Guidelines on Requests for Travel Abroad of All Members and Personnel of the Appellate Courts and Trial Courts, and SC and OCA Officials and Personnel

October 2, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Cesar C. Meneses Manager Tambo Realty Incorporated (TRI) 2150 Roxas Boulevard Malate, Manila S i r : This refers to your sub-joined letters dated June 25, 2003, July 16, 2003 and August 7, 2003, both requesting the reclassification of lots covered by Transfer Certificates of Title (TCT) Nos. 50890, 50891 and 50892, from commercial to residential, and requesting further that the payments made for the subject lots for the year 1994-1996, be refunded and/or credited for the future real property tax obligations of Tambo Realty Incorporated (TRI for brevity). It is represented herein that TRI is the registered owner of lots situated in MIA Road, Barangay Tambo, Paraaque City. Subject lots were alleged to have been erroneously classified and assessed as commercial by the City Assessor of Paraaque City despite the fact that the said lots are not devoted to any commercial purpose/activity and are located in a purely residential area. Said reclassification as commercial (50% assessment level) resulted in the overpayment of real property taxes amounting to ONE MILLION ONE HUNDRED THIRTY-NINE THOUSAND FOUR HUNDRED EIGHT PESOS and 35/100 (P1,139,408.35). Records show that Tambo Realty Inc., sought the assistance of Hon. Robert Barbers (then Secretary of the DILG), under its letter of May 15, 1997 (ANNEX "B"), requesting reclassification of the subject real property consisting of three (3) parcels of land from commercial to residential, which was then referred to the Hon. City Mayor of Paraaque under his letter dated May 16, 1997 (ANNEX B-1); Consequently, the City Assessor, reclassified the subject parcels of land as residential and subsequently issued TD Nos. E-015-05495; E-015-05496 and E-015-05497 (ANNEX K), with an assessment level of 20%, effective 1997 only. As a result of reclassification made in 1997 by the City Assessor concerned, a tax credit was correspondingly granted to TRI in the amount of P432,852.73 for the year 1997 only. A positive response on the request for reclassification made on May 16, 1997, by TRI prompted them to make a similar request for reclassification on the same properties on August 28, 1997 addressed to then Secretary Barbers including a claim for tax credit for the year 1994-1996, which letter was then forwarded to the City Mayor of Paraaque in a letter dated September 1, 1997 (ANNEX C-1). aDSTIC In your Executive Summary of Reply dated June 25, 2003, you raised the following arguments: 1. Tambo has never brought the controversy to the LBAA, for it believes that the DOF, thru the BLGF, has the power and supervision and control over the City Assessors and Treasurers; This allegedly, is part of the principle and practice of exhaustion of administrative remedies; 2. The herein case is not an assessment appeal. It is a petition for the issuance of tax credit which is properly due the TRI; 3. The City Assessor has reclassified the property in question in 1997 as residential, and granted TRI's request for partial refund of payment amounting to P432,852.73 for 1997; but refused to reclassify further the same as residential for the years 1994-1996; 4. TRI property should have been assessed under Section 7, Department Order No. 3-74 of the DOF, the special law governing the assessment of vacant and idle lands and not Article VIII(4)(c), of Assessment Regulations No. 3-75 the law used as basis by the City Assessor of Paraaque City; 5. The imposition of an additional idle land tax on Tambo property is not proper, as there is allegedly no city ordinance imposing said special levy. In support of your request for reclassification, the following additional information have been submitted, to wit: 1. A Certification from the City Planning and Development Coordinator's Office, classifying the subject area (Brgy. Tambo) from 1981-97 as "Residential Zone Area" based on MMC Zoning Ordinance No. 81-01; and the latest Comprehensive Land Use Plan and Zoning (Ordinance No. 97-08, s. 1997); (ANNEX "D") 2. A Certification dated June 24, 2003 from the Metropolitan Manila Development Authority (MMDA), that the subject properties are located within the area classified as Medium Density Residential (R-2) Zone based on the Comprehensive Zoning Ordinance No. 81-01 for the National Capital Region (NCR); (ANNEX "E") and 3. Affidavits from the President of the Homeowner's Association of Goodwill Subdivision, and the Barangay Chairman of Barangay Tambo attesting to the claim of Mr. Meneses that the said lots situated at Calle Bataan and Sampaguita Streets are classified as residential. (ANNEX "F") The City Assessor, in her letter-reply dated July 23, 2003 (ANNEX H), in response to our 1st Indorsement dated June 19, 2003 (ANNEX-H1) submitted the following: 1. Tambo Realty, Inc., filed their request for retroactive reassessment for the year 1994 to 1996 on August 28, 1997 only; after an earlier request filed on May 16, 1997, was acted upon favorably; 2. The area where the real property of TRI was located then, was still predominantly commercial, as there were more business establishments situated therein like Anflo Cars, Lozada Swimming School, La Perla Cigarette Factory and Others; 3. The lot, although vacant was utilized as a garage for passenger buses and trucks for commercial use; and that the subject lot was