Lopez vs. City of Manila

A taxpayer questioning the legality or constitutionality of a tax ordinance, or the excessiveness of a real property assessment, must first exhaust the administrative remedies provided under the Local Government Code before resorting to the courts. The failure to exhaust administrative remedies is fatal to the action, and a petition becomes moot and academic when the assailed ordinance is subsequently amended or repealed by a supervening enactment.

The petitioner, Jaime C. Lopez, was a real property owner in the City of Manila whose property taxes increased substantially following the implementation of Manila Ordinance No. 7894, which prescribed a revised schedule of fair market values for real properties. Section 219 of Republic Act No. 7160 (the Local Government Code of 1991) required the conduct of a general revision of real property assessments within two years after the Code's effectivity and every three years thereafter. The City of Manila had not conducted such a revision since 1979, and the new schedule of fair market values reflected increases ranging from 600% to 3,330% over the 1979 values.

Petitioner Jaime C. Lopez owned real property in the City of Manila. The City of Manila had not conducted a general revision of real property assessments since 1979, despite the mandate of Section 219 of R.A. 7160 requiring such revision within two years after the Code's effectivity on January 1, 1992, and every three years thereafter. In 1992, a schedule of real property values was prepared and submitted to the City Council but was not acted upon for unknown reasons. The City Assessor's office nonetheless continued updating the fair market values of real properties within the city.

In 1995, Mrs. Lourdes Laderas, the newly appointed City Assessor, received Memorandum Circular No. 04-95 dated March 20, 1995, from the Bureau of Local Government Finance regarding the failure of most Metropolitan Manila cities to conduct the general revision. After obtaining the necessary funds from the City Council, the City Assessor began the revision process based on updated fair market values. The increase in valuation compared to 1979 values ranged from 600% to 3,330%, but the City Assessor initially fixed the general average increase at 1,700%, later reducing it to 1,020% to avoid adverse public reaction.

In September 1995, the City Assessor's Office submitted the proposed schedule of fair market values to the City Council. Public hearings were conducted on September 28, October 5, 12, and 19, and November 27 and 29, 1995. The proposed ordinance was published in the Manila Standard on October 28, 1995, and in Balita on November 1, 1995. On December 12, 1995, the City Council enacted Manila Ordinance No. 7894, which was approved by the City Mayor on December 27, 1995, and made effective on January 1, 1996. Notices of revised assessments were thereafter distributed to real property owners pursuant to Section 223 of R.A. 7160.

With the implementation of Manila Ordinance No. 7894, the tax on the petitioner's land increased by 580%, and the tax on improvements increased by 250%. On March 18, 1996, the petitioner filed a special proceeding for declaration of nullity of the ordinance, alleging that it appeared "unjust, excessive, oppressive or confiscatory." On April 10, 1996, Manila Ordinance No. 7905 took effect, reducing by 50% the assessment levels for the computation of tax due, with retroactive effect to January 1, 1996. The new ordinance also provided that the tax increase on residential lands and improvements shall in no case exceed 200% of the tax levied in calendar year 1995, and the tax increase on commercial and industrial land, buildings, and other structures shall not exceed 300% of the 1995 tax. As a result, the petitioner's tax increase for residential land was reduced to 155%, and the increase for residential improvement was reduced to 82%.

The respondent filed a motion for inhibition against the presiding judge of RTC Branch 5, alleging that the judge had shown a "markedly indulgent attitude towards the petitioner." Judge Andrade inhibited herself, and the case was re-raffled to Branch 39. The respondent then filed a motion to dismiss on the ground of failure to exhaust administrative remedies. On May 9, 1996, the court directed the issuance of a writ of injunction and denied the motion to dismiss. On May 22, 1996, the respondent filed a motion for reconsideration, reiterating the ground of failure to exhaust administrative remedies and underscoring the supervening enactment of Manila Ordinance No. 7905. On October 24, 1996, the trial court granted the motion to dismiss, holding that the petitioner failed to exhaust administrative remedies and that the petition had become moot and academic when Manila Ordinance No. 7894 was repealed by Manila Ordinance No. 7905.

