Facts:
·
MERALCO is a
private corporation organized and existing under Philippine laws to operate as
a public utility engaged in electric distribution.
·
On February
20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax
Declaration No. 019-6500 covering the following electric facilities, classified
as capital investment, of the company: (a) transformer and electric post; (b)
transmission line; (c) insulator; and (d) electric meter, located in Quezon
Ave. Ext., Brgy. Gulang-Gulang, Lucena City. Under Tax Declaration No.
019-6500, these electric facilities had a market value of P81,811,000.00 and an
assessed value of P65,448,800.00, and were subjected to real property tax as of
1985.
·
MERALCO
appealed Tax Declaration No. 019-6500 before the LBAA[1] of
Lucena City. MERALCO claimed that its capital investment consisted only
of its substation facilities, the true and correct value of which was only
P9,454,400.00; and that MERALCO was exempted from payment of real property tax
on said substation facilities.
·
The LBAA
rendered a Decision in LBAA-89-2 on July 5, 1989, finding that under its
franchise, MERALCO was required to pay the City Government of Lucena a tax
equal to 5% of its gross earnings, and "[s]aid tax shall be due and
payable quarterly and shall be in lieu of any and all taxes of any kind,
nature, or description levied, established, or collected x x x, on its poles,
wires, insulators, transformers and structures, installations, conductors, and
accessories, x x x, from which taxes the grantee (MERALCO) is hereby expressly
exempted.
·
The City
Assessor of Lucena filed an appeal with the CBAA[2]. CBAA
affirmed the assailed LBAA judgment. Apparently, the City Assessor of Lucena no
longer appealed said CBAA Decision and it became final and executory.
·
Six years
later, on October 29, 1997, MERALCO received a letter19 dated October 16, 1997
from the City Treasurer of Lucena, which stated that the company was being
assessed real property tax delinquency on its machineries beginning 1990, in
the total amount of P17,925,117.34
·
MERALCO appealed Tax Declaration Nos. 019-6500 and
019-7394 before the LBAA of Lucena City on December 23, 1997 and posted a
surety bond dated December 10, 1997 to guarantee payment of its
real property tax delinquency.
·
LBAA declared
that Sections 234 and 534(f) of the Local Government Code repealed the
provisions in the franchise of MERALCO and Presidential Decree No. 551 pertaining to the exemption of MERALCO from payment of
real property tax on its poles, wires, insulators, transformers, and meters
·
MERALCO went before the CBAA on appeal, which was
docketed as CBAA Case No. L-20-98. The CBAA, in its Decision dated May 3, 2001, agreed
with the LBAA that MERALCO could no longer claim exemption from real property
tax on its machineries with the enactment of Republic Act No. 7160, otherwise
known as the Local Government Code of 1991
·
The Court of
Appeals further ruled that there was no more basis for the real property tax
exemption of MERALCO under the Local Government Code and that the withdrawal of
said exemption did not violate the non-impairment clause of the Constitution
·
Lucena: MERALCO
was obliged to pay the real property tax due, instead of posting a surety bond,
while its appeal was pending, because Section 231 of the Local Government Code
provides that the appeal of an assessment shall not suspend the collection of
the real property taxes
Issue: W/ON Surety Bond instead of paying with cash is sufficient
to enough to comply with Sec 252 of the LGC?
Held: Yes. By posting a
surety bond before filing its appeal of the
assessment with the
LBAA, MERALCO substantially complied
with the requirement of payment under
protest in Section 252 of the Local
Government Code.
Section 252 of the Local Government Code mandates that
"[n]o protest shall be entertained unless the taxpayer first pays the
tax." It is settled that the requirement of "payment under
protest" is a condition sine qua non before an appeal may be entertained
Clearly, under the Local
Government Code, even when the assessment of the real property is appealed, the
real property tax due on the basis thereof should be paid to and/or collected
by the local government unit concerned.
In the case at bar, the
City Treasurer of Lucena, in his letter dated October 16, 1997, sought to
collect from MERALCO the amount of P17,925,l 17.34 as real property taxes on
its machineries, plus penalties, for the period of 1990 to 1997, based on Tax
Declaration Nos. 019-6500 and 019-7394 issued by the City Assessor of Lucena.
MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 with the LBAA, but
instead of paying the real property taxes and penalties due, it posted a surety
bond in the amount of PI 7,925,117.34.
By posting the surety bond, MERALCO
may be considered to have substantially complied with Section 252 of the Local
Government Code for the said bond already guarantees the payment to the Office
of the City Treasurer of Lucena of the
total amount of real property taxes and penalties due on Tax Declaration Nos. 019-6500
and 019-7394. This is not the first time that the Court allowed a surety bond
as an alternative to cash payment of the real property tax before
protest/appeal as required by Section 252 of the Local Government Code. In Camp John Hay Development Corporation v.
Central Board of Assessment Appeals the
Court affirmed the ruling of the CBAA and the Court of Tax Appeals en bane
applying the "payment under protest" requirement in Section 252 of
the Local Government Code and remanding the case to the LBAA for "further
proceedings subject to a full and up-to-date payment, either in cash or surety, of realty tax on the subject properties
