Case Summary (G.R. No. 106588)
Key Dates and Procedural Posture
Petitioner purchased the subject lots on April 3, 1980 and initially declared the improvement as a residential house with a 60 sq. m. floor area; an assessment under Tax Declaration No. 02-20454 took effect in 1980. A tax-mapping inspection in February 1989 revealed the building actually comprised four storeys plus a fifth storey used as roof deck, total floor area 500.20 sq. m.; the City Assessor issued a new Tax Declaration No. GR-06-045-00162 effective 1989. The Local Board of Assessment Appeals dismissed petitioner’s appeal (January 11, 1990). The CBAA issued a decision (September 23, 1991) imposing back taxes and later issued a Resolution (July 28, 1992) modifying its decision after a joint manifestation; petitioner sought relief to annul the CBAA Resolution and elevated the matter to the Supreme Court.
Applicable Law and Legal Framework
Primary statutory framework: Presidential Decree No. 464 (the Real Property Tax Code). Relevant provisions quoted in the record include: Section 23 (certification of general revision of assessments to Secretary of Finance), Section 24 (date of effectivity of assessment or reassessment), and Section 25 (assessment of property declared for the first time and imposition of back taxes, limited to ten years prior to the year of initial assessment). The definition of “market value” appears in paragraph n, Section 3 of PD 464. Constitutional reference: Article III, Section 22 of the 1987 Constitution (prohibition on ex post facto laws), raised by petitioner in challenging retroactive tax imposition.
Statement of Facts
Petitioner acquired two adjacent lots conveyed with “a residential house of strong materials” and declared the improvement as a 60 sq. m. residential house for tax purposes; assessed market value was P60,000 and assessed value P36,900 (1980). A 1989 tax-mapping operation and a confirming ocular inspection (October 17, 1990) revealed the building to be of Type II-A materials, four storeys plus a roof-deck fifth level, with aggregate floor area 500.20 sq. m. The City Assessor cancelled the old declaration and assessed the building at a net market value of P499,860 (assessed value P374,900) using the 1981–1984 schedule of market values. Petitioner protested the increase as excessive and invoked purchase price evidence (deed reflecting P100,000 purchase price in 1980).
Procedural History Before Administrative Boards
Petitioner’s protest to the Local Board of Assessment Appeals was dismissed. On appeal to the CBAA, that board’s September 1991 decision directed issuance of retroactive tax declarations for the undeclared excess area: an effective-1981 declaration using 1978–79 schedule for years 1981–June 30, 1987, and a July 1, 1987–1989 declaration using the 1981–1984 schedule, with detailed unit values and assessed-value computations. After a motion for reconsideration and a joint manifestation/compromise among the parties (agreeing to a revised assessed value and raising Section 23 issues), the CBAA issued the assailed July 28, 1992 Resolution modifying its prior decision to classify the property as Type II-B and to issue tax declarations effective in stages (1981–1987; July 1, 1987–1988; and 1989 based on revised valuation).
Issues Presented to the Supreme Court
Principal assignments of error: (1) whether CBAA improperly decided back taxes that were not raised before the Local Board; (2) whether the CBAA misapplied Section 25 of PD 464 and/or failed to apply Section 23; (3) whether the CBAA misapplied paragraph n, Section 3 definition of “market value” in computing assessed value; ancillary challenges included alleged discrimination/confiscation, ex post facto concerns under the 1987 Constitution, and alleged misapplication of jurisprudence in Reyes v. Almanzor and PD 20 principles.
Preliminary Jurisdictional Matters and Payment-Under-Protest Rule
The Court noted procedural defects: the proper remedy to assail CBAA actions is certiorari under Rule 65 (grave abuse of discretion), not Rule 45 “appeal by certiorari,” and petitioner failed to pay the assessed tax under protest as required by Section 64 of PD 464, which bars courts from entertaining suits challenging tax assessments until the tax has been paid under protest (and limits relief absent payment). These procedural lapses could warrant dismissal, but the Court proceeded to address substantive issues as well.
Whether Back Taxes May Be Raised Before CBAA When Not Raised at Local Board
The Court explained the general rule that issues ordinarily must be raised before the lower tribunal to be cognizable on appeal, but recognized established discretion in appellate bodies to consider unassigned errors when they (1) are closely related to an error properly raised, (2) are necessary to resolve the properly assigned error, or (3) are essential to arrive at a just decision. Applying that principle to the administrative appellate context, the Court held the CBAA did not err in considering back taxes because petitioner’s central complaint (that the assessment was “excessive and unconscionable”) necessarily required examination of the factual antecedents and applicable law, including Section 25’s authorization to impose back taxes. Consideration of back taxes was therefore closely related and essential to justice in the case.
