Title
Systems Plus Computer College of Caloocan City vs. Local Government of Caloocan City
Case
G.R. No. 146382
Decision Date
Aug 7, 2003
Educational institution sought tax exemption for rented land used for school purposes; denied due to failure to exhaust administrative remedies and improper use of mandamus.
certiorari
mandamus
tax exemption
A

Case Summary (G.R. No. 146382)

Facts Leading to the Tax Exemption Dispute

Petitioner claimed that it enjoyed property tax exemption from the local government on its buildings, but not on the parcels of land it rented. The parcels of land were allegedly used by petitioner for educational purposes. Petitioner rented the lands for PHP 5,000 monthly from its sister corporations, Consolidated Assembly, Inc. (Consolidated Assembly) and Pair Management and Development Corporation (Pair Management).

On January 8, 1998, petitioner requested the City of Caloocan, through City Assessor Mamerto Manahan, to extend tax exemption to the parcels of land, invoking Article VI, Section 28(3) of the 1987 Constitution and other provisions of the Local Government Code. On February 5, 1998, the city government, upon the recommendation of Atty. Nestor Francisco, denied the request. The denial rested on the factual theory that the properties were owned by Consolidated Assembly and Pair Management, and that these owners derived income from the properties through rentals and taxes assumed by petitioner. From the owners’ standpoint, the city government concluded that the land was not actually, directly, and exclusively used for educational purposes.

Petitioner and the two sister corporations then restructured their arrangement. On February 15, 1999, petitioner and Consolidated Assembly and Pair Management executed separate agreements that, in effect, novated their existing lease contracts and converted them to donations of the beneficial use of the subject properties to petitioner. On February 19, 1999, petitioner informed the City Assessor of the new agreements and sought reconsideration of the earlier denial. Petitioner also submitted a duly notarized certification jointly issued by Consolidated Assembly and Pair Management stating that they no longer received income in the form of rentals from the subject properties, together with relevant board resolutions.

Despite these submissions, the city government again denied the exemption application on July 21, 1999. The city government reasoned, first, that it could reasonably be implied that petitioner functioned as an agency of its sister corporations in order to evade real property taxes, especially considering that shortly after the first denial, the sister corporations donated only the beneficial use of the same properties to petitioner. It invoked the principle that revenue officers, in proper cases, may disregard separate corporate personalities where they serve as shields for tax evasion. Second, it stated that tax exemptions rest on the benefit to the body of people, and not on any theory that exempts owners merely by reducing burdens on them. Third, it held that there was no showing that the beneficial use of the properties sought to be exempt was actually, directly, and exclusively used for educational purposes.

Trial Court Proceedings on Petitioner’s Mandamus Petition

After being “twice debunked” by the city government, petitioner filed a petition for mandamus with the Regional Trial Court of Caloocan City, Branch 121, in Civil Case No. C-595. The trial court dismissed the mandamus petition for being premature. Petitioner’s motion for reconsideration was subsequently denied.

In the mandamus proceeding, petitioner argued that it possessed a clear legal right to exemption under the Constitution and the Local Government Code, because the properties were allegedly actually, directly, and exclusively used for educational purposes. The trial court, however, ruled that mandamus did not lie and that petitioner failed to exhaust available administrative remedies.

The Parties’ Contentions Before the Trial Court

The trial court’s analysis began with the definition of mandamus as a remedy commanding a tribunal, corporation, board, or person to perform an act required by law when the respondent unlawfully neglects its performance, or unlawfully excludes another from a right to which the latter is entitled, provided that there is no other plain, speedy, and adequate remedy in the ordinary course of law. The court emphasized the rule that where administrative remedies are available, a petition for mandamus does not lie.

It then applied Section 226 of the Local Government Code of 1991, which provides that any owner or person having legal interest in property who is not satisfied with the action of the provincial, city, or municipal assessor in the assessment of the property may appeal within sixty (60) days to the Board of Assessment Appeals by filing a petition under oath, accompanied by required documents.

The trial court rejected petitioner’s contention that it was not contesting any assessment made by the City Assessor. It treated the determination made by the City Assessor regarding the taxability of the real properties as falling within the assessor’s power to assess properties for taxation purposes, which is appealable to the Local Board of Assessment Appeals. It relied on the broader definition of “assessment” as including the discovery, listing, classification, and appraisal of properties, and the determination of value subject to tax.

Petitioner nevertheless maintained that it was enforcing a clear legal right to tax exemption, and that the issue was essentially legal. The trial court held that petitioner improperly sought to bypass the necessary fact-finding and evidentiary determination required for classification of properties for taxation. It stressed that the authority to receive evidence for classification was legally vested in the City Assessor whose action was appealable through the statutory administrative process. It therefore concluded that petitioner could not seek direct judicial redress on the pretext of raising a pure question of law without violating the doctrine of exhaustion of administrative remedies.

Finally, the trial court ruled that mandamus did not lie against the City Assessor even if assessment is generally ministerial in nature, because the actual exercise of assessment necessarily involved discretion. It reiterated that mandamus cannot direct the exercise of judgment or discretion in a particular manner, nor retract or reverse an action already taken in the exercise of judgment or discretion.

Issues Raised in the Petition for Certiorari

In the Supreme Court, petitioner challenged the trial court’s dismissal for grave abuse of discretion. It imputed error in two respects: first, that the trial court ruled mandamus did not lie against the public respondents; and second, that petitioner failed to exhaust available administrative remedies.

Ruling of the Supreme Court

The Supreme Court dismissed the petition for certiorari. It upheld the trial court’s position that mandamus was not the proper remedy because petitioner had administrative remedies available and had not availed itself of them. The Court also sustained the conclusion that mandamus could not be used to compel the City Assessor in a manner that would effectively require the reversal or dictation of a discretionary evaluation inherent in the assessment process.

Legal Basis and Reasoning

The Supreme Court anchored its disposition on the doctrine that where the law provides administrative remedies against acts of an administrative board, body, or officer, judicial relief may be sought only af

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