government policy the establishment of export

processing zones in strategic locations in the

Philippines. Presidential Decree No. 66 aimed to
encourage and promote foreign commerce as a
means of making the Philippines a center of
international trade, of strengthening our export
trade and foreign exchange position, of hastening
SECOND DIVISION industrialization, of reducing domestic
unemployment, and of accelerating the
development of the country.7
G.R. No. 184203, November 26, 2014
chanRoblesvi rt ualLaw lib rary

To carry out this policy, the Export Processing

CITY OF LAPU- Zone Authority (EPZA) was created to operate,
LAPU, Petitioner, v. PHILIPPINE ECONOMIC administer, and manage the export processing
ZONE AUTHORITY, Respondent. zones established in the Port of Mariveles,
Bataan8and such other export processing zones
G.R. NO. 187583 that may be created by virtue of the decree.9 chanRob lesvi rtua lLawl ibra ry

PROVINCE OF BATAAN, REPRESENTED BY The decree declared the EPZA non-profit in

GOVERNOR ENRIQUE T. GARCIA, JR., AND character10 with all its revenues devoted to its
EMERLINDA S. TALENTO, IN HER CAPACITY development, improvement, and maintenance.11
AS PROVINCIAL TREASURER OF To maintain this non-profit character, the EPZA
BATAAN, Petitioners, v. PHILIPPINE was declared exempt from all taxes that may be
ECONOMIC ZONE AUTHORITY, Respondent. due to the Republic of the Philippines, its
provinces, cities, municipalities, and other
government agencies and instrumentalities.12
DECISION Specifically, Section 21 of Presidential Decree No.
66 declared the EPZA exempt from payment of
LEONEN, J.: real property taxes: cha nrob lesvi rtua llawlib ra ry

The Philippine Economic Zone Authority is exempt Section 21. Non-profit Character of the Authority;
from payment of real property taxes. Exemption from Taxes. The Authority shall be
non-profit and shall devote and use all its returns
These are consolidated1 petitions for review on from its capital investment, as well as excess
certiorari the City of Lapu-Lapu and the Province revenues from its operations, for the
of Bataan separately filed against the Philippine development, improvement and maintenance and
Economic Zone Authority (PEZA). other related expenditures of the Authority to pay
its indebtedness and obligations and in
In G.R. No. 184203, the City of Lapu-Lapu (the furtherance and effective implementation of the
City) assails the Court of Appeals decision2 dated policy enunciated in Section 1 of this Decree. In
January 11, 2008 and resolution3 dated August 6, consonance therewith, the Authority is hereby
2008, dismissing the Citys appeal for being the declared exempt: Cha nRobles Vi rtua lawlib rary

wrong mode of appeal. The City appealed the ....

Regional Trial Court, Branch 111, Pasay Citys
decision finding the PEZA exempt from payment (b) From all income taxes, franchise taxes, realty
of real property taxes. taxes and all other kinds of taxes and licenses to
be paid to the National Government, its
In G.R. No. 187583, the Province of Bataan (the provinces, cities, municipalities and other
Province) assails the Court of Appeals government agencies and instrumentalities[.]
decision4dated August 27, 2008 and
resolution5 dated April 16, 2009, granting the In 1979, President Marcos issued Proclamation
PEZAs petition for certiorari. The Court of No. 1811, establishing the Mactan Export
Appeals ruled that the Regional Trial Court, Processing Zone. Certain parcels of land of the
Branch 115, Pasay City gravely abused its public domain located in the City of Lapu-Lapu in
discretion in finding the PEZA liable for real Mactan, Cebu were reserved to serve as site of
property taxes to the Province of Bataan. the Mactan Export Processing Zone.

Facts common to the consolidated petitions In 1995, the PEZA was created by virtue of
Republic Act No. 7916 or the Special Economic
In the exercise of his legislative Zone Act of 199513 to operate, administer,
powers,6 President Ferdinand E. Marcos issued manage, and develop economic zones in the
Presidential Decree No. 66 in 1972, declaring as country.14 The PEZA was granted the power to
register, regulate, and supervise the enterprises support its argument, the City cited a legal
located in the economic zones.15 By virtue of the opinion dated September 6, 1999 issued by the
law, the export processing zone in Mariveles, Department of Justice,27 which stated that the
Bataan became the Bataan Economic Zone16 and PEZA is not exempt from payment of real
the Mactan Export Processing Zone the Mactan property taxes. The Department of Justice based
Economic Zone.17 chanRoblesvi rtual Lawli bra ry its opinion on Sections 193 and 234 of the Local
Government Code that withdrew the tax
As for the EPZA, the law required it to evolve exemptions, including real property tax
into the PEZA in accordance with the guidelines exemptions, previously granted to all persons.
and regulations set forth in an executive order
issued for [the] purpose.18 chanRob le svirt ual Lawlib rary A reply28 was filed by the PEZA to which the City
filed a rejoinder.29 chanRoble svirtual Lawli bra ry

On October 30, 1995, President Fidel V. Ramos

issued Executive Order No. 282, directing the Pursuant to Rule 63, Section 3 of Rules of
PEZA to assume and exercise all of the EPZAs Court,30 the Office of the Solicitor General filed a
powers, functions, and responsibilities as comment31 on the PEZAs petition for declaratory
provided in Presidential Decree No. 66, as relief. It agreed that the PEZA is exempt from
amended, insofar as they are not inconsistent payment of real property taxes, citing Sections 24
with the powers, functions, and responsibilities of and 51 of the Special Economic Zone Act of 1995.
the PEZA, as mandated under [the Special
Economic Zone Act of 1995].19 All of EPZAs The trial court agreed with the Solicitor General.
properties, equipment, and assets, among others, Section 24 of the Special Economic Zone Act of
were ordered transferred to the PEZA.20 chanRoblesvi rtua lLawl ibra ry 1995 provides: chan roblesv irtuallawl ib rary

Facts of G.R. No. 184203 SEC. 24. Exemption from National and Local
Taxes. Except for real property taxes on land
In the letter21 dated March 25, 1998, the City of owned by developers, no taxes, local and
Lapu-Lapu, through the Office of the Treasurer, national, shall be imposed on business
demanded from the PEZA ?32,912,350.08 in real establishments operating within the ECOZONE. In
property taxes for the period from 1992 to 1998 lieu thereof, five percent (5%) of the gross
on the PEZAs properties located in the Mactan income earned by all business enterprises within
Economic Zone. the ECOZONE shall be paid and remitted as
follows:
The City reiterated its demand in the
letter22 dated May 21, 1998. It cited Sections a. Three percent (3%) to the National
193 and 234 of the Local Government Code of Government;
1991 that withdrew the real property tax
exemptions previously granted to or presently b. Two percent (2%) which shall be directly
enjoyed by all persons. The City pointed out that remitted by the business establishments to the
no provision in the Special Economic Zone Act of treasurers office of the municipality or city where
1995 specifically exempted the PEZA from the enterprise is located.
payment of real property taxes, unlike Section 21
of Presidential Decree No. 66 that explicitly Section 51 of the law, on the other hand,
provided for EPZAs exemption. Since no legal provides:c han roblesv irt uallawl ibra ry

provision explicitly exempted the PEZA from

payment of real property taxes, the City argued SEC. 51. Ipso-Facto Clause. All privileges,
that it can tax the PEZA. benefits, advantages or exemptions granted to
special economic zones under Republic Act No.
The City made subsequent demands23 on the 7227, shall ipso-facto be accorded to special
PEZA. In its last reminder24 dated May 13, 2002, economic zones already created or to be created
the City assessed the PEZA ?86,843,503.48 as under this Act. The free port status shall not be
real property taxes for the period from 1992 to vested upon new special economic zones.
2002.
Based on Section 51, the trial court held that all
On September 11, 2002, the PEZA filed a petition privileges, benefits, advantages, or exemptions
for declaratory relief25 with the Regional Trial granted to special economic zones created under
Court of Pasay City, praying that the trial court the Bases Conversion and Development Act of
declare it exempt from payment of real property 1992 apply to special economic zones created
taxes. The case was raffled to Branch 111. under the Special Economic Zone Act of 1995.
Since these benefits include exemption from
The City answered26 the petition, maintaining that payment of national or local taxes, these benefits
the PEZA is liable for real property taxes. To apply to special economic zones owned by the
PEZA. performed governmental functions cannot
completely be addressed by law but [by] the
According to the trial court, the PEZA remained factual and actual activities [the PEZA is] carrying
tax-exempt regardless of Section 24 of the out.43
chanRoblesvi rtual Lawli bra ry

Special Economic Zone Act of 1995. It ruled that

Section 24, which taxes real property owned by Even assuming that the petition involves pure
developers of economic zones, only applies to questions of law, the City contends that the
private developers of economic zones, not to subject matter of the case is of extreme
public developers like the PEZA. The PEZA, importance with [far-reaching] consequence that
therefore, is not liable for real property taxes on [its magnitude] would surely shape and
the land it owns. determine the course of our nations future.44
The Court of Appeals, the City argues, should
Characterizing the PEZA as an agency of the have resolved the case on the merits.
National Government, the trial court ruled that
the City had no authority to tax the PEZA under The City insists that the trial court had no
Sections 133(o) and 234(a) of the Local jurisdiction to hear the PEZAs petition for
Government Code of 1991. declaratory relief. According to the City, the case
involves real property located in the City of Lapu-
In the resolution32 dated June 14, 2006, the trial Lapu. The petition for declaratory relief should
court granted the PEZAs petition for declaratory have been filed before the Regional Trial Court of
relief and declared it exempt from payment of the City of Lapu-Lapu.45 chanRoblesvi rtua lLawl ibra ry

real property taxes.

Moreover, the Province of Bataan, the City of
The City filed a motion for Baguio, and the Province of Cavite allegedly
reconsideration,33 which the trial court denied in demanded real property taxes from the PEZA.
its resolution34 dated September 26, 2006. The City argues that the PEZA should have
likewise impleaded these local government units
The City then appealed35 to the Court of Appeals. as respondents in its petition for declaratory
relief. For its failure to do so, the PEZA violated
The Court of Appeals noted the following issues Rule 63, Section 2 of the Rules of Court, and the
the City raised in its appellants brief: (1) whether trial court should have dismissed the
the trial court had jurisdiction over the PEZAs petition.46 c hanRoblesv irtual Lawlib rary

petition for declaratory relief; (2) whether the

PEZA is a government agency performing This court ordered the PEZA to comment on the
governmental functions; and (3) whether the Citys petition for review on certiorari.47 chanRoble svirtual Lawli bra ry

PEZA is exempt from payment of real property

taxes. At the outset of its comment, the PEZA argues
that the Court of Appeals decision dated January
The issues presented by the City, according to the 11, 2008 had become final and executory. After
Court of Appeals, are pure questions of law which the Court of Appeals had denied the Citys appeal,
should have been raised in a petition for review the City filed a motion for extension of time to file
on certiorari directly filed before this court. Since a motion for reconsideration. Arguing that the
the City availed itself of the wrong mode of time to file a motion for reconsideration is not
appeal, the Court of Appeals dismissed the Citys extendible, the PEZA filed its motion for
appeal in the decision36 dated January 11, 2008. reconsideration out of time. The City has no
more right to appeal to this court.48 chanRoblesv irtual Lawlib rary

The City filed a motion for extension of time to

file a motion for reconsideration,37 which the The PEZA maintains that the City availed itself of
Court of Appeals denied in the resolution38 dated the wrong mode of appeal before the Court of
April 11, 2008. Appeals. Since the City raised pure questions of
law in its appeal, the PEZA argues that the proper
Despite the denial of its motion for extension, the remedy is a petition for review on certiorari with
City filed a motion for reconsideration.39 In the this court, not an ordinary appeal before the
resolution40 dated August 6, 2008, the Court of appellate court. The Court of Appeals, therefore,
Appeals denied that motion. correctly dismissed outright the Citys appeal
under Rule 50, Section 2 of the Rules of
In its petition for review on certiorari with this Court.49 chanRoblesvi rtua lLawl ibra ry

court,41 the City argues that the Court of Appeals

hid under the skirts of technical rules42 in On the merits, the PEZA argues that it is an
resolving its appeal. The City maintains that its agency and instrumentality of the National
appeal involved mixed questions of fact and law. Government. It is therefore exempt from
According to the City, whether the PEZA payment of real property taxes under Sections
133(o) and 234(a) of the Local Government
Code.50 It adds that the tax privileges under The PEZA again requested the Province to
Sections 24 and 51 of the Special Economic Zone suspend collecting its alleged real property
Act of 1995 applied to it.51 chanRoble svirtual Lawlibra ry taxes.61 The Province denied the request in its
letter62 dated January 29, 2004, then served on
Considering that the site of the Mactan Economic the PEZA a warrant of levy63 covering the PEZAs
Zone is a reserved land under Proclamation No. real properties located in Mariveles, Bataan.
1811, the PEZA claims that the properties sought
to be taxed are lands of public dominion exempt The PEZAs subsequent requests64 for suspension
from real property taxes.52 chanRob lesvi rtu alLawli bra ry of collection were all denied by the Province.65
The Province then served on the PEZA a notice of
As to the jurisdiction issue, the PEZA counters delinquency in the payment of real property
that the Regional Trial Court of Pasay had taxes66 and a notice of sale of real property for
jurisdiction to hear its petition for declaratory unpaid real property tax.67 The Province finally
relief under Rule 63, Section 1 of the Rules of sent the PEZA a notice of public auction of the
Court.53 It also argued that it need not implead latters properties in Mariveles, Bataan.68 chanRoblesv irt ual Lawlib rary

the Province of Bataan, the City of Baguio, and

the Province of Cavite as respondents considering On June 14, 2004, the PEZA filed a petition for
that their demands came after the PEZA had injunction69 with prayer for issuance of a
already filed the petition in court.54 chanRoble svirtual Lawlib ra ry temporary restraining order and/or writ of
preliminary injunction before the Regional Trial
Facts of G.R. No. 187583 Court of Pasay City, arguing that it is exempt
from payment of real property taxes. It added
After the City of Lapu-Lapu had demanded that the notice of sale issued by the Province was
payment of real property taxes from the PEZA, void because it was not published in a newspaper
the Province of Bataan followed suit. In its of general circulation as required by Section 260
letter55 dated May 29, 2003, the Province, of the Local Government Code.70 chanRob lesvi rtua lLawl ibra ry

through the Office of the Provincial Treasurer,

informed the PEZA that it would be sending a real The case was raffled to Branch 115.
property tax billing to the PEZA. Arguing that the
PEZA is a developer of economic zones, the In its order71 dated June 18, 2004, the trial court
Province claimed that the PEZA is liable for real issued a temporary restraining order against the
property taxes under Section 24 of the Special Province. After the PEZA had filed a P100,000.00
Economic Zone Act of 1995. bond,72 the trial court issued a writ of preliminary
injunction,73 enjoining the Province from selling
In its reply letter56 dated June 18, 2003, the PEZA the PEZAs real properties at public auction.
requested the Province to suspend the service of
the real property tax billing. It cited its petition On March 3, 2006, the PEZA and Province both
for declaratory relief against the City of Lapu- manifested that each would file a memorandum
Lapu pending before the Regional Trial Court, after which the case would be deemed submitted
Branch 111, Pasay City as basis. for decision. The parties then filed their
respective memoranda.74 chanRob lesvi rtual Lawli bra ry

