G.R. No. 175210 - Sereno vs. Committee on Trade and Related Matters of the National Economic and Development Authority

Case Summary (G.R. No. 175210)

Procedural History

PHC sought relief by filing a petition for certiorari before the Court of Appeals (CA) to annul assessments, levy and sale of eleven PHC properties in Quezon City. The CA initially dismissed the petition for failure to exhaust administrative remedies, later reinstated it, but subsequently dismissed it again as the improper remedy. The Supreme Court review followed, challenging the CA Decision dated March 15, 2016 and Resolution dated June 23, 2016.

Antecedent Facts and Establishment of PHC

PHC was established in 1975 under PD 673 to provide specialized cardiovascular services to the public, particularly the poor. The national government furnished initial land, buildings, equipment and facilities. PD 673 granted PHC corporate powers (e.g., to acquire, convey, lease property, enter contracts) and a ten-year tax exemption, later extended by LOI 1455 in 1985.

Tax Notices, MOAs, and Auction Sale

Quezon City issued final Notices of Delinquency in 2004 for alleged unpaid real property taxes totaling Php36,530,545.00 on eleven properties. PHC sought relief from the national executive and entered into Memoranda of Agreement (MOAs) with Quezon City for provision of free medical services in settlement, but suspended implementation after OGCC’s memorandum advising suspension of payment pending the MIAA ruling. A second MOA was forged in 2010 but not implemented. Despite PHC’s position, Quezon City maintained assessments, issued a Warrant of Levy on June 13, 2011, and sold the properties at public auction on July 7, 2011; the city was the lone bidder.

CA Proceedings: Exhaustion of Administrative Remedies and Other Procedural Claims

The CA first dismissed the petition for lack of exhaustion of administrative remedies under Section 252 of RA 7160 (payment under protest rule) and invoked the availability of an administrative remedy. PHC argued recognized exceptions to exhaustion, and the CA later reinstated the petition concluding remedies were no longer plain, speedy or adequate due to the completed sale. Respondents asserted additional procedural defects: defective verification and certification against forum shopping, and failure to comply with deposit requirement under Section 267 of RA 7160. The CA accepted that Section 267 did not apply to government plaintiffs and ultimately dismissed the petition on the ground that certiorari was the wrong remedy because the challenged acts were not judicial or quasi-judicial.

Issues Presented to the Supreme Court

(1) Whether PHC substantially complied with verification and certification against forum shopping requirements; (2) Whether certiorari was the proper remedy to challenge respondents’ assessment, levy and sale; and (3) Whether PHC and its eleven properties in Quezon City were exempt from real property taxes.

Verification and Certification Against Forum Shopping

The Court recognized that verifications and certifications signed by corporate officers without explicit board authorization are defective in form, yet concluded such defects do not automatically warrant dismissal. Citing prior jurisprudence, the Court applied a standard of substantial compliance: an officer positioned to verify allegations (here, the Officer-in-Charge Executive Director Dr. Manzo, designated by DOH Order) may validly sign the verification and certification. Given the circumstances and the substantive issues at stake, the Court found PHC substantially complied.

Appropriateness of Certiorari as the Remedy

The Court reaffirmed its authority under Article VIII, Section 1 of the 1987 Constitution to correct grave abuse of discretion amounting to lack or excess of jurisdiction by any instrumentality of government, including non-judicial acts. Certiorari under Rule 65 may issue not only against judicial or quasi-judicial functions but also to correct grave abuse of discretion by administrative bodies. Because PHC alleged grave abuse of discretion in the assessment, levy and sale of its properties notwithstanding claimed tax-exempt status, certiorari before the CA was a proper extraordinary remedy.

Legal Characterization of PHC: Government Instrumentality with Corporate Powers

The Court applied the MIAA framework and related legal developments (EO 596 and RA 10149) recognizing a class of government instrumentalities vested with corporate powers. An instrumentality qualifies when it (a) performs governmental functions and (b) enjoys operational autonomy. PD 673 vests PHC with governmental objectives (public health, research, training, services to the poor) and corporate powers (to hold and dispose of property, contract, receive donations, adopt bylaws). Consequently, PHC is a government instrumentality vested with corporate powers and remains an instrumentality of the national government despite its juridical corporate attributes.