Meaning and Application of “Declared for the First Time” and Scope of Section 25 (Back Taxes)
The Court interpreted Section 25 of PD 464 in light of precedent (Lopez v. Crow construing a similar provision) and held that the phrase “declared for the first time” encompasses undeclared excess area discovered in a revision or reassessment. The excess area was deemed “declared for the first time” upon discovery even though some portion of the property had been declared earlier. The Court rejected petitioner’s contention that Section 24 (prospective effectivity of assessments) should preclude back taxes; construing Section 24 to bar any back taxation in such cases would frustrate Section 25’s clear legislative purpose to reach undeclared areas and would permit taxpayers to escape liability through prior undervaluation. The Court emphasized statutory construction principles favoring an interpretation that avoids absurd or contrary results and preserves both provisions’ operability.
Proper Basis for Valuation and Use of “Market Value” Definition
Petitioner argued the assessor should have used the paragraph n definition of “market value” and/or acquisition cost as the determinative basis. The Court clarified that PD 464’s definition of “market value” does not supplant the statutory appraisal framework; Section 5 requires appraisal at current and fair market value prevailing in the locality, and assessors must consider all relevant circumstances (comparable sales, actual or potential uses, acquisition cost being only one factor). The Court rejected petitioner’s insistence that acquisition cost or the mere number of stories be irrelevant; floor area and number of storeys materially affect market value when materials are comparable. The Court also noted the practical realities that acquisition prices are sometimes understated in conveyances and that value changes over time, which motivates periodic general re
...continue readingCase Syllabus (G.R. No. 106588)
Case Citation and Court
- Reported at 337 Phil. 89, Third Division, G.R. No. 106588, decided March 24, 1997.
- Decision penned by Justice Panganiban; Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concurred.
- The Central Board of Assessment Appeals (CBAA) panel in the proceeding below consisted of Margarita G. Magistrado (Chairman), and Eleonor A. Santos and Alfonso M. Medado (members).
Procedural Posture
- Petitioner filed an "APPEAL BY CERTIORARI" (Rule 45) to the Supreme Court seeking annulment and setting aside of the CBAA Resolution dated July 28, 1992 (CBAA Case No. 257).
- The Supreme Court observed that the correct remedy to question CBAA decisions is certiorari under Rule 65 (grave abuse of discretion), not Rule 45, and noted as a caveat that under Revised Administrative Circular 1-95 (effective June 1, 1995) appeals from CBAA judgments/orders should be filed with the Court of Appeals.
- The petition was ultimately DISMISSED and the assailed CBAA Resolution AFFIRMED; costs were imposed against petitioner.
Core Facts — Property, Acquisition, and Initial Assessment
- On April 3, 1980, petitioner Raul H. Sesbreao purchased two parcels of land from Estrella Benedicto Tan, covered by Transfer Certificate of Title No. T-55917 (Register of Deeds of Cebu City).
- Deed of sale described:
- Lot 308 (Cadastral Survey of Cebu) with improvements, area approx. 49 sq. m.
- Lot 309 (Cadastral Survey of Cebu) with improvements, area approx. 48 sq. m.
- Conveyance included "a residential house of strong materials constructed on the lots above-mentioned" located in Cebu City.
- Petitioner declared the property for tax assessment as a "residential house of strong materials" with a floor area of 60 sq. m.
- Effective 1980, the City Assessor assessed the declared property under Tax Declaration No. 02-20454 at a market value of P60,000.00 and an assessed value of P36,900.00.
Discovery of Undeclared Excess Area and Reassessment
- February 1989 tax-mapping operation by Cebu City Assessor field inspectors found the property to be a residential building consisting of four storeys with a fifth storey used as roof deck.
- Building total floor area was found to be 500.20 sq. m.; each floor area 100.04 sq. m.; building classified of Type II-A materials.
- Ocular inspection by the Board of Commissioners on October 17, 1990 confirmed the field inspectors' findings.
- Based on these findings, City Assessor issued Tax Declaration No. GR-06-045-00162 effective 1989, canceling Tax Declaration No. 02-20454, and assessed the building at:
- Net market value: P499,860.00
- Assessed value: P374,900.00
- The 1981–1984 Schedule of Market Value (Schedule of Base Unit Construction Costs) was applied in the assessment.