The Province argued that serving a real property

tax billing on the PEZA would not in any way In the order75 dated January 31, 2007, the trial
affect [its] petition for declaratory relief before court denied the PEZAs petition for injunction.
[the Regional Trial Court] of Pasay City.57 Thus, The trial court ruled that the PEZA is not exempt
in its letter58 dated June 27, 2003, the Province from payment of real property taxes. According
notified the PEZA of its real property tax liabilities to the trial court, Sections 193 and 234 of the
for June 1, 1995 to December 31, 2002 totalling Local Government Code had withdrawn the real
?110,549,032.55. property tax exemptions previously granted to all
persons, whether natural or juridical.76 As to the
After having been served a tax billing, the PEZA tax exemptions under Section 51 of the Special
again requested the Province to suspend Economic Zone Act of 1995, the trial court ruled
collecting its alleged real property tax liabilities that the provision only applies to businesses
until the Regional Trial Court of Pasay City operating within the economic zones, not to the
resolves its petition for declaratory relief.59 cha nRoblesv irt ual Lawlib rary PEZA.77 chanRoblesvi rtua lLawl ibra ry

The Province ignored the PEZAs request. On The PEZA filed before the Court of Appeals a
January 20, 2004, the Province served on the petition for certiorari78 with prayer for issuance of
PEZA a statement of unpaid real property tax for a temporary restraining order.
the period from June 1995 to December
2004.60 chanRoble svi rtual Lawli bra ry The Court of Appeals issued a temporary
restraining order, enjoining the Province and its was whether the trial court judge gravely abused
Provincial Treasurer from selling PEZA's his discretion in dismissing the PEZAs petition for
properties at public auction scheduled on October prohibition. This issue, according to the Court of
17, 2007.79 It also ordered the Province to Appeals, is properly addressed in a petition for
comment on the PEZAs petition. certiorari over which it has jurisdiction to resolve.
It, therefore, maintained jurisdiction to resolve
In its comment,80 the Province alleged that it the PEZAs petition for certiorari.88 chanRob lesvi rtua lLawl ibra ry

received a copy of the temporary restraining

order only on October 18, 2007 when it had Although it admitted that appeal, not certiorari,
already sold the PEZAs properties at public was the PEZAs proper remedy to reverse the trial
auction. Arguing that the act sought to be courts decision,89 the Court of Appeals proceeded
enjoined was already fait accompli, the Province to decide the petition for certiorari in the broader
prayed for the dismissal of the petition for interest of justice.90
chanRob lesvi rtua lLawl ibra ry

certiorari.
The Court of Appeals ruled that the trial court
The PEZA then filed a supplemental petition for judge gravely abused his discretion in dismissing
certiorari, prohibition, and mandamus81 against the PEZAs petition for prohibition. It held that
the Province, arguing that the Provincial Section 21 of Presidential Decree No. 66 and
Treasurer of Bataan acted with grave abuse of Section 51 of the Special Economic Zone Act of
discretion in issuing the notice of delinquency and 1995 granted the PEZA exemption from payment
notice of sale. It maintained that it is exempt of real property taxes.91 Based on the criteria set
from payment of real property taxes because it is in Manila International Airport Authority v. Court
a government instrumentality. It added that its of Appeals,92 the Court of Appeals found that the
lands are property of public dominion which PEZA is an instrumentality of the national
cannot be sold at public auction. government. No taxes, therefore, could be levied
on it by local government units.93 chanRoble svirtual Lawli bra ry

The PEZA also filed a motion82 for issuance of an

order affirming the temporary restraining order In the decision94 dated August 27, 2008, the
and a writ of preliminary injunction to enjoin the Court of Appeals granted the PEZAs petition for
Province from consolidating title over the PEZAs certiorari. It set aside the trial courts decision
properties. and nullified all the Provinces proceedings with
respect to the collection of real property taxes
In its resolution83 dated January 16, 2008, the from the PEZA.
Court of Appeals admitted the supplemental
petition for certiorari, prohibition, and The Province filed a motion for
mandamus. It required the Province to comment reconsideration,95 which the Court of Appeals
on the supplemental petition and to file a denied in the resolution96 dated April 16, 2009 for
memorandum on the PEZAs prayer for issuance lack of merit.
of temporary restraining order.
In its petition for review on certiorari with this
The Province commented84 on the PEZAs court,97 the Province of Bataan insists that the
supplemental petition, to which the PEZA Court of Appeals had no jurisdiction to take
replied.85
cha nRoblesv irt ual Lawlib rary cognizance of the PEZAs petition for certiorari.
The Province maintains that the Court of Tax
The Province then filed a motion86 for leave to Appeals had jurisdiction to hear the PEZAs
admit attached rejoinder with motion to dismiss. petition since it involved a local tax case decided
In the rejoinder with motion to dismiss,87 the by a Regional Trial Court.98 chanRoblesv i rtual Lawli bra ry

Province argued for the first time that the Court

of Appeals had no jurisdiction over the subject The Province reiterates that the PEZA is not
matter of the action. exempt from payment of real property taxes. The
Province points out that the EPZA, the PEZAs
According to the Province, the PEZA erred in filing predecessor, had to be categorically exempted
a petition for certiorari. Arguing that the PEZA from payment of real property taxes. The EPZA,
sought to reverse a Regional Trial Court decision therefore, was not inherently exempt from
in a local tax case, the Province claimed that the payment of real property taxes and so is the
court with appellate jurisdiction over the action is PEZA. Since Congress omitted from the Special
the Court of Tax Appeals. The PEZA then prayed Economic Zone Act of 1995 a provision
that the Court of Appeals dismiss the petition for specifically exempting the PEZA from payment of
certiorari for lack of jurisdiction over the subject real property taxes, the Province argues that the
matter of the action. PEZA is a taxable entity. It cited the rule in
statutory construction that provisions omitted in
The Court of Appeals held that the issue before it revised statutes are deemed repealed.99 c hanRoble svirtual Lawlib ra ry
 Ordinary appeals are governed by Rule 41,
With respect to Sections 24 and 51 of the Special Sections 3 to 13 of the Rules of Court. In
Economic Zone Act of 1995 granting tax ordinary appeals, questions of fact or mixed
exemptions and benefits, the Province argues questions of fact and law may be raised.106 chanRoble svi rtual Lawli bra ry

that these provisions only apply to business

establishments operating within special economic The second mode is through a petition for review
zones,100 not to the PEZA. before the Court of Appeals where the decision
assailed was rendered by the Regional Trial Court
This court ordered the PEZA to comment on the in the exercise of its appellate jurisdiction. Rule
Provinces petition for review on certiorari.101 c hanRoblesv irtual Lawlib rary 42 of the Rules of Court governs petitions for
review before the Court of Appeals. In petitions
In its comment,102 the PEZA argues that the Court for review under Rule 42, questions of fact, of
of Appeals had jurisdiction to hear its petition for law, or mixed questions of fact and law may be
certiorari since the issue was whether the trial raised.107
cha nRoblesvi rt ualLaw lib rary

court committed grave abuse of discretion in

denying its petition for injunction. The PEZA The third mode is through an appeal by certiorari
maintains that it is exempt from payment of real before this court under Rule 45 where only
property taxes under Section 21 of Presidential questions of law shall be raised.108 chanRob lesvi rtua lLawl ibra ry

Decree No. 66 and Section 51 of the Special

Economic Zone Act of 1995. A question of fact exists when there is doubt as to
the truth or falsity of the alleged facts.109 On the
The Province filed its reply,103 reiterating its other hand, there is a question of law if the
arguments in its petition for review on certiorari. appeal raises doubt as to the applicable law on a
certain set of facts.110 chanRoblesvirtual Lawlib ra ry

On the PEZAs motion,104 this court consolidated

the petitions filed by the City of Lapu-Lapu and Under Rule 50, Section 2, an improper appeal
the Province of Bataan.105chanRoblesv irtual Lawlib rary before the Court of Appeals is dismissed outright
and shall not be referred to the proper court: cha nrob lesvi rtua llawli bra ry

The issues for our resolution are the following:

SEC. 2. Dismissal of improper appeal to the Court
I. Whether the Court of Appeals erred in of Appeals. An appeal under Rule 41 taken from
dismissing the City of Lapu-Lapus appeal for the Regional Trial Court to the Court of Appeals
raising pure questions of law; raising only questions of law shall be dismissed,
issues purely of law not being reviewable by said
II. Whether the Regional Trial Court, Branch 111, court. Similarly, an appeal by notice of appeal
Pasay City had jurisdiction to hear, try, and instead of by petition for review from the
decide the City of Lapu-Lapus petition for appellate judgment of a Regional Trial Court shall
declaratory relief; be dismissed.

III. Whether the petition for injunction filed An appeal erroneously taken to the Court of
before the Regional Trial Court, Branch 115, Appeals shall not be transferred to the
Pasay City, is a local tax case appealable to the appropriate court but shall be dismissed outright.
Court of Tax Appeals; and
Rule 50, Section 2 repealed Rule 50, Section 3 of
IV. Whether the PEZA is exempt from payment of the 1964 Rules of Court, which provided that
real property taxes. improper appeals to the Court of Appeals shall not
be dismissed but shall be certified to the proper
We deny the consolidated petitions. court for resolution: cha nrob lesvi rtua llawli bra ry

I. Sec. 3. Where appealed case erroneously,

brought. Where the appealed case has been
erroneously brought to the Court of Appeals, it
The Court of Appeals did not err in shall not dismiss the appeal, but shall certify the
dismissing the City of Lapu-Lapus case to the proper court, with a specific and clear
appeal for raising pure questions of law statement of the grounds therefor.

Under the Rules of Court, there are three modes With respect to appeals by certiorari directly filed
of appeal from Regional Trial Court decisions. before this court but which raise questions of fact,
The first mode is through an ordinary appeal paragraph 4(b) of Circular No. 2-90 dated March
before the Court of Appeals where the decision 9, 1990 states that this court retains the option,
assailed was rendered in the exercise of the in the exercise of its sound discretion and
Regional Trial Courts original jurisdiction. considering the attendant circumstances, either
itself to take cognizance of and decide such issues of action for the court to excuse a technical lapse
or to refer them to the Court of Appeals for and afford the parties a review of the case to
determination. attain the ends of justice, rather than dispose of
the case on technicality and cause grave injustice
In Indoyon, Jr. v. Court of Appeals,111 we said to the parties, giving a false impression of speedy
that this court cannot tolerate ignorance of the disposal of cases while actually resulting in more
law on appeals.112 It is not this courts task to delay, if not a miscarriage of justice.120
determine for litigants their proper remedies
under the Rules.113 cha nRoblesv irt ual Lawlib rary Similar to Municipality of Pateros, we opt to relax
the rules in this case. The PEZA operates or
We agree that the City availed itself of the wrong otherwise administers special economic zones all
mode of appeal before the Court of Appeals. The over the country. Resolving the substantive issue
City raised pure questions of law in its appeal. of whether the PEZA is taxable for real property
The issue of whether the Regional Trial Court of taxes will clarify the taxing powers of all local
Pasay had jurisdiction over the PEZAs petition for government units where special economic zones
declaratory relief is a question of law, jurisdiction are operated. This case, therefore, should be
being a matter of law.114 The issue of whether decided on the merits.
the PEZA is a government instrumentality exempt
from payment of real property taxes is likewise a II.
question of law since this question is resolved by
examining the provisions of the PEZAs charter as The Regional Trial Court of Pasay had
well as other laws relating to the PEZA.115 chanRoblesvi rtua lLawl ibra ry
no jurisdiction to hear, try, and decide
the PEZAs petition for declaratory relief
The Court of Appeals, therefore, did not err in against the City of Lapu-Lapu
dismissing the Citys appeal pursuant to Rule 50,
Section 2 of the Rules of Court. Rule 63 of the Rules of Court governs actions for
declaratory relief. Section 1 of Rule 63
Nevertheless, considering the important questions provides:c han roblesv irt uallawl ibra ry

involved in this case, we take cognizance of the

Citys petition for review on certiorari in the SECTION 1. Who may file petition. Any person
interest of justice. interested under a deed, will, contract or other
written instrument, or whose rights are affected
In Municipality of Pateros v. The Honorable Court by a statute, executive order or regulation,
of Appeals,116 the Municipality of Pateros filed an ordinance, or any other governmental regulation
appeal under Rule 42 before the Court of Appeals, may, before breach or violation, thereof, bring an
which the Court of Appeals denied outright for action in the appropriate Regional Trial Court to
raising pure questions of law. This court agreed determine any question of construction or validity
that the Municipality of Pateros committed a arising, and for a declaration of his rights or
procedural infraction117 and should have directly duties, thereunder.
filed a petition for review on certiorari before this
court. Nevertheless, in the interest of justice An action for reformation of an instrument, to
and in order to write finis to [the] quiet title to real property or remove clouds
controversy,118 this court opt[ed] to relax the therefrom, or to consolidate ownership under
rules119 and proceeded to decide the case. This Article 1607 of the Civil Code, may be brought
court said:chanro blesvi rt uallawl ibra ry

under this Rule.