already classified as commercial prior to the acquisition of Tambo Realty from MOCA Inc., in 1991; as evidenced by the attached TD Nos. C-012-00473-00475 (ANNEX K); 4. In 1997, however, that Office admitted that there were more residential houses in the area than commercial establishments, because prominent business establishments stopped operations and structures were demolished. Riverside Street was paved to facilitate the rehabilitation of Paraaque river for more residential houses in the interior part of MIA Road and subsequently, Paraaque City Officials classified the area as R-2. AEDISC 5. The City Assessor, suggested, in her letter dated January 22, 2001 to the Hon. Mayor of Paraaque that the property be taxed an additional 5% tax for idle land as provided under Sec. 236 of the Local Government Code of 1991 (R.A. No. 7160). In compliance with BLGF Travel Order No. 08-2003 dated August 14, 2003 (ANNEX O), the representative of this Bureau who conducted the investigation submitted the following findings, observations and recommendations, portion of which are quoted below: FINDINGS: "1. The property location is MIA Road (formerly Quirino Ave.), as also indicated in the tax declarations; "2. The classification indicated therein even from the time it was still owned by Moca, Inc. is " Commercial ." Only after the request for reclassification in 1997, that it was changed to " Residential ;" and "3. The subject lots (adjacent) are surrounded by hollow blocks and are actually located in MIA Road, Brgy. Tambo, Paraaque City, as it appears that its frontage and access road is MIA Road; "4. An interview made with one of the occupants therein reveals that the said portion is being used by SUNSHINE Bus Line, serving as the sleeping quarters of the drivers/mechanics. Mr. Meneses admitted that they also own the said bus line; and "5. An interview also made with one of the security guards of Anflo Cars reveals that there were also repairs of buses being done on the subject property" OBSERVATIONS: "1. There is no showing that the subject request of TRI for refund/tax credit started in 1994. Their formal request for the reclassification of the subject property was filed on May 15, 1997 and was subsequently granted by the City Assessor's Office of Paraaque City; "2. The initial request made by the said corporation for reclassification of the said property from "Commercial" to "Residential" was made apparently based on the tax declarations issued pertaining to the 96 General Revision of Real Property Assessments to take effect 1997. Hence, the said request was given due course by the said City Assessor's Office effective 1997 only which we deemed in order "3. The request of the said Corporation indeed involves assessment matters as the same includes request for reclassification of the subject properties; "4. Payment under protest started only in 1997 when their first request for the said reclassification was granted (effective 1997). TD's and FAASes neither indicate payment under protests in prior years; "5. The abovementioned Legal Opinion of the City Legal Officer, said city, in granting the request of TRI for tax refund/credit is seemingly based purely on the information submitted by Mr. Meneses, as embodied under his letter-request dated May 15, 2000 ( Attachment "M" ), which submitted among others, that: (a) TRI applied for the said reclassification since 1994; and (b) prior to the approval of their request for tax refund/credit, all real property tax payments were made under protest. However, as mentioned earlier, there was no proof of the said request in 1994. Furthermore, the Officials Receipts ( Attachment "M-1" ) for their real property tax payments for CY 1994-1996 do not indicate "Payment Under Protest." "6. The provision of Section 253 of the Code (R.A. No. 7160) is deemed applicable only if and when the issue on the reclassification of the subject real properties had been properly resolved in their favor. It may be worth mentioning that the prescription period provided under the law has already lapsed, because the formal request for refund/tax credit for CY 1994-1996 appears to have been brought out only under the abovementioned letter dated August 28, 1997 addressed to then Sec. Barbers. Per documents presented by Mr. Meneses, the initial request for tax refund/credit of TRI was corresponding to the reclassification made on the said property effective 1997, as embodied under his letter dated July 16, 1997 (Attachment "N") after receiving the copies of tax declarations of the subject property on July 11, 1997. Also submitted therein was their payment under protest for the 1st and 2nd quarter of 1997 only." RECOMMENDATIONS "1. TRI should have exercised their right to appeal as provided for under Section 226 of R.A. No. 7160, sixty (60) days after their receipt of the RPTOP or copies Tax of Declarations in 1994 (pertaining to the 1993 General Revision of real property assessments) and not in 1997; "2. The assessment records (Tax Declarations and FAASes) in the City Assessors Office of Paraaque City do not prove that: (a) the subject real properties of TRI are indeed classified as " Commercial " from 1991 (while still declared in the name of MOCA, Inc.) until and after the two general revisions of real property assessments conducted in 1994 and 1996; and (b) the location of the said properties is MIA Road and not Calle Bataan and Sampaguita Streets as certified by CPDCO and the President of the Goodwill Homeowners