• Exhaustion of Administrative Remedies: Petitioner contended that when the trial court ruled that it had jurisdiction over the case, the question of whether he needed to resort to exhaustion of administrative remedies became moot and academic. He claimed that resort to administrative remedies on the constitutionality of a law is merely permissive as provided by Section 187 of R.A. 7160, which states that any question on the constitutionality or legality of tax ordinances may be raised on appeal to the Secretary of Justice.
• Concurrent Jurisdiction: Petitioner asserted that the question of the constitutionality of the city ordinance may be raised on appeal either to the Secretary of Justice or the Regional Trial Court, both having concurrent jurisdiction under Batas Pambansa Blg. 129.
• Prematurity of Administrative Remedies: Petitioner stated that at the time he instituted the complaint, it was premature to resort to the remedies provided by R.A. 7160 because he had not yet received the formal notice of assessment, and thus could not be expected to pay under protest and elevate the exorbitant assessment to the Board of Assessment Appeals.
• Effectivity of the Ordinance: Petitioner contended that the effectivity date of Manila Ordinance No. 7894 and the schedule of fair market values was January 1, 1996, and that Section 212 of R.A. 7160 prohibits the general revision of real property assessment before the approval of the schedule of fair market values, making the alleged revision in 1995 illegal.
• Retroactive Application: Petitioner insisted that since Manila Ordinance No. 7905 was approved on April 10, 1996, it cannot be implemented in the year 1996, citing Section 221 of R.A. 7160 which provides that assessments or reassessments made after the first day of January of any year shall take effect on the first day of January of the succeeding year.

• Timeliness of Revision: Respondent argued that the adjustment of the fair market values of real properties in the City of Manila was long overdue, being updated only after fifteen years.
• Political Motive: Respondent argued that the petitioner filed the case merely to take advantage of the situation to gain political mileage and help advance his mayoralty bid.
• Exhaustion of Administrative Remedies: Respondent moved for the dismissal of the petition on the ground of the petitioner's failure to exhaust administrative remedies.
• Mootness: Respondent underscored the supervening event of the enactment and approval of Manila Ordinance No. 7905, which amended the assessment levels and rendered the petition moot and academic.

• Exhaustion of Administrative Remedies: Whether the respondent trial court erred in holding that the petitioner failed to exhaust all administrative remedies, and therefore, the petition ought to be dismissed.
• Application of Sections 212 and 221 of the Local Government Code: Whether the respondent court erred in failing to correctly apply Sections 212 and 221 of the Local Government Code of 1991.

• Exhaustion of Administrative Remedies: Yes. The trial court correctly dismissed the petition for the petitioner's failure to exhaust administrative remedies. The petitioner should have brought the case before the Secretary of Justice for questions of legality or constitutionality of the city ordinance under Section 187 of R.A. 7160, appealed to the Board of Assessment Appeals under Section 226, and paid the tax under protest under Section 252.
• Application of Sections 212 and 221 of the Local Government Code: No. The trial court did not err in its application of Sections 212 and 221 of R.A. 7160. Compliance with Section 212 was satisfied, and the supervening enactment of Manila Ordinance No. 7905 rendered the petition moot and academic.

• Exhaustion of Administrative Remedies: The Court applied the general rule that where the law provides remedies against the action of an administrative board, body, or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. The Court enumerated the exceptions to the rule, which include: (1) when the question raised is purely legal; (2) when the administrative body is in estoppel; (3) when the act complained of is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved is small; (6) when irreparable damage will be suffered; (7) when there is no other plain, speedy and adequate remedy; (8) when strong public interest is involved; (9) when the subject of controversy is private land; and (10) in quo-warranto proceedings. The Court found that the instant petition did not fall within any of these exceptions. The crux of the petitioner's cause of action was the determination of whether the tax was excessive, oppressive, or confiscatory — an essentially factual question that precluded judicial review without prior exhaustion of administrative remedies. The Court also noted that the petitioner could always ask for a refund of the excess amount paid under protest or be credited thereof if the administrative bodies found his position meritorious.

• Application of Sections 212 and 221 of the Local Government Code: The Court found that compliance with Section 212 of R.A. 7160 was satisfied. The City Assessor prepared the schedule of fair market values, and the proposed ordinance with the schedule was published in the Manila Standard on October 28, 1995, and in Balita on November 1, 1995. The Court then addressed the effect of Manila Ordinance No. 7905, which reduced the assessment levels by 50% and applied retroactively to January 1, 1996. The Court held that the supervening enactment of Manila Ordinance No. 7905 rendered the petition moot and academic because the petitioner failed to amend his petition to reflect the new ordinance. The Court stressed that Manila Ordinance No. 7905 was favorable to taxpayers, as the reduced assessment levels multiplied by the schedule of fair market values resulted in decreased taxes. The Court characterized the ordinance as social legislation intended to soften the impact of the tremendous increase in the value of real properties subject to tax, easing the economic predicament of low and middle-income groups of taxpayers.