While it is true that rules of procedure are The court with jurisdiction over petitions for
intended to promote rather than frustrate the declaratory relief is the Regional Trial Court, the
ends of justice, and while the swift unclogging of subject matter of litigation in an action for
the dockets of the courts is a laudable objective, declaratory relief being incapable of pecuniary
it nevertheless must not be met at the expense of estimation.121 Section 19 of the Judiciary
substantial justice. Reorganization Act of 1980 provides: c han roblesv irt uallawl ibra ry

The Court has allowed some meritorious cases to SEC. 19. Jurisdiction in Civil Cases. Regional
proceed despite inherent procedural defects and Trial Courts shall exercise exclusive original
lapses. This is in keeping with the principle that jurisdiction:
rules of procedure are mere tools designed to
facilitate the attainment of justice, and that strict (1) In all civil actions in which the subject of
and rigid application of rules which should result litigation is incapable of pecuniary estimation[.]
in technicalities that tend to frustrate rather than
promote substantial justice must always be Consistent with the law, the Rules state that a
avoided. It is a far better and more prudent cause
petition for declaratory relief is filed in the in the light of our ruling in De Borja vs. Villadolid,
appropriate Regional Trial Court.122 47 O.G. (5) p. 2315, and Samson vs. Andal, G.R.
No. L-3439, July 31, 1951, where we held that an
A special civil action for declaratory relief is filed action for declaratory relief should be filed before
for a judicial determination of any question of there has been a breach of a contract, statutes or
construction or validity arising from, and for a right, and that it is sufficient to bar such action,
declaration of rights and duties, under any of the that there had been a breach which would
following subject matters: a deed, will, contract constitute actionable violation. The rule is that an
or other written instrument, statute, executive action for Declaratory Relief is proper only if
order or regulation, ordinance, or any other adequate relief is not available through the means
governmental regulation.123 However, a of other existing forms of action or proceeding (1
declaratory judgment may issue only if there has C.J.S. 1027-1028). 132
been no breach of the documents in
question.124 If the contract or statute subject It is also required that the parties to the action
matter of the action has already been breached, for declaratory relief be those whose rights or
the appropriate ordinary civil action must be interests are affected by the contract or statute in
filed.125 If adequate relief is available through question.133 There must be an actual justiciable
another form of action or proceeding, the other controversy or the ripening seeds of
action must be preferred over an action for one134 between the parties. The issue between
declaratory relief.126chanRo blesvi rtua lLawl ib rary the parties must be ripe for judicial
determination.135 An action for declaratory relief
In Ollada v. Central Bank of the Philippines,127 the based on theoretical or hypothetical questions
Central Bank issued CB-IED Form No. 5 requiring cannot be filed for our courts are not advisory
certified public accountants to submit an courts.136
chanRoble svirtual Lawlib rary

accreditation under oath before they were allowed

to certify financial statements submitted to the In Republic v. Roque,137 this court dismissed
bank. Among those financial statements the respondents petition for declaratory relief for lack
Central Bank disallowed were those certified by of justiciable controversy. According to this
accountant Felipe B. Ollada. 128 chanRob lesvi rtual Lawl ibra ry court, [the respondents] fear of prospective
prosecution [under the Human Security Act] was
Claiming that the requirement restrained the solely based on remarks of certain government
legitimate pursuit of ones trade,129 Ollada filed a officials which were addressed to the general
petition for declaratory relief against the Central public.138 chanRo blesvi rtua lLawl ib rary

Bank.
In Velarde v. Social Justice Society,139 this court
This court ordered the dismissal of Olladas refused to resolve the issue of whether or not [a
petition without prejudice to [his] seeking relief religious leaders endorsement] of a candidate for
in another appropriate action.130 According to elective office or in urging or requiring the
this court, Olladas right had already been members of his flock to vote for a specific
violated when the Central Bank refused to accept candidate is violative [of the separation
the financial statements he prepared. Since there clause].140 According to the court, there was no
was already a breach, a petition for declaratory justiciable controversy and ordered the dismissal
relief was not proper. Ollada must pursue the of the Social Justice Societys petition for
appropriate ordinary civil action or declaratory relief. This court explained: c hanro blesvi rt uallawl ibra ry

proceeding.131 This court explained: cha nro blesvi rtua llawli bra ry

Indeed, SJS merely speculated or anticipated

Petitioner commenced this action as, and clearly without factual moorings that, as religious
intended it to be one for Declaratory Relief under leaders, the petitioner and his co-respondents
the provisions of Rule 66 of the Rules of Court. below had endorsed or threatened to endorse a
On the question of when a special civil action of candidate or candidates for elective offices; and
this nature would prosper, we have already held that such actual or threatened endorsement "will
that the complaint for declaratory relief will not enable [them] to elect men to public office who
prosper if filed after a contract, statute or right [would] in turn be forever beholden to their
has been breached or violated. In the present leaders, enabling them to control the
case such is precisely the situation arising from government"[;] and "pos[ing] a clear and present
the facts alleged in the petition for declaratory danger of serious erosion of the peoples faith in
relief. As vigorously claimed by petitioner himself, the electoral process[;] and reinforc[ing] their
respondent had already invaded or violated his belief that religious leaders determine the
right and caused him injury all these giving ultimate result of elections," which would then be
him a complete cause of action enforceable in an violative of the separation clause.
appropriate ordinary civil action or proceeding.
The dismissal of the action was, therefore, proper Such premise is highly speculative and merely
theoretical, to say the least. Clearly, it does not
suffice to constitute a justiciable controversy. The There are several aspects of jurisdiction.143
Petition does not even allege any indication or Jurisdiction over the subject matter is the power
manifest intent on the part of any of the to hear and determine cases of the general class
respondents below to champion an electoral to which the proceedings in question belong.144
candidate, or to urge their so-called flock to vote It is conferred by law, which may either be the
for, or not to vote for, a particular candidate. It is Constitution or a statute.145 Jurisdiction over the
a time-honored rule that sheer speculation does subject matter means the nature of the cause of
not give rise to an actionable right. action and the relief sought.146 Thus, the cause
of action and character of the relief sought as
Obviously, there is no factual allegation that SJS alleged in the complaint are examined to
rights are being subjected to any threatened, determine whether a court had jurisdiction over
imminent and inevitable violation that should be the subject matter.147 Any decision rendered by a
prevented by the declaratory relief sought. The court without jurisdiction over the subject matter
judicial power and duty of the courts to settle of the action is void.148 chanRoble svirtual Lawli bra ry

actual controversies involving rights that are

legally demandable and enforceable cannot be Another aspect of jurisdiction is jurisdiction over
exercised when there is no actual or threatened the person. It is the power of [a] court to render
violation of a legal right. a personal judgment or to subject the parties in a
particular action to the judgment and other
All that the 5-page SJS Petition prayed for was rulings rendered in the action.149 A court
"that the question raised in paragraph 9 hereof be automatically acquires jurisdiction over the
resolved." In other words, it merely sought an person of the plaintiff upon the filing of the
opinion of the trial court on whether the initiatory pleading.150 With respect to the
speculated acts of religious leaders endorsing defendant, voluntary appearance in court or a
elective candidates for political offices violated the valid service of summons vests the court with
constitutional principle on the separation of jurisdiction over the defendants person.151
church and state. SJS did not ask for a Jurisdiction over the person of the defendant is
declaration of its rights and duties; neither did it indispensable in actions in personam or those
pray for the stoppage of any threatened violation actions based on a partys personal liability.152
of its declared rights. Courts, however, are The proceedings in an action in personam are
proscribed from rendering an advisory opinion.141 void if the court had no jurisdiction over the
person of the defendant.153 chanRoblesv irtua lLawl ibra ry

In sum, a petition for declaratory relief must

satisfy six requisites:
c hanro blesvi rt uallawl ibra ry Jurisdiction over the res or the thing under
litigation is acquired either by the seizure of the
[F]irst, the subject matter of the controversy property under legal process, whereby it is
must be a deed, will, contract or other written brought into actual custody of the law; or as a
instrument, statute, executive order or result of the institution of legal proceedings, in
regulation, or ordinance; second, the terms of which the power of the court is recognized and
said documents and the validity thereof are made effective.154 Jurisdiction over the res is
doubtful and require judicial construction; third, necessary in actions in rem or those actions
there must have been no breach of the directed against the thing or property or status
documents in question; fourth, there must be an of a person and seek judgments with respect
actual justiciable controversy or the "ripening thereto as against the whole world.155 The
seeds" of one between persons whose interests proceedings in an action in rem are void if the
are adverse; fifth, the issue must be ripe for court had no jurisdiction over the thing under
judicial determination; and sixth, adequate relief litigation.156
chanRob lesvi rtual Lawli bra ry

is not available through other means or other

forms of action or proceeding.142 (Emphases In the present case, the Regional Trial Court had
omitted) no jurisdiction over the subject matter of the
action, specifically, over the remedy sought. As
We rule that the PEZA erred in availing itself of a this court explained in Malana v. Tappa:157 chanRoblesvi rtua lLawl ibra ry

petition for declaratory relief against the City.

The City had already issued demand letters and . . . an action for declaratory relief presupposes
real property tax assessment against the PEZA, in that there has been no actual breach of the
violation of the PEZAs alleged tax-exempt status instruments involved or of rights arising
under its charter. The Special Economic Zone Act thereunder. Since the purpose of an action for
of 1995, the subject matter of PEZAs petition for declaratory relief is to secure an authoritative
declaratory relief, had already been breached. statement of the rights and obligations of the
The trial court, therefore, had no jurisdiction over parties under a statute, deed, or contract for their
the petition for declaratory relief. guidance in the enforcement thereof, or
compliance therewith, and not to settle issues
arising from an alleged breach thereof, it may be (c) In the event that the protest is finally decided
entertained only before the breach or violation of in favor of the taxpayer, the amount or portion of
the statute, deed, or contract to which it refers. the tax protested shall be refunded to the
A petition for declaratory relief gives a practical protestant, or applied as tax credit against his
remedy for ending controversies that have not existing or future tax liability.
reached the state where another relief is
immediately available; and supplies the need for (d) In the event that the protest is denied or upon
a form of action that will set controversies at rest the lapse of the sixty day period prescribed in
before they lead to a repudiation of obligations, subparagraph (a), the taxpayer may avail of the
an invasion of rights, and a commission of remedies as provided for in Chapter 3, Title II,
wrongs. Book II of this Code.

Where the law or contract has already been Should the taxpayer find the action on the protest
contravened prior to the filing of an action for unsatisfactory, the taxpayer may appeal with the
declaratory relief, the courts can no longer Local Board of Assessment Appeals within 60
assume jurisdiction over the action. In other days from receipt of the decision on the
words, a court has no more jurisdiction over an protest:chan roble svi rtual lawlib rary

action for declaratory relief if its subject has

already been infringed or transgressed before the SECTION 226. Local Board of Assessment
institution of the action.158 (Emphasis supplied) Appeals. - Any owner or person having legal
interest in the property who is not satisfied with
The trial court should have dismissed the PEZAs the action of the provincial, city or municipal
petition for declaratory relief for lack of assessor in the assessment of his property may,
jurisdiction. within sixty (60) days from the date of receipt of
the written notice of assessment, appeal to the
Once an assessment has already been issued by Board of Assessment Appeals of the provincial or
the assessor, the proper remedy of a taxpayer city by filing a petition under oath in the form
depends on whether the assessment was prescribed for the purpose, together with copies
erroneous or illegal. of the tax declarations and such affidavits or
documents submitted in support of the appeal.
An erroneous assessment presupposes that the
taxpayer is subject to the tax but is disputing the Payment under protest and appeal to the Local
correctness of the amount assessed.159 With an Board of Assessment Appeals are successive
erroneous assessment, the taxpayer claims that administrative remedies to a taxpayer who
the local assessor erred in determining any of the questions the correctness of an assessment.160
items for computing the real property tax, i.e., The Local Board Assessment Appeals shall not
the value of the real property or the portion entertain an appeal without the action of the
thereof subject to tax and the proper assessment local assessor161 on the protest.
levels. In case of an erroneous assessment, the
taxpayer must exhaust the administrative If the taxpayer is still unsatisfied after appealing
remedies provided under the Local Government with the Local Board of Assessment Appeals, the
Code before resorting to judicial action. taxpayer may appeal with the Central Board of
Assessment Appeals within 30 days from receipt
The taxpayer must first pay the real property tax of the Local Boards decision: chan roblesv irtuallawl ib rary

under protest. Section 252 of the Local

Government Code provides: cha nroble svirtual lawlib rary

SECTION 229. Action by the Local Board of

Assessment Appeals. - (a) The Board shall decide
SECTION 252. Payment Under Protest. -(a) No the appeal within one hundred twenty (120) days
protest shall be entertained unless the taxpayer from the date of receipt of such appeal. The
first pays the tax. There shall be annotated on the Board, after hearing, shall render its decision
tax receipts the words "paid under protest". The based on substantial evidence or such relevant
protest in writing must be filed within thirty (30) evidence on record as a reasonable mind might
days from payment of the tax to the provincial, accept as adequate to support the conclusion.
city treasurer or municipal treasurer, in the case
of a municipality within Metropolitan Manila Area, (b) In the exercise of its appellate jurisdiction, the
who shall decide the protest within sixty (60) Board shall have the power to summon witnesses,
days from receipt. administer oaths, conduct ocular inspection, take
depositions, and issue subpoena and subpoena
(b) The tax or a portion thereof paid under duces tecum. The proceedings of the Board shall
protest, shall be held in trust by the treasurer be conducted solely for the purpose of
concerned. ascertaining the facts without necessarily
adhering to technical rules applicable in judicial appeals before the Local and Central Board of
proceedings. Assessment Appeals, they are fruitful only where
questions of fact are involved.165 chanRoblesv irt ual Lawlib rary

