted by law. Mactan Cebu categorized the exemptions as based on the ownership, character and use of the property, thus: (a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered cooperatives. (b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i) charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and (iii) non-profit or religious cemeteries. (c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use to which they are devoted are: (i) all lands, buildings and improvements which are actually directly and exclusively used for religious, charitable or educational purposes; (ii) all machineries and equipment actually, directly and exclusively used by local water districts or by government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and

transmission of electric power; and (iii) all machinery and equipment used for pollution control and environmental protection. To help provide a healthy environment in the midst of the modernization of the country, all machinery and equipment for pollution control and environmental protection may not be taxed by local governments. 15 For the airport properties to be exempt from real property tax, they must fall within the mentioned categories. Logically, the airport properties can only qualify under the first exemption by virtue of ownership. But, as already mentioned, the Court, nevertheless, ruled in Mactan Cebu that the said properties are no longer owned by the Republic having been conveyed absolutely to the airport Authority, thus: Section 15 of the petitioner's Charter provides: Sec. 15. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation, aerodrome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, that the operations control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach control office, and the area control center shall be retained by the Air Transportation Office. No equipment, however, shall be removed by the Air Transportation Office from Mactan without the concurrence of the Authority. The Authority may assist in the maintenance of the Air Transportation Office equipment. The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International Airport in the Province of Cebu", which belonged to the Republic of the Philippines, then under the Air Transportation Office (ATO). ASHaDT It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands", among other things, to the petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines. This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner's authorized capital stock consists of, inter alia, "the value of such real estate owned and/or administered by the airports". Hence, the petitioner is now the owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable. 16 In MIAA, a different conclusion was reached by the Court on two grounds. It first banked on the general provision limiting the taxing power of LGUs as stated in Section 133 (o) of the LGC that, unless otherwise provided in the Code, the exercise of the taxing powers of LGUs shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and LGUs. The Court took pains in characterizing airport authorities as government instrumentalities, quite obviously, in order to apply the said provision. After doing so, the Court then shifted its attention and proceeded to focus on the issue of who owns the property to determine whether the case falls within the purview of Section 234 (a). Ratiocinating that airport properties are of public dominion which pertain to the

state and that the airport Authority is a mere trustee of the Republic, the Court ruled that the said properties are exempt from real property tax, thus: 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: xxx xxx xxx 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. ETDaIC 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. The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both international and domestic air traffic", are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines. b. Airport Lands and Buildings are Outside the Commerce of Man The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this

Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus: xxx xxx xxx Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man: xxx xxx xxx The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale. Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax. Before MIAA can encumber 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", provide: xxx xxx xxx 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. cSEaDA The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states: xxx xxx xxx There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man. c. MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus: xxx xxx xxx 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. 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:

xxx xxx xxx The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation. The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus: xxx xxx xxx 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 . . . dispose of a thing". Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings. IaHSCc 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: xxx xxx xxx 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 . . . ." The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable person". MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport

Lands and Buildings, such fact does not make these real properties subject to real estate tax. However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to 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: xxx xxx xxx 17 In the ultimate, I submit that the two rulings do not really contradict, but, instead, complement each one. Mactan Cebu provides the proper rule that, in order to determine whether airport properties are exempt from real property tax, it is Section 234, not Section 133, of the LGC that should be determinative of the properties exempt from the said tax. MIAA then lays down the correct doctrine that airport properties are of public dominion pertaining to the state, hence, falling within the ambit of Section 234 (a) of the LGC. However, because of the confusion generated by the apparently conflicting decisions, a fine tuning of Mactan Cebu and MIAA is imperative. IV. Parenthetically, while the basis of a real property tax assessment is actual use, 18 the tax itself is directed to the ownership of the lands and buildings or other improvements thereon. 19 Public policy considerations dictate that property of the State and of its municipal subdivisions devoted to governmental uses and purposes is generally exempt from taxation although no express provision in the law is made therefor. 20 In the instant case, the legislature specifically provided that real property owned by the Republic of the Philippines or any of its political subdivisions is exempt from real property tax, except, of course, when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. The principal basis of the exemption is likewise ownership. 21 aTADCE Indeed, emphasis should be made on the ownership of the property, rather than on the airport Authority being a taxable entity. This strategy makes it unnecessary to determine whether MIAA is an instrumentality or a GOCC, as painstakingly expounded by the ponente. Likewise, this approach provides a convenient escape from Justice Tinga's proposition that the MIAA is a taxable entity liable to pay real property taxes, but the airport properties are exempt from levy on execution to satisfy the tax liability. I fear that this hypothesis may trench on the Constitutional principle of uniformity of taxation, 22 because a tax lawfully levied and assessed against a taxable governmental entity will not be lienable while like assessments against all other taxable entities of the same tax district will be lienable. 23 The better option, then, is for the Court to concentrate on the nature of the tax as a tax on ownership and to directly apply the pertinent real property tax provisions of the LGC, specifically those dealing with the exemption based on ownership, to the case at bar. The phrase, "property owned by the Republic" in Section 234, actually refers to those identified as public property in our laws. Following MIAA, we go to Articles 420 and 421 of the Civil Code which provide:

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. Art. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. From the afore-quoted, we readily deduce that airport properties are of public dominion. The "port" in the enumeration certainly includes an airport. With its beacons, landing fields, runways, and hangars, an airport is analogous to a harbor with its lights, wharves and docks; the one is the landing place and haven of ships that navigate the water, the other of those that navigate the air. 24 Ample authority further supports the proposition that the term "roads" include runways and landing strips. 25 Airports, therefore, being properties of public dominion, are of the Republic. At this point, I cannot help but air the observation that the legislature may have really intended the phrase "owned by the Republic" in Section 234 to refer to, among others, properties of public dominion. This is because "public dominion" does not carry the idea of ownership. Tolentino, an authority in civil law, explains: cISAHT This article shows that there is a distinction between dominion and ownership. Private ownership is defined elsewhere in the Code; but the meaning of public dominion is nowhere defined. From the context of various provisions, it is clear that public dominion does not carry the idea of ownership; property of public dominion is not owned by the State, but pertains to the State, which as territorial sovereign exercises certain juridical prerogatives over such property. The ownership of such property, which has the special characteristics of a collective ownership for the general use and enjoyment, by virtue of their application to the satisfaction of the collective needs, is in the social group, whether national, provincial, or municipal. Their purpose is not to serve the State as a juridical person, but the citizens; they are intended for the common and public welfare, and so they cannot be the object of appropriation, either by the State or by private persons. The relation of the State to this property arises from the fact that the State is the juridical representative of the social group, and as such it takes care of them, preserves them and regulates their use for the general welfare. 26 Be that as it may, the legislative intent to exempt from real property tax the properties of the Republic remains clear. The soil constituting the NAIA airport and the runways cannot be taxed, being properties of public dominion and pertaining to the Republic. This is true even if the title to the said property is in the name of MIAA. Practical ownership, rather than the naked legal title, must control, particularly because, as a matter of practice, the record title may be in the name of a government agency or department rather than in the name of the Republic. In this case, even if MIAA holds the record title over the airport properties, such holding can only be for the benefit of the Republic, 27 especially when we consider that MIAA exercises an essentially public function. 28 Further, where property, the title to which is in the name of the principal, is immune from taxes, it remains immune even if the title is standing in the name of an agent or trustee for such principal. 29

Properties of public dominion are held in trust by the state or the Republic for the people. 30 The national government and the bodies it has created that exercise delegated authority are, pursuant to the general principles of public law, mere agents of the Republic. Here, insofar as it deals with the subject properties, MIAA, a governmental creation exercising delegated powers, is a mere agent of the Republic, and the latter, to repeat, is the trustee of the properties for the benefit of all the people. 31 Our ruling in MIAA, therefore, insofar as it holds that the airport Authority is a "trustee of the Republic", may not have been precise. It would have been more sound, legally that is, to consider the relationship between the Republic and the airport Authority as principal and agent, rather than as trustor and trustee. The history of the subject airport attests to this proposition, thus: The country's premier airport was originally a US Air Force Base, which was turned over to the Philippine government in 1948. It started operations as a civil aviation airport with meager facilities, then consisting of the present domestic runway as its sole landing strip, and a small building northwest of this runway as its sole passenger terminal. The airport's international runway and associated taxiway were built in 1953; followed in 1961 by the construction of a control tower and a terminal building for the exclusive use of international passengers at the southwest intersection of the two runways. These structures formed the key components of an airport system that came to be known as the Manila International Airport (MIA). Like other national airports, the MIA was first managed and operated by the National Airports Corporation, an agency created on June 5, 1948 by virtue of Republic Act No. 224. This was abolished in 1951 and [in] its stead, the MIA Division was created under the Civil Aeronautics Administration (CAA) of the Department of Commerce and Industry. cAEaSC On October 19, 1956, the entire CAA, including the MIA Division, was transferred to the Department of Public Works, Transportation and Communications. In 1979, the CAA was renamed Bureau of Air Transportation following the creation of an exclusive Executive Department for Transportation and Communications. It is worthwhile to note at this point that while the MIA General Manager then carried the rank of a Division Chief only, it became a matter of policy and practice that he be appointed by no less than the President of the Philippines since the magnitude of its impact on the country's economy has acquired such national importance and recognition. During the seventies, the Philippine tourism and industry experienced a phenomenal upsurge in the country's manpower exports, resulting in more international flight frequencies to Manila which grew by more than four times. Executive Order No. 381 promulgated by then President Marcos authorized the development of Manila International Airport to meet the needs of the coming decades. A feasibility study/airport master plan was drawn up in 1973 by Airways Engineering Corporation, the financing of which was source[d] from a US$29.6 Million loan arranged with the Asian Development Bank (ADB). The detailed Engineering Design of the new MIA Development Project (MIADP) was undertaken by Renardet-Sauti/Transplan/F.F. Cruz Consultants while the design of the IPT building was prepared by Architect L.V. Locsin and Associates. DHATcE

In 1974, the final engineering design was adopted by the Philippine Government. This was concurred by the ADB on September 18, 1975 and became known as the "Scheme E5 Modified Plan". Actual work on the project started in the second quarter of 1978. On March 4, 1982, EXECUTIVE ORDER NO. 778 was signed into law, abolishing the MIA Division under the BAT and creating in its stead the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), vested with the power to administer and operate the Manila International Airport (MIA). Though MIAA was envisioned to be autonomous, Letter of Instructions (LOI) No. 1245, signed 31 May 1982, clarified that for purpose of policy integration and program coordination, the MIAA Management shall be under the general supervision but not control of the then Ministry of Transportation and Communications. On July 21, 1983, Executive Order No. 903 was promulgated, providing that 65% of MIAA's annual gross operating income be reverted to the general fund for the maintenance and operation of other international and domestic airports in the country. It also scaled down the equity contribution of the National Government to MIAA: from PhP10 billion to PhP2.5 billion and removed the provision exempting MIAA from the payment of corporate tax. Another revision in the MIAA Charter followed with the promulgation of Executive Order No. 909, signed September 16, 1983, increasing the membership of the MIAA Board to nine (9) Directors with the inclusion of two other members to be appointed by the Philippine President. cEaACD The last amendment to the MIAA Charter was made on July 26, 1987 through Executive Order No. 298 which provided for a more realistic income sharing arrangement between MIAA and the National Government. It provided that instead of the 65% of gross operating income, only 20% of MIAA's gross income, exclusive of income generated from the passenger terminal fees and utility charges, shall revert to the general fund of the National Treasury. EO 298 also reorganized the MIAA Board and raised the capitalization to its original magnitude of PhP10 billion. The post 1986 Revolution period will not be complete without mention of the renaming of MIA to Ninoy Aquino International Airport with the enactment of Republic Act No. 6639 on August 17, 1987. While this legislation renamed the airport complex, the MIA Authority would still retain its corporate name since it did not amend the original or revised charters of MIAA. 32 The MIAA Charter further provides that any portion of the airport cannot be disposed of by the Authority through sale or through any other mode unless specifically approved by the President of the Philippines. 33 It is also noted that MIAA's board of directors is practically controlled by the national government, the members thereof being officials of the executive branch. 34 Likewise, the Authority cannot levy and collect dues, charges, fees or assessments for the use of the airport premises, works, appliances, facilities or concessions, or for any service provided by it, without the approval of several executive departments. 35 These provisions are consistent with an agency relationship. Let it be remembered that one of the principal elements of an agency relationship is the existence of some degree of control by the principal over the conduct and activities of the agent. In this regard, while an agent undertakes to act on behalf of his principal and subject to his control, a trustee as such is not subject to the control of the beneficiary, except that he is under a duty to deal with the trust property for the latter's benefit in accordance with the

terms of the trust and can be compelled by the beneficiary to perform his duty. 36 TIaCcD Finally, to consider MIAA as a "trustee of the Republic" will sanction the technical creation of a second trust in which the Republic, which is already a trustee, becomes the second trustor and the airport Authority a second trustee. Although I do not wish to belabor the point, I submit that the validity of such a scenario appears doubtful. Sufficient authority, however, supports the proposition that a trustee can delegate his duties to an agent provided he properly supervises and controls the agent's conduct. 37 In this case, we can rightly say that the Republic, as the trustee of the public dominion airport properties for the benefit of the people, has delegated to MIAA the administration of the said properties subject, as shown above, to the executive department's supervision and control. In fine, the properties comprising the NAIA being of public dominion which pertain to the State, the same should be exempt from real property tax following Section 234 (a) of the LGC. One last word. Given the foregoing disquisition, I find no necessity for this Court to abandon its ruling in Mactan. On the premise that the rationale for exempting airport properties from payment of real estate taxes is ownership thereof by the Republic, the Mactan ruling is impeccable in its logic and its conclusion should remain undisturbed. Having harmonized the apparently divergent views, we need no longer fear any fierce disagreements in the future. I therefore vote to grant the petition. Footnotes 1. Under Rule 45 of the 1997 Rules of Civil Procedure. 2. Penned by Associate Justice Ruben T. Reyes (now retired Supreme Court Justice) with Associate Justices Remedios Salazar-Fernando and Edgardo F. Sundiam, concurring. 3. Providing for a Revision of Executive Order No. 778 Creating the Manila International Airport Authority, Transferring Existing Assets of the Manila International Airport to the Authority, and Vesting the Authority with Power to Administer and Operate the Manila International Airport. 4. Section 3 of EO 903 reads: SEC. 3. Creation of the Manila International Airport Authority. There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, that any subsidiary that may be organized shall have the prior approval of the President. The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority.

Any portion thereof shall not be disposed through the sale or through any other mode unless specifically approved by the President of the Philippines. 5. Section 22 of EO 903 reads: SEC. 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other property, movable and 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. 6. G.R. No. 155650, 20 July 2006, 495 SCRA 591. 7. Id. at 644-645. 8. Section 2 (13) of the Introductory Provisions of the Administrative Code of 1987 reads: SEC. 2. General Terms Defined. . . . (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. 9. Supra note 6 at 615-618. 10. Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 150301, 2 October 2007, 534 SCRA 490. 11. Section 133 (o) of the Local Government Code reads: SEC. 133. Common Limitations on the Taxing Powers of the Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units. 12. Manila International Airport Authority v. Court of Appeals, supra note 6. YNARES-SANTIAGO, J., dissenting: 1. G.R. No. 155650, July 20, 2006, 495 SCRA 591. 2. G.R. No. 169836, July 31, 2007, 528 SCRA 707. 3. G.R. No. 151301, October 2, 2007, 534 SCRA 490. 4. 330 Phil. 392 [1996]. 5. Supra note 1. 6. Supra note 4. 7. July 21, 1983. 8. E.O. 903, Sec. 3. 9. E.O. 903, Sec. 16. TINGA, J., dissenting:

1. G.R. No. 155630, 20 July 2006, 495 SCRA 591. 2. Supra note 1 at 615-616. 3. Supra note 1 at 617-618. 4. See http://www.gbdlr.com/articles/pdf/A_TALE_OF_TWO_AIRPORTS_vol%5B1% 5D.pdf 5. Supra note 4. 6. LOCAL GOVERNMENT CODE, Sec. 234 (a). 7. 330 Phil. 392 (1996). 8. Supra note 4. 9. Villarico v. Sarmiento, G.R. No. 136438, 11 November 2004, 442 SCRA 110. 10. See CIVIL CODE, Art. 420. 11. G.R. No. 92013, 25 July 1990, 187 SCRA 797. 12. G.R. No. 109791, 14 July 2003, 406 SCRA 88. 13. Supra note 1 at 694-696, J. Tinga, dissenting. NACHURA, J.: 1. Manila International Airport Authority (MIAA) v. Court of Appeals, G.R. No. 155650, July 20, 2006, 495 SCRA 591; Mactan Cebu International Airport Authority (MCIAA) v. Marcos, 330 Phil. 392 (1996). 2. Villanueva, et al. v. City of Iloilo, 135 Phil. 572, 582-583 (1968). 3. Approved on October 10, 1991 and became effective on January 1, 1992. 4. Emphasis supplied. 5. Id. 6. Id. 7. Id. 8. Supra note 1. 9. Id. at 413-414. 10. Supra note 1. 11. Id. at 645-646. 12. Municipality of Nueva Era, Ilocos Norte v. Municipality of Marcos, Ilocos Norte, G.R. No. 169435, February 27, 2008, 547 SCRA 71, 95-96. 13. Lichauco & Co. v. Apostol and Corpus, 44 Phil. 138, 146 (1922). 14. Id. at 147. 15. MCIAA v. Marcos, supra note 1, at 410-411. 16. Id. at 418-419. (Emphasis supplied, citations omitted.) 17. Manila International Airport Authority v. Court of Appeals, supra note 10, at 621630. (Emphasis supplied, citations omitted.) 18. See Sec. 198 of R.A. No. 7160. 19. Supra note 2. 20. Aban, Law of Basic Taxation in the Philippines, 2001 ed., p. 64. 21. See Platte Valley Public Power and Irrigation Dist. v. Lincoln County, 144 Neb. 584, 586; 14 N.W.2d 202, 204 (1944). 22. See 1987 CONSTITUTION, Art. VI, Sec. 28 (1). 23. Borough of Homestead v. Defense Plant Corporation, 356 Pa. 500, 508; 52 A.2d 581, 586 (1947). 24. Hale v. Sullivan, 146 Colo. 512, 516; 362 P.2d 402, 404 (1961). 25. Id. at 518.

26. Tolentino, Civil Code of the Philippines, Vol. II, 1983 ed., p. 28; see also Laurel v. Garcia, G.R. Nos. 92013 and 92047, July 25, 1990, 187 SCRA 797. 27. See Rohr Aircraft Corporation v. County of San Diego, 362 U.S. 628, 634-635; 80 S.Ct. 1050, 1054 (1960). 28. Hanover v. Town of Morristown, 4 N.J.Super. 22, 24; 66 A.2d 187, 188 (1949); People ex rel. Lawless v. City of Quincy, 395 Ill. 190, 201; 69 N.E.2d 892, 897 (1946); People ex rel. Curren v. Wood, 391 Ill. 237, 241; 62 N.E.2d 809, 812 (1945); Macclintock v. City of Roseburg, 127 Or. 698, 701; 273 P. 331-332 (1929). 29. Pacific Grove-Asilomar Operating Corp. v. Count of Monterey, 43 Cal.App.3d 675, 684; 117 Cal.Rptr. 874, 880 (1974); United States Spruce Production Corporation v. Lincoln County, 285 F. 388, 391 (1922). 30. See Kock Wing v. Philippine Railway Co., 54 Phil. 438, 444 (1930). 31. See United States of America v. Ruby Company, 588 F.2d 697, 704 (1978). 32. http://125.60.203.88/miaa/AIRPORT/index.asp (visited Feb. 23, 2009). 33. Executive Order (E.O.) No. 903, entitled "Providing for a Revision of Executive Order No. 778 Creating the Manila International Airport Authority, Transferring Existing Assets of the Manila International Airport to the Authority, and Vesting the Authority with Power to Administer and Operate the Manila International Airport, issued on July 21, 1983, provides in its Section 3 the following: Sec. 3. Creation of the Manila International Airport Authority. There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, That any subsidiary that may be organized shall have the prior approval of the President. The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. (Underscoring ours.) 34. E.O. No. 909, entitled "Amending Section 7 of Executive Order No. 778, Creating the Manila International Airport Authority, by Increasing the Membership in the Board of Directors to Nine Members," issued on September 16, 1983, pertinently provides in its Section 1 the following: Sec. 1. Section 7 of Executive Order 778, dated 04 March 1982, is hereby amended to read as follows: "Sec. 7. Board of Directors. The corporate powers of the Authority shall be exercised by and vested in a Board of NINE (9) members, which shall be composed of a Chairman, a Vice-Chairman and SEVEN (7) members. The Minister of Transportation & Communications shall be the ex-officio Chairman of the Board. The General Manager of the Authority shall be the ex-officio Vice-Chairman of the Board. The Minister of Finance, the Minister of Tourism, the Presidential Executive Assistant,

the Chief of Staff of the Armed Forces of the Philippines, and Commissioner of Immigration & Deportation shall be the ex-officio members. TWO OTHER MEMBERS SHALL BE APPOINTED BY THE PRESIDENT UPON THE RECOMMENDATION OF THE BOARD. xxx xxx xxx." 35. Sec. 5 (k) of E.O. No. 903 provides: Sec. 5. Functions, Powers, and Duties. The Authority shall have the following functions, powers and duties: xxx xxx xxx (k) To levy and collect dues, charges, fees or assessments for the use of the airport premises, works, appliances, facilities or concessions, or for any service provided by the Authority, subject to the approval of the Minister of Transportation and Communications in consultation with the Minister of Finance, and subject further to the provisions of Batas Pambansa Blg. 325 where applicable. 36. 76 Am Jur 2d, Trusts 13 citing 3 Am Jur 2d, Agency 2 and Restatement 2d, Trusts 8, Comment b. 37. Walters-Southland Institute v. Walker, 222 Ark. 857, 861; 263 S.W.2d 83, 84 (1954); see Welsh v. Griffin, 179 Cal.App.2d 207, 215; 3 Cal.Rptr. 729, 735 (1960). Copyright 2009 C D T e c h n o l o g i e s A s i a, I n c.

