2 Lapu Lapu VS Peza

City of Lapu-Lapu versus Philippine Economic Zone Authority
G.R No. 187584
November 26, 2014
Facts:
City of Lapu-Lapu, through the Office of the Treasurer, demanded an amount of P32,
912, 350.08 from PEZA for real property taxes from 1992 to 1998 on its properties located in the
Mactan Economic Zone citing sections 193 and 234 of the Local Government Code of 1991 that
withdrew the real property tax exemptions previously granted to or presently enjoyed by all
persons. The city pointed out that there is no provision in the Special Economic Zone Act of
1995 exempting PEZA from payment of real property taxes, unlike Section 21 of the Presidential
Decree No. 66 that explicitly provided for EPZAs exemption. And since there is no legal
provision explicitly exempting the PEZA from payment of real property taxes, it argued that it
can tax PEZA. The City made subsequent demands.
PEZA filed a petition for declaratory relief in the Regional Trial Court of Pasay City,
praying that the trial court declare that it exempt from payment of real property taxes. The case
was raffled. The petition was answered by the City maintaining that PEZA is liable for real
property taxes.
The trial court ruled that the City had no authority to tax PEZA characterizing it as an
agency of the National Government. It also granted the petition for declaratory relief and
declared it exempt from payment of real property taxes.
The City filed a motion for reconsideration but was denied. It was then appealed to the
Court of Appeals but the same was dismissed. It filed again a motion for extension of time to file
a motion for reconsideration but was denied by the Court of Appeals.
Issues:
a. Whether or not the Court of Appeals erred in dismissing the City of Lapu-Lapus
appeal for raising pure questions of law?
b. Whether or not Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear,
try, and decide City of Lapu-Lapus petition for declaratory relief?
c. Whether or not PEZA is exempt from payment of real property taxes?
Ruling:
The Court of Appeals did not erred in dismissing the City of Lapu-Lapus appeal for
raising pure questions of law.
Under the Rules of Court, there are three modes of appeal from Regional Trial Court
decisions. The first mode is through an ordinary appeal before the Court of Appeals where the
decision assailed was rendered in the exercise of the Regional Trial Courts original jurisdiction.
It was governed by Rule 41, Sections 3 to 13 of the Rules of Court. Second mode is through a
petition for review before the Court of Appeals where the decision assailed was rendered by the
Regional Trial Court in the exercise of its appellate jurisdiction. Rule 42 of the Rules of Court
governs petitions for review before the Court of Appeals. In petitions for review under Rule 42,
questions of fact, of law, or mixed questions of fact and law may be raised. And the third mode is
through an appeal by certiorari before this court under Rule 45 where only questions of law shall
be raised.
An appeal erroneously taken to the Court of Appeals shall not be transferred to the
appropriate court but shall be dismissed outright. Therefore, Court of Appeals did not err in
dismissing the Citys appeal pursuant to Rule 50, Section 2 of the Rules of Court.
The Regional Trial Court of Pasay had no jurisdiction to hear, try, and decide PEZAs
petition for declaratory relief against City of Lapu-Lapu.
A petition for declaratory relief must satisfy the Six Requisites; first is the subject matter
of the controversy must be a deed, will, contract or other written instrument, statute, executive
order or regulation, or ordinance; second, the terms of said documents and the validity thereof
are doubtful and require judicial construction; third, there must have been no breach of the
documents in question; fourth, there must be an actual justiciable controversy or the "ripening
seeds" of one between persons whose interests are adverse; fifth, the issue must be ripe for
judicial determination; and sixth, adequate relief is not available through other means or other
forms of action or proceeding.
In the case at bar PEZA erred in availing itself of a petition for declaratory relief against
the City. Hence, the Regional Trial Court of Pasay had no jurisdiction over the subject matter of
the action, specifically, over the remedy sought. The trial court should have dismissed the
PEZAs petition for declaratory relief for lack of jurisdiction.
PEZA is exempt from payment of real property taxes because it is an instrumentality of
the national government.
Real property taxes are annual taxes levied on real property such as lands, buildings,
machinery, and other improvements not otherwise specifically exempted under the Local
Government Code. Real property taxes are ad valorem, with the amount charged based on a
fixed proportion of the value of the property. Under the law, provinces, cities, and municipalities
within the Metropolitan Manila Area have the power to levy real property taxes within their
respective territories.
The general rule is that real properties are subject to real property taxes. The exceptions
to the rule are provided in the Local Government Code. Under Section 133(o), local government
units have no power to levy taxes of any kind on the national government, its agencies and
instrumentalities and local government units.
Under the Special Economic Zone Act of 1995, the PEZA was established primarily to
perform the governmental function of operating, administering, managing, and developing
special economic zones to attract investments and provide opportunities for preferential use of
Filipino labor. Under its charter, the PEZA was created a body corporate endowed with some
corporate powers. However, it was not organized as a stock or non-stock corporation. Nothing
in the PEZAs charter provides that the PEZAs capital is divided into shares. The PEZA also has
no members who shall share in the PEZAs profits. It does not compete with other economic
zone authorities in the country and the government may even subsidize the PEZAs operations.
PEZA is an instrumentality of the national government. Furthermore, the lands owned by
the PEZA are real properties owned by the Republic of the Philippines. The City of Lapu-Lapu
and the Province of Bataan cannot collect real property taxes from the PEZA.

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City of Lapu-Lapu versus Philippine Economic Zone Authority

G.R No. 187584

November 26, 2014

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