(c) The secretary of the Board shall furnish the

owner of the property or the person having legal Ty raised the issue of the legality of the notice of
interest therein and the provincial or city assessor assessment, an issue that did not go into the
with a copy of the decision of the Board. In case reasonableness of the amount assessed. Neither
the provincial or city assessor concurs in the did the issue involve a question of fact. Ty raised
revision or the assessment, it shall be his duty to a question of law and, therefore, need not resort
notify the owner of the property or the person to the administrative remedies provided under
having legal interest therein of such fact using the the Local Government Code.
form prescribed for the purpose. The owner of the
property or the person having legal interest In the present case, the PEZA did not avail itself
therein or the assessor who is not satisfied with of any of the remedies against a notice of
the decision of the Board, may, within thirty (30) assessment. A petition for declaratory relief is
days after receipt of the decision of said Board, not the proper remedy once a notice of
appeal to the Central Board of Assessment assessment was already issued.
Appeals, as herein provided. The decision of the
Central Board shall be final and executory. Instead of a petition for declaratory relief, the
(Emphasis supplied) PEZA should have directly resorted to a judicial
action. The PEZA should have filed a complaint
On the other hand, an assessment is illegal if it for injunction, the appropriate ordinary civil
was made without authority under the law.162 In action166 to enjoin the City from enforcing its
case of an illegal assessment, the taxpayer may demand and collecting the assessed taxes from
directly resort to judicial action without paying the PEZA. After all, a declaratory judgment as to
under protest the assessed tax and filing an the PEZAs tax-exempt status is useless unless
appeal with the Local and Central Board of the City is enjoined from enforcing its demand.
Assessment Appeals.
Injunction is a judicial writ, process or
In Ty v. Trampe,163 the Municipal Assessor of proceeding whereby a party is ordered to do or
Pasig sent Alejandro B. Ty a notice of assessment refrain from doing a certain act.167 It may be
with respect to Tys real properties in Pasig. the main action or merely a provisional remedy
Without resorting to the administrative remedies for and as incident in the main action.168 The
under the Local Government Code, Ty filed before essential requisites of a writ of injunction are:
the Regional Trial Court a petition, praying that (1) there must be a right in esse or the existence
the trial court nullify the notice of assessment. In of a right to be protected; and (2) the act against
assessing the real property taxes due, the which the injunction is directed to constitute a
Municipal Assessor used a schedule of market violation of such right.169
chanRoblesv irt ual Lawlib rary

values solely prepared by him. This, Ty argued,

was void for being contrary to the Local We note, however, that the City confused the
Government Code requiring that the schedule of concepts of jurisdiction and venue in contending
market values be jointly prepared by the that the Regional Trial Court of Pasay had no
provincial, city, and municipal assessors of the jurisdiction because the real properties involved
municipalities within the Metropolitan Manila in this case are located in the City of Lapu-Lapu.
Area.
On the one hand, jurisdiction is the power to
This court ruled that the assessment was illegal hear and determine cases of the general class to
for having been issued without authority of the which the proceedings in question
Municipal Assessor. Reconciling provisions of the belong.170 Jurisdiction is a matter of substantive
Real Property Tax Code and the Local law.171 Thus, an action may be filed only with the
Government Code, this court held that the court or tribunal where the Constitution or a
schedule of market values must be jointly statute says it can be brought.172 Objections to
prepared by the provincial, city, and municipal jurisdiction cannot be waived and may be brought
assessors of the municipalities within the at any stage of the proceedings, even on
Metropolitan Manila Area. appeal.173 When a case is filed with a court which
has no jurisdiction over the action, the court
As to the issue of exhaustion of administrative shall motu proprio dismiss the case.174 chanRoblesvi rt ualLaw lib rary

remedies, this court held that Ty did not err in

directly resorting to judicial action. According to On the other hand, venue is the place of trial or
this court, payment under protest is required only geographical location in which an action or
where there is a question as to the proceeding should be brought.175 In civil cases,
reasonableness of the amount assessed.164 As to venue is a matter of procedural law.176 A partys
objections to venue must be brought at the their respective claims and contentions, 186
the
earliest opportunity either in a motion to dismiss judgment is on the merits.
or in the answer; otherwise the objection shall be
deemed waived.177 When the venue of a civil On the other hand, certiorari is a special civil
action is improperly laid, the court cannot motu action filed to annul or modify a proceeding of a
proprio dismiss the case.178 chanRoble svirt ual Lawlib rary tribunal, board, or officer exercising judicial or
quasi-judicial functions.187 Certiorari, which in
The venue of an action depends on whether the Latin means to be more fully informed,188 was
action is a real or personal action. Should the originally a remedy in the common law. This
action affect title to or possession of real court discussed the history of the remedy of
property, or interest therein, it is a real action. certiorari in Spouses Delos Santos v. Metropolitan
The action should be filed in the proper court Bank and Trust Company:189 chanRoble svirtual Lawlib ra ry

which has jurisdiction over the area wherein the

real property involved, or a portion thereof, is In the common law, from which the remedy of
situated.179 If the action is a personal action, the certiorari evolved, the writ of certiorari was issued
action shall be filed with the proper court where out of Chancery, or the Kings Bench,
the plaintiff or any of the principal plaintiffs commanding agents or officers of the inferior
resides, or where the defendant or any of the courts to return the record of a cause pending
principal defendants resides, or in the case of a before them, so as to give the party more sure
non-resident defendant where he may be found, and speedy justice, for the writ would enable the
at the election of the plaintiff.180 chanRoble svirtual Lawlib ra ry
superior court to determine from an inspection of
the record whether the inferior courts judgment
The City was objecting to the venue of the action, was rendered without authority. The errors were
not to the jurisdiction of the Regional Trial Court of such a nature that, if allowed to stand, they
of Pasay. In essence, the City was contending would result in a substantial injury to the
that the PEZAs petition is a real action as it petitioner to whom no other remedy was
affects title to or possession of real property, and, available. If the inferior court acted without
therefore, the PEZA should have filed the petition authority, the record was then revised and
with the Regional Trial Court of Lapu-Lapu City corrected in matters of law. The writ of certiorari
where the real properties are located. was limited to cases in which the inferior court
was said to be exceeding its jurisdiction or was
However, whatever objections the City has not proceeding according to essential
against the venue of the PEZAs action for requirements of law and would lie only to review
declaratory relief are already deemed waived. judicial or quasi-judicial acts.190
Objections to venue must be raised at the earliest
possible opportunity.181 The City did not file a In our jurisdiction, the term certiorari is used in
motion to dismiss the petition on the ground that two ways. An appeal before this court raising
the venue was improperly laid. Neither did the pure questions of law is commenced by filing a
City raise this objection in its answer. petition for review on certiorari under Rule 45 of
the Rules of Court. An appeal by certiorari, which
In any event, the law sought to be judicially continues the proceedings commenced before the
interpreted in this case had already been lower courts,191 is filed to reverse or modify
breached. The Regional Trial Court of Pasay, judgments or final orders.192 Under the Rules, an
therefore, had no jurisdiction over the PEZAs appeal by certiorari must be filed within 15 days
petition for declaratory relief against the City. from notice of the judgment or final order, or of
the denial of the appellants motion for new trial
III. or reconsideration.193c hanRoble svirtual Lawli bra ry

A petition for certiorari under Rule 65, on the

The Court of Appeals had no jurisdiction other hand, is an independent and original action
over the PEZAs petition for certiorari filed to set aside proceedings conducted without
against the Province of Bataan or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of
Appeal is the remedy to obtain a reversal or jurisdiction.194 Under the Rules, a petition for
modification of a judgment on the merits.182 A certiorari may only be filed if there is no appeal or
judgment on the merits is one which determines any plain, speedy, or adequate remedy in the
the rights and liabilities of the parties based on ordinary course of law.195 The petition must be
the disclosed facts, irrespective of the formal, filed within 60 days from notice of the judgment,
technical or dilatory objections.183 It is not even order, or resolution.196 chanRob lesvi rtua lLawl ib rary

necessary that the case proceeded to trial.184 So

long as the judgment is general185 and the Because of the longer period to file a petition for
parties had a full legal opportunity to be heard on certiorari, some litigants attempt to file petitions
for certiorari as substitutes for lost appeals by certiorari before the Court of Appeals on October
certiorari. However, Rule 65 is clear that a 15, 2007,205 which was 12 days from October 3,
petition for certiorari will not prosper if appeal is 2007206 when the PEZA had notice of the trial
available. Appeal is the proper remedy even if courts order denying the motion for
the error, or one of the errors, raised is grave reconsideration.
abuse of discretion on the part of the court
rendering judgment.197 If appeal is available, a Second, the petition for certiorari raised errors of
petition for certiorari cannot be filed. judgment. The PEZA argued that the trial court
erred in ruling that it is not exempt from payment
In this case, the trial courts decision dated of real property taxes given Section 21 of
January 31, 2007 is a judgment on the merits. Presidential Decree No. 66 and Sections 11 and
Based on the facts disclosed by the parties, the 51 of the Special Economic Zone Act of
trial court declared the PEZA liable to the Province 1995.207chanRob lesvi rtual Lawl ibra ry

of Bataan for real property taxes. The PEZAs

proper remedy against the trial courts decision, Third, there is sufficient reason to relax the rules
therefore, is appeal. given the importance of the substantive issue
presented in this case.
Since the PEZA filed a petition for certiorari
against the trial courts decision, it availed itself However, the PEZAs petition for certiorari was
of the wrong remedy. As the Province of Bataan filed before the wrong court. The PEZA should
contended, the trial courts decision dated have filed its petition before the Court of Tax
January 31, 2007 is only an error of judgment Appeals.
appealable to the higher level court and may not
be corrected by filing a petition for certiorari.198 The Court of Tax Appeals has the exclusive
That the trial court judge allegedly committed appellate jurisdiction over local tax cases decided
grave abuse of discretion does not make the by Regional Trial Courts. Section 7, paragraph
petition for certiorari the correct remedy. The (a)(3) of Republic Act No. 1125, as amended by
PEZA should have raised this ground in an appeal Republic Act No. 9282, provides: chan roble svirtual lawlib rary

filed within 15 days from notice of the assailed

resolution. Sec. 7. Jurisdiction. The [Court of Tax Appeals]
shall exercise:
This court, in the liberal spirit pervading the
Rules of Court and in the interest of substantial a. Exclusive appellate jurisdiction to review by
justice,199 has treated petitions for certiorari as appeal, as herein provided:
an appeal: (1) if the petition for certiorari was
filed within the reglementary period within which ....
to file a petition for review on certiorari; (2) when
errors of judgment are averred; and (3) when 3. Decisions, orders or resolutions of the Regional
there is sufficient reason to justify the relaxation Trial Courts in local tax cases originally decided or
of the rules.200 Considering that the nature of resolved by them in the exercise of their original
an action is determined by the allegations of the or appellate jurisdiction[.]
complaint or the petition and the character of the
relief sought,201 a petition which actually avers The local tax cases referred to in Section 7,
errors of judgment rather than errors than that of paragraph (a)(3) of Republic Act No. 1125, as
jurisdiction202 may be considered a petition for amended, include cases involving real property
review. taxes. Real property taxation is governed by
Book II of the Local Government Code on Local
However, suspending the application of the Rules Taxation and Fiscal Matters. Real property taxes
has its disadvantages. Relaxing procedural rules are collected by the Local Treasurer,208 not by the
may reduce the effective enforcement of Bureau of Internal Revenue in charge of collecting
substantive rights,203 leading to arbitrariness, national internal revenue taxes, fees, and
caprice, despotism, or whimsicality in the charges.209 chanRoblesv irtual Lawlib rary

settlement of disputes.204 Therefore, for this

court to suspend the application of the Rules, the Section 7, paragraph (a)(5) of Republic Act No.
accomplishment of substantial justice must 1125, as amended by Republic Act No. 9282,
outweigh the importance of predictability of court separately provides for the exclusive appellate
procedures. jurisdiction of the Court of Tax Appeals over
decisions of the Central Board of Assessment
The PEZAs petition for certiorari may be treated Appeals involving the assessment or collection of
as an appeal. First, the petition for certiorari was real property taxes: cha nrob lesvi rtua llawlib ra ry

