Republic of the Philippines






– versus –


– and –


x – – – – – – – – – – – – – – – – – – – – – – – – – – – x


THIS is an appeal by the Petitioner-Appellant, V.G. SINCO


decision of the Board of Assessment Appeals of Dumaguete City, The Appellee

herein, dated January 27, 1993, declaring the real properties of the Petitioner-

Appellant as taxable by reason of its actual use.

The facts of the case according to the findings of this Board are as


1.0 That sometime on March 20, 1987, Petitioner-Appellant, V.G.

Sinco Educational Corporation, acquired from the Development Bank of the

Philippines, through sale, a parcel of land known as Lot No. 586-A, located at

Barrion Taclobo, Dumaguete City, with an area of 19,227 square meters, more

or less, covered by Transfer Certificate of Title No. 16712. The purpose of the

acquisition of the said lot by Petitioner-Appellant which is located just across

Foundation University, the educational institution maintained and operated by

the Petitioner-Appellant herein, was to construct thereon a high school building,

Reference: Book VII, pp. 191-213

a gymnasium, and other sports and athletic facilities to include a swimming

pool, to be exclusively used as educational, by the Foundation University;

2.0 Sometime in 1981, Petitioner-Appellant, demanded from the

families squatting on the aforesaid land that they vacate the premises, in order

for it to commence construction of the facilities and improvements mentioned

above, but the said squatters refused to do so. Thus, on June 8, 1989, a Civil

Case for Quieting of Title, Possession, and Damages was filed against the

squatters of the said lot, which is up to the present pending before the Regional

Trial Court of Dumaguete City.

3.0 On July 17, 1990, the assistant of Respondent-Appellee, issued

Tax Declaration No. 3439, on the said lot, cancelling the old Tax Declaration

No. 2745 and declared the same as “EXEMPT” (page 110, Records) pursuant

to Section 28 (3), Article VI of the New Philippine Constitution and Joint Local

Treasury and Assessment Regulations No. 1-88, dated May 4, 1988, the

exemption to commence with the year 1988;

4.0 That on August 9, 1990, Respondent-Appellee, the City Assessor

of Dumaguete, cancelled this tax declaration (T.D. No. 3439) restoring the

taxable status of the land as per its finding on an ocular inspection conducted

on the premises on August 6, 1990, by reason of its “actual use” (Residential-


5.0 That on October 5, 1990, the City Treasurer of Dumaguete sent a

collection statement for the payment of delinquent real estate taxes on the said

lot. This was followed by another collection statement dated June 5, 1992.

6.0 That by virtue of the letter dated June 5, 1992 of the City Treasurer

of Dumaguete, Petitioner-Appellant tried to pay the same by issuing a check in

the amount of P48,339.15 covering said delinquencies, but said payment was

however countermanded or “stopped” by Petitioner-Appellant for the reason

that the said check was inadvertently issued and that the said property is

exempt from the payment of real property taxes;

Reference: Book VII, pp. 191-213

7.0 That on July 3, 1992, Petitioner-Appellant, sent a letter to

Respondent-Appellee, protesting to the reclassification of the said lot to

residential by reason of its “actual use” and declaring the same as taxable in

the payment of real property taxes. Respondent-Appellee, in a letter dated

August 5, 1992, to Petitioner-Appellant, denied the latter’s request for

exemption of Lot No. 586-A, and furnished Petitioner-Appellant copies of the

Notice of Assessment and Tax Declaration No. 3456. These were received by

Petitioner-Appellant on August 6, 1992.

8.0 That on the basis of Respondent-Appellee’s denial, on September

23,1992, Petitioner-Appellant V.G. Sinco Educational Corporation, filed an

appeal with the Local Board of Assessment Appeals of Dumaguete City. Inspite

of Respondent-Appellee’s Motion to Dismiss the appeal on the ground that the

same was filed out of time, the local board, on January 23, 1993, without ruling

on the issue of prescription, resolved the case on its merits, sustaining the

assessment of Respondent-Appellee, under Tax Declaration No. 3456.

HENCE, this appeal to this Board.

In its appeal, Petitioner-Appellant assigned the following errors, viz:

1. The respondent Board sustained the ultra vires and void act of respondent City Assessor;

2. The respondent Board sanctioned the non-observance by respondent City Assessor of due process in revoking the exemption of Lot 586-A from real estate taxation;

3. The respondent Board’s decision suffers from serious misapprehension of facts and rested on conjectures insofar as it sustained respondent City Assessor’s assertions that petitioner received the Notice of Assessment for Lot No. 586-A of February 27, 1992;

4. Respondent Board erred in sustaining respondent City Assessor’s so called standard operating procedures in the service of the Notice of Assessment, particularly for Lot No. 586-A from real estate taxation.

