Bureau of Local Government Finance Opinion

September 30, 1999 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer and the City Assessor, both of Quezon City. This refers to the letter dated September 20, 1999 of Mr. J. Antonio Leviste, President, Quezon City Development and Financing Corporation (QCDFC), in effect requesting confirmation of their contention that "during the period when the Courts, upon the instance of the government, '(W)ithdrew the property from the commerce of man and declared that the same belongs to the government to be developed for use of the general public,' the same is not subject to payment of real property taxes." It appears that the subject real property, which is particularly described as "Road Lot 1" in the attached copy of the Decision promulgated by the Supreme Court in G.R. No. 128131 dated October 8, 1998, that became final and executory on February 24, 1999 per Entry of Judgment on the said case, copy also attached, "was set aside and dedicated to the proposed Highway 38 (now C-5)" when QCDFC developed the White Plains Subdivision as early as 1960. It also appears that when the then National Planning Commission approved the subdivision plan, "it required QCDFC to set aside Road Lot 1 for the construction of a parkway known as Highway 38." As early as April 14, 1979, the said real property became the subject of several court proceedings, whereupon in one of the Decisions rendered thereon on November 14, 1985, the Supreme Court ruled that "Road Lot 1 is withdrawn from the commerce of man and should be developed for the use of the general public." Thereupon, ligitations concerning the subject real property continued until the same reached the Supreme Court the third time and that, finally, on October 8, 1998, in said G.R. No. 128131, it declared, thus: "WHEREFORE, the instant petition is DISMISSED. THE reservation or lien on Road Lot 1 intended for highway or parkway is LIFTED . Rights of full ownership including the development of the property or the collection of fees and rentals from the gardeners therein are restored to the Quezon City Development and Financing Corporation." (Emphasis supplied) Apparently, QCDFC has lost its rights to fully exercise the attributes of ownership over the said parcel of land since it was reserved and "set aside and dedicated to the proposed Highway 38," until the Supreme Court issued the ruling in G.R. No. 128131. Representations are made that the herein request is being made by Mr. Leviste in connection with the "subsequent lifting of the reservation" and for the mere purpose of securing a realty tax clearance from the Office of the City Treasurer for purposes of reconstituting the abovementioned Titles over the abovementioned real properties for reason that the original titles were burned in the fire which gutted the Office of the Register of Deeds. The question to be resolved hereon is whether or not the subject real property, covering Road Lot 1, is subject to real property taxes since the same was required to be "set aside as Road Lot 1" or reserved for public use, until such time that the Supreme Court finally lifted such reservation or lien over the same and restored its "Rights of full ownership" to QCDFC on October 8, 1999 by virtue of its Decision in G.R. No. 128131. Mr. Leviste claims that the same (Road Lot 1) is not subject to payment of real estate taxes, thus, his request before the City Treasurer's Office to issue a clearance "stating that we have no tax liabilities." We find merit in the abovementioned claim of Mr. Leviste in light of the several occasions that the Department of Finance had rendered its opinion on similar subject matter. The significant ones are those that were embodied under its 3rd Indorsement dated December 20, 1988 and 5th Indorsement dated June 11, 1991, the pertinent portions of which are quoted hereunder: 1. In the 3rd Indorsement dated December 20, 1988; "xxx xxx xxx. "After a period of more than ten years, upon motion of the Company, the Regional Trial Court, National Capital Judicial District, Branch CXXV, Caloocan City, issued an Order dated May 17, 1988, dismissing the petition for expropriation. Accordingly, the Company repossessed the land under consideration. "From the above narration of facts, the incontrovertible fact is that, as of September 1997 up to May, 1988, the Company was deprived of its rights to exercise the attributes of ownership over the said parcel of land because of the Order dated August 31, 1977 of the Court of First Instance of Caloocan City authorizing NHA to enter and take possession over the property purposely to develop the same for establishment and operation of housing sites, services, and commercial and industrial complex." "The issue, therefore, is whether or not the Company, after taking back possession of the land in question, is exempt from payment of real property taxes due from the same during the period that NHA took actual possession over said land for the purpose as stated above." "'The case which squarely applies to the issue involved is the City of Manila vs. Roxas, 60 Phil. 215, wherein it was held that where the Republic took possession of the property on October 11, 1958, the owner, while retaining the naked title, was deprived of the benefits therefrom and it is just and fair that the realty taxes for the years 1959 and onward should be borne by the entity exercising the eminent domain. In another case it was held that when an easement in land is taken for public use involves practically the exclusive possession and control of the property by the republic, and leaves the original owner with no right of substantial value, the property is exempt from taxation although the owner remains the owner of the fee ( Larcy vs. City of Boston , 71 NE 302, Mass. 128 [1902]). "xxx xxx xxx. "In view of all the foregoing, this Department supports the view that when a government entity exercises one of its inherent sovereign powers and acquires possession of a parcel of land to the exclusion of the owner, although the title still remains with the owner, the property is exempt from payment of real property taxes. . . ." 2. In the 5th Indorsement dated June 11, 1991: "xxx xxx xxx. "From the above narration of facts, it is clear that, from 1975 up to 1988, Mr. Maclan was deprived of his rights to exercise the attributes of ownership over the said parcel of land because of the order dated November 24, 1975 of the Regional Trial Court, Branch 120, Caloocan City, authorizing the plaintiff (NHA) to enter and take possession of the said lots for public purpose. "The issue to be resolved, therefore, is whether or not Atty. Maclan, after taking back possession of the subject land, is liable to pay the real property taxes due thereon during the period that NHA took actual possession as stated above. "In this connection, attention is invited to the 3rd Indorsement dated December 20, 1988 of the Department of Finance treating on a similar subject matter, . . ." "In view of the foregoing, the real property tax exemption prayed for from 1975 up to the time Atty. Maclan recovered possession of the subject property should be granted. . . ." In the same vein, when the subject Road Lot 1 was initially set aside, as a condition for the approval by the then National Planning Commission of the Subdivision plan of QCDFC, and, thereupon, after the same was declared by the Supreme Court to have been "withdrawn from the commerce of man and should be developed for the use of the general public," its owner (QCDFC) had been similarly deprived of the attributes of ownership over the said parcel of land although, the titles thereon were retained by the said owner. In view thereof, the subject Road Lot 1 of QCDFC should not have been declared by the City Assessor of Quezon City as taxable, and, thereupon, no real property tax delinquencies must have been incurred thereon until such time that the Supreme Court lifted the said reservation over the same effective February 24, 1999 when the said Decision became final and executory per attached Entry of Judgment concerning the said case. Accordingly, this Bureau finds no legal impediment in granting Mr. Leviste the requested clearance stating that QCDFC has no real property tax liabilities with the Office of City Treasurer of Quezon City, provided that real property taxes on the subject Road Lot 1 have been paid until it has been set aside or reserved as such in 1960. The foregoing opinion is issued on the basis of the facts presented by QCDFC and, therefore, it is understood that, in the event that contradicting details on the subject matter will be uncovered later on that would render this opinion inconsistent with the abovecited rulings of the Department of Finance, the same will be considered null and void. The City Assessor and the City Treasurer of Quezon City are, therefore, hereby given instructions to make the necessary rectifications of the real property tax assessment and collection records concerning the subject real property of QCDFC in accordance herewith. DEIHAa Be guided accordingly. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge