Case Summary (G.R. No. 103068)
Petitioners and Respondents
• City of Lapu-Lapu (Petitioner in G.R. No. 184203) vs. PEZA (Respondent) – contesting PEZA’s real property tax exemption and jurisdiction of Pasay RTC.
• Province of Bataan (Petitioner in G.R. No. 187583) vs. PEZA (Respondent) – contesting PEZA’s exemption and proper forum for review.
Key Dates
• 1972 – PD 66 establishes EPZA with explicit exemption from real property taxes.
• 1991 – Local Government Code withdraws general RPT exemptions but preserves those granted by special charters.
• 1995 – RA 7916 creates PEZA, directs it to assume EPZA’s powers/functions via EO 282.
• 2002–2004 – City and Province issue tax demands; PEZA files declaratory relief and injunction petitions in Pasay RTC.
• 2007–2008 – Pasay RTC decisions, Court of Appeals dismissals and grants by certiorari; petitions elevated to Supreme Court.
Applicable Law
• 1987 Constitution – grants Supreme Court appellate jurisdiction and allows creation of government instrumentalities.
• Presidential Decree No. 66 (1972) – EPZA non-profit status; exempt from real property taxes.
• Republic Act No. 7916 (1995) – creates PEZA; EO 282 mandates assumption of PD 66 powers/functions.
• Local Government Code of 1991 (RA 7160), Sections 133(o) and 234(a) – prohibits local taxation of national government agencies and exempts national government-owned real property.
• Rules of Court – delineate proper modes of appeal (Rules 41, 42, 45, 50) and special civil actions (Rule 63 declaratory relief; Rule 65 certiorari).
• Republic Act No. 1125, as amended – grants Court of Tax Appeals exclusive appellate jurisdiction over local tax cases.
Court of Appeals Dismissal of City Appeal
The City raised purely legal issues—PEZA’s status and PEZA’s tax exemption—through an ordinary appeal under Rule 41. Under Rule 50(2), the Court of Appeals must dismiss appeals raising only questions of law. The City should have filed a petition for review on certiorari with the Supreme Court (Rule 45). The dismissal was correct, but the Supreme Court in the interest of justice relaxed procedural rules to reach the merits.
Inappropriate Declaratory Relief in City Case
PEZA’s petition for declaratory relief under Rule 63 was premature and beyond the court’s jurisdiction because the City had already issued tax assessments and demands—constituting a breach. Declaratory relief lies only before any violation of rights; once breached, the appropriate remedy is an ordinary action (e.g., injunction), not a declaratory judgment.
Court of Appeals Jurisdiction in Province Case
PEZA filed a petition for certiorari (Rule 65) to annul the RTC’s denial of injunction. The RTC decision denying injunctive relief was a final judgment on the merits of a local tax case. Under RA 1125, the Court of Tax Appeals has exclusive appellate jurisdiction over local tax decisions, including appeals from injunction rulings in real property tax disputes. The Court of Appeals therefore acted without jurisdiction; its decision is void.
Proper Remedies for PEZA and Taxpayers
• Erroneous Assessment (quantum dispute): taxpayer pays under protest → appeals to Local Board of Assessment Appeals → Central Board → Court of Tax Appeals → Supreme Court (Rule 45 certiorari for law questions).
• Illegal Assessment (authority dispute): taxpayer may directly file an injunction action in RTC → appeal to Court of Tax Appeals (15-day period) → Supreme Court on law issues.
• Pending or completed tax sale: taxpayer may seek injunctive relief pre-sale or annulment post-sale upon deposit of sale proceeds.
PEZA’s Exemption as National Government Instrumentality
PEZA is an attached agency of the Department of Trade and Industry with operational autonomy, corporate powers, and a public-service mandate. Under the 1987 Constitution and Administrative Code, instrumentalities performing governmental functions need not meet economic-viability tests applicable to government-owned or controlled corporations. As a national instrumentality, PEZA cannot be taxed by local government units per LGC 133(o).
Assumption of EPZA’s Non-Profit and Tax-Exempt Status
EO 282 directed PEZA to assume EPZA’s PD 66 powers and functions not inconsistent with RA 7916. EPZA’s non-profit character and explicit real property tax exemption (PD 66 §21) are among those assumed powers. The absence of a specific ex
Case Syllabus (G.R. No. 103068)
Facts Common to Both Petitions
- In 1972, Presidential Decree No. 66 created the Export Processing Zone Authority (EPZA) to operate export processing zones, declared non-profit, with Section 21 exempting it from all national and local taxes—including real property taxes.
- Proclamation No. 1811 (1979) reserved public domain lands in Lapu-Lapu City for the Mactan Export Processing Zone; RA 5490 (1969) had earlier established the Mariveles zone in Bataan.
- Republic Act No. 7916 (1995) transformed EPZA into the Philippine Economic Zone Authority (PEZA), continuing EPZA’s powers under Executive Order No. 282 (1995) and transferring all EPZA assets to PEZA.
Facts of G.R. No. 184203 (City of Lapu-Lapu’s Petition)
- Between 1998 and 2002, the City Treasurer demanded over ₱86 million in real property taxes from PEZA on Mactan Economic Zone lands, invoking LGC Sections 193 and 234 which withdrew prior exemptions.
- PEZA filed a petition for declaratory relief in the RTC-Pasay (Branch 111) to confirm its tax-exempt status; the Department of Justice opined PEZA was taxable, but the Solicitor General supported PEZA’s exemption under RA 7916 Sections 24 and 51.
- The RTC granted PEZA’s petition, declaring it exempt; the City appealed via ordinary appeal to the Court of Appeals, which dismissed for wrong mode (pure question of law).
- The City sought relief in the Supreme Court, raising issues of appeal mode, PEZA’s status, and RTC jurisdiction.
Facts of G.R. No. 187583 (Province of Bataan’s Petition)
- Starting May 2003, the Province billed PEZA ₱110 million in real property taxes on Bataan Economic Zone lands, then served levy and sale notices despite PEZA’s protest.
- PEZA secured a TRO and writ of preliminary injunction from RTC-Pasay (Branch 115) against auction, then lost on the merits when the court held LGC Sections 193 and 234 withdrew its exemption.
- PEZA filed a Rule 65 certiorari petition in the Court of Appeals, which issued another TRO, admitted supplemental petitions, and ruled that PEZA, as a national instrumentality, enjoyed tax exemption under PD 66 Section 21 and RA 7916 Section 51.
- The Province’s motion for reconsideration was denied; it then petitioned the Supreme Court, contesting CA j