EN BANC [G.R. No. 144104. June 29, 2004.] LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of Quezon City, respondents. DECISION CALLEJO, SR., J p: This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the Decision 1 dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which affirmed the decision of the Central Board of Assessment Appeals holding that the lot owned by the petitioner and its hospital building constructed thereon are subject to assessment for purposes of real property tax. HDcaAI The Antecedents The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January 16, 1981 by virtue of Presidential Decree No. 1823. 2 It is the registered owner of a parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon Avenue corner Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters and is covered by Transfer Certificate of Title (TCT) No. 261320 of the Registry of Deeds of Quezon City. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as

their private clinics for their patients whom they charge for their professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from the government. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City. 3 Accordingly, Tax Declaration Nos. C-021-01226 (16-2518) and C-021-01231 (152518-A) were issued for the land and the hospital building, respectively. 4 On August 25, 1993, the petitioner filed a Claim for Exemption 5 from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The petitioner's request was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City (QC-LBAA, for brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the petitioner liable for real property taxes. 6 The QC-LBAA's decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of Quezon City (CBAA, for brevity) 7 which ruled that the petitioner was not a charitable institution and that its real properties were not actually, directly and exclusively used for charitable purposes; hence, it was not entitled to real property tax exemption under the constitution and the law. The petitioner sought relief from the Court of Appeals, which rendered judgment affirming the decision of the CBAA. 8 Undaunted, the petitioner filed its petition in this Court contending that: A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX EXEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE PURPOSES. B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS CHARTER, PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION. The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the 1987 Constitution. It asserts that its character as a charitable institution is not altered by the fact that it admits paying patients and renders medical services to them, leases portions of the land to private parties, and rents out portions of the hospital to private medical practitioners from which it derives income to be used for operational expenses. The petitioner points out that for the years 1995 to 1999, 100% of its outpatients were charity patients and of the hospital's 282-bed capacity, 60% thereof, or 170

beds, is allotted to charity patients. It asserts that the fact that it receives subsidies from the government attests to its character as a charitable institution. It contends that the "exclusivity" required in the Constitution does not necessarily mean "solely." Hence, even if a portion of its real estate is leased out to private individuals from whom it derives income, it does not lose its character as a charitable institution, and its exemption from the payment of real estate taxes on its real property. The petitioner cited our ruling in Herrera v. QC-BAA 9 to bolster its pose. The petitioner further contends that even if P.D. No. 1823 does not exempt it from the payment of real estate taxes, it is not precluded from seeking tax exemption under the 1987 Constitution. In their comment on the petition, the respondents aver that the petitioner is not a charitable entity. The petitioner's real property is not exempt from the payment of real estate taxes under P.D. No. 1823 and even under the 1987 Constitution because it failed to prove that it is a charitable institution and that the said property is actually, directly and exclusively used for charitable purposes. The respondents noted that in a newspaper report, it appears that graft charges were filed with the Sandiganbayan against the director of the petitioner, its administrative officer, and Zenaida Rivera, the proprietress of the Elliptical Orchids and Garden Center, for entering into a lease contract over 7,663.13 square meters of the property in 1990 for only P20,000 a month, when the monthly rental should be P357,000 a month as determined by the Commission on Audit; and that instead of complying with the directive of the COA for the cancellation of the contract for being grossly prejudicial to the government, the petitioner renewed the same on March 13, 1995 for a monthly rental of only P24,000. They assert that the petitioner uses the subsidies granted by the government for charity patients and uses the rest of its income from the property for the benefit of paying patients, among other purposes. They aver that the petitioner failed to adduce substantial evidence that 100% of its out-patients and 170 beds in the hospital are reserved for indigent patients. The respondents further assert, thus: 13. That the claims/allegations of the Petitioner LCP do not speak well of its record of service. That before a patient is admitted for treatment in the Center, first impression is that it is pay-patient and required to pay a certain amount as deposit. That even if a patient is living below the poverty line, he is charged with high hospital bills. And, without these bills being first settled, the poor patient cannot be allowed to leave the hospital or be discharged without first paying the hospital bills or issue a promissory note guaranteed and indorsed by an influential agency or person known only to the Center; that even the remains of deceased poor patients suffered the same fate. Moreover, before a patient is admitted for treatment as free or charity patient, one must undergo a series of interviews and must submit all the requirements needed by the Center, usually accompanied by endorsement by an influential agency or person known only to the Center. These facts were heard and admitted by the Petitioner LCP during the hearings before the Honorable QC-BAA and Honorable CBAA. These are the reasons of indigent patients, instead of seeking treatment with the Center, they prefer to be treated at the Quezon Institute. Can such practice by the Center be called charitable? 10 The Issues The issues for resolution are the following: (a) whether the petitioner is a charitable institution within the context of Presidential Decree No. 1823 and the 1973 and 1987

Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt from real property taxes. The Court's Ruling The petition is partially granted. On the first issue, we hold that the petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the elements which should be considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the methods of administration, the nature of the actual work performed, the character of the services rendered, the indefiniteness of the beneficiaries, and the use and occupation of the properties. 11 In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds and hearts under the influence of education or religion, by assisting them to establish themselves in life or otherwise lessening the burden of government. 12 It may be applied to almost anything that tend to promote the well-doing and well-being of social man. It embraces the improvement and promotion of the happiness of man. 13 The word "charitable" is not restricted to relief of the poor or sick. 14 The test of a charity and a charitable organization are in law the same. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or private advantage. TDCcAE Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to the provisions of the decree, is to be administered by the Office of the President of the Philippines with the Ministry of Health and the Ministry of Human Settlements. It was organized for the welfare and benefit of the Filipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines. The raison d'etre for the creation of the petitioner is stated in the decree, viz: Whereas, for decades, respiratory diseases have been a priority concern, having been the leading cause of illness and death in the Philippines, comprising more than 45% of the total annual deaths from all causes, thus, exacting a tremendous toll on human resources, which ailments are likely to increase and degenerate into serious lung diseases on account of unabated pollution, industrialization and unchecked cigarette smoking in the country; Whereas, the more common lung diseases are, to a great extent, preventable, and curable with early and adequate medical care, immunization and through prompt and intensive prevention and health education programs; Whereas, there is an urgent need to consolidate and reinforce existing programs, strategies and efforts at preventing, treating and rehabilitating people affected by lung diseases, and to undertake research and training on the cure and prevention of lung diseases, through a Lung Center which will house and nurture the above and related activities and provide tertiary-level care for more difficult and problematical cases; Whereas, to achieve this purpose, the Government intends to provide material and financial support towards the establishment and maintenance of a Lung Center for the welfare and benefit of the Filipino people. 15 The purposes for which the petitioner was created are spelled out in its Articles of Incorporation, thus: SECOND: That the purposes for which such corporation is formed are as follows:

1. To construct, establish, equip, maintain, administer and conduct an integrated medical institution which shall specialize in the treatment, care, rehabilitation and/or relief of lung and allied diseases in line with the concern of the government to assist and provide material and financial support in the establishment and maintenance of a lung center primarily to benefit the people of the Philippines and in pursuance of the policy of the State to secure the well-being of the people by providing them specialized health and medical services and by minimizing the incidence of lung diseases in the country and elsewhere. 2. To promote the noble undertaking of scientific research related to the prevention of lung or pulmonary ailments and the care of lung patients, including the holding of a series of relevant congresses, conventions, seminars and conferences; 3. To stimulate and, whenever possible, underwrite scientific researches on the biological, demographic, social, economic, eugenic and physiological aspects of lung or pulmonary diseases and their control; and to collect and publish the findings of such research for public consumption; 4. To facilitate the dissemination of ideas and public acceptance of information on lung consciousness or awareness, and the development of fact-finding, information and reporting facilities for and in aid of the general purposes or objects aforesaid, especially in human lung requirements, general health and physical fitness, and other relevant or related fields; 5. To encourage the training of physicians, nurses, health officers, social workers and medical and technical personnel in the practical and scientific implementation of services to lung patients; 6. To assist universities and research institutions in their studies about lung diseases, to encourage advanced training in matters of the lung and related fields and to support educational programs of value to general health; 7. To encourage the formation of other organizations on the national, provincial and/or city and local levels; and to coordinate their various efforts and activities for the purpose of achieving a more effective programmatic approach on the common problems relative to the objectives enumerated herein; 8. To seek and obtain assistance in any form from both international and local foundations and organizations; and to administer grants and funds that may be given to the organization; 9. To extend, whenever possible and expedient, medical services to the public and, in general, to promote and protect the health of the masses of our people, which has long been recognized as an economic asset and a social blessing; 10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the people in any and all walks of life, including those who are poor and needy, all without regard to or discrimination, because of race, creed, color or political belief of the persons helped; and to enable them to obtain treatment when such disorders occur; 11. To participate, as circumstances may warrant, in any activity designed and carried on to promote the general health of the community; 12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and supplies by purchase, donation, or otherwise and to dispose of and distribute the same in such manner, and, on such basis as the Center shall, from time to

time, deem proper and best, under the particular circumstances, to serve its general and non-profit purposes and objectives; 13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of properties, whether real or personal, for purposes herein mentioned; and 14. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the powers herein set forth and to do every other act and thing incidental thereto or connected therewith. 16 Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks of life including those who are poor and the needy without discrimination. After all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity. 17 As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution. 18 In Congregational Sunday School, etc. v. Board of Review, 19 the State Supreme Court of Illinois held, thus: . . . [A]n institution does not lose its charitable character, and consequent exemption from taxation, by reason of the fact that those recipients of its benefits who are able to pay are required to do so, where no profit is made by the institution and the amounts so received are applied in furthering its charitable purposes, and those benefits are refused to none on account of inability to pay therefor. The fundamental ground upon which all exemptions in favor of charitable institutions are based is the benefit conferred upon the public by them, and a consequent relief, to some extent, of the burden upon the state to care for and advance the interests of its citizens. 20 As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association of South Dakota v. Baker: 21 . . . [T]he fact that paying patients are taken, the profits derived from attendance upon these patients being exclusively devoted to the maintenance of the charity, seems rather to enhance the usefulness of the institution to the poor; for it is a matter of common observation amongst those who have gone about at all amongst the suffering classes, that the deserving poor can with difficulty be persuaded to enter an asylum of any kind confined to the reception of objects of charity; and that their honest pride is much less wounded by being placed in an institution in which paying patients are also received. The fact of receiving money from some of the patients does not, we think, at all impair the character of the charity, so long as the money thus received is devoted altogether to the charitable object which the institution is intended to further. 22 The money received by the petitioner becomes a part of the trust fund and must be devoted to public trust purposes and cannot be diverted to private profit or benefit. 23 Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its character as a charitable institution simply because the gift or donation is in the form of subsidies granted by the government. As held by the State Supreme Court of Utah in Yorgason v. County Board of Equalization of Salt Lake County: 24 Second, the . . . government subsidy payments are provided to the project. Thus, those payments are like a gift or donation of any other kind except they come from the

government. In both Intermountain Health Care and the present case, the crux is the presence or absence of material reciprocity. It is entirely irrelevant to this analysis that the government, rather than a private benefactor, chose to make up the deficit resulting from the exchange between St. Mark's Tower and the tenants by making a contribution to the landlord, just as it would have been irrelevant in Intermountain Health Care if the patients' income supplements had come from private individuals rather than the government. Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government rather than private charitable contributions does not dictate the denial of a charitable exemption if the facts otherwise support such an exemption, as they do here. 25 In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the government for 1991 and 1992 for its patients and for the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its operations. Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. 26 As held in Salvation Army v. Hoehn: 27 An intention on the part of the legislature to grant an exemption from the taxing power of the state will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for it is a well settled principle that, when a special privilege or exemption is claimed under a statute, charter or act of incorporation, it is to be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force to a claim of exemption from taxation. . . . 28 Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the petitioner shall enjoy the tax exemptions and privileges: SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, nonstock corporation organized primarily to help combat the high incidence of lung and pulmonary diseases in the Philippines, all donations, contributions, endowments and equipment and supplies to be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and benefit of the Lung Center, shall be exempt from income and gift taxes, the same further deductible in full for the purpose of determining the maximum deductible amount under Section 30, paragraph (h), of the National Internal Revenue Code, as amended. The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to equipment purchases made by, or for the Lung Center. 29

It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges under Section 2: It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies the exclusion of all others. The rule is expressed in the familiar maxim, expressio unius est exclusio alterius. CITSAc The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of the rule is the principle that what is expressed puts an end to that which is implied. Expressium facit cessare tacitum. Thus, where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to other matters. xxx xxx xxx The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation. They are based on the rules of logic and the natural workings of the human mind. They are predicated upon one's own voluntary act and not upon that of others. They proceed from the premise that the legislature would not have made specified enumeration in a statute had the intention been not to restrict its meaning and confine its terms to those expressly mentioned. 30 The exemption must not be so enlarged by construction since the reasonable presumption is that the State has granted in express terms all it intended to grant at all, and that unless the privilege is limited to the very terms of the statute the favor would be intended beyond what was meant. 31 Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus: (3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt from taxation. 32 The tax exemption under this constitutional provision covers property taxes only. 33 As Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: ". . . what is exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes." 34 Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160 (otherwise known as the Local Government Code of 1991) as follows: SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: xxx xxx xxx (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes. 35 We note that under the 1935 Constitution, ". . . all lands, buildings, and improvements used 'exclusively' for charitable . . . purposes shall be exempt from taxation." 36 However, under the 1973 and the present Constitutions, for "lands, buildings, and improvements" of the charitable institution to be considered exempt, the same should not

only be "exclusively" used for charitable purposes; it is required that such property be used "actually" and "directly" for such purposes. 37 In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on our ruling in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on September 30, 1961 before the 1973 and 1987 Constitutions took effect. 38 As this Court held in Province of Abra v. Hernando: 39 . . . Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation." The present Constitution added "charitable institutions, mosques, and non-profit cemeteries" and required that for the exemption of "lands, buildings, and improvements," they should not only be "exclusively" but also "actually" and "directly" used for religious or charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have sufficed were the words "actually" as well as "directly" not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation . . . Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a privilege exclusively." 40 If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. 41 The words "dominant use" or "principal use" cannot be substituted for the words "used exclusively" without doing violence to the Constitutions and the law. 42 Solely is synonymous with exclusively. 43 What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. 44 The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a private individual for her business enterprise under the business name "Elliptical Orchids and Garden Center." Indeed, the 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. 45 On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City Assessor is hereby DIRECTED to determine, after due hearing, the precise portions of the land and the area thereof which are leased to private persons, and to compute the real property taxes due thereon as provided for by law. SO ORDERED. cCAIES Davide, Jr., C .J ., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, Azcuna and Tinga, JJ ., concur. Vitug, J ., is on official leave. Ynares-Santiago and Austria-Martinez, JJ ., are on leave. Footnotes 1. Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Fermin A. Martin, Jr. and Salvador J. Valdez, Jr. concurring. 2. SECTION 1. CREATION OF THE LUNG CENTER OF THE PHILIPPINES. There is hereby created a trust, under the name and style of Lung Center of the Philippines, which, subject to the provisions of this Decree, shall be administered, according to the Articles of Incorporation, By-Laws and Objectives of the Lung Center of the Philippines, Inc., duly registered (reg. No. 85886) with the Securities and Exchange Commission of the Republic of the Philippines, by the Office of the President, in coordination with the Ministry of Human Settlements and the Ministry of Health. 3. Annex "C," Rollo, p. 49. 4. Annexes "2" & "2-A," id. at 9394. 5. Annex "D," id. at 5052. 6. Annex "E," id. at 5355. 7. Annexes "4" & "5," id. at 100109. 8. Annex "A," id. at 3341. 9. 3 SCRA 187 (1961). 10. Rollo, pp. 8384. 11. See Workmen's Circle Educational Center of Springfield v. Board of Assessors of City of Springfield, 51 N.E.2d 313 (1943). 12. Congregational Sunday School & Publishing Society v. Board of Review, 125 N.E. 7 (1919), citing Jackson v. Philipps, 14 Allen (Mass.) 539. 13. Bader Realty & Investment Co. v. St. Louis Housing Authority, 217 S.W.2d 489 (1949). 14. Board of Assessors of Boston v. Garland School of Homemaking, 6 N.E.2d 379. 15. Rollo, pp. 119120. 16. Id. at 123125. 17. Scripps Memorial Hospital v. California Employment Commission, 24 Cal.2d 669, 151 P.2d 109 (1944). 18. Sisters of Third Order of St. Frances v. Board of Review of Peoria County, 83 N.E. 272. 19. See note 12. 20. Id. at 10. 21. 167 N.W. 148 (1918), citing State v. Powers, 10 Mo. App. 263, 74 Mo. 476. 22. Id. at 149. 23. See O'brien v. Physicians' Hospital Association, 116 N.E. 975 (1917). 24. 714 P.2d 653 (1986).

25. Id. at 660661. 26. Commissioner of Internal Revenue v. Court of Appeals, 298 SCRA 83 (1998). 27. 188 S.W.2d. 826 (1945). 28. Id. at 829. 29. Rollo, p. 120. (Emphasis supplied.) 30. Malinias v. COMELEC, 390 SCRA 480 (2002). 31. St. Louis Young Men's Christian Association v. Gehner, 47 S.W.2d 776 (1932). 32. Emphasis supplied. 33. Commissioner of Internal Revenue v. Court of Appeals, supra. 34. Ibid. Citing II RECORDS OF THE CONSTITUTIONAL COMMISSION 90. 35. Emphasis supplied. 36. Article VI, Section 22, par. (3) of the 1935 Constitution provides that, "Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation." 37. Article VIII, Section 17, par. (3) of the 1973 Constitution provides that, "Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and non-profit cemeteries, and all lands, buildings, and improvements actually, directly, and exclusively used for religious or charitable purposes shall be exempt from taxation." 38. 3 SCRA 186 (1961). 39. 107 SCRA 105 (1981). 40. Young Men's Christian Association of Omaha v. Douglas County, 83 N.W. 924 (1900). 41. St. Louis Young Men's Christian Association v. Gehner, supra. 42. See State ex rel Koeln v. St. Louis Y.M.C.A., 168 S.W. 589 (1914). 43. Lodge v. Nashville, 154 S.W. 141. 44. Christian Business College v. Kalamanzoo, 131 N.W. 553. 45. See Young Men's Christian Association of Omaha v. Douglas County, supra; Martin v. City of New Orleans, 58 Am. 194 (1886).

FIRST DIVISION [G.R. No. 146534. September 18, 2009.] SPOUSES HU CHUAN HAI and LEONCIA LIM HU, petitioners, vs. SPOUSES RENATO UNICO and MARIA AURORA J. UNICO, respondents. RESOLUTION CORONA, J p: On December 13, 1978, respondent spouses Renato and Maria Aurora J. Unico purchased a 800-sq. m. residential property covered by TCT No. 236631 in Fairview Park Village, Quezon City from spouses Manuel and Adoracion de los Santos. After fully paying the purchase price, respondents built a house on the land and resided there. Respondents, however, neither registered the sale in the Registry of Deeds nor declared the property in their names for purposes of taxation. They also failed to pay realty taxes. aCTHEA Due to respondents' tax delinquency, the property was sold at public auction on March 5, 1984 to petitioner spouses Hu Chuan Hai and Leoncia Lim Hu for P6,322.14. 1 A year later, petitioners filed a petition for consolidation of ownership and issuance of new title

(LRC Case No. Q-3458[86]) in the Regional Trial Court (RTC) of Quezon City, Branch 93 which was granted in a decision dated September 8, 1986. 2 Consequently, TCT No. 236631 was cancelled and TCT No. 359854 was issued in petitioners' names. 3 On December 19, 1986, respondents decided to pay realty taxes on the property for the first time but they were informed that it was already registered in the names of petitioners. Respondents filed a complaint for annulment of sale and damages (Civil Case No. Q50553) against petitioner spouses, spouses de los Santos, the City Treasurer of Quezon City and the Registrar of Deeds of Quezon City in the RTC of Quezon City, Branch 104 assailing the validity of the tax sale. They pointed out that the City Treasurer and the Registrar of Deeds sent the notice of tax sale and advertisement to the spouses de los Santos. Because they were never informed of the tax sale, they were deprived of their property without due process of law. Hence, the tax sale was void. Petitioners, in their answer, insisted that they could not be prejudiced by respondents' failure to receive the notice of tax sale and advertisement. In a decision dated May 9, 1990, 4 the RTC found that the City Treasurer sent the notice of tax sale and advertisement to the spouses de los Santos instead of respondents who were the actual occupants of the property. Thus, it nullified the tax sale. CAaEDH Aggrieved, petitioners appealed to the Court of Appeals (CA). 5 The CA, however, affirmed the RTC decision in toto. 6 Hence, this recourse. 7 Petitioners basically claim that the courts a quo erred in nullifying the March 5, 1984 tax sale as they could not be prejudiced by respondents' failure to declare the property in their names as required by Section 6 8 of PD 464. 9 We grant the petition. This case is similar to Talusan v. Tayag. 10 In Talusan, we ruled that the decision of a land registration court in a petition for consolidation of ownership and registration precludes another action for annulment of auction sale. 11 Hence, the September 8, 1986 decision of the RTC Branch 93 in LRC Case No. Q-3458(86) barred the institution of Civil Case No. Q-50553. The RTC Branch 104 should have dismissed the latter on the ground of res judicata. With regard to determining to whom the notice of sale should have been sent, settled is the rule that, for purposes of real property taxation, the registered owner of the property is deemed the taxpayer. 12 Thus, in identifying the real delinquent taxpayer, a local treasurer cannot rely solely on the tax declaration but must verify with the Register of Deeds who the registered owner of the particular property is. 13 EHTIcD Respondents not only neglected to register the transfer of the property but also failed to declare the property in their names as required by Section 6 of PD 464. TCT No. 236631 issued to the spouses de los Santos was never cancelled and respondents never paid realty tax on the property since they acquired it. Thus, the spouses de los Santos remained the registered owners of the property in the Torrens title and tax declaration. Since the transfer of the property to respondents was never registered, the City Treasurer correctly sent notice of the tax sale and advertisement to the spouses de los Santos and the tax sale conducted in connection therewith was valid. WHEREFORE, the petition is hereby GRANTED. The December 27, 2000 decision of the Court of Appeals in CA-G.R. CV No. 27501 affirming the May 9, 1990 decision of

the Regional Trial Court of Quezon City, Branch 104 in Civil Case No. Q-50553 is REVERSED and SET ASIDE. New judgment is hereby entered dismissing Civil Case No. Q-50553 on the ground of res judicata. The March 5, 1984 tax sale is hereby declared VALID. DaCTcA SO ORDERED. Puno, C.J., Chico-Nazario, * Leonardo-de Castro and Bersamin, JJ., concur. Footnotes 1. Certificate of Sale of Delinquent Property to Purchaser. Rollo, p. 47. 2. Penned by Judge Jose C. de Guzman. Id., pp. 51-53. 3. Id., pp. 54-55. 4. Penned by Judge Maximiano C. Asuncion. Dated May 9, 1990. Id., pp. 59-66. 5. Docketed as CA-G.R. CV No. 27501. 6. Decision penned by Associate Justice B.A. Adefuin-de la Cruz (retired) and concurred in by Associate Justices Salome A. Montoya (retired) and Renato C. Dacudao (retired) of the First Division of the Court of Appeals. Dated December 27, 2000. Rollo, pp. 118-127. 7. A petition for review on certiorari under Rule 45 of the Rules of Court. 8. PD 464, Sec. 6 provides: Section 6. Declarations of Real Property by Owner or Administrator. It shall be the duty of all persons, natural or juridical, owning or administering real property, including the improvements therein, within a city or municipality, or their duly authorized representative, to prepare, or cause to be prepared, and file with the provincial or city assessor, a sworn statement declaring the true value of their property, whether previously declared or undeclared, taxable or exempt, which shall be the current and fair market value of the property, as determined by the declarant. Such declaration shall contain a description of the property sufficient in detail to enable the assessor or his deputy to identify the same for assessment purposes. The sworn declaration of real property herein referred to shall be filed with the assessor concerned once every five years during the period from January first to June thirtieth, commencing with the calendar year 1977, unless required earlier by the Secretary of Finance. Compare LOCAL GOV'T CODE, Sec. 200. 9. Real Property Tax Code. This has been superseded by the provisions of the 1991 Local Government Code on real property taxation (or Title II, Book II thereof). 10. 408 Phil. 373 (2001). 11. Id., pp. 386-387. 12. Id., p. 388. 13. Estate of the Late Mercedes Jacob v. Court of Appeals, G.R. No. 120435, 22 December 1997, 283 SCRA 474, 487-492. * Per Special Order No. 698 dated September 4, 2009.

THIRD DIVISION [G.R. No. 186242. December 23, 2009.]

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. CITY TREASURER and CITY ASSESSOR of the CITY OF MANILA, respondents. DECISION VELASCO, JR., J p: The Case For review under Rule 45 of the Rules of Court on pure question of law are the November 15, 2007 Decision 1 and January 7, 2009 Order 2 of the Regional Trial Court (RTC), Branch 49 in Manila, in Civil Case No. 02-104827, a suit to nullify the assessment of real property taxes on certain properties belonging to petitioner Government Service Insurance System (GSIS). The Facts Petitioner GSIS owns or used to own two (2) parcels of land, one located at Katigbak 25th St., Bonifacio Drive, Manila (Katigbak property), and the other, at Concepcion cor. Arroceros Sts., also in Manila (Concepcion-Arroceros property). Title to the ConcepcionArroceros property was transferred to this Court in 2005 pursuant to Proclamation No. 835 3 dated April 27, 2005. Both the GSIS and the Metropolitan Trial Court (MeTC) of Manila occupy the Concepcion-Arroceros property, while the Katigbak property was under lease. IEAacS The controversy started when the City Treasurer of Manila addressed a letter 4 dated September 13, 2002 to GSIS President and General Manager Winston F. Garcia informing him of the unpaid real property taxes due on the aforementioned properties for years 1992 to 2002, broken down as follows: (a) PhP54,826,599.37 for the Katigbak property; and (b) PhP48,498,917.01 for the Concepcion-Arroceros property. The letter warned of the inclusion of the subject properties in the scheduled October 30, 2002 public auction of all delinquent properties in Manila should the unpaid taxes remain unsettled before that date. On September 16, 2002, the City Treasurer of Manila issued separate Notices of Realty Tax Delinquency 5 for the subject properties, with the usual warning of seizure and/or sale. On October 8, 2002, GSIS, through its legal counsel, wrote back emphasizing the GSIS' exemption from all kinds of taxes, including realty taxes, under Republic Act No. (RA) 8291. 6 ITScHa Two days after, GSIS filed a petition for certiorari and prohibition 7 with prayer for a restraining and injunctive relief before the Manila RTC. In it, GSIS prayed for the nullification of the assessments thus made and that respondents City of Manila officials be permanently enjoined from proceedings against GSIS' property. GSIS would later amend its petition 8 to include the fact that: (a) the Katigbak property, covered by TCT Nos. 117685 and 119465 in the name of GSIS, has, since November 1991, been leased to and occupied by the Manila Hotel Corporation (MHC), which has contractually bound itself to pay any realty taxes that may be imposed on the subject property; and (b) the Concepcion-Arroceros property is partly occupied by GSIS and partly occupied by the MeTC of Manila. The Ruling of the RTC By Decision of November 15, 2007, the RTC dismissed GSIS' petition, as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered, DISMISSING the petition for lack of merit, and declaring the assessment conducted by the respondents City of Manila on the subject real properties of GSIS as valid pursuant to law.

SO ORDERED. 9 THaDEA GSIS sought but was denied reconsideration per the assailed Order dated January 7, 2009. Thus, the instant petition for review on pure question of law. The Issues 1. Whether petitioner is exempt from the payment of real property taxes from 1992 to 2002; 2. Whether petitioner is exempt from the payment of real property taxes on the property it leased to a taxable entity; and 3. Whether petitioner's real properties are exempt from warrants of levy and from tax sale for non-payment of real property taxes. 10 The Court's Ruling The issues raised may be formulated in the following wise: first, whether GSIS under its charter is exempt from real property taxation; second, assuming that it is so exempt, whether GSIS is liable for real property taxes for its properties leased to a taxable entity; and third, whether the properties of GSIS are exempt from levy. acHETI In the main, it is petitioner's posture that both its old charter, Presidential Decree No. (PD) 1146, and present charter, RA 8291 or the GSIS Act of 1997, exempt the agency and its properties from all forms of taxes and assessments, inclusive of realty tax. Excepting, respondents counter that GSIS may not successfully resist the city's notices and warrants of levy on the basis of its exemption under RA 8291, real property taxation being governed by RA 7160 or the Local Government Code of 1991 (LGC, hereinafter). The petition is meritorious. First Core Issue: GSIS Exempt from Real Property Tax Full tax exemption granted through PD 1146 In 1936, Commonwealth Act No. (CA) 186 11 was enacted abolishing the then pension systems under Act No. 1638, as amended, and establishing the GSIS to manage the pension system, life and retirement insurance, and other benefits of all government employees. Under what may be considered as its first charter, the GSIS was set up as a non-stock corporation managed by a board of trustees. Notably, Section 26 of CA 186 provided exemption from any legal process and liens but only for insurance policies and their proceeds, thus: Section 26. Exemption from legal process and liens. No policy of life insurance issued under this Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefit granted under this Act, shall be liable to attachment, garnishment, or other process, or to be seized, taken, appropriated, or applied by any legal or equitable process or operation of law to pay any debt or liability of such member, or his beneficiary, or any other person who may have a right thereunder, either before or after payment; nor shall the proceeds thereof, when not made payable to a named beneficiary, constitute a part of the estate of the member for payment of his debt. . . . CTaIHE In 1977, PD 1146, 12 otherwise known as the Revised Government Service Insurance Act of 1977, was issued, providing for an expanded insurance system for government employees. Sec. 33 of PD 1146 provided for a new tax treatment for GSIS, thus: Section 33. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of the State that the actuarial solvency of the funds of the System shall be preserved and maintained at all times and that the contribution rates necessary to sustain

the benefits under this Act shall be kept as low as possible in order not to burden the members of the System and/or their employees. Taxes imposed on the System tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the benefits under this Act. Accordingly, notwithstanding any laws to the contrary, the System, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and any assessment against the System as of the approval of this Act are hereby considered paid. The benefits granted under this Act shall not be subject, among others, to attachment, garnishment, levy or other processes. This, however, shall not apply to obligations of the member to the System, or to the employer, or when the benefits granted herein are assigned by the member with the authority of the System. (Emphasis ours.) A scrutiny of PD 1146 reveals that the non-stock corporate structure of GSIS, as established under CA 186, remained unchanged. Sec. 34 13 of PD 1146 pertinently provides that the GSIS, as created by CA 186, shall implement the provisions of PD 1146. cSaATC RA 7160 lifted GSIS tax exemption Then came the enactment in 1991 of the LGC or RA 7160, providing the exercise of local government units (LGUs) of their power to tax, the scope and limitations thereof, 14 and the exemptions from taxations. Of particular pertinence is the general provision on withdrawal of tax exemption privileges in Sec. 193 of the LGC, and the special provision on withdrawal of exemption from payment of real property taxes in the last paragraph of the succeeding Sec. 234, thus: SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or -controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. SEC. 234. Exemption from Real Property Tax. . . . 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 corporation are hereby withdrawn upon the effectivity of this Code. From the foregoing provisos, there can be no serious doubt about the Congress' intention to withdraw, subject to certain defined exceptions, tax exemptions granted prior to the passage of RA 7160. The question that easily comes to mind then is whether or not the full tax exemption heretofore granted to GSIS under PD 1146, particular insofar as realty tax is concerned, was deemed withdrawn. We answer in the affirmative. In Mactan Cebu International Airport Authority v. Marcos, 15 the Court held that the express withdrawal by the LGC of previously granted exemptions from realty taxes applied to instrumentalities and government-owned and controlled corporations (GOCCs), such as the Mactan-Cebu International Airport Authority. In City of Davao v. RTC, Branch XII, Davao City, 16 the Court, citing Mactan Cebu International Airport Authority, declared the GSIS liable for real property taxes for the years 1992 to 1994 (contested real estate tax assessment therein), its previous exemption under PD 1146 being considered withdrawn with the enactment of the LGC in 1991.

Significantly, the Court, in City of Davao, stated the observation that the GSIS' taxexempt status withdrawn in 1992 by the LGC was restored in 1997 by RA 8291. 17 TIEHSA Full tax exemption reenacted through RA 8291 Indeed, almost 20 years to the day after the issuance of the GSIS charter, i.e., PD 1146, it was further amended and expanded by RA 8291 which took effect on June 24, 1997. 18 Under it, the full tax exemption privilege of GSIS was restored, the operative provision being Sec. 39 thereof, a virtual replication of the earlier quoted Sec. 33 of PD 1146. Sec. 39 of RA 8291 reads: SEC. 39. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of the State that the actuarial solvency of the funds of the GSIS shall be preserved and maintained at all times and that contribution rates necessary to sustain the benefits under this Act shall be kept as low as possible in order not to burden the members of the GSIS and their employers. Taxes imposed on the GSIS tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the benefits of this Act. Accordingly, notwithstanding, any laws to the contrary, the GSIS, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and any assessment against the GSIS as of the approval of this Act are hereby considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions or jurisprudence contrary to or in derogation of this provision are hereby deemed repealed, superseded and rendered ineffective and without legal force and effect. Moreover, these exemptions shall not be affected by subsequent laws to the contrary unless this section is expressly, specifically and categorically revoked or repealed by law and a provision is enacted to substitute or replace the exemption referred to herein as an essential factor to maintain or protect the solvency of the fund, notwithstanding and independently of the guaranty of the national government to secure such solvency or liability. AICHaS The funds and/or the properties referred to herein as well as the benefits, sums or monies corresponding to the benefits under this Act shall be exempt from attachment, garnishment, execution, levy or other processes issued by the courts, quasi-judicial agencies or administrative bodies including Commission on Audit (COA) disallowances and from all financial obligations of the members, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in connection with his position or work except when his monetary liability, contractual or otherwise, is in favor of the GSIS. (Emphasis ours.) The foregoing exempting proviso, couched as it were in an encompassing manner, brooks no other construction but that GSIS is exempt from all forms of taxes. While not determinative of this case, it is to be noted that prominently added in GSIS' present charter is a paragraph precluding any implied repeal of the tax-exempt clause so as to protect the solvency of GSIS funds. Moreover, an express repeal by a subsequent law would not suffice to affect the full exemption benefits granted the GSIS, unless the following conditionalities are met: (1) The repealing clause must expressly, specifically, and categorically revoke or repeal Sec. 39; and (2) a provision is enacted to substitute or

replace the exemption referred to herein as an essential factor to maintain or protect the solvency of the fund. These restrictions for a future express repeal, notwithstanding, do not make the proviso an irrepealable law, for such restrictions do not impinge or limit the carte blanche legislative authority of the legislature to so amend it. The restrictions merely enhance other provisos in the law ensuring the solvency of the GSIS fund. Given the foregoing perspectives, the following may be assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax exemption from real estate taxes, among other tax burdens, until January 1, 1992 when the LGC took effect and withdrew exemptions from payment of real estate taxes privileges granted under PD 1146; (2) RA 8291 restored in 1997 the tax exempt status of GSIS by reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146; 19 and (3) If any real estate tax is due to the City of Manila, it is, following City of Davao, only for the interim period, or from 1992 to 1996, to be precise. Real property taxes assessed and due from GSIS considered paid While recognizing the exempt status of GSIS owing to the reenactment of the full tax exemption clause under Sec. 39 of RA 8291 in 1997, the ponencia in City of Davao appeared to have failed to take stock of and fully appreciate the all-embracing condoning proviso in the very same Sec. 39 which, for all intents and purposes, considered as paid "any assessment against the GSIS as of the approval of this Act." If only to stress the point, we hereby reproduce the pertinent portion of said Sec. 39: SEC. 39. Exemption from Tax, Legal Process and Lien. . . . Taxes imposed on the GSIS tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the benefits of this Act. Accordingly, notwithstanding, any laws to the contrary, the GSIS, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and any assessment against the GSIS as of the approval of this Act are hereby considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions or jurisprudence contrary to or in derogation of this provision are hereby deemed repealed, superseded and rendered ineffective and without legal force and effect. (Emphasis added.) TSHEIc GSIS an instrumentality of the National Government Apart from the foregoing consideration, the Court's fairly recent ruling in Manila International Airport Authority v. Court of Appeals, 20 a case likewise involving real estate tax assessments by a Metro Manila city on the real properties administered by MIAA, argues for the non-tax liability of GSIS for real estate taxes. There, the Court held that MIAA does not qualify as a GOCC, not having been organized either as a stock corporation, its capital not being divided into shares, or as a non-stock corporation because it has no members. MIAA is rather an instrumentality of the National Government and, hence, outside the purview of local taxation by force of Sec. 133 of the LGC providing in context that "unless otherwise provided," local governments cannot tax national government instrumentalities. And as the Court pronounced in Manila International Airport Authority, the airport lands and buildings MIAA administers belong to the Republic of the Philippines, which makes MIAA a mere trustee of such assets. No less than the Administrative Code of 1987 recognizes a scenario where a piece of land owned by the Republic is titled in the name of a department, agency, or instrumentality. The following provision of the said Code suggests as much:

Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: . . . (2) For property belonging to the Republic of the Philippines, but titled in the name of . . . any corporate agency or instrumentality, by the executive head of the agency or instrumentality. 21 While perhaps not of governing sway in all fours inasmuch as what were involved in Manila International Airport Authority, e.g., airfields and runways, are properties of the public dominion and, hence, outside the commerce of man, the rationale underpinning the disposition in that case is squarely applicable to GSIS, both MIAA and GSIS being similarly situated. First, while created under CA 186 as a non-stock corporation, a status that has remained unchanged even when it operated under PD 1146 and RA 8291, GSIS is not, in the context of the afore quoted Sec. 193 of the LGC, a GOCC following the teaching of Manila International Airport Authority, for, like MIAA, GSIS' capital is not divided into unit shares. Also, GSIS has no members to speak of. And by members, the reference is to those who, under Sec. 87 of the Corporation Code, make up the non-stock corporation, and not to the compulsory members of the system who are government employees. Its management is entrusted to a Board of Trustees whose members are appointed by the President. SEcADa Second, the subject properties under GSIS's name are likewise owned by the Republic. The GSIS is but a mere trustee of the subject properties which have either been ceded to it by the Government or acquired for the enhancement of the system. This particular property arrangement is clearly shown by the fact that the disposal or conveyance of said subject properties are either done by or through the authority of the President of the Philippines. Specifically, in the case of the Concepcion-Arroceros property, it was transferred, conveyed, and ceded to this Court on April 27, 2005 through a presidential proclamation, Proclamation No. 835. Pertinently, the text of the proclamation announces that the Concepcion-Arroceros property was earlier ceded to the GSIS on October 13, 1954 pursuant to Proclamation No. 78 for office purposes and had since been titled to GSIS which constructed an office building thereon. Thus, the transfer on April 27, 2005 of the Concepcion-Arroceros property to this Court by the President through Proclamation No. 835. This illustrates the nature of the government ownership of the subject GSIS properties, as indubitably shown in the last clause of Presidential Proclamation No. 835: WHEREAS, by virtue of the Public Land Act (Commonwealth Act No. 141, as amended), Presidential Decree No. 1455, and the Administrative Code of 1987, the President is authorized to transfer any government property that is no longer needed by the agency to which it belongs to other branches or agencies of the government. (Emphasis ours.) Third, GSIS manages the funds for the life insurance, retirement, survivorship, and disability benefits of all government employees and their beneficiaries. This undertaking, to be sure, constitutes an essential and vital function which the government, through one of its agencies or instrumentalities, ought to perform if social security services to civil service employees are to be delivered with reasonable dispatch. It is no wonder, therefore, that the Republic guarantees the fulfillment of the obligations of the GSIS to its members (government employees and their beneficiaries) when and as they become due.