This Board finds that the foregoing assignment of errors are interrelated

to each other and for purposes of this resolution shall be simplified and

arranged as follows, viz:

1. Whether or not the appeal with the local board was filed within the reglementary period;

Reference: Book VII, pp. 191-213

2. Whether or not Respondent-Appellee had the authority to issue the questioned Tax Declaration No. 3456, thereby revoking the tax exemption embodied in the previous tax declaration; and

3. Whether or not Lot No. 586-A which is owned and registered in the name of Petitioner-Appellant, an educational institution, is exempt from the payment of real property taxes on its real properties.

Anent the first issue, Whether or not the appeal with the local board was

filed within the reglementary period: It may be of note that the local board

without passing on the issue of prescription, proceeded to resolve the case on

its merits. It being a jurisdictional issue and can be raised at any stage of the

proceedings, before final judgment, this Board deems it wise to discuss the

issue of prescription raised by Respondent-Appellee below.

Petitioner-Appellant alleged that it received for the first time copies of the

written notice of assessment and owner’s copy of Tax Declaration No. 3456,

issued on August 9, 1990 on August 6, 1992 and filed its appeal with the local

board on September 25, 1992 (page 169 to 188 Records) or within the sixty-

day period required by law. On the other hand, Respondent-Appellee, stated

that the notice of assessment together with the owner’s copy of Tax Declaration

No. 3456, was served upon the Petitioner-Appellant on February 27, 1992, and

as proof thereof, a machine copy of the Registry Return Receipt was attached.

(Annex 2, page 74, Records).

A thorough scrutiny of said return receipt, bore out that a certain Mrs.

Merle C. Estrebela, representative of Petitioner-Appellant, received and signed

for the receipt of the said notices and owner’s copies of Tax Declaration Nos.

29-1617, 06-101, 29-3456 and 17-069, on February 27, 1992. Although this

was denied by its representative, her signature and date of receipt as appearing

on the Registry Return Receipt is proof enough to show that due notice was

given to Petitioner-Appellant on the said date. Besides, such affidavit being self-

serving cannot overcome what appears in the records of Respondent-Appellee.

Nonetheless, in a related case before this Board in CBAA Case No. 195,

Land Bank of the Philippines, versus, Board of Assessment Appeals of Manila

and City Assessor of Manila), this Board ruled that “x x x, it bears emphasis to

Reference: Book VII, pp. 191-213

state that what has prescribed was the right of Land Bank of the Philippines

(Petitioner-Appellant, in the case at bar) to appeal but not the right to claim

exemption from payment of real property tax granted by law.” (Underlining

supplied). Section 9 of P.D. 464, now reproduced under Article 206 R.A. 7160,

provides as follows:

“Every person by or for whom real property is declared, who shall claim for tax exemption for such property under this Title shall file with the provincial, city, or municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary evidence in support of such claim, including corporate charters, title of ownership, articles of incorporation, by-laws, contracts, affidavits, certifications and mortgage deeds, and similar documents.”

If the required evidence is not submitted within the period prescribed, the property shall be listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll”.

In the appeal at bar, Petitioner-Appellant filed its claim for exemption on

July 3, 1992, before the City Assessor of Dumaguete City, the Respondent-

Appellee herein, pursuant to the aforesaid provision of law. But, the same was

denied by Respondent-Appellee in its letter dated August 5, 1992, received by

Petitioner-Appellant on August 6, 1992. On September 23, 1992, Petitioner-

Appellant filed its appeal on its claim of exemption with the local board of

assessment appeals, which was filed within the sixty-day period required by


Accordingly, the appeal from the claim for exemption filed by Petitioner-

Appellant was filed within the reglementary period required by law.

Anent the second issue, viz, Whether or not Respondent-Appellee had

the authority to issue Tax Declaration No. 3456, which revokes the tax

exemption under the previous tax declaration No. 3439; Petitioner-Appellant

claims that the issuance of the said Tax Declaration No. 3456, which declared

the real property in question as taxable, was n ultra vires act of Respondent-

Appellee and that assuming arguendo, that Respondent-Appellee had the

authority to revoke the exemption, it did not observe procedural process by

sending a written notice of assessment to Petitioner-Appellant.

Reference: Book VII, pp. 191-213

This is untenable, it appears that Petitioner-Appellant’s contention is

anchored on the failure of Respondent-Appellee to send to the Petitioner-

Appellant a written notice of assessment as provided by law. Section 27 of P.D.

464, as amended, which is totally reproduced under Article 223 of R.A. 7160,

provides as follows:

“Notification of New or Revised Assessment. When real property is assessed for the first time or when an existing assessment is increased or decreased, the provincial, city or municipal assessor shall within thirty (30) days give written notice of such new or revised assessment to the person in whose name the property is declared. The notice may be delivered personally or by registered mail or through the assistance of the punong barangay in the last known address of the person to be served.

From the foregoing, in order to have a valid assessment or before the tax

liability is fixed, the owner/taxpayer is entitled to a hearing on the assessment of

his property; notice and hearing constitute part of due process (not strictly

judicial) in taxation. BUT, only in the following circumstances, viz: (1) when the

real property is assessed for the first time, or (2) when an existing assessment

is increased or decreased, then the assessor shall within thirty (30) days give

written notice of such new or revised assessment to the person in whose name

the property is declared. In the case at bar, the records shows that it is not a

new assessment, nor is it an increase or decrease of an existing assessments.

In general, grants of tax exemption are revocable. There is a recognized

exemption on the theory that revocation without consent of the grantee would

impair the obligation of contracts and/or a violation of the due process of law.

(Real Property Taxation, Cabaluna, page 53, 2nd Edition) Respondent-

Appellee’s real properties, without due notice and hearing is not an ultra vires

act nor a violation of the due process of the law. Accordingly, Tax Declaration

No. 3456, is valid and enforceable.

Anent the third issue, Petitioner-Appellant contends that Lot No. 586-A,

described under Tax Declaration No. 3456, being intended for educational

purpose is exempt from real property tax by virtue of the provisions of Article VI,

Section 28 (3) of the 1987 Constitution which provides that “Charitable

institutions, churches and parsonages or convents appurtenant thereto,

Reference: Book VII, pp. 191-213

mosques, non-profit cemeteries, and all lands, buildings, and improvements,

actually, directly, and exclusively used for religious, charitable, or educational

purposes shall be exempt from taxation” and Article 325 of the Implementing

Rules and Regulations of the Local Government Code which says that

“Charitable institutions, churches and parsonages, or convents appurtenant

thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and

improvements actually, directly, and exclusively used for religious, charitable or

educational purposes” shall be exempt from the payment of real property tax.

On the other hand, Respondent-Appellee denies that the same is not so

exempted because of the fact that the said lot is not actually, directly and

exclusively used for educational purposes, but as a residential area; that, in

issuing T.D. No. 3456, she was guided by the fundamental principles of

Appraisal and Assessment enunciated under Section 198(b), R.A. 7160

[reiterating Sec. 2(3) of P.D. 464] which provides that “Real property shall be

classified for assessment purposes on the basis of its actual use” and Section

217 of the same Act (reiterating Sec. 19 of P.D. 464) which says that “Real

property shall be classified, valued and assessed on the basis of its actual use

regardless of where located, whoever owns it, and whoever uses it.”

During the hearing of this case in Dumaguete City on July 26, 1993,

Respondent-Appellee admitted that Petitioner-Appellant was indeed an

educational institution. There is, therefore, no controversy on the qualification of

Petitioner-Appellant as an educational institution. The issue which remains to

be resolved is whether or not the property in question is exempt from realty


As defined by Section 3(a) of P.D. 464 and Section 199(b) of R.A. 7160,

Actual Use refers to the purpose for which the property is principally or

predominantly utilized by the person in possession thereof.

Reference: Book VII, pp. 191-213

Petitioner-Appellant argued that the Supreme Court ruling in Province of

Abra vs. Hernando (G.R. No. L-493326, August 31, 1981, 107 SCRA 104),

whereby the Court said:

“x x x The present Constitution added charitable institutions, mosques, and non-profit cemeteries, and required that for the exemption of lands, buildings, and improvements, they should not only be ‘exclusively’ but also ‘actually’ and directly used for religious and charitable purposes. x x x There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation.”

has already been clarified in Abra Valley College, Inc. vs. Aquino (G.R. No. L-

39086, June 15, 1988, 162 SCRA 106), citing Herrera vs. Quezon City Board of

Assessment Appeals (G.R. No. L-1570, September 30, 1961, 3 SCRA 186) and

Commissioner of Internal Revenue vs. Bishop of the Missionary District (14

SCRA 991).

