Cagayan Robina Sugar Milling Co. vs. Court of Appeals

Tax assessments are presumed correct and made in good faith, and valuation of machineries under the Real Property Tax Code is not confined to the depreciation formula in Section 28; the broad definition of "market value" in Section 3(n) permits adoption of the Sales Analysis or Market Data Approach, including use of a floor bid price as basis. Perfection of an appeal within the reglementary period prescribed by Section 34 of P.D. No. 464 is mandatory and jurisdictional, and failure to comply renders the assailed decision final and executory.

Petitioner Cagayan Robina Sugar Milling Co. acquired the assets and properties of the Cagayan Sugar Corporation (CASUCO)—previously foreclosed by the Development Bank of the Philippines and transferred to the Assets Privatization Trust (APT)—through a public bidding in 1990 at a purchase price of ₱464,000,000.00, against an APT-set floor bid price of ₱355,000,000.00. Among the acquired assets were sugar mill machineries installed at the CASUCO millsite in Sto. Domingo, Piat, Cagayan. The real property tax being assessed and collected was for the year 1990, making the Real Property Tax Code (P.D. No. 464)—rather than the Local Government Code of 1991 (R.A. No. 7160)—the applicable law.

In 1990, the Assets Privatization Trust (APT) offered for sale all assets and properties of the Cagayan Sugar Corporation (CASUCO), which had been foreclosed and transferred to APT by the Development Bank of the Philippines. APT set the floor bid price at ₱355,000,000.00. Petitioner Cagayan Robina Sugar Milling Co., as the highest bidder, acquired the properties for ₱464,000,000.00. Among the purchased assets were sugar mill machineries located at the CASUCO millsite in Sto. Domingo, Piat, Cagayan, covered by Lots 89-F-1 and 89-F-2 of Psd-2-01-005548.

On October 18, 1990, the Provincial Assessor of Cagayan issued a Notice of Assessment of Real Property to petitioner covering the machineries, pegging the market value at ₱391,623,520.00 and the assessed value at ₱313,298,820.00 under Tax Declaration No. 5355. Petitioner received this notice and, on February 8, 1991, appealed the assessment to the Local Board of Assessment Appeals (LBAA) on the ground that it was excessive, erroneous, and unjust. On September 10, 1991, petitioner asked the Provincial Assessor to reconsider, contending that the assessment should not be based solely on the APT-set selling price but should also consider the operating conditions of the properties and pricing factors such as goodwill and future business potential.

On April 1, 1992, the LBAA resolved that the basis of the market value for assessment purposes should be the APT floor bid price of ₱355,000,000.00. From this amount, the LBAA deducted the value of the land (₱4,721,130.00) and the total market value of the buildings (₱17,605,340.00) to derive the market value of the machineries at ₱332,673,530.00. By further deducting the value of machineries not subject to real property tax, the LBAA fixed the market value of petitioner's machineries at ₱260,327,060.00. The Provincial Assessor was directed to make the necessary amendments, resulting in Tax Declaration No. 5514 with an assessed value of ₱208,261,650.00.

Petitioner received the LBAA resolution on April 18, 1992, and prepared an "Appeal of Assessment" on that same date but did not file it with the Central Board of Assessment Appeals (CBAA). It was only on November 25, 1992—over seven months later—that petitioner filed an identical appeal with the CBAA. On January 2, 1994, the LBAA and the Provincial Assessor moved to dismiss the appeal on the ground that it had been filed beyond the thirty-day reglementary period. The CBAA dismissed the appeal as time-barred on May 17, 1994, and denied reconsideration on June 30, 1994. Petitioner then filed a special civil action for certiorari with the Supreme Court (G.R. No. 116795), which was referred to the Court of Appeals on July 3, 1995 pursuant to Revised Administrative Circular No. 1-95. The Court of Appeals denied the petition on September 26, 1995, prompting the instant petition.