• Exhaustion of Administrative Remedies — As a general rule, where the law provides for remedies against the action of an administrative board, body, or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. The Court applied this doctrine to hold that the petitioner's failure to exhaust the remedies under Sections 187, 226, and 252 of R.A. 7160 was fatal to his action.
• Exceptions to the Exhaustion Doctrine — The doctrine admits of exceptions: (1) when the question raised is purely legal; (2) when the administrative body is in estoppel; (3) when the act complained of is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved is small; (6) when irreparable damage will be suffered; (7) when there is no other plain, speedy and adequate remedy; (8) when strong public interest is involved; (9) when the subject of controversy is private land; and (10) in quo-warranto proceedings. The Court found that none of these exceptions applied to the petitioner's case.
• Mootness — A petition becomes moot and academic when a supervening event renders the resolution of the issues no longer necessary or effective. The Court held that the enactment of Manila Ordinance No. 7905, which amended the assessment levels and applied retroactively, rendered the petitioner's challenge to Manila Ordinance No. 7894 moot and academic, especially since the petitioner failed to amend his petition.

• "As a general rule, where the law provides for the remedies against the action of an administrative board, body, or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. Therefore, where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts." — This passage states the general rule on exhaustion of administrative remedies and the policy rationale behind it, forming the basis of the Court's ruling on the first issue.
• "The rule is well-settled that courts will not interfere in matters which addressed to the sound discretion of government agencies entrusted with the regulations of activities coming under the special technical knowledge and training of such agencies." — This passage articulates the principle of judicial non-interference with matters within the competence of administrative agencies, supporting the dismissal of the petition.
• "The reduced assessment levels multiplied by the schedule of fair market values of real properties, provided by Manila Ordinance No. 7894, resulted to decrease in taxes. To that extent, the ordinance is likewise, a social legislation intended to soften the impact of the tremendous increase in the value of the real properties subject to tax. The lower taxes will ease, in part, the economic predicament of the low and middle-income groups of taxpayers. In enacting this ordinance, the due process of law was considered by the City of Manila so that the increase in realty tax will not amount to the confiscation of the property." — This passage explains the Court's characterization of Manila Ordinance No. 7905 as social legislation and its conclusion that the supervening ordinance addressed due process concerns.

• Cruz vs. Del Rosario, 9 SCRA 755 (1963) — Cited as controlling authority for the general rule on exhaustion of administrative remedies, which the Court applied to the petitioner's case.
• Sunville Timber Products, Inc. vs. Abad, 206 SCRA 483 — Cited for the proposition that the exhaustion doctrine admits of certain exceptions, which the Court enumerated and found inapplicable to the petitioner's case.
• First Lepanto Ceramics, Inc. vs. Court of Appeals, 253 SCRA 540 (1996) — Cited for the rule that courts will not interfere in matters addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under their special technical knowledge and training.
• Ty vs. Trampe, 250 SCRA 500 (1995) — Cited for the proposition that the determination of whether a tax is excessive, oppressive, or confiscatory is essentially a question of fact that precludes judicial review.
• National Housing Authority vs. Court of Appeals, 121 SCRA 777 — Cited by the trial court for the principle that a case may be decided in its totality, resolving all interlocking issues to render justice to all concerned and end litigation once and for all.

• Section 187, R.A. 7160 (Local Government Code of 1991) — Provides that any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty days from effectivity to the Secretary of Justice. The Court held that the petitioner should have availed of this remedy before resorting to the courts.
• Section 212, R.A. 7160 — Requires the preparation of a schedule of fair market values by the provincial, city, or municipal assessor for enactment by ordinance of the sanggunian concerned, and requires publication in a newspaper of general circulation. The Court found that compliance with this provision was satisfied.
• Section 219, R.A. 7160 — Requires the conduct of a general revision of real property assessments within two years after the effectivity of the Code and every three years thereafter. This provision was the statutory basis for the general revision undertaken by the City of Manila.
• Section 221, R.A. 7160 — Provides that all assessments or reassessments made after the first day of January of any year shall take effect on the first day of January of the succeeding year. The petitioner invoked this provision to challenge the retroactive application of Manila Ordinance No. 7905.
• Section 223, R.A. 7160 — Requires written notice of new or revised assessments to the person in whose name the property is declared within thirty days. This provision governed the distribution of notices of revised assessments to real property owners.
• Section 226, R.A. 7160 — Provides that an owner of real property who is not satisfied with the assessment of his property may, within sixty days from notice of assessment, appeal to the Board of Assessment Appeals. The Court held that the petitioner should have availed of this remedy.
• Section 252, R.A. 7160 — Requires a taxpayer questioning the excessiveness of the amount of tax to first pay the amount due, request the annotation of the phrase "paid under protest," and appeal to the Board of Assessment Appeals. The Court held that the petitioner should have followed this procedure.

Bellosillo, Puno, Mendoza, and Buena, JJ., concurred.