854 Phil. 251
CARPIO, J.:
x x x xUP filed the present case before this Court within 60 days from receipt of the 11 July 2014 Final Notice of Delinquency.[4]
5. UP is the registered owner of a parcel of land covered by and more particularly described in TCT No. RT-107530 (192689) of the Registry of Deeds of Quezon City, with an area of 985,597 square meters and located along Commonwealth Avenue, Diliman, Quezon City.
6. On 27 October 2006, UP entered into a Contract of Lease with Development Obligations with [ALI] over a portion of the aforementioned parcel of land containing an area of 380,630 square meters. The leased property is now known as the UP-Ayala Technohub.
7. In a Notice of Assessment addressed to ALI dated 23 August 2012, ALI was informed that the subject property has been "reclassified and assessed for taxation purposes with an assessed value of P499,500,000.00 effective 2009."
8. In a letter to UP President Pascual dated 22 August 2012, the City Assessor of Quezon City informed UP that the aforementioned Notice of Assessment was served upon ALI as the entity liable for the real property tax on the subject property pursuant to Section 205(d) and Section 234(a) of the Local Government Code.
9. In a Statement of Delinquency dated 05 December 2012, addressed to the UP North Property Holdings, Inc., the [City Treasurer] demanded the payment of real property tax on the subject property amounting to P78,970,950.00 for the years 2009-2011 and the first three quarters of 2012.
10. In another letter to UP President Pascual dated 09 September 2013, the City Assessor of Quezon City furnished UP a copy of the letter of the Bureau of Local Government Finance (BLGF) of the Department of Finance [(DOF)] dated 01 August 2013, which opined that ALI is the party legally accountable for the real property taxes on the subject property. It was further stated that the City Assessor's Office "will be sending the official Notice of Assessment and the corresponding Tax Declaration for the subject property under the name of [ALI]. . ."
11. In another Statement of Delinquency dated 24 September 2013, addressed to the UP North Property Holdings, Inc., the [City Treasurer] again demanded the payment of real property tax on the subject property in the updated amount of P102,747,150.00 for the years 2009-2012 and the first three quarters of 2013.
12. For the first time and without a prior Notice of Assessment, a Statement of Delinquency dated 27 May 2014 addressed to UP was issued by the [City Treasurer] demanding the payment of real property tax on the subject property amounting to P106,992,990.00 for the years 2009 to 2013 and the first quarter of 2014.
13. In his letter to the City Treasurer of Quezon City dated 13 June 2014, UP President Pascual requested the postponement of any proceeding related to the aforementioned Statement of Delinquency. He explained -We respectfully take exception to the Statement of Delinquency dated 27 May 2014 and the alleged delinquency of the University with respect to the payment of the real estate taxes. The University of the Philippines, as the National University, has been granted tax exemptions under Republic Act No. 9500, otherwise known as the University of the Philippines Charter of 2008, that are express, patent and unambiguous. The grant is exceedingly extensive that it provided the University the exemption from all taxes and duties vis-a-vis all revenues and assets used for educational purposes or in support thereof.14. On 22 July 2014, UP received the Final Notice of Delinquency dated 11 July 2014 from the Office of the City Treasurer demanding the payment of real property tax on the subject property in the updated amount of P117,182,700.00 for the years 2009-2013 and the first three quarters of 2014.[3]
Moreover, in the letter of the Bureau of Local Government Finance ("BLGF") dated 01 August 2013, addressed to the Hon. City Mayor, Herbert M. Bautista, the BLGF opined on the issue as to which party shall be accountable for the unpaid real estate taxes due on the thirty-seven (37) hectares of land owned by the University and being leased out to [ALI], the same property which is the subject of the Statement of Delinquency dated 27 May 2014. The BLGF concluded that "[ALI], being the lessee, is the legally accountable party to the unpaid real property taxes on the government-owned UP Property." The foregoing opinion of the BLGF confirms that the University is exempt from real estate taxes, an absolute right that the University enjoys under R.A. No. 9500.
