Extent of Authority of the AMLC on the Management of Assets Forfeited in Favor of the National Government

DOJ OPINION NO. 022 , s. 2013 February 18, 2013 Atty. Julia C. Bacay-Abad Officer-in-Charge Secretariat Anti-Money Laundering Council Bangko Sentral ng Pilipinas Complex Manila, Philippines Dear Atty. Abad : This refers to your request for clarificatory opinion on certain issues relating to the extent of the authority of the Anti-Money Laundering Council (AMLC) on the management of assets that were forfeited in favor of the National Government. Specifically, the following issues are raised: 1. Whether the National Government may be held liable to pay the arrears or unpaid real property taxes of the forfeited real properties; 2. Whether the National Government, through the AMLC, may pay the arrears or unpaid real property taxes of the forfeited real properties; and 3. Whether the forfeited properties, whether real or personal, may be sold in public auction, and the proceeds thereof be turned over to the National Treasury after all the taxes and other necessary legal expenses are paid. The request, it appears, is made in connection with the denial by the City Treasurer of Quezon City of AMLC's request for the waiver of the unpaid real property taxes for 2010 and 2011 of a parcel of land, located at Purdue Street, Cubao, Quezon City, and covered by Transfer Certificate of Title (TCT) No. N-205350, on the ground that the prior owner of the forfeited real property was a private individual who is not one of those enumerated in Section 234 of Republic Act No. 7160 (RA 7160), otherwise known as the " Local Government Code of 1991 " as exempt from the payment of real property tax. CSDcTH It also appears that the said real property, among others, was ordered forfeited in favor of the National Government and placed under the authority of the AMLC pursuant to the decision issued by Branch 33, Regional Trial Court (RTC), Manila, in a civil forfeiture case docketed as AMLC Case No. 09-0003. We take it that the dilemma of the AMLC is that formal transfer of ownership and title of the forfeited property to the Republic of the Philippines or the National Government would not be possible if the arrears or unpaid real property taxes are not paid to the City Treasurer of Quezon City not only because the private individual in whose name the property is registered may no longer be expected to pay the arrears or unpaid real property taxes but also since the local government unit, in whose jurisdiction the forfeited real property is located, is of the position that it is entitled to the payment of real property tax prior to the transfer of title and ownership of the forfeited real property in favor of the National Government. It is the claim of your Office that under paragraph 3, Section 7 of Republic Act No. 9160 1 (RA 9160), as amended, the AMLC is authorized "to institute civil forfeiture proceedings", through the Office of the Solicitor General, applying the Rules of Procedure in Cases of Civil Forfeiture, Asset Preservation and Freezing of Monetary Instrument, Property, or Proceeds representing, involving, or relating to an Unlawful Activity or Money Laundering Offense; that the AMLC is prosecuting a number of civil forfeiture cases involving real and personal properties other than cash; that RA 9160, as amended, and the Rules on Civil Forfeiture, however, provide no provision which addresses the management of forfeited assets in favor of the National Government; and that forfeited cash, like bank deposits, is nevertheless remitted directly to the National Treasury. In the light of the foregoing circumstances, it must be borne in mind that the subject real property taxes imposed on the forfeited real property are perfectly valid insofar as the assessment thereof was made prior to its forfeiture in favor of the government, the prior owner of the forfeited real property being a private individual who is not exempted from Payment of real property tax under RA 7160. For this reason, the real property taxes constitute a lien on the property the forfeited real property subject to tax and may only be extinguished upon payment of the tax and related interests and expenses. This is clear from Section 257 of RA 7160, to wit: TaHDAS Section 257. Local Government's Lien. The basic real property tax and any other tax levied under this Title constitutes a lien on the property subject to tax , superior to all liens, charges or encumbrances in favor of any person, irrespective of the owner or possessor thereof, enforceable by administrative or judicial action, and may only be extinguished upon payment of the tax and the related interests and expenses . (Emphasis supplied) While we are mindful that Section 234 (a) of Republic Act No. 7160 provides that the properties owned by the Republic of the Philippines are exempt from real property tax, the benefit of said exemption from real property tax would only apply to the Republic of the Philippines or National Government from the time of forfeiture of real property in its favor. Stated differently, the Republic of the Philippines or the National Government or any of its political subdivisions, may be exempted only from payment of real property tax only from the time it acquired ownership of the real property. Consequently, it appears that the Republic of the Philippines or National Government may be held liable to pay for the arrears or unpaid real property taxes of the forfeited property, the prior owner of the forfeited real property being a private individual who is not exempted from payment of real property tax. Besides, it may be significant to note that the exemption from payment of real property tax by the Republic of the Philippines or any of its political subdivision is not absolute since Section 234 of RA 7160 likewise provides that the real property owned by the Republic of the Philippines or any of its political subdivision would not be exempted from real property taxes when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person, thus: " Section 234. Exemptions from Real