Manila Electric Co. v. Office of the City Treasurer of Bacoor City

[CBAA CASE NO. L-144-2020. August 19, 2022.] (LBAA Case No. 2018-01) MANILA ELECTRIC COMPANY (MERALCO) , petitioner-appellant , vs. LOCAL BOARD OF ASSESSMENT APPEALS OF BACOOR CITY, CAVITE , appellee , OFFICE OF THE CITY TREASURER OF BACOOR CITY, represented by Atty. Edith C. Napalan, City Treasurer Bacoor City , respondent-appellee . DECISION Before this Board is an Appeal assailing the Resolution dated 9 January 2019 and the Order dated 14 November 2019 of the Local Board of Assessment Appeals ("LBAA") of Bacoor City, Cavite. Said ruling found the protest of Petitioner-Appellant partially meritorious and held that the transformers, electric posts, transmission lines, insulators, and electric meters of Petitioner-Appellant are not exempted from real property tax under the Local Government Code. However, the LBAA also declared the Summary of Collectibles dated 10 September 2017 as violating the right to due process of Petitioner-Appellant for not complying with the requirements of the Local Government Code and directed that a new appraisal and assessment of the same properties be conducted by the City Assessor of Bacoor from 1996 to present in accord with the provisions of the Local Government Code and its implementing rules and regulations. ANTECEDENTS On 27 June 2017, Petitioner-Appellant received a copy of the "Summary of Collectibles Electrical Poles as of June 2017" ("Summary of Collectibles") with attached various Real Property Tax Bills requiring it to settle the real property taxes due on its electric poles in the total amount of Fourteen Million Three Hundred Forty-Five Thousand Five Hundred Fifty-Eight Pesos and 18/100 (PHP14,345,558.18) covering the taxable period from 1996 to 2017. The pertinent details of the Summary of Collectibles and Real Property Tax Bills provide: HTcADC ANNEX Tax Declaration Number Assessed Value Period Tax Due "A-1" 03-0001-02107 217,680.00 1996-2017 159,646.66 "A-2" 03-0003-02272 728,110.00 1996-2017 533,995.80 "A-3" 03-0004-00428 671,730.00 1996-2017 492,646.94 "A-4" 03-0006-00108 380,050.00 1996-2017 278,728.68 "A-5" 03-0007-00043 795,830.00 1996-2017 583,661.88 "A-6" 03-0008-00083 903,740.00 1996-2017 662,802.98 "A-7" 03-0009-06409 1,476,690.00 1996-2017 1,083,004.52 "A-8" 03-0010-00240 486,820.00 1996-2017 357,033.64 "A-9" 03-0013-00842 846,910.00 1996-2017 621,123.72 "A-10" 238-0014-11206 1,766,770.00 1996-2017 1,295,748.96 "A-11" 03-0017-07758 1,362,600.00 1996-2017 1,526,657.04 "A-12" 03-0018-00101 716,930.00 1996-2017 525,796.62 "A-13" 238-0019-14348 4,324,560.00 1996-2017 3,171,632.24 "A-14" 03-0021-00358 904,330.00 1996-2017 663,235.78 "A-15" 03-0022-00911 1,752,690.00 1996-2017 1,285,422.92 "A-16" 03-0016-01997 1,505,890.00 1996-2017 1,104,419.80 14,345,558.18 On 11 September 2017, Petitioner-Appellant filed a protest on the Summary of Collectibles before the Office of the City Treasurer for the period covering 1996-2017. Petitioner-Appellant paid under protest the said collectibles by a posting a Surety Bond issued in the same amount as the collectibles. On 8 January 2018, Petitioner-Appellant filed an Appeal with the LBAA on the ground of the denial by inaction of the Bacoor City Treasurer on the letter-protest dated 10 September 2017 questioning the validity of the Summary of Collectibles. The LBAA in its Resolution dated 9 January 2019, found the appeal partially meritorious, the dispositive portion of the Resolution reads: "WHEREFORE, premises considered, the Board finds the instant protest PARTIALLY meritorious. The Board HOLDS that the transformers, electric posts, transmission lines, insulators and electric meters of MERALCO are NOT EXEMPTED from real property tax under the Local Government Code. However, the Board also DECLARES the Summary of Collectibles dated September 10, 2017 as violating the right to due process of MERALCO for not complying with the requirements of the Local Government Code and, DIRECTS that a new appraisal and assessment of the same properties be conducted by the City Assessor of Bacoor from 1996 to present in accord with the provisions of the Local Government Code and its implementing rules and regulations." Hence, on 21 March 2019, Petitioner-Appellant filed a Motion for Partial Reconsideration on the said Resolution. CAIHTE On 11 December 2019, Petitioner-Appellant received an Order dated 14 November 2019 issued by the LBAA denying Petitioner-Appellant's Motion. On 09 January 2020, and 10 January 2020, Petitioner filed an appeal to this Board, through registered mail and by personal service, respectively. ISSUES The following are the issues for resolution before this Board, to wit: A. Whether or not the City of Bacoor has the authority to assess and demand real property taxes prior to 10 April 2012 (the date of its creation by RA No. 10160) . B. Whether or not the City Treasurer's right to demand real property taxes for the years 1996 until 2017 had prescribed . C. Whether or not LBAA has jurisdiction over the person of the City Assessor of Bacoor directing the latter to conduct a new appraisal and assessment of the same properties from 1996 