This guarantee was first formalized under Sec. 24 22 of CA 186, then Sec. 8 23 of PD 1146, and finally in Sec. 8 24 of RA 8291. Second Core Issue: Beneficial Use Doctrine Applicable The foregoing notwithstanding, the leased Katigbak property shall be taxable pursuant to the "beneficial use" principle under Sec. 234 (a) of the LGC. It is true that said Sec. 234 (a), quoted below, exempts from real estate taxes real property owned by the Republic, unless the beneficial use of the property is, for consideration, transferred to a taxable person. 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. This exemption, however, must be read in relation with Sec. 133 (o) of the LGC, which prohibits LGUs from imposing taxes or fees of any kind on the national government, its agencies, and instrumentalities: 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: CSDcTH xxx xxx xxx (o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. (Emphasis supplied.) Thus read together, the provisions allow the Republic to grant the beneficial use of its property to an agency or instrumentality of the national government. Such grant does not necessarily result in the loss of the tax exemption. The tax exemption the property of the Republic or its instrumentality carries ceases only if, as stated in Sec. 234 (a) of the LGC of 1991, "beneficial use thereof has been granted, for a consideration or otherwise, to a taxable person." GSIS, as a government instrumentality, is not a taxable juridical person under Sec. 133 (o) of the LGC. GSIS, however, lost in a sense that status with respect to the Katigbak property when it contracted its beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax assessment of PhP54,826,599.37 covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax delinquency is concerned as assessed over said property. Taxable entity having beneficial use of leased property liable for real property taxes thereon The next query as to which between GSIS, as the owner of the Katigbak property, or MHC, as the lessee thereof, is liable to pay the accrued real estate tax, need not detain us long. MHC ought to pay. As we declared in Testate Estate of Concordia T. Lim, "the unpaid tax attaches to the property and is chargeable against the taxable person who had actual or beneficial use and possession of it regardless of whether or not he is the owner." Of the same tenor is the Court's holding in the subsequent Manila Electric Company v. Barlis 25 and later in Republic v. City of Kidapawan. 26 Actual use refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof. 27

Being in possession and having actual use of the Katigbak property since November 1991, MHC is liable for the realty taxes assessed over the Katigbak property from 1992 to 2002. The foregoing is not all. As it were, MHC has obligated itself under the GSIS-MHC Contract of Lease to shoulder such assessment. Stipulation 18 of the contract pertinently reads: 18. By law, the Lessor, [GSIS], is exempt from taxes, assessments and levies. Should there be any change in the law or the interpretation thereof or any other circumstances which would subject the Leased Property to any kind of tax, assessment or levy which would constitute a charge against the Lessor or create a lien against the Leased Property, the Lessee agrees and obligates itself to shoulder and pay such tax, assessment or levy as it becomes due. 28 (Emphasis ours.) As a matter of law and contract, therefore, MHC stands liable to pay the realty taxes due on the Katigbak property. Considering, however, that MHC has not been impleaded in the instant case, the remedy of the City of Manila is to serve the realty tax assessment covering the subject Katigbak property to MHC and to pursue other available remedies in case of nonpayment, for said property cannot be levied upon as shall be explained below. ECcaDT Third Core Issue: GSIS Properties Exempt from Levy In light of the foregoing disquisition, the issue of the propriety of the threatened levy of subject properties by the City of Manila to answer for the demanded realty tax deficiency is now moot and academic. A valid tax levy presupposes a corresponding tax liability. Nonetheless, it will not be remiss to note that it is without doubt that the subject GSIS properties are exempt from any attachment, garnishment, execution, levy, or other legal processes. This is the clear import of the third paragraph of Sec. 39, RA 8291, which we quote anew for clarity: SEC. 39. Exemption from Tax, Legal Process and Lien. . . . . xxx xxx xxx The funds and/or the properties referred to herein as well as the benefits, sums or monies corresponding to the benefits under this Act shall be exempt from attachment, garnishment, execution, levy or other processes issued by the courts, quasi-judicial agencies or administrative bodies including Commission on Audit (COA) disallowances and from all financial obligations of the members, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in connection with his position or work except when his monetary liability, contractual or otherwise, is in favor of the GSIS. (Emphasis ours.) The Court would not be indulging in pure speculative exercise to say that the underlying legislative intent behind the above exempting proviso cannot be other than to isolate GSIS funds and properties from legal processes that will either impair the solvency of its fund or hamper its operation that would ultimately require an increase in the contribution rate necessary to sustain the benefits of the system. Throughout GSIS' life under three different charters, the need to ensure the solvency of GSIS fund has always been a legislative concern, a concern expressed in the tax-exempting provisions. Thus, even granting arguendo that GSIS' liability for realty taxes attached from 1992, when RA 7160 effectively lifted its tax exemption under PD 1146, to 1996, when RA

8291 restored the tax incentive, the levy on the subject properties to answer for the assessed realty tax delinquencies cannot still be sustained. The simple reason: The governing law, RA 8291, in force at the time of the levy prohibits it. And in the final analysis, the proscription against the levy extends to the leased Katigbak property, the beneficial use doctrine, notwithstanding. EacHSA Summary In sum, the Court finds that GSIS enjoys under its charter full tax exemption. Moreover, as an instrumentality of the national government, it is itself not liable to pay real estate taxes assessed by the City of Manila against its Katigbak and Concepcion-Arroceros properties. Following the "beneficial use" rule, however, accrued real property taxes are due from the Katigbak property, leased as it is to a taxable entity. But the corresponding liability for the payment thereof devolves on the taxable beneficial user. The Katigbak property cannot in any event be subject of a public auction sale, notwithstanding its realty tax delinquency. This means that the City of Manila has to satisfy its tax claim by serving the accrued realty tax assessment on MHC, as the taxable beneficial user of the Katigbak property and, in case of nonpayment, through means other than the sale at public auction of the leased property. WHEREFORE, the instant petition is hereby GRANTED. The November 15, 2007 Decision and January 7, 2009 Order of the Regional Trial Court, Branch 49, Manila are REVERSED and SET ASIDE. Accordingly, the real property tax assessments issued by the City of Manila to the Government Service Insurance System on the subject properties are declared VOID, except that the real property tax assessment pertaining to the leased Katigbak property shall be valid if served on the Manila Hotel Corporation, as lessee which has actual and beneficial use thereof. The City of Manila is permanently restrained from levying on or selling at public auction the subject properties to satisfy the payment of the real property tax delinquency. No pronouncement as to costs. SO ORDERED. SEHACI Corona, Nachura, Peralta and Del Castillo, * JJ., concur. Footnotes 1. Rollo, pp. 29-38. Penned by Judge Concepcion S. Alarcon-Vergara. 2. Id. at 39. 3. Id. at 51-52, entitled "Amending Proclamation No. 78 dated October 13, 1954 by Transferring the Property Housing the Former Offices of the [GSIS] to the Supreme Court of the Philippines, Reserving the Same for the City of Manila Hall of Justice." 4. Id. at 40-41. 5. Id. at 53, 54-55. 6. Id. at 56-62. 7. Id. at 63-76, dated October 7, 2002. 8. Id. at 77-90. 9. Id. at 38. 10. Id. at 11. 11. Entitled "An Act to Create and Establish a 'Government Service Insurance System,' to Provide for its Administration, and to Appropriate the Necessary Funds Therefor."

12. Entitled "Amending, Expanding, Increasing and Integrating the Social Security and Insurance Benefits of Government Employees and Facilitating the Payment Thereof Under Commonwealth Act No. 186, as Amended, and for Other Purposes," approved on May 31, 1977. 13. Section 34. Implementing Body. The Government Service Insurance System as created and established under Commonwealth Act No. 186 shall implement the provisions of this Act. 14. Sec. 133(o) of the LGC provides that the taxing power of LGUs shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and LGUs. 15. G.R. No. 120082, September 11, 1996, 261 SCRA 667. 16. G.R. No. 127383, 18 August 2005, 467 SCRA 280. 17. Id. at 299. 18. After its publication in the June 9, 1997 issue of the Philippine Star. 19. City of Davao, supra note 16. 20. G.R. No. 155650, July 20, 2006, 495 SCRA 591. 21. Chapter 12, Book I. 22. Section 24. Accounts to be maintained. The System shall keep separate and distinct from one another the following funds: (a) . . . . The Government of the Republic of the Philippines hereby guarantees the fulfillment of the obligations of the [GSIS] to the members thereof when and as they shall become due. 23. Section 8. Government Guarantee. The Government of the Republic of the Philippines hereby guarantees the fulfillment of the obligations of the System to its members as and when they fall due. 24. SEC. 8. Government Guarantee. The government of the Republic of the Philippines hereby guarantees the fulfillment of the obligations of the GSIS to its members as and when they fall due. 25. G.R. No. 114231, May 18, 2001, 357 SCRA 832 and June 29, 2004, 433 SCRA 11. 26. G.R. No. 166651, December 9, 2005, 477 SCRA 324. 27. Id at 333-334; citing Local Government Code, Sec. 199(b). 28. Rollo, p. 48. * Additional member per Special Order No. 805 dated December 4, 2009.

EN BANC [G.R. No. 156040. December 11, 2008.] DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., petitioner, vs. CITY GOVERNMENT OF BATANGAS represented by HON. ANGELITO DONDON A. DIMACUHA, Batangas City Mayor, MR. BENJAMIN S. PARGAS, Batangas City Treasurer, and ATTY. TEODULFO A. DEQUITO, Batangas City Legal Officer, respondents. DECISION

CARPIO, J p: The Case This is a petition for review on certiorari 1 assailing the Regional Trial Court's Order 2 dated 2 May 2002 in Civil Case No. 5343 as well as the 19 November 2002 Order denying the Motion for Reconsideration. In the assailed orders, Branch 8 of the Regional Trial Court (RTC) of Batangas City (RTC-Branch 8) reversed the 28 March 2001 Order 3 issued by Branch 3 of RTC-Batangas City (RTC-Branch 3). RTC-Branch 8 declared that under its legislative franchise, Digital Telecommunications Philippines, Inc. (petitioner) is not exempt from paying real property tax assessed by the Batangas City Government (respondent). The Facts On 17 February 1994, Republic Act No. 7678 (RA 7678) 4 granted petitioner a 25-year franchise to install, operate and maintain telecommunications systems throughout the Philippines. Section 5 of RA 7678 reads: Sec. 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay. In addition thereto, the grantee shall pay to the Bureau of Internal Revenue each year, within thirty (30) days after the audit and approval of the accounts, a franchise tax as may be prescribed by law of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee; Provided, That the grantee shall continue to be liable for income taxes payable under Title II of the National Internal Revenue Code pursuant to Section 2 of Executive Order No. 72 unless the latter enactment is amended or repealed, in which case the amendment or repeal shall be applicable thereto. HTCaAD The grantee shall file the return with and pay the tax due thereon to the Commissioner of Internal Revenue or his duly authorized representative in accordance with the National Internal Revenue Code and the return shall be subject to audit by the Bureau of Internal Revenue. (Boldfacing and underscoring supplied) Sometime in 1997, respondent issued a building permit for the installation of petitioner's telecommunications facilities in Batangas City. After the installation of the facilities, petitioner applied with the Mayor's office of Batangas City for a permit to operate. Because of a discrepancy in the actual investment costs used in computing the prescribed fees for the clearances and permits, petitioner was not able to secure a Mayor's Permit for the year 1998. Petitioner was also advised to settle its unpaid realty taxes. However, petitioner claimed exemption from the payment of realty tax, citing the first sentence of Section 5 of RA 7678, the Letter-Opinion of the Bureau of Local Government Finance (BLGF) dated 8 April 1997, 5 and the letter of the Office of the President dated 12 March 1996. 6 EHSADa In 1999, respondent refused to issue a Mayor's Permit to petitioner without payment of its realty taxes. On 22 June 1999, petitioner paid P68,890.39 under protest as fees for the permit to operate, but respondent refused to accept the payment unless petitioner also paid the realty taxes. 7 On 2 July 1999, respondent threatened to close down petitioner's operations. Hence, on 3 July 1999, petitioner instituted a complaint for prohibition and mandamus with prayer for a temporary restraining order or writ of preliminary injunction. This case was raffled to

RTC-Branch 3. On the same date, respondent served a Cease and Desist Order on petitioner. 8 On 20 January 2000, during the pendency of the complaint, petitioner paid its realty taxes of P2,043,265 under protest. 9 Petitioner resumed its business, rendering the other issues raised in petitioner's complaint moot. Consequently, the only issue left for resolution is whether petitioner is exempt from the realty tax under Section 5 of RA 7678. ADCIca The Ruling of RTC-Branch 3 On 28 March 2001, RTC-Branch 3 issued the following Order: WHEREFORE, premises considered, the Court hereby declares that the real estate, buildings and personal property of plaintiff Digital Telecommunications Philippines, Inc. which are used in the operation of its franchise are exempt from payment of real property taxes, but those not so used should be held liable thereto. 10 RTC-Branch 3 reasoned that the phrase "exclusive of this franchise" in the first sentence of Section 5 of RA 7678 limits the real properties that are subject to realty tax only to those which are not used in petitioner's telecommunications business. In short, petitioner's real properties used in its telecommunications business are not subject to realty tax. 11 On 1 May 2001, respondent moved for reconsideration. Before acting on the motion, the Presiding Judge of RTC-Branch 3 voluntarily inhibited himself because the newlyelected mayor of Batangas City was his kumpadre. 12 The case was re-raffled to RTCBranch 8. IaHCAD The Ruling of RTC-Branch 8 On 2 May 2002, RTC-Branch 8 issued an Order which reads: WHEREFORE, the defendants' Motion for Reconsideration is hereby granted. The Order of this Court dated March 21, 2001 is hereby set aside and, in lieu thereof, judgment is hereby rendered in favor of the defendants and against the plaintiff: DISMISSING the Amended Complaint; DECLARING that the plaintiff Digital Telecommunications Philippines, Inc., under its legislative franchise RA No. 7678, is not exempted from the payment of real property tax being collected by the defendant City of Batangas and, accordingly, CaEIST ORDERING said plaintiff to pay the City of Batangas real estate taxes in the amount of Ph4,620,683.33 which was due as of January, 2000, as well as those due thereafter, plus corresponding interest and penalties. 13 On 29 May 2002, petitioner moved for reconsideration. On 19 November 2002, RTCBranch 8 denied petitioner's motion for reconsideration. Hence, this petition. The Issue The sole issue for resolution is whether, under the first sentence of Section 5 of RA 7678, petitioner's real properties used in its telecommunications business are exempt from the realty tax. TACEDI Petitioner's Contentions Petitioner contends that its exemption from realty tax is based on the first sentence of Section 5 of RA 7678. Petitioner claims that the evident purpose of the phrase "exclusive of this franchise" is to limit the real properties that are subject to realty tax only to properties that are not used in petitioner's telecommunications business. 14 Petitioner asserts that the phrase "exclusive of this franchise" must not be construed as a useless

surplusage. Petitioner points out that its exemption from realty tax was affirmed in two separate opinions, one rendered by the Office of the President on 12 March 1996 and the other by the BLGF on 8 April 1997 and reaffirmed on 4 January 1999. 15 The BLGF declared that "the real properties of Digitel, which are used in the operation of its franchise are . . . found to be exempt from the payment of real property taxes beginning 1 January 1993. However, all other properties of that company not used in connection with the operation of its franchise shall remain taxable." 16 Petitioner further argues that under the Local Government Code, the realty tax is imposed on all lands, buildings, machineries and other improvements attached to real property. A franchise is an incorporeal being, a special privilege granted by the legislature. Hence, to read the first sentence of Section 5 of RA 7678 to mean that the franchisee shall pay taxes on its real properties used in its telecommunications business would render the phrase "exclusive of this franchise" meaningless. cCAaHD Petitioner admits that the franchise granted under RA 7678 is a personal property, but the franchise is not the "personal property" referred to in the first sentence of Section 5. Petitioner asserts that the phrase "real estate, buildings, and personal property" in the first sentence of Section 5 refers solely to real properties and does not include personal properties. Petitioner explains thus: For PTEs (public telecommunication entities), these personal properties include the switches which were installed in the exchange buildings as well as the outside and inside plant equipment. Initially, these telecommunications materials and equipment were personal property in character. But, having been installed and made operational by being attached to the exchange building, they are now converted into immovables or real property. That being the case, the phrase "real estate, buildings and personal property" actually refer[s] to properties that are liable for real estate tax. And, Congress having made the qualification with the phrase "exclusive of this franchise", only such real properties that are not used in furtherance of the franchise are subject to real property tax. 17 (Emphasis supplied) TEHDIA Respondent's Contentions Respondent contends that the phrase "exclusive of this franchise" does not mean that petitioner is exempt from the realty tax on its real properties used in its telecommunications business. The first sentence of Section 5 of RA 7678 makes petitioner "liable to pay the same taxes for its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are or hereafter may be required by law to pay". This shows the clear intent of Congress to tax petitioner's real and personal properties. 18 Respondent asserts that the phrase "exclusive of this franchise" is a qualification of the broad declaration on the franchisee's liability for taxes which is the main thrust of the first sentence of Section 5. Respondent points out that petitioner is paying taxes and fees on all its motor vehicles, which are personal properties, without distinction. 19 Respondent also points out that petitioner admits that the first sentence of Section 5 of RA 7678 is ambiguous with respect to the phrase "exclusive of this franchise", 20 thus petitioner resorted to the rules on statutory construction. 21 IcHSCT Respondent adds that the legislative franchises granted to other telecommunications companies contain the same phrase "exclusive of this franchise". This shows the intent of

Congress to make franchisees liable for the realty tax rather than exempt them even if the real properties are used in their telecommunications business. 22 SECATH The Office of the Solicitor General (OSG), appearing for respondent, contends that the first sentence of Section 5 provides for petitioner's general liability to pay taxes and does not provide for petitioner's exemption from realty tax. The OSG invokes the doctrine of last antecedent which is an aid in statutory construction. The OSG argues that under this doctrine, the qualifying word or phrase only restricts the word or phrase to which the qualifying word or phrase is immediately associated and not the word or phrase which is distantly or remotely located. In the first sentence of Section 5, the phrase "exclusive of this franchise" restricts only the words "personal property" which immediately precede the phrase "exclusive of this franchise". This means that the franchise, an intangible personal property, should be excluded from the personal properties that are subject to taxes under the first sentence of Section 5. The OSG adds that the use of the comma to separate "real estate, buildings" from "personal property" exerts a dominant influence in the application of the doctrine of last antecedent. Further, the OSG reiterates that laws granting exemption from tax are to be construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. AEDISC The Ruling of the Court The petition has no merit. Section 5 of RA 7678 imposes taxes and does not exempt from realty tax The issue in this case involves the interpretation of the phrase "exclusive of this franchise" in the first sentence of Section 5 of RA 7678. Section 5 of RA 7678 states: Sec. 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay. In addition thereto, the grantee shall pay to the Bureau of Internal Revenue each year, within thirty (30) days after the audit and approval of the accounts, a franchise tax as may be prescribed by law of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee; Provided, That the grantee shall continue to be liable for income taxes payable under Title II of the National Internal Revenue Code pursuant to Section 2 of Executive Order No. 72 unless the latter enactment is amended or repealed, in which case the amendment or repeal shall be applicable thereto. SaHTCE The grantee shall file the return with and pay the tax due thereon to the Commissioner of Internal Revenue or his duly authorized representative in accordance with the National Internal Revenue Code and the return shall be subject to audit by the Bureau of Internal Revenue. (Boldfacing and underscoring supplied) AHCaES The first sentence of Section 5 of RA 7678 is the same provision found in almost all legislative franchises in the telecommunications industry dating back to 1905. 23 It is also the same provision that appears in the legislative franchises of other telecommunications companies like Philippine Long Distance Telephone Company, 24 Smart Information Technologies, Inc., 25 and Globe Telecom. 26 Since 1905, no telecommunications company has claimed exemption from realty tax based on the phrase "exclusive of this franchise," until petitioner filed the present case on 3 July 1999. 27

The first sentence of Section 5 clearly states that the legislative franchisee shall be liable to pay the following taxes: (1) "the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay"; (2) "franchise tax as may be prescribed by law of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise"; 28 and (3) "income taxes payable under Title II of the National Internal Revenue Code". The crux of the controversy lies in the interpretation of the phrase "exclusive of this franchise" in the first sentence of Section 5. Petitioner interprets the phrase to mean that its real properties that are used in its telecommunications business shall not be subject to realty tax. Respondent interprets the same phrase to mean that the term "personal property" shall not include petitioner's franchise, which is an intangible personal property. SHIETa We rule that the phrase "exclusive of this franchise" simply means that petitioner's franchise shall not be subject to the taxes imposed in the first sentence of Section 5. The first sentence lists the properties that are subject to taxes, and the list excludes the franchise. Thus, the first sentence provides: The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay. (Emphasis supplied) A plain reading shows that the phrase "exclusive of this franchise" is meant to exclude the legislative franchise from the properties subject to taxes under the first sentence. In effect, petitioner's franchise, which is a personal property, is not subject to the taxes imposed on properties under the first sentence of Section 5. However, petitioner's gross receipts from its franchise are subject to the "franchise tax" under the second sentence of Section 5. Thus, the second sentence provides: TaDSHC In addition thereto, the grantee shall pay to the Bureau of Internal Revenue each year, within thirty (30) days after the audit and approval of the accounts, a franchise tax as may be prescribed by law of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee; . . . (Emphasis supplied) In short, petitioners franchise is excluded from the properties taxable under the first sentence of Section 5 but the gross receipts from its franchise are expressly taxable under the second sentence of the same Section. DEcSaI The first sentence of Section 5 imposes on the franchisee the "same taxes" that nonfranchisees are subject to with respect to real and personal properties. The clear intent is to put the franchisees and non-franchisees in parity in the taxation of their real and personal properties. Since non-franchisees have obviously no franchises, the franchise must be excluded from the list of properties subject to tax to maintain the parity between the franchisees and non-franchisees. However, the franchisee is taxable separately from its franchise. Thus, the second sentence of Section 5 imposes the "franchise tax" on gross receipts, which under Republic Act No. 7716 has been replaced by the 10% Valued Added Tax effective 1 January 1996. 29 Section 5 can be divided into three parts. First is the first sentence which imposes taxes on real and personal properties, excluding one property, that is, the franchise. This puts in parity the franchisees and non-franchisees in the taxation of real and personal properties. Second is the second sentence which imposes the franchise tax, which is applicable solely

to the franchisee. And third is the proviso in the second sentence that imposes the income tax on the franchisee, the same income tax payable by non-franchisees. CScaDH Petitioner claims that the first sentence refers only to real properties, and that the phrase "exclusive of this franchise" exempts petitioner from realty tax on its real properties used in its telecommunications business. This claim has no basis in the language of the law as written in the first sentence of Section 5. First, the first sentence expressly refers to taxes on "real estate" and on "personal property". Clearly, the first sentence does not refer only to taxes on real properties, but also to taxes on personal properties. The trial court correctly observed that petitioner pays taxes on its motor vehicles, 30 which are personal properties, that are used in its telecommunications business. 31 There is also the documentary stamp tax on transactions involving real and personal properties, which petitioner and other taxpayers are liable for. 32 A franchise granted by Congress to operate a private radio station for the franchisee's communications in deep-sea fishing shows that the first sentence of Section 5 of RA 7678 does not refer to real properties alone. Section 6 of Republic Act No. 3218 (RA 3218), entitled An Act Granting Batas Riego de Dios a Franchise to Construct, Maintain and Operate Private Radio Stations for Radio Communications in its Deep-Sea Fishing Industry, provides: SEC. 6. The grantee shall be liable (1) to pay the same taxes on its real estate, building, fishing boats and personal property, exclusive of this franchise as other persons or corporations are now, or hereafter may be required by law to pay, and shall further be liable (2) to pay all other taxes that may be imposed by the National Internal Revenue Code by reason of this franchise. (Emphasis supplied) The inclusion of "fishing boats", personal properties that can never be attached to a land or building so as to make them real properties, demonstrates that Section 6 of RA 3218, like the first sentence of Section 5 of RA 7678, not only applies to real properties but also to personal properties. HESCcA Second, there is no language in the first sentence of Section 5 expressly or even impliedly exempting petitioner from the realty tax. The phrases "exemption from real estate tax", "free from real estate tax" or "not subject to real estate tax" do not appear in the first sentence. No matter how one reads the first sentence, there is no grant of exemption, express or implied, from realty tax. In fact, the first sentence expressly imposes taxes on both real and personal properties, excluding only the intangible personal property that is the franchise. A tax exemption cannot arise from vague inference. The first sentence of Section 5 does not grant any express or even implied exemption from realty tax. On the contrary, the first sentence categorically states that the franchisee is subject to the "same taxes currently imposed, and those taxes that may be subsequently imposed, on other persons or corporations", taxpayers that admittedly are all subject to realty tax. The first sentence does not limit the imposition of the "same taxes" to realty tax only but even to "those taxes" that may in the future be imposed on other taxpayers, which future taxes shall also be imposed on petitioner. Thus, the first sentence of Section 5 imposes on petitioner not only realty tax but also other taxes. The phrase "personal property exclusive of this franchise" merely means that "personal property" does not include the franchise even if the franchise is an intangible personal property. Stated differently, the first sentence of Section 5 provides that petitioner shall