Association the same therefore should not be reclassified from commercial to residential for the year 1994-1996; and "3. In line with Supreme Court Decisions under G.R. Nos. 115253-7 and 36155, in the cases of Antonio Callanta vs. the Office of the Ombudsman and the City Government of Cebu dated January 30, 1998; and Montinola vs. Gonzales dated October 26, 1989 (178 SCRA 677); respectively," the request of TRI cannot be granted for lack of legal basis. cDSAEI Argument Nos. 1 and 2 In reply to argument Nos. 1 and 2, please be informed that Section 260 of the Local Government Code (LGC) of 1991 as implemented under Sec. 291 of its IRR provides that the Department of Finance shall "be primarily responsible for the proper, efficient and effective administration of the real property tax subject to the rules and regulations governing the classification, appraisal and assessment of real property issued by the DOF." Further, the DOF shall exercise the authority to review and examine on continuing basis property, assessment, and real property tax records to ensure the proper implementation and determine compliance w/ existing laws and regulations. However, this technical supervision of the DOF over local assessors does not include the jurisdiction to entertain any request for a readjustment either to increase or decrease the revised value, when the notice of assessment (RPTOP or TD) has been sent and received by the taxpayer concerned. The appropriate forum where the aggrieved or dissatisfied party may bring his appeal is the Local Board of Assessment Appeals (LBAA), as provided under Section 226 of the Local Government Code of 1991, which we quote hereunder: Section 226 of the Local Government Code of 1991 provides the following: "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." A case in point is the Supreme Court Decision dated January 30, 1998 under G.R. Nos. 115253-74, in the case of Antonio Callanta vs. the Office of the Ombudsman and the City Government of Cebu which held, thus: ". . . Whenever the local assessor sends a notice to the owner or lawful possessor of real property of its revised assessed value, the former shall thereafter no longer have any jurisdiction to entertain any request for a review or readjustment. Indeed, the long-standing practice adverted to by petitioners does not justify a continuance of their acts. We cannot sanction such comprising situations. Henceforth, whenever the local assessor sends a notice to the owner or lawful possessor of real property of its revised assessed value, the former shall thereafter no longer have any jurisdiction to entertain any request for a review or readjustment. The appropriate forum where the aggrieved party may bring his appeal is the LBAA, as provided by law. "The assessment is deemed made when the notice to this effect is released, mailed or sent to the taxpayer for the purpose of giving effect to said assessment. In the same vein, we have said that assessment is deemed made when the notice to this effect is released, mailed or sent to the taxpayer for the purpose of giving effect to said assessment.' " Where the taxpayer fails to question such assessment within the reglementary period provided by law, the local governments right becomes absolute upon the expiration of such period with respect to that taxpayers property . With respect to real property taxes, the obligation to pay arises on the first day of January of the year following the assessment. Corollarily, on the same date, the right of the local government to collect said taxes also arises. And where the taxpayer fails to question such assessment within the reglementary period provided by law, the local government's right becomes absolute upon the expiration of such period with respect to that taxpayers property." (Emphasis supplied) Beyond doubt, aggrieved owners who are not satisfied with the assessment of their property should file an appeal with the LBAA within sixty (60) days from receipt of the Notice of Assessment. TRI should have, within 60 days upon receipt of Notice of Assessment in 1994, filed an appeal with the LBAA of Paraaque City and should not have waited until 1997 to file the request for reclassification retroactively for 1994-1996. Failure on the part of the taxpayer concerned to file within the prescribed sixty (60) day period, after receipt of the Notice of Assessment means forfeiture of his right to appeal. EcIaTA With regard to your allegation that the City Assessor of Paraaque City erroneously assessed your property as commercial instead of residential, please be informed of the Supreme Court Decision in the case of Victorias Milling Co., Inc., vs. Court of Appeals (No. L-24213, 13 March 1968, 22 SCRA 1008), which held, thus: "It is settled in our jurisdiction that where an assessment is illegal and void , the remedy of a taxpayer who has already paid the tax under protest, is to sue for refund in the competent Court of First Instance. On the other hand, where the assessment is merely erroneous, his recourse is to file an appeal in the Provincial Board of Assessment Appeals within sixty (60) days from receipt of the Assessment ." (Emphasis supplied) "xxx xxx xxx "An assessment is illegal and void when the assessor has no power to act at all. It is erroneous when the assessor has the power but errs in the exercise of that power." Likewise, it is your contention that Section 226 of the Code does not apply because what is involved here is the request for refund