Manila Electric Company vs. Barlis

Notices demanding payment of real property taxes that do not contain the essential elements of an assessment—such as the value of specific property, discovery, listing, classification, and appraisal—but merely demand payment under threat of auction sale constitute collection letters, not assessments; consequently, the taxpayer need not pay under protest under Section 64 of P.D. No. 464 before contesting the validity of the tax collection, and the doctrine of exhaustion of administrative remedies does not apply where no valid assessment has been made and served upon the taxpayer.

The dispute arose from the assessment and collection of real property taxes on machineries and equipment comprising MERALCO’s power generating plants in Sucat, Muntinlupa. After MERALCO sold these plants to the National Power Corporation (NAPOCOR) in December 1978, the Municipal Assessor conducted a review in 1985 and discovered alleged under-declaration of machinery values for the years 1976-1978. The Assessor subsequently issued new tax declarations with significantly higher assessed values, and the Municipal Treasurer issued notices demanding payment of deficiency taxes totaling over P36 million. When MERALCO refused to pay, the Municipal Treasurer garnished its bank deposits in 1990, leading to a protracted legal battle involving multiple proceedings before the Regional Trial Court, Court of Appeals, and Supreme Court regarding the nature of the notices and the applicability of the “payment under protest” requirement.

• From 1968 to 1972, MERALCO erected four power generating plants in Sucat, Muntinlupa (Gardner I, Gardner II, Snyder I, and Snyder II stations) and purchased various machineries and equipment locally and abroad to equip these plants.
• When the Real Property Tax Code (P.D. No. 464) took effect on June 1, 1974, MERALCO filed tax declarations covering the power plants, buildings, machineries, and equipment.
• In 1976, the Provincial Assessor found the market value of the machineries at P41,660,220.00 and assessed value at P33,328,380.00; in 1978, the Municipal Assessor assessed the value at P36,974,610.00.
• From 1975 to 1978, MERALCO paid real property taxes based on the assessed values stated in its tax declarations.
• On December 29, 1978, MERALCO sold all the power-generating plants including the landsite to the National Power Corporation (NAPOCOR).
• In 1985, the Municipal Assessor discovered that MERALCO allegedly misdeclared and/or failed to declare for taxation purposes several equipment and machineries for the period January 1, 1976 to December 29, 1978, and determined new assessed values under Tax Declarations Nos. T-009-05486 to T-05506 totaling hundreds of millions of pesos.
• On September 3, 1986, the Municipal Treasurer issued three notices to MERALCO requesting payment of deficiency real property taxes and warning of public auction sale if unpaid.
• On October 31, 1989, the Municipal Treasurer sent another letter demanding immediate payment of P36,432,001.97 as unpaid real property taxes inclusive of penalties and interest.
• On October 4, 1990, the Municipal Treasurer issued Warrants of Garnishment ordering the attachment of MERALCO’s bank deposits with PCIB, Metrobank, and BPI to the extent of the unpaid taxes.
• MERALCO denied receiving any notice of assessment from the Municipal Assessor prior to the collection letters, and denied that Basilio Afuang (who signed a receipt for tax declarations dated November 29, 1985) was authorized to receive documents on its behalf or was connected to the company.

• The notices dated September 3, 1986 and October 31, 1989 were collection letters, not notices of assessment under Section 27 of P.D. No. 464, as they lacked essential information such as the value of specific property, discovery, listing, classification, and appraisal.
• Since no valid assessment was made and served, Section 64 of P.D. No. 464 (requiring payment under protest before courts can entertain suits assailing tax validity) does not apply, and the doctrine of exhaustion of administrative remedies is inapplicable.
• The Municipal Treasurer had no authority to issue notices of assessment; only the Municipal Assessor has authority under Sections 90 and 90-A of P.D. No. 464.
• MERALCO was not the proper taxpayer for purposes of assessment under the Real Property Tax Code since it had already sold the properties to NAPOCOR in 1978; NAPOCOR was the present owner.
• The garnishment of bank deposits was improper because real property tax constitutes a lien only on the real property subject to tax, and the remedy is limited to levy upon such real property, not personal property or bank deposits not located on the realty.
• The assessment and collection of taxes had already prescribed.
• The entry of judgment on March 6, 2002 was premature because the February 1, 2002 Resolution contained new findings inconsistent with the May 18, 2001 Decision, giving MERALCO the right to file a motion for reconsideration despite the general prohibition on second motions.