• Method of Valuation: Petitioner argued that the LBAA deviated from the rules in the Real Property Tax Code for appraising machineries by simply deducting the value of land, buildings, and non-taxable machineries from the APT floor bid price to arrive at the market value, using a method not sanctioned by P.D. No. 464.
• Sales Analysis Approach Misapplied: Petitioner contended that the APT erred in relying on the Sales Analysis or Market Data Approach to determine the floor bid price, because no comparison with any similar property was ever made—the comparison was made to a bid price—and the LBAA failed to account for other circumstances of value such as goodwill and future business potential.
• Proper Formula: Petitioner insisted that the Provincial Assessor and the LBAA should have applied the formula under Section 28 of P.D. No. 464: Remaining Economic Life ÷ Economic Life × Replacement Cost = Current Market Value.
• Prescriptive Period Inapplicable: Petitioner posited that since the Provincial Assessor's appraisal and assessment was void ab initio for non-compliance with Section 28 of P.D. No. 464, the prescriptive period under Section 30 should not apply, citing the CBAA's ruling in Basey Wood Industries, Inc. vs. Board of Assessment Appeals.
• Bureau of Local Government Finance Letter: Petitioner invoked a 1st Indorsement Letter from the Deputy Executive Director of the Bureau of Local Government Finance dated May 17, 1996, directing the Provincial Assessor to recompute the market value of petitioner's machineries, as evidence that its protest had merit.

• Valuation of Machineries: Whether the Court of Appeals erred in finding the assessment of petitioner's machineries proper and correct under the Real Property Tax Code.
• Timeliness of Appeal: Whether the appellate court erred in upholding the dismissal of petitioner's appeal to the CBAA for being time-barred.

• Valuation of Machineries: No. The assessment was proper, Section 28 of P.D. No. 464 being read in conjunction with Section 3(n), which defines "market value" broadly enough to permit the Sales Analysis or Market Data Approach, including valuation based on a floor bid price.
• Timeliness of Appeal: No. The appeal was correctly dismissed as time-barred, the applicable provision being Section 34 of P.D. No. 464, which requires appeal to the CBAA within thirty days from receipt of the LBAA decision; perfection of appeal within the reglementary period is mandatory and jurisdictional.

• Valuation of Machineries: Section 28 of the Real Property Tax Code provides a formula for computing the current market value of machineries based on remaining economic life, economic life, and replacement or reproduction cost. However, Section 28 must be read in consonance with Section 3(n), which defines "market value" as the highest price estimated in terms of money which the property will bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted. Under this broad definition, the LBAA and CBAA were not precluded from adopting various approaches to value determination, including the Sales Analysis or Market Data Approach, where the source of market data for valuation is from offers of sales or bids of real property. Valuation based on the APT floor bid price belongs to this approach. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer bearing the burden of proving otherwise. Petitioner failed to show that the use of the APT floor bid price was incorrect or done in bad faith. There is no rigid rule for the valuation of property, which is affected by a multitude of circumstances that rules could not foresee nor provide for. Moreover, petitioner did not demonstrate that the current market value would be significantly lower if its proposed formula were adopted; a party challenging an appraiser's finding of value must prove not only that the appraised value is erroneous but also what the proper value is. Factual findings of administrative agencies with expertise in their field are generally binding and conclusive, and where the judicial mind is left in doubt, the assessment should be left undisturbed. The 1st Indorsement Letter from the Bureau of Local Government Finance referred only to the Provincial Assessor's assessment, not to the LBAA's re-assessment, and did not find the LBAA's valuation erroneous.

• Timeliness of Appeal: The appeal found to be time-barred was not petitioner's appeal of the Provincial Assessor's assessment to the LBAA, but the appeal of the LBAA resolution to the CBAA. The applicable provision is Section 34 of P.D. No. 464, not Section 30. Section 34 provides that the owner or administrator of the property or the assessor who is not satisfied with the decision of the Local Board of Assessment Appeals may, within thirty days after receipt of the decision, appeal to the Central Board of Assessment Appeals. Petitioner received the LBAA resolution on April 18, 1992, and thus had until May 18, 1992 to appeal to the CBAA. Petitioner filed its appeal only on November 25, 1992—well beyond the thirty-day reglementary period. Perfection of an appeal within the period prescribed is both mandatory and jurisdictional; failure to comply renders the decision final and executory. Petitioner's reliance on Basey Wood Industries, Inc. vs. Board of Assessment Appeals was misplaced, as that case involved suspension of the prescriptive period for appeal to the Provincial Board when an assessment is not in accordance with law—an inapplicable scenario here, since the issue is the appeal from the LBAA to the CBAA, not from the Provincial Assessor to the LBAA.