filed within the 15-day reglementary period for

filing an appeal. The PEZA filed its petition for
Sec. 7. Jurisdiction. The [Court of Tax Appeals] contention that jurisdiction over their certiorari
shall exercise: petition lies with the CA, this Court would be
confirming the exercise by two judicial bodies, the
a. Exclusive appellate jurisdiction to review by CA and the CTA, of jurisdiction over basically the
appeal, as herein provided: same subject matter precisely the split-
jurisdiction situation which is anathema to the
.... orderly administration of justice. The Court
cannot accept that such was the legislative
5. Decisions of the Central Board of Assessment motive, especially considering that the law
Appeals in the exercise of its appellate jurisdiction expressly confers on the CTA, the tribunal with
over cases involving the assessment and taxation the specialized competence over tax and tariff
of real property originally decided by the matters, the role of judicial review over local tax
provincial or city board of assessment appeals[.] cases without mention of any other court that
may exercise such power. Thus, the Court agrees
This separate provision, nevertheless, does not with the ruling of the CA that since appellate
bar the Court of Tax Appeals from taking jurisdiction over private respondents' complaint
cognizance of trial court decisions involving the for tax refund is vested in the CTA, it follows that
collection of real property tax cases. Sections a petition for certiorari seeking nullification of an
256210 and 266211of the Local Government Code interlocutory order issued in the said case should,
expressly allow local government units to file in likewise, be filed with the same court. To rule
any court of competent jurisdiction civil actions otherwise would lead to an absurd situation
to collect basic real property taxes. Should the where one court decides an appeal in the main
trial court rule against them, local government case while another court rules on an incident in
units cannot be barred from appealing before the the very same case.
Court of Tax Appeals the highly specialized
body specifically created for the purpose of Stated differently, it would be somewhat
reviewing tax cases.212 chanRoblesvi rt ual Lawlib rary incongruent with the pronounced judicial
abhorrence to split jurisdiction to conclude that
We have also ruled that the Court of Tax Appeals, the intention of the law is to divide the authority
not the Court of Appeals, has the exclusive over a local tax case filed with the RTC by giving
original jurisdiction over petitions for certiorari to the CA or this Court jurisdiction to issue a writ
assailing interlocutory orders issued by Regional of certiorari against interlocutory orders of the
Trial Courts in a local tax case. We explained RTC but giving to the CTA the jurisdiction over
in The City of Manila v. Hon. Grecia- the appeal from the decision of the trial court in
Cuerdo213 that while the Court of Tax Appeals has the same case. It is more in consonance with
no express grant of power to issue writs of logic and legal soundness to conclude that the
certiorari under Republic Act No. 1125,214 as grant of appellate jurisdiction to the CTA over tax
amended, the tax courts judicial power as cases filed in and decided by the RTC carries with
defined in the Constitution215 includes the power it the power to issue a writ of certiorari when
to determine whether or not there has been necessary in aid of such appellate jurisdiction.
grave abuse of discretion amounting to lack or The supervisory power or jurisdiction of the CTA
excess of jurisdiction on the part of the [Regional to issue a writ of certiorari in aid of its appellate
Trial Court] in issuing an interlocutory order of jurisdiction should co-exist with, and be a
jurisdiction in cases falling within the exclusive complement to, its appellate jurisdiction to
appellate jurisdiction of the tax court.216 We review, by appeal, the final orders and decisions
further elaborated: chan rob lesvi rtual lawlib rary of the RTC, in order to have complete supervision
over the acts of the latter.217 (Citations omitted)
Indeed, in order for any appellate court to
effectively exercise its appellate jurisdiction, it In this case, the petition for injunction filed before
must have the authority to issue, among others, the Regional Trial Court of Pasay was a local tax
a writ of certiorari. In transferring exclusive case originally decided by the trial court in its
jurisdiction over appealed tax cases to the CTA, it original jurisdiction. Since the PEZA assailed a
can reasonably be assumed that the law intended judgment, not an interlocutory order, of the
to transfer also such power as is deemed Regional Trial Court, the PEZAs proper remedy
necessary, if not indispensable, in aid of such was an appeal to the Court of Tax Appeals.
appellate jurisdiction. There is no perceivable
reason why the transfer should only be Considering that the appellate jurisdiction of the
considered as partial, not total. Court of Tax Appeals is to the exclusion of all
other courts, the Court of Appeals had no
.... jurisdiction to take cognizance of the PEZAs
petition. The Court of Appeals acted without
If this Court were to sustain petitioners' jurisdiction in rendering the decision in CA-G.R.
SP No. 100984. Its decision in CA-G.R. SP No. assessment was issued without authority,
100984 is void.218 c hanRoble svirtual Lawlib ra ry exhaustion of administrative remedies is not
necessary and the taxpayer may directly resort to
The filing of appeal in the wrong court does not judicial action.227 The taxpayer shall file a
toll the period to appeal. Consequently, the complaint for injunction before the Regional Trial
decision of the Regional Trial Court, Branch 115, Court228 to enjoin the local government unit from
Pasay City, became final and executory after the collecting real property taxes.
lapse of the 15th day from the PEZAs receipt of
the trial courts decision.219 The denial of the The party unsatisfied with the decision of the
petition for injunction became final and Regional Trial Court shall file an appeal, not a
executory. petition for certiorari, before the Court of Tax
Appeals, the complaint being a local tax case
IV. decided by the Regional Trial Court.229 The
appeal shall be filed within fifteen (15) days from
notice of the trial courts decision.
The remedy of a taxpayer depends on the
stage in which the local government unit is The Court of Tax Appeals decision may then be
enforcing its authority to impose real appealed before this court through a petition for
property taxes review on certiorari under Rule 45 of the Rules of
Court raising pure questions of law.230 chanRoblesv irt ual Lawlib rary

The proper remedy of a taxpayer depends on the

stage in which the local government unit is In case the local government unit has issued a
enforcing its authority to collect real property notice of delinquency, the taxpayer may file a
taxes. For the guidance of the members of the complaint for injunction to enjoin the impending
bench and the bar, we reiterate the taxpayers sale of the real property at public auction. In
remedies against the erroneous or illegal case the local government unit has already sold
assessment of real property taxes. the property at public auction, the taxpayer must
first deposit with the court the amount for which
Exhaustion of administrative remedies under the the real property was sold, together with interest
Local Government Code is necessary in cases of of 2% per month from the date of sale to the
erroneous assessments where the correctness of time of the institution of action. The taxpayer
the amount assessed is assailed. The taxpayer may then file a complaint to assail the validity of
must first pay the tax then file a protest with the the public auction.231 The decisions of the
Local Treasurer within 30 days from date of Regional Trial Court in these cases shall be
payment of tax.220 If protest is denied or upon appealable before the Court of Tax
the lapse of the 60-day period to decide the Appeals,232 and the latters decisions appealable
protest, the taxpayer may appeal to the Local before this court through a petition for review on
Board of Assessment Appeals within 60 days from certiorari under Rule 45 of the Rules of
the denial of the protest or the lapse of the 60- Court.233
chanRoblesvi rtua lLaw lib rary

day period to decide the protest.221 The Local

Board of Assessment Appeals has 120 days to V.
decide the appeal.222 c hanRoblesv irtual Lawlib rary

The PEZA is exempt from payment

If the taxpayer is unsatisfied with the Local of real property taxes
Boards decision, the taxpayer may appeal before
the Central Board of Assessment Appeals within The jurisdictional errors in this case render these
30 days from receipt of the Local Boards consolidated petitions moot. We do not review
decision.223 c hanRoble svirtual Lawlib ra ry void decisions rendered without jurisdiction.

The decision of the Central Board of Assessment However, the PEZA alleged that several local
Appeals is appealable before the Court of Tax government units, including the City of Baguio
Appeals En Banc.224 The appeal before the Court and the Province of Cavite, have issued their
of Tax Appeals shall be filed following the respective real property tax assessments against
procedure under Rule 43 of the Rules of the PEZA. Other local government units will likely
Court.225
chanRoblesvi rtua lLaw lib rary follow suit, and either the PEZA or the local
government units taxing the PEZA may file their
The Court of Tax Appeals decision may then be respective actions against each other.
appealed before this court through a petition for
review on certiorari under Rule 45 of the Rules of In the interest of judicial economy234 and
Court raising pure questions of law.226 chanRoblesv irt ual Lawlib rary avoidance of conflicting decisions involving the
same issues,235 we resolve the substantive issue
In case of an illegal assessment where the of whether the PEZA is exempt from payment of
real property taxes. taxable period,] whether or not [the person
owned the property for the period he or she is
Real property taxes are annual taxes levied on being taxed].239
chanRoble svi rtual Lawli bra ry

real property such as lands, buildings, machinery,

and other improvements not otherwise specifically The exceptions to the rule are provided in the
exempted under the Local Government Code.236 Local Government Code. Under Section 133(o),
Real property taxes are ad valorem, with the local government units have no power to levy
amount charged based on a fixed proportion of taxes of any kind on the national government, its
the value of the property.237 Under the law, agencies and instrumentalities and local
provinces, cities, and municipalities within the government units: chan roblesv irt uallawl ibrary

Metropolitan Manila Area have the power to levy

real property taxes within their respective SEC. 133. Common Limitations on the Taxing
territories.238
c hanRoblesv irt ual Lawlib rary
Powers of Local Government Units. Unless
otherwise provided herein, the exercise of taxing
The general rule is that real properties are subject powers of provinces, cities, municipalities, and
to real property taxes. This is true especially barangays shall not extend to the levy of the
since the Local Government Code has withdrawn following:
exemptions from real property taxes of all
persons, whether natural or juridical: chan rob lesvi rtual lawlib rary
....

SEC. 234. Exemptions from Real Property Tax. (o) Taxes, fees or charges of any kind on the
The following are exempted from payment of real National Government, its agencies and
property tax: instrumentalities and local government units.

(a) Real property owned by the Republic of the Specifically on real property taxes, Section 234
Philippines or any of its political subdivisions enumerates the persons and real property
except when the beneficial use thereof has been exempt from real property taxes: chanrob lesvi rtua llawli bra ry

granted, for consideration or otherwise, to a

taxable person; SEC. 234. Exemptions from Real Property Tax.
The following are exempted from payment of real
(b) Charitable institutions, churches, parsonages property tax:
or convents appurtenant thereto, mosques,
nonprofit or religious cemeteries and all lands, (a) Real property owned by the Republic of the
buildings, and improvements actually, directly, Philippines or any of its political subdivisions
and exclusively used for religious, charitable or except when the beneficial use thereof has been
educational purposes; granted, for consideration or otherwise, to a
taxable person;
(c) All machineries and equipment that are
actually, directly and exclusively used by local (b) Charitable institutions, churches, parsonages
water districts and government-owned or or convents appurtenant thereto, mosques,
controlled corporations engaged in the supply and nonprofit or religious cemeteries and all lands,
distribution of water and/or generation and buildings, and improvements actually, directly,
transmission of electric power; and exclusively used for religious, charitable or
educational purposes;
(d) All real property owned by duly registered
cooperatives as provided under R.A. No. 6938; (c) All machineries and equipment that are
and actually, directly and exclusively used by local
water districts and government-owned or
(e) Machinery and equipment used for pollution controlled corporations engaged in the supply and
control and environmental protection. distribution of water and/or generation and
transmission of electric power;
Except as provided herein, any exemption from
payment of real property taxes previously granted (d) All real property owned by duly registered
to, or presently enjoyed by, all persons, whether cooperatives as provided under R.A. No. 6938;
natural or juridical, including government-owned and
or -controlled corporations are hereby withdrawn
upon the effectivity of this Code. (Emphasis (e) Machinery and equipment used for pollution
supplied) control and environmental protection.

The person liable for real property taxes is the Except as provided herein, any exemption from
taxable person who had actual or beneficial use payment of real property tax previously granted
and possession [of the real property for the to, or presently enjoyed by, all persons, whether
natural or juridical, including all government- educational purpose; (2) machineries and
owned or -controlled corporations are hereby equipment actually, directly and exclusively used
withdrawn upon the effectivity of this Code. by local water districts or by government-owned
(Emphasis supplied) or controlled corporations engaged in the supply
and distribution of water and/or generation and
For persons granted tax exemptions or incentives transmission of electric power; and (3) machinery
before the effectivity of the Local Government and equipment used for pollution control and
Code, Section 193 withdrew these tax exemption environmental protection.243 c h anRoblesvi rtua lLawl ibra ry

privileges. These persons consist of both natural

and juridical persons, including government- Persons may likewise be exempt from payment of
owned or controlled corporations: chan roble svirtuallaw lib rary real properties if their charters, which were
enacted or reenacted after the effectivity of the
SEC. 193. Withdrawal of Tax Exemption Local Government Code, exempt them payment
Privileges. Unless otherwise provided in this of real property taxes.244 chanRob lesvi rtua lLawl ibra ry

code, tax exemptions or incentives granted to or

presently enjoyed by all persons, whether natural V. (A)
or juridical, including government-owned or
controlled corporations, except local water The PEZA is an instrumentality of the
districts, cooperatives duly registered under R.A. national government
6938, non stock and non profit hospitals and
educational institutions, are hereby withdrawn An instrumentality is any agency of the National
upon effectivity of this Code. Government, not integrated within the
department framework, vested with special
As discussed, Section 234 withdrew all tax functions or jurisdiction by law, endowed with
privileges with respect to real property taxes. some if not all corporate powers, administering
special funds, and enjoying operational
Nevertheless, local government units may grant autonomy, usually through a charter.245 chanRoblesvirtual Lawlib ra ry

tax exemptions under such terms and conditions

as they may deem necessary: chan roblesv irt uallawl ibra ry Examples of instrumentalities of the national
government are the Manila International Airport
SEC. 192. Authority to Grant Tax Exemption Authority,246 the Philippine Fisheries Development
Privileges. Local government units may, Authority,247 the Government Service Insurance
through ordinances duly approved, grant tax System,248 and the Philippine Reclamation
exemptions, incentives or reliefs under such Authority.249 These entities are not integrated
terms and conditions as they may deem within the department framework but are
necessary. nevertheless vested with special functions to
carry out a declared policy of the national
In Mactan Cebu International Airport Authority v. government.
Hon. Marcos,240 this court classified the
exemptions from real property taxes into Similarly, the PEZA is an instrumentality of the
ownership, character, and usage exemptions. national government. It is not integrated within
the department framework but is an agency
Ownership exemptions are exemptions based on attached to the Department of Trade and
the ownership of the real property. The Industry.250 Book IV, Chapter 7, Section 38(3)(a)
exemptions of real property owned by the of the Administrative Code of 1987 defines
Republic of the Philippines, provinces, cities, attachment: chanroblesvi rtua llawlib ra ry

municipalities, barangays, and registered

cooperatives fall under this classification.241 chanRob lesvi rtual Lawl ibra ry SEC. 38. Definition of Administrative Relationship.
Unless otherwise expressly stated in the Code
Character exemptions are exemptions based on or in other laws defining the special relationships
the character of the real property. Thus, no real of particular agencies, administrative
property taxes may be levied on charitable relationships shall be categorized and defined as
institutions, houses and temples of prayer like follows:
churches, parsonages, or convents appurtenant
thereto, mosques, and non profit or religious ....
cemeteries.242chanRob lesvi rtual Lawli bra ry

