G.R. No. L-17280 - Sta. Romana vs. Imperio

The case involves the Philippine Fisheries Development Authority (PFDA), an instrumentality of the national government, petitioning against various respondents including the Municipality of Navotas, its Municipal Treasurer, and the Public Auction Sale Committee.
The controversy centers on the assessment of real property taxes on properties comprising the Navotas Fishing Port Complex (NFPC), which were allegedly unpaid during the period 1981–1990.

The Municipality of Navotas assessed real estate taxes on properties under its jurisdiction, management, and operation within the NFPC.
Despite demand, the assessed taxes (which amounted to over P23 million as of June 30, 1990) remained unpaid.
Consequently, Municipal Treasurer Florante M. Barredo issued a notice on October 29, 1990, announcing the public auction of the NFPC on November 30, 1990 to satisfy the delinquent tax liability.

PFDA sought to defer the auction sale asserting that the entire NFPC is owned by the Republic of the Philippines and, by virtue of Presidential Decree (P.D.) No. 977, is exempt from real property tax.
PFDA maintained that only a small portion of the complex, which was leased to private parties, might be taxable.
In response, and notwithstanding instructions from the Department of Finance (DOF) to determine the actual users of the properties, the Municipality proceeded with the auction notice.

PFDA filed Civil Case No. 1524 in the Regional Trial Court (RTC) of Malabon, Metro Manila to enjoin the auction, claiming state ownership and tax exemption.
Respondents argued that:

PFDA failed to demonstrate that the properties were indeed government-owned.
If the property were government-owned, the complaint should have been filed in the name of the Republic of the Philippines.
The case was fatally defective due to non-compliance with the condition precedent of payment under protest.

The RTC initially granted a writ of preliminary injunction (December 8, 1990) enjoining the auction but later dismissed the case on February 19, 1993, finding that PFDA had failed to avail itself of the proper administrative remedies by not contesting the tax assessments to the Local and Central Boards of Assessment Appeals and the Court of Tax Appeals.

The Court of Appeals (CA) affirmed the RTC ruling in its decision dated July 19, 2001.
The CA detailed the historical background of the NFPC, emphasizing:

The reclaimed land nature of the NFPC, its boundaries, and its provenance as property of public dominion.
The transfer of the NFPC’s management to PFDA through Executive Order No. 772 (amending P.D. No. 977) on February 8, 1982, effectively making the NFPC part of PFDA’s capital assets.

Notably, the CA underscored that while the PFDA is exempt from income tax, this exemption did not extend to real property taxes, particularly on portions leased to private entities.
In its petition, PFDA argued that:

The NFPC, being reclaimed land, is state-owned and should be considered reserved and thus tax exempt as established in related cases (e.g., NDC v. Cebu City, Government v. Cabangis, and Lampria v. Director of Lands).
PFDA merely operates the complex in favor of the state, and only the portions leased to private users should be subject to real property tax.

The Supreme Court, on reviewing the case, held that PFDA is liable to pay real property taxes only on the portions of NFPC leased to private persons and entities.
The Court granted the petition, set aside the CA decisions that allowed the auction of the entire NFPC, and declared void the Realty Tax Order of Payment except for the amount (P62,841,947.79) corresponding to the taxable leased portions.
The decision enjoined the Municipality of Navotas from levying the full NFPC for the tax delinquency, recognizing that the NFPC as a whole is a property of public dominion.

Whether PFDA, as an instrumentality of the national government, is liable to pay real property taxes on the entire NFPC despite its claim of state ownership and tax exemption under P.D. No. 977.
Whether the NFPC, being reclaimed land and a property of public dominion, should be completely exempt from real property taxation.
Whether the appropriate remedy for disputing the tax assessments was properly pursued by PFDA, given the requirement to pay under protest and the subsequent administrative appeals mechanism.
Whether the portions of the NFPC leased to private entities should be taxed separately from those portions retained for public use.