x x x xOn 29 September 2016, Ms. Guevarra, as Officer in Charge of the City Treasurer's Office, filed her Comment[11] which reads:
2. That as early on [sic] April 15, 2016, herein respondent through its City Treasurer, Ms. Basilia S. Pacis and to date, through its Acting Assistant City Treasurer, sought for the legal assistance of Atty. Christian B. Valencia, City Legal Officer of the Local Government Unit, Quezon City, to prepare and file Comment to the instant Petition for Certiorari and Prohibition, as may be evidenced by the Indorsement dated August 11, 2016 and Indorsement dated August 15, 2016 true copies of them are hereto attached as Annexes "1" and "2" and made parts hereof[;]
To date, August 18, 2016, there was no prepared Comment by the City Legal Officer to be filed in the Honorable Court;
3. That to date, the undersigned, Ms. Ruby Rosa G. Guevarra is in [sic] the Acting Assistant City Treasurer of the Local Government Unit, Quezon City, as the City Treasurer, Ms. Basilia S. Pacis retired [from] said position as Treasurer;
4. That to date, the undersigned, Ms. Ruby Rosa G. Guevarra is looking for a counsel to help her in the preparation and filing of a Comment to the Petition for Certiorari and Prohibition;
5. That the amount of Two Thousand (P2,000) Pesos, as fine for the non-filing of the Comment was paid, but the said payment shall be considered payment under protest, as the undersigned is unjustifiably failed [sic], refused and ignored to be legally assisted by the City Legal Officer of the Local Government Unit, Quezon City, for [sic] the preparation and filing the said required Comment[.][10]
1. That the relief prayed for in the instant Petition for Certiorari and Prohibition is the same allegation specifically stated in its body, that:On 28 November 2016, we issued a Resolution[13] that, among others, noted Ms. Guevarra's Comment, and required UP to file a reply. UP, through the OSG, filed its Reply[14] on 20 February 2017, where it addressed Ms. Guevarra's questions regarding the propriety of the remedy and the taxability of UP based on Republic Act No. 9500[15] and on Section 133(o)[16] of the Local Government Code.to annul the Statement of Delinquency dated 27 May 2014 and the Final Notice of Delinquency dated 11 July 2014.WITH ALL DUE RESPECT, not within the province of the Honorable Court to adjudicate. Truth to tell, there must be [a] full-blown trial to be conducted by a trial court for the determination of the true facts whether to annul the said Statement of Delinquency dated 27 May 2014 and the Final Notice of Delinquency dated 11 July 2014. But, time and again, it is ruled that the Honorable Court is not a trier of facts.
In APQ Shipmanagement [sic] Co., LTD, versus Casenas, 725 SCRA 108, the Honorable Court reminded us:The Supreme Court is not a trier of facts and, thus, its jurisdiction is limited only to reviewing errors of law.2. That the respondent is not the real party-in-interest in the instant Petition for Certiorari and Prohibition[.]
3. That the petitioner failed to file the Motion for Reconsideration, when it admitted the receipt of· the assailed Notice of Statement of Delinquency dated May 27,2014 and the Final Notice of Delinquency dated July 11, 2014.
Thus, petitioner filed the Instant Petition without filing the appropriate motion to give the respondent the opportunity to correct its alleged error.In Lanier versus People. 719 SCRA 477, the Honorable Court held: Well-established is the rule that a motion for reconsideration is a condition sine qua non for the filing of a petition for certiorari.[7.] Most importantly, petitioner is not exempted from paying real property tax for its real property leased to [ALI] pursuant to the mandate of Section 205(d) and Section 234(a) of Republic Act No. 7160, otherwise known as "The Local Government Code of 1991[.]"
x x x x
Admittedly, on October 27, 2006, petitioner entered into the Contract of Lease with [ALI], subject matter of which is petitioner's parcel of land covered by Transfer Certificate of Title No. RT-107350 (192689), now allegedly owned by UP North Property Holdings, Inc. Said leased [sic] of the real property belonging to the petitioner failed to pay the real property tax from 2009-2013 and the first three quarters of 2014.
In City of Pasig versus Republic, 656 SCRA 271, the Honorable Court unswervingly ruled:Where the parcels of land owned by the Republic are not properties of public dominion, portions of the properties leased to taxable entities are not only subject to real estate tax, they can also be sold at public auction to satisfy the tax delinquency.Moreover, respondent merely followed the legal basis of the Department of Finance, that:ALI (Ayala Land Inc.) is the party legally accountable for the real property taxes on the subject property.[ALI] was duly notified of the subject Statement of Delinquency and other similar notices.[12]
WHETHER PETITIONER UNIVERSITY OF THE PHILIPPINES IS LIABLE FOR REAL PROPERTY TAX IMPOSED ON THE SUBJECT PROPERTY LEASED TO AYALA LAND, INC.[17]
WHEREAS, in response to the LESSOR's aforementioned invitation, Ayala Land, Inc., in September 2005, submitted to the LESSOR a Development Proposal entitled "DEVELOPMENT PROPOSAL FOR UP NORTH SCIENCE & TECHNOLOGY PARK," dated August 1, 2005, and subsequently, presented to the then UP Board of Regents such proposal which is embodied in a presentation manual, entitled "DEVELOPMENT PROPOSAL FOR UP NORTH SCIENCE & TECHNOLOGY PARK," dated September 2005, both attached hereto and marked as Annexes "E" and "E-1," respectively (the "Development Proposals"), signifying therein its interest in leasing and developing the UP North S&T Park and proposing to lease and develop the UP North S&T Park Phase I according to its proposals, into a prestigious and dynamic science and technology park, where research and technology-based collaborative projects between technology and the academe thrive, thereby becoming a catalyst for the development of the information technology and information technology enabled services;[18]The Contract provided that ALI owns the improvements on the leased land:
3.2 PERMANENT IMPROVEMENTS; LESSOR TO BECOME OWNER OF PERMANENT IMPROVEMENTS AT END OF LEASEAs to real property taxes, the contract between UP and ALI stated:
x x x x
(c) Before the termination, expiration, or cancellation of this Contract prior to the lapse of the original Lease Term, all renovations, alterations, and improvements and the Permanent Improvements constructed during the original Lease Term shall be owned by, and shall be for the account of the LESSEE; x x x.[19]
12.2 REAL ESTATE TAXES ON LANDOn 29 April 2008, Republic Act No. 9500, or the UP Charter of 2008, was signed into law. Republic Act No. 9500 addressed UP's real property and income derived therefrom in Sections 22 and 25(a). These sections read:
Should real estate taxes be levied on the LEASED PREMISES, the LESSOR shall assume the payment of the real estate taxes on the land, while the LESSEE shall assume the payment of real property taxes on the improvements introduced on the LEASED PREMISES.[20]
SEC. 22. Land Grants and Other Real Properties of the University. -A letter,[21] dated 22 August 2012 and addressed to the UP President from Mr. Rodolfo M. Ordanes, Officer In Charge, City Assessor (City Assessor), informed UP of the City Assessor's service of a Notice of Assessment to ALI This Notice of Assessment had Sections 205 and 234 of the Local Government Code as its bases. On 23 August 2012, the City Assessor issued a Notice of Assessment[22] to ALI. The notice stated that the land subject of the lease agreement with UP was reclassified and assessed for taxation purposes with an assessed value of P499,500,000.00 effective 2009. The pertinent provisions of Sections 205 and 234 read:
(a) The State shall support the University of the Philippines System as the national university in the form of lump sum amount, through general appropriations and other financial benefits, and in kind, through land grants and donations and use of other real properties. To carry out the intent of these grants, income derived from the development of all land grants and real properties shall be used to further the end of the national university, as may be decided by the board;
x x x x
(c) The Board may plan, design, approve and/or cause the implementation of land leases: Provided, That such mechanisms and arrangements shall sustain and protect the environment in accordance with law, and be exclusive of the academic core zone of the campuses of the University of the Philippines: Provided, further, That such mechanisms and arrangements shall not conflict with the academic mission of the national university;
(d) The Board may allow the use of the income coming from real properties of the national university as security for transactions to generate additional revenues when needed for educational purposes;
x x x x
SEC. 25. Tax Exemptions. - The provisions of any general or special law to the contrary notwithstanding:
(a) All revenues and assets of the University of the Philippines used for educational purposes or in support thereof shall be exempt from all taxes and duties;
x x x x (Emphasis supplied)
Section 205. Listing of Real Property in the Assessment Rolls. -The Local Government Code took effect on 1 January 1992.x x x xSection 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property tax:
(d) Real property owned by the Republic of the Philippines, its instrumentalities and political subdivisions, the beneficial use of which has been granted, for consideration or otherwise, to a taxable person, shall be listed, valued and assessed in the name of the possessor, grantee or of the public entity if such property has been acquired or held for resale or lease.(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;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.
