Philippine Fisheries Development Authority v. Lucena City Assessor

[CBAA CASE NO. L-33. October 5, 2005.] PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY , petitioner-appellant , vs. THE LOCAL BOARD OF ASSESSMENT APPEALS OF LUCENA CITY , appellee , LUCENA CITY ASSESSOR and LUCENA CITY TREASURER , respondents-appellees . DECISION This is an Appeal by the Philippine Fisheries Development Authority (PFDA), Petitioner-Appellant, against the Decision of the Local Board of Assessment Appeals (LBAA) of Lucena City, which dispositive portion is as follows: "WHEREFORE, premises considered, subject Petition of the Philippine Fisheries Development Authority (PFDA) for the deletion of subject roll of the City Assessor of Lucena City, the tax declaration of subject properties in the name of Philippine Fisheries Development Authority, is hereby DISMISSED for lack of merit. PFDA is hereby ordered to pay the realty tax of subject properties as assessed in accordance with law." The records show that the Lucena Fishing Port Complex (LFPC) is one of the fishery infrastructure projects undertaken by the National Government under the Nationwide Fish Port-Package . Located at Barangay Dalahican, Lucena City, the fish port was constructed on a reclaimed land with an area of 8.7 hectares more or less, at a total cost of PHP296,764,618.77 financed through a loan (L/A PH-25 and 51) from the Overseas Economic Cooperation Fund (OECF) of Japan, dated November 9, 1978 and May 31, 1978, respectively. The Philippine Fisheries Development Authority (PFDA) was created by virtue of P.D. 977 as amended by E.O. 772, with functions and powers to "(m)anage, operate, and develop the Navotas Fishing Port Complex and such other fishing port complexes that may be established by the Authority. Pursuant thereto, Petitioner-Appellant PFDA took over the management and operation of LFPC in February 1992. On October 26, 1999, in a letter addressed to PFDA, the City Government of Lucena demanded payment of realty taxes on the LFPC property for the period from 1993 to 1999 in the total amount of P39,397,880.00. This was received by PFDA on November 24, 1999. On October 17, 2000 another demand letter was sent by the Government of Lucena City on the same LFPC property, this time in the amount of P45,660,080.00 covering the period from 1993 to 2000. On December 18, 2000 Petitioner-Appellant filed its Appeal before the Local Board of Assessment Appeals of Lucena City, which was dismissed for lack of merit. On November 6, 2001 Petitioner-Appellant filed its motion for reconsideration; this was denied by Appellee Local Board on December 10, 2001, hence this Appeal. CAIHTE Petitioner-Appellant advanced the following: "LONE ISSUE SUBMITTED FOR RESOLUTION WHETHER OR NOT PETITIONER-APPELLANT IS LIABLE FOR THE REAL PROPERTY TAX ASSESSED ON THE REAL PROPERTIES OF LUCENA FISHING PORT COMPLEX PURSUANT TO SECTION 234 OF THE LOCAL GOVERNMENT CODE OF 1991, NOTWITHSTANDING THAT THE COMPLEX IS OWNED BY THE REPUBLIC OF THE PHILIPPINES." Petitioner-Appellant cited Presidential Decree No. 977, as amended, which defined Petitioner-Appellant's "functions and powers and for other purposes": "'Sec. 4. Functions and Powers. The Authority shall have the following functions and powers. (a) To manage, administer, operate, improve and modernize, coordinate and otherwise govern the activities, operation (sic) and facilities in the fishing ports, markets and landings that may hereinafter be placed under, or transferred to the Authority and such other fish markets, fishing ports/harbor and infrastructure facilities and may be established under this Decree, to investigate, prepare, adopt, implement and execute a comprehensive plan for the overall development of fishing port and market complexes and update such plan as may be necessary from time to time; to construct or authorize the construction in the land area under its jurisdiction, or infrastructure facilities, factory buildings, warehouses, cold storage and ice plants, and other structures related to the fishing industry or necessary and useful in the conduct of its business or in the attainment of the purpose and objectives of this Decree: to acquire, hold and dispose real and personal property in the exercise of its functions and powers'; (underscoring ours) xxx xxx xxx 'Sec. 10. Non-profit Character of the Authority; Exemption from taxes. The authority shall be non-profit. After providing for the amortization of