Property Tax. The following are exempted from payment of the 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 consideration or otherwise, to a taxable person ;" (Emphasis supplied) In the case of City of Pasig v. the Republic of the Philippines , 2 the Supreme Court held that the portions of the properties owned by the Republic of the Philippines are subject to real property tax when they leased the same to taxable entities, thus: "In sum, only those portions of the properties leased to taxable entities are subject to real estate tax for the period of such leases. Pasig City must, therefore, issue to respondent new real property tax assessments covering the portions of the properties leased to taxable entities. If the Republic of the Philippines fails to pay the real property tax on the portions of the properties leased to taxable entities, then such portions may be sold at public auction to satisfy the tax delinquency." ACHEaI Accordingly, the Republic of the Philippines or National Government may be required to pay for the arrears or unpaid real property taxes due on the forfeited property prior to the formal transfer of ownership and title in the same manner that it is liable to pay real property taxes when the beneficial use of the real property it owned has been granted for consideration to a taxable person. It may be important to note that the prior owner of the forfeited property is a private individual, hence, a taxable person. Therefore, if the Republic of the Philippines or National Government would not be able to pay the arrears or unpaid real property taxes of the forfeited real property, the local government of Quezon City may then avail itself of the allowed remedies under RA 7160 to satisfy the tax delinquency. It may be worthy to note, at this point, that the President, however, has the power to condone or reduce the real property tax under Section 217 of RA 7160, to wit: "Section 277. Condonation or Reduction of Tax by the President of the Philippines. The President of the Philippines may, when public interest so requires, condone or reduce the real property tax and interest for any year in any province or city or a municipality within the Metropolitan Manila Area." As to the second query, it is a fundamental rule in administrative law that an administrative agency has such powers as are expressly granted to it by law and those powers that are necessarily implied in the exercise of its express powers. 3 It is equally well-settled that statutes conferring powers on administrative agencies must be liberally construed to enable them to discharge their assigned duties in accordance with the legislative purpose. 4 R.A. 9160, as amended, criminalized money laundering in the Philippines and, at the same time, introduced civil forfeiture as an appropriate remedy for the seizure and forfeiture in favor of the Republic of the Philippines of monetary instrument, property or proceeds involved in or related to an unlawful activity or money laundering offence without the necessity of conviction or prosecution in a criminal case. In line with this, it is reasonable to assume that the express authority of AMLC to institute civil forfeiture proceeding for the purpose of seizing and forfeiting in favor of the Republic of the Philippines of monetary instrument, property or proceeds involved in or related to an unlawful activity or money laundering offence carries with it the implied authority of AMLC to take such actions and measures that would ensure that the forfeited property, whether real or personal, will be eventually transferred in the name of Republic of the Philippines. DSHTaC Corollary, it is our view that the National Government, through the AMLC, may pay the arrears or unpaid real property taxes of the forfeited property for the purpose of transferring the ownership and title of the said property in the name of the Republic of the Philippines. Meanwhile, given that the opinion of this Department is merely advisory in nature, 5 we suggest, that the AMLC likewise seek the official position of the Department of Budget and Management (DBM), insofar as the payment of arrears or unpaid real property would come from the budget of the AMLC, and the Commission on Audit (COA), insofar as the payment of arrears or unpaid real property tax would involve expenditure of public funds. With regard to the last query, this Department finds no legal impediment in selling the forfeited properties, whether real or personal, which are all placed under the authority of the AMLC pursuant to an order of the court. In this regard, we reiterate that the AMLC has the implied authority to take such actions and measures that would ensure that the forfeited property, whether real or personal, will be eventually transferred to Republic of the Philippines. Thus, once the forfeited properties are sold in public auction, the proceeds thereof must be directly remitted to the National Treasury, the principal custodian of financial assets of the National Government, its agencies and instrumentalities, 6 after all the taxes and other necessary legal expenses are paid. This notwithstanding, it must be borne in mind that the forfeited real properties may be sold only by AMLC in public auction in case the said real properties do not form part of public dominion. 7 The properties of public dominion can be found under Article 420 of the Civil Code, to wit: "ARTICLE 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth." Please be advised accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. Anti-Money Laundering Act of 2001. 2. G.R. 185023, August 24, 2011. 3. Sec. of Justice Op. Nos. 106, 66 & 22, s. 2012, citing Laguna Lake Development v. Court of Appeals , 232 SCRA 292, 306. 4. Administrative Law, 4th ed. De Leon, pp. 56-57, citing cases. 5. Secretary of Justice Opinion No. 14, s. 1982; No. 166, s. 1984; No. 66, s. 1987. 6. Section 1 (8) of Executive Order No. 449 (Realigning the Organization of the Bureau of Treasury). 7. See Philippine Fisheries Development Authority vs. Court of Appeals, et al. , G.R. No. 169836, July 31, 2007.