[G.R. No. 114231. May 18, 2001.

MANILA ELECTRIC COMPANY, Petitioner, v. NELIA A. BARLIS, in her capacity as

DECISION

DE LEON, JR., J.:

At the crux of this petition for review on certiorari under Rule 45 is the issue of whether or not
the trial court has jurisdiction over a petition for prohibition which seeks to set aside the warrants
of garnishment over petitioner’s bank deposits in satisfaction of real property taxes, without
paying under protest the tax assessed and without exhausting available administrative remedies.
1aw 1ibrary
chanrob1es virtua1

In its 11 August 1993 Decision, 2 the Court of Appeals ruled in the negative and declared void
for lack of jurisdiction the 17 June 1992 Order of the Regional Trial Court 3 as the petition for
prohibition lacked sufficient cause of action and was filed without exhaustion of available
administrative remedies. Thus, the petitioner seeks to set aside the appellate court’s Decision and
its 28 February 1994 Resolution denying his motion for reconsideration of its decision.

The facts are as follows: chanrob1es virtual 1aw library

From 1968 to 1972 the Manila Electric Company (MERALCO), a duly organized corporation in
the Philippines engaged in the distribution of electricity, erected four (4) power generating plants
in Sucat, Muntinlupa, named as Gardner I, Gardner II, Snyder I and Snyder II stations. To equip
the power plants, various machineries and equipment were purchased both locally and abroad.
When the Real Property Tax Code took effect on 1 June 1974, MERALCO filed its tax
declarations covering the Sucat power plants, the buildings thereon and the machineries and
equipment therein. From 1975 to 1978 MERALCO paid the real property taxes on the said
properties on the basis of their assessed value as stated in the tax declarations. On 29 December
1978 MERALCO sold all the power-generating plants including the landsite to the National
Power Corporation (NAPOCOR), a corporation fully owned and controlled by the Philippine
government. chanrob1es virtua1 1aw 1ibrary

In 1985, the Offices of the Municipal Assessor and Municipal Treasurer of Muntinlupa, while
reviewing records pertaining to assessments and collection of real property taxes, discovered,
among others, that MERALCO, for the period beginning 1 January 1976 to 29 December 1978,
misdeclared and/or failed to declare for taxation purposes a number of real properties, consisting
of several equipment and machineries, found in the said power plants. A review of the Deed of
Sale which MERALCO executed in favor of NAPOCOR when it sold the power plants to the
latter convinced the municipal government of Muntinlupa of the misdeclaration/non-declaration
of the true value of the said machineries and equipment. The Municipal Assessor of Muntinlupa
then declared and assessed the subject real properties for taxation purposes and on 19 November
1985 furnished MERALCO their corresponding tax declarations. There was no response from
MERALCO. Thereafter, on 3 September 1986, the then Municipal Treasurer of Muntinlupa,
Norberto A. San Mateo issued several collection notices to MERALCO, ordering it to pay the
deficiency in the real property taxes covering the machineries and equipment found in the said
power plants. Still, MERALCO did not pay the tax assessed.

The Municipality of Muntinlupa sought the assistance of the Bureau of Local Government
Finance-Department of Finance (BLGF-DOF), and a number of hearings were conducted with
both MERALCO and the Municipality of Muntinlupa participating. Finally, on 14 August 1989,
the BLGF-DOF issued a Letter-Endorsement declaring MERALCO liable to pay the deficiency
or delinquent real property taxes claimed by the Municipality of Muntinlupa on the grounds that
the properties were not declared for taxation purposes by MERALCO, and that they were not
used in a new and preferred industry.

On the basis thereof, Municipal Treasurer Eduardo A. Alon forwarded a supplemental collection
notice to MERALCO, dated 31 October 1989, demanding the immediate payment of thirty six
million pesos (P36,000,000.00) of unpaid real property taxes inclusive of penalties and accrued
interest. In addition, Municipal Treasurer Alon also sent a formal letter to MERALCO, dated 20
November 1989, reiterating his demand for tax payment. chanrob1es vrtua1 1aw 1ibrary

Again, MERALCO did not pay. Accordingly, after issuing the requisite certification of non-
payment of real property taxes and complying with the additional requirement of public posting
of the notice of delinquency, Municipal Treasurer Eduardo A. Alon issued warrants of
garnishment, copies of which were served on MERALCO on 10 October 1990, ordering the
attachment of the bank deposits of MERALCO with the Philippine Commercial and Industrial
Bank (PCIB), Metropolitan Bank and Trust Company (METROBANK) and the Bank of the
Philippine Islands (BPI) to the extent of its unpaid real property taxes.

