Title
Sesbreno vs. Central Board of Assessment Appeals
Case
G.R. No. 106588
Decision Date
Mar 24, 1997
Petitioner challenged a 1,000% tax increase after undeclared property improvements were discovered, arguing excessive assessment and improper application of PD 464. The Supreme Court upheld the back taxes, affirming the CBAA's authority and market value computation.
property owner
back taxes
undeclared excess area

Case Summary (G.R. No. L-58321)

Factual Background

On April 3, 1980, petitioner purchased two parcels of land in Cebu City described in the deed of sale as Lots 308 and 309 with a conveyed “residential house of strong materials.” Petitioner declared the property for taxation as a residential house of strong materials with a floor area of 60 square meters. Effective 1980 the City Assessor assessed the declared property under Tax Declaration No. 02-20454 at a market value of P60,000 and an assessed value of P36,900. During a tax-mapping operation in February 1989, field inspectors discovered that the property was in fact a four-storey residential building with a fifth-storey roof deck, having a total floor area of 500.20 square meters and constructed of Type II-A materials. The Board of Commissioners confirmed these findings by ocular inspection on October 17, 1990.

Administrative Assessment and Protest

Based on the 1989 discovery, the City Assessor issued Tax Declaration No. GR-06-045-00162, effective 1989, cancelling Tax Declaration No. 02-20454 and assessing the building at a net market value of P499,860 and an assessed value of P374,900, applying the 1981-1984 Schedule of Market Values. Petitioner protested the new assessment as “excessive and unconscionable,” asserting that he bought the building and lots for P100,000 in 1980 and arguing that this amount should be its market value. The Local Board of Assessment Appeals of Cebu City dismissed petitioner’s appeal on January 11, 1990.

Central Board Proceedings and Decision

Petitioner appealed to the Central Board of Assessment Appeals (CBAA). On September 23, 1991, the CBAA rendered a decision directing the City Assessor to issue retroactive tax declarations for the undeclared excess area and to compute back taxes for discrete periods using the applicable schedules of values in force during those periods. The CBAA specified assessments for the years 1981 to June 30, 1987 using the 1978–1979 schedule and for July 1, 1987 to 1989 using the 1981–1984 schedule, computing unit values, total market values, deductions, and assessed values for each period. Petitioner filed a motion for reconsideration and during its hearing the parties submitted a joint manifestation proposing a compromise valuation and invoking Section 23 of Presidential Decree No. 464. The CBAA accepted the parties’ first manifestation as not contrary to law but held that the second manifestation regarding Section 23 was immaterial because Section 25 and not Section 23 applied to the case. The CBAA issued the assailed Resolution dated July 28, 1992 modifying its decision to order issuance of tax declarations retroactive to 1981 and to July 1, 1987, and to apply the revised valuation agreed by the parties to take effect in 1989.

Petition to the Supreme Court and Procedural Objections

Petitioner sought review of the CBAA Resolution by an “appeal by certiorari” under Rule 45, Rules of Court, assigning errors including that the CBAA resolved back taxes which were not raised below, misapplied jurisprudence in Reyes v. Almanzor, misinterpreted Section 25 and failed to apply Section 23 of PD 464. The Supreme Court observed that the proper remedy to assail CBAA actions is a petition for certiorari under Rule 65, Rules of Court, and that petitioner had failed to pay the tax under protest as required by Section 64, PD 464, a prerequisite before courts may entertain suits challenging tax assessments.

Issue One — Raising Back Taxes Not Plead Below

The Court addressed whether the CBAA and the Supreme Court could consider back taxes though petitioner did not raise that issue before the Local Board. The Court recognized the general rule that appellate tribunals ordinarily do not consider issues not raised below. It then explained that appellate bodies have discretionary authority to consider unassigned errors when such errors are closely related to assigned errors, are necessary to determine the assigned error, or are essential to render a just decision. Applying this principle, the Court held that the CBAA acted within its authority in considering back taxes because petitioner had attacked the assessment as “excessive and unconscionable,” and the issue of back taxes was closely related and necessary to resolve that contention.

Issue Two — Construction and Application of Sections 24 and 25 of PD 464

Petitioner argued that Section 24 rather than Section 25 of PD 464 should govern and thus preclude imposition of back taxes. The Court set out both provisions and rejected petitioner’s contention. Relying on precedent, notably Lopez v. Crow, the Court explained that an area discovered upon revision that exceeds the declared area is deemed “declared for the first time” upon its discovery. The Court reasoned that construing Section 24 to bar back taxes in such cases would permit taxpayers to evade liability by deliberately or inadvertently understating area or value, would render Section 25 superfluous, and would thwart the purpose of general reassessments. The Court therefore affirmed the CBAA’s application of Section 25 to assess back taxes on the undeclared excess area, subject to the statutory ten-year limitation and computation on schedules applicable during the corresponding periods.

Issue Three — Market Value and Paragraph n, Section 3 of PD 464

Petitioner urged that assessed value should be computed on the basis of the definition of “market value” in paragraph n, Section 3 of PD 464, and implied that acquisition cost should control. The Court observed that paragraph n merely defines “market value” and does not mandate that acquisition cost alone determine current value for taxation. The Court pointed to Section 5, PD 464, which requires appraisal at the current and fair market value prevailing in the locality, considering all circumstances and elements of value. The Court emphasized that assessors must consider factors beyond acquisition cost, including comparable current values and actual or potential uses, and that courts will not lightly disturb the considered judgment of appraisers. The Court also rejected petitioner’s contention that number of stories and floor area are irrelevant, noting that additional floors increase market value when materials are comparable.

Issue Four — Section 23 and Effectivity of a General Revision

Petitioner contended that the assessor had not submitted the certification required by Section 23, PD 464 and therefore the general revision had not taken effect. The CBAA had found that the retroactive assessments ordered were not imposed pursuant to an unimplemented general revision but instead were calculated using approved schedules of base unit construction costs for the relevant periods. The Court found no grave abuse of discretion in that finding. The Court noted that the 1981–1984 Schedule of Values was approved by the Secretary of Finance on May 22, 1984 and became finally effective on July 1, 1987 by Memorandum

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