Petitioner’s Administrative and Judicial Challenges
- Petitioner protested the new assessment as "excessive and unconscionable," noting an increase of more than 1,000% from prior market value P60,000.00 and stating he bought the building with lots for P100,000.00 in 1980 (claimed to be proper market value).
- Local Board of Assessment Appeals of Cebu City dismissed petitioner’s appeal on January 11, 1990.
- Petitioner appealed to the Central Board of Assessment Appeals (CBAA).
CBAA Decision (September 23, 1991) — Initial Disposition and Computation
- CBAA modified the appealed Resolution and directed the City Assessor to issue new tax declarations for back taxes on the excess area:
- For 1981 to June 30, 1987:
- Assessed the undeclared excess area using Type II-A Building (Residential) at P380.00/sq. m. (minimum rate) pursuant to the 1978–1979 Schedule.
- Computation shown for five sections (S1a–S5a), totaling 415 sq. m. with total market value P132,430.00; assessment level 45% producing assessed value P59,593.50.
- For July 1, 1987 to 1989:
- Assessed undeclared excess area using Type II-A at P1,400.00/sq. m. (minimum rate) pursuant to the 1981–1984 Schedule.
- Computation for same areas totaling 415 sq. m. with total gross market value P487,900.00, less 30% depreciation allowance P146,370.00, net market value P341,530.00; assessment level 65% producing assessed value P221,994.50.
- For 1981 to June 30, 1987:
Joint Manifestation / Compromise during Reconsideration
- Petitioner filed a motion for reconsideration; during hearing parties submitted a joint manifestation/compromise agreement comprising:
- Revised valuation of the property as assessed value P78,330.00, classifying the property as Class II-B at P1,110 per sq. m.; building completed and occupied in 1950 (42 years prior).
- Invocation of Section 23 of Presidential Decree (P.D.) No. 464, claiming the City Assessor had not submitted the required certification to the Secretary of Finance that the general revision of property assessments for Cebu City had been finished; argued Section 23 uses conjunctive wording making assessments ineffective until certification is submitted and taxes accrue/payable thereafter.
CBAA Resolution (Assailed; July 28, 1992) — Disposition on Manifestation and Modification
- CBAA accepted the joint manifestation "for whatever purpose it may be worth to the case."
- CBAA found:
- No objection to Manifestation No. 1 (revised valuation) as not contrary to law or public policy.
- Manifestation No. 2 (Section 23 argument) had no bearing because Section 25, not Section 23 of P.D. 464, applied in the instant case.
- Dispositive orders of the assailed Resolution:
- For back taxes due on excess area from 1981 to June 30, 1987: issue a tax declaration effective 1981 based on minimum rate per sq. m. for a Type II-B building in accordance with 1978–79 Schedule of Values.
- For July 1, 1987 to 1988: issue a tax declaration effective July 1, 1987 based on minimum rate per sq. m. for a Type II-B building in accordance with 1981–1984 Schedule of Values.
- For 1989: issue a tax declaration to take effect in 1989 based on the revised valuation provided under No. 1 of the joint manifestation.
Petitioner's Assignments of Error and Refined Issues
- Petitioner assigned these alleged errors by CBAA:
- CBAA gravely erred in resolving the matter of back taxes which was never raised in issue before the Local Board or in the appeal to CBAA.
- CBAA gravely erred in disregarding the jurisprudence in Reyes v. Almanzor (196 SCRA 328/322).
- CBAA gravely erred in misinterpreting or misapplying Section 25 of P.D. 464.
- CBAA gravely erred in disregarding or refusing to apply Section 23 of P.D. 464.
- In a July 23, 1993 Memorandum petitioner refined issues as:
- B-1: Whether CBAA erred in resolving back taxes 1981–1988 though not raised in appeal, under pretext of applying Section 25.
- B-2: Whether CBAA erred in not strictly applying paragraph n, Section 3 (definition of "market value") of P.D. 464 as basis for computing assessed value.
- B-3: Whether CBAA erred in not strictly applying or refusing to apply Section 23 of P.D. 464.
- Corollary issues:
- Whether CBAA’s assessment is discriminatory, unjust, confiscatory, and unconstitutional.
- Whether P.D. No. 20, as invoked in Reyes v. Almanzor, may be applied in relation to paragraph n, Section 3 of P.D. 464 defining "market value."
Preliminary and Jurisdictional Matters Addressed by the Court
- The Court stressed that an "appeal by certiorari" under Rule 45 was not the correct remedy; the proper remedy is certiorari under Rule 65 alleging grave abuse of discretion.
- The Court noted petitioner failed to pay the assess