University of the Philippines vs. City Treasurer of Quezon City

Republic Act No. 9500 (The University of the Philippines Charter of 2008) grants UP an absolute tax exemption on all its assets used for educational purposes or in support thereof, which supersedes Sections 205(d) and 234(a) of the Local Government Code regarding the taxation of government property where beneficial use is transferred to a taxable entity; consequently, the beneficial user (lessee) is not liable for real property tax on the land, and the government instrumentality (lessor) is exempt based on the specific statutory exemption rather than the general rules on beneficial use.

The case involves a conflict between the general taxing authority of local government units under the Local Government Code (LGC) and the specific tax exemptions granted to the University of the Philippines under its legislative charter. UP, as the national university, entered into a long-term lease agreement with Ayala Land, Inc. for the development of a science and technology park. Following the enactment of RA 9500 in 2008, which strengthened UP's fiscal autonomy and tax exemptions, the Quezon City Treasurer assessed real property taxes on the leased land for the years 2009-2014, initially demanding payment from ALI and later from UP directly, leading to this dispute over the proper interpretation of statutory tax exemptions.

• The University of the Philippines is the registered owner of a parcel of land with an area of 985,597 square meters located along Commonwealth Avenue, Diliman, Quezon City, covered by Transfer Certificate of Title No. RT-107350 (192689).
• On 27 October 2006, UP entered into a Contract of Lease with Development Obligations with Ayala Land, Inc. (ALI) covering a portion of the land consisting of 380,630 square meters, subsequently developed into the UP-Ayala Technohub, a science and technology park intended for research and technology-based collaborative projects between technology and the academe.
• On 23 August 2012, the City Assessor of Quezon City issued a Notice of Assessment addressed to ALI, informing it that the subject property was reclassified and assessed for taxation purposes with an assessed value of P499,500,000.00 effective 2009, based on Sections 205(d) and 234(a) of the Local Government Code.
• On 5 December 2012, the City Treasurer issued a Statement of Delinquency addressed to UP North Property Holdings, Inc. demanding payment of real property tax for the years 2009 to 2011 and the first three quarters of 2012 in the amount of P78,970,950.00, including penalties.
• On 1 August 2013, the Bureau of Local Government Finance (BLGF) of the Department of Finance issued a letter to the Mayor of Quezon City opining that ALI, being the lessee, is the legally accountable party for the unpaid real property taxes on the government-owned UP property, citing Sections 205 and 234 of the Local Government Code and distinguishing the situation from National Power Corporation v. Province of Quezon.
• On 24 September 2013, the City Treasurer issued another Statement of Delinquency addressed to UP North Property Holdings, Inc. demanding payment of P102,747,150.00 for the years 2009 to 2012 and the first three quarters of 2013.
• On 27 May 2014, the City Treasurer issued for the first time a Statement of Delinquency directly addressed to UP demanding payment of P106,992,990.00 for the years 2009 to 2013 and the first quarter of 2014, without prior issuance of a Notice of Assessment to UP.
• On 13 June 2014, UP President Alfredo E. Pascual wrote to the City Treasurer objecting to the delinquency notice, asserting UP's absolute tax exemption under Republic Act No. 9500 (The University of the Philippines Charter of 2008) for all assets used for educational purposes, and citing the BLGF opinion that ALI is the legally accountable party.
• On 11 July 2014, the City Treasurer issued a Final Notice of Delinquency addressed to UP demanding payment of P117,182,700.00 for the years 2009 to 2013 and the first three quarters of 2014, including penalties, and scheduled the property for public auction.
• UP filed the petition for certiorari and prohibition within sixty days from receipt of the 11 July 2014 Final Notice of Delinquency, seeking to annul the notices and enjoin the auction sale.