Properties as Public Dominion and Exemption from Real Property Tax

Properties devoted to public use or public service constitute property of public dominion and are generally exempt from levy, encumbrance, or disposition through sale. Section 234(a) of RA 7160 exempts real property owned by the Republic from real property tax, except where the beneficial use has been granted to a taxable person. PHC’s properties are integral to its public-service mandate (patient care, training, research); they are therefore properties of public dominion and exempt from real property tax and from levy or auction sale.

Exception for Portions Beneficially Used by Private Lessees and Burden of Proof

The Court acknowledged established jurisprudence that portions of government-owned property granted in beneficial use to private, taxable persons lose the tax exemption for those portions. However, the burden is on the local government to allege and prove (a) which specific properties or portions were leased to private parties, (b) identity of lessees, (c) lease periods, and (d) valid service of tax assessments on those taxable lessees. Here, respondents failed to specify which of the eleven properties, if any, were leased or to offer proof that taxable lessees were properly assessed and notified; mere allegation was insufficient.

Impropriety of Levy and Sale Against Government Properties

The Court interpreted Section 256 of RA 7160 and related provisions to require that collection remedies for real property tax (administrative levy or judicial action) be directed against the taxable person who enjoys beneficial use. Where the property owner is a national instrumenta

Case Syllabus (G.R. No. 175210)

Citation and Court

Supreme Court of the Philippines, First Division, G.R. No. 225409, March 11, 2020; reported at 872 Phil. 930; 118 O.G. No. 9, 1848 (February 28, 2022).
Decision authored by Justice Lazaro-Javier; concurrence by Peralta (C.J.), Caguioa, J. Reyes, Jr., and Lopez, JJ.
Case originated as CA-G.R. SP No. 121019 in the Court of Appeals.

Nature of the Case

Petition for review on certiorari under Rule 45 of the Rules of Court.
Challenge to Court of Appeals’ Decision dated March 15, 2016 dismissing PHC’s petition for certiorari, and Resolution dated June 23, 2016 denying reconsideration.
Central subject: validity of real property tax assessments, levy, and public auction sale of Philippine Heart Center (PHC) properties by Quezon City officials.

Antecedent Facts and Background

PHC was created in 1975 by Presidential Decree No. 673 (PD 673) as a specialty hospital mandated to provide comprehensive cardiovascular care, especially to the poor and less fortunate.
The national government provided initial land, building, equipment, and facilities to establish PHC (PD 673, Section 2).
PD 673 authorized PHC to acquire properties, enter into contracts, and mortgage, encumber, lease, sell or otherwise dispose of its properties (Section 5, PD 673).
PD 673 exempted PHC from payment of "all taxes, charges, fees imposed by the Government or any political subdivision or instrumentality thereof" for a period of ten (10) years (Section 6).
In 1985 Letter of Instruction (LOI) 1455 extended that tax exemption "without interruption."
PHC owned eleven (11) parcels of land and buildings in Quezon City, each listed by tax declaration numbers set out in the record.
In 2004 Quezon City issued three final Notices of Delinquency for unpaid real property taxes totaling Php36,530,545.00 on those eleven properties.
PHC sought condonation or reduction from the President; when no action was taken, PHC entered into a Memorandum of Agreement (MOA) with Quezon City to provide free medical services in lieu of payment until value of services covered the tax liabilities.
On August 22, 2006 the Office of the Government Corporate Counsel (OGCC) informed PHC of the Court’s ruling in Manila International Airport Authority v. Court of Appeals (MIAA), advising suspension of local tax payments pending finality; PHC withheld implementation of its MOA.
A second MOA between PHC and Quezon City was executed in November 2010 but PHC suspended implementation when a new Executive Director assumed office and again relied on OGCC memorandum regarding exemption.
Quezon City maintained PHC’s liability for taxes on the ground that major portions of PHC properties were leased to private individuals.
On June 13, 2011 the Quezon City Treasurer issued a Warrant of Levy; after publication a public auction sale occurred on July 7, 2011 with Quezon City as lone bidder and purchaser.
On September 1, 2011 PHC filed a petition for certiorari in the Court of Appeals attacking assessment, levy and sale, asserting exemption from local taxes under PD 673, LOI 1455, Article III, Section 28(3) of the 1987 Constitution, Section 234(b) of RA 7160, and jurisprudence including MIAA and MCIAA.