pay tax on its real properties as well as on its personal properties but the franchise, which is an intangible personal property, shall not be deemed personal property. The historical usage of the phrase "exclusive of this franchise" in franchise laws enacted by Congress indubitably shows that the phrase is not a grant of tax exemption, but an exclusion of one type of personal property subject to taxes, and the excluded personal property is the franchise. Thus, the franchises of telecommunications companies in Republic Act Nos. 4137, 33 5692, 34 5739, 35 5785, 36 5790, 37 5791, 38 5795, 39 5810, 40 5847, 41 5848, 42 5856, 43 5857, 44 5913, 45 5914, 46 5929, 47 5937, 48 5958, 49 5959, 50 5974, 51 5993, 52 5994, 53 6002, 54 6006, 55 6007, 56 6013, 57 6024, 58 6097, 59 6510, 60 6536, 61 and 6530 62 contain the following common tax provision: The grantee shall be liable to pay the same taxes, unless exempted therefrom, on its business, real estate, buildings, and personal property, exclusive of this franchise, as other persons or corporations are now or hereafter may be required by law to pay. (Emphasis supplied) ATICcS The phrase "unless exempted therefrom" in the common provision clearly clarifies that the phrase "exclusive of this franchise" does not grant any tax exemption. To claim tax exemption, there must be an express exemption from tax in another provision of law. On the other hand, the deletion of the phrase "unless exempted therefrom" from the common provision does not give rise to any tax exemption. Bayantel and Digitel Cases In City Government of Quezon City v. Bayan Telecommunications, Inc., 63 this Court's Second Division held that "all realties which are actually, directly and exclusively used in the operation of its franchise are 'exempted' from any property tax". The Second Division added that Bayantel's franchise being national in character, the "exemption" granted applies to all its real and personal properties found anywhere within the Philippines. The Second Division reasoned in this wise: The legislative intent expressed in the phrase 'exclusive of this franchise' cannot be construed other than distinguishing between two (2) sets of properties, be they real or personal, owned by the franchisee, namely, (a) those actually, directly and exclusively used in its radio or telecommunications business, and (b) those properties which are not so used. It is worthy to note that the properties subject of the present controversy are only those which are admittedly falling under the first category. aADSIc To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to grant or delegate to local governments of Congress' inherent power to tax the franchisee's properties belonging to the second group of properties indicated above, that is, all properties which, "exclusive of this franchise", are not actually and directly used in the pursuit of its franchise. As may be recalled, the taxing power of local governments under both the 1935 and the 1973 Constitutions solely depended upon an enabling law. Absent such enabling law, local government units were without authority to impose and collect taxes on real properties within their respective territorial jurisdictions. While Section 14 of Rep. Act No. 3259 may be validly viewed as an implied delegation of power to tax, the delegation under that provision, as couched, is limited to impositions over properties of the franchisee which are not actually, directly and exclusively used in the pursuit of its franchise. Necessarily, other properties of Bayantel directly used in the pursuit of its business are beyond the pale of the delegated taxing power of local governments. In a very real sense, therefore, real properties of Bayantel, save those exclusive of its

franchise, are subject to realty taxes. Ultimately, therefore, the inevitable result was that all realties which are actually, directly and exclusively used in the operation of its franchise are "exempted" from any property tax. (Emphasis supplied) In Digital Telecommunications Philippines, Inc. (Digitel) v. Province of Pangasinan, 64 this Court's Third Division ruled that Digitel's real properties located within the territorial jurisdiction of Pangasinan that are actually, directly and exclusively used in its franchise are exempt from realty tax under the first sentence of Section 5 of RA 7678. The Third Division explained thus: The more pertinent issue to consider is whether or not, by passing Republic Act No. 7678, Congress intended to exempt petitioner DIGITEL's real properties actually, directly and exclusively used by the grantee in its franchise. The fact that Republic Act No. 7678 was a later piece of legislation can be taken to mean that Congress, knowing fully well that the Local Government Code had already withdrawn exemptions from real property taxes, chose to restore such immunity even to a limited degree. Accordingly: The Court views this subsequent piece of legislation as an express and real intention on the part of Congress to once again remove from the LGC's delegated taxing power, all of the franchisee's . . . properties that are actually, directly and exclusively used in the pursuit of its franchise. ACTESI In view of the unequivocal intent of Congress to exempt from real property tax those real properties actually, directly and exclusively used by petitioner DIGITEL in the pursuit of its franchise, respondent Province of Pangasinan can only levy real property tax on the remaining real properties of the grantee located within its territorial jurisdiction not part of the above-stated classification. Said exemption, however, merely applies from the time of the effectivity of petitioner DIGITEL's legislative franchise and not a moment sooner. Nowhere in the language of the first sentence of Section 5 of RA 7678 does it expressly or even impliedly provide that petitioner's real properties that are actually, directly and exclusively used in its telecommunications business are exempt from payment of realty tax. On the contrary, the first sentence of Section 5 specifically states that the petitioner, as the franchisee, shall pay the "same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay". The heading of Section 5 is "Tax Provisions", not Tax Exemptions. To reiterate, the phrase "exemption from real estate tax" or other words conveying exemption from realty tax do not appear in the first sentence of Section 5. The phrase "exclusive of this franchise" in the first sentence of Section 5 merely qualifies the phrase "personal property" to exclude petitioner's legislative franchise, which is an intangible personal property. Petitioner's franchise is subject to tax in the second sentence of Section 5 which imposes the "franchise tax". Thus, there is no grant of tax exemption in the first sentence of Section 5. The interpretation of the phrase "exclusive of this franchise" in the Bayantel and Digitel cases goes against the basic principle in construing tax exemptions. In PLDT v. City of Davao, 65 the Court held that "tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain to be mistaken. They cannot be extended by mere implication or inference". HAIaEc

Tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer. 66 RCPI case In Radio Communications of the Philippines, Inc. (RCPI) v. Provincial Assessor of South Cotabato, 67 the Court's First Division held that RCPI's radio relay station tower, radio station building, and machinery shed are real properties and are subject to real property tax. The Court added that: RCPI cannot also invoke the equality of treatment clause under Section 23 of Republic Act No. 7925. The franchises of Smart, Islacom, TeleTech, Bell, Major Telecoms, Island Country, and IslaTel, 68 all expressly declare that the franchisee shall pay the real estate tax, using words similar to Section 14 of RA 2036, as amended. The provisions of these subsequent telecommunication franchises imposing the real estate tax on franchisees only confirm that RCPI is subject to the real estate tax. Otherwise, RCPI will stick out like a sore thumb, being the only telecommunications company exempt from the real estate tax, in mockery of the spirit of equality of treatment that RCPI is invoking, not to mention the violation of the constitutional rule on uniformity of taxation. It is an elementary rule in taxation that exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority. It is the taxpayer's duty to justify the exemption by words too plain to be mistaken and too categorical to be misinterpreted. (Emphasis supplied) In RCPI, the Court emphasized that telecommunications companies which were granted legislative franchise are liable to realty tax. The intent to grant realty tax exemption cannot be discerned from Republic Act No. 4054 69 and neither from the legislative franchises of other telecommunications companies. Tax exemptions granted to one or more, but not to all, telecommunications companies similarly situated will violate the constitutional rule on uniformity of taxation. 70 ISDHcT The intent of Congress is to make legislative franchisees liable to tax In PLDT v. City of Davao, 71 it was observed that after the imposition of VAT on telecommunications companies, Congress refused to grant any tax exemption to telecommunications companies that sought new franchises from Congress, except the exemption from specific tax. 72 More importantly, the uniform tax provision in these new franchises expressly states that the franchisee shall pay not only all taxes, except specific tax, under the National Internal Revenue Code, but also all taxes under "other applicable laws", 73 one of which is the Local Government Code which imposes the realty tax. 74 In fact, Section 12 of Republic Act No. 9180 (RA 9180), 75 the legislative franchise of Digitel Mobile, a 100%-owned subsidiary of petitioner, states that the franchisee, its successors or assigns shall be subject to the payment of "all taxes, duties, fees or charges and other impositions under the National Internal Revenue Code of 1997, as amended, and other applicable laws". 76 Section 12 of RA 9180 provides: SEC. 12. Tax Provisions. The grantee, its successors or assigns, shall be subject to the payment of all taxes, duties, fees or charges and other impositions under the National Internal Revenue Code of 1997, as amended, and other applicable laws: Provided, That nothing herein shall be construed as repealing any specific tax

exemptions, incentives, or privileges granted under any relevant law: Provided, further, That all rights, privileges, benefits and exemptions accorded to existing and future telecommunications franchises shall likewise be extended to the grantee. CASaEc The grantee shall file the return with the city or province where its facility is located and pay the income tax due thereon to the Commissioner of Internal Revenue or his duly authorized representatives in accordance with the National Internal Revenue Code and the return shall be subject to audit by the Bureau of Internal Revenue. (Emphasis supplied) Thus, Digitel Mobile is subject to tax on its real estate and personal properties, whether or not used in its telecommunications business. In Compagnie Financiere Sucres et Denrees v. Commissioner of Internal Revenue, 77 the Court ruled that "the governing principle is that tax exemptions are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority he who claims an exemption must be able to justify his claim by the clearest grant of statute". A person claiming an exemption has the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted. Tax exemptions are never presumed and the burden lies with the taxpayer to clearly establish his right to exemption. 78 BLGF Opinions On 25 October 2004, the BLGF issued Memorandum Circular No. 15-2004. 79 This circular reversed the BLGF's Letter-Opinion dated 8 April 1997 recognizing realty tax exemption under the phrase "exclusive of this franchise". This later circular states that the real properties owned by Globe and Smart Telecommunications and all other telecommunications companies similarly situated are subject to the realty tax. The BLGF has reversed its opinion on the realty tax exemption of telecommunications companies. Hence, petitioner's claim of tax exemption based on BLGF's opinion does not hold water. Besides, the BLGF has no authority to rule on claims for exemption from the realty tax. 80 Wherefore, we DENY the petition. We AFFIRM the 2 May 2002 and 19 November 2002 Orders of the Regional Trial Court, Branch 8, Batangas City, in Civil Case No. 5343. aEHIDT SO ORDERED. Puno, C.J., Quisumbing, Ynares-Santiago, Austria-Martinez, Carpio-Morales, Tinga, Chico-Nazario, Velasco, Jr., Nachura, Reyes, Leonardo-de Castro and Brion, JJ., concur. Corona and Azcuna, JJ., are on official leave. Footnotes 1. Under Rule 45 of the Rules of Court. 2. Penned by Judge Liberato C. Cortes. 3. Penned by Presiding Judge Romeo F. Barza. 4. An Act Granting the Digital Telecommunications Philippines, Incorporated, a Franchise to Install, Operate and Maintain Telecommunications Systems Throughout the Philippines and for Other Purposes. aSTECA 5. Rollo, pp. 41-44. April 8, 1997 Mr. William S. Pamintuan Senior Vice President

Digital Telecommunications Phils., Inc. (DIGITEL) 110 E. Rodriguez Jr. Avenue Bagumbayan, Quezon City Sir: This refers to your letter dated January 28, 1997, requesting opinion concerning the exemption from real property taxes of DIGITEL pursuant to the provisions of its franchise (R.A. No. 7678), which was approved on February 17, 1994. That company advanced the contention that Digitel "is not liable to pay the aforementioned tax" on its "real estate, buildings and personal property. . . inclusive of its franchise", in view of the provisions of Section 5 of Republic Act No. 7678 (Digitel's legislative franchise) which, among others, provides that "[T]he grantee (Digitel) shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise, . . .". Moreover, Digitel's position is based on the ipso facto provision of Section 12 of their abovementioned franchise, which reads: SEC. 12. Non-exclusivity of Franchise; Interpretation of Franchise. The franchise granted under this Act is not exclusive and shall not prevent the grant of similar franchise to other qualified persons or entities: . . . Provided, finally, that if any subsequent franchise for telecommunications services is awarded or granted by the Congress of the Philippines with terms, privileges and conditions more favorable and beneficial than those contained in this Act, then the same privileges or advantages shall, ipso facto, accrue to the herein grantee and shall be deemed part of this Act. It appears that the abovementioned request was prompted by the following: 1. The letter dated March 12, 1996 of the Executive Secretary, Office of the President, Malacaang, Manila, which ruled as follows: As clearly spelled out in the above ipso facto provision, it is the intent of the legislature to provide 'equality of treatment in the telecommunications industy'. Equally clear is the fact that the tax exemption being enjoyed by telecommunications companies similarly situated with Digitel or those whose franchises provide similar benefits constitutes an 'advantage, favor, privilege, exemption, or immunity' granted under an existing franchise. Hence, Section 6, R.A. No. 7293 granting a similar franchise to Pilipino Telephone Corporation (PILTEL) ipso facto became part of Digitel's franchise pursuant to Section 23 of R.A. No. 7925. Digitel, therefore, became entitled to the tax exemptions provided for under Section 6, R.A. No. 7293 immediately upon effectivity of R.A. No. 7925. 2. The 1st Indorsement dated February 14, 1995 of the Department of Finance (DOF), concerning the request of the Philippine Telegraph and Telephone Corporation (PT&T) for reconsideration of the DOF's ruling embodied under a 1st Indorsement dated May 27, 1994 which held, in view of the withdrawal of exemption provision of Section 234 of R.A. No. 7160, that: "the real properties of PT&T, although directly used in the operation of its franchise, shall be liable to the payment of real property taxes beginning January 1, 1992, the effectivity of R.A. No. 7160". IDScTE The said February 14, 1995 ruling, which is relatively similar to that of the abovecited ruling of the Office of the President, held, thus:

In view thereof, such pertinent portion of the Tax Provisions of the franchises of SMART, Bell Telecommunication Philippines, Inc., and Digital Telecommunications Philippines, Inc., stating that "(T)he grantee shall be liable to pay the same taxes on real estate, buildings and personal property, exclusive of this franchise", is again deemed a part of PT&T's franchise when R.A. No. 7294 (SMART's franchise) took effect on April 15, 1992. The stand of this Department under its 1st Indorsement dated May 27, 1994, 'that real properties of PT&T, although directly used in the operations of its franchise, shall be liable to the payment of real property taxes beginning January 1, 1992', is, therefore, hereby maintained. However, such real properties of the said company (PT&T) which are directly used in the operation of its franchise, should again, in view of the foregoing considerations, be assessed as exempt from payment of real property taxes commencing January 1, 1993, the year after the franchise of SMART took effect, in line with Article III (B) (2) of the Manual on Real Property Tax Administration in the Philippines and Section 221 of R.A. No. 7160, . . .. Moreover, it is emphasized that all other real properties of PT&T not used in connection with the operations of its franchise shall remain subject to the payment of real property taxes. EICScD It is worthwhile to note that under the aforecited 1st Indorsement of the Department of Finance, Digitel's real property tax exemption was already recognized in granting PT&T's request for real property tax exemption. Moreover, attention is likewise invited to the letter dated July 24, 1996, of this Bureau, also treating on a similar subject matter, to wit: Like the abovementioned telecommunications (PT&T, SMART, BELL and DIGITAL), ISLACOM was granted, under Section 1 of R.A. No. 7372, the 'right, privilege and authority to construct, operate and maintain all types of mobile communications, including cellular, personal communication network, paging and trunk radio services (such as but not limited to the transmission and reception of voice, data facsimile, audio and video and all other improvements and innovations pertaining to or as may be applicable to mobile telecommunication technology) as well as multi-channel microwave fiber optic and satellite distribution . . .. The exemption provisions under the legislative franchise of PT&T, SMART, BELL and DIGITAL is similarly found under Section 14 of ISLACOM's franchise (R.A. 7372), which provides as follows: ACSaHc 'xxx xxx xxx'. Obviously, the same privilege (exemption from payment of real property taxes on properties used in the operation of franchise) should be enjoyed by ISLACOM, in the same way that exemption of the abovecited telecommunications companies (PT&T, SMART, BELL and DIGITAL) were, in effect, considered by the Department of Finance (DOF). In view of all the foregoing, this Bureau finds merit in the abovementioned contention and claim of that company for real property tax exemption. Hence, the real properties of DIGITEL, which are used in the operation of its franchise, are hereby similarly found to be exempt from the payment of real property taxes, beginning January 1, 1993.

However, all other real properties of that company not used in connection with the operations of its franchise shall remain taxable. Very truly yours, LORINDA M. CARLOS Executive Director 6. Id. at 59-62. 12 March 1996 Mr. John Gokongwei, Jr. Chairman Digital Telecommunications Philippines, Inc. c/o JG Summit Holdings, Inc. 29th Floor, Galleria Corporate Center EDSA corner Ortigas Avenue Quezon City Sir: This refers to your request for "a ruling addressed to the Bureau of Internal Revenue and the Department of Finance for the tax and duty-free importations of Digitel", the same privilege which you understood as being accorded to other telecommunications companies with the same franchise. xxx xxx xxx Hence, Section 6, R.A. No. 7293 granting a similar franchise to Pilipino Telephone Corporation (PILTEL) ipso facto became part of Digitel's franchise pursuant to Section 23 of R.A. No. 7925. Digitel, therefore, became entitled to the tax exemptions provided for under Section 6, R.A. No. 7293 immediately upon effectivity of R.A. No. 7925. IaDTES Corollarily, as ruled by the BIR in its letter-opinion dated 25 January 1995 regarding PILTEL's tax exemption, Digitel, too, shall be subject only to the following taxes, to wit: 1. Taxes on its real estate, buildings and personal property not used in connection with the conduct of its business under its franchise, as other persons or corporations are now or hereafter may be required to pay; 2. 35% corporate income tax as provided for under Section 24(a) of the Tax Code, as amended; 3. 20% final withholding tax (FWT) on interest income derived from Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes, trust funds and similar arrangements, and royalties derived from sources within the Philippines (Section 2 [e] [1], NIRC); 4. Creditable expanded withholding tax (EWT) on sales, exchanges or transfers of real properties (whether classified as ordinary or capital asset) by Digitel consummated on or after January 1, 1990 (RMC 7-90); 5. Capital gains tax (CGT) on capital gains realized from sale, exchange or disposition of shares of stock in any domestic corporation under Section 24 (e) (2) of the Tax Code, as amended; 6. All other income taxes as provided for and imposed under Title II of the Tax Code, as amended; and

7. The 3% franchise tax on gross which shall be in lieu of all taxes, franchise or earnings thereof. In view of the foregoing, this Office hereby holds that Digitel is exempt from any and all duties, taxes and assessments on the importation of radio and message handling equipment, machineries, pagers, accessories, spare parts and all other goods and articles used in connection with its business conducted under its franchise, including Value Added Tax (VAT). Very truly yours, RUBEN D. TORRES Executive Secretary 7. Id. at 10. 8. Id. 9. Records, p. 236. 10. Rollo, p. 40. TcIHDa 11. Records, p. 250. 12. Id. at 311. 13. Rollo, pp. 25-26. 14. Id. at 11-12. 15. Id. at 63-66. January 4, 1999 ATTY. WILLIAM S. PAMINTUAN Senior Vice President-Legal Services Digital Telecommunications Philippines, Inc. (DIGITEL) 110 E. Rodriguez Jr. Avenue Bagumbayan, Quezon City Sir: This refers to your letter dated October 19, 1998, seeking the assistance of this Bureau to render an opinion affirming its previous position that real properties of DIGITEL which are used in the operation of its franchise are exempt from payment of real property taxes. In this connection, enclosed is a copy of our 2nd Indorsement of the same date addressed thru the Regional Director for Local Government Finance, Department of Finance, Region IV, to the Provincial Assessor of Batangas, the dispositive portion of which states as follows: ". . . in adherence to the aforementioned March 12, 1996 pronouncement of the Office of the President, this Bureau, in its November 9, 1998 letter. . ., likewise maintained the same stand, which in effect expressed that 'the claim for exemption of that company from the payment of real property taxes on the real properties which are used in the operation of . . . (the company's) franchise is hereby deemed meritorious'. "In view thereof, the said Regional Director for Local Government Finance and the Provincial Assessor are hereby enjoined to implement the subject Opinions rendered by the Offices of the President and the Department of Finance, thru the Bureau of Local Government Finance, on matters pertaining to the real property tax exemption covering the real properties of DIGITEL which are used in the operation of its franchise". We trust that this will clarify matters. aATEDS