Immediately, MERALCO filed before the Regional Trial Court (RTC) of Makati, Metro Manila
a Petition for Prohibition with Prayer for Writ of Preliminary Mandatory Injunction and/or
Temporary Restraining Order (TRO) praying, among others, that a TRO be issued to enjoin the
Municipal Treasurer of Muntinlupa from enforcing the warrants of garnishment. Thereupon, the
trial court issued a TRO which, after hearing on the injunctive aspect of the case, was modified
to the effect that the warrants of garnishment against the bank accounts shall be in full force and
effect, provided, that the Municipal Treasurer shall not in the meantime collect, receive or
withdraw the frozen bank deposits; and that MERALCO can withdraw from the frozen deposits
provided that it does not leave a balance less than the tax claim of the Municipality of
Muntinlupa.

On 17 October 1990 MERALCO filed an Amended Petition. For its part, the Municipal
Treasurer filed a Motion to Dismiss on the grounds of: (1) lack of jurisdiction since, under Sec.
64 of the Real Property Tax Code, courts are prohibited from entertaining any suit assailing the
validity of a tax assessed thereunder until the taxpayer shall have paid, under protest, the tax
assessed against him; and (2) lack of cause of action by reason of MERALCO’s failure to
question the notice of assessment issued to it by the Municipality of Muntinlupa before the Local
Board of Assessment Appeals. In its 17 June 1991 Order the trial court denied the said motion.

On a Petition for Certiorari filed before the Supreme Court, later endorsed to the Court of
Appeals, the Municipal Treasurer of Muntinlupa assailed the Order of 17 June 1991 of the RTC.
13 On 11 August 1993 the Court of Appeals in its Decision granted the petition declaring the
assailed order "void and without life in law, having been issued without jurisdiction, on a petition
that further does not state a sufficient cause of action, filed by a party who had not exhausted
available administrative remedies." 14 MERALCO moved for a reconsideration of the Decision,
but was denied for lack of merit in a Resolution dated 28 February 1994. chanrob1es virtua1 1aw 1ibrary

Two (2) questions require our resolution, to wit: (a) Whether or not the RTC has jurisdiction
over a petition for prohibition which seeks to set aside the warrants of garnishment over the bank
deposits of petitioner MERALCO without payment under protest of the tax assessed as required
in Sec. 64 of the Real Property Tax Code, as amended (RPTC, for brevity); and (b) Whether or
not the Petition for Prohibition had no cause of action by reason of MERALCO’s failure to
exhaust available administrative remedies, i.e., to question the notice of assessment issued to it
by the Municipality of Muntinlupa before the Local Board of Assessment Appeals prior to the
filing of the said petition before the trial court.

Petitioner MERALCO maintains that the trial court has jurisdiction to entertain the Petition for
Prohibition since it is not the taxpayer, referred to in Sec. 64 of the RPTC, required to make a
protest payment of the tax assessed before a tax action may be taken cognizance of by the court.
Petitioner reasons that by inference from Secs. 27 and 34 of the RPTC, the term "taxpayer"
alludes to the property owner, a person in whose name the property is declared, or the owner or
administrator, but not a previous owner which petitioner was at the time the notice of collection
was sent to it. Hence, it argues that its protest payment of the tax assessed is not a condition
precedent to the court’s acquiring jurisdiction over its petition.

Petitioner further maintains that the trial court has jurisdiction over the Petition for Prohibition as
it has sufficient cause of action — the annulment of the warrants of garnishment over its bank
deposits in PCI Bank, METROBANK and BPI. Petitioner contends that it need not exhaust any
administrative remedies, i.e., to appeal the tax assessment before the Local Board of Assessment
Appeals since, first, the petition merely seeks to assail the validity of the issuance of the warrants
of garnishment over its bank deposits, and not the tax assessment; second, it is not a taxpayer for
purposes of appealing a real property tax assessment over the power plant machineries and
equipment since it is no longer the owner thereof; and, third, even if it were to follow the
prescribed remedies on protesting a tax assessment it had nothing to appeal since the respondent
municipal treasurer issued notices of collection and not notices of assessment. chanrob1es virtua1 1aw 1ibrary

Petitioner contends that, assuming arguendo, what respondent sent were notices of assessment,
such act was irregular since pursuant to Secs. 7 and 90 of the RPTC, it is only the provincial or
city assessor, and the municipal deputy assessor, who has the authority to conduct and issue tax
assessments, and not respondent municipal treasurer.