(3) Attachment.(a) This refers to the lateral

Usage exemptions are exemptions based on the relationship between the department or its
use of the real property. Thus, no real property equivalent and the attached agency or
taxes may be levied on real property such as: (1) corporation for purposes of policy and program
lands and buildings actually, directly, and coordination. The coordination may be
exclusively used for religious, charitable or accomplished by having the department
represented in the governing board of the As an instrumentality of the national government,
attached agency or corporation, either as the PEZA is vested with special functions or
chairman or as a member, with or without voting jurisdiction by law. Congress created the PEZA to
rights, if this is permitted by the charter; having operate, administer, manage and develop special
the attached corporation or agency comply with a economic zones in the Philippines.259 Special
system of periodic reporting which shall reflect economic zones are areas with highly developed
the progress of the programs and projects; and or which have the potential to be developed into
having the department or its equivalent provide agro-industrial, industrial tourist/recreational,
general policies through its representative in the commercial, banking, investment and financial
board, which shall serve as the framework for the centers.260 By operating, administering,
internal policies of the attached corporation or managing, and developing special economic zones
agency[.] which attract investments and promote use of
domestic labor, the PEZA carries out the following
Attachment, which enjoys a larger measure of policy of the Government: chan roble svi rtual law libra ry

independence251 compared with other

administrative relationships such as supervision SECTION 2. Declaration of Policy. It is the
and control, is further explained in Beja, Sr. v. declared policy of the government to translate
Court of Appeals:252 chanRob lesvi rtua lLawl ibra ry
into practical realities the following State policies
and mandates in the 1987 Constitution, namely:
An attached agency has a larger measure of
independence from the Department to which it is (a) The State recognizes the indispensable role
attached than one which is under departmental of the private sector, encourages private
supervision and control or administrative enterprise, and provides incentives to needed
supervision. This is borne out by the lateral investments. (Sec. 20, Art. II)
relationship between the Department and the
attached agency. The attachment is merely for (b) The State shall promote the preferential use
policy and program coordination. With respect of Filipino labor, domestic materials and locally
to administrative matters, the independence of an produced goods, and adopt measures that help
attached agency from Departmental control and make them competitive. (Sec. 12, Art. XII)
supervision is further reinforced by the fact that
even an agency under a Departments In pursuance of these policies, the government
administrative supervision is free from shall actively encourage, promote, induce and
Departmental interference with respect to accelerate a sound and balanced industrial,
appointments and other personnel actions in economic and social development of the country
accordance with the decentralization of personnel in order to provide jobs to the people especially
functions under the Administrative Code of 1987. those in the rural areas, increase their
Moreover, the Administrative Code explicitly productivity and their individual and family
provides that Chapter 8 of Book IV on supervision income, and thereby improve the level and
and control shall not apply to chartered quality of their living condition through the
institutions attached to a Department.253 establishment, among others, of special economic
zones in suitable and strategic locations in the
With the PEZA as an attached agency to the country and through measures that shall
Department of Trade and Industry, the 13-person effectively attract legitimate and productive
PEZA Board is chaired by the Department foreign investments.261
Secretary.254 Among the powers and functions of
the PEZA is its ability to coordinate with the Being an instrumentality of the national
Department of Trade and Industry for policy and government, the PEZA cannot be taxed by local
program formulation and implementation.255 In government units.
strategizing and prioritizing the development of
special economic zones, the PEZA coordinates Although a body corporate vested with some
with the Department of Trade and Industry.256 chanRoblesvi rtual Lawli bra ry corporate powers,262 the PEZA is not a
government-owned or controlled corporation
The PEZA also administers its own funds and taxable for real property taxes.
operates autonomously, with the PEZA Board
formulating and approving the PEZAs annual Section 2(13) of the Introductory Provisions of
budget.257 Appointments and other personnel the Administrative Code of 1987 defines the term
actions in the PEZA are also free from government-owned or controlled
departmental interference, with the PEZA Board corporation: chanro blesvi rt uallawl ibra ry

having the exclusive and final authority to

promote, transfer, assign and reassign officers of SEC. 2. General Terms Defined. Unless the
the PEZA.258chanRoblesvi rtua lLawl ibra ry
specific words of the text, or the context as a
whole, or a particular statute, shall require a
different meaning: In contrast, government instrumentalities vested
with corporate powers and performing
.... governmental or public functions need not meet
the test of economic viability. These
(13) Government-owned or controlled corporation instrumentalities perform essential public services
refers to any agency organized as a stock or non- for the common good, services that every modern
stock corporation, vested with functions relating State must provide its citizens. These
to public needs whether governmental or instrumentalities need not be economically viable
proprietary in nature, and owned by the since the government may even subsidize their
Government directly or through its entire operations. These instrumentalities are not
instrumentalities either wholly, or, where the "government-owned or controlled
applicable as in the case of stock corporations, to corporations" referred to in Section 16, Article XII
the extent of at least fifty-one (51) per cent of its of the 1987 Constitution.
capital stock: Provided, That government-owned
or controlled corporations may be further Thus, the Constitution imposes no limitation when
categorized by the Department of the Budget, the the legislature creates government
Civil Service Commission, and the Commission on instrumentalities vested with corporate powers
Audit for purposes of the exercise and discharge but performing essential governmental or public
of their respective powers, functions and functions. Congress has plenary authority to
responsibilities with respect to such corporations. create government instrumentalities vested with
corporate powers provided these instrumentalities
Government entities are created by law, perform essential government functions or public
specifically, by the Constitution or by statute. In services. However, when the legislature creates
the case of government-owned or controlled through special charters corporations that
corporations, they are incorporated by virtue of perform economic or commercial activities, such
special charters263to participate in the market for entities known as "government-owned or
special reasons which may be related to controlled corporations" must meet the test of
dysfunctions or inefficiencies of the market economic viability because they compete in the
structure. This is to adjust reality as against the market place.
concept of full competition where all market
players are price takers. Thus, under the ....
Constitution, government-owned or controlled
corporations are created in the interest of the Commissioner Blas F. Ople, proponent of the test
common good and should satisfy the test of of economic viability, explained to the
economic viability.264 Article XII, Section 16 of Constitutional Commission the purpose of this
the Constitution provides: chan roble svirtual lawli brary test, as follows:
chanrob lesvi rtua llawli bra ry

Section 16. The Congress shall not, except by MR. OPLE: Madam President, the reason for this
general law, provide for the formation, concern is really that when the government
organization, or regulation of private creates a corporation, there is a sense in which
corporations. Government-owned or controlled this corporation becomes exempt from the test of
corporations may be created or established by economic performance. We know what happened
special charters in the interest of the common in the past. If a government corporation loses,
good and subject to the test of economic viability. then it makes its claim upon the taxpayers'
money through new equity infusions from the
Economic viability is the capacity to function government and what is always invoked is the
efficiently in business.265 To be economically common good. That is the reason why this year,
viable, the entity should not go into activities out of a budget of P115 billion for the entire
which the private sector can do better.266 chanRoble svi rtual Lawli bra ry government, about P28 billion of this will go into
equity infusions to support a few government
To be considered a government-owned or financial institutions. And this is all taxpayers'
controlled corporation, the entity must have been money which could have been relocated to
organized as a stock or non-stock agrarian reform, to social services like health and
corporation.267 chanRob lesvi rtua lLawl ibra ry education, to augment the salaries of grossly
underpaid public employees. And yet this is all
Government instrumentalities, on the other hand, going down the drain.
are also created by law but partake of sovereign
functions. When a government entity performs Therefore, when we insert the phrase "ECONOMIC
sovereign functions, it need not meet the test of VIABILITY" together with the "common good,"
economic viability. In Manila International Airport this becomes a restraint on future enthusiasts for
Authority v. Court of Appeals,268 this court state capitalism to excuse themselves from the
explained: c hanroblesv irt uallawl ibra ry responsibility of meeting the market test so that
they become viable. And so, Madam President, I charter. Section 21 of Presidential Decree No. 66
reiterate, for the committee's consideration and I provides:c han roblesv irt uallawl ibra ry

am glad that I am joined in this proposal by

Commissioner Foz, the insertion of the standard Section 21. Non-profit Character of the Authority;
of "ECONOMIC VIABILITY OR THE ECONOMIC Exemption from Taxes. The Authority shall be
TEST," together with the common good. non-profit and shall devote and use all its returns
from its capital investment, as well as excess
.... revenues from its operations, for the
development, improvement and maintenance and
Clearly, the test of economic viability does not other related expenditures of the Authority to pay
apply to government entities vested with its indebtedness and obligations and in
corporate powers and performing essential public furtherance and effective implementation of the
services. The State is obligated to render policy enunciated in Section 1 of this Decree. In
essential public services regardless of the consonance therewith, the Authority is hereby
economic viability of providing such service. The declared exempt: Cha nRobles Vi rtua lawlib rary

non-economic viability of rendering such essential ....

public service does not excuse the State from
withholding such essential services from the (b) From all income taxes, franchise taxes, realty
public.269(Emphases and citations omitted) taxes and all other kinds of taxes and licenses to
be paid to the National Government, its
The law created the PEZAs charter. Under the provinces, cities, municipalities and other
Special Economic Zone Act of 1995, the PEZA was government agencies and instrumentalities[.]
established primarily to perform the
governmental function of operating, The Special Economic Zone Act of 1995, on the
administering, managing, and developing special other hand, does not specifically exempt the PEZA
economic zones to attract investments and from payment of real property taxes.
provide opportunities for preferential use of
Filipino labor. Nevertheless, we rule that the PEZA is exempt
from real property taxes by virtue of its charter.
Under its charter, the PEZA was created a body A provision in the Special Economic Zone Act of
corporate endowed with some corporate powers. 1995 explicitly exempting the PEZA is
However, it was not organized as a stock270 or unnecessary. The PEZA assumed the real
non-stock271 corporation. Nothing in the PEZAs property exemption of the EPZA under
charter provides that the PEZAs capital is divided Presidential Decree No. 66.
into shares.272 The PEZA also has no members
who shall share in the PEZAs profits. Section 11 of the Special Economic Zone Act of
1995 mandated the EPZA to evolve into the
The PEZA does not compete with other economic PEZA in accordance with the guidelines and
zone authorities in the country. The government regulations set forth in an executive order issued
may even subsidize the PEZAs operations. Under for this purpose. President Ramos then issued
Section 47 of the Special Economic Zone Act of Executive Order No. 282 in 1995, ordering the
1995, any sum necessary to augment [the PEZA to assume the EPZAs powers, functions,
PEZAs] capital outlay shall be included in the and responsibilities under Presidential Decree No.
General Appropriations Act to be treated as an 66 not inconsistent with the Special Economic
equity of the national government.273 chanRoblesvi rtua lLawl ibra ry
Zone Act of 1995: chanrob lesvi rtua llawli bra ry

The PEZA, therefore, need not be economically SECTION 1. Assumption of EPZAs Powers and
viable. It is not a government-owned or Functions by PEZA. All the powers, functions and
controlled corporation liable for real property responsibilities of EPZA as provided under its
taxes. Charter, Presidential Decree No. 66, as amended,
insofar as they are not inconsistent with the
V. (B) powers, functions and responsibilities of the
PEZA, as mandated under Republic Act No. 7916,
The PEZA assumed the non-profit character, shall hereafter be assumed and exercised by the
including the tax exempt status, of the EPZA PEZA. Henceforth, the EPZA shall be referred to
as the PEZA.
The PEZAs predecessor, the EPZA, was declared
non-profit in character with all its revenues The following sections of the Special Economic
devoted for its development, improvement, and Zone Act of 1995 provide for the PEZAs powers,
maintenance. Consistent with this non-profit functions, and responsibilities: chan roblesv irt uallawl ibra ry

