Herarc Realty Corporation vs. Provincial Treasurer of Batangas

Decisions of the Regional Trial Court in local tax cases must be appealed to the Court of Tax Appeals (CTA), not directly to the Supreme Court. Substantively, the personal liability for real property tax is generally imposed on the registered owner of the property at the time the tax accrues, especially when the owner is a taxable entity.

Herarc Corporation acquired thirteen parcels of land in Batangas through an execution sale in 2004 and became the registered owner in 2006. However, from March 2006 to August 2009, the property remained in the actual possession of private respondents, who were assignees in a separate involuntary insolvency case involving the previous owners. Herarc only gained full possession and control of the property on August 13, 2009, after a court-issued writ of execution. The dispute arose when the Provincial Treasurer of Batangas assessed Herarc for the unpaid real property taxes corresponding to the period when it was the registered owner but not the possessor.

• Herarc Corporation acquired thirteen parcels of land in Calatagan, Batangas, via an execution sale in August 2004 and had them registered under its name in 2006.
• From March 2, 2006, to August 12, 2009 ("covered period"), private respondents Dr. Rafael A. Manalo, Grace Oliva, and Freida Rivera Yap were in actual possession of the property as assignees in an involuntary insolvency proceeding.
• Herarc Corporation was only able to take full possession and control of the property on August 13, 2009, by virtue of a writ of execution.
• On October 9, 2012, the Provincial Treasurer of Batangas sent Herarc a Statement of Real Property Tax (RPT) Liabilities for P8,093,256.89, covering the unpaid RPT for the years 2007, 2008, and January to August 12, 2009.
• On November 20, 2012, Herarc paid the assessed tax under protest.
• Shortly after, Herarc filed a petition for prohibition and mandamus with the RTC, seeking to nullify the assessment against it and have it charged against the private respondents instead.

• The assessment for unpaid RPT is illegal and erroneous because Herarc Corporation was not in possession of the subject property during the covered period.
• Citing jurisprudence, the petitioner argued that the unpaid tax is chargeable against the person who had actual or beneficial use and possession of the property, regardless of who the owner is.
• Consequently, the private respondents, who had actual possession and beneficial use of the property during the covered period, should be held liable for the RPT.

• The doctrine that the beneficial user is liable for RPT applies only when the registered owner is a tax-exempt entity.
• Since Herarc Corporation is a juridical person subject to tax and is the registered owner of the property, it is responsible for paying the deficiency taxes.
• The unpaid real property tax attaches to the land, and the primary liability for its payment rests on the registered owner.

• Procedural Issues:
  • Whether a direct appeal to the Supreme Court via a petition for review on certiorari under Rule 45 is the proper remedy for a decision of the RTC in a local tax case.
• Substantive Issues:
  • Whether the registered owner of a property is liable for the real property tax that accrued during a period when it did not have actual or beneficial possession.

• Procedural:
  • The petition was denied for being the wrong remedy. The Court held that a taxpayer not satisfied with an RTC decision in a local tax case must file a petition for review before the Court of Tax Appeals (CTA), not directly with the Supreme Court. The perfection of an appeal in the manner and within the period permitted by law is mandatory and jurisdictional. Herarc's failure to appeal to the proper court rendered the RTC decision final and the RPT assessment executory and demandable.
• Substantive:
  • The petition was denied on its merits. The Court affirmed the general rule that in real estate taxation, the unpaid tax attaches to the property, and personal liability for the tax delinquency is on whoever is the owner of the real property at the time the tax accrues. The doctrine that shifts liability to the beneficial user is an exception that applies when the registered owner is a tax-exempt entity (e.g., the government) and the beneficial use has been granted to a taxable person. Because Herarc is a taxable entity and the registered owner, it is personally liable for the RPT.

• Doctrine of Beneficial Use in Real Property Taxation — This doctrine posits that liability for real property tax can be imposed on the person who has the actual or beneficial use and possession of the property. The Court clarified that this doctrine is not a universal rule but is applied specifically in cases where a tax-exempt entity, such as the Republic of the Philippines, owns the property, but its beneficial use has been granted to a taxable person or entity. It was deemed inapplicable in this case because the registered owner, Herarc, was a taxable corporation.
• Unpaid Tax Attaches to the Property — This principle holds that real property tax is a charge against the property itself, regardless of who the owner or possessor is. The Court applied this doctrine to reinforce that the primary liability for the tax generally falls on the registered owner at the time the tax accrues, as a necessary consequence of ownership.
• Mandatory and Jurisdictional Nature of Appeal Periods — This procedural doctrine states that the right to appeal is a statutory right that must be exercised strictly in accordance with the procedures and rules governing it. The Court invoked this principle to rule that Herarc's failure to appeal the RTC decision to the correct judicial body (the Court of Tax Appeals) within the prescribed period rendered the judgment final and executory, thereby losing its right of appeal.

• "Even if this case is resolved on its substantive merit, the disposition remains the same. As the RTC correctly opined, in real estate taxation, the unpaid tax attaches to the property. The personal liability for the tax delinquency is generally on whoever is the owner of the real property at the time the tax accrues. This is a necessary consequence that proceeds from the fact of ownership."

• Testate Estate of Concordia T. Lim v. City of Manila and Government Service Insurance System v. City Treasurer and City Assessor of the City of Manila — These cases were cited by the petitioner to support its argument that the beneficial user is liable for RPT. The Supreme Court distinguished these cases, clarifying that the ruling therein applies when the registered owner is a tax-exempt entity, which was not the situation in the present case.
• National Power Corp. v. Municipal Government of Navotas — This case was cited by the Supreme Court as controlling precedent establishing that the proper remedy for a taxpayer unsatisfied with an RTC decision in a local tax case is to file a petition for review with the Court of Tax Appeals (CTA).

• Rule 45 of the Rules of Court — This was the procedural basis for the petitioner's direct appeal to the Supreme Court, which the Court determined was an erroneous remedy for a local tax case decided by the RTC.
• Republic Act No. 9282, Section 7(a)(3) — The Court cited this provision to establish the exclusive appellate jurisdiction of the Court of Tax Appeals (CTA) over decisions of the RTC in local tax cases, which was the correct procedural path the petitioner should have taken.
• Local Government Code of 1991 (R.A. No. 7160), Section 234 — This section, which enumerates exemptions from Real Property Tax, was referenced by the Court to explain the legal context for the beneficial use doctrine. The doctrine primarily operates when property owned by an entity exempt under this section (like the government) is used by a taxable person.