• The University of the Philippines is absolutely exempt from real property taxes under Section 25(a) of Republic Act No. 9500 (The UP Charter of 2008), which provides that all revenues and assets of UP used for educational purposes or in support thereof shall be exempt from all taxes and duties.
• The tax exemption granted to UP under RA 9500 is express, patent, unambiguous, and exceedingly extensive, covering all assets regardless of beneficial use by third parties.
• The BLGF itself opined in its 1 August 2013 letter that ALI is the legally accountable party for the unpaid taxes, which confirms that UP is exempt from real estate taxes.
• The City Treasurer failed to issue a Notice of Assessment to UP prior to issuing the Statement of Delinquency dated 27 May 2014, violating basic assessment procedures.
• The present case involves a pure question of law regarding statutory interpretation of tax exemptions, which the Supreme Court has the power to decide without needing to be a trier of facts.
• Republic Act No. 9500, enacted in 2008, supersedes the general provisions of the Local Government Code (enacted in 1991) regarding the taxation of government-owned property leased to private entities.

• The Supreme Court is not a trier of facts, and the determination of whether to annul the Statement of Delinquency requires a full-blown trial to ascertain facts, which is outside the Court's limited jurisdiction to review errors of law.
• The City Treasurer is not the real party-in-interest in this case.
• The petitioner failed to file a Motion for Reconsideration before filing the petition for certiorari, which is a condition sine qua non for the remedy to be available.
• UP is not exempt from paying real property tax on the leased land under Sections 205(d) and 234(a) of the Local Government Code, which provide that when beneficial use of government-owned property is granted to a taxable person, the property becomes taxable and shall be assessed in the name of the possessor or grantee.
• The contractual stipulation in the lease agreement where UP assumed the payment of real estate taxes is invalid without congressional authority, citing National Power Corporation v. Province of Quezon, which held that it is "essentially wrong" for a tax-exempt government entity to assume the tax liability of a contracting party without legislative approval.
• ALI, as the lessee and beneficial user, is the legally accountable party for the real property taxes pursuant to the Local Government Code and the BLGF opinion.

• Procedural Issues: Whether the Supreme Court has jurisdiction to decide the case despite not being a trier of facts; Whether a Motion for Reconsideration is a condition sine qua non for the filing of the petition for certiorari in this case.
• Substantive Issues: Whether the University of the Philippines is liable for real property tax imposed on land leased to Ayala Land, Inc.; Whether Republic Act No. 9500 supersedes Sections 205(d) and 234(a) of the Local Government Code regarding tax exemption of government property; Whether the tax exemption applies to the land but not the improvements constructed by the lessee.

• Procedural: The Supreme Court has the power to decide the present case because it involves a pure question of law regarding whether UP, as a chartered academic institution with specific legislated tax exemptions, is legally liable for real property tax on the land leased to ALI; findings of fact are unnecessary as the facts are admitted or undisputed. The issue of the failure to file a Motion for Reconsideration is rendered moot by the Court's decision on the merits, and given the pure question of law involved, the Court may proceed to resolve the substantive issue to prevent multiplicity of suits and give substantial justice.
• Substantive: The petition is granted. Republic Act No. 9500 (The UP Charter of 2008), which took effect on 29 April 2008, supersedes Sections 205(d) and 234(a) of the Local Government Code of 1991. Section 25(a) of RA 9500 provides that all assets of UP used for educational purposes or in support thereof are exempt from all taxes and duties. The subject land qualifies as an asset used for educational purposes because the lease contract contemplates the development of a science and technology park for research and collaborative projects between technology and the academe. Therefore, UP is exempt from real property tax on the land. The Court distinguished this case from National Power Corporation v. Province of Quezon because UP now has specific congressional authority (RA 9500) to claim the exemption, unlike NPC which lacked such legislative backing for its contractual assumption of tax liability. However, the tax exemption does not extend to the improvements constructed by ALI on the leased land, as these are owned by ALI and not "assets" of UP under RA 9500.

