Herarc Corporation v. Provincial Treasurer of Batangas
REITERATIONFacts
1. The Antecedents: Petitioner Herarc Realty Corporation acquired thirteen parcels of land in Sta. Ana, Calatagan, Batangas, via execution sale in August 2004, with titles registered in its name since 2006. From March 2, 2006, to August 12, 2009, these properties were under the actual possession of private respondents Dr. Rafael A. Manalo, Grace Oliva, and Freida Rivera Yap, as assignees in an involuntary insolvency proceeding. The Provincial Treasurer of Batangas subsequently sent Herarc Realty Corporation a Statement of Real Property Tax Liabilities demanding P8,093,256.89 for unpaid real property taxes covering the period of 2007, 2008, and January to August 12, 2009. 2. Procedural History: Herarc Realty Corporation paid the assessed real property taxes under protest on November 20, 2012. Subsequently, it filed a petition for prohibition and mandamus with the Regional Trial Court (RTC) of Batangas City, Branch 8, seeking to nullify the tax assessments and have them charged against the private respondents who were in possession of the property during the covered period. The RTC denied the petition on November 18, 2013, holding Herarc Realty Corporation liable for the deficiency real property taxes. Upon denial of its motion for reconsideration on January 7, 2014, Herarc Realty Corporation filed the present petition for review on certiorari with the Supreme Court. 3. The Petition: This petition for review on certiorari under Rule 45 of the Rules of Court seeks to reverse the RTC's decision, arguing that the real property tax assessment is illegal and erroneous because the subject property was not in its possession during the covered period. Petitioner contends, citing previous jurisprudence, that the unpaid tax should be chargeable against the party with actual or beneficial use and possession. The Supreme Court, however, found that the petitioner erred in its appeal by directly filing with the Supreme Court instead of the Court of Tax Appeals after the RTC decision. Even on the merits, the Court affirmed that unpaid real property tax attaches to the property and the registered owner is generally liable, especially when the owner is a taxable entity, as opposed to situations involving tax-exempt entities.
Issue(s)
Whether the Regional Trial Court erred in holding petitioner Herarc Realty Corporation liable for the deficiency real property tax for the period when private respondents were in actual possession of the subject property. Whether the petition for review on certiorari was the proper mode of appeal from the Regional Trial Court's decision on a local tax case.
Ruling
The Supreme Court denied the petition for review on certiorari. It held that the petition was not filed in the proper appellate court, as appeals from RTC decisions on local tax cases should be filed with the Court of Tax Appeals. Even on the merits, the Court found petitioner liable for the deficiency real property tax.
Ratio Decidendi
On the issue of tax liability: Even if the case were resolved on its merits, the disposition would remain the same. The Court affirmed the principle that in real estate taxation, unpaid taxes attach to the property, and the personal liability for the tax delinquency is generally on the owner of the real property at the time the tax accrues. This is a necessary consequence of ownership. The Court clarified that the doctrine of beneficial user being liable, as cited by petitioner in Testate Estate of Concordia T. Lim and Government Service Insurance System v. City Treasurer, applies when the registered owner is tax-exempt. In this case, petitioner Herarc Realty Corporation is a juridical person not exempt from tax and is the registered owner of the property. Therefore, it is personally liable for the real property tax at the time it accrued, regardless of the actual possession by private respondents. The Court distinguished this from cases where the beneficial use of tax-exempt government property is granted to a taxable person, in which case the taxable beneficial user becomes liable. On the proper mode of appeal: The Court reiterated that appeals from decisions of the RTC involving local tax cases, such as real property tax assessments, must be filed with the Court of Tax Appeals (CTA) pursuant to Section 7(a)(3) of Republic Act No. 9282. The RTC's direct recourse to the Supreme Court via a Rule 45 petition was improper because the appellate jurisdiction of the CTA over RTC decisions in local tax cases must be exhausted first. Failure to appeal in due course renders the assessment final, executory, and demandable, precluding the taxpayer from assailing its legality or validity. The right to appeal is a statutory right that requires strict compliance with procedural rules.
Main Doctrine
The registered owner of a real property is personally liable for the real property tax that accrues, even if another party had actual or beneficial use and possession of the property, unless the property is owned by a tax-exempt entity and the beneficial use is granted to a taxable person. Furthermore, appeals from decisions of the Regional Trial Court involving local tax cases, including real property tax assessments, must be filed with the Court of Tax Appeals.