Very truly yours, Angelina M. Magsino Deputy Executive Director Officer-in-Charge 2nd Indorsement January 4, 1999 Respectfully returned, thru the Regional Director for Local Government Finance, Department of Finance, Region IV, People Mansion Compound, Batangas City, to the Provincial Assessor of Batangas, same city. This pertains to the "contrary opinion" expressed by the said Provincial Assessor concerning the letter dated April 18, 1997 of this Bureau, which held that "the real properties of DIGITEL, which are used in the operation of its franchise, are hereby found to be exempt from the payment of real property taxes". It is worthwhile to note that the stand/opinion expressed in the abovementioned letter dated April 8, 1997 of this Bureau, including those that similarly resolved real property tax exemption controversies of other telecommunication companies, were primarily based on the Opinion dated September 21, 1981 of the Office of the President stating that the phrase "exclusive of this franchise" found in Section 7 of R.A. No. 3662 (RETELCO's franchise) "has been construed to mean as excluding real estate, buildings and personal property of defendant RETELCO, Inc., directly used in the operation of its franchise, for which the latter is not subject to real estate tax as other persons or corporations are now or hereafter may be required by law to pay". CSHcDT Apparently, the abovementioned "contrary opinion" of the Provincial Assessor of Batangas was prompted by the claim of DIGITEL for real property tax exemption on its real properties situated in Batangas Province, which are used in the operation of its franchise; and the Court of Appeals Decision, CA-GR CV No. 21897, promulgated on January 21, 1992, entitled, "The City Government of Batangas vs. Republic Telephone Company, Inc. (RETELCO), that "RETELCO is liable to pay the real property taxes on its real estate, building and personal property excluding its franchise". (Underscoring supplied) Hence, "RETELCO is ordered to pay the City of Batangas . . . the real property tax on said defendants' real estate, buildings and personal property located at Batangas City, covering the period from 1972 to June, 1980 and the real property tax due thereafter, plus the interest and penalty as provided by law". In a letter dated October 19, 1998 (copy attached), the Senior Vice President Legal Service, Digital Telecommunications, Inc. (DIGITEL), advanced that, while most local government units "recognize and honor the said letter-opinion" of this Bureau, "the province of Batangas . . . rejected our (DIGITEL's) claim and refuses to honor the learned opinion of this (BLGF's) Office", thus, it argued that: ACcTDS 1. "(T)he Court of Appeals Decision cannot be used as basis for the refusal to honor the opinion of this (BLGF's) Honorable Office and the denial of DIGITEL's claim for real property tax exemption" considering that DIGITEL "is not a party to the said case". 2. "(I)t cannot be said that the Court of Appeals decision has established a precedent upon which other telecommunications companies can be compelled to comply with. . . . In the case of Miranda v. Imperial (77 Phil. 1066), the Supreme Tribunal categorically stated that 'only decision of this Honorable Court

establish jurisprudence or doctrines in this jurisdiction'. Consequently, decisions of subordinate court are only persuasive in nature, and can have no mandatory effect (Paras, Civil Code of the Philippines annotated)". 3. "(R)eal property tax is not imposed on a franchise (as the said Court of Appeals Decision resolved it to be), because it (the real property tax) is imposed specifically on real properties such as land, buildings and machineries. A franchise is never subject to real property tax. It is subject to a franchise tax". EaISTD This Bureau finds the foregoing arguments of DIGITEL tenable considering the fact that, actually, even the Office of the President (OP) appears to share the same stand when OP, notwithstanding the subject January 21, 1992 Court of Appeals Decision, reaffirmed its position on the matter under a letter dated March 12, 1996, which categorically declared that "DIGITEL, too, shall be subject only to the following taxes, to wit: "1. Taxes on its real estate, buildings and personal property not used in connection with the conduct of its business under its franchise, as other persons or corporations are now or hereafter may be required to pay; (Underscoring supplied) xxx xxx xxx It is likewise important to note hereon that, in adherence to the aforementioned March 12, 1996 pronouncement of the Office of the President, this Bureau, in its November 9, 1998 letter . . ., likewise maintained the same stand, which in effect expressed that "the claim for exemption of that company from the payment of real property taxes on the real properties which are used in the operation of . . . (the company's) franchise is hereby deemed meritorious". IDaEHC In view thereof, the said Regional Director for Local Government Finance and the Provincial Assessor are hereby enjoined to implement the subject Opinions rendered by the Offices of the President and the Department of Finance, thru the Bureau of Local Government Finance, on matters pertaining to the real property tax exemption covering the real properties of DIGITEL which are used in the operation of its franchise. Be guided accordingly. ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge 16. Id. at 13. 17. Id. at 14. 18. Id. at 181-182. 19. Id. at 187-188. 20. Id. at 189. 21. Id. at 161. CAaEDH 22. Id. at 185-186. 23. Act No. 1368 entitled "An Act to provide for the granting of a franchise to construct, maintain, and operate telephone and telegraph systems, and to carry on other electrical transmission business in and between the provinces, cities, and municipalities of the Island of Luzon". Enacted on 6 July 1905. Sec. 5 reads: "Sec. 5. The grantees, their successors or assigns, shall be liable to pay the same taxes on their real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be

required by law to pay. The grantees, their successors or assigns, shall further pay to the Insular Treasurer each year, within ten days after the audit and approval of the accounts as prescribed in section four of this Act, two per centum of all gross receipts of the telephone, telegraph, or other electrical transmission business transacted under this franchise by the grantees, their successors or assigns, and the said percentage shall be in lieu of all taxes on the franchise or earnings thereof". (Boldfacing and underscoring supplied) 24. Republic Act No. 7082 entitled "An Act Further Amending Act No. 3436, as Amended, Entitled 'An Act Granting to the Philippine Long Distance Telephone Company a Franchise to Install, Operate and Maintain a Telephone System Throughout the Philippine Islands", Consolidating the Terms and Conditions of the Franchise Granted to the Philippine Long Distance Telephone Company, and Extending the Said Franchise by Twenty-Five (25) Years from the Expiration of the Terms Thereof as Provided in Republic Act No. 6146". cSTHaE 25. Republic Act No. 7294 entitled "An Act Granting Smart Information Technologies, Inc. (SMART) A Franchise to Establish, Install, Maintain, Lease and Operate Integrated Telecommunications/Computer/Electronic Services and Stations Throughout the Philippines for Public Domestic and International Telecommunications, and for Other Purposes". 26. Republic Act No. 4630 entitled "An Act Amending Act Numbered Thirty-Four Hundred Ninety-Five, as Amended, Granting Globe Wireless, Limited, of the Philippines, a Franchise to Construct, Maintain and Operate in the Philippines Stations for the Reception and Transmission of Wireless Messages". AaCEDS 27. In Digital Telecommunications, Inc. (Digitel) v. Province of Pangasinan (516 SCRA 541), the Province sued Digitel on 1 March 2000 for collection of unpaid real estate taxes. Bayantel Telecommunications, Inc. (484 SCRA 169) sued the City of Quezon in 2002 to prevent the collection of real estate taxes. 28. Republic Act No. 7716 abolished the franchise tax on telecommunications companies effective 1 January 1996 and replaced it with a 10% value-added tax on telecommunications companies under Section 102 (now Section 108 of the Tax Reform Act of 1997, RA 8424) of the National Internal Revenue Code. RA 9337 increased the rate of VAT to 12% on 1 January 2006. 29. See note 28. 30. Rollo, p. 21. 31. See also Republic Act No. 8794 entitled "An Act Imposing a Motor Vehicle User's Charge on Owners of All Types of Motor Vehicles and for Other Purposes". 32. Sections 173, 174, 195 and 196 of the National Internal Revenue Code. 33. An Act Granting the Luzon Broadcasting Company, Inc., a Franchise to Construct, Maintain and Operate Radio Broadcasting Stations Within the Philippines for Commercial Purposes. IcTCHD 34. An Act Granting Alfredo Angeles a Franchise to Install, Maintain and Operate an Electric Light, Heat, Power System and an Ice Plant in the Municipality of Molave, Province of Zamboanga del Sur. 35. An Act Granting Leonides C. Pengson a Franchise to Construct, Operate and Maintain an Ice Plant and Cold Storage in the Municipality of Makati, Province of Rizal,

and to Sell and Distribute Ice in the Cities of Pasay, Quezon, and the Municipality of Makati, Province of Rizal. 36. An Act Approving Any Assignment, Sale and Transfer of the Franchise Granted to Juan R. Alcasid by Republic Act Numbered Forty-Five Hundred Six, and of the Franchise Granted to Feliciana S. Bermudez Under the Republic Act Numbered Eighteen Hundred Forty Which was Later Assigned, Sold and Transferred to Juan R. Alcasid Duly Approved by Congress Under Republic Act Numbered Forty-Five Hundred Fifty-Three, in Favor of Rural Electric, Inc. 37. An Act Granting Romulo Rodriguez, Jr., a Franchise to Construct, Maintain and Operate Radio Broadcasting and Television Stations in Gingoog City. 38. An Act Granting Burauen Electric and Ice Plant Corporation a Franchise to Construct, Operate and Maintain an Electric Light and Power System, an Ice Plant and Cold Storage in the Municipality of Burauen, Province of Leyte, and to Sell Electric Current, Ice and to Supply Cold Storage Therein. 39. An Act Granting Elpideforo Cuna, Jr. a Franchise to Construct, Operate and Maintain Ice Plants and Cold Storage, to Distribute and Sell Ice So Manufactured and Furnish Cold Storage in the Cities of Pasay, Caloocan, Quezon and Manila and in Paraaque in the Province of Rizal. DAHaTc 40. An Act Granting Philippine Greenhills Development Corporation a Franchise to Establish, Maintain and Operate Private, Fixed, Point-to-Point, Private Coastal, Landbased, Aeronautical and Land-Mobile Radio Stations for the Transmission and Reception of Wireless Messages. 41. An Act Granting Pedro R. Luspo, Sr. a Franchise to Construct, Operate and Maintain Radio Broadcasting and Television Stations in Northern Mindanao. 42. An Act Granting Felipe C. Adamos a Franchise to Construct, Operate and Maintain an Ice Plant and Cold Storage in the Municipality of San Felipe, Province of Zambales and to Sell Ice and Supply Cold Storage in the Said Province. 43. An Act Granting Katigbak Enterprises, Incorporated, a Franchise to Construct, Operate and Maintain a Radio Broadcasting Station in the City of San Pablo. EaDATc 44. An Act Amending Section Five of Republic Act Numbered Fifty-One Hundred and Six, Entitled an Act Granting Rafael C. Aquino a Franchise to Install, Maintain and Operate an Electric Light, Heat, Power System, an Ice Plant and Cold Storage in the Municipalities of Bayugan and Prosperidad, Province of Agusan. 45. An Act Granting Far Corporation a Franchise to Construct, Operate and Maintain Radio Broadcasting Stations in Luzon. 46. An Act Granting Basilan Broadcasting Corporation a Franchise to Establish, Operate and Maintain Radio Broadcasting Stations in Mindanao. 47. An Act Granting Felipe dela Cruz a Franchise to Construct, Operate and Maintain an Ice Plant and Cold Storage and to Sell and to Supply Cold Storage Facilities in Quezon City. 48. An Act Granting the Asiatic Integrated Corporation, a Franchise to Construct, Maintain and Operate an Ice Plant and Cold Storage in the Municipality of Mariveles, Province of Bataan. 49. An Act Granting Bidcor Telephone Company, Inc. a Franchise to Install, Operate and Maintain a Telephone System in the Province of South Cotabato.

50. An Act Granting Lourdes P. San Diego a Franchise to Construct, Operate and Maintain Ice Plants and Cold Storage in the City of Iriga and in the Municipality of Balatan, Province of Camarines Sur, and to Sell Ice and Supply Cold Storage Therein. HAaDTE 51. An Act Granting Iriga Telephone Company, Incorporated, a Franchise to Install, Operate and Maintain a Telephone System in the City of Iriga. 52. An Act Granting Eusebio G. Bernales, Sr. a Franchise to Install, Operate and Maintain an Electric Light, Heat and Power System, and an Ice Plant in the Municipality of Bacolod, Province of Lanao del Norte. 53. An Act Granting Garcia, Diapo and Co., a Franchise for an Electric Light, Heat and Power System in the Municipalities of Banga and New Washington, Both in the Province of Aklan. 54. An Act Granting Jesus Arevalo a Franchise to Construct, Operate and Maintain an Ice Plant and Cold Storage in the Municipality of San Fernando, Province of Masbate, and to Sell Ice and Cold Storage in the Municipality of Batuan, San Jacinto and Monreal, All in the Province of Masbate. 55. An Act Granting Restituto Palma Gil a Franchise for an Electric Light, Heat and Power System in the Municipality of Caraga, Province of Davao Oriental. TacESD 56. An Act Granting Combined Broadcasting, Inc., a Franchise to Construct, Operate and Maintain a Radio Broadcasting Station in the City of Lipa and the Province of Batangas. 57. An Act Granting a Franchise for an Electric Light, Heat and Power System to Leopoldo T. Calderon, Jr., in the Municipality of Pulilan, Province of Bulacan. 58. An Act Amending Republic Act Numbered Forty-Five Hundred Fifty (Re: CE Plant in Hagonoy, Davao del Sur). 59. An Act Granting Enrique M. Reyes a Franchise to Install, Maintain and Operate a Telephone System in the Province of Davao del Sur. 60. An Act Granting the Arcadia Agricultural and Development Co., Inc., a Franchise to Construct, Operate and Maintain an Ice Plant and Cold Storage in Barrio Bagbaguin, Caloocan City and to Sell and Distribute Ice and to Supply Cold Storage in the City of Caloocan and Suburbs. 61. An Act Granting Bayani Pingol a Franchise to Construct, Operate and Maintain an Ice Plant and Cold Storage in the City of Naga and to Sell Ice and Supply Cold Storage in Certain Municipalities in the Province of Camarines Sur and the Said City. IEHTaA 62. An Act Granting Makati Broadcasting Corporation a Franchise to Construct, Operate and Maintain Radio Broadcasting Stations Within the Greater Manila Area and Rizal Province. 63. G.R. No. 162015, 6 March 2006, 484 SCRA 169, 181. 64. G.R. No. 152534, 23 February 2007, 516 SCRA 541, 559-560. 65. G.R. No. 143867, 25 March 2003, 399 SCRA 442, 453. 66. RA No. 7229 expressly provides that original provisions of the franchise of Clavecilla under Republic Act No. 402, as amended, which have not been repealed, shall continue in full force and effect. The clear intent of the law is that provisions as of the enactment of RA No. 7229 shall remain repealed and shall not be reenacted with the passage of RA No. 7229. Thus, Section 11 of RA No. 7229 states

All other provisions of Republic Act No. 402, as amended by Republic Act Nos. 1618 and 4540, and other provisions of Batas Pambansa Blg. 95 which are not inconsistent with the provisions of this Act and are still unrepealed shall continue to be in full force and effect. (Emphasis supplied in the original) Concurring Opinion of Justice Antonio T. Carpio in PLDT v. City of Davao, 447 Phil. 571, 591-592 (2003). aEcADH 67. G.R. No. 144486, 13 April 2005, 456 SCRA 1, 12-14. 68. The tax provision of all these franchises partly reads: "The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal property exclusive of this franchise, as other persons or telecommunication entities are now or hereafter may be required by law to pay. . . ." 69. Republic Act No. 4054 entitled "An Act Granting the Radio Communications of the Philippines a Franchise to Establish Radio Stations for Domestic Telecommunications". 70. Concurring Opinion of Justice Antonio T. Carpio in PLDT v. City of Davao, 447 Phil. 571, 596-597 (2003). 71. 447 Phil. 571 (2003). 72. From September 2000 to July 2001, all the fourteen telecommunications franchises approved by Congress uniformly and expressly state that the franchisee shall be subject to all taxes under the National Internal Revenue Code, and other applicable laws. 73. Supra note 66 at 596. SaHTCE 74. Section 197, Title Two, Book II of Republic Act No. 7160 (RA 7160) or the Local Government Code provides: Sec. 197. Scope. This title shall govern the administration, appraisal, assessment, levy and collection of real property tax. 75. An Act Granting the Digitel Mobile Phils., Inc. a Franchise to Construct, Install, Establish, Operate and Maintain Telecommunications Systems Throughout the Philippines. 76. RA 9180, Section 12. Tax Provisions. The grantee, its successors or assigns, shall be subject to the payment of all taxes, duties, fees or charges and other impositions under the National Internal Revenue Code of 1997, as amended, and other applicable laws; Provided that nothing herein shall be construed as repealing any specific tax exceptions, incentives, or privileges granted under any relevant law; Provided, further, That all rights, privileges, benefits and exemptions accorded to existing and future telecommunications franchise shall likewise be extended to the grantee. 77. G.R. No. 133834, 28 August 2006, 499 SCRA 664. ACHEaI 78. Section 206 of Title Two, Book II of RA 7160 states: Sec. 206. Proof of Exemption of Real Property from Taxation. Every person by or for whom real property is declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary evidence in support of such claims including corporate charters, title of ownership, articles of incorporation, by laws, contracts, affidavits, certifications and mortgage deeds, and similar documents.

If the required evidence is not submitted within the period herein prescribed, the property shall be listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll. 79. Reversal of the Real Property Tax Exemption Previously Granted to GLOBE Telecommunications (GLOBE for brevity) in line with the Supreme Court (SC) Decision (G.R. No. 143867) dated August 22, 2001, and the Central Board of Assessment Appeals (CBAA) Decision (Case No. V-17) dated January 31, 2002. 80. Section 33, Chapter 4, Title II, Book IV of Executive Order No. 292 or "The Administrative Code of 1987" provides: EcDATH Sec. 33. Bureau of Local Government Finance. The Bureau of Local Government Finance, which shall be headed by and subject to the supervision and control of an Executive Director who shall be appointed by the President upon the recommendation of the Secretary, shall have the following functions: (1) Assist in the formulation and implementation of policies on local government revenue administration and fund management; (2) Exercise administrative and technical supervision and coordination over the treasury and assessment operations of local governments; (3) Develop and promote plans and programs for the improvement of resource management systems, collection enforcement mechanisms, and credit utilization schemes at the local levels; (4) Provide consultative services and technical assistance to the local governments and the general public on local taxation, real property assessment and other related matters; (5) Exercise line supervision over its Regional Offices/field units within the Department Regional Administrative Coordination Office and the Local Treasury and Assessment Services; and (6) Perform such other appropriate functions as may be assigned by the Secretary or Undersecretary for Domestic Operations. (Emphasis supplied) cTDIaC

THIRD DIVISION [G.R. No. 181845. August 4, 2009.] THE CITY OF MANILA, LIBERTY M. TOLEDO, in her capacity as THE TREASURER OF MANILA and JOSEPH SANTIAGO, in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OF MANILA, petitioners, vs. COCA-COLA BOTTLERS PHILIPPINES, INC., respondent. DECISION CHICO-NAZARIO, J p:

This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Civil Procedure seeking to review and reverse the Decision 1 dated 18 January 2008 and Resolution 2 dated 18 February 2008 of the Court of Tax Appeals en banc (CTA en banc) in C.T.A. EB No. 307. In its assailed Decision, the CTA en banc dismissed the Petition for Review of herein petitioners City of Manila, Liberty M. Toledo (Toledo), and Joseph Santiago (Santiago); and affirmed the Resolutions dated 24 May 2007, 3 8 June 2007, 4 and 26 July 2007, 5 of the CTA First Division in C.T.A. AC No. 31, which, in turn, dismissed the Petition for Review of petitioners in said case for being filed out of time. In its questioned Resolution, the CTA en banc denied the Motion for Reconsideration of petitioners. HDIaST Petitioner City of Manila is a public corporation empowered to collect and assess business taxes, revenue fees, and permit fees, through its officers, petitioners Toledo and Santiago, in their capacities as City Treasurer and Chief of the Licensing Division, respectively. On the other hand, respondent Coca-Cola Bottlers Philippines, Inc. is a corporation engaged in the business of manufacturing and selling beverages, and which maintains a sales office in the City of Manila. The case stemmed from the following facts: Prior to 25 February 2000, respondent had been paying the City of Manila local business tax only under Section 14 of Tax Ordinance No. 7794, 6 being expressly exempted from the business tax under Section 21 of the same tax ordinance. Pertinent provisions of Tax Ordinance No. 7794 provide: Section 14. Tax on Manufacturers, Assemblers and Other Processors. There is hereby imposed a graduated tax on manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, in accordance with any of the following schedule: xxx xxx xxx over P6,500,000.00 up to P36,000.00 plus 50% of 1% P25,000,000.00 in excess of P6,500,000.00 xxx xxx xxx Section 21. Tax on Businesses Subject to the Excise, Value-Added or Percentage Taxes under the NIRC. On any of the following businesses and articles of commerce subject to excise, value-added or percentage taxes under the National Internal Revenue Code hereinafter referred to as NIRC, as amended, a tax of FIFTY PERCENT (50%) of ONE PERCENT (1%) per annum on the gross sales or receipts of the preceding calendar year is hereby imposed: (A) On persons who sell goods and services in the course of trade or business; and those who import goods whether for business or otherwise; as provided for in Sections 100 to 103 of the NIRC as administered and determined by the Bureau of Internal Revenue pursuant to the pertinent provisions of the said Code. aDHCcE xxx xxx xxx (D) Excisable goods subject to VAT (1) Distilled spirits (2) Wines xxx xxx xxx (8) Coal and coke