the loans with the Asian Development Bank and other financial institutions to finance the Navotas Fisheries Port Project, it shall use the balance of the returns from its capital investment and from development, improvement and maintenance of the fish ports and other related expenditures of the Authority provided that such outlays and expenditures are incorporated in the Annual Budget of the National Government.'" Petitioner-Appellant alleges: 1. The LFPC property belongs to the Republic of the Philippines: "Nowhere in the appellant's Charter (Presidential Decree No. 977, as amended by Executive Order 772) is it provided that ownership of the LFPC is transferred to appellant. At most it only prescribes for the transfer to appellant of exclusive jurisdiction, control, administration and supervision over LFPC (Section 11, E.O. 772). These powers so transferred are essential in carrying out the operations of the complex. Nevertheless, title remains with the Republic of the Philippines." 2. The LFPC property is exempted under P.D. 464 and R.A. 7160: Petitioner-Appellant cites Section 40 of the Real Property Tax Code (P.D. 464), the law then obtaining, which exempts it from real property taxes; the same exemption clause is restated in the LGC, more specifically Section 234 thereof: the LFPC is property of the Republic of the Philippines. The aforecited Section 40, P.D. 464 and Section 234 of R.A. 7160 respectively, read: "SEC. 40. Exemptions from Real Property Tax. The exemption shall be as follows: (a) Real Property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter; provided, however, that this exemption shall not apply to real property of the above named entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person." "SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real property tax: (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 considerations or otherwise, to a taxable person." Petitioner-Appellant further quotes the Supreme Court in the case of NDC vs. Cebu City , 215 SCRA 382 (the NDC case), which "succinctly held that what is important is to establish that the property is owned by the government and once government ownership is determined, the nature of the use of the property becomes immaterial": DETACa "'To come within the ambit of the exemption provided in Art. 3, par. (a), of the Assessment Law, it is important to establish that the property is owned by the government or by its unincorporated agency, and once the government ownership is determined, the nature of the use property (sic) , whether for proprietary or sovereign purposes, becomes immaterial. What appears to have been ceded to MWS (later transferred to NDC), in the case before us (sic) , is merely the administration of the property while the government retains ownership of what has been declared reserved for warehousing purposes under Proclamation No. 430.' ( NDC vs. Cebu City , 215 SCRA 382, at p. 391)" In the aforecited case, the administration of the property is only transferred to NDC, a government corporation: Petitioner-Appellant is similarly situated as the government has not transferred ownership of the LFPC to PFDA. 3. PFDA is not the beneficial user of the LFPC property. Under Sec. 234, R.A. 7160, real property owned by the Republic of the Philippines is taxable "when the beneficial use thereof has been granted for consideration or otherwise through a taxable person." As established "the beneficial use of subject property has NOT been granted to appellant." 4. "Appellant is NOT a taxable person. The subject property is registered in the name of the Republic of the Philippines and the same is only being administered, managed, and operated by appellant in behalf of its true owner, the Republic of the Philippines." Parenthetically: time and again overtures were made by the parties to enter into a Compromise Agreement. No Compromise Agreement thereto was reached hence, the submission of the case for Decision. Petitioner-Appellant's avowal that the LFPC property belongs to the Republic of the Philippines and its contentions that "(n)owhere in the appellant's Charter (Presidential Decree No. 977 as amended by Executive Order 772) is it provided that ownership of the LFPC is transferred to appellant" and its allegation that "(a)t most it only prescribes for the transfer to appellant of exclusive jurisdiction, control, administration and supervision over LFPC," is quite incorrect, SEC. 11 of P.D. 977 (Charter