character, the EPZA was explicitly declared

exempt from real property taxes under its
SEC. 5. Establishment of ECOZONES. To ensure easily be established to curtail smuggling
the viability and geographical dispersal of activities.
ECOZONES through a system of prioritization, the
following areas are initially identified as Other areas which do not meet the foregoing
ECOZONES, subject to the criteria specified in criteria may be established as ECOZONES:
Section 6: Provided, That the said area shall be developed
only through local government and/or private
.... sector initiative under any of the schemes allowed
in Republic Act No. 6957 (the build-operate-
The metes and bounds of each ECOZONE are to transfer law), and without any financial exposure
be delineated and more particularly described in a on the part of the national government: Provided,
proclamation to be issued by the President of the further, That the area can be easily secured to
Philippines, upon the recommendation of the curtail smuggling activities: Provided, finally, That
Philippine Economic Zone Authority (PEZA), which after five (5) years the area must have attained a
shall be established under this Act, in substantial degree of development, the indicators
coordination with the municipal and / or city of which shall be formulated by the PEZA.
council, National Land Use Coordinating
Committee and / or the Regional Land Use SEC. 7. ECOZONE to be a Decentralized Agro-
Committee. Industrial, Industrial, Commercial / Trading,
Tourist, Investment and Financial Community. -
SEC. 6. Criteria for the Establishment of Other Within the framework of the Constitution, the
ECOZONES. In addition to the ECOZONES interest of national sovereignty and territorial
identified in Section 5 of this Act, other areas may integrity of the Republic, ECOZONE shall be
be established as ECOZONES in a proclamation to developed, as much as possible, into a
be issued by the President of the Philippines decentralized, self-reliant and self-sustaining
subject to the evaluation and recommendation of industrial, commercial/trading, agro-industrial,
the PEZA, based on a detailed feasibility and tourist, banking, financial and investment center
engineering study which must conform to the with minimum government intervention. Each
following criteria: ECOZONE shall be provided with transportation,
telecommunications, and other facilities needed to
(a) The proposed area must be identified as a generate linkage with industries and employment
regional growth center in the Medium-Term opportunities for its own inhabitants and those of
Philippine Development Plan or by the Regional nearby towns and cities.
Development Council;
The ECOZONE shall administer itself on economic,
(b) The existence of required infrastructure in the financial, industrial, tourism development and
proposed ECOZONE, such as roads, railways, such other matters within the exclusive
telephones, ports, airports, etc., and the competence of the national government.
suitability and capacity of the proposed site to
absorb such improvements; The ECOZONE may establish mutually beneficial
economic relations with other entities within the
(c) The availability of water source and electric country, or, subject to the administrative
power supply for use of the ECOZONE; guidance of the Department of Foreign Affairs
and/or the Department of Trade and Industry,
(d) The extent of vacant lands available for with foreign entities or enterprises.
industrial and commercial development and
future expansion of the ECOZONE as well as of Foreign citizens and companies owned by non-
lands adjacent to the ECOZONE available for Filipinos in whatever proportion may set up
development of residential areas for the enterprises in the ECOZONE, either by themselves
ECOZONE workers; or in joint venture with Filipinos in any sector of
industry, international trade and commerce within
(e) The availability of skilled, semi-skilled and the ECOZONE. Their assets, profits and other
non-skilled trainable labor force in and around the legitimate interests shall be protected: Provided,
ECOZONE; That the ECOZONE through the PEZA may require
a minimum investment for any ECOZONE
(f) The area must have a significant incremental enterprises in freely convertible currencies:
advantage over the existing economic zones and Provided, further, That the new investment shall
its potential profitability can be established; fall under the priorities, thrusts and limits
provided for in the Act.
(g) The area must be strategically located; and
SEC. 8. ECOZONE to be Operated and Managed
(h) The area must be situated where controls can as Separate Customs Territory. The ECOZONE
shall be managed and operated by the PEZA as
separate customs territory. (d) In coordination with local government units
concerned and appropriate agencies, to construct,
The PEZA is hereby vested with the authority to acquire, own, lease, operate and maintain on its
issue certificate of origin for products own or through contract, franchise, license, bulk
manufactured or processed in each ECOZONE in purchase from the private sector and build-
accordance with the prevailing rules or origin, and operate-transfer scheme or joint venture,
the pertinent regulations of the Department of adequate facilities and infrastructure, such as
Trade and Industry and/or the Department of light and power systems, water supply and
Finance. distribution systems, telecommunication and
transportation, buildings, structures, warehouses,
SEC. 9. Defense and Security. The defense of roads, bridges, ports and other facilities for the
the ECOZONE and the security of its perimeter operation and development of the ECOZONE;
fence shall be the responsibility of the national
government in coordination with the PEZA. (e) To create, operate and/or contract to operate
Military forces sent by the national government such agencies and functional units or offices of
for the purpose of defense shall not interfere in the authority as it may deem necessary;
the internal affairs of any of the ECOZONE and
expenditure for these military forces shall be (f) To adopt, alter and use a corporate seal; make
borne by the national government. The PEZA may contracts, lease, own or otherwise dispose of
provide and establish the ECOZONES internal personal or real property; sue and be sued; and
security and firefighting forces. otherwise carry out its duties and functions as
provided for in this Act;
SEC. 10. Immigration. Any investor within the
ECOZONE whose initial investment shall not be (g) To coordinate the formulation and preparation
less than One Hundred Fifty Thousand Dollars of the development plans of the different entities
($150,000.00), his/her spouse and dependent mentioned above;
children under twenty-one (21) years of age shall
be granted permanent resident status within the (h) To coordinate with the National Economic
ECOZONE. They shall have freedom of ingress Development Authority (NEDA), the Department
and egress to and from the ECOZONE without any of Trade and Industry (DTI), the Department of
need of special authorization from the Bureau of Science and Technology (DOST), and the local
Immigration. government units and appropriate government
agencies for policy and program formulation and
The PEZA shall issue working visas renewable implementation; and
every two (2) years to foreign executives and
other aliens, processing highly-technical skills (i) To monitor and evaluate the development and
which no Filipino within the ECOZONE possesses, requirements of entities in subsection (a) and
as certified by the Department of Labor and recommend to the local government units or
Employment. The names of aliens granted other appropriate authorities the location,
permanent resident status and working visas by incentives, basic services, utilities and
the PEZA shall be reported to the Bureau of infrastructure required or to be made available for
Immigration within thirty (30) days after issuance said entities.
thereof.
SEC. 17. Investigation and Inquiries. Upon a
SEC. 13. General Powers and Functions of the written formal complaint made under oath, which
Authority. The PEZA shall have the following on its face provides reasonable basis to believe
powers and functions: that some anomaly or irregularity might have
been committed, the PEZA or the administrator of
(a) To operate, administer, manage and develop the ECOZONE concerned, shall have the power to
the ECOZONE according to the principles and inquire into the conduct of firms or employees of
provisions set forth in this Act; the ECOZONE and to conduct investigations, and
for that purpose may subpoena witnesses,
(b) To register, regulate and supervise the administer oaths, and compel the production of
enterprises in the ECOZONE in an efficient and books, papers, and other evidences: Provided,
decentralized manner; That to arrive at the truth, the investigator(s)
may grant immunity from prosecution to any
(c) To coordinate with local government units and person whose testimony or whose possessions of
exercise general supervision over the documents or other evidence is necessary or
development, plans, activities and operations of convenient to determine the truth in any
the ECOZONES, industrial estates, export investigation conducted by him or under the
processing zones, free trade zones, and the like; authority of the PEZA or the administrator of the
ECOZONE concerned.
b. Acquisition of right of way to the ECOZONE;
SEC. 21. Development Strategy of the ECOZONE. and
- The strategy and priority of development of
each ECOZONE established pursuant to this Act c. The protection of watershed areas and natural
shall be formulated by the PEZA, in coordination assets valuable to the prosperity of the
with the Department of Trade and Industry and ECOZONE.
the National Economic and Development
Authority; Provided, That such development If in the establishment of a publicly-owned
strategy is consistent with the priorities of the ECOZONE, any person or group of persons who
national government as outlined in the medium- has been occupying a parcel of land within the
term Philippine development plan. It shall be the Zone has to be evicted, the PEZA shall provide
policy of the government and the PEZA to the person or group of persons concerned with
encourage and provide Incentives and facilitate proper disturbance compensation: Provided,
private sector participation in the construction however, That in the case of displaced agrarian
and operation of public utilities and infrastructure reform beneficiaries, they shall be entitled to the
in the ECOZONE, using any of the schemes benefits under the Comprehensive Agrarian
allowed in Republic Act No. 6957 (the build- Reform Law, including but not limited to Section
operate-transfer law). 36 of Republic Act No. 3844, in addition to a
homelot in the relocation site and preferential
SEC. 22. Survey of Resources. The PEZA shall, in employment in the project being undertaken.
coordination with appropriate authorities and
neighboring cities and SEC. 32. Shipping and Shipping Register.
Private shipping and related business including
municipalities, immediately conduct a survey of private container terminals may operate freely in
the physical, natural assets and potentialities of the ECOZONE, subject only to such minimum
the ECOZONE areas under its reasonable regulations of local application which
the PEZA may prescribe.
jurisdiction.
The PEZA shall, in coordination with the
SEC. 26. Domestic Sales. Goods manufactured Department of Transportation and
by an ECOZONE enterprise shall be made Communications, maintain a shipping register for
available for immediate retail sales in the each ECOZONE as a business register of
domestic market, subject to payment of convenience for ocean-going vessels and issue
corresponding taxes on the raw materials and related certification.
other regulations that may be adopted by the
Board of the PEZA. Ships of all sizes, descriptions and nationalities
shall enjoy access to the ports of the ECOZONE,
However, in order to protect the domestic subject only to such reasonable requirement as
industry, there shall be a negative list of may be prescribed by the PEZA In coordination
Industries that will be drawn up by the PEZA. with the appropriate agencies of the national
Enterprises engaged in the industries included in government.
the negative list shall not be allowed to sell their
products locally. Said negative list shall be SEC. 33. Protection of Environment. - The PEZA,
regularly updated by the PEZA. in coordination with the appropriate agencies,
shall take concrete and appropriate steps and
The PEZA, in coordination with the Department of enact the proper measure for the protection of
Trade and Industry and the Bureau of Customs, the local environment.
shall jointly issue the necessary implementing
rules and guidelines for the effective SEC. 34. Termination of Business. - Investors In
Implementation of this section. the ECOZONE who desire to terminate business or
operations shall comply with such requirements
SEC. 29. Eminent Domain. The areas and procedures which the PEZA shall set,
comprising an ECOZONE may be expanded or particularly those relating to the clearing of debts.
reduced when necessary. For this purpose, the The assets of the closed enterprise can be
government shall have the power to acquire, transferred and the funds con be remitted out of
either by purchase, negotiation or condemnation the ECOZONE subject to the rules, guidelines and
proceedings, any private lands within or adjacent procedures prescribed jointly by the Bangko
to the ECOZONE for: Sentral ng Pilipinas, the Department of Finance
and the PEZA.
a. Consolidation of lands for zone development
purposes; SEC. 35. Registration of Business Enterprises. -
Business enterprises within a designated charters and the municipalities shall operate and
ECOZONE shall register with the PEZA to avail of function In accordance with Republic Act No.
all incentives and benefits provided for in this Act. 7160, otherwise known as the Local Government

SEC. 36. One Stop Shop Center. - The PEZA shall Code of 1991.
establish a one stop shop center for the purpose
of facilitating the registration of new enterprises SEC. 45. Relationship of PEZA to Privately-Owned
in the ECOZONE. Thus, all appropriate Industrial Estates. Privately-owned industrial
government agencies that are Involved In estates shall retain their autonomy and
registering, licensing or issuing permits to independence and shall be monitored by the PEZA
investors shall assign their representatives to the for the implementation of incentives.
ECOZONE to attend to Investors requirements.
SEC. 46. Transfer of Resources. - The relevant
SEC. 39. Master Employment Contracts. - The functions of the Board of Investments over
PEZA, in coordination with the Department of industrial estates and agri-export processing
Tabor and Employment, shall prescribe a master estates shall be transferred to the PEZA. The
employment contract for all ECOZONE enterprise resources of government-owned Industrial
staff members and workers, the terms of which estates and similar bodies except the Bases
provide salaries and benefits not less than those Conversion Development Authority and those
provided under this Act, the Philippine Labor areas identified under Republic Act No. 7227, are
Code, as amended, and other relevant issuances hereby transferred to the PEZA as the holding
of the national government. agency. They are hereby detached from their
mother agencies and attached to the PEZA for
SEC. 41. Migrant Worker. - The PEZA, in policy, program and operational supervision.
coordination with the Department of Labor and
Employment, shall promulgate appropriate The Boards of the affected government-owned
measures and programs leading to the expansion industrial estates shall be phased out and only
of the services of the ECOZONE to help the local the management level and an appropriate
governments of nearby areas meet the needs of number of personnel shall be retained.
the migrant workers.
Government personnel whose services are not
SEC. 42. Incentive Scheme. - An additional retained by the PEZA or any government office
deduction equivalent to one- half (1/2) of the within the ECOZONE shall be entitled to
value of training expenses incurred in developing separation pay and such retirement and other
skilled or unskilled labor or for managerial or benefits they are entitled to under the laws then
other management development programs in force at the time of their separation: Provided,
incurred by enterprises in the ECOZONE can be That in no case shall the separation pay be less
deducted from the national government's share of than one and one-fourth (1 1/4) month of every
three percent (3%) as provided In Section 24. year of service.

The PEZA, the Department of Labor and The non-profit character of the EPZA under
Employment, and the Department of Finance shall Presidential Decree No. 66 is not inconsistent with
jointly make a review of the incentive scheme any of the powers, functions, and responsibilities
provided In this section every two (2) years or of the PEZA. The EPZAs non-profit character,
when circumstances so warrant. including the EPZAs exemption from real
property taxes, must be deemed assumed by the
SEC. 43. Relationship with the Regional PEZA.
Development Council. - The PEZA shall determine
the development goals for the ECOZONE within In addition, the Local Government Code
the framework of national development plans, exempting instrumentalities of the national
policies and goals, and the administrator shall, government from real property taxes was already
upon approval by the PEZA Board, submit the in force274 when the PEZAs charter was enacted
ECOZONE plans, programs and projects to the in 1995. It would have been redundant to
regional development council for inclusion in and provide for the PEZAs exemption in its charter
as inputs to the overall regional development considering that the PEZA is already exempt by
plan. virtue of Section 133(o) of the Local Government
Code.
SEC. 44. Relationship with the Local Government
Units. - Except as herein provided, the local As for the EPZA, Commonwealth Act No. 470 or
government units comprising the ECOZONE shall the Assessment Law was in force when the
retain their basic autonomy and identity. The EPZAs charter was enacted. Unlike the Local
cities shall be governed by their respective Government Code, Commonwealth Act No. 470
does not contain a provision specifically V. (C)
exempting instrumentalities of the national
government from payment of real property Real properties under the PEZAs title are
taxes.275 It was necessary to put an exempting owned by the Republic of the Philippines
provision in the EPZAs charter.

Contrary to the PEZAs claim, however, Section Under Section 234(a) of the Local Government
24 of the Special Economic Zone Act of 1995 is Code, real properties owned by the Republic of
not a basis for the PEZAs exemption. Section 24 the Philippines are exempt from real property
of the Special Economic Zone Act of 1995 taxes:chanrob lesvi rtua llawlib ra ry

provides: c han roblesv irt uallawl ibra ry

SEC. 234. Exemptions from Real Property Tax.