of the amount paid by the company, and not an appeal on the assessment of the said property. Please be informed that the classification of real property is part and parcel of the assessment process. Assessment as defined under Section 199 of the Local Government Code of 1991 (R.A. No. 7160) means the act or process of determining the value of a property, or properties thereof subject to tax, including the discovery, listing, classification, and appraisal of properties for assessment purposes. Article 306 implementing Section 215 of the Code is quoted as follows: "Article 306. Classes of Real Property for Assessment Purposes . Real property shall be classified as residential, agricultural, commercial, industrial, mineral, timberland, or special by the provincial and city assessors including the municipal assessors of MMA. The city or municipality within MMA shall, through their respective sanggunian, have the power to classify lands as such in accordance with their zoning ordinances provided that for purposes of assessment, real property shall be classified on the basis of actual use regardless of where located as provided for under Article 308 of this Rule." Argument No . 3 The City Assessor has reclassified the property in question in 1997, as residential because she alleged that in 1997, "there were more residential houses in the area than commercial establishments, because the latter have stopped business operations." She cannot, however, grant the same request for retroactive reclassification for 1994-1996, because at that time, there were allegedly more commercial establishments in the area than residential houses. This Bureau in the spirit of fair play, is not in a better position to determine whether the area where the properties are located was indeed either predominantly residential in 1994 1996, as claimed by TRI; or predominantly commercial as argued by the City Assessor. However, records will show that the location of the properties as reflected in the FAASes and TDs: (1) is not indeed Calle Bataan and Sampaguita Streets, but MIA Road; (2) the classification of the property prior to the acquisition by Tambo from Moca Inc., has been commercial; (3) granting for the sake of argument that the area was predominantly residential in 1994-1996, TRI should have brought the matter to the LBAA's attention in 1994 yet; and not in 1997, or after the City had already conducted its 2nd general revision of real property assessments. Argument No. 4 With regard to Argument No. 4, please be informed that the rules governing the assessment of lands located in area of mixed land uses are provided under Sec. II (b) of Assessment Regulations No. 1-92 dated October 6, 1992 of the Department of Finance (DOF), in pursuance of Sections 201 and 219 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, Section 11 (B) (D) thereof is quoted below: SIcTAC "Sec. 11. Rules for Assessment of Lands . "xxx xxx xxx "B. Lands located in area of mixed land uses. In an area of mixed land uses, such as residential with commercial or industrial, the predominant use of the lands in that area shall govern the classification, valuation and assessment thereof. If the predominant use is residential, all lands in that area shall be classified, valued and assessed as residential; if the predominant use is commercial or industrial, all lands in that area shall be classified, valued and assessed as such. "xxx xxx xxx. "D. Vacant lands shall be classified, valued and assessed like similar lands in the locality." This Bureau believes that the property of TRI should have been assessed pursuant to the above provision of law and not on either Section 7, Department Order No. 3-74 as claimed by Mr. Meneses nor Article VIII(4)(c) of Assessment Regulations No. 3-75, as submitted by the City Assessor; Argument No. 5 TRI alleged that the imposition of an additional idle land tax on the TRI property is not proper in the absence of an enabling Ordinance imposing the special levy. This Bureau believes that, if indeed, the City has not enacted an ordinance imposing the special levy provided under Section 236 of the Code, then the imposition of the special levy on idle land tax, is without legal basis. Lastly, in the case of Montinola vs. Gonzales (G.R. No. 36155, 26 October 1989, 178 SCRA 677) the Supreme Court held that: " If no appeal to the Board of Assessment Appeals is made by the property owner within the statutory period, the assessment becomes final and unappealable. The owner cannot go to court to question any errors in the assessment and to seek refund of the realty taxes paid . Since as held in Victorias Milling Co., Inc. vs. Court of Tax appeals (22 SCRA 1008), 'By the doctrine of primacy of administrative remedy, the Provincial Board of Assessment Appeals had jurisdiction over the dispute to the exclusion of the Court of First Instance, and the party's resort to the Court of First Instance instead of appealing to the Board of Assessment Appeals was held fatal to his claim for refund." (Emphasis supplied) In view hereof, we regret that your abovementioned request for the reclassification of the subject lots, and the subsequent refund/tax credit of the payments made thereon for the year 1994-1996 cannot be given due course for lack of legal basis. The classification made by the City Assessor of Paraaque City on your properties for the period 1994-1996, as commercial, is final and executory. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director