By LEONARD D. POSTRADO
September 4, 2011, 6:47pm [ Manila Bulletin Online ]
MANILA, Philippines -- The Supreme Court (SC) has nullified the public sale and acquisition by the Pasig City government of the so-called “Payanig” property, a disputed 18.5-hectare lot at the heart of Pasig City’s booming business center, in 2005.
The Presidential Commission on Good Governance (PCGG), which acquired the 18.4691-has lot from an alleged crony of the late former President Ferdinand Marcos, had failed to pay its real property taxes.
This prompted the Pasig City government to put it on public auction and since there was no other bidder, the city government bought the property and was issued the corresponding certificate of sale.
But in its 19-page ruling penned by Associate Justice Antonio Carpio, the SC 2nd Division noted that properties owned by the government are exempt from real property tax.
Thus, the High Court cancelled the P389-million real property tax assessment and the warrants of levy on the property issued by the Pasig City government.
The SC noted that government-owned properties are exempt from real property tax “except when the beneficial use thereof has been granted, for consideration or otherwise, for a taxable person” as stated under Section 234 (a) of Republic Act 7160 or the Local Government Code of the Philippines.”
Still, the High Court allowed the local government to issue to respondent PCGG new real property tax assessments, covering only the portions of the properties actually leased to various taxable individuals and entities and only for the period of such leases.
The SC stressed that interests and penalties on such new real property tax assessment shall accrue only after receipt of new assessment by the PCGG.
“Thus, the portions of the properties not leased to taxable entities are exempt from real estate tax, while the portions of the properties leased to taxable entities are subject to real estate tax. The law imposes the liability to pay real estate tax on the Republic of the Philippines for the portions of the properties leased to taxable entities,” the ruling said.
Court records showed that the controversial property was first owned by Jose Campos, an alleged crony of Marcos and the controlling owner of Mid-Pasig Land Development Corporation (MPLDC) and Independent Realty Corporation (IRC).
In 1986, Campos surrendered the corporations and their assets to the PCGG, including the Payanig property as part of the so-called ill-gotten wealth of the Marcos family, in exchange for his and his associates’ immunity from suit.
On Dec. 2, 2005, the Pasig City government put up the property for sale at public auction due to PCGG’s non-payment of real property taxes.
When the Pasig City government bought the property, the PCGG filed a petition for certiorari, prohibition, and mandamus seeking to nullify the assessment for the payment of real property taxes.
The petition was later granted by the Regional Trial Court (RTC), which also set aside the warrants of levy issued by the city government over the property and its subsequent public auction sale.
In effect, the court prohibited the city government from assessing real property taxes and penalties on the said property.
The Pasig RTC’s decision was later affirmed by the Court of Appeals (CA), prompting the Pasig City government to elevate the case to the SC.
Furthermore, the High Court said Article 420 of the Civil Code classifies “public properties” as those “intended for public use such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, banks, shores” and those that “are intended for some public service for the development of the national wealth.
It added that public properties are not only exempt from real estate tax, but also from sale at public auction.
However, in the case of the Payanig property, the Court held that the parcels of land are not properties of public dominion, since they are not intended for public use nor are they intended for public service.
It noted that MPLDC leases portions of the properties to different business establishments, thus, the portions leased to taxable entities are not only subject to real estate tax, but can also be sold at public auction to satisfy the tax delinquency.
“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 portions of the properties leased to taxable entities,” the SC said.
“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,” it added.
Concurring with the ruling were Associate Justices Arturo Brion, Diosdado Peralta, Jose Portugal Perez, and Jose Mendoza.
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