We find the petitioner’s arguments to be without merit. The trial court has no jurisdiction to
entertain a Petition for Prohibition absent petitioner’s payment, under protest, of the tax assessed
as required by Sec. 64 of the RPTC. Payment of the tax assessed under protest, is a condition
sine qua non before the trial court could assume jurisdiction over the petition and failure to do so,
the RTC has no jurisdiction to entertain it.

The restriction upon the power of courts to impeach tax assessment without a prior payment,
under protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of
the nation and as such their collection cannot be curtailed by injunction or any like action;
otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the
needed services to the people, and its machinery gravely disabled.

Petitioner is begging the question when it asserts that it is not the taxpayer contemplated under
Sec. 64 of the RPTC. It is an accepted principle in taxation that taxes are paid by the person
obliged to declare the same for taxation purposes. Under the Real Property Tax Code, the duty to
declare the true value of real property for taxation purposes is imposed upon the owner, or
administrator, or their duly authorized representatives. 16 They are thus the taxpayers. When
these persons fail or refuse to make a declaration of the true value of their real property within
the prescribed period, the provincial or city assessor shall declare the property in the name of the
defaulting owner and assess the property for taxation. 17 In this wise, the taxpayer assumes the
character of a defaulting owner, or defaulting administrator, or defaulting authorized
representative, liable to pay back taxes.cralaw : red

Respondent Municipal Treasurer claims that petitioner MERALCO misdeclared and/or failed to
declare the true value of the Sucat power plant machineries and equipment during the taxable
years 1976-1978 when it was still the owner thereof, and that it is the deficiency in the realty tax
on the real property’s reassessed value which it seeks to collect. Based on the foregoing, the
notice of assessment and collection was directed to petitioner, not because it is still the present
owner of the subject real property including the machineries and equipment thereon, but because
it is the defaulting owner thereof who has failed to make proper tax declaration and the proper
tax payment thereon. Thus, petitioner is the taxpayer contemplated under Sec. 64 of the RPTC,
and payment under protest of the tax assessed is necessary for the trial court to acquire
jurisdiction over its petition.

The fact that NAPOCOR is the present owner of the Sucat power plant machineries and
equipment does not constitute a legal barrier to the collection of delinquent taxes from the
previous owner, MERALCO, who has defaulted in its payment. In Testate Estate of Concordia T
. Lim v. City of Manila, 18 the Court held that the unpaid tax attaches to the property and is
chargeable against the person who had actual or beneficial use and possession of it regardless of
whether or not he is the owner. In that case, the Court declared that to impose the real property
tax on the subsequent owner which was neither the owner nor the beneficial user of the property
during the designated periods would not only be contrary to law but also unjust.
Correspondingly, petitioner MERALCO, not NAPOCOR, is liable for the payment of the back
taxes on said properties.

There is no merit in petitioner’s argument that the trial court could take cognizance of the
petition as it only questions the validity of the issuance of the warrants of garnishment on its
bank deposits and not the tax assessment. Petitioner MERALCO in filing the Petition for
Prohibition before the RTC was in truth assailing the validity of the tax assessment and
collection. To resolve the petition, it would not only be the question of validity of the warrants of
garnishments that would have to be tackled, but in addition the issues of tax assessment and
collection would necessarily have to be dealt with too. As the warrants of garnishment were
issued to collect back taxes from petitioner, the petition for prohibition would be for no other
reason than to forestall the collection of back taxes on the basis of tax assessment arguments.
This, petitioner cannot do without first resorting to the proper administrative remedies, 19 or as
previously discussed, by paying under protest the tax assessed, to allow the court to assume
jurisdiction over the petition.
chanrob1es virtua1 1aw 1ibrary

Respondent claims that on 19 November 1985 the Municipal Assessor of Muntinlupa sent
petitioner a real property tax declaration containing the reassessed valuation of the Sucat power
plant machineries and equipment therein, and this served as notice of assessment to petitioner.
The Municipal Treasurer thereafter sent petitioner notices of collection dated 3 September 1986.
The records are, however, bereft of any evidence showing actual receipt by petitioner of the real
property tax declaration sent by the Municipal Assessor. However, the respondent in a Petition
for Certiorari (G.R. No. 100763) 20 filed with this Court which later referred the same to the
Court of Appeals for resolution, narrated that "the municipal assessor assessed and declared the
afore-listed properties for taxation purposes as of 28 November 1985." Significantly, in the same
petition, respondent referred to former Municipal Treasurer Norberto A. San Mateo’s notices to
MERALCO, all dated 3 September 1986, as notices of assessment and not notices of collection
as it claims in this present petition. Respondent cannot maintain diverse positions.