Procedural History in the Court of Appeals

Respondents moved to dismiss for failure to exhaust administrative remedies, defective verification and certification against forum shopping, and PHC’s failure to deposit the amount required under Section 267 of RA 7160; respondents also disputed the substantive basis of PHC’s tax exemption claim.
On September 25, 2012 the Court of Appeals initially dismissed PHC’s petition for failure to exhaust administrative remedies under Section 252 of RA 7160 (payment under protest requirement).
PHC moved for reconsideration, arguing exceptions to exhaustion doctrine (several exceptions enumerated in its pleadings) and that remedies under Section 252 were no longer plain, speedy and adequate because properties had already been auctioned.
By Resolution dated March 18, 2013 the Court of Appeals reinstated the petition, finding Section 252 remedies inadequate in view of the completed auction and PHC’s public importance.
The Court of Appeals held that Section 267 deposit requirement did not apply where the plaintiff is a government entity or agency, citing National Housing Authority v. Iloilo City.
Respondents’ motion for reconsideration was denied on September 27, 2013.
However, by Decision dated March 15, 2016 the Court of Appeals again dismissed PHC’s petition, ruling that certiorari was the wrong remedy because certiorari lies only against judicial or quasi-judicial functions and respondents’ actions in assessment, levy and sale were not judicial or quasi-judicial acts; it therefore declined to reach merits.
PHC’s motion for reconsideration in the Court of Appeals was denied by Resolution dated June 23, 2016.

Issues Presented to the Supreme Court

Whether the PHC’s petition should be dismissed for failure to exhaust administrative remedies, given prior Court of Appeals resolution reinstating the petition.
Whether PHC complied with verification and certification against forum shopping requirements.
Whether certiorari is the proper remedy to challenge respondents’ assessment, levy and sale of PHC properties for alleged failure to pay real property taxes.
Whether PHC is exempt from real property taxes on its eleven properties in Quezon City.

Threshold Matters Identified by the Supreme Court

The issue of exhaustion of administrative remedies had been finally resolved by the Court of Appeals in its March 18, 2013 Resolution, invoking finality/immutability of judgment; thus the exhaustion question was no longer open to relitigation.
Remaining threshold issues were: (1) compliance with verification and certification against forum shopping; (2) propriety of certiorari as remedy; and (3) substantive exemption from real property taxes.

Ruling on Verification and Certification Against Forum Shopping

General rule: corporate acts and documents must be authorized by board resolution; verifications and certifications signed without board authorization are formally defective.
Defect in verification or certification affects form but is not necessarily fatal; courts may allow correction or act despite infirmity to secure ends of justice.
Citing Cagayan Valley Drug Corporation and other cases (Mactan-Cebu International Airport Authority; Pfizer v. Galan; Novelty Philippines, Inc.; Lepanto), Court accepted authority of corporate officers to sign verification/certification where they are positioned to verify truthfulness of allegations.
In this case, PHC produced DOH Order No. 2016-2359-A designating Dr. Gerardo S. Manzo as PHC Officer-in-Charge Executive Director; Dr. Manzo was thus in a position to verify allegations.
Conclusion: the petition substantially complied with Rule 7, Sections 4 and 5 of the Rules of Court; liberal application warranted given substantive stakes.

Ruling on Proper Remedy — Certiorari as Appropriate Means

The Supreme Court emphasized its power under Article VIII, Section 1 of the 1987 Constitution to determine grave abus