of PFDA) reads: "SEC. 11. The Navotas Fishing Port and Fish Market; Other Fish Markets Facilities/Infrastructures. The Navotas Fish Market x x x, including all lands, piers, wharves, quays, landings, anchorages, basin breakwaters, markets and other infrastructure facilities therein, is hereby transferred to and placed under the exclusive jurisdiction, control, administration, and supervision of the Authority. Other fish markets and related facilities may be established by the Board, with the approval of the President of the Philippines, to be governed and operated by the Authority under this Decree." SECTION 5 of E.O. 772 amended SEC. 11 of P.D. 977 to wit: "SEC. 11. The Navotas Fishing Port Complex; Other Fishing Port Complexes. The Navotas Fishing Port Complex x x x, including all lands, piers, wharves, quays, landings, anchorages, basin, breakwaters, markets and other infrastructure facilities therein, is hereby transferred to and placed under the exclusive jurisdiction, control, administration, and supervision of the Authority. Other fishing port complexes and related facilities may be established by the Board, with the approval of the President of the Philippines, to be governed and operated by the Authority." In the hearing of June 17, 2002, Mr. Juan Gaspar G. Mercado, describing himself as Division Chief detailed to the legal staff of PFDA was called upon to testify to the number of Fishing Port Complexes that PFDA operates. Mr. Gaspar named eight (8), namely, Navotas, Sual, Lucena, Camaligan, Iloilo, Zamboanga, Davao and General Santos City. Under P.D. 977 as amended, all the above-eight Fishing Port Complexes, LFPC included, are inherently "transferred to and placed under the exclusive jurisdiction, control, administration and supervision of the Authority" (the PFDA). Contrary to Petitioner-Appellant's claim, PFDA and NDC, in the aforecited NDC case are not similarly situated. In P.D. 977 as amended the Government of the Republic of the Philippines (GRP) transferred not only the fishing port existing at the time, (which mentioned only the Navotas Fishing Port), but other fishing ports, yet to exist, to the PFDA. aDSIHc In Presidential Proclamation No. 430, (in the NDC case) the government retained ownership of what has been declared reserved for warehousing purposes; merely the administration of the property was ceded to NWC (later transferred to NDC). Instead, the instant case is similar, if not situationally identical, to the case of Mactan Cebu International Airport Authority vs. Marcos (the MCIAA case) (G.R. No. 120082, September 11, 1996). The following is stated of the case: "Mactan Cebu International Airport Authority (MCIAA) was created by the virtue of Republic Act No. 6958, mandated to 'principally undertake the economical, efficient, and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City, x x x and such other airports as may be established in the Province of Cebu x x x' (Sec. 3, RA 6958). It is also mandated to: a) encourage, promote and develop international and domestic air traffic in the Central Visayas and Mindanao regions as a means of making the regions centers of international trade and tourism, and accelerating the development of the means of transportation and communication in the country; and, b) upgrade the services and facilities of the airports and to formulate internationally acceptable standards of airport accommodation and service." Payments of realty taxes on several parcels of land belonging to MCIAA were demanded by the Office of the Treasurer of the City of Cebu. "It was also asserted that it is an instrumentality of the government performing governmental functions." The Supreme Court cited Section 15 of MCIAA's Charter, viz. : "Sec. 15. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation, aerodrome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: x x x." xxx xxx xxx "This 'transfer' is actually an absolute conveyance of the ownership thereof because the petitioner's authorized capital stock consists of, inter alia , 'the value of such real estate owned and/or administered by the airports.' x x x." Petitioner-Appellant begged the question on its "LONE ISSUE SUBMITTED FOR RESOLUTION" (supra) ; Petitioner-Appellant need not have maintained that it is not a beneficial user of LFPC and that it is not a taxable person. All of these hinges on whether or not the LFPC is owned by the Republic of the Philippines. If indeed LFPC is owned by the