Chavez vs. Ongpin

Executive Order No. 73 is constitutional because it merely directs the effectivity of the 1984 general revision of real property assessments mandated by Section 21 of Presidential Decree No. 464 and does not constitute an exercise of the power to tax that would trigger the due process requirements applicable to new tax impositions or tax rate increases.

Petitioner Francisco I. Chavez is a taxpayer and owner of three parcels of land. Intervenor Realty Owners Association of the Philippines, Inc. (ROAP) is the national association of owners-lessors. Respondent Jaime B. Ongpin is the Minister of Finance, and respondent Fidelina Cruz is the Acting Municipal Treasurer of the Municipality of Las Piñas. The dispute centers on Executive Order No. 73, dated November 25, 1986, which directed that real property values as of December 31, 1984 — as determined by local assessors during the latest general revision of assessments — take effect beginning January 1, 1987 for purposes of real property tax collection. This order effectively accelerated the implementation of revised assessments that had previously been deferred to January 1, 1988 by Executive Order No. 1019, issued on April 18, 1985. The general revision of assessments is a process mandated by Section 21 of Presidential Decree No. 464, the Real Property Tax Code, which requires periodic revision of real property assessments at least once every five years.

Petitioner Francisco I. Chavez, a taxpayer and owner of three parcels of land, filed the instant petition before his appointment as Solicitor General, seeking to declare Executive Order No. 73 unconstitutional. Executive Order No. 73, dated November 25, 1986, directed that real property values as of December 31, 1984 — as determined by local assessors during the latest general revision of assessments — take effect beginning January 1, 1987 for purposes of real property tax collection. This order accelerated the implementation of the 1984 revised assessments, which had previously been deferred from January 1, 1985 to January 1, 1988 by Executive Order No. 1019, issued on April 18, 1985, in order to alleviate the condition of property owners during temporary economic difficulties. On March 31, 1987, Memorandum Order No. 77 was issued suspending the implementation of Executive Order No. 73 until June 30, 1987.

Chavez alleged that Executive Order No. 73 mandated an excessive increase in real property taxes by 100% to 400% on improvements and up to 100% on land, and that any increase in real property values resulting from the revision would necessarily lead to a proportionate increase in real property taxes. He contended that increasing real property taxes during a period of harsh economic conditions constituted sheer oppression, and that the increase in market values reflected in the schedule of values was brought about only by inflation and economic recession.

The intervenor, Realty Owners Association of the Philippines, Inc. (ROAP), the national association of owners-lessors, joined Chavez in challenging Executive Order No. 73 but additionally alleged that Presidential Decree No. 464 was unconstitutional insofar as it imposed an additional one percent tax on all property owners to raise funds for education, that the general revision of assessments did not meet due process requirements as regards publication, notice of hearing, and opportunity to be heard, and that it authorized "replacement cost" of buildings not provided in Presidential Decree No. 464 but only in an administrative regulation of the Department of Finance. ROAP further contended that Joint Local Assessment/Treasury Regulations No. 2-86, issued on December 12, 1986 to implement Executive Order No. 73, was oppressive and unconstitutional as it imposed successive increases of 150% over the 1986 tax.

The Office of the Solicitor General argued against the petition. The Court found that Executive Order No. 73 merely directed that the 1984 real property values take effect beginning January 1, 1987, and that the general revision of assessments completed in 1984 was based on Section 21 of Presidential Decree No. 464, which mandates periodic general revisions of real property assessments.

• Confiscatory Taxation: Petitioner Chavez argued that the unreasonable increase in real property taxes brought about by Executive Order No. 73 amounts to a confiscation of property repugnant to the constitutional guarantee of due process, invoking the cases of Ermita-Malate Hotel vs. Mayor of Manila and Sison vs. Ancheta.
• Excessive Increase: Petitioner alleged that Executive Order No. 73 accelerated the application of the general revision of assessment to January 1, 1987, thereby mandating an excessive increase in real property taxes by 100% to 400% on improvements and up to 100% on land.
• Economic Oppression: Petitioner maintained that increasing real property taxes at a period when harsh economic conditions prevail constitutes sheer oppression, and that the increase in market values reflected in the schedule of values was brought about only by inflation and economic recession.