In Herrera, the High Tribunal said:

“x x x Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as in the case of hospitals, a school for training nurses, a nurses home, a property used to provide housing facilities, and other members of the hospital staff, and recreational facilities for student nurses, interns, and residents (8 C.J.S. 621); such as athletics fields, including a farm used for inmates of the institutions (Cooley on Taxation, Vol. 2, p. 1430).”

We do not believe, however, that the ruling in Herrera has any bearing on

the case at bar. While in that case the taxpayer was actually using the property

in question, the very issue in the instant case is “actual use” itself.

Immediately after the hearing of this case in Dumaguete City on July 26,

1993, an ocular inspection of the subject property was conducted by this

Board’s Hearing Officer for the Visayas accompanied by the parties and their

respective counsels. It was established then and there that several residential

buildings of assorted sizes and materials were scattered throughout the subject

property. An old unfinished structure which was said to be existing as of the

date Petitioner-Appellant acquired said property stood thereon. Subject lot is

situated near but not adjoining the campus of petitioner-appellant. It cannot,

however, be utilized for the purpose intended by petitioner-appellant due to the

Reference: Book VII, pp. 191-213

existence of said residential buildings which occupy about three-fourths of the

same. Under Section 28 (3), Article VI of the New Constitution, in order to be

exempt from taxation, the real properties of an educational institution must be

actually, directly, and exclusively used for educational purposes. Thus, in

Mabuhay Pagamutang Maynila, Inc. vs. BAA of Manila and City Assessor of

Manila (CBAA Case No. 97), this Board had the occasion to rule that:

“x x x a property could be classified as belonging to a special class if it is actually, directly and exclusively used as, among others, hospital. A hospital has yet to be constructed on subject property. Thus, the same could not have been classified as pertaining to a special class under the above-quoted provision during the general revision in 1973. Subject property was then actually a vacant or idle land located in a mixed residential-commercial area which, under Department of Finance Order No. 3-74, should be classified as residential.”

The importance of education is so paramount such that Art. II, Sec. 17 of

the Constitution provides that “The State shall give priority to education, science

and technology, arts, culture, and sports to foster patriotism and nationalism,

accelerate social progress, and promote total human liberation and

development.” The Constitution, aside from the exemption from taxation under

Sec. 28 (3), Art. VI of all lands, buildings, and improvements, actually, directly,

and exclusively used for educational purposes, also grants, among others,

exemption from taxes and duties on all revenues and assets used actually,

directly, and exclusively for educational purposes by non-stock, non-profit

educational institutions and, subject to limitations provided by law, by

proprietary educational institutions as well as (No. 3, Sec. 4, Art. XIV);

exemption from taxes on all grants, endowments, donations, or contributions

used actually, directly, and exclusively for educational purposes, subject to

conditions prescribed by law (No. 4, Ibid.); and highest budgetary priority

accorded to education (No. 5, Ibid).

The mandates under Section 1 to 5, Article XIV of the New Constitution

“truly indicate how much the State values education as part of an over-all

development effort in our country. It is the justified belief of every Member of the

1988 Constitutional Commission on education plays a vital role in strengthening

Reference: Book VII, pp. 191-213

the Nation’s fabric for an educated citizenry produces a strong and vibrant

society.” (Nolledo, The New Constitution of the Republic of the Philippines,

1993 Ed., p. 241).

It is admitted that petitioner-appellant is an educational institution and

there is no cause to doubt the sincerity of its intention to use the property in

question for educational purposes. It is equally admitted that petitioner-

appellant has not been able to use the lot for the purposes it intended due to

actual and continuing occupation of the same by unauthorized persons inspte

of notice for them to vacate (See Local Board’s Decision, p. 8).

For one reason or another, it is quite hard for property owners to eject or

cause the ejectment for squatters or interlopers from their properties. This fact

is of common knowledge. Even the government is having a hard time trying to

lick the problem. No less than His Excellency, President Ferdinand E. Marcos,

with his vast powers under Proclamation No. 1081 dated September 21, 1972

had recognized this. Thus, the opening statement of P.D. 772 dated August 20,

1975 reads:

“WHEREAS, it came to my knowledge that despite the issuance of Letter of Instruction No. 19 dated October 2, 1972, directing the Secretaries x x x to remove all illegal constructions including buildings on and along esteros and river banks, those along railroad tracks and those built without permits on public and private property, squatting is still a major problem in urban communities all over the country.” (Emphasis supplied.)