• Lex posterior derogat priori (Later law repeals earlier law) — A statute enacted later prevails over a statute enacted earlier because it is the latest expression of legislative will; applied to hold that RA 9500 (2008) supersedes the general provisions of the LGC (1991) regarding real property taxation of government assets.
• Rules of Statutory Construction in favor of UP — Under Sections 27 and 30 of RA 9500, no statutory issuance shall diminish the powers and benefits accorded to UP, and any doubt in the interpretation of the Charter shall be resolved in favor of the academic freedom and fiscal autonomy of the University.
• Doctrine of Beneficial Use (as modified by special law) — While the Local Government Code generally subjects government property to tax when beneficial use is granted to a taxable person (Section 234(a)), a specific exemption law (RA 9500) that categorically exempts the government instrumentality's assets used for educational purposes prevails over the general rule.
• Pure Question of Law — The Supreme Court has jurisdiction to decide issues that do not require the reception of evidence or examination of controverted facts, but merely the application of law to admitted facts.

• "All revenues and assets of the University of the Philippines used for educational purposes or in support thereof shall be exempt from all taxes and duties." (Section 25(a), Republic Act No. 9500)
• "The passage of Republic Act No. 9500 in 2008 obliterated what was essentially wrong in the lease contract between UP and ALI. The legislature established a tax system that allows UP to validly claim exemption from real property taxes on the land leased to ALI."
• "We cannot be a party to this kind of arrangement; for us to allow it without congressional authority is to intrude into the realm of policy and to debase the tax system that the Legislature established." (Cited from National Power Corporation v. Province of Quezon, regarding contractual assumption of tax liability without legislative authority, but distinguished in this case because UP now has RA 9500 as congressional authority.)
• "The sole determinative factor for exemption from realty taxes is the 'use' to which the property is devoted. And where the 'use' is the test, the ownership is immaterial." (Cited from City of Baguio v. Busuego, regarding the test for tax exemption based on use rather than ownership.)
• "Republic Act No. 9500 is UP's congressional authority for this particular exemption from real property tax."

• National Power Corporation v. Province of Quezon (610 Phil. 456, 2009) — Distinguished; the Court held therein that it was "essentially wrong" for NPC to assume tax liability without congressional authority and then claim exemption, but noted that UP in the present case has specific legislative authority under RA 9500 enacted in 2008.
• University of the Philippines v. Judge Dizon (693 Phil. 226, 2012) — Cited to establish that UP is a "chartered institution" performing a legitimate government function and a government instrumentality, and that its funds constitute a "special trust fund" subject to COA audit.
• City of Pasig v. Republic (656 SCRA 271) — Cited by respondent regarding the rule that government-owned land not of public dominion, when leased to taxable entities, may be sold at public auction to satisfy tax delinquency.
• City of Baguio v. Busuego (G.R. No. L-29772) — Cited regarding the doctrine that the determinative factor for real property tax exemption is the "use" to which the property is devoted, not ownership.
• Development Bank of the Philippines v. Court of Appeals (259 Phil. 1096, 1989) — Cited for the principle of lex posterior derogat priori.

• Section 25(a), Republic Act No. 9500 (The University of the Philippines Charter of 2008) — Provides that all revenues and assets of UP used for educational purposes or in support thereof shall be exempt from all taxes and duties.
• Section 27, Republic Act No. 9500 — Rules of construction providing that no statutory issuance shall diminish UP's rights and privileges, and doubts shall be resolved in favor of UP's academic freedom and fiscal autonomy.
• Section 30, Republic Act No. 9500 — Repealing clause stating that laws inconsistent with the Charter are repealed or modified accordingly.
• Section 22, Republic Act No. 9500 — Provisions regarding land grants and real properties of the University, including authority to lease land provided such arrangements do not conflict with the academic mission.
• Section 133(o), Republic Act No. 7160 (Local Government Code of 1991) — Common limitation on taxing powers of local government units prohibiting taxes on the National Government, its agencies and instrumentalities.
• Section 205(d), Republic Act No. 7160 — Provides that real property owned by the Republic, its instrumentalities and political subdivisions, the beneficial use of which has been granted to a taxable person, shall be listed, valued and assessed in the name of the possessor or grantee.
• Section 234(a), Republic Act No. 7160 — Exemption from real property tax for real property owned by the Republic or its political subdivisions except when beneficial use is granted to a taxable person.
• Act No. 1870 — The original UP Charter of 1908, establishing UP as the national university.
• Executive Order No. 714 — Cited regarding the administration of special funds by UP.