x x x x
Evidently, real property owned by the Republic of the Philippines are exempt from payment of the real property tax. However, if the beneficial use thereof has been granted for consideration or otherwise to a taxable person, the subject real property shall: (1) be listed, valued and assessed in the name of the beneficial user; and (2) becomes taxable.On 24 September 2013, the City Treasurer issued a Statement of Delinquency[27] to UP North Property Holdings, Inc. The City Treasurer demanded payment of real property tax on the subject land in the amount of P102,747,150.00 for the years 2009 to 2012 and the first three quarters of 2013.
It is also worthy to note that as soon as the notice of assessment is served and received by the taxpayer, an obligation to pay the amount assessed and demanded arises (BLGF Memorandum Circular No. 04-2008, January 7, 2008)[.]
As to the argument that as stipulated in the Lease Contract entered into by and between UP and Ayala Land Inc. that UP shall shoulder the real property taxes due on the subject property, please be informed of the Supreme Court Decision under G.R. No. 171586, dated July 15, 2009 (National Power Corporation vs. Province of Quezon and Municipality of Pagbilao), which is quoted in part, below:x x xFurther, attention is likewise invited to the pertinent portion of another SC Decision (G.R. No. L-29772), in the case of the City of Baguio vs. Fernando S. Busuego, viz:
Lastly, from the points of view of essential fairness and the integrity of our tax system, we find it essentially wrong to allow the NPC to assume in its BOT contracts the liability of the other contracting party for taxes that the government can impose on that other party, and at the same time allow NPC to turn around and say that no taxes should be collected because the NPC is tax-exempt as a government-owned and controlled corporation. We cannot be a party to this kind of arrangement; for us to allow it without congressional authority is to intrude into the realm of policy and to debase the tax system that the Legislature established. We will then also be grossly unfair to the people of the Province of Quezon and the Municipality of Pagbilao who, by law, stand to benefit from the tax provisions of the LGC.
x x x. . . when the GSIS sold the property and imposed said condition, the agency although exempt from the payment of taxes clearly indicated that the property became taxable upon its delivery to the purchaser and that the sole determinative factor for exemption from realty taxes is the 'use' to which the property is devoted. And where the 'use' is the test, the ownership is immaterial. (Martin on the Rev. Adm. Code, 1961, Vol. II, p. 487, citing Apostolic Prefect of Mt. Province vs. Treasurer of Baguio City, 71 Phil. 547). In the instant case, although the property was still in the name of the GSIS pending the payment of the full price, its use and possession was already transferred to the defendant.' Such contractual stipulation that the purchaser on installment pay the real estate taxes pending completion of payments, although the seller who retained title is exempt from such taxes, is valid and binding, absent any law to the contrary and none has been cited by appellant. x x x.Similarly, therefore, we also deemed it essentially wrong being without congressional authority for UP to assume the real property tax liability of the Ayala Land, Inc. over the subject property. Hence, we opine that the Ayala Land, Inc., being the lessee, is the legally accountable party to the unpaid real property taxes due on the government-owned UP property.[26] (Underscoring, boldfacing and italicization in the original)
We write in connection with the Statement of Delinquency dated 27 May 2014 issued by your office, which the University received on 3 June 2014. In the Statement of Delinquency, the University was required to pay the real estate taxes on its property/ies, specifically on Tax Declaration E-128-00051, for the period from 2009 to the 1st quarter of 2014, which was noted to be in the total amount of Php106,992,900.00, including penalties. The University was given a period often (10) days from receipt of the Statement of Delinquency, or until 13 June 2014, to pay the said real estate taxes.On 11 July 2014, the City Treasurer issued a Final Notice of Delinquency[30] to UP for the years 2009 to 2013 and the first three quarters of 2014 in the total amount of P117,182,700.00. The total amount also included the tax due and penalty.
We respectfully take exception to the Statement of Delinquency dated 27 May 2014 and the alleged delinquency of the University with respect to the payment of real estate taxes. The University of the Philippines, as the National University, has been granted tax exemptions under Republic Act No. 9500, otherwise known as the University of the Philippines Charter of 2008, that are express, patent, and unambiguous. The grant is exceedingly extensive that it provided the University exemption from all taxes and duties vis-a-vis all its revenues and assets used for educational purposes or in support thereof.
Moreover, in the letter of the Bureau of Local Government Finance ("BLGF") dated 1 August 2013, addressed to the Hon. City Mayor, Herbert M. Bautista, the BLGF opined on the issue as to which party shall be held accountable for the unpaid real estate taxes due on the thirty-seven (37) hectares of land owned by the University and being leased out to Ayala Land, Inc., the same property which is [the] subject of the Statement of Delinquency dated 27 May 2014. The BLGF concluded that "Ayala Land, Inc., being the lessee, is the legally accountable party to the unpaid real property taxes due on the government-owned UP property." The foregoing opinion of the BLGF confirms that the University is exempt from real estate taxes, an absolute right that the University enjoys under [Republic Act] No. 9500.
Finally, while maintaining the position that the University is exempt from real estate taxes, we wish to point out that the University was not furnished any Notice of Assessment prior to the issuance of the Statement of Delinquency dated 27 May 2014.[29]
The UP was founded on June 18, 1908 through Act 1870 to provide advanced instruction in literature, philosophy, the sciences, and arts, and to give professional and technical training to deserving students. Despite its establishment as a body corporate, the UP remains to be a "chartered institution" performing a legitimate government function. It is an institution of higher learning, not a corporation established for profit and declaring any dividends. In enacting Republic Act No. 9500 (The University of the Philippines Charter of 2008), Congress has declared the UP as the national university "dedicated to the search for truth and knowledge as well as the development of future leaders."In the present set of facts, both parties agree that UP owns the land subject of this case.
Irrefragably, the UP is a government instrumentality, performing the State's constitutional mandate of promoting quality and accessible education. As a government instrumentality, the UP administers special funds sourced from the fees and income enumerated under Act No. 1870 and Section 1 of Executive Order No. 714, and from the yearly appropriations, to achieve the purposes laid down by Section 2 of Act 1870, as expanded in Republic Act No. 9500. All the funds going into the possession of the UP, including any interest accruing from the deposit of such funds in any banking institution, constitute a "special trust fund," the disbursement of which should always be aligned with the UP's mission and purpose, and should always be subject to auditing by the COA.[34] (Citations omitted)
SEC. 27. Rules of Construction.- No statutory or other issuances shall diminish the powers, rights, privileges and benefits accorded to the national university under this Act or enjoyed at present, by it under other issuances not otherwise modified or repealed under this Act, unless subsequent legislation expressly provides for their repeal, amendment or modification. Any case of doubt in the interpretation of any of the provisions of this Charter shall be resolved in favor of the academic freedom and fiscal autonomy of the University of the Philippines.Non-Applicability of the NPC Case
SEC. 30. Repealing Clause. - Act No. 1870, as amended, and all laws, decrees, orders, rules, and regulations or other issuances or parts inconsistent with the provisions of this Act are hereby repealed or modified accordingly.