to present . D. Whether or not all MERALCO's electric poles installed in Bacoor City are subject to real property tax . RULING Authority of City of Bacoor to assess and demand real property taxes prior to 10 April 2012 Petitioner-Appellant argues that LBAA failed to show any valid reason in ruling that the Bacoor City Treasurer can collect real property taxes prior to its cityhood by virtue of RA 10160 on 10 April 2012. Thus, when it was still a municipality before the effectivity of RA 10160, the power to impose real property was expressly withheld from it. As such, there is no ordinance regarding the imposition of real property taxes to the then Municipality of Bacoor to re-enact or be re-enacted. The Petitioner-Appellant further argues that the power of taxation is statutory and may be provided by law. In the absence of a statute which provides for the imposition of a tax, the same may not be assessed by a taxing authority. Petitioner-Appellant claims that since becoming a city, the City of Bacoor has been given the power to assess and collect taxes within its territorial boundaries. This power, however, is not retroactive. The City Treasurer cannot collect real property taxes prior to Bacoor's cityhood on 10 April 2012. It was the province of Cavite that had the power to levy real property tax at the time when Bacoor was not yet a city. aScITE On its part, Respondent-Appellee counters that the Municipal Treasurer of Bacoor is responsible and authorized to collect real property taxes equally with the Provincial Treasurer. Even when Bacoor City was still a municipality, it has always been authorized to assess and collect real property taxes. When the local government unit of Bacoor was made into a component city by virtue of Republic Act No. 10160, its City Treasurer continues to be authorized under the Revised Revenue Code of the Province of Cavite, to collect the aforementioned tax in their behalf for the unpaid taxes due thereto. Section 232 of RA 7160, the Local Government Code provides: Section 232. Power to Levy Real Property Tax . A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted. It is well-defined under Section 232 of the Local Government Code that the power to levy real property tax belongs to: (1) a province; (2) a city; and (3) a municipality within the Metropolitan Manila Area. The municipality Bacoor became the City of Bacoor on 10 April 2012 by virtue of Republic Act No. 10160, otherwise known as the "Charter of the City of Bacoor." Section 4 of the Charter of the City of Bacoor enumerates the general powers of the City of Bacoor, which includes, among others: Section 4. General Powers . The City shall have a common seal and may alter the same at pleasure: Provided, That any change of corporate Seal shall be registered with the Department of the Interior and Local Government (DILG). It shall exercise the powers to levy taxes, fees and charges; x x x. It is clear that the City of Bacoor by virtue of its Charter which became effective on 10 April 2012 was empowered to levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not specifically exempted under the Local Government Code. And consistent with Article 4 of the Civil Code which states that laws shall have no retroactive effect, unless the contrary is provided, therefore, the power of the City of Bacoor to levy an annual ad valorem tax on real property took effect only on 10 April 2012 and it shall have no retroactive effect unless the contrary is provided. Bacoor was a municipality and converted to a city by virtue of Republic Act No. 10160 only on 10 April 2012, hence, it is entitled to assess and collect taxes beginning on said date only and not before. DETACa City Treasurer's right to demand real property taxes The Petitioner-Appellant contends that the inclusion of "municipal assessor" in Sections 220 and 223 of the LGC pertains to the exercise of the authority by the municipal assessor to assess real property taxes in a representative capacity in behalf of the provincial assessor who is duly authorized and/or authority provided under Article 232 to municipal assessors in the Metropolitan Manila Area. The Petitioner-Appellant also contends that under its Charter, the City of Bacoor has been given the power to assess and collect taxes within its territorial boundaries. This power, however, is not retroactive. The City Treasurer cannot collect real property taxes prior to Bacoor's cityhood on 10 April 2012. It was the province of Cavite that had the power to levy real property tax at the time when Bacoor was not yet a city. The Petitioner-Appellant asserts that the law also does not give the provincial treasurer the power to deputize city treasurers to collect taxes on its behalf. Only municipalities and barangays may be deputized by the Province to collect real property taxes, and not cities. Assuming arguendo that, while Bacoor was still a municipality, its municipal treasurer was deputized by the Cavite Provincial Treasurer to collect real property tax, said deputation ipso facto ceased when Bacoor became a city since, city treasurers are not one of those authorized to be deputized by the provincial