4/17/23, 2:14 PM G.R. No.

171586

Today is Monday, April 17, 2023

Republic of the Philippines

SUPREME COURT
Manila

SPECIAL SECOND DIVISION

G.R. No. 171586               January 25, 2010

NATIONAL POWER CORPORATION, Petitioner,

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

RESOLUTION

BRION, J.:

The petitioner National Power Corporation (Napocor) filed the present motion for reconsideration1 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.

BACKGROUND FACTS

The Province of Quezon assessed Mirant Pagbilao Corporation (Mirant) for unpaid real property taxes in the amount
of ₱1.5 Billion for the machineries located in its power plant in Pagbilao, Quezon. Napocor, which entered into a
Build-Operate-Transfer (BOT) Agreement (entitled Energy Conversion Agreement) with Mirant, was furnished a copy
of the tax assessment.

Napocor (nota bene, not Mirant) protested the assessment before the Local Board of Assessment Appeals (LBAA),
claiming entitlement to the tax exemptions provided under Section 234 of the Local Government Code (LGC), which
states:

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

xxxx

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

xxxx

(e) Machinery and equipment used for pollution control and environmental protection.

xxxx

Assuming that it cannot claim the above tax exemptions, Napocor argued that it is entitled to certain tax privileges,
namely:

a. the lower assessment level of 10% under Section 218(d) of the LGC for government-owned and controlled
corporations engaged in the generation and transmission of electric power, instead of the 80% assessment level for
commercial properties 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,
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executory, and demandable, precluding the taxpayer from questioning the correctness of the assessment or from
invoking any defense that would reopen the question of its liability on the merits.2

Under Section 226 of the LGC,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

For the third argument, we relied on the Court’s rulings in Baguio v. Busuego6 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.

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.

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xxxx

Pursuant to this arrangement, Mirant’s ownership over the subject machineries is merely a security interest, given
only for the purpose of ensuring the performance of Napocor’s obligations.

Napocor additionally contends that its contractual assumption liability (through the BOT Agreement) for all taxes
vests it with sufficient legal interest because it is actually, directly, and materially affected by the assessment.

While its motion for reconsideration was pending, Napocor filed a Motion to Refer the Case to the Court En Banc
considering that "the issues raised have far-reaching consequences in the power industry, the country’s economy
and the daily lives of the Filipino people, and since it involves the application of real property tax provision of the
LGC against Napocor, an exempt government instrumentality."9

Also, the Philippine Independent Power Producers Association, Inc. (PIPPA) filed a Motion for Leave to Intervene
and a Motion for Reconsideration-in-Intervention. PIPPA is a non-stock corporation comprising of privately-owned
power generating companies which includes TeaM Energy Corporation (TeaM Energy), successor of Mirant. PIPPA
is claiming interest in the case since any decision here will affect the other members of PIPPA, all of which have
executed similar BOT agreements with Napocor.

THE COURT’S RULING

At the outset, we resolve to deny the referral of the case to the Court en banc. We do not find the reasons raised by
Napocor meritorious enough to warrant the attention of the members of the Court en banc, as they are merely
reiterations of the arguments it raised in the petition for review on certiorari that it earlier filed with the Court.10

Who may appeal a real property tax assessment

Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a legal owner who
has legal title to the property.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. CBAA12 – 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:

Build-operate-and-transfer – A contractual arrangement whereby the project proponent undertakes the construction,
including financing, of a given infrastructure facility, and the operation and maintenance thereof. The project
proponent operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls,
fees, rentals, and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract
to enable the project proponent to recover its investment, and operating and maintenance expenses in the project.
The project proponent transfers the facility to the government agency or local government unit concerned at the end
of the fixed term which shall not exceed fifty (50) years x x x x.

Under this concept, it is the project proponent who constructs the project at its own cost and subsequently operates
and manages it. The proponent secures the return on its investments from those using the project’s facilities through
appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated. At the end of
the fixed term agreed upon, the project proponent transfers the ownership of the facility to the government agency.
Thus, the government is able to put up projects and provide immediate services without the burden of the heavy
expenditures that a project start up requires. 1avvphi1

A reading of the provisions of the parties’ BOT Agreement shows that it fully conforms to this concept. By its
express terms, BPPC has complete ownership – both legal and beneficial – of the project, including the
machineries and equipment used, subject only to the transfer of these properties without cost to NAPOCOR
after the lapse of the period agreed upon. As agreed upon, BPPC provided the funds for the construction of the
power plant, including the machineries and equipment needed for power generation; thereafter, it actually operated
and still operates the power plant, uses its machineries and equipment, and receives payment for these activities
and the electricity generated under a defined compensation scheme. Notably, BPPC – as owner-user – is
responsible for any defect in the machineries and equipment.