A notice of assessment should effectively inform the taxpayer of the value of a specific property,
or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal
of properties. From the tone and content of the notices, the 3 September 1986 notices sent by
former Municipal Treasurer Norberto A. San Mateo to petitioner MERALCO are the notices of
assessment required by the law as it merely informed the petitioner that it has yet to pay the taxes
in accordance with the reassessed values of the real property mentioned therein. The 31 October
1989 notices sent by Municipal Treasurer Eduardo A. Alon to MERALCO is likewise of the
same character. Only the letter dated 20 November 1989 sent by Municipal Treasurer Eduardo
A. Alon to petitioner MERALCO could qualify as the actual notice of collection since it is an
unmistakable demand for payment of back taxes. claw:red

Be that as it may, petitioner was correct when it pointed out that the Municipal Treasurer,
contrary to that required by law, issued the notices of assessment. However, the trial court is
without authority to address the alleged irregularity in the issuance of the notices of assessment
without prior tax payment, under protest, by petitioner. Section 64 of the RPTC, prohibits courts
from declaring any tax invalid by reason of irregularities or informalities in the proceedings of
the officers charged with the assessment or collection of taxes except upon the condition that the
taxpayer pays the just amount of the tax, as determined by the court in the pending proceeding.
27 As petitioner failed to make a protest payment of the tax assessed, any argument regarding the
procedure observed in the preparation of the notice of assessment and collection is futile as the
trial court in such a scenario cannot assume jurisdiction over the matter.chanrob1es virtua1 1aw 1ibrary
II.
It cannot be gainsaid that petitioner should have addressed its arguments to respondent at the first
opportunity — upon receipt of the 3 September 1986 notices of assessment signed by Municipal
Treasurer Norberto A. San Mateo. Thereafter, it should have availed of the proper administrative
remedies in protesting an erroneous tax assessment, i.e., to question the correctness of the
assessments before the Local Board of Assessment Appeals (LBAA), and later, invoke the
appellate jurisdiction of the Central Board of Assessment Appeals (CBAA). Under the doctrine
of primacy of administrative remedies, an error in the assessment must be administratively
pursued to the exclusion of ordinary courts whose decisions would be void for lack of
jurisdiction. But an appeal shall not suspend the collection of the tax assessed without prejudice
to a later adjustment pending the outcome of the appeal. The failure to appeal within the
statutory period shall render the assessment final and unappealable. Petitioner having failed to
exhaust the administrative remedies available to it, the assessment attained finality and collection
would be in order.

To quell any further argument regarding the validity of the issuance of the warrants of
garnishment of the bank deposits of petitioner, we shall rule upon it.

Petitioner contends that real property tax constitutes a lien on the property subject to tax, thus,
payment thereof should be made by proceeding against the real property itself or any personal
property located therein, and not the separate personal property of petitioner, specifically its bank
deposits.

Respondent, while agreeing to that proposition, in turn points out that the Real Property Tax
Code, as amended, affords local government units three (3) concurrent and simultaneous
remedies to enforce the Code’s provisions, namely: (a) distraint of personal property, (b) sale of
delinquent real property, and (c) collection of real property tax through ordinary court action.
From the foregoing, respondent argues that it is not limited to the enforcement of tax lien but is
also authorized to proceed against the personal properties of the defaulting taxpayer unless it
could be shown that the personal properties being subject to distraint are exempt from
attachment, which the bank deposits are not. chanrob1es virtua1 1aw 1ibrary

We agree with the Respondent. The remedy of levy can be pursued by putting up for sale the real
property subject of tax, i.e., the delinquent property upon which the tax lien attaches, regardless
of the present owner or possessor thereof. The remedy of distraint and levy of personal property
meanwhile allows the taxing authority to subject any personal property of the taxpayer to
execution, 31 save certain exceptions as enumerated under Sec. 69 of the RPTC. 32 Bank
deposits are not among those exceptions. Thus, the issuance of the warrants of garnishment over
petitioner’s bank deposits was not improper or irregular, and hence, could not be subject to
prohibition.