treasurers. For its part, Respondent-Appellee maintains that even when Bacoor City was still a municipality, it has always been authorized to assess and collect real property taxes. When the local government unit of Bacoor was made into a component city by virtue of Republic Act No. 10160, its City Treasurer continues to be authorized as per Section 2F.02 of the Revised Revenue Code of the Province of Cavite, to collect the aforementioned tax in their behalf for the unpaid taxes due thereto. Respondent-Appellee opines that the law explicitly empowers the provincial treasurer and the city or municipal treasurer to collect real property taxes as also provided in Section 200 of the LGC in connection with Section 247 thereof. The City Treasurer is one of the officials of the City of Bacoor whose qualifications, appointment, and powers are provided for under Section 27 of RA 10160, to wit: "SECTION 27. The City Treasurer . (a) The city treasurer shall be appointed by the Secretary of the Department of Finance (DOF) from a list of at least three (3) ranking eligible recommendees of the city mayor, subject to civil service law, rules and regulations. xxx xxx xxx (e) The city treasurer shall take charge of the city finance department, and shall: (1) Advise the city mayor, the sangguniang panlungsod and other local government and national officials concerned regarding disposition of local government funds and on such other matters relative to public finance; (2) Take custody and exercise proper management of the funds of the City; HEITAD (3) Take charge of the disbursement of all funds of the City and such other funds, the custody of which has been entrusted by law or other competent authority; (4) Inspect private commercial and industrial establishments within the jurisdiction of the City in relation to the implementation of tax ordinances, pursuant to the provisions of the Local Government Code of 1991; (5) Maintain and update the tax information system of the City; and (6) Perform such other duties and functions and exercise such other powers as provided for under the Local Government Code of 1991, and those that are prescribed by law or ordinance." The City Treasurer of Bacoor exercises above enumerated powers only upon effectivity of the Charter of City of Bacoor on 10 April 2012. Again, consistent with Article 4 of the Civil Code which states that laws shall have no retroactive effect, unless the contrary is provided, therefore, the power of the City Treasurer of Bacoor to collect an annual ad valorem tax on real property took effect only on 10 April 2012 and it shall have no retroactive effect unless the contrary is provided. LBAA's jurisdiction over the person of the City Assessor of Bacoor directing the latter to conduct a new appraisal and assessment of the same properties The Petitioner-Appellant claims that the LBAA has no jurisdiction over the person of the City Assessor of Bacoor. The LBAA has no power to direct the City Assessor of Bacoor to conduct a new appraisal and assessment of the same properties from 1996 to present. Petitioner-Appellant emphasizes that the City Assessor is not a party to the present case precisely because MERALCO has not yet received the notices of assessment and tax declarations that would have been the basis of the Summary of Collectibles issued by the City Treasurer. The Petitioner-Appellant further argues that the LBAA-Bacoor declared null and void the Summary of Collectibles by the City Treasurer due to failure of the City Assessor to issue the notices of assessment which shows that the LBAA did not acquire jurisdiction over the person of the City Treasurer, thus, the LBAA acted without jurisdiction when it directed said office to conduct new appraisal and assessment from 1996 to present. aDSIHc On the other hand, Respondent-Appellees the believes that the City Government of Bacoor is not bound by the mistake and/or negligence of its employees as jurisprudence are clear that the government is not bound by the errors of its agent especially in cases of collection of taxes. The jurisdiction of the LBAA is found under the 2016 Consolidated and Revised Rules of Procedure before the Local Boards of Assessment Appeals and the Central Board of Assessment Appeals , Rule III, Section 4 thereof, provides: "SECTION 4. Jurisdiction of the Local Boards . It shall have the original jurisdiction to hear and decide appeals of owners/administrators of real property from the actions of the provincial, city or municipal assessors in the assessments of their real properties, and from the actions of the provincial, city or municipal treasurers in the collection of real property taxes, special levies, or other real property taxes under Title Two, Book II of Republic Act No. 7160" The LBAA based on the above provision of the LGC has jurisdiction over the person of the City Assessor of Bacoor and contrary to the stand of the Petitioner-Appellant, it is not the party to the case which defines jurisdiction of the LBAA but rather the rule or law itself. In the instant case, the LBAA may direct the City Assessor to conduct an assessment on the subject property. However, the LBAA can not