• Presumption of Correctness of Tax Assessments — Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer bearing the burden of proving otherwise. The Court applied this doctrine to uphold the LBAA and CBAA's use of the APT floor bid price, petitioner having failed to show that the method was incorrect or done in bad faith.

• Finality of Administrative Findings of Fact — Factual findings of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect but finality when affirmed by the Court of Appeals. The Court relied on this doctrine to decline interference with the LBAA and CBAA's valuation.

• Mandatory and Jurisdictional Nature of Appeal Periods — Perfection of an appeal within the reglementary period is both mandatory and jurisdictional; failure to comply renders the assailed decision final and executory. The Court applied this rule to affirm the CBAA's dismissal of petitioner's appeal filed beyond the thirty-day period under Section 34 of P.D. No. 464.

• Burden on Taxpayer Challenging Assessment — A party challenging an appraiser's finding of value is required not only to prove that the appraised value is erroneous but also what the proper value is. Petitioner failed to demonstrate that the current market value would be significantly lower under its proposed formula.

• "Valuation on the basis of a floor bid price is not bereft of any basis in law. One of the approaches to value is the Sales Analysis Approach or the Market Data Approach where the source of market data for valuation is from offer of sales or bids of real property. Valuation based on the floor bid price belongs to this approach, pursuant to Section 3(n)…" — This passage, quoted by the Court from the CBAA and affirmed by the Court of Appeals, articulates the legal basis for using a floor bid price in property valuation under the Real Property Tax Code.

• "Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise." — This states the controlling doctrine on the presumption of validity of tax assessments, central to the Court's refusal to disturb the LBAA and CBAA valuation.

• "Well-entrenched is the rule that the perfection of an appeal within the period therefor is both mandatory and jurisdictional, and that failing in this regard renders the decision final and executory." — This is the canonical formulation of the jurisdictional character of appeal periods, applied to affirm the dismissal of petitioner's CBAA appeal.

• Commissioner of Internal Revenue vs. Antonio Tuason, Inc., 173 SCRA 397 (1989) — Cited for the doctrine that tax assessments are presumed correct and made in good faith, with the taxpayer bearing the burden of proving otherwise.

• Army & Navy Club vs. Trinidad, 44 Phil. 383 (1923) — Cited twice: first for the proposition that there is no rigid rule for the valuation of property, and second for the rule that where the judicial mind is left in doubt, the assessment should be left undisturbed.

• Caltex (Philippines), Inc. vs. Court of Appeals, 292 SCRA 273 (1998) — Cited for the requirement that a party challenging an appraiser's finding of value must prove not only that the appraised value is erroneous but also what the proper value is.

• Fortich vs. Corona, 298 SCRA 678 (1998) — Cited for the doctrine that factual findings of administrative agencies with expertise in their field are generally binding and conclusive upon the Court.

• Vda. de Nazareno vs. Court of Appeals, 257 SCRA 589 (1996) — Cited for the principle that findings of fact of administrative agencies and quasi-judicial bodies, when affirmed by the Court of Appeals, are accorded finality.

• Pascual vs. Court of Appeals, 300 SCRA 214 (1998) — Cited for the rule that perfection of an appeal within the reglementary period is both mandatory and jurisdictional.

• Section 28, P.D. No. 464 (Real Property Tax Code) — Provides the formula for appraising machinery: the current market value is determined by dividing the remaining economic life of the machinery by its economic life and multiplying the result by the replacement or reproduction cost (new). The Court held this provision must be read in conjunction with Section 3(n) and does not exclusively mandate the depreciation formula.

• Section 3(n), P.D. No. 464 — Defines "market value" as the highest price estimated in terms of money which the property will bring if exposed for sale in the open market, allowing a reasonable time to find a knowledgeable purchaser. The Court relied on this broad definition to uphold the LBAA's use of the APT floor bid price under the Sales Analysis or Market Data Approach.

• Section 34, P.D. No. 464 — Governs appeals from the Local Board of Assessment Appeals to the Central Board of Assessment Appeals, requiring that the appeal be filed within thirty days from receipt of the LBAA decision. The Court applied this provision to uphold the dismissal of petitioner's appeal as time-barred.

• Section 30, P.D. No. 464 — Governs appeals from the provincial or city assessor to the Local Board of Assessment Appeals, allowing sixty days from receipt of the notice of assessment. The Court held this provision inapplicable to the issue of timeliness of the CBAA appeal.

Bellosillo (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concurred.