• Validity of EO No. 73: The Office of the Solicitor General argued against the petition, contending that the attack on Executive Order No. 73 has no legal basis because the general revision of assessments is a continuing process mandated by Section 21 of Presidential Decree No. 464.
• Adequate Administrative Remedy: The OSG observed that without Executive Order No. 73, the basis for collection of real property taxes would still be the 1978 revision of property values, and that continuing to collect taxes based on outdated valuations is not in consonance with a sound tax system.

• Constitutionality of EO No. 73: Whether Executive Order No. 73 is unconstitutional for accelerating the effectivity of the 1984 general revision of real property assessments and thereby causing excessive increases in real property taxes.
• Due Process — Confiscatory Taxation: Whether the increase in real property taxes resulting from Executive Order No. 73 amounts to confiscation of property violative of the constitutional guarantee of due process.
• Constitutionality of PD No. 464: Whether the constitutionality of Presidential Decree No. 464 may be properly resolved in the present petition filed by the intervenor.

• Constitutionality of EO No. 73: No, Executive Order No. 73 is not unconstitutional. It merely directs the effectivity of the 1984 general revision of assessments mandated by Section 21 of Presidential Decree No. 464 and does not impose new taxes nor increase tax rates.
• Due Process — Confiscatory Taxation: No, the increase does not amount to confiscation. The due process requirement invoked by petitioner applies to the "power to tax," and Executive Order No. 73 does not constitute an exercise of that power.
• Constitutionality of PD No. 464: No, the challenge to Presidential Decree No. 464 is not proper for resolution in this petition. Intervention is an ancillary proceeding limited to the field of litigation open to the original parties.

• Constitutionality of EO No. 73: Executive Order No. 73, in Section 1 thereof, merely directs that real property values as of December 31, 1984, as determined by local assessors during the latest general revision of assessments, shall take effect beginning January 1, 1987 for purposes of real property tax collection. The general revision of assessments completed in 1984 is based on Section 21 of Presidential Decree No. 464, which mandates that the provincial or city assessor shall make a general revision of real property assessments beginning with calendar year 1978 and once every five years thereafter. The attack on Executive Order No. 73 therefore has no legal basis, as the general revision is a continuing process mandated by law. If at all, it is Presidential Decree No. 464 itself which should be challenged, but Chavez failed to raise any objection against said decree. Moreover, Presidential Decree No. 464 furnishes an administrative remedy — appeal to the Local Board of Assessment Appeals within sixty days from receipt of the written notice of assessment, and thereafter to the Central Board of Assessment Appeals — by which a tax assessment may be questioned. Fiscal adequacy, one of the characteristics of a sound tax system, requires that sources of revenue must be adequate to meet government expenditures and their variations; continuing to collect taxes based on 1978 valuations in disregard of subsequent increases in property values is not consonant with this principle.

• Due Process — Confiscatory Taxation: Petitioner's reliance on Ermita-Malate Hotel vs. Mayor of Manila and Sison vs. Ancheta is misplaced because the due process requirement called for in those cases applies to the "power to tax." Executive Order No. 73 does not impose new taxes nor increase taxes. It merely changes the date of implementation of the increase in real property taxes resulting from the revised assessments from January 1, 1988 to January 1, 1987. The order finds ample justification in its whereas clauses, which cite the deprivation of local government units of an additional source of revenue and the urgent need for local governments to augment their financial resources to meet the rising cost of rendering effective services to the people.

• Constitutionality of PD No. 464: The allegation of ROAP that Presidential Decree No. 464 is unconstitutional is not proper to be resolved in the present petition because the issue before the Court is limited to the constitutionality of Executive Order No. 73. Intervention is not an independent proceeding but an ancillary and supplemental one, which must be in subordination to the main proceeding. An intervention is limited to the field of litigation open to the original parties.

• Fiscal Adequacy — One of the characteristics of a sound tax system, requiring that sources of revenue must be adequate to meet government expenditures and their variations. The Court relied on this principle to justify the acceleration of revised property valuations, noting that continuing to collect real property taxes based on outdated 1978 valuations, in disregard of subsequent increases in property values, is not in consonance with a sound tax system.