Squatters have certain rights under our laws. Thus, Sec. 28 of R.A. 7279,

approved on March 24, 1992 provides, that “eviction or demolition as a practice

shall be discouraged. . .”

If we were to give literal meanings to the provisions of Sections 2(3) and

19, P.D. 464 and/or Sections 198(b) and 217), R.A. 7160, the inescapable

conclusion is that the subject property is not exempt from the payment of real

property tax for being actually used as a residential area, lack of authority on

the part of present occupants notwithstanding. We cannot, however, ignore the

fact that petitioner-appellant was and is actually and physically prevented from

utilizing its own property. The President of the Philippines in promulgating P.D.

Reference: Book VII, pp. 191-213

464 (Sec. 19) or the Congress in enacting R.A. 7160 (Sec. 217), could not have

contemplated the unauthorized use by someone of the property of another as a

basis for real property assessment. For if they did, such laws would have been

violative of the due process and equal protection clauses of the Constitution.

“Justice and equity demand that Petitioner-Appellant should not be made to

pay. . . taxes on account of the act of another without its consent and the fruits

of which did not inure to its benefit.” (Nicanor T. Santos vs. BAA of Benguet and

Provincial Assessor of Benguet, CBAA Case No. 144).

In Jose B.L. Reyes and Edmundo A. Reyes vs. Pedro Almanzor, et al.

(G.R. Nos. L-49839-46 [April 26, 1991]) the Supreme Court said:

“The power to tax is an attribute of sovereignty. In fact, it is the strongest of all the powers of government. But for all its plenitude, the power to tax is not unconfined as there are restrictions. Adversely affecting as it does property rights, both the due process and equal protection clauses of the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it were otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that the power to tax involves the power to destroy. The web of unreality spun from Marshall’s famous dictum was brushed away by one stroke of Mr. Justice Holmes pen, thus: The power to tax is not the power to destroy while this court sits. So it is in the Philippines. (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. V. Commissioner of Internal Revenue, 139 SCRA 439 [1985].

“In the same vein, the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to confiscation of property. That would be a clear abuse of power (Sison v. Ancheta, supra).

“The taxing power has the authority to make a reasonable and natural classification for purpose of taxation but the government’s act must not be prompted by a spirit of hostility, or at the very least discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different both in the privileges conferred and the liabilities imposed (Fernando, The Constitution of the Philippines, Second Edition, p. 662).”

Petitioner-Appellant was not remiss in its duties as owner of subject

property for as early as 1981 it demanded of the unauthorized occupants to

vacate the same property and consequently filed a case against them.

Unfortunately, however, the same case is still pending with the Regional Trial

Court. Petitioner-Appellant is already illegally deprived of the use of its property.

We cannot now aggravate its misery by making it pay taxes on the same

Reference: Book VII, pp. 191-213

property which, in the absence of the illegal occupants, would have been

exempt from the payment of said taxes under the Constitution:

“Verily, taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which is the promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Alque, Inc., et al., 158 SCRA 9 [1988]. Consequently, it stands to reason that petitioners-appellants who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.” (Jose B.L. Reyes and Edmundo A. Reyes vs. Pedro Almanzor, et al., supra).

Finally, the said plight of private landowners whose lands are illegally

occupied by squatters, like herein petitioner-appellant, has been publicly

recognized. Thus, in his explanatory note to the Senate s. No. 1537, introduced

in November, 1993, Senator Jose D. Lina, Jr. said: “This measure seeks to

grant relief to private landowners whose lands are illegally occupied by

squatters by exempting them from the payment of real property taxes by the

local government where the property is located imposed pursuant to Book II on

“Local Taxation and Fiscal Matters,” Title II on “Real Property Taxation,” of R.A.

7160, the Local Government Code.”

WHEREFORE, the appeal is hereby GRANTED and the assailed

decision is hereby REVERSED and SET ASIDE. The respondent City Assessor

of Dumaguete City is hereby ordered to drop from the taxable list of its

assessment roll, Tax Declaration No. 3456 and restore the exemption of Lot

No. 586-A from real property taxes effective the year 1988, to the Exempt list in

its Assessment Roll. Likewise4 the City Treasurer of Dumaguete City is hereby

ordered to act accordingly.


Manila, Philippines, May 31, 1994.


Reference: Book VII, pp. 191-213



Reference: Book VII, pp. 191-213