Philippine Ports Authority v. City of Iloilo
REITERATIONFacts
The Antecedents: The City of Iloilo filed an action for collection of sum of money against the Philippine Ports Authority (PPA) for real property and business taxes from the last quarter of 1984 to the fourth quarter of 1988. The City alleged that PPA is engaged in the business of arrastre and stevedoring services and leasing real estate, making it liable for business taxes, and that PPA owns a warehouse used in its business, making it liable for real property taxes. Procedural History: The Regional Trial Court (RTC) denied PPA's motion to dismiss. During pre-trial, factual issues included whether PPA is engaged in business and the accuracy of the tax assessment. Legal issues included PPA's exemption from real property and business taxes, and whether filing a motion to dismiss implied admission. PPA presented no evidence after the City rested its case, relying on legal arguments. The RTC ruled PPA liable for real property taxes from the last quarter of 1984 to December 1986, and for business taxes for leasing real estate from the last quarter of 1984 to 1988, but not for arrastre and stevedoring services as these were deemed governmental functions. The Petition: PPA sought review, arguing that the RTC erred in decreeing a property of public dominion (port facility) as subject to realty taxes and in declaring PPA subject to business taxes for leasing real estate, asserting it is not engaged in business.
Issue(s)
Whether the Philippine Ports Authority (PPA) may be permitted to change its theory on appeal by claiming its warehouse is a property of public dominion. Whether PPA is liable for real property taxes on its warehouse from the last quarter of 1984 to December 1986. Whether PPA is liable for business taxes for leasing its real estate from the last quarter of 1984 to 1988.
Ruling
The Petition is DENIED and the assailed Decision is AFFIRMED. The Philippine Ports Authority is liable for real property taxes from the last quarter of 1984 to December 1986, and for business taxes for leasing real estate from the last quarter of 1984 to 1988.
Ratio Decidendi
On the issue of changing theory on appeal: The Court held that PPA may not be permitted to change its theory on appeal. The rule is that a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court will not be permitted to change theory on appeal. This is to avoid unfairness to the adverse party who would have no opportunity to present further evidence material to the new theory. The exception in Lianga Lumber Co. v. Lianga Timber Co., Inc., allowing a change of theory in the interest of justice, was found inapplicable because the new issue (property of public dominion) was not purely legal and required further evidence, which respondent would have been deprived of. Furthermore, PPA's new stance contradicted its explicit admission in its Answer that it was the declared and registered owner of the warehouse. On the liability for real property taxes: The Court affirmed the RTC's ruling that PPA is liable for real property taxes from the last quarter of 1984 to December 1986. While PPA was initially exempt under its charter (P.D. 857) and Section 40 of the Real Property Tax Code, Presidential Decree (P.D.) No. 1931, effective June 11, 1984, withdrew all tax exemption privileges granted to government-owned or controlled corporations. Although Executive Order (E.O.) No. 93, effective December 17, 1986, restored certain tax exemptions, including those under the Real Property Tax Code, this restoration only applied from that date onwards. Therefore, PPA's exemption was effectively withdrawn from June 11, 1984, to December 16, 1986, making it liable for taxes during that period. The Court also rejected PPA's reliance on Basco v. PAGCOR, noting that P.D. 1931 was not considered in that case and that subsequent jurisprudence, particularly Mactan Cebu International Airport Authority v. Marcos, clarified that Congress can subject even government instrumentalities to tax. The Court also found PPA's argument that P.D. 1931 only covered corporations not performing governmental functions to be without legal basis. On the liability for business taxes: The Court affirmed the RTC's ruling that PPA is liable for business taxes for the lease of its building to private corporations. PPA failed to present any evidence to refute the City's proof of income from the lease or any proof of exemption from business taxes. While PPA argued that leasing its premises was for convenience and not for profit, and thus not a business, the Court noted that its charter classified such leasing as a corporate power. The Court emphasized that any income or profit generated by an entity is subject to tax, regardless of its original intent, and that PPA regularly earned substantial income from leasing its building to ten private entities. In the absence of proof of exemption, PPA is liable for the assessed business taxes.
Main Doctrine
A government-owned or controlled corporation's tax exemption, once withdrawn by law, can only be restored through specific legal means; and a new theory on appeal, particularly one involving factual assertions, is generally disallowed if not raised in the lower court, absent compelling reasons of justice and due process.