• The letters dated September 3, 1986 and October 31, 1989 were notices of assessment under Section 27 of P.D. No. 464, and MERALCO’s failure to appeal these assessments to the Local Board of Assessment Appeals within 60 days rendered them final and enforceable.
• MERALCO was the taxpayer liable for the deficiency taxes for the period 1976-1978 when it was the owner and beneficial user of the properties, citing Testate Estate of Lim v. City of Manila.
• Section 64 of P.D. No. 464 bars courts from entertaining suits assailing the validity of taxes until the taxpayer pays under protest, which MERALCO failed to do.
• The garnishment of bank deposits was a proper remedy under Section 57 of P.D. No. 464, which allows the treasurer to enforce remedies provided in the Code or any applicable laws, including distraint and levy of personal property.
• The receipt signed by Basilio Afuang on November 29, 1985 proved that MERALCO received the tax declarations/assessments.
• A second motion for reconsideration is prohibited under Rule 52, Section 2 of the Rules of Court, and the Court should not grant leave to file such a prohibited pleading.

• Procedural Issues:
  • Whether the entry of judgment made on March 6, 2002 was premature and should be recalled.
  • Whether the Supreme Court should grant MERALCO’s second motion for reconsideration of the February 1, 2002 Resolution.
• Substantive Issues:
  • Whether the notices sent by the Municipal Treasurer dated September 3, 1986 and October 31, 1989 constituted notices of assessment or mere collection letters.
  • Whether Section 64 of P.D. No. 464 (requiring payment under protest) applies to the case.
  • Whether the doctrine of exhaustion of administrative remedies applies.
  • Whether MERALCO was the proper taxpayer liable for the deficiency taxes.
  • Whether the garnishment of MERALCO’s bank deposits was a proper remedy for the collection of real property taxes.

• Procedural:
  • The entry of judgment was premature and inefficacious because the February 1, 2002 Resolution contained supervening findings inconsistent with the May 18, 2001 Decision (specifically reversing the finding that the notices were assessments), which gave MERALCO the right to file a motion for reconsideration.
  • While a second motion for reconsideration is generally prohibited under Rule 52, Section 2, the prohibition does not apply when the Court itself makes inconsistent findings in subsequent resolutions, as occurred here when the Court reversed its earlier ruling that the notices were assessments.
  • The Court granted leave to file the motion for reconsideration and recalled the entry of judgment.
• Substantive:
  • The notices dated September 3, 1986 and October 31, 1989 were collection letters, not notices of assessment under Section 27 of P.D. No. 464. They did not contain the essential elements of an assessment: the value of a specific property subject to tax, discovery, listing, classification, and appraisal. Instead, they merely demanded payment of alleged delinquencies under threat of auction sale.
  • Section 30 of P.D. No. 464 (appeal to Local Board of Assessment Appeals) applies only to the assessment and valuation of property, not to the imposition of tax and determination of who should bear the burden of tax.
  • Since no valid assessment was proven to have been served on MERALCO (the receipt signed by Basilio Afuang failed to establish his authority to receive for MERALCO), Section 64 of P.D. No. 464 (payment under protest) does not apply, and the doctrine of exhaustion of administrative remedies is inapplicable.
  • The RTC did not commit grave abuse of discretion in denying the Motion to Dismiss on the ground that MERALCO was not the taxpayer under Section 64, though the Court noted that MERALCO was indeed the taxpayer liable for taxes during the period it owned the properties (1976-1978).
  • The Court of Appeals erred in granting the petition for certiorari because the RTC did not commit grave abuse of discretion amounting to lack or excess of jurisdiction; errors of judgment are correctible by appeal, not certiorari.
  • The case was remanded to the trial court to resolve the factual issue of whether the Municipal Assessor actually served copies of the tax declarations on MERALCO, and if so, when they were received, and to resolve other issues raised in the pleadings within six months.