(9) Fermented liquor, brewers' wholesale price, excluding the ad valorem tax xxx xxx xxx PROVIDED, that all registered businesses in the City of Manila that are already paying the aforementioned tax shall be exempted from payment thereof. Petitioner City of Manila subsequently approved on 25 February 2000, Tax Ordinance No. 7988, 7 amending certain sections of Tax Ordinance No. 7794, particularly: (1) Section 14, by increasing the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila; and (2) Section 21, by deleting the proviso found therein, which stated "that all registered businesses in the City of Manila that are already paying the aforementioned tax shall be exempted from payment thereof". Petitioner City of Manila approved only after a year, on 22 February 2001, another tax ordinance, Tax Ordinance No. 8011, amending Tax Ordinance No. 7988. Tax Ordinances No. 7988 and No. 8011 were later declared by the Court null and void in Coca-Cola Bottlers Philippines, Inc. v. City of Manila 8 (Coca-Cola case) for the following reasons: (1) Tax Ordinance No. 7988 was enacted in contravention of the provisions of the Local Government Code (LGC) of 1991 and its implementing rules and regulations; and (2) Tax Ordinance No. 8011 could not cure the defects of Tax Ordinance No. 7988, which did not legally exist. aSIAHC However, before the Court could declare Tax Ordinance No. 7988 and Tax Ordinance No. 8011 null and void, petitioner City of Manila assessed respondent on the basis of Section 21 of Tax Ordinance No. 7794, as amended by the aforementioned tax ordinances, for deficiency local business taxes, penalties, and interest, in the total amount of P18,583,932.04, for the third and fourth quarters of the year 2000. Respondent filed a protest with petitioner Toledo on the ground that the said assessment amounted to double taxation, as respondent was taxed twice, i.e., under Sections 14 and 21 of Tax Ordinance No. 7794, as amended by Tax Ordinances No. 7988 and No. 8011. Petitioner Toledo did not respond to the protest of respondent. Consequently, respondent filed with the Regional Trial Court (RTC) of Manila, Branch 47, an action for the cancellation of the assessment against respondent for business taxes, which was docketed as Civil Case No. 03-107088. On 14 July 2006, the RTC rendered a Decision 9 dismissing Civil Case No. 03-107088. The RTC ruled that the business taxes imposed upon the respondent under Sections 14 and 21 of Tax Ordinance No. 7988, as amended, were not of the same kind or character; therefore, there was no double taxation. The RTC, though, in an Order 10 dated 16 November 2006, granted the Motion for Reconsideration of respondent, decreed the cancellation and withdrawal of the assessment against the latter, and barred petitioners from further imposing/assessing local business taxes against respondent under Section 21 of Tax Ordinance No. 7794, as amended by Tax Ordinance No. 7988 and Tax Ordinance No. 8011. The 16 November 2006 Decision of the RTC was in conformity with the ruling of this Court in the Coca-Cola case, in which Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were declared null and void. The Motion for Reconsideration of petitioners was denied by the RTC in an Order 11 dated 4 April 2007. Petitioners received a copy of the 4 April 2007 Order of the RTC, denying their Motion for Reconsideration of the 16 November 2006 Order of the same court, on 20 April 2007. On 4 May 2007, petitioners filed with the CTA a Motion for Extension of Time to File Petition for Review, praying for a 15-day extension or until 20 May 2007 within which to

file their Petition. The Motion for Extension of petitioners was docketed as C.T.A. AC No. 31, raffled to the CTA First Division. Again, on 18 May 2007, petitioners filed, through registered mail, a Second Motion for Extension of Time to File a Petition for Review, praying for another 10-day extension, or until 30 May 2007, within which to file their Petition. cHEATI On 24 May 2007, however, the CTA First Division already issued a Resolution dismissing C.T.A. AC No. 31 for failure of petitioners to timely file their Petition for Review on 20 May 2007. Unaware of the 24 May 2007 Resolution of the CTA First Division, petitioners filed their Petition for Review therewith on 30 May 2007 via registered mail. On 8 June 2007, the CTA First Division issued another Resolution, reiterating the dismissal of the Petition for Review of petitioners. Petitioners moved for the reconsideration of the foregoing Resolutions dated 24 May 2007 and 8 June 2007, but their motion was denied by the CTA First Division in a Resolution dated 26 July 2007. The CTA First Division reasoned that the Petition for Review of petitioners was not only filed out of time it also failed to comply with the provisions of Section 4, Rule 5; and Sections 2 and 3, Rule 6, of the Revised Rules of the CTA. Petitioners thereafter filed a Petition for Review before the CTA en banc, docketed as C.T.A. EB No. 307, arguing that the CTA First Division erred in dismissing their Petition for Review in C.T.A. AC No. 31 for being filed out of time, without considering the merits of their Petition. The CTA en banc rendered its Decision on 18 January 2008, dismissing the Petition for Review of petitioners and affirming the Resolutions dated 24 May 2007, 8 June 2007, and 26 July 2007 of the CTA First Division. The CTA en banc similarly denied the Motion for Reconsideration of petitioners in a Resolution dated 18 February 2008. Hence, the present Petition, where petitioners raise the following issues: I. WHETHER OR NOT PETITIONERS SUBSTANTIALLY COMPLIED WITH THE REGLEMENTARY PERIOD TO TIMELY APPEAL THE CASE FOR REVIEW BEFORE THE [CTA DIVISION]. II. WHETHER OR NOT THE RULING OF THIS COURT IN THE EARLIER [COCA-COLA CASE] IS DOCTRINAL AND CONTROLLING IN THE INSTANT CASE. III. WHETHER OR NOT PETITIONER CITY OF MANILA CAN STILL ASSESS TAXES UNDER [SECTIONS] 14 AND 21 OF [TAX ORDINANCE NO. 7794, AS AMENDED]. IV. WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21 OF THE [TAX ORDINANCE NO. 7794, AS AMENDED] CONSTITUTES DOUBLE TAXATION. ITAaCc Petitioners assert that Section 1, Rule 7 12 of the Revised Rules of the CTA refers to certain provisions of the Rules of Court, such as Rule 42 of the latter, and makes them applicable to the tax court. Petitioners then cannot be faulted in relying on the provisions of Section 1, Rule 42 13 of the Rules of Court as regards the period for filing a Petition for Review with the CTA in division. Section 1, Rule 42 of the Rules of Court provides for a 15-day period, reckoned from receipt of the adverse decision of the trial court, within which to file a Petition for Review with the Court of Appeals. The same rule

allows an additional 15-day period within which to file such a Petition; and, only for the most compelling reasons, another extension period not to exceed 15 days. Petitioners received on 20 April 2007 a copy of the 4 April 2007 Order of the RTC, denying their Motion for Reconsideration of the 16 November 2006 Order of the same court. On 4 May 2007, believing that they only had 15 days to file a Petition for Review with the CTA in division, petitioners moved for a 15-day extension, or until 20 May 2007, within which to file said Petition. Prior to the lapse of their first extension period, or on 18 May 2007, petitioners again moved for a 10-day extension, or until 30 May 2007, within which to file their Petition for Review. Thus, when petitioners filed their Petition for Review with the CTA First Division on 30 May 2007, the same was filed well within the reglementary period for doing so. Petitioners argue in the alternative that even assuming that Section 3 (a), Rule 8 14 of the Revised Rules of the CTA governs the period for filing a Petition for Review with the CTA in division, still, their Petition for Review was filed within the reglementary period. Petitioners call attention to the fact that prior to the lapse of the 30-day period for filing a Petition for Review under Section 3 (a), Rule 8 of the Revised Rules of the CTA, they had already moved for a 10-day extension, or until 30 May 2007, within which to file their Petition. Petitioners claim that there was sufficient justification in equity for the grant of the 10-day extension they requested, as the primordial consideration should be the substantive, and not the procedural, aspect of the case. Moreover, Section 3 (a), Rule 8 of the Revised Rules of the CTA, is silent as to whether the 30-day period for filing a Petition for Review with the CTA in division may be extended or not. Petitioners also contend that the Coca-Cola case is not determinative of the issues in the present case because the issue of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 is not the lis mota herein. The Coca-Cola case is not doctrinal and cannot be considered as the law of the case. HDaACI Petitioners further insist that notwithstanding the declaration of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011, Tax Ordinance No. 7794 remains a valid piece of local legislation. The nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 does not effectively bar petitioners from imposing local business taxes upon respondent under Sections 14 and 21 of Tax Ordinance No. 7794, as they were read prior to their being amended by the foregoing null and void tax ordinances. Petitioners finally maintain that imposing upon respondent local business taxes under both Sections 14 and 21 of Tax Ordinance No. 7794 does not constitute direct double taxation. Section 143 of the LGC gives municipal, as well as city governments, the power to impose business taxes, to wit: SECTION 143. Tax on Business. The municipality may impose taxes on the following businesses: (a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, in accordance with the following schedule: xxx xxx xxx (b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature in accordance with the following schedule: xxx xxx xxx

(c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates prescribed under subsections (a), (b) and (d) of this Section: xxx xxx xxx Provided, however, That barangays shall have the exclusive power to levy taxes, as provided under Section 152 hereof, on gross sales or receipts of the preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the case of cities, and Thirty thousand pesos (P30,000) or less, in the case of municipalities. (e) On contractors and other independent contractors, in accordance with the following schedule: EaHcDS xxx xxx xxx (f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent (1%) on the gross receipts of the preceding calendar year derived from interest, commissions and discounts from lending activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of property, insurance premium. (g) On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not exceeding Fifty pesos (P50.00) per peddler annually. (h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem proper to tax: Provided, That on any business subject to the excise, value-added or percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year. Section 14 of Tax Ordinance No. 7794 imposes local business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section 143 (a) of the LGC. On the other hand, the local business tax under Section 21 of Tax Ordinance No. 7794 is imposed upon persons selling goods and services in the course of trade or business, and those importing goods for business or otherwise, who, pursuant to Section 143 (h) of the LGC, are subject to excise tax, value-added tax (VAT), or percentage tax under the National Internal Revenue Code (NIRC). Thus, there can be no double taxation when respondent is being taxed under both Sections 14 and 21 of Tax Ordinance No. 7794, for under the first, it is being taxed as a manufacturer; while under the second, it is being taxed as a person selling goods in the course of trade or business subject to excise, VAT, or percentage tax. The Court first addresses the issue raised by petitioners concerning the period within which to file with the CTA a Petition for Review from an adverse decision or ruling of the RTC. The period to appeal the decision or ruling of the RTC to the CTA via a Petition for Review is specifically governed by Section 11 of Republic Act No. 9282, 15 and Section 3 (a), Rule 8 of the Revised Rules of the CTA. Section 11 of Republic Act No. 9282 provides: cTIESa SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an Appeal with the CTA within thirty (30) days

after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein. Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the case of inaction as herein provided, from the expiration of the period fixed by law to act thereon. . . . . (Emphasis supplied.) Section 3 (a), Rule 8 of the Revised Rules of the CTA states: SEC. 3. Who may appeal; period to file petition. (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. . . . . (Emphasis supplied.) It is crystal clear from the afore-quoted provisions that to appeal an adverse decision or ruling of the RTC to the CTA, the taxpayer must file a Petition for Review with the CTA within 30 days from receipt of said adverse decision or ruling of the RTC. It is also true that the same provisions are silent as to whether such 30-day period can be extended or not. However, Section 11 of Republic Act No. 9282 does state that the Petition for Review shall be filed with the CTA following the procedure analogous to Rule 42 of the Revised Rules of Civil Procedure. Section 1, Rule 42 16 of the Revised Rules of Civil Procedure provides that the Petition for Review of an adverse judgment or final order of the RTC must be filed with the Court of Appeals within: (1) the original 15day period from receipt of the judgment or final order to be appealed; (2) an extended period of 15 days from the lapse of the original period; and (3) only for the most compelling reasons, another extended period not to exceed 15 days from the lapse of the first extended period. SEHTIc Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure, the 30day original period for filing a Petition for Review with the CTA under Section 11 of Republic Act No. 9282, as implemented by Section 3 (a), Rule 8 of the Revised Rules of the CTA, may be extended for a period of 15 days. No further extension shall be allowed thereafter, except only for the most compelling reasons, in which case the extended period shall not exceed 15 days. Even the CTA en banc, in its Decision dated 18 January 2008, recognizes that the 30-day period within which to file the Petition for Review with the CTA may, indeed, be extended, thus: Being suppletory to R.A. 9282, the 1997 Rules of Civil Procedure allow an additional period of fifteen (15) days for the movant to file a Petition for Review, upon Motion, and payment of the full amount of the docket fees. A further extension of fifteen (15) days may be granted on compelling reasons in accordance with the provision of Section 1, Rule 42 of the 1997 Rules of Civil Procedure . . . . 17 In this case, the CTA First Division did indeed err in finding that petitioners failed to file their Petition for Review in C.T.A. AC No. 31 within the reglementary period.

From 20 April 2007, the date petitioners received a copy of the 4 April 2007 Order of the RTC, denying their Motion for Reconsideration of the 16 November 2006 Order, petitioners had 30 days, or until 20 May 2007, within which to file their Petition for Review with the CTA. Hence, the Motion for Extension filed by petitioners on 4 May 2007 grounded on their belief that the reglementary period for filing their Petition for Review with the CTA was to expire on 5 May 2007, thus, compelling them to seek an extension of 15 days, or until 20 May 2007, to file said Petition was unnecessary and superfluous. Even without said Motion for Extension, petitioners could file their Petition for Review until 20 May 2007, as it was still within the 30-day reglementary period provided for under Section 11 of Republic Act No. 9282; and implemented by Section 3 (a), Rule 8 of the Revised Rules of the CTA. The Motion for Extension filed by the petitioners on 18 May 2007, prior to the lapse of the 30-day reglementary period on 20 May 2007, in which they prayed for another extended period of 10 days, or until 30 May 2007, to file their Petition for Review was, in reality, only the first Motion for Extension of petitioners. The CTA First Division should have granted the same, as it was sanctioned by the rules of procedure. In fact, petitioners were only praying for a 10-day extension, five days less than the 15-day extended period allowed by the rules. Thus, when petitioners filed via registered mail their Petition for Review in C.T.A. AC No. 31 on 30 May 2007, they were able to comply with the reglementary period for filing such a petition. cHAaCE Nevertheless, there were other reasons for which the CTA First Division dismissed the Petition for Review of petitioners in C.T.A. AC No. 31; i.e., petitioners failed to conform to Section 4 of Rule 5, and Section 2 of Rule 6 of the Revised Rules of the CTA. The Court sustains the CTA First Division in this regard. Section 4, Rule 5 of the Revised Rules of the CTA requires that: SEC. 4. Number of copies. The parties shall file eleven signed copies of every paper for cases before the Court en banc and six signed copies for cases before a Division of the Court in addition to the signed original copy, except as otherwise directed by the Court. Papers to be filed in more than one case shall include one additional copy for each additional case. (Emphasis supplied.) Section 2, Rule 6 of the Revised Rules of the CTA further necessitates that: SEC. 2. Petition for review; contents. The petition for review shall contain allegations showing the jurisdiction of the Court, a concise statement of the complete facts and a summary statement of the issues involved in the case, as well as the reasons relied upon for the review of the challenged decision. The petition shall be verified and must contain a certification against forum shopping as provided in Section 3, Rule 46 of the Rules of Court. A clearly legible duplicate original or certified true copy of the decision appealed from shall be attached to the petition. (Emphasis supplied.) The aforesaid provisions should be read in conjunction with Section 1, Rule 7 of the Revised Rules of the CTA, which provides: SECTION 1. Applicability of the Rules of Court on procedure in the Court of Appeals, exception. The procedure in the Court en banc or in Divisions in original or in appealed cases shall be the same as those in petitions for review and appeals before the Court of Appeals pursuant to the applicable provisions of Rules 42, 43, 44, and 46 of the Rules of Court, except as otherwise provided for in these Rules. (Emphasis supplied.) aESIDH

As found by the CTA First Division and affirmed by the CTA en banc, the Petition for Review filed by petitioners via registered mail on 30 May 2007 consisted only of one copy and all the attachments thereto, including the Decision dated 14 July 2006; and that the assailed Orders dated 16 November 2006 and 4 April 2007 of the RTC in Civil Case No. 03-107088 were mere machine copies. Evidently, petitioners did not comply at all with the requirements set forth under Section 4, Rule 5; or with Section 2, Rule 6 of the Revised Rules of the CTA. Although the Revised Rules of the CTA do not provide for the consequence of such non-compliance, Section 3, Rule 42 of the Rules of Court may be applied suppletorily, as allowed by Section 1, Rule 7 of the Revised Rules of the CTA. Section 3, Rule 42 of the Rules of Court reads: SEC. 3. Effect of failure to comply with requirements. The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof. (Emphasis supplied.) True, petitioners subsequently submitted certified copies of the Decision dated 14 July 2006 and assailed Orders dated 16 November 2006 and 4 April 2007 of the RTC in Civil Case No. 03-107088, but a closer examination of the stamp on said documents reveals that they were prepared and certified only on 14 August 2007, about two months and a half after the filing of the Petition for Review by petitioners. Petitioners never offered an explanation for their non-compliance with Section 4 of Rule 5, and Section 2 of Rule 6 of the Revised Rules of the CTA. Hence, although the Court had, in previous instances, relaxed the application of rules of procedure, it cannot do so in this case for lack of any justification. Even assuming arguendo that the Petition for Review of petitioners in C.T.A. AC No. 31 should have been given due course by the CTA First Division, it is still dismissible for lack of merit. Contrary to the assertions of petitioners, the Coca-Cola case is indeed applicable to the instant case. The pivotal issue raised therein was whether Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void, which this Court resolved in the affirmative. Tax Ordinance No. 7988 was declared by the Secretary of the Department of Justice (DOJ) as null and void and without legal effect due to the failure of herein petitioner City of Manila to satisfy the requirement under the law that said ordinance be published for three consecutive days. Petitioner City of Manila never appealed said declaration of the DOJ Secretary; thus, it attained finality after the lapse of the period for appeal of the same. The passage of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988, did not cure the defects of the latter, which, in any way, did not legally exist. EcSCAD By virtue of the Coca-Cola case, Tax Ordinance No. 7988 and Tax Ordinance No. 8011 are null and void and without any legal effect. Therefore, respondent cannot be taxed and assessed under the amendatory laws Tax Ordinance No. 7988 and Tax Ordinance No. 8011. Petitioners insist that even with the declaration of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011, respondent could still be made liable for local business taxes under both Sections 14 and 21 of Tax Ordinance No. 7944 as they were originally read, without the amendment by the null and void tax ordinances.

Emphasis must be given to the fact that prior to the passage of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 by petitioner City of Manila, petitioners subjected and assessed respondent only for the local business tax under Section 14 of Tax Ordinance No. 7794, but never under Section 21 of the same. This was due to the clear and unambiguous proviso in Section 21 of Tax Ordinance No. 7794, which stated that "all registered business in the City of Manila that are already paying the aforementioned tax shall be exempted from payment thereof". The "aforementioned tax" referred to in said proviso refers to local business tax. Stated differently, Section 21 of Tax Ordinance No. 7794 exempts from the payment of the local business tax imposed by said section, businesses that are already paying such tax under other sections of the same tax ordinance. The said proviso, however, was deleted from Section 21 of Tax Ordinance No. 7794 by Tax Ordinances No. 7988 and No. 8011. Following this deletion, petitioners began assessing respondent for the local business tax under Section 21 of Tax Ordinance No. 7794, as amended. The Court easily infers from the foregoing circumstances that petitioners themselves believed that prior to Tax Ordinance No. 7988 and Tax Ordinance No. 8011, respondent was exempt from the local business tax under Section 21 of Tax Ordinance No. 7794. Hence, petitioners had to wait for the deletion of the exempting proviso in Section 21 of Tax Ordinance No. 7794 by Tax Ordinance No. 7988 and Tax Ordinance No. 8011 before they assessed respondent for the local business tax under said section. Yet, with the pronouncement by this Court in the Coca-Cola case that Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void and without legal effect, then Section 21 of Tax Ordinance No. 7794, as it has been previously worded, with its exempting proviso, is back in effect. Accordingly, respondent should not have been subjected to the local business tax under Section 21 of Tax Ordinance No. 7794 for the third and fourth quarters of 2000, given its exemption therefrom since it was already paying the local business tax under Section 14 of the same ordinance. cIADTC Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their own detriment. Said exempting proviso was precisely included in said section so as to avoid double taxation. Double taxation means taxing the same property twice when it should be taxed only once; that is, "taxing the same person twice by the same jurisdiction for the same thing". It is obnoxious when the taxpayer is taxed twice, when it should be but once. Otherwise described as "direct duplicate taxation", the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same kind or character. 18 Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the same subject matter the privilege of doing business in the City of Manila; (2) for the same purpose to make persons conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority petitioner City of Manila; (4) within the same taxing jurisdiction within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods per calendar year; and (6) of the same kind or character a local business tax imposed on gross sales or receipts of the business.

The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance No. 7794 is specious. The Court revisits Section 143 of the LGC, the very source of the power of municipalities and cities to impose a local business tax, and to which any local business tax imposed by petitioner City of Manila must conform. It is apparent from a perusal thereof that when a municipality or city has already imposed a business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section 143 (a) of the LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business tax under Section 143 (h) of the same Code. Section 143 (h) may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are "not otherwise specified in preceding paragraphs". In the same way, businesses such as respondent's, already subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which is based on Section 143 (a) of the LGC], can no longer be made liable for local business tax under Section 21 of the same Tax Ordinance [which is based on Section 143 (h) of the LGC]. TSCIEa WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby DENIED. No costs. SO ORDERED. Ynares-Santiago, Velasco, Jr., Nachura and Peralta, JJ., concur. Footnotes 1. Penned by Associate Justice Juanito C. Castaeda, Jr. with Presiding Justice Ernesto D. Acosta, Associate Justices Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova and Olga Palanca-Enriquez, concurring, rollo, pp. 32-44. 2. Id. at 45-46. 3. Signed by Presiding Justice Ernesto D. Acosta and Associate Justices Lovell R. Bautista and Caesar A. Casanova, rollo, pp. 106-107. 4. Id. at 127-129. 5. Id. at 130-133. 6. Otherwise known as "Revenue Code of the City of Manila". Tax Ordinance No. 7794, as referred to in this case, is deemed to have already incorporated the amendments previously introduced to it by Tax Ordinance No. 7807. The Court no longer highlights the fact of the previous amendment of Tax Ordinance No. 7794 by Tax Ordinance No. 7807, since it is not an issue in this case, and to avoid confusion with the subsequent amendment of the former by Tax Ordinances No. 7988 and No. 8011. 7. Otherwise known as "Revised Revenue Code of the City of Manila". 8. G.R. No. 156252, 27 June 2006, 493 SCRA 279. 9. Penned by Presiding Judge Augusto T. Gutierrez, rollo, pp. 47-53. 10. Id. at 89-90. 11. Id. at 96-97. 12. SEC. 1. Applicability of the Rules on procedure in the Court of Appeals, exception. The procedure in the Court En Banc or in Divisions in original and in appealed cases shall be the same as those in petitions for review and appeals before the Court of Appeals pursuant to the applicable provisions of Rules 42, 43, 44 and 46 of the Rules of Court, except as otherwise provided for in these Rules. 13. SEC. 1. How appeal taken; time for filing. A party desiring to appeal from a decision of the Regional Trial Court rendered in the exercise of its appellate jurisdiction

may file a verified petition for review with the Court of Appeals, paying at the same time to the clerk of said court the corresponding docket and other lawful fees, depositing the amount of P500.00 for costs, and furnishing the Regional Trial Court and the adverse party with a copy of the petition. The petition shall be filed and served within fifteen (15) days from notice of the decision sought to be reviewed or of the denial of petitioner's motion for new trial or reconsideration filed in due time after judgment. Upon proper motion and the payment of the full amount of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. 14. SEC. 3. Who may appeal; period to file petition. (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes. 15. An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as amended, Otherwise Known as the Law Creating the Court of Tax Appeals and for Other Purposes. 16. Section 1. How appeal taken; time for filing. . . . The petition shall be filed and served within fifteen (15) days from notice of the decision sought to be reviewed or of the denial of petitioner's motion for new trial or reconsideration filed in due time after judgment. Upon proper motion and the payment of the full amount of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. 17. Rollo, p. 40. 18. Commissioner of Internal Revenue v. Bank of Commerce, G.R. No. 149636, 8 June 2005, 459 SCRA 638, 655.

SECOND DIVISION
[G.R. No. 152904. June 8, 2007.]

CITY ASSESSOR OF CEBU CITY, petitioner, vs. ASSOCIATION OF BENEVOLA DE CEBU, INC., respondent.

DECISION

VELASCO, JR., J :
p

Is a medical arts center built by a hospital to house its doctors a separate commercial establishment or an appurtenant to the hospital? This is the core issue to be resolved in the instant petition where petitioner insists on a 35% assessment rate on the building which he considers commercial in nature contrary to respondent's position that it is a special real property entitled to a 10% assessment rate for purposes of realty tax. The Case This Petition for Review on Certiorari 1 under Rule 45 assails the October 31, 2001 Decision 2 of the Court of Appeals (CA) in CA-G.R. SP No. 62548, which affirmed the January 24, 2000 Decision 3 and October 25, 2000 Resolution 4 of the Central Board of Assessment Appeals (CBAA); and the March 11, 2002 Resolution 5 of the same court denying petitioner's Motion for Reconsideration. 6 The CBAA upheld the February 10, 1999 Decision of the Local Board of Assessment Appeals (LBAA), which overturned the 35% assessment rate of respondent Cebu City Assessor and ruled that petitioner is entitled to a 10% assessment. The Facts Respondent Association of Benevola de Cebu, Inc. is a non-stock, non-profit organization organized under the laws of the Republic of the Philippines and is the owner of Chong Hua Hospital (CHH) in Cebu City. In the late 1990's, respondent constructed the CHH Medical Arts Center (CHHMAC). Thereafter, an April 17, 1998 Certificate of Occupancy 7 was issued to the center with a classification of "Commercial [Clinic]."
CHDAaS

Petitioner City Assessor of Cebu City assessed the CHHMAC building under Tax Declaration (TD) No. '97 GR-04-024-02529 as "commercial" with a market value of PhP28,060,520 and an assessed value of PhP9,821,180 at the assessment level of 35% for commercial buildings, and not at the 10% special assessment currently imposed for CHH and its other separate buildings the CHH's Dietary and Records Departments.

Thus, respondent filed its September 15, 1998 letter-petition with the Cebu City LBAA for reconsideration, asserting that CHHMAC is part of CHH and ought to be imposed the same special assessment level of 10% with that of CHH. On September 25, 1998, respondent formally filed its appeal with the LBAA which was docketed as Case No. 4406, TD No. '97 GR-04-024-02529 entitled Association Benevola de Cebu, Inc. v. City Assessor. In the September 30, 1998 Order, the LBAA directed petitioner to conduct an ocular inspection of the subject property and to submit a report on the scheduled date of hearing. In the October 7, 1998 hearing, the parties were required to submit their respective position papers. In its position paper, petitioner argued that CHHMAC is a newly constructed fivestorey building situated about 100 meters away from CHH and, based on actual inspection, was ascertained that it is not a part of the CHH building but a separate building which is actually used as commercial clinic/room spaces for renting out to physicians and, thus, classified as "commercial." Petitioner contended that in turn the medical specialists in CHHMAC charge consultation fees for patients who consult for diagnosis and relief of bodily ailment together with the ancillary (or support) services which include the areas of anesthesia, radiology, pathology, and more. Petitioner concluded the foregoing set up to be ultimately geared for commercial purposes, and thus having the proper classification as "commercial" under Building Permit No. B01-9750087 pursuant to Section 10 of the Local Assessment Regulations No. 1-92 issued by the Department of Finance (DOF). On the other hand, respondent contended in its position paper that CHHMAC building is actually, directly, and exclusively part of CHH and should have a special assessment level of 10% as provided under City Tax Ordinance LXX. Respondent asserted that the CHHMAC building is similarly situated as the buildings of CHH, housing its Dietary and Records Departments, are completely separate from the main CHH building and are imposed the 10% special assessment level. In fine, respondent argued that the CHHMAC, though not actually indispensable, is nonetheless incidental and reasonably necessary to CHH's operations.
SDHCac

The Ruling of the Local Board of Assessment Appeals On February 10, 1999, the LBAA rendered a Decision, 8 the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed decision imposing a thirty five (35) percent assessment level of TD No. '97 GR-04-02402529 on the Chong Hua Hospital Medical Arts building is reversed and

set aside and other [sic] one issued declaring that the building is entitled to a ten (10) percent assessment level.

In reversing the ruling of petitioner City Assessor of Cebu City, the LBAA reasoned that it is of public knowledge that hospitals have plenty of spaces leased out to medical practitioners, which is both an accepted and desirable fact; thus, respondent's claim is not disputed that such is a must for a tertiary hospital like CHH. The LBAA held that it is inconsequential that a separate building was constructed for that purpose pointing out that departments or services of other institutions and establishments are also not always housed in the same building. Thus, the LBAA pointed to the fact that respondent's Dietary and Records Departments which are housed in separate buildings were similarly imposed with CHH the special assessment level of 10%, ratiocinating in turn that there is no reason therefore why a higher level would be imposed for CHHMAC as it is similarly situated with the Dietary and Records Departments of the CHH. The Ruling of the Central Board of Assessment Appeals Aggrieved, petitioner filed its March 15, 1999 Notice of Appeal 9 and March 16, 1999 Appeal Memorandum 10 before the CBAA Visayas Field Office which docketed the appeal as CBAA Case No. V-15, In Re: LBAA Case No. 4406, TD No. '97 GR-04-024-02529 entitled City Assessor of Cebu City v. Local Board of Assessment Appeals of Cebu City and Associacion Benevola de Cebu, Inc. On June 3, 1999, respondent filed its Answer 11 to petitioner's appeal. Subsequently, on January 24, 2000, the CBAA rendered a Decision 12 affirming in toto the LBAA Decision and resolved the issue of whether the subject building of CHHMAC is part and parcel of CHH. It agreed with the above disquisition of the LBAA that it is a matter of public knowledge that hospitals lease out spaces to its accredited medical practitioners, and in particular it is of public knowledge that before the CHHMAC was constructed, the accredited doctors of CHH were housed in the main hospital building of CHH. Moreover, citing Herrera v. Quezon City Board of Assessment Appeals 13 later applied in Abra Valley College, Inc. v. Aquino, 14 the CBAA held that the fact that the subject building is detached from the main hospital building is of no consequence as the exemption in favor of property used exclusively for charitable or educational purposes is not only limited to property actually indispensable to the hospital, but also extends to facilities which are incidental and reasonably necessary for the accomplishment of such purposes.
HcDaAI

Through its October 25, 2000 Resolution, 15 the CBAA denied petitioner's Motion for Reconsideration. 16

The Ruling of the Court of Appeals Not satisfied, petitioner brought before the CA a petition for review 17 under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 62548, ascribing error on the CBAA in dismissing his appeal and in affirming the February 10, 1999 Decision 18 of the LBAA. On October 31, 2001, the appellate court rendered the assailed Decision 19 which affirmed the January 24, 2000 Decision of the CBAA. It agreed with the CBAA that CHHMAC is part and parcel of CHH in line with the ruling in Herrera 20 on what the term "appurtenant thereto" means. Thus, the CA held that the facilities and utilities of CHHMAC are undoubtedly necessary and indispensable for the CHH to achieve its ultimate purpose. The CA likewise ruled that the fact that rentals are paid by CHH accredited doctors and medical specialists for spaces in CHHMAC has no bearing on its classification as a hospital since CHHMAC serves also as a place for medical check-up, diagnosis, treatment, and care for its patients as well as a specialized out-patient department of CHH where treatment and diagnosis are done by accredited medical specialists in their respective fields of anesthesia, radiology, pathology, and more. The appellate court also applied Secs. 215 and 216 of the Local Government Code (Republic Act No. 7160) which classify lands, buildings, and improvements actually, directly, and exclusively used for hospitals as special cases of real property and not as commercial. Thus, CHHMAC being an integral part of CHH is not commercial but special and should be imposed the 10% special assessment, the same as CHH, instead of the 35% for commercial establishments. Lastly, the CA pointed out that courts generally will not interfere in matters which are addressed to the sound discretion of the government agencies entrusted with the regulation of activities under their special technical knowledge and training their findings and conclusions are accorded not only respect but even finality. Through the assailed March 11, 2002 Resolution, 21 the CA denied petitioner's Motion for Reconsideration. The Issues Hence, before us is the instant petition with the solitary issue, as follows:
WHETHER OR NOT THERE IS SERIOUS ERROR BY THE COURT OF APPEALS IN AFFIRMING THE DECISION OF THE CENTRAL BOARD OF ASSESSMENT APPEALS THAT THE NEW BUILDING

"CHONG HUA HOSPITAL AND MEDICAL ARTS CENTER" (CHHMAC) IS AN ESSENTIAL PART OF THE OLD BUILDING KNOWN AS "CHONG HUA HOSPITAL." IN THE NEGATIVE, WHETHER OR NOT THE NEW BUILDING IS LIABLE TO PAY THE 35% ASSESSMENT LEVEL. AND WHETHER OR NOT THE COURT OF APPEALS COULD INTERFERE WITH THE FINDINGS OF THE CENTRAL BOARD OF ASSESSMENT APPEALS, A GOVERNMENT AGENCY HAVING SPECIAL TECHNICAL KNOWLEDGE AND TRAINING ON THE MATTER SUBJECT OF THE PRESENT CASE. 22
HSEcTC

The Court's Ruling The petition is devoid of merit. It is petitioner's strong belief that the subject building, CHHMAC, which is built on a rented land and situated about 100 meters from the main building of CHH, is not an extension nor an integral part of CHH and thus should not enjoy the 10% special assessment. Petitioner anchors the classification of CHHMAC as "commercial", first, on Sec. 10 of Local Assessment Regulations No. 1-92 issued by the DOF, which provides:
SEC. 10.Actual use of Real Property as basis of Assessment. Real Property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. (Sec. 217, R.A. 7160) A."Actual use" refers to the purpose for which the property is principally or predominantly utilized by the person in possession of the property. (Sec. 199 (b), R.A. 7160)

Secondly, the result of the inspection on subject building by the City Assessor's inspection team shows that CHHMAC is a commercial establishment based on the following: (1) CHHMAC is exclusively intended for lease to doctors; (2) there are neither operating rooms nor beds for patients; and (3) the doctors renting the spaces earn income from the patients who avail themselves of their services. Thus, petitioner argues that CHHMAC is principally and actually used for lease to doctors, and respondent as owner of CHHMAC derives rental income from it; hence, CHHMAC was built and is intended for profit and functions commercially. Moreover, petitioner asserts that CHHMAC is not part of the CHH main building as it is exclusively used as private clinics of physicians who pay rental fees to petitioner. And while the private clinics might be considered facilities, they are not

incidental to nor reasonably necessary for the accomplishment of the hospital's purposes as CHH can still function and accomplish its purpose without the existence of CHHMAC. In addition, petitioner contends that the Abra Valley College, Inc. 23 ruling is not applicable to the instant case for schools, the subject matter in said case, are already entitled to special assessment. Besides, petitioner points CHHMAC is not among the facilities mentioned in said case. Further, petitioner argues that CHHMAC is not in the same category as nurses' homes and housing facilities for the hospital staff as these are clearly not for profit, that is, not commercial, and are clearly incidental and reasonably necessary for the hospital's purposes. We are not persuaded. A careful review of the records compels us to affirm the assailed CA Decision as we find no reversible error for us to reverse or alter it. Chong Hua Hospital Medical Arts Center is an integral part of Chong Hua Hospital We so hold that CHHMAC is an integral part of CHH. It is undisputed that the doctors and medical specialists holding clinics in CHHMAC are those duly accredited by CHH, that is, they are consultants of the hospital and the ones who can treat CHH's patients confined in it. This fact alone takes away CHHMAC from being categorized as "commercial" since a tertiary hospital like CHH is required by law to have a pool of physicians who comprises the required medical departments in various medical fields. As aptly pointed out by respondent:
Chong Hua Hospital is a duly licensed tertiary hospital and is covered by Dept. of Health (DOH) Adm. Order No. 68-A and the "1989 Revised Rules and Regulations" governing the registration, licensure and operation of hospitals in the Philippines. Under Sec. 6, sub-sec. 6.3, it is mandated by law, that respondent appellee in order to retain its classification as a "TERTIARY HOSPITAL," must be fully departmentalized and equipped with the service capabilities needed to support certified medical specialists and other licensed physicians rendering services in the field of medicine, pediatrics, obstetrics and gynecology, surgery, and their sub-specialties, ICCU and ancillary services which is precisely the function of the Chong Hua Hospital Medical Arts Center. 24
TSEHcA

Sec. 6.3, Administrative Order No. (AO) 68-A, Series of 1989, Revised Rules and Regulations Governing the Registration, Licensure and Operation of Hospitals in the Philippines pertinently provides:
Tertiary Hospital is fully departmentalized and equipped with the service capabilities needed to support certified medical specialists and other licensed physicians rendering services in the field of Medicine, Pediatrics, Obstetrics and Gynecology, Surgery, their subspecialties and ancillary services. (Emphasis supplied.)

Moreover, AO 68-A likewise provides what clinic service and medical ancillary service are, thus:
11.3.2Clinical Service The medical services to patients shall be performed by the medical staff appointed by the governing body of the institution. . . . 11.3.3Medical Ancillary Service These are support services which include Anesthesia Department, Pathology Department, Radiology Department, Out-Patient Department (OPD), Emergency Service, Dental, Pharmacy, Medical Records and Medical Social Services.
SACEca

Based on these provisions, these physicians holding offices or clinics in CHHMAC, duly appointed or accredited by CHH, precisely fulfill and carry out their roles in the hospital's services for its patients through the CHHMAC. The fact that they are holding office in a separate building, like at CHHMAC, does not take away the essence and nature of their services vis--vis the over-all operation of the hospital and the benefits to the hospital's patients. Given what the law requires, it is clear that CHHMAC is an integral part of CHH. These accredited physicians normally hold offices within the premises of the hospital; in which case there is no question as to the conduct of their business in the ambit of diagnosis, treatment and/or confinement of patients. This was the case before 1998 and before CHHMAC was built. Verily, their transfer to a more spacious and, perhaps, convenient place and location for the benefit of the hospital's patients does not remove them from being an integral part of the overall operation of the hospital. Conversely, it would have been different if CHHMAC was also open for nonaccredited physicians, that is, any medical practitioner, for then respondent would be running a commercial building for lease only to doctors which would indeed subject the CHHMAC to the commercial level of 35% assessment.

Moreover, the CHHMAC, being hundred meters away from the CHH main building, does not denigrate from its being an integral part of the latter. As aptly applied by the CBAA, the Herrera ruling on what constitutes property exempt from taxation is indeed applicable in the instant case, thus:
CAaSED

Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is "not limited to property actually indispensable" therefore (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are "incidental to and reasonably necessary for" the accomplishment of said purposes, such as, in the case of hospitals, "a school for training nurses, a nurses' home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns and residents" (84 C.J.S., 621), such as "athletic fields," including "a farm used for the inmates of the institution" (Cooley on Taxation, Vol. 2, p. 1430). 25

Verily, being an integral part of CHH, CHHMAC should be under the same special assessment level of as that of the former. The CHHMAC facility is definitely incidental to and reasonably necessary for the operations of Chong Hua Hospital Given our discussion above, the CHHMAC facility, while seemingly not indispensable to the operations of CHH, is definitely incidental to and reasonably necessary for the operations of the hospital. Considering the legal requirements and the ramifications of the medical and clinical operations that have been transferred to the CHHMAC from the CHH main building in light of the accredited physicians' transfer of offices in 1998 after the CHHMAC building was finished, it cannot be gainsaid that the services done in CHHMAC are indispensable and essential to the hospital's operation. For one, as found by the appellate court, the CHHMAC facility is primarily used by the hospital's accredited physicians to perform medical check-up, diagnosis, treatment, and care of patients. For another, it also serves as a specialized outpatient department of the hospital. Indubitably, the operation of the hospital is not only for confinement and surgical operations where hospital beds and operating theaters are required. Generally, confinement is required in emergency cases and where a patient necessitates close monitoring. The usual course is that patients have to be diagnosed, and then treatment and follow-up consultations follow or are required. Other cases may necessitate surgical operations or other medical intervention and confinement. Thus, the more the patients, the more important task of diagnosis, treatment, and

care that may or may not require eventual confinement or medical operation in the CHHMAC. Thus, the importance of CHHMAC in the operation of CHH cannot be overemphasized nor disputed. Clearly, it plays a key role and provides critical support to hospital operations. Charging rentals for the offices used by its accredited physicians cannot be equated to a commercial venture Finally, respondent's charge of rentals for the offices and clinics its accredited physicians occupy cannot be equated to a commercial venture, which is mainly for profit.
ESAHca

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

Given the foregoing arguments, we fail to see any reason why the CHHMAC building should be classified as "commercial" and be imposed the commercial level of 35% as it is not operated primarily for profit but as an integral part of CHH. The CHHMAC, with operations being devoted for the benefit of the CHH's patients, should be accorded the 10% special assessment.
DaIACS

In this regard, we point with approbation the appellate court's application of Sec. 216 in relation with Sec. 215 of the Local Government Code on the proper classification of the subject CHHMAC building as "special" and not "commercial". Secs. 215 and 216 pertinently provide:
SEC. 215.Classes of Real Property for Assessment Purposes. For purposes of assessment, real property shall be classified as residential, agricultural, commercial, industrial, mineral, timberland or special. xxx xxx xxx

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

Thus, applying the above provisos in line with City Tax Ordinance LXX of Cebu City, the 10% special assessment should be imposed for the CHHMAC building which should be classified as "special". WHEREFORE, the petition is DENIED for lack of merit and the October 31, 2001 Decision and March 11, 2002 Resolution of the CA are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. Quisumbing, Carpio, Carpio-Morales and Tinga, JJ., concur.
Footnotes 1.Rollo, pp. 12-24. 2.Id. at 26-34. The Decision was penned by Associate Justice Portia AlioHormachuelos (Chairperson) and concurred in by Associate Justices Eriberto U. Rosario, Jr. and Amelita G. Tolentino of the Seventeenth Division. 3.CA rollo, pp. 13-17. 4.Id. at 22. 5.Rollo, p. 36. 6.Id. at 37-43. 7.CA rollo, p. 23. 8.Folder 1, CBAA Records; per Cebu City Prosecutor Primo C. Miro as concurred in by Cebu City Register of Deeds Felixberto F. Alino (Chairperson) and Cebu City Engineer Antonio B. Sanchez.
TSHEIc

9.Id. 10.Id.

11.Id. 12.Supra note 3. 13.No. L-15270, September 30, 1961, 3 SCRA 186. 14.No. L-39086, June 15, 1988, 162 SCRA 106. 15.Supra note 4. 16.CA rollo, pp. 18-21. 17.Id. at 2-10. 18.Supra note 8. 19.Supra note 2. 20.Supra note 13. 21.Supra note 5. 22.Rollo, p. 91. 23.Supra note 14. 24.Rollo, pp. 107-108. 25.Supra note 13, at 192.