National Food Authority v. City Government of Tagum
REITERATIONFacts
The Antecedents: The National Food Authority (NFA) is a government entity with a long history, evolving from earlier corporations like the National Rice and Corn Corporation (NARIC) and the National Grains Authority (NGA). Its primary mandate has been to ensure national food security and stabilize the supply and prices of rice and corn. Initially, it held broad powers, including regulatory and supervisory functions over the grains industry. However, with the passage of Republic Act No. 11203, the "Rice Tariffication Law," NFA's functions were significantly refocused on maintaining a national buffer stock of rice, sourced from local farmers, for emergency and calamity situations. The NFA owns several real properties, including land, buildings, and machineries, located in Tagum City, Province of Davao del Norte. Procedural History: The City Government of Tagum sought to collect real property taxes from the NFA for its properties within the city. The NFA, relying on opinions from the Office of the Government Corporate Counsel (OGCC) and the Supreme Court's ruling in MIAA v. Court of Appeals, asserted its exemption from such taxes, arguing it was a government instrumentality. After receiving notices of delinquency, the NFA filed a Petition for Prohibition with the Regional Trial Court (RTC) of Tagum City. The RTC dismissed the petition, and the NFA appealed to the Court of Tax Appeals (CTA) Second Division. The CTA Second Division affirmed the RTC's dismissal. Subsequently, the NFA filed a Petition for Review with the CTA En Banc, which dismissed the petition, ruling that the RTC lacked jurisdiction and that the NFA had failed to exhaust administrative remedies, specifically by not paying the taxes under protest. The Petition: The National Food Authority (NFA) filed this Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the decision of the Court of Tax Appeals (CTA) En Banc. The NFA contends that the CTA En Banc erred in ruling that the RTC lacked jurisdiction and that the NFA failed to exhaust administrative remedies. The core of the NFA's argument is that it is a government instrumentality, not a government-owned or controlled corporation (GOCC), and therefore exempt from real property taxes under Section 133(o) of the Local Government Code. The NFA argues that its status as a government instrumentality is a question of law, not fact, and thus the RTC had jurisdiction to hear its petition for prohibition. It further asserts that the requirement of "payment under protest" is not absolute when the very authority to tax is being questioned, especially when claiming tax exemption as a government instrumentality.
Issue(s)
Whether the Regional Trial Court for Tagum City, Branch 31 has jurisdiction over the Petition for Prohibition initiated by NFA, and whether 'payment under protest' is an absolute requirement for assailing real property taxes. Whether NFA is a government instrumentality. Whether NFA is exempt from payment of real property taxes.
Ruling
The Supreme Court GRANTED the Petition. The Decision dated June 30, 2020, and Resolution dated November 5, 2021, of the Court of Tax Appeals En Banc in CTA EB No. 1930 were REVERSED. The National Food Authority was declared a government instrumentality exempt from real property taxes. The Notices of Delinquency issued by the City Treasurer of Tagum were declared VOID.
Ratio Decidendi
On the jurisdiction of the Regional Trial Court and the requirement of 'payment under protest': The Court held that the Regional Trial Court properly exercised jurisdiction over NFA's Petition for Prohibition because the issue raised was a pure question of law – whether NFA, as a government instrumentality, could be subjected to real property taxes. The Court clarified that the remedies of appeal to the Local Board of Assessment Appeals (LBAA) and 'payment under protest' under Sections 226 and 252 of the Local Government Code (LGC) are applicable when the dispute involves the correctness or reasonableness of the assessment, not when the very authority of the assessor or treasurer to impose and collect the tax is questioned. Such a challenge to authority constitutes a question of law, which falls within the original jurisdiction of the courts, and the doctrine of exhaustion of administrative remedies does not apply. Furthermore, requiring payment under protest would be unjust when the taxpayer claims tax exemption, as it would force the payment of a tax that is allegedly illegal from the outset. On whether NFA is a government instrumentality: The Court ruled that NFA is a government instrumentality vested with corporate powers. It performs special governmental functions, such as maintaining a national buffer stock for emergency situations and disaster relief, as mandated by its charter and subsequent laws like Republic Act No. 11203. While NFA has corporate powers and an authorized capital stock, it was not organized as a stock or non-stock corporation in the strict sense, as it lacks shareholders or members and is not authorized to distribute dividends. It also enjoys operational autonomy, being attached to the Department of Agriculture but not integrated within its departmental framework. These characteristics align with the definition of a government instrumentality with corporate powers (GICP) or government corporate entity (GCE) as defined in Republic Act No. 10149 and jurisprudence. On whether NFA is exempt from real property taxes: The Court affirmed that as a government instrumentality, NFA's properties are considered properties of the Republic of the Philippines and are therefore exempt from real property taxes under Section 133(o) and Section 234(a) of the LGC. These provisions prohibit local government units from levying taxes on the National Government, its agencies, and instrumentalities. The Court reiterated the principle that taxing government instrumentalities would merely result in the transfer of funds from one government pocket to another, which is contrary to public policy and the principle of national government supremacy. The exemption applies unless the beneficial use of the property has been granted to a taxable person, which was not alleged in this case. The Court emphasized that the 'power to destroy' through taxation should not be used against the very entity that wields it.
Main Doctrine
A government instrumentality, such as the National Food Authority (NFA), is exempt from real property taxes imposed by local government units, as such properties are considered properties of the Republic of the Philippines. The Local Government Code, specifically Section 133(o) and Section 234(a), exempts properties owned by the National Government, its agencies, and instrumentalities from real property taxation, unless the beneficial use has been granted to a taxable person. The requirement of 'payment under protest' is not absolute when the very authority to assess and collect taxes is questioned as a matter of law.