• Assessment vs. Collection Letters — A notice of assessment under the Real Property Tax Code must effectively inform the taxpayer of the value of a specific property subject to tax, including the discovery, listing, classification, and appraisal of properties. Notices that merely demand payment of alleged tax delinquencies and threaten auction sale without containing these essential elements are collection letters, not assessments.
• Payment Under Protest (Section 64, P.D. No. 464) — Courts are prohibited from entertaining suits assailing the validity of tax assessments until the taxpayer pays under protest; however, this applies only when a valid assessment has been made and served. If no assessment exists, the requirement does not apply.
• Exhaustion of Administrative Remedies — The doctrine does not apply where no tax assessment has been made, as there is no administrative action to exhaust.
• Nature of Real Property Tax — Real property tax constitutes a lien on the property enforceable against the property whether in the possession of the delinquent or any subsequent owner; the tax attaches to the person who had actual or beneficial use and possession regardless of whether he is the owner at the time of collection.
• Second Motion for Reconsideration — While generally prohibited under Rule 52, Section 2 of the Rules of Court, a second motion may be allowed when the Court itself makes supervening findings inconsistent with its earlier decision, giving the party a right to seek clarification or reconsideration.
• Certiorari — The writ of certiorari is limited to correcting errors of jurisdiction; it does not lie to correct errors of judgment, which are reviewable only by appeal or petition for review under Rule 45.

• "A notice of assessment as provided for in the Real Property Tax Code should effectively inform the taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of properties."
• "The tenor of the notices bespeaks an intention to collect unpaid taxes... The last paragraph of the said notices that inform the taxpayer that in case payment has already been made, the notices may be disregarded is an indication that it is in fact a notice of collection."
• "Section 30 of P.D. No. 464 pertains to the assessment and valuation of the property for purposes of real estate taxation. Such provision does not apply where what is questioned is the imposition of the tax assessed and who should shoulder the burden of the tax."
• "Concomitantly, the doctrine of exhaustion of administrative remedies finds no application where no tax assessment has been made."
• "The foregoing rule [prohibiting second motions for reconsideration] has no application in this case. It bears stressing that this Court, in its May 18, 2001 Decision... upheld... that the petitioner received a notice of assessment... However, in its February 1, 2002 Resolution, the Court reversed its findings... In light of the supervening findings of this Court... which are inconsistent with its ruling in its May 18, 2001 Decision... the Court now rules that the petitioner had the right to file a motion for reconsideration thereon."

• Testate Estate of Concordia T. Lim v. City of Manila (182 SCRA 482) — Cited for the principle that unpaid real property tax attaches to the property and is chargeable against the person who had actual or beneficial use and possession regardless of whether or not he is the owner.
• Ortigas and Company Limited Partnership v. Velasco (254 SCRA 234) — Cited for the general rule that no second motion for reconsideration of a judgment or final resolution by the same party shall be entertained.
• People v. Court of Appeals (G.R. No. 144332, June 10, 2004) — Cited for the distinction between errors of jurisdiction (correctible by certiorari) and errors of judgment (correctible by appeal).
• Commissioner of Internal Revenue v. Island Government Manufacturing Corporation (153 SCRA 665) — Cited for the definition that an assessment fixes and determines the tax liability of a taxpayer.
• Tupaz v. Ulep (316 SCRA 118) — Cited for the principle that an assessment is a notice to the effect that the amount therein stated is due as tax and a demand for payment thereof.
• Callanta v. Office of the Ombudsman (285 SCRA 648) — Cited for the rule that an assessment is deemed made when the notice is released, mailed or sent to the taxpayer.
• Republic v. De la Rama (18 SCRA 861) — Cited for the rule that an assessment is deemed made when the notice is released, mailed or sent.
• Republic of the Philippines v. Court of Appeals (149 SCRA 351) — Cited for the principle that the action to collect taxes due is akin to an action to enforce a judgment.

• Section 27 of Presidential Decree No. 464 (Real Property Tax Code) — Mandates the assessor to give written notice of new or revised assessments within thirty days, containing the kind of property, actual use, market value, assessment level, and assessed value.
• Section 30 of Presidential Decree No. 464 — Provides for appeals to the Local Board of Assessment Appeals within 60 days from receipt of written notice of assessment; applies only to assessment and valuation, not to collection.
• Section 57 of Presidential Decree No. 464 — Makes the collection of real property tax and enforcement of remedies the responsibility of the treasurer.
• Section 64 of Presidential Decree No. 464 — Prohibits courts from entertaining suits assailing the validity of tax assessments until the taxpayer pays under protest; applies only when there is a tax assessment whose validity is questioned.
• Rule 52, Section 2 of the Rules of Court — Prohibits second motions for reconsideration by the same party.
• Rule 45 of the Rules of Court — Governs petitions for review on certiorari to the Supreme Court.