Sec. 24. Exemption from National and Local The following are exempted from payment of real
Taxes. Except for real property taxes on land property tax:
owned by developers, no taxes, local and
national, shall be imposed on business (a) Real property owned by the Republic of the
establishments operating within the ECOZONE. In Philippines or any of its political subdivisions
lieu thereof, five percent (5%) of the gross except when the beneficial use thereof has been
income earned by all business enterprises within granted, for consideration or otherwise, to a
the ECOZONE shall be paid and remitted as taxable person[.]
follows:cha nro blesvi rtua llawli bra ry

Properties owned by the state are either property

(a) Three percent (3%) to the National of public dominion or patrimonial property.
Government; Article 420 of the Civil Code of the Philippines
enumerates property of public dominion: c hanro blesvi rt uallawl ibra ry

(b) Two percent (2%) which shall be directly

remitted by the business establishments to the Art. 420. The following things are property of
treasurer's office of the municipality or city where public dominion:
the enterprise is located. (Emphasis supplied)
(1) Those intended for public use, such as roads,
Tax exemptions provided under Section 24 apply canals, rivers, torrents, ports and bridges
only to business establishments operating within constructed by the State, banks, shores,
economic zones. Considering that the PEZA is not roadsteads, and others of similar character;
a business establishment but an instrumentality
performing governmental functions, Section 24 is (2) Those which belong to the State, without
inapplicable to the PEZA. belonging for public use, and are intended for
some public service or for the development of the
Also, contrary to the PEZAs claim, developers of national wealth.
economic zones, whether public or private
developers, are liable for real property taxes on Properties of public dominion are outside the
lands they own. Section 24 does not distinguish commerce of man. These properties are exempt
between a public and private developer. Thus, from levy, encumbrance or disposition through
courts cannot distinguish.276 Unless the public public or private sale.278 As this court explained
developer is exempt under the Local Government in Manila International Airport Authority: chan rob lesvi rtual lawlib rary

Code or under its charter enacted after the Local

Government Codes effectivity, the public Properties of public dominion, being for public
developer must pay real property taxes on their use, are not subject to levy, encumbrance or
land. disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of
At any rate, the PEZA cannot be taxed for real any property of public dominion is void for being
property taxes even if it acts as a developer or contrary to public policy. Essential public services
operator of special economic zones. The PEZA is will stop if properties of public dominion are
an instrumentality of the national government subject to encumbrances, foreclosures and
exempt from payment of real property taxes auction sale[.]279
under Section 133(o) of the Local Government
Code. As this court said in Manila International On the other hand, all other properties of the
Airport Authority, there must be express state that are not intended for public use or are
language in the law empowering local not intended for some public service or for the
governments to tax national government development of the national wealth are
instrumentalities. Any doubt whether such power patrimonial properties. Article 421 of the Civil
exists is resolved against local Code of the Philippines provides: chan roble svirtual lawlib rary

governments.277 chanRoblesv irt ual Lawlib rary

Art. 421. All other property of the State, which is
not of the character stated in the preceding The port in Mariveles, Bataan then became the
article, is patrimonial property. Bataan Economic Zone under the Special
Economic Zone Act of 1995.287 Republic Act No.
Patrimonial properties are also properties of the 9728 then converted the Bataan Economic Zone
state, but the state may dispose of its patrimonial into the Freeport Area of Bataan.288 chanRoblesvirtual Lawlib ra ry

property similar to private persons disposing of

their property. Patrimonial properties are within A port of entry, where imported goods are
the commerce of man and are susceptible to unloaded then introduced in the market for public
prescription, unless otherwise provided.280 chanRob lesvi rtua lLawl ibra ry consumption, is considered property for public
use. Thus, Article 420 of the Civil Code classifies
In this case, the properties sought to be taxed are a port as property of public dominion. The
located in publicly owned economic zones. These Freeport Area of Bataan, where the government
economic zones are property of public dominion. allows tax and duty-free importation of
The City seeks to tax properties located within the goods,289 is considered property of public
Mactan Economic Zone,281 the site of which was dominion. The Freeport Area of Bataan is owned
reserved by President Marcos under Proclamation by the state and cannot be taxed under Section
No. 1811, Series of 1979. Reserved lands are 234(a) of the Local Government Code.
lands of the public domain set aside for
settlement or public use, and for specific public Properties of public dominion, even if titled in the
purposes by virtue of a presidential name of an instrumentality as in this case, remain
proclamation.282 Reserved lands are inalienable owned by the Republic of the Philippines. If
and outside the commerce of man,283 and remain property registered in the name of an
property of the Republic until withdrawn from instrumentality is conveyed to another person,
public use either by law or presidential the property is considered conveyed on behalf of
proclamation.284 Since no law or presidential the Republic of the Philippines. Book I, Chapter
proclamation has been issued withdrawing the 12, Section 48 of the Administrative Code of 1987
site of the Mactan Economic Zone from public provides:c han roblesv irt uallawl ibra ry

use, the property remains reserved land.

SEC. 48. Official Authorized to Convey Real
As for the Bataan Economic Zone, the law Property. Whenever real property of the
consistently characterized the property as a port. government is authorized by law to be
Under Republic Act No. 5490, Congress declared conveyed, the deed of conveyance shall be
Mariveles, Bataan a principal port of entry285 to executed in behalf of the government by the
serve as site of a foreign trade zone where following:
foreign and domestic merchandise may be
brought in without being subject to customs and ....
internal revenue laws and regulations of the
Philippines.286 Section 4 of Republic Act No. 5490 (2) For property belonging to the Republic of the
provided that the foreign trade zone in Mariveles, Philippines, but titled in the name of any political
Bataan shall at all times remain to be owned by subdivision or of any corporate agency
the Government: chanroble svi rtual lawlib rary
or instrumentality, by the executive head of the
agency or instrumentality. (Emphasis supplied)
SEC. 4. Powers and Duties. The Foreign Trade
Zone Authority shall have the following powers In Manila International Airport Authority, this
and duties: court explained: cha nrob lesvi rtua llawli bra ry

a. To fix and delimit the site of the [The exemption under Section 234(a) of the Local
Zone which at all times remain to be Government Code] should be read in relation with
owned by the Government, and which Section 133(o) of the same Code, which prohibits
shall have a contiguous and adequate local governments from imposing [t]axes, fess or
area with well defined and policed charges of any kind on the National Government,
boundaries, with adequate enclosures to its agencies and instrumentalities x x x. The
segregate the Zone from the customs real properties owned by the Republic are titled
territory for protection of revenues, either in the name of the Republic itself or in the
together with suitable provisions for name of agencies or instrumentalities of the
ingress and egress of persons, National Government. The Administrative Code
conveyance, vessels and merchandise allows real property owned by the Republic to be
sufficient for the purpose of this Act[.] titled in the name of agencies or instrumentalities
(Emphasis supplied) of the national government. Such real properties
remained owned by the Republic of the
Philippines and continue to be exempt from real
estate tax. Government;

The Republic may grant the beneficial use of its b. Two percent (2%) which shall be directly
real property to an agency or instrumentality of remitted by the business establishments to the
the national government. This happens when title treasurers office of the municipality or city where
of the real property is transferred to an agency or the enterprise is located.293(Emphasis supplied)
instrumentality even as the Republic remains the
owner of the real property. Such arrangement For its part, the Province of Bataan collects a fifth
does not result in the loss of the tax exemption/ of the 5% final tax on gross income paid by all
Section 234(a) of the Local Government Code business establishments operating within the
states that real property owned by the Republic Freeport Area of Bataan: chanroblesvi rtua llawli bra ry

loses its tax exemption only if the beneficial use

thereof has been granted, for consideration or Section 6. Imposition of a Tax Rate of Five
otherwise, to a taxable person. . . Percent (5%) on Gross Income Earned. - No
.290 (Emphasis in the original; italics supplied) taxes, local and national, shall be imposed on
business establishments operating within the FAB.
Even the PEZAs lands and buildings whose In lieu thereof, said business establishments shall
beneficial use have been granted to other persons pay a five percent (5%) final tax on their gross
may not be taxed with real property taxes. The income earned in the following percentages:
PEZA may only lease its lands and buildings to
PEZA-registered economic zone enterprises and (a) One per centum (1%) to the National
entities.291 These PEZA-registered enterprises Government;
and entities, which operate within economic
zones, are not subject to real property taxes. (b) One per centum (1%) to the Province of
Under Section 24 of the Special Economic Zone Bataan;
Act of 1995, no taxes, whether local or national,
shall be imposed on all business establishments (c) One per centum (1%) to the treasurer's office
operating within the economic zones: chan rob lesvi rtual lawlib rary
of the Municipality of Mariveles; and

SEC. 24. Exemption from National and Local (d) Two per centum (2%) to the Authority of the
Taxes. Except for real property on land owned Freeport of Area of Bataan.294(Emphasis supplied)
by developers, no taxes, local and national, shall
be imposed on business establishments operating Petitioners, therefore, are not deprived of
within the ECOZONE. In lieu thereof, five percent revenues from the operations of economic zones
(5%) of the gross income earned by all business within their respective territorial jurisdictions.
enterprises within the ECOZONE shall be paid and The national government ensured that local
remitted as follows: government units comprising economic zones
shall retain their basic autonomy and
a. Three percent (3%) to the National identity.295
c hanRoble svirtual Lawlib rary

Government;
All told, the PEZA is an instrumentality of the
b. Two percent (2%) which shall be directly national government. Furthermore, the lands
remitted by the business establishments to the owned by the PEZA are real properties owned by
treasurers office of the municipality or city where the Republic of the Philippines. The City of Lapu-
the enterprise is located.292(Emphasis supplied) Lapu and the Province of Bataan cannot collect
real property taxes from the PEZA. chanrobles law

In lieu of revenues from real property taxes, the

City of Lapu-Lapu collects two-fifths of 5% final WHEREFORE, the consolidated petitions
tax on gross income paid by all business are DENIED.
establishments operating within the Mactan
Economic Zone: chanroble svirtual lawlib rary SO ORDERED. cralawlawlibra ry

SEC. 24. Exemption from National and Local

Taxes. Except for real property on land owned
by developers, no taxes, local and national, shall
be imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent
(5%) of the gross income earned by all business
enterprises within the ECOZONE shall be paid and
remitted as follows:

a. Three percent (3%) to the National

City of Lapu-Lapu v. PEZA 21 of Presidential Decree No. 66 that explicitly
provided for EPZAs exemption. Since no legal
Facts: provision explicitly exempted the PEZA from
payment of real property taxes, the City argued
These are consolidated petitions for review on that it can tax the PEZA.
certiorari the City of Lapu-Lapu and the
Province of Bataan separately filed against the
Philippine Economic Zone Authority (PEZA). On September 11, 2002, the PEZA filed a
petition for declaratory relief25 with the Regional
In G.R. No. 184203, the City of Lapu-Lapu (the Trial Court of Pasay City, praying that the trial
City) assails the Court of Appeals court declare it exempt from payment of real
decision2 dated January 11, 2008 and property taxes. Pursuant to Rule 63, Section 3 of
resolution3 dated August 6, 2008, dismissing the Rules of Court, the Office of the Solicitor
Citys appeal for being the wrong mode of General filed a comment31 on the PEZAs
appeal. The City appealed the Regional Trial petition for declaratory relief. It agreed that the
Court, Branch 111, Pasay Citys decision PEZA is exempt from payment of real property
finding the PEZA exempt from payment of real taxes, citing Sections 24 and 51 of the Special
property taxes. Economic Zone Act of 1995.Characterizing the
PEZA as an agency of the National Government,
In G.R. No. 187583, the Province of Bataan (the the trial court ruled that the City had no
Province) assails the Court of Appeals authority to tax the PEZA under Sections 133(o)
decision4dated August 27, 2008 and and 234(a) of the Local Government Code of
resolution5 dated April 16, 2009, granting the 1991.In the resolution32 dated June 14, 2006, the
PEZAs petition for certiorari. The Court of trial court granted the PEZAs petition for
Appeals ruled that the Regional Trial Court, declaratory relief and declared it exempt from
Branch 115, Pasay City gravely abused its payment of real property taxes.
discretion in finding the PEZA liable for real
property taxes to the Province of Bataan. Issue: WON the RTC had jurisdiction to hear
and decide on the petition of declaratory relief
Facts common to both cases: by PEZA against the city of Lapu-Lapu
President Ferdinand E. Marcos issued Ruling:
Presidential Decree No. 66 in 1972, declaring as
government policy the establishment of export The Regional Trial Court of Pasay hadno
processing zones in strategic locations in the jurisdiction to hear, try, and decide
Philippines. To carry such policy, the Export the PEZAs petition for declaratory
Processing Zone Authority was created. The said reliefagainst the City of Lapu-Lapu
decree declared that EPZA will be a non-profit
entity, and was also declared to be exempt from
taxes. We rule that the PEZA erred in availing itself of
a petition for declaratory relief against the City.
Facts of G.R. No. 184203 The City had already issued demand letters and
real property tax assessment against the PEZA,
On March 25, 1998, the City of Lapu-Lapu, in violation of the PEZAs alleged tax-exempt
through the Office of the Treasurer, demanded status under its charter. The Special Economic
from the PEZA PHP 32,912,350.08 in real Zone Act of 1995, the subject matter of PEZAs
property taxes for the period from 1992 to 1998 petition for declaratory relief, had already been
on the PEZAs properties located in the Mactan breached. The trial court, therefore, had no
Economic Zone.The City pointed out that no jurisdiction over the petition for declaratory
provision in the Special Economic Zone Act of relief.
1995 specifically exempted the PEZA from
payment of real property taxes, unlike Section
A special civil action for declaratory relief is
filed for a judicial determination of any question
of construction or validity arising from, and for a In the present case, the Regional Trial Court had
declaration of rights and duties, under any of the no jurisdiction over the subject matter of the
following subject matters: a deed, will, contract action, specially, over the remedy. The trial
or other written instrument, statute, executive court should have dismissed the PEZAs petition
order or regulation, ordinance, or any other for declaratory relief for lack of jurisdiction.
governmental regulation. However, a
declaratory judgment may issue only if there has
been no breach of the documents in question.
If the contract or statute subject matter of the
action has already been breached, the
appropriate ordinary civil action must be filed.
If adequate relief is available through another
form of action or proceeding, the other action
must be preferred over an action for declaratory
relief. In the present case, the Regional Trial
Court had no jurisdiction over the subject matter
of the action, specifically, over the remedy
sought.

In sum, a petition for declaratory relief must

satisfy six requisites:c[F]irst, 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.

We rule that the PEZA erred in availing itself of

a petition for declaratory relief against the City.
The City had already issued demand letters and
real property tax assessment against the PEZA,
in violation of the PEZAs alleged tax-exempt
status under its charter. The Special Economic
Zone Act of 1995, the subject matter of PEZAs
petition for declaratory relief, had already been
breached. The trial court, therefore, had no
jurisdiction over thepetition for declaratory
relief.