WHEREFORE, the 11 August 1993 Decision of the Court of Appeals declaring as void the 17
June 1992 Order of the Regional Trial Court for lack of jurisdiction, as the petition for
prohibition was filed therein without complying with the provision of Section 64 of the Real
Property Tax Code, and without exhaustion of available administrative remedies, is AFFIRMED.
The appellate court’s 28 February 1994 Resolution denying petitioner’s motion for
reconsideration of its subject Decision is likewise AFFIRMED.

SO ORDERED.

Doctrines:

Taxation; Real Property Tax Code; Courts; Jurisdiction; Payment of the tax assessed under protest, is a
condition sine qua non before the trial court could assume jurisdiction over the petition and for failure
to do so, the RTC has no jurisdiction to entertain it.—We find the petitioner’s arguments to be without
merit. The trial court has no jurisdiction to entertain a Petition for Prohibition absent petitioner’s
payment, under protest, of the tax assessed as required by Sec. 64 of the RPTC. Payment of the tax
assessed under protest, is a condition sine qua non before the trial court could assume jurisdiction over
the petition and failure to do so, the RTC has no jurisdiction to entertain it.

Same; Same; Under the Real Property Tax Code, the duty to declare the true value of real property for
taxation purposes is imposed upon the owner, or administrator, or their duly authorized
representatives.—Petitioner is begging the question when it asserts that it is not the taxpayer
contemplated under Sec. 64 of the RPTC. It is an accepted principle in taxation that taxes are paid by the
person obliged to declare the same for taxation purposes. Under the Real Property Tax Code, the duty to
declare the true value of real property for taxation purposes is imposed upon the owner, or
administrator, or their duly authorized representatives. They are thus the taxpayers. When these
persons fail or refuse to make a declaration of the true value of their real property within the prescribed
period, the provincial or city assessor shall declare the property in the name of the defaulting owner and
assess the property for taxation. In this wise, the taxpayer assumes the character of a defaulting owner,
or defaulting administrator, or defaulting authorized representative, liable to pay back taxes.

Same; Same; Same; Petitioner is the taxpayer contemplated under Sec. 64 of the RPTC, and payment
under protest of the tax assessed is necessary for the trial court to acquire jurisdiction over its petition.
—Respondent Municipal Treasurer claims that petitioner MERALCO misdeclared and/or failed to declare
the true value of the Sucat power plant machineries and equipment during the taxable years 1976-1978
when it was still the owner thereof, and that it is the deficiency in the realty tax on the real property’s
reassessed value which it seeks to collect. Based on the foregoing, the notice of assessment and
collection was directed to petitioner, not because it is still the present owner of the subject real
property including the machineries and equipment thereon, but because it is the defaulting owner
thereof who has failed to make proper tax declaration and the proper tax payment thereon. Thus,
petitioner is the taxpayer contemplated under Sec. 64 of the RPTC, and payment under protest of the
tax assessed is necessary for the trial court to acquire jurisdiction over its petition.

Same; Same; Same; To impose the real property tax on the subsequent owner which was neither the
owner nor the beneficial user of the property during the designated periods would not only be
contrary to law but also unjust—The fact that NAPOCOR is the present owner of the Sucat power plant
machineries and equipment does not constitute a legal barrier to the collection of delinquent taxes from
the previous owner, MERALCO, who has defaulted in its payment. In Testate Estate of Concordia T. Lim
v. City of Manila, the Court held that the unpaid tax attaches to the property and is chargeable against
the person who had actual or beneficial use and possession of it regardless of whether or not he is the
owner. In that case, the Court declared that to impose the real property tax on the subsequent owner
which was neither the owner nor the beneficial user of the property during the designated periods
would not only be contrary to law but also unjust. Correspondingly, petitioner MERALCO, not NAPOCOR,
is liable for the payment of the back taxes on said properties.

Same; Same; Same; Administrative Law; Exhaustion of administrative remedies; Under the doctrine of
primacy of administrative remedies an error in the assessment must be administratively pursued to
the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction.—Under the
doctrine of primacy of administrative remedies, an error in the assessment must be administratively
pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction. But an
appeal shall not suspend the collection of the tax assessed without prejudice to a later adjustment
pending the outcome of the appeal. The failure to appeal within the statutory period shall render the
assessment final and unappealable. Petitioner having failed to exhaust the administrative remedies
available to it, the assessment attained finality and collection would be in order.