Republic of the Philippines, as in the NDC case, then it is not taxable. Ownership of LFPC however has, before hand, been handed over to the PFDA, as provided for under Sec. 11 of P.D. 977, as amended, and declared under the MCIAA case. The allegations therefore that PFDA is not a beneficial user of LFPC and not a taxable person are rendered moot and academic by such ownership of PFDA over LFPC. In hindsight, the issue of Prescription was raised before the LBAA of Lucena but not before this Board. LBAA Lucena Board's findings was: "subject Petition was filed out of time." It declared: "On the timeliness of the Petition. We find that no appeal/protest of any action was taken by PFDA in connection with the Demand Letter originally sent by the City Government on October 26, 1999 covering PFDA realty taxes from 1993 to 1999. The follow up demand letter on October 17, 2000 merely reiterated the first assessment and included the assessment for the year 2000. The herein Petition/Protest was filed and received by the Local Board of Assessment Appeals, Lucena City only on December 18, 2000, the same date it was received by the City Treasurer, City Engineer, City Assessor and City Mayor, as per annotation on the petition and the registered receipt of the Post Office. The Petition was filed more than one (1) year after they were notified of the first assessment, which was neither amended nor revoked, much less waived, but merely supplemented by the 2nd assessment." ETHIDa It appears however, that: "On December 18, 2000, PFDA filed Petition dated December 14, 2000 for Protest on Assessment of Real Property Tax, with the Local Assessment Board of Assessment Appeals, Lucena City, asking for deletion from the roll of the City Assessor, subject properties, at the same time praying that PFDA be exempted from payment of realty taxes on the subject real properties in accordance with Section 206, 1991 Local Government Code, to wit: Section 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, titles of ownership, Articles of Incorporation, by laws 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 as tax exempt, the same shall be dropped from the assessment roll." Pursuantly: How could the property be tax exempt and dropped from the assessment roll, as provided for under Sec. 206, R.A. 7160 (supra) , unless proven to be so? Would not such proof be ultimately determined in proceedings before a proper forum? PFDA's Charter, P.D. 977, provided for exemption from income tax under Par. 2, Sec. 10 thereof: "(t)he Authority shall be exempted from the payment of income tax." Nothing was said however about PFDA's exemption from payment of real property tax: PFDA therefore was not to lay claim for realty tax exemption on its Fishing Port Complexes. Reading Sec. 40 of P.D. 464 and Sec. 234 of R.A. 7160 however, provided such ground: LFPC is owned by the Republic of the Philippines, PFDA is only tasked to manage, operate, and develop the same. Hence, LFPC is exempted from payment of realty tax. Petitioner-Appellant submitted pieces of evidence as (a) the Improvement of LFPC Building Facilities by Edano Construction; (b) Repair of Beacon Lights, Restoration of Security Fence Improvement of Existing Open Canal and Construction of Pier by N.Q. Villapando Construction; (c) Construction of Motorpool, Guardhouse, Tollbooth, Installation of 150KVR Capacitor Bank, Cables, Electrical Lighting System, Telephone Wires, Conduits & Other Related Works by A. Viernes Construction; (d) Improvement of Cooling System for the Refrigeration Facility by ANMOR Construction; (e) Repair and Rehabilitation of the LFPC Multi-Purpose Pier by D.M. Wenceslao and Associates. Petitioner-Appellant also provided this Board with LFPC's (a) General Payroll, (b) Financial Report, (c) Annual Income Tax Return. Evidently, the above-submitted documents showed nothing about ownership of the LFPC being reposed in the Republic of the Philippines: they could only account for the administration by PFDA over LFPC. The ownership of LFPC as passed on by the Republic of the Philippines to PFDA is bourne by Direct evidence: P.D. 977, as amended (supra) . Therefore, Petitioner-Appellant's claim for realty tax exemption on LFPC is untenable. WHEREFORE, for all the foregoing, the herein Appeal is hereby dismissed for lack of merit. SO ORDERED. Manila, Philippines, October 5, 2005. (SGD.) CESAR S. GUTIERREZ Chairman (SGD.) ANGEL P. PALOMARES Member (SGD.) RAFAEL O. CORTES Member