direct the City Assessor to conduct assessment of the property prior to the enactment of the Charter of the City of Bacoor or prior to 10 April 2012. Electric poles may qualify as "machinery" Petitioner-Appellant faults the LBAA of Bacoor when it interpreted the "2015 MERALCO vs. Lucena" case, which held that: "The transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO may qualify as "machinery" under the Local Government Code subject to real property tax." (Emphasis supplied) despite the use by the Supreme Court of the phrase "may qualify" in referring to MERALCO's poles, it erroneously interpreted the same to mean that all electric poles are automatically considered machineries that are subject to real property tax. Petitioner-Appellant adds that MERALCO's poles are also being used by other entities like telephone and cable companies which the City Treasurer never disputed the fact that MERALCO is not exclusively using its poles. Section 199 (o) of the Local Government Code of 1991 expressly provides that the facilities must be exclusively used to meet the needs of the industry, business, or activity. ATICcS Likewise Petitioner-Appellant emphasizes that there are conditions that should be met before the poles can be made subject to real property tax such as 1) machinery should be actually, directly, and exclusively used to meet the needs of the particular industry, business or activity; and 2) which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes. Therefore, electric poles are not automatically considered machinery that are subject to real property tax. On the other hand, Respondent-Appellee argues that the " 2015 MERALCO vs. City of Lucena " case held that the definition of machinery and the taxability of transformers and electric posts are within the scope of the definition of real property. It adds that what needs to be, directly and exclusively used are those appurtenant service facilities, those which are mobile, self-powered or self-propelled, or are not permanently attached. A perfunctory glance at the MERALCO electric poles would readily reveal that it cannot be classified as such. The Respondent-Appellee points that the City Assessor need not allege that the said electric poles are, directly and exclusively used by MERALCO for the purpose of real property taxation because the above-mentioned Supreme Court decision already expressly provides that the same are taxable. Hence, there is no need for the electric poles to be declared by the city assessor as subject of taxation. The Respondent-Appellee underscores that based on the records of the case, MERALCO did not present evidence of its exemption from payment of real property taxes apart from stating that the electric poles are not exclusively used by MERALCO considering said posts are also utilized by cable and telephone companies, thus excluded as machinery to be subject of real property taxes under Section 199 (o) of the Local Government Code. For failure of MERALCO to allege or provide any other privilege or exemption that were granted to it by the legislature after the enactment of the Local Government Code, Respondent conclude that the presumption stays that it enjoys no such privilege or exemption. Respondents-Appellees take refuge in the case of "2015 Meralco vs. Lucena City," which held that MERALCO do not qualify under the ownership character or usage exemptions. The Supreme Court in the off-cited case of Manila Electric Co. v. City Assessor, G.R. No. 166102, August 5, 2015 , or the "2015 MERALCO v. City of Lucena" case ruled on the taxability of MERALCO's electric posts, as follows: "While the Local Government Code still does not provide for a specific definition of "real property," Sections 199 (o) and 232 of the said Code, respectively, gives an extensive definition of what constitutes "machinery" and unequivocally subjects such machinery to real property tax. The Court reiterates that the machinery subject to real property tax under the Local Government Code "may or may not be attached, permanently or temporarily to the real property;" and the physical facilities for production, installations, and appurtenant service facilities, those which are mobile, self-powered or self-propelled, or are not permanently attached must (a) be actually, directly, and exclusively used to meet the needs of the particular industry, business, or activity; and (2) by their very nature and purpose, be designed for, or necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes. ETHIDa Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and, buildings, roads and constructions of all kinds adhered to the soil." The land, buildings, and roads are immovables by nature "which cannot be moved from place to place," whereas the constructions adhered to the soil are immovables by incorporation "which are essentially movables, but are attached to an immovable in such manner as to be an integral part thereof." Article 415, paragraph (3) of the Civil Code, referring to "[e]verything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object," are likewise immovables by incorporation. In contrast, the Local Government Code considers as real property machinery which "may or may not be attached, permanently or temporarily to the real property," and even those which are "mobile." Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[m]achinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works." The Civil Code, however, does not define "machinery." The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which are essentially movables, but by the purpose for which they have been placed in an immovable, partake of the nature of the latter because of the added utility derived therefrom." These properties, including machinery, become immobilized if the following requisites concur: (a) they are placed in the tenement by the owner of such tenement; (b) they are destined for use in the industry or work in the tenement; and (c) they tend to directly meet the needs of said industry or works. The first two requisites are not found anywhere in the Local Government Code. MERALCO insists on harmonizing the aforementioned provisions of the Civil Code and the Local Government Code. The Court disagrees, however, for this would necessarily mean imposing additional requirements for classifying machinery as real property for real property tax purposes not provided for, or even in direct conflict with, the provisions of the Local Government Code. TIADCc As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a special law granting local government units the power to impose real property tax, then the latter shall prevail. As the Court pronounced in Disomangcop v. The Secretary of the Department of Public Works and Highways Simeon A. Datumanong : It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general one. Lex specialis derogant generali . As this Court expressed in the case of Leveriza v. Intermediate Appellate Court , "another basic principle of statutory construction mandates that general legislation must give way to special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the special provisions are not applicable, that specific statute prevails over a general statute and that where two statutes are of equal theoretical application to a particular case, the one designed therefor specially should prevail." (Citations omitted.) The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation that: A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read together and harmonized, if possible, with a view to giving effect to both. The rule is that where there are two acts, one of which is special and particular and the other general which, if standing alone, would include the same matter and thus conflict with the special act, the special law must prevail since it evinces the legislative intent more clearly than that of a general statute and must not be taken as intended to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so to construe it in order to give its words any meaning at all. The circumstance that the special law is passed before or after the general act does not change the principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication. (Citations omitted.) Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals , the Court acknowledged that "[i]t is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property[.]" Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements under the Local Government Code are controlling. cSEDTC MERALCO maintains that its electric posts are not machinery subject to real property tax because said posts are not being exclusively used by MERALCO; these are also being utilized by cable and telephone companies. This, however, is a factual issue which the Court cannot take cognizance of in the Petition at bar as it is not a trier of facts. Whether or not the electric posts of MERALCO are actually being used by other companies or industries is best left to the determination of the City Assessor or his deputy, who has been granted the authority to take evidence under Article 304 of the Rules and Regulations Implementing the Local Government Code of 1991." There is no compelling reason or justification why this Board should digress from the above ruling of the Supreme Court which is apt and applicable in the instant case. WHEREFORE , in view of all the foregoing, the appeal is hereby PARTIALLY GRANTED , the ruling of the LBAA that the transformers, electric posts, transmission lines, insulators and electric meters of MERALCO are NOT EXEMPTED from real property tax under the Local Government Code is hereby AFFIRMED . On the Summary of Collectibles dated 10 September 2017, the declaration of the LBAA that the Summary of Collectibles dated 10 September 2017 as violating the right to due process of MERALCO for not complying with the requirements of the Local Government Code, is likewise, AFFIRMED . However, the Board hereby DIRECTS that a new appraisal and assessment of the subject properties be conducted by the City Assessor of Bacoor from 10 April 2012 to present in accord with the provisions of the Local Government Code and its implementing rules and regulations. AIDSTE SO ORDERED. Manila, Philippines, August 19, 2022. (SGD.) ROBERT H. TOBIA Chairperson VACANT Member (SGD.) SILVERIO Q. CASTILLO Member