xxxx

That some kind of "financing" arrangement is contemplated – in the sense that the private sector proponent shall
initially shoulder the heavy cost of constructing the project’s buildings and structures and of purchasing the needed
machineries and equipment – is undeniable. The arrangement, however, goes beyond the simple provision of funds,
since the private sector proponent not only constructs and buys the necessary assets to put up the project, but
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operates and manages it as well during an agreed period that would allow it to recover its basic costs and earn
profits. In other words, the private sector proponent goes into business for itself, assuming risks and incurring costs
for its account. If it receives support from the government at all during the agreed period, these are pre-agreed items
of assistance geared to ensure that the BOT agreement’s objectives – both for the project proponent and for the
government – are achieved. In this sense, a BOT arrangement is sui generis and is different from the usual
financing arrangements where funds are advanced to a borrower who uses the funds to establish a project that it
owns, subject only to a collateral security arrangement to guard against the nonpayment of the loan. It is different,
too, from an arrangement where a government agency borrows funds to put a project from a private sector-lender
who is thereafter commissioned to run the project for the government agency. In the latter case, the government
agency is the owner of the project from the beginning, and the lender-operator is merely its agent in running the
project.

If the BOT Agreement under consideration departs at all from the concept of a BOT project as defined by law, it is
only in the way BPPC’s cost recovery is achieved; instead of selling to facility users or to the general public at large,
the generated electricity is purchased by NAPOCOR which then resells it to power distribution companies. This
deviation, however, is dictated, more than anything else, by the structure and usages of the power industry and does
not change the BOT nature of the transaction between the parties.

Consistent with the BOT concept and as implemented, BPPC – the owner-manager-operator of the project – is
the actual user of its machineries and equipment. BPPC’s ownership and use of the machineries and
equipment are actual, direct, and immediate, while NAPOCOR’s is contingent and, at this stage of the BOT
Agreement, not sufficient to support its claim for tax exemption. Thus, the CTA committed no reversible error in
denying NAPOCOR’s claim for tax exemption. [Emphasis supplied.]

Given the special nature of a BOT agreement as discussed in the cited case, we find Article 1503 inapplicable to
define the contract between Napocor and Mirant, as it refers only to ordinary contracts of sale. We thus declared in
Tatad v. Garcia13 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 x x x. [Mirant] shall operate, manage, and maintain the
Power Station for the purpose of converting fuel of Napocor into electricity."

Moreover, if Napocor truly believed that it was the owner of the subject machineries, it should have complied with
Sections 202 and 206 of the LGC which obligates owners of real property to:

a. file a sworn statement declaring the true value of the real property, whether taxable or exempt;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

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 LBAA18 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
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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

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.

In light of our ruling above, PIPPA’s motion to intervene and motion for reconsideration-in-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 LGC30
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. Trampe31 and Olivarez v. Marquez.32

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
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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 x x x." Appeals to the LBAA (under
Section 226) are therefore fruitful only where questions of fact are involved.

Olivarez v. Marquez, on the other hand, involved a petition for certiorari, mandamus, and prohibition questioning the
assessment and levy made by the City of Parañaque. Olivarez was seeking the annulment of his realty tax
delinquency assessment. Marquez assailed Olivarez’ failure to first exhaust administrative remedies, particularly the
requirement of payment under protest. Olivarez replied that his petition was filed to question the assessor’s authority
to assess and collect realty taxes and therefore, as held in Ty v. Trampe, the exhaustion of administrative remedies
was not required. The Court however did not agree with Olivarez’s argument. It found that there was nothing in his
petition that supported his claim regarding the assessor’s alleged lack of authority. What Olivarez raised were the
following grounds: "(1) some of the taxes being collected have already prescribed and may no longer be collected
as provided in Section 194 of the Local Government Code of 1991; (2) some properties have been doubly
taxed/assessed; (3) some properties being taxed are no longer existent; (4) some properties are exempt from
taxation as they are being used exclusively for educational purposes; and (5) some errors are made in the
assessment and collection of taxes due on petitioners’ properties, and that respondents committed grave abuse of
discretion in making the improper, excessive and unlawful the collection of taxes against the petitioner." The
Olivarez petition filed before the trial court primarily involved the correctness of the assessments, which is a
question of fact that is not allowed in a petition for certiorari, prohibition, and mandamus. Hence, we declared that
the petition should have been brought, at the very first instance, to the LBAA, not the trial court.

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

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

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 x x x appeal to the Board of Assessment Appeals x x x," should be read in
conjunction with Section 252 (d), which states that "in the event that the protest is denied x x x, the taxpayer may
avail of the remedies as provided for in Chapter 3, Title II, Book II of the LGC [Chapter 3 refers to Assessment
Appeals, which includes Sections 226 to 231]. The "action" referred to in Section 226 (in relation to a protest of real
property tax assessment) thus refers to the local assessor’s act of denying the protest filed pursuant to Section 252.
Without the action of the local assessor, the appellate authority of the LBAA cannot be invoked. Napocor’s action
before the LBAA was thus prematurely filed.

For the foregoing reasons, we DENY the petitioner’s motion for reconsideration.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice
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Acting Chairperson

TERESITA J. LEONARDO-DE CASTRO ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE P. PEREZ
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

CONCHITA CARPIO MORALES

Associate Justice
Acting Chairperson

C E RTI F I CATI O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

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 Cariño 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

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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. x x x x.

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. – x x x x

(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.

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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. – x x x x

(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

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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.

The Lawphil Project - Arellano Law Foundation

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