• Distinction Between the Power to Tax and Implementation of Tax Assessments — The due process requirement applicable to the exercise of the "power to tax" — such as the imposition of new taxes or the increase of tax rates — does not apply to executive orders that merely set the date of effectivity for revised assessments already mandated by law. Executive Order No. 73 was held not to constitute an exercise of the taxing power because it neither imposed new taxes nor increased tax rates.

• Nature and Scope of Intervention — Intervention is not an independent proceeding but an ancillary and supplemental one, which must be in subordination to the main proceeding. An intervenor is limited to the field of litigation open to the original parties and may not expand the issues beyond those raised in the principal petition.

• Administrative Remedy for Assessment Disputes — Under Presidential Decree No. 464, an owner who is not satisfied with the assessment of his property may, within sixty days from receipt of the written notice of assessment, appeal to the Local Board of Assessment Appeals. A dissatisfied party may thereafter appeal to the Central Board of Assessment Appeals within thirty days from receipt of the Local Board's decision. The decision of the Central Board becomes final and executory after fifteen days from receipt.

• "Executive Order No. 73 does not impose new taxes nor increase taxes." — This passage articulates the ratio decidendi distinguishing the order from an exercise of the taxing power, thereby defeating the due process challenge predicated on confiscatory taxation.

• "The general revision of assessments is a continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464 which should be challenged as constitutionally infirm." — This establishes that the revision of assessments derives its authority from the Real Property Tax Code itself, not from the executive order, and identifies the proper target of any constitutional challenge.

• "Intervention is not an independent proceeding, but an ancillary and supplemental one which, in the nature of things, unless otherwise provided for by legislation (or Rules of Court), must be in subordination to the main proceeding, and it may be laid down as a general rule that an intervention is limited to the field of litigation open to the original parties." — This defines the doctrinal limitation on intervention, precluding the intervenor from expanding the issues to include the constitutionality of Presidential Decree No. 464.

• Ermita-Malate Hotel vs. Mayor of Manila, G.R. No. L-24693, July 31, 1967, 20 SCRA 849 — Cited by petitioner for the proposition that excessive tax increases amount to confiscation of property violative of due process. Distinguished and held inapplicable because the due process requirement in that case applies to the "power to tax," which Executive Order No. 73 does not exercise.

• Sison vs. Ancheta, G.R. No. 59431, July 25, 1984, 130 SCRA 654 — Cited by petitioner alongside Ermita-Malate Hotel for the same due process argument. Similarly distinguished and held misplaced for the same reason.

• Garcia vs. David, 67 Phil. 279 — Cited as authority for the rule that intervention is limited to the field of litigation open to the original parties and must be in subordination to the main proceeding.

• Section 21, Presidential Decree No. 464 (Real Property Tax Code) — Mandates the general revision of real property assessments by the provincial or city assessor beginning with calendar year 1978 and once every five years thereafter, with provision for earlier revision if property values have greatly changed. The Court held that the 1984 general revision was based on this provision and that Executive Order No. 73 merely set the date of effectivity for the revised values.

• Sections 30, 34, and 36, Presidential Decree No. 464 — Provide the administrative appeal mechanism for disputing property assessments: appeal to the Local Board of Assessment Appeals within sixty days from receipt of notice of assessment, then to the Central Board of Assessment Appeals within thirty days from receipt of the Local Board's decision, with the Central Board's decision becoming final after fifteen days. The Court identified this as the proper remedy for challenging individual assessments.

• Executive Order No. 73, dated November 25, 1986 — Directed that real property values as of December 31, 1984 take effect beginning January 1, 1987 for purposes of real property tax collection. Upheld as constitutional.

• Executive Order No. 1019, dated April 18, 1985 — Previously deferred the implementation of the increase in real property taxes from January 1, 1985 to January 1, 1988. Repealed by Executive Order No. 73.

• Memorandum Order No. 77, dated March 31, 1987 — Suspended the implementation of Executive Order No. 73 until June 30, 1987.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, and Regalado, JJ., concurred.